Returns in goods and services tax

Returns in goods and services tax
A brief overview Ritvik Pandey

Outline Prologue – What’s special about GST return?
Overview of Returns to be submitted by regular tax payers Process of filing of return and the rationale Returns to be filed by some specific tax payers ITC Matching and Reversal Correction of Returns Annual Return First and final Return Epilogue – How can we make it happen?

Why Returns Mode for transfer of information to tax administration
To declare tax liability for a given period Furnish details about the taxes paid in accordance with that return Compliance verification program of tax administration Providing necessary inputs for taking policy decision Management of audit and anti-evasion programs of tax administration

Features of Tax Returns in GST
Based on transactions – Invoice based Designed for system based matching of Input Tax Credit and other details (import, export etc.) Auto-population from details of outward supplies Auto-reversal of ITC in case of mismatch Concepts of ledgers – cash, ITC and liability No revised returns – changes through amendments to original details

Types of return in GST Format Description Due date GSTR-1
Statement of Outward Supplies 10th of next month GSTR-2 Statement of Inward Supplies 15th of next month GSTR-3 Return 20th of next month

Statement of Outward Supplies
Basic details – GSTIN, Name, period, Turnover in last financial year – mostly auto-populated Invoice level details B2B supplies, interstate and intrastate, interstate B2C supplies more than Rs. 2.5 lakh GSTIN of recipient Invoice details – Number, date, Value, HSN/SAC, Taxable value Tax – IGST, CGST, SGST – Rate and Tax amount Place of Supply (relevant for interstate supplies) Section 37 of the Draft Model Bill

Details of supplies to customers HSN/SAC Place of Supply Aggregate value Tax – IGST, CGST, SGST – Rate and tax amount Credit and Debit Notes – linkage to original invoice Document number Original Invoice Number Deferential amount and deferential tax Section 37 of the Draft Model Bill

Reverse Charge Details of exports – with and without payment of tax Invoice details, Shipping Bill/Bill of Export, tax details Details of exempt, Nil rated and Non-GST supplies Interstate and Intrastate B2B and B2C supplies Tax paid on advances and adjustment of advances Amendment of any of the above details filed in previous months Section 37 of the Draft Model Bill

Statement of Inward Supplies
Basic Details Statement of Inwards Supplies Auto-populated from Statements of outward supplies Claimed – non auto-populated Supplies attracting reverse charge Invoice level details As in statement of outward supplies Input Tax Credit available, eligibility and availed Import of Services Invoice details, IGST rate and amount, ITC Section 38 of the Draft Model Bill

Statement of Inward Supplies
Details of credit and debit notes Auto-populated from statement of outward supplies Claimed – non auto-populated ISD Credit received TDS Credit received Other details of inward supplies From exempt/composition suppliers Exempt, nil rated and non-GST supplies Section 38 of the Draft Model Bill

Return Auto-populated based on GSTR-1 and GSTR-2 Outward Supplies
B2B and B2C inter and intra state supplies Exports Revision of tax of previous periods Inward Supplies Inter and intra state supplies received Imports Amendment to tax of previous periods Credit to ITC Ledger Section 39 of the Draft Model Bill

Return Tax Liability Payment details
Tax on outward supplies Changes in output liability of previous periods Amount payable due to reversal of ITC Payment details Utilisation of credit of each tax (debit to ITC ledger) Cash (debit to cash ledger) Claim of Refund of ITC or cash ledger Section 39 of the Draft Model Bill

Salient features Mostly based on timely filing of GSTR-1
GSTR-2 shall be auto-populated based on GSTR-1 Some additional details to be entered in GSTR-2 Claims of ITC not auto-populated Details of import Other inward supplies HSN Classification 4 digit compulsory for turnover above Rs. 5 crore 2 digit optional in first year and compulsory from second year

How does Return get filed
All registered persons to file GSTR-1by 10th Can be filed during the month as well GSTR-2 of all registered persons allowed to view their inward supplies uploaded by their suppliers GSTR-2 of taxpayers to be auto-populated after 10th Recipients to prepare GSTR-2 based on auto-populated details Recipients to upload details not auto-populated GSTR-2 to be filed by 15th

Auto-population of TDS details and recipient to accept or reject TDS details Those auto-populated details that have been modified or those that have been added or deleted will be communicated back to supplier Supplier may accept the changes by 17th and his GSTR-1 shall get amended Based on the GSTR-1 and GSTR-2, GSTR-3 would be completely auto-populated

Tax payers can avail ITC credit for payment of taxes and pay the rest by debiting their cash ledger Tax payer to credit the cash ledger by making payment by filling challan on GSTN Submit GSTR-3 and at the same time following actions happen simultaneously ITC ledger gets credited by the ITC availed as per GSTR-2 ITC ledger gets debited by the ITC utilised for payment of taxes Cash ledger gets credited by the amount of TDS claimed Cash ledger get debited by the amount utilised for payment of taxes

Statement of Outward Supplies 10th of next month GSTR-2 Statement of Inward Supplies 15th of next month GSTR-3 Return 20th of next month GSTR-4 Return for Compounding suppliers 18th of month in next quarter GSTR-5 Return for Non-resident suppliers GSTR-6 Return for ISD 13th of next month GSTR-7 Return for TDS Deductors

Return for Composition suppliers
No ITC Available Details of inward supplies Invoice level – auto-populated and uploaded Details attracting reverse charge – purchases from unregistered suppliers Details of import of goods and services Details of outward supplies – gross basis Tax liability and payment details Section 39 (2) of the Draft Model Bill

Return for Non-resident tax payers
Backed by advance tax They can take credit of IGST on import and pass on credit on all supplies Credit of tax paid on imports Details of outward supplies Similar to GSTR-1 Details of tax paid – ITC ledger and cash ledger Closing stock of goods

Return for ISD Details of inward supplies
Similar to GSTR-2 Details of credit distributed GSTIN of recipient Invoice details Credit distributed – IGST, CGST, SGST ITC account ITC received ITC distributed Section 39 (6) of the Draft Model Bill

Return for TDS Deductors
Pertains to cash ledger and not credit ledger TDS details GSTIN of deductee Invoice details – number, date value TDS details – rate and amount – IGST, CGST, SGST Details of payment – only by cash ledger TDS amount cannot be paid by debiting ITC ledger Section 39 (3) of the Draft Model Bill

End – Session 1

ITC Matching Reversal – Why at all?
Seamless availability of credit in one State of tax paid in another State IGST Model Credit of IGST paid in one State available for payment of local tax in another State – Central Government to transfer funds to State Credit of local taxes paid in one State available for payment of IGST in another State – State Government to transfer funds to Centre No Government can transfer funds unless collection of tax is ensured But recipient have to be given an opportunity to claim ITC ITC matching and auto-reversal is the workable solution

What gets matched Tax invoices Debit and credit note
Issued for every supply by every taxpayer other than composition Including supplementary and revised invoices Debit and credit note To be issued only against an invoice To be issued before end of September of next year Conditions and restrictions about discounts regulated by law

ITC Matching and Reversal
All returns filed with payment of taxes are treated as valid return Self assessment – ITC to be allowed on filing of return Provisionally allowed for payment of taxes in that return as per his claim [Section 41 of the Draft Model Bill] After filing of return [Section 42 of the Draft Model Bill] ITC claims checked for duplication ITC claims matched with tax paid in valid returns Claims that come as a result of auto-population taken as matched if tax paid by supplier Uploaded invoices matched with supply invoices

ITC Matching and Reversal
Duplicate claims communicated to recipient and unmatched claims communicated to both ITC claimed on duplicate invoice added in next return Unmatched invoices Either supplier owns up in next return and uploads it as part of his next month’s GSTR-1 – match in that return cycle Otherwise, ITC claim remains unmatched in next month return and gets added in next return Section 42 of the Draft Model Bill

Reclaim of reversal Any invoice uploaded in a month that does not match with a supply invoice in a valid return gets reversed in two months Once reversed, recipient should not reclaim it again unless uploaded by supplier At any time it gets automatically reclaimed if supplier uploads the invoice Interest on reversal Refund of interest on reclaim – supplier to pay interest on delayed payment of tax Section 42 of the Draft Model Bill

Matching of Credit Notes
Process in previous slides applicable to invoices and debit notes – both lead to payment of tax in the hands of supplier and ITC in hands of recipient Credit Note Reduction of tax liability in hands of supplier Reduction of ITC in hands of recipient Same matching and auto-reversal process but different consequence The reduction of output liability claimed gets added to his liability if recipient does not own it and reduce his ITC clam Same two month cycle Section 43 of the Draft Model Bill

Valid Return Unless tax is paid, the return does not go for matching – ITC for invoices that have been uploaded but tax not paid will get reversed ITC claimed in a return that is not valid available only for utilisation for liability in that return No tax payer can file a monthly return unless he has filed a valid return for previous month’s return If a State has transferred funds to Centre and supplier fails to pay SGST, the recipient shall pay the SGST credit used but not paid If a State has transferred funds to Centre and supplier fails to pay IGST, the recipient shall pay the IGST credit used but not paid Proviso to Section 39 of the Draft Model Bill

Correction in returns No Revision of returns
As per the return taxes have already been paid and fund transfers already settled No significance as the basis now is individual transaction All changes through amendments in subsequent returns If an invoice has been left out in GSTR-1 or GSTR-2 – can be uploaded in subsequent returns If and invoice has been wrongly entered but remains unmatched – can be amended in subsequent returns Proviso to Sections 37 and 38 of the Draft Model Bill

Correction in returns Post transaction changes to be done through debit or credit notes Other details like B2C supplies can be amended in subsequent returns Delayed uploading coupled with payment of interest All changes, credit or debit notes to be carried out before September of the next financial year To enable any auto-reversal before Annual Return Proviso to Sections 37 and 38 of the Draft Model Bill

Statement of Outward Supplies 10th of next month GSTR-2 Statement of Inward Supplies 15th of next month GSTR-3 Return 20th of next month GSTR-4 Return for Compounding suppliers 18th of month in next quarter GSTR-5 Return for Non-resident suppliers GSTR-6 Return for ISD 13th of next month GSTR-7 Return for TDS Deductors GSTR-9 Annual Return 31 dec of next financial year

Annual Return Annual summary of all transactions
Accounts to be certified by Chartered Accountant etc. if turnover more than Rs. 1 Crore Personal Details Details of Expenditure Purchases – goods/services – intra/inter state Imports Details of Income Supplies – goods/services – intra/inter state Exports Section 40 of the Draft Model Bill

Annual Return Account of taxes payable and paid Arrears of taxes
Refunds Profit and Loss Reconciliation Statement Not to be filed by ISD, TDS Deductor, Casual Taxpayer, and Non resident taxpayer Section 44 of the Draft Model Bill

First and Final Returns
First Return Required when the liability to register and pay tax arose before grant of registration Manual process To pay tax where supplies were made before registration To take credit on receipts that happened before registration Final Return On closure of business Reversal of credit on goods in stock Sections 40 and 45 of the Draft Model Bill

Post Return Filing System based notice in case of failure to file return Late fee – Rs. 100 per day Non-filer assessment Analysis of Returns System based scrutiny Scrutiny Assessments Compliance verification

What is our role? To understand the criticality and disseminate
Make Invoice level uploading easy Easy upload through GSTN Software Regular uploading possible System of GSP Integration with accounting software Tax Return Preparers – formal role in the Act and Software Capacity building – tax payers, CAs/TRPs Follow up on invoice level uploading Mitigate risks of failure of uploading and auto-reversal

Thank You

Returns in goods and services tax

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