INTRODUCTION
1. When GST was introduced in July,
2017, a lot of noise was created around the proposed elaborate return filing
systems which provided for online uploading of invoices issued by the supplier
systems, monthly reconciliation of transaction between registered persons,
amendment of transaction in case of mis-matches and subsequently filing of the
final return on a monthly basis to be followed by an annual return at the end
of the financial year and audit for suppliers where the aggregate turnover
exceeded the prescribed limit of Rs. 2 crore.
2. However, the system remained in
papers only as implementation was hit with multiple issues, ranging from
non-functional government portal, lack of preparedness amongst all the
stakeholders, confusion relating to the law, and so on. Therefore, dropping the
above proposed structure, the elaborate return filing mechanism was kept on
hold and compliance was restricted to filing of GSTR 1, i.e., details of
outward supplies on either monthly or quarterly basis depending upon prescribed
turnover and GSTR 3B, a summary statement of outward supplies made during the
period and input tax credit availed on inward supplies on a monthly basis.
3. However, the makeshift
arrangement did not serve the purpose of Government to allow credits based on
transaction level matching, identifying defaulting taxpayers at an earlier
stage, etc. Therefore, a new return filing mechanism has been proposed to
re-introduce the concept of uploading of all details relating to outward and
inward supplies and matching of transactions. In this article, we shall deal
with the proposed return forms and various intricate issues revolving around
the same. The entire discussion is based on the proposed return formats made
available on the public platform. The proposed return filing mechanism is
expected to be made applicable w.e.f July, 2019. The enabling provisions w.r.t
the same are contained in section 43A of the CGST Act, 2017.
BROAD FRAMEWORK
4. The proposed framework
bifurcates tax payers into two categories, based on their aggregate turnover
as:
–Tax payers having annualised aggregate turnover during FY 2017-18
not exceeding Rs. 5 crore. Such tax payers have been given an option to
file returns quarterly or monthly. Further, there are three different options
of returns which can be filed by such tax payers, which are Sahaj, Sugam and
Normal returns. However, if opting for quarterly returns, the tax payers would
be required to make payment of taxes on monthly basis only, which would be
considered while filing of quarterly returns. Further, in case of fresh
registration, the turnover of the previous financial year shall be considered
as zero and therefore such taxpayers shall have an option of filing the returns
either monthly or quarterly.
–Tax payers having annualised aggregate turnover during FY 2017-18
exceeding Rs. 5 crore. Such tax payers have to compulsorily file returns on
monthly basis.
5. The following chart explains
the proposed scheme:
6. The option of whether return
has to be filed monthly or quarterly has to be selected at the start of the
financial year. It is important to note that once a periodicity is selected,
the same can be changed only during the start of next financial year. It is
also important to note that in case there is a change in status during the next
Financial Year, it will be the responsibility of the tax payer to opt for the
change. In case no option is selected, the option selected in the previous year
shall continue to be applied for the next Financial Year as well.
7. Once a tax payer opts to file
quarterly returns, the next step that he needs to take is decide the type of
return that he has to file. For such tax payers there are three different
options of return filing available based on the type of transactions carried
out. For instance, Sahaj scheme is feasible for such tax payers who exclusively
provide service to unregistered persons while Sugam is suitable for those class
of tax payers who are providing service to both, registered as well as
unregistered persons but do not make other supplies, such as exempt, non-GST,
zero rated, etc. For the balance tax payers, i.e., who have all kinds of
transactions, the normal option has to be chosen.
8. In case Sahaj option has been
selected, the tax payer can switch to Sugam but not vice-versa. Similarly, in
case a tax payer selects the normal scheme, he can switch to Sahaj / Sugam
scheme. However, the switch can be done only once, at the start of the
financial year. Further, option for switching from Sugam to Sahaj is not
available, except at the start of the financial year.
FLOW OF EVENTS
9. The flow of events preceding
the filing of the above returns, be it Sahaj / Sugam / Normal return is
-Filing of ANX – 1 – this contains details of outward supplies made
during the tax period and details of inward supplies liable to RCM.
-Filing of ANX – 2 – based on details auto-populated from the suppliers
ANX – 1, the recipient shall file details of inward supplies are following the
steps discussed in the subsequent paras.
-Filing of RET – 1/2/3 – basis the details furnished in ANX – 1 and ANX
– 2, the tax payer will be required to file his applicable return and discharge
the applicable taxes, interest, fees, etc.,
-Interestingly, the formats are silent w.r.t the due dates for filing
the Annexures. Only in the context of ANX – 2, it has been stated that the same
shall be deemed to be filed after the return for the relevant period (month /
quarter) has been filed.
10. While the return in case of
Sahaj and Sugam has to be filed quarterly, the tax payer will have to make
payment on monthly basis in PMT-08 on provisional basis, after disclosing the
liability as well as the ITC availed provisionally, which will be available for
offset while filing the quarterly return. However, in all other cases,
compliances will have to be done on a monthly basis.
11. In this article, we shall
discuss in detail the various intricate aspects revolving around the filing of
ANX – 1 , ANX – 2 and RET – 1 along with the amendments through ANX – 1A and
RET – 1A.
ANX – 1 – details of outward supplies and inward
supplies liable to RCM
12. The new mechanism provides the
tax payer an option to upload ANX – 1 during the course of tax period itself
and not after the end of tax period. Further, the details will also be updated
on real time basis and would be made available to the recipient in his ANX – 2
by way of auto-population.
13. It is imperative to note that
the information to be provided in ANX – 1 is segregated into two parts, one
relating to outward supplies and second relating to inward supplies liable to
RCM. However, on going through the proposed formats, one can note that the
details relating to inward supplies required to be reported not only covers
transactions where tax is payable on RCM, but also all other cases where tax is
applicable but not charged by vendors. For instance, import of goods from
outside India / SEZ / SEZ developer and documents on which credit has been
claimed but not disclosed by the supplier in his RET – 1 for more than two tax
periods, if the tax payer files return monthly and one tax period if the tax
payer files return quarterly.
14. The following table lists down
the key information relating to a transaction that would be required to be
reported in ANX – 1:
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GSTIN / UIN
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– The requirement to file this information
is available in the current scheme as well.
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Place of Supply
(Name of State/ UT)
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Document Details
– Type
– No.
– Date
– Value
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– Under the
current scheme of things, each document type had to be reported separately.
For instance, under the current regime, invoices and credit notes were
reported in separate tables. This is sought to be changed with all document
types, have to be reported under the same head.
|
|
HSN Code
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– While the
current formats prescribed the need to
disclose the HSN code of goods / SAC of service being supplied to be
disclosed in the GSTR 1, the said functionality was never enabled on the
portal. The same is sought to be reintroduced.
– Under the
proposed scheme, the reporting is mandated as under:
– Interestingly, the need to report HSN
wise summary, containing quantitative details has been done away with.
|
|
|
|
Tax rate (%)
|
This is standard
information which is required to be disclosed even under the existing scheme.
|
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Taxable value
|
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Tax amount
(I/C/S/Cess)
|
– Under the proposed scheme, the tax
amount will be auto calculated and not editable, except by way of issue of
debit notes / credit notes. Cess will have to be inputted manually.
|
|
Shipping Bill/ Bill
of Export details (No. & Date)
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– If at the time of filing ANX – 1, these
details are not available, an option to update the same at a later date will
also be provided.
|
15. Once the above set of details
w.r.t each transaction has been collated, the tax payers will need to
segregate, depending on its’ nature, each transaction into:
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Segregation into
the basket of
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Comments
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3A. Supplies made to consumers and unregistered persons
(Net of debit notes/ credit notes)
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3A is common across all the three return schemes while
3B is common for Sugam and the normal scheme.
– HSN wise
details need not be reported for 3A, though required for 3B.
– It is
however important to note that disclosure relating to outward supplies liable
for tax under reverse charge need not be reported here.
|
|
3B. Supplies made to registered persons (Other than
those attracting reverse charge mechanism) – including edit / amendment
|
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3C. Exports with payment of tax
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– The
information sought in this section is similar to what is being required to be
provided in the current scheme as well.
– However, it
is provided that in case of export of goods, details of shipping bill / bill
of export may be provided at a later date also.
|
|
3D. Exports w/o
payment of tax
|
|
3E. Supplies to SEZ units/ developers with payment of
tax – including edit / amendment
|
– The
information sought in this section is similar to what is being required to be
provided in the current scheme as well.
– However,
one important aspect that needs to be noted in the context of 3E is that the
supplier will have an option to select whether he / the SEZ Unit / Developer
would claim refund on such supplies or not? The SEZ Developer / unit will be
entitled to avail such credits and claim consequential claim refund of such
tax only if the supplier is not claiming refunds.
– Similarly,
even in the context of 3G, it has been provided that supplier shall declare
who will claim the refund, the supplier or recipient. If supplier is claiming
refund, the recipient shall not be entitled to avail the corresponding
credits.
|
|
3F. Supplies to SEZ units/ developers without payment
of tax – including edit / amendment
|
|
3G. Deemed exports
– including edit / amendment
|
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3H. Inward supplies attracting reverse charge
|
– The notes
to the return provides that the details of inward supplies attracting RCM
need to be provided GSTIN wise and not invoice wise. In case of unregistered
suppliers, it has been provided that the PAN wise details may be disclosed.
– Furthermore,
it has been also clarified that the details of advances / debit notes /
credit notes relating to such inward supplies have also to be included in the
summary referred. Interestingly, the notes further provide that in case of
advance payment, the tax credit needs to be reversed in the Return form and
the same has to be claimed only after the said service has been received.
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|
3I. Import of Services (Net of DN/ CN and advances
paid, if any)
|
|
3J. Import of goods
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– The note
provides that the details of tax paid on import of goods from outside India /
SEZ Units / developers shall be reported here.
– It further
clarifies that this information shall be required to be provided till the
data starts flowing from the ICEGATE (Customs) portal.
|
|
3K. Import of goods from SEZ units/developers on a Bill
of Entry
|
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3L. Missing documents on which credit has been claimed
in T-2 / T-1 (for quarter) tax period and supplier has not reported the same
till the filing of the return for current tax period
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– This refers
to cases where credit was claimed though not appearing in ANX – 2 but even
after the expiry of two months/1 quarter from the availment of credit, the
same has not been uploaded by the supplier, thus triggering a reversal u/s.
42 (5) of CGST Act, 2017.
|
16. The above classification at
various junctures mentions “including edit / amendment”. The background to the
same is that the proposed scheme is also expected to work on a concept of
matching of transactions. It has been provided that once a transaction has been
uploaded on the portal, the facility to edit/amend the same shall depend on the
status of the transaction, i.e., whether it has been accepted or not? If not
accepted, the same can be amended upto 10th of the following month.
However, if accepted, the same can be amended upto 10th of the
following month, provided the same has been reset/unlocked by the recipient.
However, this restriction of editing/amending a transaction will not apply to
cases where the same pertains to a transaction of supply to a person not filing
returns in RET – 1/2/3, for example supplies made to composition dealers, ISD
or UIN holders and so on). Further, a facility of shifting the documents is
also proposed to be provided for transactions rejected by recipients on account
of wrong tagging. For instance, transaction wrongly tagged as SEZ supply on
payment of tax while the same relates to SEZ supply without payment of tax.
17. In addition to the above, all
tax payers who make supplies through e-commerce operators shall also be
required to disclose the details of turnover made through E-commerce operator
in table 4. However, it is important to note that the details to be disclosed
in table 4 should already be disclosed in table 3 and this is merely for
statistical purpose and would not have any impact on the output liability of
the tax payer.
TRANSITION FROM EXISTING SYSTEM
18. One important question that
arises is how to deal with cases where invoices were issued prior to the
introduction of the proposed scheme. For such cases, there can be three
probable scenarios, as tabulated below:
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Scenario
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Probable actions
|
|
Not reported, either in R1/ 3B
|
Upload the document in ANX – 1 and discharge tax along
with interest in RET – 1
|
|
Reported in 3B, but not reported in R1
|
Document should be uploaded, but in case of invoice,
since the tax liability would already have been discharged, the same would
have to be disclosed at 3C (5) of RET – 1 as reduction in liability.
However, while dealing with CNs, since the reduction
has already been claimed in the earlier scheme, reporting of CN would require
increase in liability to be reported at 3A (8) of RET – 1.
|
|
Reported in R1, but not reported in 3B
|
This would refer to cases where the tax effect of an
invoice/CN has not be considered while filing 3B. For such cases, w.r.t
invoices, the tax amount should be disclosed at 3A (8) in RET – 1 to increase
the liability and in case of credit notes, the tax amount should be disclosed
at 3C (5) to reduce the liability.
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ANX – 2 ANNEXURE OF INWARD SUPPLIES AND MATCHING CONCEPT
19. This annexure primarily deals
with the concept of matching of transactions wherein the transactions reported
by suppliers would be auto-populated on real time basis in this annexure and
the recipient is required to mark each such transaction as either accepted,
rejected or pending.
20. The act of accepting a document
would mean that the recipient has accepted the transaction in all aspects. Acceptance
of a transaction would make it not eligible for edit / amendment by supplier,
unless unlocked.
21. Upon acceptance, if the
supplier has disclosed the transaction in ANX – 1 by 10th of the
next month, credit of the same can be claimed by the recipient in the month to
which the transaction pertains. However, for transactions disclosed after 10th
of the next month, credit would get deferred. Let us understand this with an
example. A supplier has issued an invoice on 15th July, 2019 and
disclosed the same in ANX – 1 on 5th August, 2019, the recipient can
claim credit of this invoice while filing the return for the month of July,
2019 itself. However, in case the supplier reports this transaction only on 15th
August, 2019, then the credit will have to be claimed in the next month.
22. The need to reject a
transaction shall arise, as per the instructions to filing ANX – 2, when
recipient does not agree with details disclosed such as the HSN Code, tax rate,
value etc., which cannot be corrected through a credit/debit note or the GSTIN
of the recipient itself is erroneous and therefore the transaction appears to a
person who is not concerned with the same. The notice of rejection of a
transaction would be sent to the supplier only after filing of return by the
recipient and the same would enable the supplier to edit / amend the
transactions in ANX – 1.
23. The third action, i.e., mark
the transaction as pending means that the recipient is either unsure of the
transaction appearing in ANX – 2 or he is yet to receive the invoice for such
transaction or the corresponding supplies would not have been received by them.
Such transactions which are marked as pending would be rolled over to the ANX –
2 for the next period. However, the same would not be available to the
supplier for editing / amendment unless the recipient rejects them.
24. However, if any transaction is
not marked as accepted/ rejected / pending and the return in RET – 1 / 2 / 3 is
filed, the same shall be deemed to be accepted and corresponding ITC shall be
made available for such recipient. Therefore, it would be very important for
the recipient to ensure that all transactions are marked as either accepted,
rejected or pending as failure to do so might result in claim of credit in case
of transactions which were ultimately meant to be rejected or dealt with
ineligible credits.
25. In addition to the above, there
can be instances wherein a recipient has received invoice from a supplier and
accounted the same in his books of accounts. However, such invoice is not
reported by the supplier in his ANX – 1 or has been reported wrongly (say
classified as B2C or tagged to wrong GSTIN and so on). For such transactions,
the recipient of supply shall be required to self-claim credit for such
transactions in the return form. However, such recipient shall be required to
disclose transactions of self – claim of credit in ANX – 1 if the supplier has
failed to report the transaction in his ANX – 1, in the following manner:
-If the supplier failed to report supplies after lapse of two tax
periods in case of monthly return and one tax period in case of quarterly
return being filed by the recipient.
-The details of such transactions
wherein the suppliers have still not filed their returns, but credit has been
claimed by therecipient shall be made available to the recipient through ANX –
2.
RET – 1 – MONTHLY OR QUARTERLY RETURNS UNDER THE NORMAL SCHEME
26. This is the return which each
tax payer is required to file w.r.t his outward and inward supplies. As of now,
the formats suggest that substantial information would be auto-populated from
disclosures made in ANX – 1 and actions taken on various transactions appearing
in ANX – 2 of the tax payer.
27. However, there would be certain
information which would be required to be filled by the tax payer. The same in
the context of outward supplies would be:
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3.A.8. Liabilities relating to period prior to the
introduction of current return filing system and any other liability to be
paid
|
Refer discussion at para 19
|
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3.C.3. Advances received (net of refund vouchers and
including adjustments on account of wrong reporting of advances earlier)
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In the current scheme, this information needs to be
furnished in GSTR 1 along with POS wise, rate wise summary.
|
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3.C.4. Advances adjusted
|
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3.C.5. Reduction in output tax liability on account of
transition from composition levy to normal levy, if any or any other
reduction in liability
|
Refer discussion at para 19
|
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3.D. (1-5) Details of supplies having no liability
[Exempt and nil rated supplies, non-GST supplies (including no
supply/Schedule III supplies), outward supplies attracting reverse charge and
supply of goods by a SEZ unit/ developer to DTA on a bill of entry]
|
This clause proposes to cover transactions of outward
supplies on which no GST is applicable, such as exempt supplies, non-GST
supplies and so on.
|
28. Similarly in the context of
inward supplies and input tax credit, the tax payer would require to input
following details which would increase the claim of input tax credit:
|
4.A.4. Eligible credit (after 1st July,
2017) not availed prior to the introduction of this return but admissible as
per Law (transition to new return system)
|
This clause will cover disclosure of credit claim relating to invoices issued
under the GST Regime but prior to the introduction of the new scheme of
returns filing.
|
|
4.A.10. Provisional input tax credit on documents not
uploaded by the supplier (net of ineligible credit)
|
This clause will cover self – claimed credits where
transactions are not appearing in ANX – 2 but claimed by the tax payer on the
strength of the documents available on record.
|
|
4.A.11. Upward adjustments to input tax credits due to
receipt of credit notes and all other adjustments and reclaims
|
In case of credit notes reported by a supplier in ANX –
1 and accepted by the recipient in his ANX – 2, there will be automatic
reversal of input tax credit. However, there can be cases where the recipient
would not have claimed credit in the original invoice itself, thus resulting
in double reversal of credit for the recipient. For such cases, the amount of
tax associated with each credit notes will have to be added back to the ITC
claim of the recipient.
Any other adjustments shall also be reported here.
|
29. Further following details which
would decrease the claim of input tax credit will also have to be manually
added to the return by the tax payer:
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4.B.2. Supplies not eligible for credit (including ISD
credit)
[out of net credit available in table 4A above]
|
This would cover cases relating to claim of input tax
credit which are covered by section 17 (5) or other cases wherein the claim
of credit is not eligible.
|
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4.B.3. Reversal of credit in respect of supplies on
which provisional credit has already been claimed in the previous tax periods
but documents have been uploaded by the supplier in the current tax period
|
This clause covers credits which were self-claimed in
the earlier period, and the corresponding transaction has been uploaded by
the supplier and accepted by the tax payer during the current tax period and
therefore in order to avoid double claim, to the extent credit was claimed
provisionally to be reversed.
|
|
4.B.4. Reversal of input tax credit as per law (Rule
37, 39, 42 and 43)
|
This would include adjustments on account of the
specific provisions in the Act
|
|
4.B.5. Other reversals, including downward adjustments
to input tax credits on account of transition from composition to normal
levy, if any
|
This would include all other reversals to input tax
credit on account of reasons, other than the above.
|
30.In addition to the above, as statistical
information, the tax payer would need to identify the amount of credit which
pertains to capital goods and input services out of ITC available net of
reversals determined in the return. The logic behind this segregation is to
determine the amount of ITC in case the tax payer claims refund of accumulated
ITC on account of zero rated supplies/inverted rate structure. However, this
would pose a substantial challenge since various adjustments to the ITC
reported in the return, such as relating to Rule 43 are at aggregate level and
cannot be identified easily at transaction level and therefore the submission
of information to this extent might pose difficulty.
31. The next field that is relevant relates to
calculation of interest and late fee details at table 6. The liability on
account of interest and late fee due to late filing of returns would be
auto-computed by the system. Interestingly, this would also cover following:
liability on
account of late reporting of tax invoices, for instance, invoice of July
reported in August.
liability on
account of rejection of accepted documents.
32. In addition to the above, the tax payer will be
also required to self-calculate interest liability on account of following:
reversal of input
tax credit on account of various reasons, such as Rule 37, 42, 43, etc., as
well as interest
interest liability on account of delayed reporting of transactions
attracting reverse charge. The time of supply in case of reverse charge
transactions is attracted within 60 days from the date of invoice or date of
payment to the vendor, whichever is earlier. However, in case of supply of
services by Associated Enterprises located outside India, the time of supply is
triggered on the date when the entry is made in the books of accounts or the
date of payment, whichever is earlier. In all such cases where the time of
supply is determined late, the same would result in a liability to pay interest
which would have to be reported here.
• Any other interest liability
33. Once the above action is taken, the tax payer
will have to discharge the liability, either by utilising the balance lying in
electronic cash ledger or electronic credit ledger as per the applicable
provisions and file the return.
ANX – 1A – AMENDMENTS TO ANX – 1
34. Under the proposed scheme, it is provided that
a tax payer can amend the details furnished in ANX – 1 and RET – 1 by amending
the return filed for the tax period in which the transaction was reported.
However, such amendment can be done only for transactions wherein GSTIN level
details were not submitted. In other words, B2B, SEZ and Deemed export
transactions cannot be amended. The same will have to be processed through the
“edit/amendment” route only as discussed above.
35. For other cases wherein amendment is required,
the amendment will have to be given effect for the period to which the
transaction pertains. For instance, a sales invoice was reported in July, 2019
as local sale. In September, 2019, it came to the tax payers’ attention that
the transaction was wrongly reported as local sale though it was an interstate
sale as per invoice. Accordingly, for such transaction, the tax payer will be
required to file ANX – 1A of July, 2019 and then proceed to file RET – 1A to
amend the RET – 1 of that period.
36. The above concept will be applicable in case of
amendment of transaction reported late in ANX – 1 also. For instance, an
invoice dated July, 2019 has been reported in ANX – 1 of September, 2019 and
liability discharged while filing the return for September, 2019. However, if
for such transaction any amendment is required to be done, the same will have
to be done in the month of July, 2019 as the transaction pertains to that
month, though disclosed in September, 2019.
37. An amendment can be done in ANX – 1A only w.r.t
transactions which have been reported in ANX – 1. For instance in the above
example, if an invoice dated July, 2019 was not reported in ANX – 1 of July,
2019, the same cannot be then reported in July, 2019 through ANX – 1A. Such
transactions can be reported only through ANX – 1.
38. The ANX – 1A shall be deemed to be filed only
after the RET – 1A has been filed.
RET – 1A – AMENDMENT TO RET – 1
39. Based on the details amended in ANX – 1A,
amendment to details already disclosed in RET – 1 on account of the ANX – 1A
will have to be done. For instance, in ANX – 1A, the liability under reverse
charge has been increased. The impact of this amendment will be auto-populated
in RET – 1A and the tax payer will have to make disclosures w.r.t the said
amendment as to whether any supplies are not eligible for credits and so on.
Only the impact of amendments will be considered in RET – 1A and not all the
transactions reported in the original return.
40. Basis the amendments disclosed in the RET – 1A,
the net tax payable/refundable will be determined. In case a liability is
determined, the same will have to be paid before the filing of RET – 1A.
However, in case the amendment results in excess payment, or negative liability
as referred in the instructions, the same will be made available to the
taxpayer in the next RET – 1 to be filed after filing of RET – 1A.
CONCLUSION:
41. The proposed scheme of returns, undoubtedly
appear more in the nature of old wine in new bottle, with the scope of details
to be disclosed remaining more or less the same. However, there are certain
substantial changes, such as option to amend the returns itself.
42. In
addition to the above, it will also be important for tax payers to shore up
their IT systems to facilitate the above process through automation rather than
manual intervention to avoid possibility of errors.
