With the introduction of GST, multiple reporting under VAT, service tax and central excise have been done away with and a uniform compliance mechanism has been introduced. While this is seen as a major reform and a step towards ease of doing business in India, there have been constant changes to the compliance system which has now led to complexities.
Changes to GST return filing system
It was initially prescribed that Form GSTR-1 (details of outward supplies), Form GSTR-2 (details of inward supplies) and summary return in Form GSTR-3 needed to be filed. However, due to glitches in the GST portal, this mechanism could not be implemented and a simplified return in Form GSTR-3B was introduced in place of GSTR-3. GSTR-1 continued to be filed by taxpayers and GSTR-2 was deferred to a later date.
In order to move forward with the “matching” concept for seamless flow of input tax credit (ITC), the government introduced Form GSTR-2A where a taxpayer could view the inward supplies reported by vendors. This statement came with a “view only” option. Taxpayers were then required to undertake a reconciliation between the ITC register and Form GSTR-2A on a regular basis to ascertain the gaps, which increased efforts in compliance.
Thereafter, the government asked for suggestions from the trade and industry regarding their views on the return filing mechanism. Based on the feedback, the GST Council proposed a new return filing system which comprised one return Form GST RET-1, and two annexures — Form GST ANX-1 (bill-wise details of outward supplies) and Form GST ANX-2 (bill-wise details of inward supplies).
A prototype was introduced for testing purposes and businesses started configuring their systems based on the new returns. However, the proposed new GST returns system has been kept in abeyance and instead, changes are being made to the existing returns system to optimise compliance.
The government has made changes to Form GSTR-2A to include details of import of goods from outside India/SEZ. Also, Form GSTR-2B has been introduced for easy reconciliation of ITC availed with the ITC available as per GST records. A matching tool has also been made available for comparing the ITC register with Form GSTR-2B.
Thus, many changes have been/are being brought out in the return filing system since the inception of GST which require considerable effort to stay updated on the part of taxpayers.
Taxpayers need to file an annual return (summary of inward and outward transactions of a financial year) and a reconciliation statement (comparative of the GST returns with the books of accounts) in specified cases.
During the first year of filing, there were certain issues with the offline utilities provided by the government which led to multiple extensions of the due date for filing these returns. Also, businesses were facing issues in reporting requirements, which were later clarified by the government by issuing FAQs.
Certain reporting requirements were eased for FY 2017-18 and FY 2018-19 such as HSN code-wise details of inward and outward supplies, value of expenses reported in financials vis-à-vis ITC availed of, etc., for helping the taxpayers in filing these returns.
A topic which has been in much discussion of late is the e-invoicing system to be introduced from October 1, 2020, for certain taxpayers. Taxpayers would now be required to transmit the details of outward supplies on a separate portal. A unique invoice reference number and QR code would be given by the portal which is required to be mentioned on the invoice generated by a taxpayer for being GST compliant.
This system is based on an interplay of the accounting system of the taxpayers with the portal. The e-invoicing system would be linked to the e-waybill as well as to the return filing system.
The government has been making changes to the prescribed format and the schema on a regular basis to create a robust system. However, taxpayers have been facing issues in coping with the same as changes to the internal IT systems are also required to be made.
Frequent changes by the government have, sometimes, caused confusion among taxpayers regarding the reporting requirements to be compliant with GST provisions. The recent steps taken by the government for GST compliance may involve a certain effort on the part of taxpayers, but are expected to ease the burden in the longer run.
Saloni Roy is Senior Director, Ankur Goel is Senior Manager and Rajat Gupta is Deputy Manager with Deloitte Haskins and Sells LLP