Comments on recommendations of the GST Council in its 42nd meeting on 5th October 2020.
1. Recommendation- In an effort to reduce the compliance burden on the small taxpayers having the aggregate annual turnover less than Rs. 5 cr., allowing filing of returns on a quarterly basis with monthly payments w.e.f. January 2021. However, these taxpayers would, for the first two months of the quarter, have an option to pay 35% of the net cash tax liability of the last quarter using an auto-generated challan.
Difficult to imagine that this would help the small taxpayers because they will have to work out their monthly tax liability in the same manner as they are doing presently then only they can know how much to pay. So it hardly reduces their burden and quantum of work.
These taxpayers have been given the option to pay a tax equal to 35% of their net cash liability of the previous quarter. For example- a taxpayer who paid net cash liability in the October to December 2020 quarter amounting to Rs.1,00,000, then he will have the option to pay Rs.35,000/- in January,2021,Rs.35,000/- in February 2021, and then they have to calculate their liability for the quarter and adjust the balance amount in the quarterly return. Now, what happens if their total cash liability in Jan to March 2021 quarter is only Rs.50,000/-.What will happen to this excess paid (because they have already paid Rs.70,000/-). So it will be better to calculate the actual liability and make a payment every month based on that. What will be the implications of interest for any shortfall in the first 2 months?
The second problem which will come is that those taxpayers having an aggregate turnover of exceeding Rs.5 cr. (say larger taxpayers) will have lesser ITC available as these small taxpayers will shift to file their GSTR1 quarterly. So this will adversely affect the cash flow of the larger taxpayer. These large taxpayers may also resort to withholding the payment of small taxpayers for not able to avail credit on their supplies and this will affect the cash flow of small taxpayers.
So this is going to immediately hit all taxpayers adversely and that too in this pandemic situation.
2. Recommendation- Due date of filing quarterly GSTR-1 return will be revised to the 13th of the month following the end of the quarter.
As per the department’s communication on the GSTN portal, GSTR2B will be getting generated at 12 AM on the 12th morning of the following month. That means it will have invoices from the outward supplies declared by suppliers up to 11.59 PM on the 11th night. It is also being stated that the ITC in GSTR3B will be getting auto-populated from GSTR2B. Now if the small taxpayers file their quarterly return GSTR1 of January 2021 to March 2021 on the 13th of April 2021 then the recipient will not be able to get any ITC of the goods or services from January to March,2021 quarter while filing GSTR3B of March 2021. This may create a very big issue for the larger taxpayers to arrange funds for discharging their liability for the Month of March 2021. Lets sincerely hope that this would not be the intention of the Government and it will take due care while issuing notifications.
3. Recommendation- From 1st April 2021 taxpayers are required to mention 4 digits,6 digits, and 8 digits HSN code for goods and SAC code for services.
This is having implications and effects of complexity to comply with such requirements practically. One has to see from the recipient's point of view. He will have to make different provision in his system (ERP or any other software) in terms of capturing HSN/SAC codes for procurements different suppliers. It is surely impractical to have item master of goods or services supplier-wise. The suggestion is to make it uniform for all whether 4/6/8 digits.
The above comments are based on the press release and we have to wait for notifications to see the details of the changes
Disclaimer: All the views are personal of the author and for educational purposes.
The author is a member of the Institute of Chartered Accountants of India.
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