If you think GST is a 'Good and Simple Tax', you are mistaken. GST is all about technical glitches, daily amendments and confusions. More the Government tries to put to rest the confusions, the poorer its implementation becomes.
If you think Annual Return is just another return seeking consolidation of data filed in GSTR-3B & GSTR-1 in Financial Year 2017-18, you are again mistaken. Imagine you studied the whole year and all of sudden, during exam time, the syllabus is changed. That's what the Annual Return format is. The Government is liberal enough to seek as much as details they could in 5-page Annual Return Format coupled with 5-page instructions notified on 4thSeptember 2018.
If you think you have time till 31stDecember 2018 to file Annual Return that would be your third mistake, Sir. Because, if I state that you have time till 20thOctober 2018, would you believe me? No? Then, read on.
Time to re-draw and revisit 9-month data!
By this time we would have finalized the Balance Sheet for last financial year and would start gearing up for half yearly closing of the Current Financial year. However, let me tell you, it's time to revisit the data of sales and purchases submitted by you for the period July 2017 to March 2018 and re-configure your IT systems to enable arrive at correct data required for requisite fields in Annual Return. It is not a simple sum &consolidation but requires careful analysis and recreation of details which were never required to be filed or which were filed but now dusted and that too for 9 months together.
No one-to-one correlation or auto-population with GSTR 3B & GSTR 1
The details and the format in which details have been sought in Annual Return do not have any one-to-one correlation with details filed in GSTR-1 & GSTR-3B. There may be cases, where details in one field of Table would be fetched from GSTR-3B and other from GSTR-1. Similarly, the way details have been sought, it would be very difficult for the ERP systems to fetch data in the same fashion as demanded in the Annual Return. For example, Exports made with payment of IGST and without payment of IGST is filed in Table 6A of GSTR-1. However, Annual Return Format seeks details in Separate Tables. It would have been easier for taxpayers if most of the details could be auto-populated by GSTN from GSTR-3B and GSTR-1 filed in sequential or appropriate manner. This will surely slog various hours of extra nights for taxpayers and for professionals as well.
In the instructions for filing Annual Returns, reference of Table No's of GSTR-1 & GSTR-3B has been mentioned at most of the places. If all details are to be taken from 1 & 3B, would not be it prudent to auto-populate the data from returns directly. In other words, the Annual Return should have been formulated in a way which facilitates auto-population of data in respective fields. Otherwise, it will necessitate manual intervention, a couple of calculations, adjustments to arrive at correct data.
Overlapping- Exempt, Nil rated & Non-GST Supply.
We are still struggling to identify what all are included in these 3 categories. The very reason is overlapping in their scope. Section 2(47) of the CGST Act, 2017, defines 'Exempt supply' to inter-alia include Nil rated supply and Non-GST Supply. It means multiple interpretations across trades and disparity in disclosure. To add to this, the instructions also point to declare the value of 'no-supply'. Now, what does that mean?
Disclose Value of Credit &Debit Notes - Exempt, Nil rated &non-GST Supply
Amongst others, Table 5H & 5I of Annual Return seeks details of credit notes and debit notes issued in respect of exempt, nil-rated and Non-GST supply. The question is, do we have a separate table in GSTR-1 to report details of credit notes and debit notes for this kind of supplies? If no, then from where this part of the world, Annual Return is asking for these details. The Instructions also states to obtain these figures from Table 9B of GSTR-1. If you refer to Table 9B, it comprises of details only in respect of B2B taxable supplies and Exempt, Nil rated & Non-GST Supply.
Details of Input tax credit- Real Mess
Input tax credit is like a spoiled brat of rich Dad which has all the luxury in-house as it is not less than a hard cash. But when this brat is excessively exploited, he gives you dangerous results. That's what happened with Part III seeking details of ITC in Annual Return. This Part is so confusing that even lawmakers appear to be clueless about their purpose and intention about kind of disclosure required.
Table No. 6: Bifurcate details of Input, Capital goods & Input services
Table seeks separate bifurcation for inputs, capital goods & input services in respect of Input tax credit. This is beyond my imagination as these details were never part of GSTR-1 or GSTR-3B. The details were originally planned to be sought in GSTR-2 which was long suspended thereafter. It seems as GSTR-2 came back to haunt us. Do Government expect us to go back to each and every purchases and cost and re-classify it under Inputs, input services and capital goods for the sake of report and that too for whopping 9 months. This appears to be an unrealistic exercise which will only waste the constructive time of businesses as well as professionals.
Moreover, the similar bifurcation is also required for inward supplies received from unregistered persons covered under reverse charge mechanism, Please note that RCM on inward supplies received from unregistered persons was effective between 1stJuly 2017 and 12.10.2018.
ITC as per GSTR-2A- Whether final credit
Excessive reliance on GSTR-2A by the Government may be in contradiction to requirements contained in CGST Act, 2017 for availing ITC. Section 16(2)(c) of CGST Act, 2017 provides that GST charged by Supplier should have been paid by him as one of the conditions to avail ITC. GSTR-2A is created from GSTR-1 filed by the Supplier. But does it ensure payment of tax by the Supplier? There may be a situation where Supplier has filed GSTR-1 but has not filed GSTR-3B for corresponding supply and thus, not paid tax. Ideally, GSTR-2A is required to be verified whether a tax on these supplies have been paid or not to enable complete compliance of the conditions of availment of input tax credit.
Lapse of ITC- Innovative thought
This is an interesting thing. The Annual return calculates for you the input credit lapsed in last financial year i.e. 2017-18. It comprises of 3 things:
1. The difference in ITC available as GSTR-2A and ITC actually availed in GSTR-3B filed for the period July 2017 to September 2018 which is further classified into :
- ITC available but not availed
- ITC available but ineligible
2. The difference in ITC available on the import of goods and ITC actually availed in GSTR-3B
Note: However, no calculation is contained in Annual return for comparing corresponding details of ITC availed and available in respect of import of services and inward supplies liable under reverse charge mechanism.
The total of above items would be treated as ITC lapsed i.e. cannot be availed anymore.
To avoid lapse of ITC you are supposed to initiate following on immediate basis:
- Compare details of ITC appearing GSTR-2A for all 9 months in last Financial year with corresponding input tax credit availed in GSTR-3B
- The difference if any, should be looked into and rectified by coordination with Suppliers.
- If there is case where ITC was missed to be availed, the same can only be claimed latest in GSTR-3B for the month of September, 2018
- This is the reason that we have stated that effective date for getting prepared for Annual return is 20th October, 2018, because after that ITC would be lapsed forever.
HSN Wise summary of Inward Supply- Keep digging old gold
This Government do not let businesses and professional to have an easy life. The task of digging HSN wise details of Inward supply is like repeating the same Semester not because we failed in exams but because syllabus has changes. This will only add to compliances woes of taxpayers.
It would not be out of context if this Annual Return format is terms a Surgical Strike by the Government.
Two quick recommendation for GST Council:
- To introduce an online facility wherein details of GSTR-3B and GSTR-1 filed for July, 2018 to March, 2018 is made available on consolidated basis.
- To mandate filing of Annual return first year only for Taxpayers having Aggregate Turnover of more than 1.5 crs. This would ease compliance burden and increasing costs of small taxpayers
The author is a practicing Chartered Accountant and Faculty Member of GST by ICAI in Delhi/NCR specializing in GST, UAE VAT, end-to-end start-up formation, compliances& advisory. He has deliberated his views on various GST related issues by Seminars & articles in leading tax journals. He can also be reached at firstname.lastname@example.org