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How to trade in Interdependency of GST?

CA Umesh Sharma 
on 03 May 2017

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Arjuna (Fictional Character): Krishna, the biggest change in the indirect tax law i.e. GST is coming from 1 July 2017. This law will be applicable to all right from Large businesses to small traders. How trading will be done under GST?

Krishna (Fictional Character): Arjuna, currently many indirect tax laws are there in our country. There is a wide variety of return types and ways to file returns. GST is called as 'One Nation One Tax'. Initially many people are considering  GST law as a very difficult and complicated law. GST is totally  dependent on technology. This will reduce paperwork and increase the number of online transactions. Let's see how traders should handle GST and take care of it!

Arjuna: Krishna, How many returns is to be filed by traders in GST?

Krishna: Arjuna, Every registered person has to file three returns per month under GST. This means that together  36 returns and one annual returns each year i.e. 37 returns will have to be filed in one year. If registered in different states than 37 returns are to be filed in each state. If no transactions are conducted in a particular month, than filing of NIL return is compulsory. The three returns are GSTR-1 (Outward Supply), GSTR-2 (Inward Supply) and  GSTR-3 Final Returns (Original Return).

Arjuna: Krishna, Explain the process for filing returns with the help of an example. How and when first return is to be filed?

Krishna:  Arjuna, Let's see the interpretation of the returns with the help of an illustration.  Luv is a registered person, who is a wholesaler of readymade garments and Kush is a registered person, who is a retailer of readymade garments. If 'Kush' has purchased ready-made clothes from 'Luv' on  3rd  July, 8th  July and 20th July. 'Luv' gave the tax invoice to 'Kush'. Now After the completion of the month of July, 'Luv' has to file return giving details of sales made by him in the month of July in form GSTR-1 till 10th August. 'Luv' will have to take bill-wise information i.e. GSTN number, Date of Invoice, Invoice Number, Quantity, Rate of Tax, Total transaction value and  GST amount.

Arjuna: Krishna, when we have to file the return of purchases and how it will be done?

Krishna: Arjuna, Every purchaser can see Information given by the seller relating to the transactions given by him in the return filed on 10th of next month. That means 'Kush' will get information of bill-wise purchases made from 'Luv'. This information will appear on GSTN. 'Kush' will have to tally all the bill-wise information i.e. GSTN number, Date of Invoice, Invoice Number, Quantity, Rate of Tax, Total transaction value and  GST amount. GSTR-2 is to be filed till 15th August if the information provided is right and accepted. And if there are any change, that means 'Luv' has gave information of the transaction made on 3rd July and 8th July only and forget to give information of transaction made on 20th July than 'Kush' have to file GSTR-2 giving the information about the transaction made on 20th July till 15th August. 'Kush' will get full credit (Input Tax Debit) only if the information of purchases is tallied.

Arjuna: Krishna, What steps are to be taken by 'Luv' after 'Kush' has filed GSTR-2?

Krishna: Arjuna, if 'Kush' changes the information of some bills or more and updates it on  GSTR-2 then changes made will be available to 'Luv' on GSTN. 'Luv' will have 2 days i.e. on 17th August have to accept or reject the changes made by 'Kush'. If 'Luv' accepts the changes then he has to file Revised GSTR-1 till 17th August. In this way there will be matching of sale and purchase of 'Luv' and 'Kush'.

Arjuna: Krishna, How and when GSTR 3 will have to be uploaded?

Krishna: Arjuna, As per the information on GSTN, GSTR 3A will be auto generated  and will be available to both Luv and Kush. Then both will have to fill the details of the ITC taken on sales and purchases made and have to upload GSTR 3 before 20th August and will have to make the payment of GST.

Arjuna: Krishna, what will happen if the Input tax credit does not match?

Krishna: Arjuna, If the Input Tax Credit mismatch means that the seller has shown less sale and the purchaser has shown more purchases which is why there is a difference between GST and Input tax Credit, and if that happens then GSTN will generate ITC report which will show that excess credit claimed by 'Kush' and this will be added in the next month’s liability and 'Kush' will have to pay  with interest.

Arjuna: Krishna, what will happen if 'Luv' does not pay tax?

Krishna: Arjuna, If 'Luv' does not pay tax or did not revise changes then 'Kush' will receive notice for the difference amount in the month of August and ITC of 'Kush' will be reduced and he will have to pay tax on 20th Sept with interest. Interest will be calculated from the month of July.

Arjuna: Krishna, What will be time limit for 'Luv' and 'Kush' to clear the mismatches?

Krishna: Arjuna, 'Luv' and 'Kush' can clear the mismatches before 30th September from the end of the financial year or filling of annual return whichever is earlier.

Arjuna: Krishna, what lesson can be leant from the process of return filling in GST?

Krishna: Arjuna, Every Trader has to learn the return filling procedure under GST. Small traders will have to make changes in Accounting software, Goods and Services Provider, internet, etc. Details of sale and purchase will have to be updated regularly and properly accounting is to be done. If there is any discrepancy then doing business will be very difficult because of the information about the sales is not updated, the buyer will not get it's credit. That's why the same customer  will not come to  buy from that trader. Also if purchases are not updated, than ITC which could have available cannot be claimed.


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