The Goods and Services Tax (GST) regime, which was rolled out in July 2017, has been a success as far as registration of tax-payers on the GSTN portal and revenue collection goes. But the return filing process has been a nightmare for companies, tax consultants and the revenue department.
In a bid to reduce the burden on taxpayers, the GST Council recently proposed simplified GST return filing rules. While the new rules appear simpler, they could create additional burden on smaller taxpayers. The government needs to ensure that the glitches in the GST Network are ironed out so that the return filing is smoother this time.
A difficult journey
The initial challenge faced by the revenue department while rolling out the GST was in moving all the taxpayers registered to pay sales tax, VAT, excise duty, service tax, luxury and entertainment tax to the new regime. The migration of existing tax payers has been done quite successfully, with almost 66 lakh tax payers being moved from the old system to the new.
But the traffic created by the large number of users (1.14 crore registered taxpayers on the network) proved too difficult to handle for the GSTN — the IT back-bone of the GST. Not only was the system extremely slow, it also had numerous glitches that resulted in taxpayers spending days trying to upload invoices.
To compound the trouble, many taxpayers were not computer-literate and moving to an IT-based tax filing system was difficult for them.
The architects of the GST were too ambitious in trying to make the system a source of data that could be used to check tax evasion. Uploading all the invoices on the GSTN was time-consuming. The need to file three GST returns per month (GSTR-1 for outward supplies, GSTR-2 for inward supplies and GSTR-3 for the final tax payable) also proved onerous.
Recognising these travails, the government offered a reprieve to taxpayers in the initial months, asking them to file every month just the summary return (GSTR-3B) that contained the GST payable by each entity, based on self-assessment. The point of concern is that, one year after the roll-out, taxpayers are mainly relying on GSTR-3B returns to file tax.
What’s changed
The GST Council has now proposed quarterly filing of returns by small taxpayers recording a turnover below ₹5 crore. These taxpayers have the option to pay tax monthly while filing returns every quarter. There is additional leeway provided to very small traders. Simplified returns, in forms called Sahaj and Sugam, that require less information, have been designed for them.
Other taxpayers shall file only one monthly return, as opposed to the three monthly returns that had to be filed earlier. The return is greatly simplified with two main tables. One table contains details of all the outward supplies made by the business. The second contains details about the input tax credit that is claimed, based on invoices uploaded by the supplier.
To prevent last minute congestion on the GSTN, it is now proposed that invoices will be uploaded continuously by the supplier. These invoices can be viewed by the buyer and locked by him/her to claim input tax credit. The Council is calling this the ‘Upload-Lock-Pay’ method. Registered tax-payers with no purchase and sale in a given period can file the return by sending an SMS.
Since errors while filing returns are common, the new return design provides facility for amendment of invoices and other details filed in the return. This can be done through the amendment return.
The Council estimates that 93 per cent of taxpayers have a turnover of less than ₹5 crore, and that they would benefit from the simplified forms.
What tax experts think
Tax consultants think that while the simplification of forms will help, there could be pressure on smaller taxpayers to upload invoices on time so that larger businesses can claim input tax credit.
“The issue, again, for small taxpayers is the payment of tax has been fixed on monthly basis. Further, to ensure that large taxpayers get their input tax credit on a monthly basis, small taxpayers will also have to upload their sales invoices on monthly basis. Hence, the compliance level may reduce a bit, but not substantially, for the small taxpayers,” says Parag Mehta, Partner, NA Shah Associates LLP.
Also, the input tax credit (ITC) will be allowed only if the vendor uploads the invoice. If the vendor fails to upload it within a specified time, the ITC availed will be recovered from the company.
In addition, tax consultants say that enough time should be given to entities and tax consultants to migrate to the new system. The offline IT tool, as mentioned by the department, should be made available at earliest for businesses to get used to the system.