The GST regime is very different from the previous indirect tax regime, in more ways than one. However, the biggest difference is in the nature of compliance, which has undergone a major change. In the previous regime, it was not mandatory for a buyer or supplier to reconcile their invoices before filing onto the government’s systems. Under GST, a buyer will need to reconcile inward supply invoices with the outward supply of their vendor to be eligible for input tax credit before filing periodic returns. In case a buyer today files the tax returns without reconciling with his supplier, he will be carrying a risk of loss of Input Tax Credit (ITC). Given that ITC is of crucial importance to pay off a business’s tax liabilities, non-compliance in the GST era will have a direct impact on a business’s cash flow.
While the task does seem important enough, it is complicated – given the multiple transactions a business has with numerous suppliers and customers. Is there a way, businesses can make this experience a little easier for themselves? In this blog, we will try to understand, 5 steps which we can take to make GST filing easier.
GST returns filing process
Before we can evaluate the steps we can take to make the returns filing process easier, let us quickly go through the process itself in one shot:
|Form Type||Frequency||Due Date||Details to be Furnished|
|Form GSTR 1||Monthly||10th of succeeding month||Furnish details of outward supplies of taxable goods and/or services affected|
|Form GSTR 2A||Monthly||On 11th of succeeding Month||Auto-populated details of inward supplies made available to the recipient on the basis of Form GSTR 1 furnished by the supplier|
|Form GSTR 2||Monthly||15th of succeeding month||Details of inward supplies of taxable goods and/or services for claiming input tax credit. Addition (Claims) or modification in Form GSTR 2A should be submitted in Form GSTR 2.|
|Form GSTR 1A||Monthly||17th of succeeding month||Details of outward supplies as added, corrected or deleted by the recipient in Form GSTR 2 will be made available to supplier|
|Form GSTR 3||Monthly||20th of succeeding month||Monthly return on the basis of finalization of details of outward supplies and inward supplies along with the payment of amount of tax|
|Form GST MIS-1||Monthly||—||Communication of acceptance, discrepancy or duplication of input tax credit claim|
|Form GSTR 3A||—||15 Days from default||Notice to a registered taxable person who fails to furnish returns|
|Form GSTR 9||Annually||31st Dec of next fiscal||Annual Return – furnish the details of ITC availed and GST paid which includes local, interstate and import/exports.|
GST returns filing – How to make it easier?
Now, that we have revisited the monthly cycle businesses need to follow for filing GST returns, it is safe to conclude, that managing all of this on a manual basis is next to impossible. Let alone manual, even those businesses, who maintain their books on excel sheets, will find it difficult to maintain the high standards of compliance which are required from them, in order to safeguard their ITC.
In order to ensure that GST returns filing is a cakewalk, we suggest the following 5 steps:
- Step 1: Computerise your accounts – The first step to take, is to take that crucial decision to computerise your business if you haven’t already. Computerising your billing and accounting will ensure that your records are maintained accurately, which will not only make filing returns easier but also make identification of errors if any, quicker.
- Step 2: Choose the right software for your GST compliance – Once you have got a computer for your business, the next step will be to finalise the right software for your GST compliance. While theoretically, it is possible to file returns directly on the GST portal using utilities made available by the GSTN, it would be easier, especially if you have a large number of transactions and customer base, to use the services of a GST ready software or ERP. The software should ideally allow you to:
- Maintain your accounts in a GST compliant fashion
- Quickly audit and detect errors if any, and correct them on the go
- Seamlessly connect and provide the required transaction-level information to the GST portal
- Match your invoices online with your suppliers, for the right ITC
In short, choosing the right software which allows for a last-mile connectivity to the GSTN portal, will be very crucial and also will be a reliable and hassle-free method to file GST returns for any business, big or small.
- Step 3: Record transactions real-time – The decision of buying a computer, and going for GST compliant accounting software will not hold good if the basic discipline to records transactions in real-time is not inculcated in your business. Recording transactions in real time, and accurately, will ensure that your workload while filing returns will be much lesser. The practice of reconciling your books of accounts, at least at the end of the day, if not more frequently, will go a long way in making sure that your books are already GST compliant, and help you to seamlessly file the requisite returns for your business.
- Step 4: Get the right support for GST – Most businesses will already be using the services of internal or external auditors or tax return preparers – who will be now known as GST Practitioners or GSTPs, who will continue to provide their guidance and expertise in the GST era. Alternatively, if you would like to manage your compliance in-house, ensure that your team is well-trained in GST – as the procedures and formats of GST returns are altogether different than the earlier law. Various trade associations, government, professional organisations, and private organisations provide GST training, and a lot of GST training and sessions are being held across the country, which can help you become prepared.
- Step 5: Allocate a resource to manage reconciliations – For the right compliance and for the right ITC to be availed, the data submitted by the supplier must match that of the customer in order to be accepted by the GSTN. Since this system is new and the data requirements are high, initially there may be many discrepancies within the returns. To resolve these discrepancies, it is a good idea to have a resource in your office, who can talk to your suppliers and resolve the discrepancies. While your software will be able to point out the discrepancies, but ultimately human intervention will be required to resolve them. Similarly, on the output side, your customers will likely appreciate your initiative to rectify discrepancies. However, this step will be more from a short-term perspective as discrepancies are likely to diminish over time.
By taking the above-prescribed steps, businesses can ensure that the extremely critical activity of filing GST returns, does not take up much time and can be done in a hassle-free manner. Getting into the basic discipline of compliance will not only ensure that businesses avail the right ITC, maintain their cash flow and profitability in the GST era, but also do good for one’s credibility in the business system.