Prime Minister Narendra Modi launched the Goods and Services Tax (GST) at midnight on July 1, 2017. The implementation process has been in the making for nearly two decades since the concept was first proposed under the government of Atal Bihari Vajpayee. In the sight of the new GST returns filing system, the aforementioned law’s journey has always been storm-tossed.
The complex, multifaceted returns structure has been one of the significant challenges of the current GST compliance framework. The initial set up of the GST compliance framework (GSTR-1, GSTR-2, and GSTR-3) is not fully operational. The government and taxpayers have been encountering several difficulties concerning the current layout of GST compliance.
Considering the point of view mentioned above, the 31st meeting of the Goods and Service Tax Council brought some of the significant proposals to the table, one of which includes the GST new return format. Although it was proposed to be implemented from April 2020, the government implemented the GST scheme from October 2020 due to the on-going pandemic and economic crisis.
In this article, we have compiled the structure, types, key features, and know-how of the new GST compliance framework to provide you a clear picture of the new GST regime.
Overview of the New GST Returns Filing System
GST RET-1 / RET-2 / RET-3 is a recently proposed new GST returns filing system that contains the details of each supply made, available ITC, tax payments, and interests (if any). It is one of the significant amendments made under the GST tax calculation system in the year 2020. This return has two annexures called FORM GST ANX-1 and FORM GST ANX-2. Taxpayers are required to present necessary information in each of these components. Here are the complete details on the scheduled timeline and flow of the return cycle.
GST ANX-1 Form (Annexure of Supplies)
GST ANX-1 is proposed to substitute the existing tax form GSTR-1. It contains details of all the outward supplies, inward supplies subjected to reverse charge GST, and imports of goods and services, which must be reported as per the GST invoice rules (excluding B2C supplies) in real-time.
According to the new return filing system, details of supplies must be uploaded by the suppliers, i.e., invoices, debit notes, and credit notes, in real-time before the notified deadline to file GST returns. For supplies subjected to reverse charge, taxpayers must report GSTIN details on form ANX-1, debit/credit notes, and paid advances (if any).
Document-level information has to be filed on the import of goods. Besides, suppliers are required to upload manual reports of the information until data from the ICEGATE system to GSTN begins to flow online. Documents and necessary information should be made available to the recipients to claim ITC in ANX-2 of the recipient.
All necessary information and documents uploaded up to the tenth day of the month following the recipient’s claim of Input Tax Credit (ITC) will be provided in the recipient’s ANX-2. Any document uploaded after the 10th of the month will be made available for the recipient in the next month.
GST ANX-1 provides room for taxpayers to upload missing documents or invoices. Now, what is a missing invoice or document? These are documents on which the government has already issued tax credits on a provisional basis, but the taxpayers fail to present the actual documents before the given timeframe. Note that, in case suppliers fail to produce missing documents, availed ITC has to be borne by the recipient.
GST ANX-2 Form (Annexure of Inward Supplies)
GST ANX-2 is proposed to substitute the existing tax form GSTR-2. The form contains details of all inward supplies. It gives authority to the recipient of the supplies to take actions on the supplier’s auto-populated documents uploaded. These are generally available to them on a real-time basis. It also provides a comparison tool to help taxpayers match their input tax credit based on GST return and purchase history.
ANX-2 allows the recipient to accept, reject, or keep the invoices pending if the supplier uploads documents after the 10th of the following month. Once a recipient agrees to all the details furnished in the documents and accepts it, the documents will no longer be available for modifications of any sort. However, a supplier can edit the document before submitting it. The credits can only be claimed by the recipient under the form ANX-2, although the supplier’s tax liability is calculated in the same taxation period.
Suppliers can make adjustments in the invoices uploaded under GST ANX-1A (read below to know more). Invoices on which the recipient has already claimed ITC are considered as blocked invoices. Thus, if a supplier wants to make adjustments on these invoices, one must either issue a credit note or discount. The recipient can unblock any blocked invoices online, blocked automatically or incorrectly, subject to reversing the ITC claim submitted and confirmed online.
A recipient cannot claim ITC on the invoices that are kept pending. In case suppliers do not file their returns for two months or more, the recipient cannot claim the returns under ANX-2. These invoices must be rejected or kept pending until the supplier claims returns.
GST ANX-1A Form (Modifications of the Data Compiled in Form ANX-1 by the Supplier)
GST ANX-1 form is exclusively proposed to allow taxpayers to make amendments to the details submitted in the prior tax period if required. Taxpayers can make the necessary changes before the due date of September returns, the end of the financial year, or on the actual returns filing date that was earlier.
The recipient can accept the supplier’s monthly return details until the 10th of the following month. The recipient can agree to provide details of quarterly returns uploaded till the 10th of the month, following the quarter end for which the return is filed.
Suppliers can amend rejected documents before submitting subsequent returns. However, ITC will be provided to the recipient via the following Form GST ANX-2. The tax liability for these modified documents will be calculated in the same tax period.
Only suppliers will be able to edit the details of any document. Furthermore, such amendments by the supplier will only be allowed if the recipient does not accept these documents’ details. If the recipient has already accepted these details, the supplier cannot edit these details unless the recipient initiates a reset / unlock procedure. Invoices/documents that have already been claimed will not be available for modifications.
How Often Should Taxpayers File New GST Return?
The Form GST RET-1 has to be filed monthly, except for small taxpayers (taxpayers with an annual turnover of rupees 5 crores in the previous fiscal year), who are required to file quarterly returns. However, taxpayers who opt to file quarterly returns must pay monthly tax through the Form GST PMT-08.
Key Features of the New GST Returns System
The GST Council reviewed a presentation on GST returns’ simplification in its 28th meeting held on July 21, 2018; Considering the suggestions presented by Shri. Manish Kumar Sinha, Joint Secretary (TRU- II), and CBIC, the council approved the key features of the new GST return forms.
- Taxpayers with annual turnover less than Rs 5 crores are required to file single quarterly returns.
- Other taxpayers are required to file single monthly returns statement.
- All taxpayers must pay their monthly tax payments.
- Taxpayers can claim ITC in the new GST returns only against the invoices uploaded directly on the portal.
Conclusion
The COVID-19 pandemic and the global economic crisis have abruptly disturbed the government coffer. Amid the tough times, it would have been a wise decision if the government choose to improve the current GST compliance system rather than implementing the new system in place.
However, we cannot ignore the time and effort that the government has already invested in testing and developing the new GST returns filing system on the GST portal. This news comes with unexpected changes welcomed within the GST decision-making body leaving the taxpayers clueless and confused.
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