Beware of Dealing with Non-Compliant Businessman in GST

Last Updated On: Feb. 9, 2020, 7:21 p.m.

The 'One Nation One Tax' goal seems close to becoming a reality in less than a month. Therefore it is important for the Taxpayers to have knowledge of the GST Compliances that need to be done after a couple of days. The Migration of Existing taxpayers to the GST Regime has been restarted from 1st June and it expects to migrate the entire taxpayers before the Appointed Day. Thereafter the Transition Phase will start where the Registered Taxpayers would be able to carry forward their input tax credits in the GST Regime through the filing of certain forms.

But the most interesting thing about the online Compliance procedure in GST would be the careful selection of the Businessman with whom you will be dealing because your Input Tax credit will stand reversed if the Supplier does not comply with the process of confirmation of Invoices in their respective GST Returns

Dealing with unorganized vendors/customers can be a major obstacle. Constant communication with vendors/customers is very crucial for a smooth transition. Taking along unorganized vendors into the GST regime is a risky affair. Many aspects such as matching concepts, compliances, etc, will perturb the process if the vendors are not organized. The challenging task during vendor evaluation is that their preparedness for GST must be assessed well in advance during the transitional phase so that loose links of the chain are not carried forward.

The government believes that the unified tax code will bring in better compliance and better collection of indirect taxes and direct taxes. The government also claims that ultimately, GST will also lead to greater ease of doing business. However, most taxpayers are still worried about the Compliance burden in GST. The first major concern is that compliances are not getting reduced. Every taxpayer, small or large, has to file 37 returns every year. It may be quite hectic for small scale enterprises to comply. Also, the cost of compliance may be too high. 

Every trader will have to file returns once a month and pay tax. The input credits of taxes that have been paid on purchases will be automatic and will be available to every trader. The whole process of filing returns is online. If accounts are kept in the Excel sheet provided by GSTN, then the same account will automatically be converted into returns with the help of an offline tool every month.

If a trader sells all his merchandise only to retail customers, then the returns of such a trader will be very simple – the summary of rate-wise turnover will be shown. If a trader avails of the composition scheme and has a turnover of less than `50 lakh, such a trader will not have to file returns every month, but every three months, showing the total turnover.

Traders selling business-to-business merchandise must give specific details for each sale invoice in their returns. When a trader’s sales details are entered into the form of returns on the GST website by the 10th of the month, the complete details of purchases made by his buyers will be seen in his GSTR-2 (GST Online Account). That means it will auto-populate.

With the purchasing buyer clicking okay, after looking at these details, the merchant’s GSTR-3 return will appear in the computer itself. The GSTN system will auto prepare and show the merchant’s tax liability and the complete details of the input tax credit, along with net tax liability. The trader would be required to deposit the difference between tax liability and input tax credit. Taxes must be deposited online or in the bank.

After this, the trader will have to submit the final return made by the computer by clicking on GSTR-3 and submitting it by the 20th of the month. If the trader from whom you buy goods has shown that transaction in his return by the 10th of the month, you will get the input tax credit. But in case, a person selling the goods does not put that invoice in his returns, even then you will get an opportunity to show it in your GSTR-2 return by the 15th of the month, and by doing so, you will get a full input tax credit.

After that, you have to contact the businessman (the supplier) and explain that he must show that transaction in his return so that there is no reversal of the input tax credit received in the next month. You will get 30 days for this and if even then the merchant who sells the merchandise does not accept this transaction and does not show it in his return, then the input tax credit tax that you got would be reversed in your returns next month.

It is the duty of every businessman to deal with such traders who have deposited the tax with the government after collecting the tax from you. On the basis of the default of each merchant, they will be given a compliance rating, which will be visible to all other traders so that you do not do business with frequent defaulters.

Therefore it is important for every Businessman to deal with such a trader who has a good GST Compliance rating in order to get Input Tax Credit easily.


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