Small businesses are the backbone of Indian economics. They drive the velocity of the country's economics, industrial growth, and catalyst for job creation. However, a large number of businesses in the country are unorganized and irregular in filing returns and paying taxes. This could be due to the knowledge gap, situational issue or perception among businessmen that they are small in size, operations, and earnings, and it is okay to miss the deadline.
As a result, they end up getting a notice from the tax department demanding tax payment, interest, late fee and penalties for non-compliance. Especially in case of VAT dealers, the severity of consequence in terms of monetary impact is lesser to extent of additional cash outflow to the extent of default.
GST, a comprehensive indirect tax system is all set to subsume a host of existing indirect taxes and with its implementation, compliance will become a key factor for the success and credibility of a business. GST works on a self-monitoring mechanism, which is matching the concept of invoice between supplier and recipient of goods and services. Only after matching of invoices and payment of tax by the supplier, the input tax credit will be available to the recipient.
Thus, a customer will always want to do business with vendors who are compliant. This results in a change of relationship between supplier and recipient from 'customer-cum-emotional relationship to compliance relationship'. Hence under GST, non-compliance will not only affect your cash outflow in paying fines, interest, and penalties but also affect the continuity of your business and compliance rating.
Let us understand the various returns to be furnished under GST and things to be taken care of during return filing.
11th of Subsequent Month - Form GSTR-1
In Form GSTR-1, you need to declare the details of all the outward supplies of goods and/or services effected during the month. Invoice-wise details of outward supplies made to registered dealers and aggregate taxable value of supplies made to the consumer are required to be declared. In case, the taxable value of supply made to a consumer is more than Rs 2.5 lakh and if it is interstate supply, you need to declare invoice-wise details.
On the 12th, the visibility of inward supplies is made available to the recipient in the auto-populated GSTR-2A. This is generated based on the outward supplies declared by your supplier in Form GSTR-1. The period from 11th to 15th will allow for any corrections (additions, modifications, and deletion) in Form GSTR-2A. This is the most critical phase of filing of your return, as any omission or correction not reconciled as per the statement in Form GSTR-2A with your inward supplies register, will impact your Input Tax credit eligibility. To save time, quicker and accurate reconciliation, technology will play a key role in your compliance.
15th of Subsequent Month - Form GSTR-2
After reconciling, any additional claim or correction as per Form GSTR-2A needs to be incorporated and submitted in Form GSTR-2 by the 15th of the subsequent month. Based on the claim reported in Form GSTR-2, ITC will be credited to your E-credit ledger on a provisional basis and post matching of the invoice, it will be finalized.
16th of Subsequent Month - Form GSTR-1A
The corrections (addition, modification, and deletion) reported by you in Form GSTR-2 will be made available to your supplier in Form GSTR-1A. The supplier has to accept or reject the adjustments made by the customer by verifying with suppliers the outward supply register.
20th of Subsequent Month - Form GSTR-3
On 20th, based on the Form GSTR-1 and Form GSTR-2, an auto-populated return GSTR-3 will be available for submission along with the payment.
Final Acceptance of Input tax credit in Form GST MIS-1
After the due date of filing the monthly return in Form GSTR-3, the inward supplies will be matched with the outward supplies furnished by the supplier, and then the final acceptance of input tax credit will be communicated in Form GST MIS-1. The following details will be considered in the matching of invoices:
GSTIN of the supplier
GSTIN of the recipient
Invoice/or debit note number
Invoice/or debit note date
Taxable value and
The claim of the input tax credit will be considered as matched, if the amount of input tax credit claimed is equal to or less than the output tax paid on such tax invoice or debit note by the corresponding supplier.
Also, the mismatch input tax credit on account of excess claims or duplication claims will be communicated to the recipient in Form GST MIS-1 and to the supplier in Form GST MIS-2. Discrepancies not ratified will be added as output tax liability along with interest. However, there will be some breathing space since the law provides a window of two months to ratify the discrepancies before reversing the ITC claim on a provision basis.
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