Quarterly returns tend to be a new hurdle for MSME's

Last Updated On: Nov. 17, 2020, 10 p.m.



The Small Business people are finding it a bit difficult for quarterly GST return filing. Compliance Resulting in blockage of Input Tax Credit (ITC) is the major relaxation for Micro, Small, and Medium Enterprises. and cash flow problems for large companies. As large companies have to file GST returns on a monthly basis, this problem is prompting them to change suppliers.

Due to large companies trying to harmonize the GST returns issue. The payments to small companies having an annual turnover of up to 5 crore and filing returns on a quarterly basis have also been delayed.

After this issue is been informed to the Government, the larger companies are forced to change suppliers, and the industry

The secretary-general at the Federation of Indian Micro and Small & Medium Enterprises made a statement that

 “Large buyers tend to shirk suppliers filing quarterly returns due to delays in the reconciliation of account. Many small-scale suppliers are afraid that large companies may not continue supply contracts”. He also added that small companies have started looking for ways to solve the issue.

It is believed that companies having a turnover of up to 1.5 crores have been allowed to file returns on a quarterly basis and the same facility will be available to companies having a turnover up to Rs 5 crore by 2021.

In GSTR-1, the GST Rules were amended by inserting Rule 36 (4) from October last year, where the amendment rules state that the input tax credit to be received by the taxpayer in respect of invoices or debit notes not uploaded by suppliers in Form GSTR-1 return shall not cross over 10% of the eligible ITC available. Industry officials said that most MSMEs and small suppliers had opted for filing quarterly returns.

There are a few things that need to be changed in the GSTN system. As done during Covid, the government may consider relaxing the restrictions under Rule 36(4), and allowing provisional credits to all with a quarterly or half-yearly application of Rule 36(4), so that it takes care of mismatch in the monthly vs quarterly filings”.

Small businesses act as a feeder to large conglomerates, and due to the operation of online tax credit matching, such large enterprises face a lot of hassles in monthly reconciliation. Therefore, many businesses have stopped onboarding vendors who file quarterly tax returns, said Rajat Mohan, senior partner at AMRG Associates.

FISME’s Bhardwaj said some of the smaller firms had begun filing monthly returns to mitigate credit blockage and reconciliation issues for larger companies, ends ensuring smoother payments.

“GSTN has also stabilized and thanks to intermediary companies filing is not as cumbersome as it used to be initially

Tax experts said the government should look at correcting the anomaly. “Allow the purchaser to claim input credit on a monthly basis and apply the 10% rule (wherein the credit is limited to 110% of the amount reflected on the portal) on a quarterly basis with respect to purchases from smaller vendors.




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