Date: 14th December 2017
Necessity to
change the system of filing returns under GST
Implementation of GST
and subsuming almost all indirect taxes all over India in `one tax’ is really
appreciable huge reform in indirect tax system brought in by the Indian
Government. If the system of filing of returns under GST is kept simplified, no
one can deny that it is a great relief to the business community from
compliance of various indirect tax laws. Therefore, for success of GST, it was
utmost necessary that the simplified system of compliance of returns must have
been brought in. However, it is very unfortunate that, every person in the
Country who is concern with compliance of GST return has become panic because
of complicated and long procedure for compliance of returns. Your Honour would
appreciate, day in day out trade and practitioners are bringing to the notice
of the Departmental Authorities and GSTN, various shortfalls in the online
system. It is also unfortunate to note that even the Departmental Authorities
are helpless and cannot give solution for technical defaults of online system.
The system of compliance
of return is very long which involves several steps as explained below:
(i) Step
1– 10th day of every month: – Filing of
invoice wise sales register in Form GSTR-1.
(ii) Step
2– 11th to 15thday of every month: –
Purchase register in Form GSTR 2A is generated online on the basis of sales
register in form GSTR-1 filed by seller. The invoices reflected in the said
register are to be accepted or rejected or additional invoices to be entered
after checking and comparing each invoice in books of account.
(iii) Step
3– 15th day of every month: – Invoice
wise purchase register to be filed with necessary modifications in Form GSTR 2
(i.e. either accepting or rejecting or adding invoices in Form GSTR 2A). Kindly
note, GSTR 2A is not automatically converted in GSTR 2 on GSTN portal.
(iv) Step
4– 16th & 17th day of every month: – Sales Register in
Form GSTR 1A would be generated online on the basis of purchases modified by
the purchaser. Invoices reflected in said register are to be accepted or
rejected or additional invoices to be entered after checking and comparing each
invoice in books of account.
(v) Step
5- 17th day of every month: – Invoices
in Form GSTR 1A are to be accepted or rejected.
(vi) Step
6- 20th day of every month: – Tax to be paid and actual
return with computation of tax to be filed in Form GSTR 3.
Your Honour will
appreciate the above explained steps and procedure of online filing of returns
is very cumbersome and complicated. Further the technical glitches on the
online GSTN portal make addition to the pain full time- consuming process.
The whole objective
behind employing the above stated long procedure of filing returns is to stop
ineligible claim of Input Tax Credit (ITC), the tax in respect of which would
not have been actually paid in to Government Treasury by seller. The said
objective of the Government may be absolutely logical and necessary to be
achieved when the seamless ITC is offered under the GST Law. However, every
month matching of each invoice of seller with each invoice of purchaser is
herculean task made to perform by way of above stated lengthy process of
return. Prior to GST the tax payer had to access the Government’s web-site only
once for uploading return once it is prepared. However, for GST return one has
to access web-site thousand times because filing of GST return does not involve
simply uploading return. It involves uploading invoice wise registers and
thereafter matching each invoice etc. as stated above. This has created huge
burden and panic amongst the Trade and practitioners.
The objective of the Government
of matching seller’s sales with purchaser’s purchases can be achieved even by
asking to file party wise sales and purchases annexures instead matching each
invoice. This will reduce the burden on the Trade and Practitioners as well as
the burden on the online system. The said party wise annexures used to be filed
under Maharashtra VAT Act up to 31st March, 2016, which was the most successful
system of returns implemented by the Maharashtra Government in VAT era. The
Maharashtra Government had achieved satisfactory success when the system of
party wise annexure of sales and purchases was implemented. It could
successfully identify the mismatched in the sales of seller and purchases of
purchaser. It is necessary to note that the said system was accepted and
welcomed even by Trade and Practitioners all over Maharashtra. Therefore, for
success of GST, such system of party wise annexures of sales and purchases
which was adopted by the Maharashtra Government up to 31st March, 2016 should
be adopted all over India.
After implementation of
GST, huge revenue has been received in the Government Treasury as published by
the Government. This situation of receipt of satisfactory revenue in the
Government Treasury has been witnessed by the Government even though system of
return filing is collapsed and not yet properly and fully available. Utility of
filing actual return in form GSTR- 3 is yet to be made available even for the
month of July, 2017, still people have paid legitimate tax. This is a proof
that almost whole business community and Trade in India are law compliant,
barring may be few. Therefore, it is necessary that Government should realize
that it would have had more increased revenue, if it would have timely
implemented simplified return system instead of making it complicated for
matching invoice level transactions. Therefore, we hereby suggest Honorable Sir
the following:
1. The whole lengthy
procedure of filing GST returns as explained above should be discarded.
2. Return Form GSTR 3B
should made final return under GST.
3. The taxable persons
should be made to file party wise annexures of sales and purchases in addition
to the return in Form GSTR 3B.
4. Online matching of
Sales and Purchases should be automatic and mismatch report should be
generated.
5. Once the mismatch
report is generated on the web-site, the necessary recovery action should be
taken against the defaulting seller who would not have paid tax into Government
Treasury.
6. The tax should be
recovered from the purchaser by disallowing input tax credit only after
exhausting all the machineries of recovery against the defaulting seller and
only when the collusion between seller and buyer is proved.
Honorable Sir, it is
utmost necessary that the above suggestions should be implemented for success
of GST and to avoid panic among st Trade and Practitioners.
Apart from above
procedural problems, certain technical issues have to be addressed immediately
which are as under:
1. Merchant
Exporters:
It is really appreciable
steps taken for the benefit of merchant exporters by exempting taxes in excess
of the amount calculated at the rate of 0.05% or 1.0% when such goods are
procured from registered persons under GST by issuance of Notification No.
40/2017 – CT (Rate) – Dated 23-10-2017.
When registered supplier
supplies goods to such merchant exporters, they will supply by levying 1.0% tax
on output side whereas on input side they may have paid taxes and resultantly
there would be excess input tax credit. Pursuant to Section 54 of CGST Act,
2017, such excess input tax credits are not eligible to refund as refund is
eligible only under a situation when supplies are (i) zero rated- Section 16 of
IGST Act, 2017, made without payment of tax and (ii) where the credit has
accumulated on account of rate of tax on inputs being higher than the rate of
tax on output supplies (other than Nil rated or fully exempt supplies)
Section 54 has not taken
in to consideration such scenario wherein excess input tax credit is on account
of such a situation wherein supplier had supplied goods to merchant exporters.
Hence, it would be difficult for the suppliers to claim the un-utilized input
tax credit arises when supplies to merchant exporters which leads to blockage
of credits and hence supplier would not like to pass on the benefit of input
tax credit at the time of supplying to merchant exporters.
Accordingly, it is
suggested to amend the Section 54 and includes circumstances mentioned above.
Meantime, it is also expected to provide clarification pursuant to Section 172
of CGST Act, 2017 that such suppliers would be eligible to claim the refund of
such un-utilized input tax credits just like other tax payers supplies to
exporters.
2. Deemed
Exporters
One more benevolent
steps taken for the Indian Exporters is to notify supplies of goods by a
registered person would be considered as Deemed Exports when supplies to (i)
Export Oriented Units which also includes Electronic Hardware Technology Park
Unit or Software Technology Park Unit or Bio-Technology Park Unit approved in
accordance with the provisions of Chapter 6 of the Foreign Trade Policy
2015-20; (ii) Supply of goods by a registered person against Advance
Authorization; (iii) Supply of capital goods by a registered person against Export
Promotion Capital Goods Authorization.
We would require
“clarification / amendment in law in respect of followings –
a. When supplier
supplies to Export Oriented Units located with the same State, whether such
supplies would be considered as Exports? Exports are defined under section 2(5)
of IGST Act, 2017 and it means taking out of India to a place outside India.
Accordingly, such supplies would not constitute exports of goods.
b. If such supplies are
considered as export of goods, whether supplier of such goods can exports by
without making payment of tax and would be eligible to furnish Letter of
Undertaking as provided under N. No. 37/2017- Central Tax Dated 04-10-2017?
c. If such supplies are
not considered as export of goods, whether supplier of such goods have to
charge CGST and SG ST as both supplier and Export Oriented Units are located in
same State or supplier have to charge IGST. At present GSTN portal consider
such supplies to Export Oriented Unit under Interstate transactions.
d. Export Oriented Units
are eligible to sale their goods in local market i.e. in India subject to
certain conditions. In such a scenario, when Export Oriented Units supplies
goods, whether such transactions would be considered as Inter-State
transactions or Intra- State transactions pursuant to Section 7 of IGST Act,
2017.
3. Refund to
tax payers supplies goods locally as well as exporting:
Tax payers is exporting
goods outside India, such supplies are considered as zero rated supplies [S. 16
of IGST Act, 2017] and tax payers are eligible for refund of taxes paid on
goods or services or both pursuant to provisions of Section 54 of CGST Act,
2017. When such tax payers supplies any goods within India (Local Sales)
whether DEPB License or any other goods or services, Rule 89(4) provides for
eligibility of input tax credit on proportionate basis of zero rated supplies
upon Turnover in State (includes local taxable supplies). Accordingly, though
majority of expenses are in relation to export of goods, since tax payers is
selling very meager amount of local sales, for availing input tax credit, tax
payers needs to do the proportion of such turnover which results in to lower
amount of refund attributable to export turnover.
4. Composition
Scheme:
The CGST Rules, 2017
(Registration and Composition) Rule 3(4)provided that any person who files an
intimation under sub-rule 1 to pay tax under section 10 (Composition) .shall
furnish details of stock, including URD purchases, held by him on the day
preceding the date from which he opts to pay tax under the said section in FORM
GST CMP 03. According to sub-rule 1 migrated dealer those who opts composition
have to file CMP-01.
These rules are provided
that if the migrated dealer those who are not opting composition under existing
law have to file CMP-01 and CMP-3 if they opts to composition under the GST.
Now, see the Maharashtra
Value Added Tax (Amendment) Rules 2017 date 30/06/2017 in Rule 53 for sub
rule(5) new sub rule shall be substituted- “Rule 53(5)(c) if the dealer who has
not opted to pay tax under composition scheme provided as per sec. 42 or 43
during the previous year but opts for the composition scheme provided under the
GST Act, then is such cases the set off on the purchases corresponding the
goods held in stock as on the date immediately preceding the date of
commencement of the GST shall be disallowed and accordingly be reduced fully”.
We would like to get
clarification, whether tax payers have to file revised return for the 30th June
and to give effect to reduced setoff under MVAT? Whether the intimation CMP-03
without payment of GST? However fact remains that tax payers are not able to
file CMP-03 without making payment of taxes.
It is further observed
that in case the of those tax payers who have applied composition after
16/08/17 their periodicity shown on GSTN portal for the period July to
September and hence such tax payers are not able to file either monthly or
quarterly return for the period July to September.
