Why this is a welcome step for MSMEs?

Earlier the government has introduced rule 36(4) which says that a taxpayer can claim ITC of only those invoices which are appearing in 2A. A variation of only 10% is allowed. This rule was inoperative for the period from February 2020 to August 2020, but now it is operative.

By the introduction of this rule 36(4), the quarterly filers of GSTR-1 are facing a unique problem. Let’s understand this through an example.

The invoice appears in GSTR-2A only after counterparty files GSTR-1. The quarterly filer files GSTR-1 quarterly. The invoice of this taxpayers appears in GSTR-2A of the counterparty once every quarter. Say if the invoice date is of April 2020 and he is filing the quarterly return on 28th July 2020, his invoice will appear in the GSTR-2A of the counterparty on 28th July 2020. By then the counterparty must have already filed its monthly return GSTR-3B for June month.

This creates a situation that a person purchasing from a quarterly filer can claim ITC credit after a long period which can extend up to 4 months.

This provision alone has created a great hardship on the quarterly filers. The MSMEs who are supplying to large companies are getting continuous requests to file the GSTR-1 monthly.

But the taxpayer cannot change the option to monthly return filing in a mid of the year. This created a situation where the large companies started to avoid doing business with such taxpayers who are filing their return quarterly.

By the introduction of this new due date, quarterly filers get a marginal relief. The period of delay of a maximum of 4 months is now reduced to 3 months.

But this still does not solve the problem completely. Unless the quarterly filers get to change the option of filing GSTR-1 from quarterly to monthly in the mid of the year, the problem cannot be completely solved.

The post Why due date for filing quarterly GSTR-1 is changed first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

This is not a new thing in the tax regulatory system in India. In the time of service tax and excise duty, the Income Tax Department used to share the 26AS data with CBIC. There are so many cases of tax evasion found out by CBIC just by sharing of 26AS data.

In our previous article, we emphasized that now GSTR-2A is the new equivalent of 26AS. GSTR-2A contains such vital information about a particular business that it can be a huge data mine for the income tax authorities in finalising the assessments. 

Now the government has openly come up with an MOU with its 2 departments. This means that in future, the GSTR-2A will play a very important role in income tax assessments.

How GSTR-2A can play a game-changing role in tax assessments, let’s discuss.

1. Expense Verification: The verification of expenses claimed by an income taxpayer can be done from the GSTR-2A data. If expenses data primarily matches with the GSTR-2A, it can be reasonably assumed that the expenses are verified. If data is not matching then there is something fishy about it.
2. Unexplained Expenses: GSTR-2A can show the data of such expenses which have not been claimed by the income taxpayer. This will form a basis of enquiry as to check for the source of such expenses incurred. If the taxpayer is not able to justify the source of the expenses incurred, then it can be treated as unexplained expenses by the taxpayer.
3. Underreported income: GSTR-2A can give a good idea about the size of the business. At present, many cases are showing on the income tax compliance portal where the taxpayer is having entries in his GSTR-2A but not filing the income tax return or not disclosing adequate turnover in the income tax return. This will help in unearthing the underreported income by the income tax department.
4. Non-existing firms: In GST era, the government is facing serious challenges in the form of the dummy and non-existing firms. There are many cases where a GST registered firm is running in a person’s name without the knowledge of the said person. With data sharing between CBIC & CBDT, this will introduce an additional check for finding out the non-existing firms in GST.

The above points are just a brief view of how powerful GSTR-2A can be in tax compliance. Government is now sitting on huge data where it can extract such information which an ordinary taxpayer cannot imagine.

Reconciliation of GSTR-2A is now more important than ever before as it will be treated as a “Janam Kundali” of the taxpayer by the assessing authorities.

The post GST Department to share GST data with Income Tax Department first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

Many are looking at this as a welcome step towards ease of compliance in GST. No doubt that this step certainly is a welcome step for easing the compliance burden of the small taxpayers, however, there will be many cases where this can prove to be only a mirage for them.

For small taxpayers primarily making b2c sales, this will be a good step for reducing their compliance burden. Most of such taxpayers will get a major relief in compliance by filing the GSTR-3B quarterly. But they have to face the challenge of monthly tax payments also.

But for small taxpayers who are making b2b sales, then there is a problem which lies ahead.

In the same meeting, the GST council has proposed that the Input Tax Credit will be auto-populated through form GSTR-2B based on GSTR-1 filing by the counterparty. This means that, if a person is purchasing from a monthly GSTR-1 filer, the input tax credit of the purchases made shall be available to the buyer in the same month in which the purchase is made.

But, if the same buyer buys from a person who is filing GSTR-1 quarterly, he will get the input tax credit only after filing of quarterly GSTR-1 by the vendor. This means that the availment of the input tax credit from quarterly filer can extend up to as far as 4 months from the date of purchase.

This should be a major area of concern for MSMEs who are supplying to large companies having turnover above Rs. 5 crores. These large companies will now prefer to buy from the vendors who are filing GSTR-1 quarterly. Thus a small taxpayer will be under pressure from its large customers to opt for monthly filing of GSTR-1 with a constant fear of losing out of their large customer.

Though the MSMEs are currently also facing this problem since the rule 36(4) was made applicable last year. Due to COVID-19 situation, said rule was kept in abeyance till August 2020. But with this newly proposed provisions where the input tax credit is going to be auto-populated through form GSTR-2B, the challenge for MSMEs are even more.

Thus this option to file the GSTR-1 and GSTR-3B quarterly combined with new and revised input tax credit availment rules will result into a catch 22 situations for the small taxpayers who are supplying to large taxpayers in a b2b sales. They will be either forced to opt for monthly filing or lose their customer.

The post How quarterly filing of GST Returns will impact MSMEs? first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

The company had 80% of its expenses as GST input expenses. Being a service company, it was quite important to vouch for all such expenses. In this period of COVID-19 where movement is quite limited, he used the GSTR-2A reconciliation as the vouching tool for completing the audit.

He got the GST Input Tax Credit register from the client and used Digitax G-RECS for reconciling the full-year data. He was able to do so within hours.

After matching the GSTR-2A data with the GST input tax register of the company, he was able to vouch for 80% of the companies expenses with reasonable certainty that such expenses are genuine and validly claimed.

He was able to find the unclaimed credit on bank charges paid by the company which was more than double the amount of audit fees charged by him. In effect for the client, the auditor has recovered twice the amount of audit costs to the company.

The focus of the auditor remained on the accounts which are not matching with GSTR-2A data and he was able to suggest many points of correction to the client which he was quite happy to implement.

From this case, it can be seen that the GSTR-2A reconciliation is a very powerful tool to finalise the audit for the professionals. As the time period for completion of the audit seems shrinking forever, with the help of a good tool, it is quite possible to complete the audit in an effective and efficient manner.

With our user-friendly GST credit reconciliation tool Digitax G-RECS, it will be quite easy for the professionals to reconcile the GST Input tax credit.

To know more about this product you can contact us over mail on support@digitaxindia.com.

The post Using GSTR-2A Reconciliation as an Audit Tool first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

Recently the government has introduced 26AS in a new avatar. 26AS is now not only a tool to monitor your TDS but also an information tool for the government.

You must have experienced how Income Tax and GST (earlier Service Tax and Excise) departments are continuously pressing upon the reconciliation of 26AS with both income tax returns and service tax or excise returns.

Similarly, in very near future Income Tax and GST departments will also ask for matching of GSTR-2A with your Income Tax Returns, your books, and GST returns.

GSTR-2A will be one of the most important weapons in the arsenal of the Income Tax and GST departments while doing the assessments of your clients.

That’s why we say that GSTR-2A = 26AS

Have you included GSTR-2A reconciliation in your GST and Income Tax return filing process for your clients?

This is very important not only in the return filing process but also in doing accounting for your clients.

Try using Digitax G-RECS ITC reconciliation system.

The post Why GSTR 2A is equal to form 26AS first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

So, let’s get started and go at length with types of GST returns.

1. GSTR-1

We all know that GSTR-1  is the return which is furnished for reporting details of all outward supplies of goods and services made within a  tax period. In simple words, it reports all the details of sales transactions made during a tax period. It also includes details of debit and credit notes, invoices and revised invoices issued during the tax period. If any amendments pertaining to sales invoices are made, even in regard to previous tax periods then they should also be reported in the GSTR-1 return.

GSTR-1 is to be filed by all the registered taxpayers. It is to be filed monthly, with an exception in the case of small taxpayers with a turnover up to Rs.1.5 crores in the previous financial year, who are allowed to file it quarterly.

2. GSTR-2

As we know it, GSTR-2 is the return wherein the reporting of the inward supplies of goods and services, that is,  the purchases made during a tax period. GSTR-2 return details are auto-populated from the Form GSTR-2A. The GSTR-2 return is editable unlike GSTR-2A.

GST Tip: The filing of GSTR-2 return has been suspended ever since the inception of GST.

3. GSTR-2A

GSTR-2A return is auto-populated from the GST portal based on data filed by the suppliers in their GSTR-1. It is non-editable and a read-only return. It is the return which has the details of all inward supplies of goods and services i.e. purchases made from registered suppliers during a tax period. The data is auto-populated based on data filed by the suppliers in their GSTR-1 return.

4. GSTR-3

As we discussed in the last article, GSTR-3 is a monthly summary return providing the summarized details of all outward supplies made, inward supplies received and input tax credit claimed, in addition to the details of the tax liability and taxes paid. The return is auto-generated based on the GSTR-1 and GSTR-2 returns that have been filed.

GST Tip: The filing of the GSTR-3 has been suspended ever since the inception of GST.

5. GSTR-3B

GSTR-3B is a monthly return containing details of tax collected on outward supplies and details of tax paid on input supplies. In simple words, it is a self-declaration containing the summarized details of all outward supplies made, input tax credit claimed, tax liability  and taxes paid. GSTR-3B is to be filed by all the registered taxpayers.

GST Tip: If there is no business activity for any period under tax, in such cases NIL return is to be filed.

6. GSTR-4 / CMP-08

GSTR-4 is the return that was to be filed by the registered taxpayers who opted for the Composition Scheme. But this return has now been replaced by CMP-08 return. The Composition Scheme is the scheme which requires taxpayers with turnover up to Rs.1.5 crores to opt into and pay taxes at a fixed rate on the turnover declared.

GST Tip: The CMP-08 return is a self-assessed statement-cum-payment done on a quarterly basis by the composition dealer.

7. GSTR-5

GSTR-5 is the GST return which is to be filed by non-resident foreign taxpayers, who carry out business transactions in India and are registered under GST. The return contains all business details from all of the outward supplies made to inward supplies received to credit/debit notes to  tax liability and taxes paid.

The GSTR-5 return is to be filed on a monthly basis, for each month the taxpayer is to be registered under GST in India.

8. GSTR-6

GSTR-6 is a monthly return which is to be filed by an Input Service Distributor (ISD). It contains the details of input tax credit received and distributed by the ISD. It also contains the details of all the documents issued for distribution of input credit and the manner of distribution. The return is to be filed before the 13th of next month.

9. GSTR-7

GSTR-7 is a monthly return to be filed by persons who are required to deduct TDS (Tax deducted at source) under GST. GSTR 7 contains all the details of TDS deducted, the TDS liability payable and paid and TDS refund claimed, if any.

10. GSTR-8

GSTR-8 is a monthly return to be filed by e-commerce operators under GST who are required to collect tax at source (TCS). GSTR-8 contains all the details of supplies made through the E-commerce platform, and the amount of TCS collected on such supplies.

11. GSTR-9

GSTR-9 is the annual return to be filed once in a year by the taxpayers registered under GST. It contains the details of all outward supplies made, inward supplies received during the year under different tax heads i.e. CGST, SGST & IGST and HSN codes. It also consists of all the details of taxes payable and paid. It is a consolidation of all the monthly or quarterly returns, i.e., GSTR-1, GSTR-2A, GSTR-3B filed during the year.

Exceptions to GSTR-9 are the taxpayers under the Composition Scheme, Casual Taxable Persons, Non-resident Taxable Persons, Input Service Distributors and the persons paying TDS under section 51 of the CGST Act.

GST Tip: The 37th GST Council meeting has decided GSTR-9 filing to be optional for the businesses with turnover up to Rs.2 crore in FY 17-18 and FY 18-19.

12. GSTR-9A

GSTR-9A is an annual return to be filed by the taxpayers who have opted for the Composition Scheme in a financial year. It consolidates the information of all the quarterly returns filed during the financial year.

GST Tip: The 37th GST Council meeting took the decision to waive off filing of GSTR-9A for Composition taxpayers for FY 2017-18 and FY 2018-19.

13. GSTR-9C

GSTR-9C is a reconciliation statement to be filed by all the registered taxpayers under GST whose annual turnover exceeds Rs.2 crores. The statement of reconciliation is between the figures as per audited financial statements of the taxpayer and the annual return GSTR-9 that has already been filed. It is certified by  a Chartered/Cost Accountant and is similar to that of a tax credit report provided under the Income-tax act.

GST Tip: GSTR-9C is to be filed for every GSTIN, thus, one PAN can have multiple GSTR-9C returns being filed.

14. GSTR-10

GSTR-10 is to be filed by a taxable person whose registration has been cancelled or surrendered under the GST. The return is also known as  final return and is required to be filed within 3 months from the date of cancellation or cancellation order, whichever is earlier.

15. GSTR-11

GSTR-11 is a return to be filed by persons who have been issued a Unique Identity Number(UIN) in order to get a refund under GST for the goods and services purchased by them in India. GSTR-11 contains the details of inward supplies received and refund claimed.

GST Tip: UIN is a classification especially made for the foreign diplomatic missions and embassies not liable to tax in India with the purpose of getting a refund of taxes.

So here are the types of GST returns and every extra information about them. Stay tuned for more such GST enhanced blogs.

The post All About Types of GST Returns first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

In today’s blog, we will talk about GST Return, its types and how to file them. All registered businesses are required to file monthly, quarterly and/or annual GST Returns based on the type of business to take the benefit of Input Tax Credit. Let’s dive deeper in the coming sections.

What is a GST Return?

A GST return is a document containing details of income which a taxpayer is required to file with the tax administrative authorities. The detailed document is then used by tax authorities to calculate tax liability. In simple words, it showcases the income of the registered taxpayers.

As per the GST Act, a registered dealer has to file GST returns that include:

• Sales

• Output GST (On sales)

• Purchases

• Input tax credit (GST paid on purchases)

To file GST returns, a taxpayer needs to have GST compliant sales and purchase invoices.

Who all are required to file GST Returns?

Any regular business is required to file two monthly returns and one annual return in the GST regime. Hence, making it 26 returns in a financial year.

Now, with the advanced technology, a taxpayer only has to manually enter details of one monthly return – GSTR-1 and the other return – GSTR 3B will get auto-populated by deriving information from GSTR-1 filed by the taxpayers and his/her vendors.

However, there are special cases under GST who need to furnish separate returns and these include –

• Input Service Distributors

• Non-resident taxable persons

• Persons allotted with Unique Identification Number (UIN)

• Taxpayers registered under Composition Scheme

• Persons required to deduct TDS or collect TCS under GST

What are the various types of GST Returns?

Following is the list of all the returns to be filed as prescribed under the GST Law along with their purpose and frequency.

1. Form GSTR – 1 :  It contains the details of outward supplies of taxable goods or/and services affected. One needs to file it monthly.

2. Form GSTR – 2 :  It contains the details of inward supplies of taxable goods or/and services affected claiming the ITC. One needs to file it monthly.

3. Form GSTR – 3 :  It is a monthly return on the basis of finalization of details of outward and inward supplies along with tax payment. One needs to file it monthly.

4. Form GSTR – 3B :  It is a simple return in which summary of outward supplies along with ITC is declared and tax payment is affected by a taxpayer. One needs to file it monthly.

5. Form GSTR – 4 :  It is a return filed by a taxpayer registered under the composition levy. One needs to file it quarterly.

6. Form GSTR – 5 :  It is a return that is required to be filed by a Non-Resident foreign taxable person. On needs to file it on a monthly basis.

7. Form GSTR – 6 :  This is the return for an Input Service Distributor which requires a monthly filing.

8. Form GSTR –  7 :  It is a return to be filed for the authorities deducting tax at source and requires a monthly filing.

9. Form GSTR – 8 :  It is a simple return which contains the details of supplies effected through e-commerce operators and the amount of tax collected. One needs to file it monthly.

10. Form GSTR – 9 :  A very important and only return that requires annual filing for the financial year by a normal taxpayer.

11. Form GSTR – 9A :  It is also an annual return which needs to be filed by a taxpayer registered under the composition levy anytime during the year.

12. Form GSTR – 10 :  This return has to be filed only once, when GST registration is cancelled or surrendered and is a Final Return.

13. Form GSTR – 11 :  A return which has the details of inward supplies needed to be furnished by a person with UIN  and claiming a refund. One needs to file it monthly.

GST Tip: It is important to know that all the returns are not in function and some of these were introduced but were suspended.

What is the late fee for not filing returns on time?

As we know, there are always provisions for not following the prescribed time frame, so is the case with GST returns. If one misses the time limit and does not file them within the time then he/she would stand liable to pay interest and a late fee.

The interest is 18% per annum and is calculated by the taxpayer on the amount of outstanding tax that has to be paid. The time period for the interest starts from the very next day of the last day of filing to the date of payment.

The provisions for a late fee is Rs. 100 per day per Act, meaning it is Rs. 100 under CGST and Rs. 100 under SGST, making it a total of Rs. 200 per day. The maximum amount is Rs.500.

GST Tip: There is no late fee on IGST.

For more in-depth information on topics related to GST and GST Returns, stay tuned!

The post Brief Introduction: GST Return, Types and Filing first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

The post Key Outcomes – 3rd National GST Conference first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

You must be thinking, how is this even possible because the money passes through so many direct-indirect channels so its quite tedious task to do but in the advancing technological world everything is easy and can be done on a click. Just like using GRECS for ITC reconciliation to save time and money with a perk of doing it from home!

So, here we are to help you out with your doubt of how the government keeps a check on your tax credit claim. Let’s get started with the following pointers telling the exact method and process followed by the government. 

• Government is sitting on voluminous data in the GST regime.
• Earlier, the power of access to such huge data was unavailable.
• Government engages in the heavy use of Data Analytics with industry and sector benchmarking regarding ITC claim.
• Next comes the smart monitoring systems available with assessing officers configured with various kinds of analytical, graphical and ratio analysis.
• The advancing technology helps in keeping a close eye on unscrupulous refund claims.
• Availability of data trail enables the identification of circular trading transactions.
• Identification of fake entities and registrations using locational mapping techniques helps in tracking down the defaulters. 
• All India e-way bill system tracks the transportation of goods which is now linked with www.vahan.nic.in which provides transparency. Moreover, a proposed system of e-invoicing will further strengthen the control of the government.

With the increasing use of technology, there is less and less requirement of any human intervention in finding out the red flags among such big data. Hence, technology is being used in pinpointing the exact event of fraud and has increased the accuracy of anti-evasion measures undertaken by the department.

Do let us know in the comment section how do you like this piece of information. 

The post How GST department is monitoring your Tax Credit Claim? first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

1. Background.
2. A journey towards Faceless Assessment.
3. Existing Structure of Commissionerates.
4. Future Structure of Commissionerates.
5. Functions of National Assessment Commissionerates [NACs] and Jurisdictional Port Commissionerates [JPCs].
6. Proposed National Assessment Commissionerates [NACs].
7. Procedure for Assessment of Bill of Entry by FAGs.
8. Speaking Order.
9. Appellate proceedings.
10. Review proceedings.
11. Exchange of communication exclusively by electronic mode and Authentication of electronic records.
12. Board to specify the format, mode, procedure, and processes.

The post Detailed Concept Paper on Faceless E-Assessment issued by CBIC requesting suggestions from stakeholders first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.