New Rules in GST Registration and Filings
On 21st July 2017 India bought out its most significant reforms in taxation by implementing GST (Goods and Services Tax). A GST Council was formed for framing rules and regulations governing GST compliance in India. This council is headed by Union Finance Minister of India. The Council has been very responsive to the difficulties faced by traders and have been coming up with reforms making it easy for the traders to comply with GST regulations. To understand the changes of the council meetings we need to understand the structuring of GST Registration and filing in the beginning
- GST Registration Criteria
It was compulsory for any trader with an annual turnover of INR 20 Lac or more to register for GST. If you are providing service to other than your home state it was mandatory to get registration irrespective of your revenue. If you are selling products on e-commerce platform it was compulsory to get GST registration even if your annual revenue has not crossed INR 20 Lac. These rules made it compulsory for almost all traders to get GST Registration and consequently follow the complex filing process.
- GST Filing
Govt. envisaged 3 parts of filing and had 3 deadlines every month for the traders to follow. The sales and purchase details were to be filed through GSTR-1 before the 10th day of every month. Input credits as entered by vendors (recipients) was to be updated by the department through GSTR-2 which can be edited by the traders between the 11th and 15th day of every month. Then a final form GSTR-3 which was updated by the department was to be approved by traders either with or without editing between the 16th and 20th day of every month.
Due to some technical difficulties, the govt., could not come up with the forms GSTR-1,2 and 3 on time for the first filing of GST returns. Hence Govt. had to come up with an intermediate form called GSTR-3b in which the traders had to declare their sales and purchases for the month and pay the outstanding GST for the month before 20th day of every month. Govt. extended the deadline for other forms to be filed.
This created lots of confusion and the compliance burden on small traders was extremely high which created chaos in small traders community. The collective feeling of the trading community was that of confusion and desperation since compliance for GST rules created a heavy financial burden on them.
Rules proposed in October 2017
GST council on its 22nd meeting on October 6, 2017, implemented few landmark reforms which went a long way in simplifying the compliances for GST.
- GST Registration Criteria
For a service sector it was made optional to go for GST Registration until they reach a revenue of Rs.20 Lac irrespective of them having sales in states other than their home state. The council also made it optional for traders having inter state sales through e-commerce platform only. They also increased the maximum limit for composition registration from annual turnover of 75 Lacs to 1 Crore
- GST Filing
Council proposed a quarterly filing for GST registered firms with annual turnover less than 1.5 crores. These firms constitute around 90% of the GST registered entities and hence provided great relief to small traders. Govt. Proposed a monthly filing of GSTR-3B (which was to be scrapped eventually) and make GST payment to govt. The returns through GSTR-1, 2 and 3 was to be made quarterly for these small firms. However, different last dates for different forms and heavy penalty still continued to create lot of confusion and financial burden on these small traders
The meeting on May 04 2018 has proposed a returns filing methodology which can be considered as future ready. The council has also taken a decision to implement these changes in 2 phases to avoid any confusion and inconvenience to traders
- GST Filing
Initially for the next 6 months, until the new software gets ready the current system of GSTR-3B (Monthly) and GSTR-1 (Quarterly for small firms). After 6 months, the seller will upload the invoices in GSTN portal which needs to be acknowledged by the buyer. This enables the buyer to get input credit. If there is any gap in the tax paid and credit claimed, the buyer will be notified and the buyer will have to correct the excess claim made, if any. This phase is proposed to be in place for only 6 months after implementation.
After this by around June 2019, there will be facility for the sellers to upload the invoice on the portal on real time so that the input credit for the buyer is not stuck. In both the second and third phases, taxpayers will have to file details of total turnover in case of business-to-consumer transactions. For business-to-business transactions, a four-digit Harmonised System of Nomenclature (HSN) code would have to be mentioned besides all invoice and turnover details.
If the seller fails to pay the tax, the tax authorities will recover it from the seller, unlike in the current system where the buyer is asked to reverse the credit availed along with interest. If the seller is untraceable, the tax will be recovered from the buyer following due course of law. In case of missing invoices, the buyer will not be able to avail the credit.