Annual filings under the goods and services tax (GST) regime are expected to create chaos for the trade and industry community in the coming months.
Until today, two forms were notified for annual filing. These include an annual return to be filed by a taxpayer and a GST reconciliation statement that has be certified by a practising chartered accountant.
Considering the complexities of annual filing forms, we believe it is an appropriate time to discuss critical issues that require immediate attention from various stakeholders, including corporates, professionals and the government.
Small taxpayers are at disadvantage
Every registered person is required to be file an annual return in Form GSTR-9 irrespective of turnover limit, whereas Form GSTR 9C, which is a reconciliation statement needs to be filed by only those taxpayers whose aggregate turnover exceeds Rs 2 crore in a financial year.
Annual return is a basic form that is based on arithmetic calculations of details furnished in GSTR-3B and GSTR-1 during the relevant period and there is no column for amendment of such details. This means that small taxpayers have no mechanism to correct mistakes committed during the 2017-18 financial year even if they intend to correct it by payment of additional tax or reversal of ineligible tax credits.
Annual return enforces tax positions on taxpayers
Annual return puts a break on claims of tax credit pertaining to the 2017-18 financial year post 30 September 2018 in line with a particular provision of GST law. Tax experts have divergent views on this aspect. The Gujarat High Court has also admitted a writ petition on merits against such tax provision in GST law.
Legally speaking, GST is a trust-based self-assessment tax, whereby taxpayers are permitted to pay tax according to their understanding of tax laws and tax positions taken by them. By notifying a watertight provision, the department has denied legally valid tax positions to taxpayers. This shows a culture of tax compliance where a subordinate piece of legislation (rules and forms) has taken a superior piece of legislation (CGST Act) head on.
The embargo in forms must be removed.
Mismatch in monthly GSTR-3B and GSTR-1
The first year of GST was a bumpy ride riddled with numerous clarifications and notifications as well as frequently changing tax rules. This resulted in mismatches between monthly reporting of outward supplies in GSTR-3B and GSTR-1. Now the concern is whether GSTR 1 or GSTR3B should be taken as a basis for preparation of annual return. Instructions issued by department on annual filing is of no concrete help as it has used the words
“Table ___ from GSTR ___ may be used for filling up these details”. It is evident that authorities themselves are not clear on the manner of preparation of such tax returns and filing the same. Additional reporting burden on taxpayers
There are a few tables that need information that are currently not required to be filed in any tax return. Many taxpayers have not captured such information at the time of processing transactions. Two of them are discussed below.
One, annual returns have a table that requires a taxable person to report Harmonised System of Nomenclature (HSN) wise summary of all inward supplies. Now the dilemma is that such reporting is mandatory irrespective of the fact that supplier has not mentioned any HSN on the invoice, forcing a reporting taxpayer to find out HSN for all products and take the onus of finding a correct one for every supply.
Two, the mandatory reporting of aggregate value of supplies received from composition taxpayers in annual return. GST law never obligated a taxpayer to accumulate and assimilate such information, thereby putting this additional burden on taxpayers to manually check millions and millions of transactions is a cost-ineffective activity.
Such requirements should be done away with.
Taxpayers under cancellation!
There are taxpayers who filed for cancellation of GSTIN on or before March 31, 2018 and some have even filed after such date. All such taxpayers are required to file annual return forms. But what needs to be seen is whether GSTN would permit such taxpayers to log in to the system for the purposes of filing tax returns even though they have surrendered their tax ids.
Annual accounts with reconciliation statement
A reconciliation statement needs to be appended with audited annual accounts as it draws a comparison between annual returns and such audited annual accounts. Now the concern in the case of multi-state taxpayers whether PAN level financial statement needs to be attached with Form 9C or a separate branch level statement needs to be prepared.
These are only a few of the areas that need to be pondered upon by authorities before a final version is implemented. We believe sooner or later issues would be settled in favour of taxpayers, easing the forms and removing the jargons therefrom ensuring a quick a seamless compliance of law.
Rajat Mohan is a partner at AMRG & Associates.
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