System-generated returns under GST to accelerate digitization; more GST reforms may boost taxpayer confidence

The Indian tax system witnessed some radical reforms after the implementation of the Goods and Services tax (GST), which replaced a slew of indirect taxes in the country. Hence, it is imperative for one to stay abreast about its compliance. The Goods and Services Tax Network, or GSTN, is the technological platform that helps taxpayers facilitate various functions regarding GST compliance. Applying for registration, assessment, returns, making payments, refunds, adjudication, audit and enforcement, and recovery are some examples of the various functions that the platform facilitates.

One important compliance among those listed above is the filing of GST returns. All dealers registered under the GST law need to file periodic returns. These returns are statements that project the transactions carried out by the business. The frequency of these GST returns depends on the company’s turnover and is either monthly, quarterly, or annual.

At present, there are two key returns or statements that need to be filed by every taxpayer registered under GST: GSTR-1 and GSTR-3B.

Let’s understand these in detail:

Form GSTR-1: GSTR-1 is a sales report mentioning all relevant sales of the organisation. The taxpayers must ensure all sales and its consequent returns are entered in this form. At present, this form needs to be filed either monthly or quarterly based on the applicable turnover of your organisation.

Form GSTR-3B: GSTR-3B, on the other hand, is a summary of liabilities that is due by the taxpayer. It is a self-declaration and needs to be filed on a quarterly or monthly basis based on the turnover. For more information on how to file GSTR-3B, you can head over to Finserv MARKETS.

Based on the above information entered in GSTR-1, GSTR-2A and 2B are auto-populated by the system. These forms help the taxpayer to claim the benefit of input tax credit on the purchases. While GSTR-2A is a dynamic report, Form GSTR-2B is a static one. This data is then made available under Table 4 of GSTR-3B where input tax credit can be claimed against the output liability. Thus, the taxpayer is required only to pay for net liabilities.

At present, GSTN has further introduced two new features that enable the auto-population of details in GSTR-3B based on the inputs from GSTR-1 and GSTR-2B. First, the auto-populated data eliminates the hassle of entering each figure but allows the taxpayer to make necessary amendments in input tax credit based on their books of accounts. Any variation in input tax credit available more than 5% is immediately flagged for attention but the taxpayer can still file a return. This auto-population of fields is a smart move by the GSTN as it eliminates most manual errors.

Further, the system-generated returns that auto-populate data regarding input tax credit are based on integrating information from various other sources like ICEGATE for imports. Auto-filled data helps reduce the errors of mismatch between GSTR-1 and GSTR-3B and avoid complications of reconciliations. Moreover, such a change in filing GSTR-3B helps reduce the time lag in receiving returns.

However, there are some limitations of the system-generated GST returns. For instance, if a taxpayer does not file their sales return on time, i.e. GSTR-1, the consequent buyers may not be able to avail complete credit. Thus, there will be an incomplete auto-population of Form GSTR-2B. Also, any value entered by the taxpayer prior to the auto-fill will not be overridden and may lead to manual errors. Moreover, supplies that require GST to be paid on reverse-charge basis need to be entered by the taxpayer.

While these are only a few limitations, correcting them can help increase the faith of the taxpayers in system-generated reports and facilitate lesser hassles with regards to payments and refunds.