The easier returns-filing system being put in place by the Goods and Services Tax (GST) Council may even dispense with the summary return form GSTR 3B eventually. In the new system, verification of businesses’ tax liabilities by revenue officials will hinge a lot on the supply invoices that will necessarily have to be uploaded on the GST Network portal. Other anti-evasion measures like e-way bill and reverse charge mechanism will complement the effort to plug revenue leakages. Tax experts said the proposed regime, much simpler than the tried-and-failed mechanism of filing returns in three comprehensive forms, would still allow invoices-matching on a real-time basis, though the onus of this process will shift to the assessees themselves. Small businesses, however, fear that they could find it difficult to get their suppliers to comply promptly and save them the hassle of tax credits getting blocked. The new system, mooted by Infosys chairman Nandan Nilekani in his presentation to the GST Council on Thursday, is akin to what many states employed for value added tax (VAT), but is superior for its ability to present the invoice mismatches on a real-time basis.
Even as over 1 crore businesses have registered themselves on the GSTN and the new tax is into its seventh month, just 1.5 crore detailed returns (GSTR-1) on outward supplies have so far been filed, showing the low level of compliance. While the supply-invoices-only system appears to be much simpler, there are concerns that it will increase the need for businesses to interact with the tax authorities as well the units they transact with.“The absence of GSTR-2 would mean that in case an invoice is not uploaded or a mistake is made, an assessee will have to physically take the matter up with the supplier, which could be onerous in many cases. This will defeat the purpose of end-to-end IT system as in the current system GSTR-2 (purchase returns that get auto-populated once supply returns are filed) provides the ease of fixing a mistake online for an assessee,” Rajat Mohan, partner, AMRG associates, said.
Earlier this month, a committee headed by GST Network chairman Ajay Bhushan Pandey had submitted a report to the Council proposing to merge the triplicate returns into one to ease compliance. This proposal had retained most of the extant return-filing attributes but sought to simplify the processes and cut down on time required for firms to comply. Finance minister Arun Jaitley on Thursday said both the proposals of the Pandey panel and Nilekani would be discussed by the group of ministers on IT along with GSTN and Infosys before finalising a mechanism. This would then be brought before the GST Council for approval before the month-end. He added that the summary return GSTR-3B, which is a self-declared statement of tax liability and ITC, will continue to be used in the initial few months before it is phased out in favour of the new system.”While the return filing process is expected to be simplified by adopting a single-stage filing process instead of a three-stage one, it should be ensured that the verification process that is key to GST’s success is not done away with. Further, the anti-evasion steps which commence with the e-way bill introduction from February 1 are expected to increase the responsibilities of the taxpayers, ” MS Mani, partner at Deloitte India, said.
A government official said that the proposed mechanism could make the system supplier-driven, giving them leverage over buyers as credits could be blocked for the latter without the invoice uploads by the former. “Till the summary return is not done away with, a firm can avail input tax credit for at least two months even if the supplier doesn’t upload invoices in time but this facility will not be available in the new mechanism,” he said. The system should have a mitigating mechanism so that smaller firms aren’t denied prompt ITC if a supplier fails to upload invoices, he added. Since GST was rolled out in July, the Council deferred several measures intended to plug tax evasion including e-way bill, reverse charge mechanism and invoice-matching. This led to a sharp decline in GST revenue in October and November compared with earlier months. While the e-way bill will be rolled out from February 1, the Council is looking to bring back RCM for composition-scheme dealers as well as invoice-matching in a more taxpayer-friendly form.