India GST flaws may force early reform

Sun 11th Feb 2018

The Indian Goods and Services Tax Council may in early March consider simplifying the new, complex Goods and Services Tax (GST) filing requirements in the face of IT difficulties.

GST was introduced to India in July 2017, replacing a labyrinth of complex and overlapping indirect taxes. Its aim was to reduce compliance, tax fraud and encourage intra-state trade by ensuring limited double taxation.

3 GST returns to reconcile sales and purchases

A key, and highly ambitious component of the new regime was for tax payers to e-submit three returns each month. The staggered returns covered sales, purchases and reconciled GST due. Any arising differences on matched sales and purchase invoices declared had to be first resolved between the parties before the final GST liability or credits would be accepted. The system has been suspended since the 2017 launch due to IT glitches in the reconciliation.

Proposed new returns process

The IT provider of the network, Infosys, and GSTN have been reported to have drawn up a plan for a revised returns process:

 

  1. Seller has the option to upload invoices on real time basis
  2. Buyer can view the uploaded invoices from their vendors on the portal
  3. Buyer to accept the sales invoices to claim credits, although process for this clearance has yet to be determined
  4. Seller to report sales liabilities in GSTR 3B based on invoices uploaded
  5. Credit to be restricted for the buyer in GSTR 3B to the extent of invoices accepted
  6. Buyer to claim credit/ report transaction w.r.t unregistered suppliers/RCM in GSTR 3B
  7. Buyer would not have option to claim credit for any invoice not uploaded by seller
  8. GSTN would NOT perform any reconciliation for the data uploaded as credit will be restricted to invoices accepted

 

The new proposal thus envisages at least three returns – GSTR 3B(self declaration) on 20th of the Month following a Filing Period; GSTR 1 for outward supply; and the GSTR-2(B?) for inward supply and the final GST liability.

 



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