The Goods and Services Tax (GST) will come into effect from July 1, 2017.
Under the new indirect tax system, every business and professional entity in India with an annual turnover exceeding US$31,054 (Rs 20 lakh), and US$15,527 (Rs 10 lakh) in the north-eastern states of India, will be required to obtain GST registration.
Once registered, businesses will receive a 15-digit GST identification number (GSTIN) based on a State-wise code and their Permanent Account Number (PAN). The format is shown below:
Under the GST system, businesses will levy GST on their sales and deposit the same with the tax authority every month. Subsequently, a monthly summary of all sales transactions will have to be submitted online to the tax department. This process is known as return filing and the form in which the return is to be filed is called a GST return.
GST return filing is a mandatory compliance even if there are no sales and purchases carried out by a business during the return period. Such tax payers will have to file a ‘nil’ return. Failure to file returns in time may attract penalty, and in case of non-compliance, a notice from the tax authorities.
However, due to confusion over the GST implementation and non-preparedness of small businesses, the government has relaxed the time-lines for filing returns for the first two months, following the GST roll-out. As a result, no business or company will be charged late fee or penalties for filing late returns until September 2017.
The period for filing GST returns and types of returns vary among different categories of tax payers.
Below we provide a brief overview of the types of returns to be filed under the GST.
Registered tax payers
Every registered tax payer is required to file three monthly returns and one annual return. These include:
GSTR-1 (monthly return)
GSTR-1 provides all the details of the outward supplies or sales made by the tax payer. The return must be filed within 10 days from the end of the tax period, that is, the transaction month.
This is an important form, and provides the basis for all future flow and match of input and output credit settlements. The form contains 13 different heads, including:
- Basic details like business name along with the GSTIN and the period for which the return is being filed;
- Details of invoices issued in the previous month and the corresponding taxes paid;
- Details of advances received against a supply that has to be made in future, and;
- Details of revision made to outward sales invoices in the previous tax periods.
With respect to the last point, tax payers must note that unlike the current regime, the GST does not provide a provision for revised returns. In other words, tax payers will have to file a fresh return for any correction, addition, or deletion in a previous return submitted by them.
GSTR-2 (monthly return)
GSTR-2 provides a summary of all the purchase transactions made by the tax payer.
The tax information on purchase transactions is automatically filled in the GSTR-2 of the tax payer as the same information is provided by the vendors or suppliers to the tax payer in their respective GSTR-1 forms. The tax payer just has to validate the pre-filled information provided by the vendor, and make modifications if any.
GSTR-2 return must be submitted within 15 days from the end of the tax period.
GSTR-3 (monthly return)
GSTR-3 is an automatically generated return form that includes details on sales and purchases as furnished in GSTR-1 and GSTR-2 by the tax payer. The portal auto-calculates the tax liability after considering the input tax credit from GSTR-2.
The due date for filing GSTR-3 is within 20 days from the end of the tax period.
GSTR-9 (annual return)
GSTR-9 is a detailed return form that provides information on all the income and expenditure of the tax payer and regroups them in accordance with the monthly returns. It provides tax payers with an opportunity to correct for short reporting of sales, if any.
Every tax payer with an annual turnover exceeding US$155,568 (Rs 1 crore) is required to furnish a copy of the audited annual accounts and a reconciliation statement along with GSTR-9.
A reconciliation statement includes the value of supplies declared in the return filed for the financial year with the audited annual financial statement.
The due date for filing GSTR-9 is December 31, following the end of the financial year for which it is filed.
GSTR-4 (quarterly return)
Small businesses, including startups and small and medium enterprises (SMEs), which do not have the requisite resources and expertise to comply with the new tax regime, have a provision to opt for the ‘Composition Scheme’ under GST.
Such tax payers are called compounding tax payers and are required to file summarized returns only on a quarterly basis through GSTR-4, instead of filing three monthly returns.
The scheme can be availed by businesses dealing only in goods (service providers have been kept outside the purview of this scheme), and whose annual turnover is less than US$77,634 (Rs 50 lakh).
Moreover, a compounding tax payer is not allowed to avail input tax credit of GST paid to their supplier.
To file a GSTR-4, a compounding tax payer must provide:
- The total value of supply made during the period of return;
- Details of payment of tax in the return, and;
- Declare invoice-level purchase information.
The due date to file the GSTR-4 is the 18th of the month following the quarter for which the return is being filed.
Non-resident taxable persons
Non-resident foreign businessmen or suppliers who make supplies in India for a short period without having any formal business establishment in the country are required to file returns under GSTR-5 for the period of registration.
Foreign businesses must file their GSTR-5 returns monthly, within 20 days from the end of the tax period; or within seven days after the date of expiry of their registration.
Other types of GST returns
Every input service distributor is required to file returns under GSTR-6, and the due date for furnishing details is the 13th day of the month following the tax period.
Authorities deducting tax at source are required to file returns using the GSTR-7 form within 10 days from the end of the tax period.
E-commerce operators are required to provide details of supplies, and the amount of tax collected at source in the GSTR-8 form. GSTR-8 must be filed within 10 days from the end of tax period.
Every taxable person whose registration has been surrendered or cancelled must file their final returns in the GSTR-10 form. The final returns need to be furnished within three months of the date of cancellation or date of cancellation order, whichever is later.
Details of purchases made by a person having a Unique Identification Number (UIN) and claiming refund is to be furnished in GSTR-11. A UIN is a special classification made for foreign diplomatic missions and embassies that are not liable to taxes in the Indian territory.
The due date for filing GSTR-11 is 28th of the month following the month for which the statement is filed (tax period).
Goods and Services Tax Network
All returns have to be filed electronically, through a common portal to be provided by the Goods and Services Tax Network (GSTN). GSTN is a not-for-profit, private limited company, promoted by the government with the specific mandate to provide information technology support and the digital services required for implementing the GST.
This article was first published June 2017.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.