- By Sivaramakrishnan Iswaran
GST and Taxation for MSMEs: The Goods and Services Tax (GST), was launched as a single, simple tax system to exchange a number of oblique taxes. The GST has served as an environment friendly tax system by bringing in additional transparency and streamlining the tax submitting course of for each the authorities and the taxpayers. In order to simplify the compliance process additional for GST-registered companies, the 31st GST Council assembly proposed a brand new return system. This system is prone to be launched on October 1st, 2020. Here, we will focus on the types beneath the brand new system, the important thing variations between the outdated and new returns, and how small enterprise homeowners can use a cloud accounting resolution to remain compliant always.
New GST Return
Under the brand new system, there will likely be three most important return types – Normal (RET-1), Sahaj (RET-2) and Sugam (RET-3). The sort of return to be filed and the submitting frequency is set primarily based on the turnover of a enterprise.
More than Rs 5 crore annual turnover: Businesses fulfilling this criterion should compulsorily file the Normal return on a month-to-month foundation.
Less than Rs 5 crore annual turnover: Businesses that fall beneath this threshold and perform B2C transactions should file Sahaj on a quarterly foundation. Those companies that perform each B2B and B2C transactions should file Sugam on a quarterly foundation. If a enterprise has a turnover of lower than Rs.5 crore however is not eligible to file Sahaj or Sugam return, then they will file the conventional return on a quarterly foundation.
Annexures of Main Returns
All three most important return types can have two annexures (GST ANX-1 and GST ANX-2).
- GST ANX-1 (additionally referred to as Annexure of Supplies) is used for reporting outward provides, inward provides which are topic to reverse cost, and imports of products and providers. The provider can add associated paperwork on a real-time foundation in GST ANX-1.
- GST ANX-2 can have particulars associated to all of the inward provides (besides those that fall beneath the reverse cost mechanism) obtained from a registered provider together with imports and provides obtained from an SEZ unit. Some of the main points uploaded by the provider in ANX-1 will likely be robotically accessible for the recipients in ANX-2 to confirm and settle for, reject or preserve it pending.
Amendments and Payment Form
In the brand new return system, the taxpayer has the choice to amend particulars filed in the principle returns and ANX-1. These amendments will be filed for every tax interval. Any tax funds and claiming of eligible Input Tax Credit (ITC) should be performed utilizing type PMT-08.
Current vs New Return
The new GST returns have introduced in a number of modifications, Here are the important thing variations between the present and the brand new GST return.
Turnover restrict for small taxpayers: Rs 1.5 crore for the earlier monetary yr beneath present GST returns and Rs 5 crore beneath new GST returns.
Number of return types: Multiple return types, like GSTR1, GSTR 3B, and so forth., relying on the taxpayer’s class. MSME taxpayers needed to file as much as 16 returns on a quarterly foundation beneath the present system. Under the brand new system, there’s a single return type (Normal/Sahaj/Sugam), containing two annexures. MSME taxpayers will file four returns.
Claiming Input Tax Credit (ITC): ITC is claimed by self-declaration beneath present returns, whereas beneath new returns, ITC will be claimed by matching auto-uploaded transactions in ANX-2 with the acquisition register. Taxpayers can take provisional credit score for lacking invoices and may report them later.
Reporting of lacking invoices: Missing invoices have been reported utilizing GSTR-3B within the present system. Missing invoices will likely be reported utilizing RET-1 within the new system.
Filing a return whereas cancelling registration: Under the present system, taxpayers needed to file return types even when their software for cancellation was being processed. Under the brand new system, taxpayers needn’t file return types if they’ve filed for cancellation of registration.
Reporting of provides beneath Reverse Charge Mechanism (RCM): Inward provides attracting reverse cost have been reported in GSTR-3B beneath present returns however beneath new returns, inward provides beneath RCM will likely be reported at the GSTIN degree within the ANX-1.
Reporting Harmonised System Nomenclature (HSN) codes: HSN codes needed to be reported individually within the current system however within the upcoming system, HSN will likely be reported at an bill degree.
Reporting imports: In the present returns, ITC on imports was individually reported in GSTR-3B. However, ITC stories will likely be recorded beneath GST ANX-1 within the new returns system.
Challenges Posed by New GST Return
The new system focuses on matching transactions at the bill degree. It permits taxpayers to add invoices constantly in real-time, to be recorded in GST ANX-1. It is certain to be difficult for taxpayers to add correct, error-free invoices and associated paperwork into the portal.
In conditions the place the ITC was claimed on a provisional foundation by the recipient, however the related invoices weren’t been uploaded into the portal by the provider inside a sure interval, the recipient might want to reverse the ITC claimed within the ancient times. So, with the intention to declare Input Tax Credit, enterprise homeowners will now need to preserve their data clear and regularly match their invoices with their accounting.
Need for Cloud Accounting
A GST-compliant accounting system is the easiest way to deal with the modifications launched by the brand new GST return. It will relieve the taxpayers from the agony of guide information entry into the types by auto-populating the fields. This would support in submitting error-free types in a brief span of time. An environment friendly accounting system will help you observe these transactions that are eligible for ITC by matching them with those on the acquisition registers. Having the receipts of those transactions in your cloud account can simplify your return submitting, as they’ll straight get uploaded to the GSTN portal.
The new GST return has paved manner for e-invoicing in India, the place the taxpayers will now need to add invoices in real-time. In such conditions, cloud accounting software program will help you create GST compliant e-invoices and instantaneously ship them to the central system for validation. Since your accounting software program will likely be linked with the federal government portal, it’s going to help you retrieve invoices anytime to make clear the inconsistencies in your books.
With a brand new GST return system arising, it’s a good time for all companies to modify to GST-compliant cloud accounting software program. By adopting the precise software program and processes now, companies can keep away from penalties or different repercussions for non-compliance when the brand new return is carried out in October 2020.
Sivaramakrishnan Iswaran is the Vice President at Zoho Corporation. Views expressed are the writer’s personal.