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Returns Process and matching of Input Tax Credit

Q 1.     What is the purpose of returns?


a)    Mode    for   transfer    of   information   to   tax administration;

b)    Compliance    verification    program    of     tax administration;

c)    Finalization of the tax liabilities of the taxpayer within stipulated period of limitation; to declare tax liability for a given period;

d)    Providing   n e c e s s a r y    i n p u t s    f o r    t a k i n g p o l i c y decision;

e)    Management of audit and anti-evasion programs of tax administration.


Q 2.   Who needs to file Return in GST regime?

Ans.   Every person registered under GST will have to file returns in some form or other.   A registered person will have to file returns either monthly (normal supplier) or quarterly basis (Supplier opting for composition scheme). An ISD will have to file monthly returns showing details of credit distributed during the particular month.  A person required to deduct tax (TDS) and persons required to collect  tax  (TCS)  will  also  have  to  file monthly returns showing the amount deducted/collected and other details as may be prescribed.  A non-resident taxable person will also have to file returns for the period of activity undertaken.

Q 3.   What type of outward supply details are to be filed in the return?

Ans.   A normal registered taxpayer has to file the outward supply details in  GSTR-1 in  relation to various types of supplies  made  in  a  month,  namely  outward supplies  to registered persons, outward supplies to unregistered persons (consumers),  details of Credit/Debit Notes, zero rated, exempted and non-GST supplies, exports, and advances received in relation to future supply.

Q 4.   Is the scanned copy of invoices to be uploaded along with GSTR-1?

Ans.   No scanned copy of invoices is to be uploaded. Only certain prescribed fields of information from invoices need to be uploaded.

Q 5.   Whether     all     invoices     will     have     to     be uploaded?

Ans.   No. It depends on whether B2B or B2C plus whether Intra-state or Inter-state supplies. For B2B supplies, all invoices, whether Intra-state or Inter- state supplies, will have to be uploaded. Why So? Because ITC  will  be taken by the recipients,  invoice matching is required to be done.

In B2C supplies, uploading in general may not be required as the buyer will not be taking ITC. However still in order to implement the destination based principle, invoices of value more than Rs.2.5 lacs in inter-state B2C supplies will have to be uploaded. For inter-state invoices below Rs. 2.5 lacs and all intra-state invoices, state wise summary will be sufficient.

Q 6.   Whether description of each item in the invoice will have to be uploaded?

Ans.   No. In fact, description will not have to be uploaded. Only HSN code in respect of supply of goods and Accounting code in respect of supply of services will have to be fed. The minimum number of digits that the filer will have to upload would depend on his turnover in the last year.

Q 7.   Whether value  for  each transaction  will  have to be fed? What if no consideration?

Ans.   Yes. Not only value but taxable value will also have to be fed. In some cases, both may be different.

In  case  there  is  no  consideration,  but  it  is  supply   by virtue of schedule 1, the taxable value will have to be worked out as prescribed and uploaded.

Q 8.   Can a recipient feed information in his GSTR-2 which has been missed by the supplier?

Ans.      Yes, the recipient can himself feed the invoices not uploaded by his supplier. The credit on such invoices will also be given provisionally but will be subject to matching. On matching, if the invoice is not uploaded by the supplier, both of them will be intimated. If the mismatch is rectified, provisional credit will be confirmed. But if the mismatch continues, the amount will be added to the output tax liability of the recipient in the returns for the month subsequent to the month in which such discrepancy was communicated.

Q 9.   Does    the    taxable    person    have    to    feed anything in the GSTR-2 or everything is auto- populated from GSTR-1?

Ans.   While a large part of GSTR-2 will be auto-populated, there are some details that only recipient can fill like details of imports, details of purchases from non-registered

or  composition  suppliers  and  exempt/non-GST/nil  GST supplies etc.

Q 10. What  if  the  invoices  do  not  match?  Whether ITC  is  to  be  given  or  denied?  If  denied,  what action is taken against supplier?

Ans.   If invoices in GSTR-2 do not match with invoices in counter-party GSTR-1, then such mismatch shall be intimated to the supplier. If the mismatch continues even after it is made known to both and still it is not rectified. Mismatch can be because of two reasons. First, it could be due to mistake at the side of the recipient, and in such a case, no further action is required. Secondly, it could be possible that the said invoice was issued by supplier but he did not upload it and pay tax on it. In such a case, the ITC availed by the recipient would be added to his output tax liability, in  short,  all  mismatches  will  lead to  proceedings  if  the supplier has made a supply but not paid tax on it.

Q 11. What will be the legal position in regard to the reversed input tax credit if the supplier later realizes the mistake and feeds the information?

Ans. At any stage, but before September of the next financial  year,  supplier  can  upload the  invoice and  pay duty and interest on such missing invoices in his GSTR-3 of the month in which he  had earlier failed to upload the invoice. The recipient shall be eligible to reduce his output tax liability to the extent of the amount in respect of which the supplier has rectified the mis-match.  The interest paid by the recipient at the time of reversal will also be refunded to the recipient by crediting the amount in corresponding head of his electronic cash ledger.


Q 12. What is the special feature of GSTR-2?

Ans.   The special feature of GSTR-2 is that the details of supplies  received  by  a  recipient  can  be  auto  populated on the basis of the details furnished by the counterparty supplier in his GSTR-1.

Q 13. Do tax payers under the composition scheme also need to file GSTR-1 and GSTR-2?

Ans.   No. Composition tax payers do not need to file any statement of outward or inward supplies.  They have to file a quarterly return in Form GSTR-4 by the 18th of the month after the end of the quarter.   Since they are not eligible for  any input tax credit, there is no relevance of GSTR-2 for them and since the credit of tax paid under Composition Levy is not eligible, there is no relevance of GSTR-1 for them.   In their return, they have to declare summary details of their  outward supplies along with the details  of  tax  payment.    They  also  have  to  give details of their purchases in their quarterly return itself, most of which will be auto populated.

Q 14. Do I n p u t  S e r v i c e  D i s t r i b u t o r s  ( ISDs) n e e d  to file separate statement of outward and inward supplies with their return?

Ans.   No, the ISDs need to file only a return in Form GSTR-6 and the return has the details of credit received by them from the  service  provider  and the  credit  distributed  by them to the recipient units.  Since their return itself covers these aspects, there is no requirement to file separate statement of inward and outward supplies.

Q 15. How does a taxpayer get the credit of the tax deducted at source on his behalf?  Does he need to produce TDS certificate from the deductee to get the credit?

Ans. Under GST, the deductor will be submitting the deductee wise details of all the deductions made by him in his return in Form GSTR-7 to be filed by 10th of the month next to the month in which deductions were made. The details of the deductions as uploaded by the deductor shall be auto populated in the GSTR-2 of the deductee. The taxpayer shall be required to confirm these details in  his GSTR-2 to avail  the credit  for deductions made on his behalf.  To avail this credit, he does not require to produce  any certificate  in physical or  electronic form. The certificate will only  be  for  record  keeping  of  the tax payer and can be downloaded from the Common Portal.


Q 16. Which type of taxpayers need to file Annual Return?

Ans.      All  taxpayers  filing  return  in  GSTR-1  to GSTR-3, other   than  ISD’s,  casual/non-resident  taxpayers, taxpayers under composition scheme, TDS/TCS deductors, are required to file an annual return. Casual taxpayers, non- resident taxpayers, ISDs and persons authorized to deduct/collect tax at source are not required to file annual return.

Q 17. Is  an  Annual  Return  and  a  Final  Return  one and the same?

Ans.       No. Annual Return has to be filed by every registered person paying tax as a normal taxpayer. Final Return has to be filed only by those registered persons who have applied for cancellation  of registration.  The Final return has to be filed within three  months of  the date of cancellation or the date of cancellation order.

Q 18.   If a return has been filed, how can it be revised if some changes are required to be made?

Ans.      In GST since the returns are built from details of individual transactions, there is no requirement for having a revised return.   Any need to revise a return may arise due to the need to change a set of invoices or debit/ credit notes. Instead of revising the return already submitted, the system will allow changing the details of those transactions (invoices  or  debit/credit  notes)  that  are required  to  be amended. They can be amended in any of the future GSTR- 1/2 in the tables specifically provided for the purposes of amending previously declared details.

Q 19.   How can taxpayers file their returns?

Ans. Taxpayers will have various modes to file the statements and returns. Firstly, they can file their statement and returns directly on the Common Portal online. However, this  may  be  tedious  and  time  consuming  for  taxpayers with large  number  of invoices.    For  such taxpayers,  an offline utility will be provided that can be used for preparing the statements offline after downloading the auto   populated   details   and   uploading   them   on   the Common Portal.  GSTN has also developed an ecosystem of GST Suvidha Providers (GSP) that will integrate with the Common Portal.

Q 20.   What  precautions,  a  taxpayer  is  required  to take for a hassle free compliance under GST?

Ans.     One of the most important things under GST will be timely uploading of the details of outward supplies in Form GSTR-1 by 10th of next month.  How best this can be ensured will depend on the number of B2B invoices that the taxpayer issues. If the number is small, the taxpayer can upload all the information in one go.  However, if the number of invoices is large, the invoices (or debit/ credit notes) should be uploaded on a regular basis.    GSTN will allow regular uploading of invoices even  on a real  time basis.    Till the  statement  is actually submitted, the system will also allow the taxpayer to modify the uploaded invoices.  Therefore, it would always be beneficial for the taxpayers to regularly upload the invoices. Last minute rush will make uploading difficult and will come with higher risk of possible failure and default.   The second thing would be to ensure that taxpayers follow up on uploading the invoices of their inward supplies by their suppliers. This would be helpful in ensuring that the input tax credit is available without any hassle and delay.  Recipients can also encourage their suppliers to upload their invoices on a regular basis instead of doing it on or close to the due date. The system would allow recipients to see if their suppliers have uploaded invoices pertaining to them.  The GSTN system will also provide the track record about the compliance level of a tax payer, especially about his track record in respect of timely uploading of his supply invoices giving details about the auto reversals that have happened for invoices issued by a supplier. The Common Portal of GST would have pan India data at one place which will enable valuable services to the taxpayers. Efforts are being made to make regular uploading of invoices as easy as possible and it is expected that an enabling eco- system will be developed to achieve this objective. Taxpayers should make  efficient  use  of  this  ecosystem  for  easy  and hassle free compliance under GST.

Q 21.   Is  it compulsory for a  taxpayer to file return by himself?

Ans.    No.  A registered taxpayer can  also get  his return filed through a Tax Return Preparer, duly approved by the Central or the State tax administration.

Q 22.   What  is  t h e  c o n s e q u e n c e  of  n o t  f i l i n g t h e return within the prescribed date?

Ans.     A  registered  person  who  files  return  beyond the prescribed date will have to pay late fees of rupees one hundred for every day of delay subject to a maximum of rupees five thousand. For failure to furnish Annual returns by  due  date,  late  fee  of Rs.  One hundred for  every  day during which such failure continues subject to a maximum of an amount calculated at a quarter percent [0.25%] of his turnover in a state, will be levied.

Q 23.   What happens if ITC is taken on the basis of a document more than once?

Ans.     In  case the  system detects ITC being taken on the same document more than once (duplication of claim), the amount  of such credit would be added to the output tax liability of the recipient in the return. [section 42(6)]

Q 24.   Whether the amount of credit detected by the system on account of mis-match between GSTR-1 and GSTR-2 and recovered as output tax can be reclaimed?

Ans. Yes, once the mismatch is rectified by the supplier by declaring the details of the invoices or debit notes, as the case may be, in his valid return for the month/quarter in which the error had been detected. The said amount can be reclaimed by way of reducing the output tax liability during the  subsequent  tax  period.  [section  42(7)].  Similar provisions have also been made in Section 43 of the Act in respect of the credit notes issued by the supplier.