FAQ On Returns Process and matching of ITC

26th Nov

FAQ On  Returns Process and matching of ITC

The Govt has come out with FAQ On  Returns Process and matching of ITC to clarify the doubts in the minds of users. Please find the details:-

FAQ On Returns Process and matching of ITC

Q 1. What is the purpose of returns?

Ans. FAQ On  Returns Process and matching of ITC explain that the purpose of returns are;

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 necessary inputs for taking policy decision;

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

Q 2. Who needs to file Return in GST regime?

Ans. FAQ On  Returns Process and matching of ITC explain that Every registered taxable person – who crosses the threshold limit for payment of taxes. A supplier needs to be registered when the aggregate turnover crosses Rs. nine lacs but he become taxable person ONLY when he crosses Rs. ten lacs. So he will be required to file returns when he crosses the threshold limit of Rs. ten lacs. There are some other classes of persons who need to be registered and therefore will have to file returns like interstate suppliers, TDS deductors, e-commerce operators, suppliers supplying goods through e-commerce operators etc (reference Schedule-III and Question 6 of the  Registration Chapter).

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

Ans. A normal registered taxpayer has to file 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 fields 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 Interstate 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 B2B supplies will have to be uploaded. For intra-state invoices below Rs. 2.5 lacs and all intra-state invoices, state wise summary will be sufficient.

Q 6. Whether the 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 the supply of goods and Accounting code in respect of the supply of services will have to be fed. The minimum number of digits that the filer 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 the 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 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 rectified, provisional credit will be confirmed. But if mismatch continues even after intimation, the credit provisionally allowed will be reversed.

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

Ans. FAQ On  Returns Process and matching of ITC explains that  While a large part of GSTR-2 will be auto-populated, there are some details that only recipient can fill 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 was 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, the ITC will be reversed if the mismatch continues even after it is made known to both and still it is not rectified. A mismatch can be because of two reasons.

First, it could be due to the 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 the supplier but he did not upload it and pay tax on it. In such a case, recovery action shall be taken against the supplier. 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. FAQ On  Returns Process and matching of ITC explains that at any stage, but before September of the next financial year, a supplier can upload the invoice and pay duty and interest on such missing invoices in his GSTR-3 of the month in which he uploaded the invoice. The recipient will then automatically get ITC on that invoice. The interest paid by the recipient at the time of reversal will also be returned to the recipient through an automated system on the GSTN.

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

Ans. FAQ On  Returns Process and matching of ITC explain that 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. Whether the ITC denied can be restored?

Ans. FAQ On  Returns Process and matching of ITC explains that if the supplier uploads the invoice at any time after the reversal but by September of the next financial year, the credit reversed earlier gets restored along with the refund of the interest paid during reversal.

Q 14. Do taxpayers under the composition scheme also need to file GSTR-1 and GSTR2?

Ans. No. Composition taxpayers 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 1st 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 they do not pass on any credit to their recipients, 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 15. Do Input Service Distributors (ISDs) need to file a separate statement of outward and inward supplies with their return?

Ans. No, the ISDs need to file only a return in 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 subsidiaries. Since their return itself covers these aspects, there is no requirement to the file separate statement of inward and outward supplies.

Q 16. How does a taxpayer get the credit of the tax deducted at source on his behalf? Does he need to produce TDS certificate from the deductee to get the credit?

Ans.FAQ On  Returns Process and matching of ITC explains that 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 filled 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 taxpayer and can be downloaded from the Common Portal.

Q 17. Who all need to file Annual Return?

Ans. FAQ On  Returns Process and matching of ITC explain that all taxpayers filing return in GSTR-1 to 3 other than casual taxpayers and taxpayers under composition scheme are required to file an annual return. Casual taxpayers, non-resident taxpayers, ISDs and persons authorized to deduct tax at source are not required to file an annual return.

Q 18. Is an Annual Return and a Final Return one and the same?
Ans. No. Annual Return has to be filed by every registered taxable person paying tax as a normal or a compounding taxpayer. Final Return has to be filed only by those registered taxable persons who have applied for cancellation of registration. This has to be filed within three months of the date of cancellation or the date of cancellation order.

Q 19. If a return has been filed, how can it be revised if some changes are required to be made?

Ans. FAQ On  Returns Process and matching of ITC explains that 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 20. How can taxpayers file their returns?

Ans. Taxpayers will have various modes to file the statements and returns. Firstly, they can file their statement and returns directly on the Common Portal online. However, this may be tedious and time taking for taxpayers with a 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 21. What all should a diligent taxpayer ensure for a hassle free compliance under GST?

Ans. FAQ On  Returns Process and matching of ITC explains that 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 taxpayer, 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 develop towards this objective. Taxpayers should make efficient use of this ecosystem for easy and hassle free compliance under GST.

Q 22. Is it compulsory for the taxpayer to file return by himself?
Ans. No. A registered taxpayer person can also get his return filed through a Tax Return Preparer, duly approved by the Central or the State tax administration.

Q 23. What is the consequence of not filing the return within the prescribed date?
Ans. A registered taxable 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 five thousand.

Source: Central Board of Excise & Customs Website

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FAQ On  Returns Process and matching of ITC
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FAQ On Returns Process and matching of ITC