Litmus test for GST regime as returns deadline looms

Over the next few weeks, the Goods and Services Tax regime will face its most critical test.

The government had extended the date for filing the full returns for July by a month in order to allow tax-payers time to get their processes in place.

Tax-payers, consultants and the government officials face a tough challenge over the next two months as numerous GST returns have to be filed in this period for transactions done in July and August along with the underlying invoices.

Over the weekend, CBEC pushed the deadline for the first return — a self-assessment tax return for July (GSTR 3B) — from August 20 to 25, on the request by many tax-payers. Those with pre-GST tax credit can file the GSTR 3B by August 28 along with the form to claim the transition tax.

Businesses that pay GST at regular rates have to file three returns every month. GSTR-1 for outward supplies, GSTR-2 for inward supplies and GSTR-3 that contains details of the net tax payable based on the outward and inward supply. These forms pertaining to July and August have to be filed between August 25, 2017 and September 30, 2017.

Can they cope? Tax consultants have expressed doubts over small companies’ preparedness to comply with the new rules.

“In the next 60 days, the tax-payer has to file 10 returns, which translate to one return every six days. Large companies can handle this and are gearing for it, but smaller companies with turnover of a few crore rupees do not have the manpower to handle this,” says Pritam Mahure, Pune-based Tax Consultant.

“Also this is for the first time that people are filing returns, so the problem is going to be compounded. Even tax consultants do not know what kind of problems can crop up,” he adds.

The smooth rollout from here will hinge on the functioning of the Goods and Services Tax Network (GSTN), the company that provides the IT infrastructure and services backbone for the tax regime.

More than 70 lakh tax-payers have registered on the GSTN system so far. If these tax-payers have an average of 10 invoices per day, that adds up to over 200 crore invoices to be uploaded on the GSTN every month.

Since the invoices for both July and August are to be uploaded in September, the system will have to handle close to 400 crore invoices that month.

Whether the GSTN system can withstand this stress, especially given the tendency among Indians to do everything on the last day, remains to be seen.

Overdone apprehensions? Officials in the Tax Department, however, feel that the fears are over-done. G Ravindranath, Commissioner, Service Tax, Chennai region, says that a tax-payer actually has to file only GSTR-1. The system provides most of the fields for GSTR-2 and GSTR-3.

“As a tax-payer, you have to file only GSTR-1 for outward supplies. Your supply is some other entity’s inward supply. Now, the system has the data for the entire country. Based on that, the system will give you GSTR-2 that contains inward supplies. You have to check it and add any item that is left out, such as imports. Based on GSTR 1 and 2, the system will give you GSTR-3. The tax-payer will have to check the numbers in this and validate,” he says.

Government officials advice tax payers to key in invoice details on a daily basis to reduce last minute hassles.

Technology handicap With so many Indian businesses not using computers, will filing returns be a challenge?

“Not really,” says Prashanth Ghanti, Head of Product Management - Global Compliance, Zoho Corp. “Even if you do not have your own interface, the government portal is up and running. You can upload your returns using the offline utility.”

Since the GST portal is cloud-based, there are no installation challenges. “You just go to gst.gov.in , log in with your GSTN user name and password and you can start filing your returns,” says Ghanti.

“Small companies which do not have accountants have to go for additional manpower to handle the returns. Part-time accountants are in demand,” says Krishna Kumar, Vice-President, SIEMA. According to him, the main problem facing industry is in understanding the tax rate applicable to their business.