The new GST return system will be implemented from October 2020 onwards. The main reason the old system got revamped is because of the need for a single, simple and concise return form, as compared to multiple return forms of complex nature that are currently being filed. Under the new system, there will be only one main return called the GST RET-1, which will comprise of 2 annexures – GST ANX-1 and GST ANX-2.
Here are some of the key changes between the old and new GST return systems relating to inward supplies and input tax credit.
1. What are the Forms under the New GST Return System?
The main return RET-1 will contain all details of outward and inward supplies, along with taxes paid. The first annexure GST ANX-1 (Annexure of Supplies), is for reporting details of outward supplies, inward supplies liable to reverse-charge, and import of goods and services. The second annexure GST ANX-2 (Annexure of Inward Supplies) will contain details of inward supplies.
The annexures under the new return system will work on a real-time basis where suppliers can upload invoices as and when a transaction takes place. Recipients have the option to accept or reject these invoices, or mark them as pending in order to take a decision on them at a later date. It is advantageous to suppliers and recipients both, as they do not have to wait until the end of a tax period in order to reconcile their returns with their books of accounts.
2. What are the Differences with Regard to Reporting of Inward Supplies and Input Tax Credit?
Let’s classify the differences in reporting inward supplies and input tax credit into 3 main categories based on Procedural Actions, Formats and Reporting, and Claiming of Input Tax Credit.
(i) Differences based on Procedural Actions
Old Return System:
Under the old return-filing system, the procedure for the reporting of inward supplies was as follows.
- After the end of a tax period, a supplier of goods and services would report details of all supply transactions carried out during the tax period in his GSTR-1 return.
- These details would get uploaded to the GSTN only after the return had been filed by the supplier, monthly or quarterly as opted by him.
- The recipients of supplies were required to compute their inward supplies and eligible input tax credit, on a self-declaration basis, based on transactions taken place during the tax period.
- Once computed, this data was required to be reported monthly in their Form GSTR-3B, and eligible input tax credit could have been used for setting-off of their monthly output liability.
- The data uploaded by the supplier would not bear any effect on the monthly declaration of inward supplies and input tax credit filed by the recipient, as the recipient would only be able to view these details once the supplier’s return had been filed.
New Return System:
Under the New GST Return System, the procedure for the reporting of inward supplies will be as follows-
- At any time during a tax period, a supplier of goods and services can report details of supply transactions carried out during a tax period in his Form GST ANX-1.
- These details will be uploaded to the GSTN in real-time and will be available for viewing, and to take action by the recipient.
- The recipient of supplies will only be able to declare his inward supplies and claim input tax credit based on documents uploaded by his supplier in his Form GST ANX-1.
- All documents uploaded by the supplier in his Form GST ANX-1 will reflect in the Form GST ANX-2 of the recipient, on a real-time basis for viewing and taking action.
- The recipient can choose to accept or reject these documents or mark them as pending in order to take a decision at a later date.
- Once accepted, this data will reflect in the main return GST RET-1 of the recipient in the relevant tables.
(ii) Differences based on Formats and Reporting
The Format of GSTR-2A, which was the auto-drafted return for inward supplies under the old return system, contains the following information-
- Legal Name & Trade Name
- Inward Supplies received from a registered person (other than supplies attracting reverse-charge)
- Inward Supplies received from a registered person on which tax had to be paid on reverse charge
- Debit/Credit Notes received during the current tax period
- ISD Credit received
- TDS and TCS Credit received
The Format of GST ANX-2, which is the form for inward supplies under the new return system, contains the following information to be reported-
- Legal Name, Trade Name, ARN and Date of Filing
- Inward Supplies received from a registered person (other than supplies attracting reverse-charge), imports and supplies received from SEZ units/developers on Bill of Entry
- Summary of the Input Tax Credit
- ISD Credit received
Key Differences in the Formats & Reporting of Inward Supplies and Input Tax Credit are:
- The number of fields of data to be reported has reduced from 7 fields to 5 fields under the new return system.
- As this return needs to be submitted unlike GSTR-2A, which was for viewing only, the ARN (application reference number) and the date of filing will be auto-filled in.
- Under the new return system, a person liable to pay tax on reverse-charge will need to declare inward supplies liable to reverse-charge in his GST ANX-1 only, and the supplier will not be required to report the same.
- Imports and supplies received from SEZ units/developers are the new fields introduced for reporting, under the new return system.
- The table for reporting debit/credit notes received during the tax period has been withdrawn.
- The table for reporting TDS/TCS credit has been withdrawn.
(iii) Differences based on Claiming of Input Tax Credit
Old Return System:
- The system of claiming input tax was based on a complete self-declaration of inward supplies and the related input tax credit.
- A recipient of supplies, at the time of filing his GSTR-3B return, needed to report his inward supplies for a tax period and how much of the input tax credit was eligible, ineligible, reversed, reclaimed, etc.
- The data needed to be declared on a summary level, and not invoice-wise.
- Based on the above declaration of data, the eligible input tax credit could be used for the set-off of outward tax liability, and the balance paid in cash.
- At the time of filing of the annual return, this data needed to be reconciled with the auto-drafted GSTR-2A return, in order to verify if the data declared by the recipient matched with the data reported by the suppliers in their GSTR-1 returns.
New Return System:
- The new return system is based on a mechanism of real-time upload of data, with complete transparency in reporting.
- The recipient of supplies can only accept or reject the data in his GST ANX-2, which has already been declared by the supplier in his GST ANX-1.
- Once a recipient has accepted an invoice, it will be locked and no further action can be taken on it unless the recipient unlocks the invoices himself.
The input tax credit claimed will be limited to such data reported in the GST ANX-2, which will be on an invoice-wise basis.
- In case a supplier has not uploaded documents for a particular tax period, a 20% margin of credit, based on rules to be notified by the CBIC, will be allowed to be taken on a self-declaration basis.