Though GST was implemented two years ago in India, some of the provisions of the GST law are still ambiguous. Taxpayers, with the help of professionals, are continuously trying to understand the applicability of the provisions and the impact of the same on their business. The taxpayers are trying to adapt to GST using various technologies.
The GST Council has decided to implement the new GST return system from April 2020. The new GST return system was introduced to address certain gaps under the present return system. However, there are still some challenges in the implementation of the new GST return system.
Latest Update as on 14th March 2020*
The new GST return system will be implemented from October 2020.
The present return filing system (GSTR-1, 2A & 3B) will continue until September 2020.
*Subject to CBIC notification
1. Educating the client
The taxpayers will take some time to understand the changes in tax laws. During this transition phase, taxpayers will get ample time to comply with the law. However, it is a big challenge for a chartered accountant to educate a taxpayer about how a new GST return system works.
For example, the chartered accountant has to take responsibility to explain to the client about how a real-time upload of invoices works, how a taxpayer has to take actions in ANX-2 to claim ITC, and how a taxpayer has to report missing invoices.
2. Invoice upload
Under the new GST return system, there will be a facility provided for taxpayers to upload invoices continuously on a real-time basis in GST ANX-1. If the taxpayers intend to upload invoices continuously, they will need a new mechanism that will capture and upload all the invoices issued and other related documents into the portal.
This becomes a challenge to a taxpayer as there is no such concept of real-time invoice upload under the present return system. The taxpayer has to put additional effort to upload the invoices with accurate details continuously.
3. Frequent matching
The frequent matching involves matching the invoices uploaded by the supplier with the books of accounts to claim ITC. As the supplier uploads invoices on a real-time basis, the recipient has to match the invoices continuously. The invoices uploaded by the supplier in his GST ANX-1 will auto-populate to GST ANX-2 of the recipient.
The taxpayer usually matches their invoices with books of account at the time of filing their GST return. The pain point involved in frequent matching is that the taxpayer has to allocate time from his daily business activities or he has to dedicate personnel to do the same.
For example, under new GST return system, if the taxpayer matches invoices at the time of filing his return, he will not have enough time to follow up with the supplier, and this leads to an incorrect or inaccurate claim of ITC.
4. Invoice tracking
There may be cases of missing invoices where the recipient will have a physical invoice, but the same is not available on the GST portal to take the necessary actions. The recipient has to track these missing invoices and report them to the supplier. The recipient has to continuously check whether the supplier has uploaded invoices on the portal.
The above process will put additional responsibility on the recipient even though he has paid the tax amount to his supplier. The challenge here is to continuously follow up with the supplier to upload invoices. This may impact the relationship between the supplier and the recipient.
5. Vendor communication
Vendor communication plays a vital role in the new GST return system. The vendor has to focus more on accounts receivables and accounts payables when compared with the present return filing system. The accounts receivable will determine the value of sales/debtors and ITC claimed. On the other hand, the accounts payable will decide the value of purchases/creditors and output tax liability.
Hence, vendor communication is vital while following up for missing invoices and reconciling differences. This is one of the foremost things which needs to be taken care of by a taxpayer for hassle-free submission of GST returns.
6. Transition to the new GST return system
Taxpayers under the present return system will need ample time to adapt to the new GST return system. The government has already provided the prototype of the new GST return system. But all the specified features are not enabled in prototype returns.
The pain point during the transition is that the taxpayer must get used to new features such as the upload of invoices in GST ANX-1, taking action in GST ANX-2 for ITC claims, regular reconciliation of differences, claiming provisional credit for missing invoices, and more.
To overcome the above challenges, taxpayers can use the latest technologies available in the market so the adapting process to new GST returns becomes easy. New features such as bulk upload and tracking of invoices, regular reconciliation of books of accounts with GST returns, continuous follow up with vendors, and hassle-free communication to bulk vendors are available.