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Monthly vs. Quarterly GST Returns – A Comparison Analysis: What Should Small Taxpayers Opt For?

Updated on:  

08 min read

The new return system came into effect on a trial basis from July 2019 and aims to simplify the procedure of filing GST returns. It was planned to be implemented on a full-fledged basis from April 2020 onwards as against earlier October 2019 as per the 37th GST Council meeting held on 20th September 2019. However, it has been pushed to October 2020. Some of the new aspects introduced in the new return system are simple returns forms for small taxpayers, real-time availability of input invoice details, amendment of returns, etc. 

Lates Updates

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

What are the types of returns to be filed and the frequency of filing them?

It is important to note that small taxpayers (having an aggregate turnover of up to Rs.5 crore in the preceding FY) have the option of filing either quarterly or monthly returns. However, large taxpayers (having an aggregate turnover over Rs.5 crore in the preceding FY) have to compulsorily opt for monthly filing of returns.  The types of returns and the frequency of filing them can be summarised in the table below:

Edit
FrequencyName of the returnDetails to be reported
Quarterly (to be filed by the 10th of the month following the quarter) SahajB2C outward supplies and inward supplies attracting reverse charge can be declared. Supplies made through e-commerce operators where tax is required to be collected CANNOT be declared in this return. No credit can be taken on missing invoices.
SugamB2B and B2C outward supplies, and inward supplies attracting reverse charge can be declared. Supplies made through e-commerce operators where tax is required to be collected CANNOT be declared in this return. No credit can be taken on missing invoices.
Normal (Quarterly)All types of supplies – no restrictions.
Monthly (by 10th of the following month) Normal (Monthly)All types of supplies – no restrictions.

A Comparison Analysis for Small Taxpayers: Quarterly vs. Monthly Returns

Before diving into the comparative analysis of both the types of returns, it is pertinent to note that a small taxpayer can choose between filing either quarterly or monthly returns only ONCE during a financial year – at the time of filing his first return. 

 Quarterly ReturnsMonthly Returns
FrequencyQuarterly – 4 times a yearMonthly – 12 times a year
Forms to be filedDepending on the information to be declared, quarterly filers may choose between Sahaj, Sugam, and Normal (Quarterly) types of returns.Only one type of return is available  – Normal (Monthly)
Days during which no upload of documents is allowed23rd to 25th of the month following the relevant quarter18th to 20th of the next month
Time available to take credit As a recipient of supply, credit can be taken on documents uploaded by the supplier until the 10th of the month following the relevant quarter. This gives a supplier more time comparatively, to file any missing invoices for the first two months of the quarter.As a recipient of supply, credit can be taken on documents uploaded by a supplier till the 10th of the following month.
Editing of documents uploadedAll documents uploaded by a supplier can be accepted or rejected by the recipient by the 10th of the month following the relevant quarter.  Once accepted, a recipient will need to reset/unlock the document before a supplier can edit the same. Quarterly returns filers will get comparatively more time for the editing and finalising of documents.All documents uploaded by a supplier can be accepted or rejected by the recipient by the 10th of the following month. Once accepted, a recipient will need to reset/unlock the document before a supplier can edit the same. Monthly return filers will get less time for the editing and finalising of documents, as the supplier gets time only till the 10th of the following month once a document has been reset/unlocked.
Editing of documents after the 10th of the following monthIn case a document is rejected after the 10th of the month following the concerned quarter, the same shall be available for correction to the supplier only after the recipient files his return for that quarter. In case a document is rejected after the 10th of the following month, the same shall be available for correction to the supplier only after the recipient files his return for that month.
Availability of credit in respect of edited documentsCredit will be available to the recipient in the quarter in which the supplier files the edited document.Credit will be available to the recipient in the month in which the supplier files the edited document.
Unavailability of creditWhere the supplier fails to file his return for a particular quarter, the recipient will not be able to claim credit on the invoices declared in the following quarter.Where the supplier fails to file his return for two consecutive months, the recipient will not be able to claim credit on the invoices declared in the next month.

Should Small Taxpayers opt for Quarterly or Monthly Filing of Returns?

The frequency of filing returns is in itself the biggest merit of quarterly returns. The taxpayers who have a small number of suppliers that are regular in their compliances and who also have simple outward supplies may find the availability of the ‘Sahaj’ and ‘Sugam’ returns to be a boon. The facility of quarterly filing is ideal for those taxpayers whose compliance procedures are straightforward and usually without too many complications. 

However, monthly filing of returns disciplines a taxpayer into dealing with any complications as soon as they occur. Settlement of disputes between a supplier and the recipient regarding the upload of documents can be done on a monthly basis, instead of quarterly. This could avoid prolonging the availability of due credit and reduce any negative impact on the working capital of the taxpayer, which could happen when a taxpayer has to deal with a large number of suppliers and customers. 

Hence, the selection of either quarterly or monthly filing of returns ultimately depends on how a business is managed, and what its priorities are.

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