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Avoid Traps In GSTR 9: Achieve 100% GST Compliance With Zero Tension
Taxpayers need to be extra careful in these, since there is a very high likelihood that these data is used for analysis for inconsistency checks, and could land you in the red category for notices and fines.
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On July 1, 2019, the GST regime in India completed two years of existence. During this time, this nation-wide transformation project has succeeded on multiple counts. By June 2019, more than 1.22 crore entities have registered under GST, over 28 crore GST returns were filed by then, and the government collected over ₹ 11.77 lakh crore payments between April 2018 and March 2019. The government also took substantial pains to plug most of the technical loopholes that the GSTN portal was found to be suffering from.
Amidst these successes, there exist some teething challenges today faced by taxpayers and accounts professionals alike. At the end of every financial year, entities who have done business even for a day during the fiscal year have to mandatorily file annual GST returns using GSTR 9 form. For the composition taxpayers, the form to be used is GSTR 9A.
There are a few serious traps in these filings. Taxpayers need to be extra careful in these, since there is a very high likelihood that these data is used for analysis for inconsistency checks, and could land you in the red category for notices and fines.
There are two types of issues that people encounter: i.e. Those related to Outward Supplies, and ii. Those related to Inward Supplies. Let’s examine these one-by-one and how best they can be addressed.
Challenges related to outward supplies
A1. Annual bifurcation of revenue for SEZ suppliers:
Under GST, business entities are classified as business-to-consumer (B2C), business-to-business (B2B), composite, and SEZ suppliers. In case of SEZ suppliers, i.e. businesses selling goods or services to SEZ units, GSTR 9 (or 9A) mandates that taxpayers specify in Table 4 whether the goods/services sold have been for ‘local market’ or ‘deemed export’. The deemed export attracts GST at the rate of 0.1 percent whereas the goods or services sold for ‘local market consumption’ attract GST at different rates.
Since this information pertains to numerous transactions carried out throughout the financial year, it becomes cumbersome for taxpayers to pull out all that information at one go. The right way to address this is to raise two separate invoices—one for ‘local market consumption’ and one for ‘deemed export’ every time goods or services are sold to SEZ units. This way, the taxpayer can easily mention the consolidated values for both revenue types while filing GSTR 9.
A2. Classification of supplies:
The Table 5 of GSTR 9 (or 9A) requires a taxpayer to declare the information about outward supplies under three categories:
i. Exempted supplies list: These supplies are taxable in normal course but because of certain notification(s), they are exempted
ii. NIL rated: These supplies are taxable at the rate of zero percent.
iii. Non-GST supplies: These are items where GST is not at all applicable. e.g. Petrol, Alcohol, Jaggery, Grains, Salt, Bread, Fresh fruits, Fresh Milk, etc.
Taxpayers find it difficult to collect and declare such category-wise information about all outward supplies delivered throughout the year. The ideal way to deal with this issue is by avoiding the need to reclassify transactions at the end of the year —by being careful at the time of the transaction itself. Each zero-tax item needs to be classified either as Exempted, NIL rated or Non-GST right at the time of generating an invoice and tagging the category-information for every item sold. It’s only then that the mandatory declaration of item-wise classification under GSTR 9 (or 9A) can be hassle-free.
A3. HSN code summary report
GSTR 9 mandates that taxpayers provide an HSN code summary report under Table 17 for all items sold during the financial year. A similar challenge arises here as it calls for identifying the HSN code of every item sold in the year. The correct approach here is to include HSN code of every item sold in the invoice itself.
This confusion may have been caused due to misinterpretation of a notification which says that if your turnover is less than ₹ 1.5 crore then you do not need to issue tax invoice with HSN code and if it is between ₹ 1.5 crore and ₹ 5 crore, then you need to declare only the first two digits of the code. Many taxpayers (and consultants) misinterpreted this notification and stopped adding HSN code information at the time of invoicing. But it becomes a challenge at the end of the year when taxpayer has to file the annual return with a mandatory HSN code declaration. The right approach is to prevent the occurrence of the issue by tagging every item sold with the relevant HSN code at the time of invoice creation itself—for every invoice generated during the year.
Challenges related to inward supplies
Taxpayers can be seen facing a similar issue with respect to inward supplies as well.
B1. Category-wise declaration of ITC claim
Inward supplies are classified as i. input goods, ii. input services, and iii. capital goods. In order to claim an input tax credit (ITC), a taxpayer has to specify a consolidated value of the GST paid items procured in GSTR 3B (which is a replacement for erstwhile GSTR 2 and GSTR 3). However, GSTR 9 (or 9A) mandates that the taxpayers declare inward supplies separately as per the three above-mentioned categories. As taxpayers do not mention these details while filing monthly returns, reconciliation becomes a tedious, time-consuming task.
Taxpayers can, thus, be seen hassled by the process of GSTR filing and spending their valuable time and resources on the unproductive task of information gathering. I have seen examples where companies have appointed four to five dedicated resources just to collate such information from thousands of invoices generated during the financial year.
The best foot forward
While we discussed how being careful at the time of raising invoices or filing monthly returns is the best way to avoid future-trouble, the best way to do so is by embracing automation. There are a few good software products available in the market today that can be a help.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.