Although the government has postponed the deadline for the filing of annual returns under the Goods and Services Tax (GST) for the fourth time, tax analysts say that the problems with the form are so confounding that most filers won’t be able to meet even the new deadline of November 30.
The GST legislation requires the filing of the GST annual returns by specified categories of taxpayers along with a GST audit if the turnover is more than ₹2 crore in a financial year.
As of July 1, 2019, the third year of GST implementation had started and yet, tax filers had not been able to file the returns even for the first year. The government had extended the due date for filing the returns four times, with the latest being the extension from August 31 to November 30.
One of the biggest pain points for tax filers, according to the analysts, is that the annual return form — the GSTR-9 — asks for a lot of information. Such information was not required to be given in the monthly or quarterly return forms — GSTR-1 and GSTR-3B. Tax filers are thus finding it very difficult to provide that information.
“GSTR-9 is nothing but complexity and confusion galore,” said Ritesh Kanodia, partner, Dhruva Advisors.
“The complexity starts with the level of details required, despite the fact that most of these were waived for monthly return filing. For example, the break-up of credit into input, input services and capital goods, or the break-up of reversals type-wise, reporting of ineligible credit, which may not have been captured in the financials.
“The values derived from the system does not always match with the books and a lot of time is wasted in trying to match them, with the only conclusion that it cannot be done,” Mr. Kanodia added.
Apart from the discrepancies between the data in the various GST forms that have to be submitted, another major issue being faced is the complexity of the annual return filing itself, and the fact that it requires information that is often at odds with the GST law itself.
“The manner in which the said information is to be provided is quite complicated,” said Prashanth Agarwal, partner, indirect tax, PwC India. “Although some of the aspects have been clarified by the government on this, still there are open issues which need clarity.
“There is a need to provide HSN classification for services at a six-digit level whereas the GST law allows companies to maintain the same at a four-digit level as well,” Mr. Agarwal added.
“Hence, companies don’t have this six-digit classification available with them. The government should allow companies to report HSN at the four-digit level.”
In what is being seen as an extremely onerous requirement, the annual return also requires tax filers to provide details of the transactions on which GST is not payable. Further, in terms of discrepancies, the power lies with the government. Companies cannot claim more input tax credit (ITC) than had already been claimed in the year, but the government can ask for more tax if it feels it is needed.
“The annual return requires the details of all those transactions in respect of which no GST is payable during the relevant period, which make the entire process more complex,” Rahul Dhuparh, deputy general manager, Taxmann said.
“No additional ITC can be claimed in GSTR-9, though additional tax, if found to be payable while reconciling, must be deposited with the government in cash.
“Due to the complex structure of the annual return, taxpayers are afraid to file it as there is no provision in the law to rectify the annual returns,” he added.
“Small taxpayers, who run their business from multiple registrations, but do not maintain separate books of accounts and do not have information split according to GSTIN registrations, are facing a huge challenge in preparing GSTR-9,” said Archit Gupta, founder and CEO, Cleartax.
“Taxpayers with a turnover of less than ₹5 crore must be allowed to report GSTR-9 on an aggregate basis, instead of GSTIN-wise,” said Mr. Gupta.
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