A comprehensive guide to the challenges and solutions for GST compliance
Introduction
GST, which stands for Goods and Services Tax, is a comprehensive indirect tax system that was introduced in India in 2017. It replaced various taxes levied by the central and state governments, such as excise duty, service tax, VAT, etc. GST aims to simplify the tax structure, eliminate cascading of taxes, widen the tax base, and promote ease of doing business.
However, GST also poses many challenges and complexities for taxpayers and professionals. There are various aspects of GST compliance that require utmost attention and caution from taxpayers. Non-compliance or ignorance of GST laws and rules can result in heavy penalties and litigation.
This article discusses the critical issues under GST that taxpayers should be aware of and take care of. It covers various topics such as scrutiny, audit, returns, appeals, input tax credit, e-way bills, e-invoicing, and more. It also provides some tips and suggestions for taxpayers to avoid pitfalls and disputes in GST.
GST Scrutiny & Audit
GST scrutiny and audit are the processes by which the tax authorities verify the correctness of the returns filed by the taxpayers and the taxes paid by them. The tax authorities can select any case for scrutiny or audit on various parameters, such as excess claim of input tax credit, short payment of tax, payment of interest for delayed payment of tax, mismatch in GST TDS data, etc.
The tax authorities issue notices to the taxpayers online through the GST portal or email, asking them to furnish information or documents related to their returns or transactions. The taxpayers are required to respond to the notices within a specified time limit, failing which the tax authorities can pass ex-parte orders against them.
The taxpayers should be alert and vigilant about any notice issued by the tax authorities and respond to them promptly and accurately. The taxpayers should also keep proper records and documents to support their returns and claims. The taxpayers should also consult their tax advisors or professionals before submitting any reply or information to the tax authorities.
Correct Filing of GST Returns
GST returns are the periodic statements filed by the taxpayers online through the GST portal, declaring their outward supplies, inward supplies, tax liability, input tax credit, etc. The taxpayers are required to file different types of returns depending on their turnover, registration status, nature of business, etc. The taxpayers are also required to file annual return and reconciliation statement at the end of each financial year.
The correct filing of GST returns is crucial for ensuring compliance and avoiding penalties. Many taxpayers are not serious in filing accurate returns and they are getting penalized in future. One instance is of reporting taxable outward supply, which if not reported in the same month attracts payment of interest even if paid through input tax credit in future period. The rule 88B read with section 50 (1) of CGST Act is a draconian provision for genuine taxpayers who made unintentional mistakes in filing GST returns.
The taxpayers should be careful and diligent in filing their GST returns timely and accurately. The taxpayers should also reconcile their returns with their books of accounts and invoices. The taxpayers should also rectify any errors or omissions in their returns within the prescribed time limit. The taxpayers should also use the online tools and software available on the GST portal or from third-party service providers to facilitate their return filing process.
Timely Filing of GST Appeals
GST appeals are the legal remedies available to the taxpayers who are aggrieved by any order passed by the tax authorities under GST law. The taxpayers can file appeals against any order relating to assessment, refund, penalty, interest, etc. The appeals can be filed before different forums depending on the hierarchy and jurisdiction of the order.
The first appeal can be filed before the first appellate authority within three months from the date of communication of the order. The second appeal can be filed before the Appellate Tribunal within three months from the date of communication of the order passed by the first appellate authority or an order passed by the Commissioner (Appeals) under section 107(6) of CGST Act.
The third appeal can be filed before the High Court within 180 days from the date of communication of the order passed by the Appellate Tribunal or an order passed by National Appellate Authority for Advance Ruling under section 101(3) of CGST Act.
The fourth appeal can be filed before the Supreme Court within 90 days from the date of communication of the order passed by High Court or an order passed by National Appellate Authority for Advance Ruling under section 101(4) of CGST Act.
The timely filing of GST appeals is important for safeguarding the rights and interests of the taxpayers. The tax authorities have passed a large number of ex-parte assessment orders against the taxpayers in many cases, which the taxpayers themselves were not aware of. The GST provision allows filing of GST appeal within three months along with one month delay condonation. However, after that, the appellate authority has no power to condone the delay howsoever genuine the ground be for the delay. The only recourse left is to knock the doors of High Court for getting relief.
The taxpayers should be careful and vigilant about any order passed against them and its timeline for filing GST appeals. The taxpayers should also keep track of their appeals and their status online through the GST portal or email. The taxpayers should also seek legal advice or representation from tax experts or lawyers before filing or pursuing any appeal.
Proper Claim of Input Tax Credit.
Input tax credit (ITC) is the credit available to the taxpayers for the tax paid on their inward supplies of goods or services or both, which are used or intended to be used in the course or furtherance of their business. ITC is one of the key features of GST, which eliminates the cascading effect of taxes and reduces the tax burden on the taxpayers.
However, ITC is also one of the most contentious and litigious issues under GST. A lot of cases are being observed where penal action is taken by the department on the grounds of ITC violation. Non-payment of tax by supplier, cancellation of suppliers’ GST number, non-filing of GST return either by supplier or recipient, claim of ineligible input credit, delay claiming of input credit by recipient after the time limit prescribed in section 16 (4) of CGST Act, etc. are giving sleepless nights to the genuine taxpayers.
The taxpayers should be cautious and prudent in claiming ITC under GST. The taxpayers should ensure that they fulfill all the conditions and restrictions prescribed under GST law and rules for availing ITC. The taxpayers should also verify and match their ITC with their suppliers’ returns and invoices through the online facility provided on the GST portal. The taxpayers should also rectify any discrepancies or mismatches in their ITC within the prescribed time limit.
E-way Bill
E-way bill is an electronic document generated on the GST portal for the movement of goods from one place to another. E-way bill is mandatory for inter-state movement of goods worth more than Rs. 50,000 and for intra-state movement of goods as per the rules notified by each state. E-way bill contains details such as invoice number, date, value, quantity, HSN code, transporter details, vehicle number, etc.
E-way bill is a tool to monitor and track the movement of goods under GST. A lot of cases are being observed where penal action is taken by the department on the grounds of e-way bill violation. Non-generation or wrong generation or non-updation or non-cancellation or non-extension or non-acceptance or non-rejection or non-printing or non-carrying or non-production or non-verification or non-compliance or non-reporting or non-furnishing or non-disposal or non-discharge or non-disposition or non-delivery or non-distribution or non-dispatch or non-declaration or non-disclosure or any other irregularity related to e-way bill can attract penalty under section 122 or 129 or 130 or 132 or 133 or 134 or 135 or 136 or 137 or 138 or 139 or 140 or 141 or 142 or 143 or 144 or 145 or 146 or 147 or 148 or 149 or any other section of CGST Act.
The taxpayers should be very careful and diligent while dealing with e-way bills under GST. The taxpayers should ensure that they generate and update e-way bills correctly and timely as per the GST law and rules. The taxpayers should also carry and produce e-way bills whenever required by the tax authorities. The taxpayers should also use the online tools and software available on the GST portal or from third-party service providers to facilitate their e-way bill process.
Other Issues
Apart from the above-mentioned issues, there are some other issues that taxpayers should be aware of and take care of under GST. Some of these issues are:
- E-invoicing: E-invoicing is a system where invoices are generated electronically on a common portal for B2B transactions. E-invoicing is mandatory for registered persons whose aggregate turnover in any preceding financial year from 2017-18 onwards exceeds Rs. 50 crores. E-invoicing aims to standardize and automate the invoice generation process and reduce errors and frauds.
- Business Promotional Expenses: Business promotional expenses are expenses incurred by a registered person for promoting his business, such as advertisement, sponsorship, free samples, gifts, etc. Business promotional expenses are generally not eligible for ITC under GST as they are not used in the course or furtherance of business. However, there are some exceptions and conditions for availing ITC on such expenses as per GST law and rules.
- Annual Return and Reconciliation: Annual return is a consolidated statement filed by a registered person at the end of each financial year, declaring his annual turnover, tax liability, ITC, etc.
