New GSTR changes: What they mean for MSMEs
In its 28th meeting held in New Delhi, the GST Council announced a series of changes to simplify GST return filing procedures and slashed down tax rates on several items. The Council introduced new return formats making associated changes in its rules. One of the key objectives of these changes has been to offer a few benefits to small taxpayers.
Upload – Lock – Pay
According to the GST Council, the return filing procedure has been made simpler. The Main Return now comprises two main tables only: one for reporting outward supplies and one for availing input tax credit based on invoices uploaded by the supplier. Moreover, suppliers can continuously upload invoices and buyers can view and lock these to avail of input tax credit (ITC). This way, the government has endeavoured to create a system wherein a large part of the return gets filled up automatically based on the invoices uploaded by the buyers and sellers. Simply put, the process would be Upload – Lock – Pay for most taxpayers.
Defining the small taxpayer
As per the government’s new definition, companies with an annual turnover of less than Rs 5 crore are considered as the small taxpayers. For companies that dealt in business-to-business transactions, this limit was Rs 1.5 crore earlier. In effect, the government had expanded the scope of the definition of small taxpayers by more than two-fold.
Nearly 93 per cent of total business taxpayers come under the category of < Rs 5 crore in annual revenues. Thus, keeping in view that the majority of taxpayers are small businesses with uncomplicated business models, the changes issued to the procedure are aimed at making GST return filing procedures simpler for them.
The GST Council has come up with multiple form options for small businesses. Earlier there was one standard form applicable to everyone. Now, there are different forms available based on the nature of a taxpayer’s business. Using the names used in Income Tax returns by CBDT, the GST Council has created the following categories of return:
A. 1. Sahaj
A. 3. Quarterly Return
B. Main Return (Monthly)
Here are the scenarios which will decide what type of return you have to use:
- Sahaj: If a small company (Revenue < Rs 5 crore) undertakes business-to-consumer (B2C) transactions, i.e. selling directly to end-consumers only and not to any business(es), then it can opt for a form called, Sahaj. Typically, the small grocery shops and corner stores fall into this category.
- Sugam: If a small company (Revenue < Rs 5 crore) undertakes business-to-consumer (B2C) as well as business-to-business (B2B) transactions, then it can opt for a form called, Sugam.
- Quarterly Return: If a small company is into anything in addition to B2C or B2B type of transactions, such as exports or advances, etc., then it has to opt for the Main form but can avail of the quarterly return filing facility.Main Return (Monthly): This type is applicable to any large taxpayer. See the simplified visual that captures this classification at the bottom of this article. The Main return also has several annexures attached. These have details of the transactions undertaken by the business including the type of transactions such as B2B, B2C, exports, advances, etc.
The procedure for large companies
In the case of Main Return, the government has provided an interactive questionnaire on the GSTN portal. Called taxpayers Profile (TPP), it consists of a range of questions aimed at identifying the exact nature of current business of the taxpayer.
Some of these questions, for instance, are: Have you done any business-to-business (B2B) transaction(s)? Have you done any business-to-consumer (B2C) transaction(s)? Are you engaged in the exports business? Are you engaged in imports business? There are nearly 13 questions that a taxpayer has to answer. Based on the responses provided by the taxpayer, the Return opens certain sections for the taxpayer to fill up. The taxpayer then has to fill up those relevant sections only.
An additional benefit?
It should be noted that for small taxpayers, the government has extended only the periodicity of GSTR filing. The tax payments, however, will need to be made to the exchequer every month. As a business owner, you do not have to file returns, you still have to complete all the internal accounting and computation processes every month, nevertheless. So, even though the government says the process has been simplified, from a small taxpayer’s perspective, the new provision of quarterly returns does not eliminate the hassle, at the moment.
Moreover, in case a small taxpayer has been selling to a large taxpayer, then it is also required to upload invoices on a monthly basis to enable the large taxpayers to claim ITC.
These, in a nutshell, are the important changes that the government has introduced. The complete details of the new applicable GST return types and the government’s own documentation and notes on the simplified procedures can be downloaded here.
In case you have any questions, write to our Tax Expert at firstname.lastname@example.org