Bridging the Gap amidst Discrepancies in GST Return Fillings
One of the most common taxing hurdles faced by taxpayers is having a smooth coordination between GSTR-1 and GSTR-3B return submissions. It is to be duly noted that as these two return filling are integrated with each other, they hold utmost importance. Any complications or inconsistency can lead to disputes with the tax authorities. We shall discuss the significance of aligning GSTR-1 and GSTR-3B in detail.
The Interlinked Dynamics of GST Returns
The intricate web of GST returns include e-invoices, GSTR-1 & GSTR-3B which are connected through the entire return filing procedure. These processes have an option for adjustments but why to go that extra mile while you can make it right in the first place.
The first and foremost thing to keep in mind while filing both returns is the reconciliation of GSTR-1 and GSTR-3B. This helps you to ensure that no duplication or omission is found. It also helps to determine the sales tax due during the specific time period. Make sure the data you enter and the invoices you register are all also recorded in GSTR-1 and then GSTR-3B. This will guarantee a consistent and accurate reporting process.
As discussed earlier, there is a seamless integration between both the returns the taxpayer should make sure that the record of all bills in GSTR-1 is done without any error. These corresponding details will reflect in the GSTR-2B and GSTR-2A and GSTR-2B of receiver. This is to be noted that even though the GSTR-2 filing has been suspended, the taxpayers are obligated to harmonize the ITC claimed in GSTR-3B and GSTR-2B in the given time frame. A synopsis of these activities is presented in the GSTR-3B form. Consequently, the ITC amount disclosed in Table 4(a) must align with tax particulars outlined in Form GSTR-2B, along with regular updates from GSTR-2A.
All of this means that businesses should stick to the recommended practice of keeping their data accurate across these connected GST returns. This reduces the need for change in the later stage and makes it a dependable process.
Liability Discrepancy Notice for GSTR-1 and GSTR-3B (DRC-01B)
The government has released a fresh advisory related to online compliance concerning the liability differences between GSTR-1 and GSTR-3B returns, known as DRC-01B. GSTN (Goods and Services Tax Network) has developed a feature that enables taxpayers to clarify the variations in their GSTR-1 and GSTR-3B returns online, in line with the directives from the GST Council. This feature compares the liability stated in GSTR-1/IFF (Invoice Furnishing Facility) with the amount paid in GSTR-3B for each return period.
Thereafter if the liability stated is higher than the liability paid by a predefined limit or if the percentage surpasses the threshold limit, the taxpayer will be informed through a notification in the form DRC-01B. This functionality plays an important role in facilitating an open and cooperative process for resolving issues. This also gives the taxpayer an opportunity to provide comprehensive explanations and supporting documents helping the government to make informed decisions.
This proactive approach enhances communication between businesses and the government, guaranteeing that the government receives detailed information to conduct impartial and accurate assessments. In case the government determines the need for further steps, it might issue a Show Cause Notice, initiating a formal procedure in which the business can respond and present additional evidence to substantiate their position.
Preparing for Tax Return Filing
In order to comply with the GST rules and regulations and to make sure your return filing process is accurate, here are some valuable recommendations and techniques to avoid discrepancies:
1) Reconciliation Matters:
The taxpayer should note that before filing the tax return, reconciling the business’s financial records is a must. This means cross-checking data such as invoice and tax transactions with the official tax documents of GSTR-1 and GSTR-3B. This will act as a guidance to identify any missing entry or duplications. By resolving such discrepancies beforehand will help the taxpayer to ensure accurate reporting and the chances of penalties or audits will be decreased.
2) Optimize Your Data:
Data optimization is one of the crucial parts of return filings. It helps to maintain accurate and consistent data across all platforms. It is advisable to not make any changes once the e-invoice has been generated. If any unavoided adjustments arise try using authorized methods like credit or debit notes. Maintaining a clear and unaltered transaction trail will help taxpayers reduce the need for explanations and smooth tax filing can be undertaken.
3) Use Automated Calculations:
With an urge to being a digital nation, India has progressed in inventing modern tax software solutions which offer features that automatically compute important data and figures such as outward liability or Input Tax Credit (ITC) based on the data the taxpayer has entered. These tools will help increase efficiency and accuracy on the filing process. These automated calculations will reduce the manual errors ensuring the taxpayers’ returns are reliable and compliant.
Things to keep in mind after return filing
1) Maintain Compliance Communication:
After filing your GST return, it’s important to stay connected with tax authorities or regulatory bodies. Be prepared to respond promptly to any queries, notices, or communication you receive. Keeping the lines of communication open ensures you’re addressing any concerns and demonstrating your commitment to compliance.
2) Review Analysis Reports:
Once your return is filed, review the analysis or summary reports provided by your tax software or financial experts. These reports can highlight potential issues, discrepancies, or patterns which might need attention. By analyzing these reports, you can proactively identify areas that require further clarification or correction.
3) Address Inconsistencies and Discrepancies:
If you notice any inconsistencies or discrepancies in your return after filing, take immediate action to rectify them. Your further course of action will depend on the nature of the error. It might involve filing an amended return or providing additional documentation. Addressing these issues promptly can help you avoid penalties.
Understanding a Case Law
The Calcutta High Court has ruled that the tax department should have first taken measures against the seller before instructing the recipient of a service or the buyer to undo the input tax credit and send the credit amount back to the government.
The bench, consisting of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya, noted that issuing a demand notice to the service recipient due to a mismatch in GSTR-2A and GSTR-3B is a primary step for addressing the issue. ITC cannot be upheld without investigating the supplier whose invoices are not showing up in GSTR-2A. Taking away the supplier’s tax payment and denying the ITC without investigation is not justified.
The buyer in question had contested an order from the Assistant Commissioner of State Tax. The department had reversed the buyer’s input tax credit as per the West Bengal Goods and Services Tax Act, 2017. The supplier had provided goods and services to the buyer, and the buyer had paid tax to the supplier at the time of the purchase, along with the value of the goods or services.
Nevertheless, some of the supplier’s invoices didn’t appear in the buyer’s GSTR-2A for the fiscal year 2017-18. The department was wrong in reversing the granted credit and instructing the buyer to repay the tax already handed over to the supplier during the acquisition of goods or services. The court highlighted that if the seller fails to pay taxes, the recovery should be made from the seller.
However, the department retains the option to reverse input tax credit from the buyer for exceptional scenarios like dealers going missing or closing their businesses, or if the suppliers lack sufficient assets, and similar situations.
The court emphasized that before instructing the buyer to undo the input tax credit, the department should have initiated action against the supplier. Unless the department can prove an exceptional case where there’s a collusion between the buyer and the supplier, or if the supplier is missing, has ceased business, or lacks assets, the buyer shouldn’t be directed to instantly reverse the credit.
GSTrobo has your Back
Companies either working on a small scale or large scale, must emphasize on creating strong systems and using efficient resources to reduce the risk of variations in GST returns. To help you fulfill all your needs our GSTrobo will your ultimate solution. By integrating with our GSTrobo, you can simplify all the lengthy procedures. The features of GSTrobo will help you minimize the risk of discrepancies in your GST submission. This is your one-stop solution for enhancing effectiveness and ensuring all the GST compliances are fulfilled. It will also act as your tool for making your finances right.
