Navigate GSTR-6 Filling To Perfection & Claim Maximized ITC

March 15, 2024

GSTR-6 is a GST return statement/ form that the Input service distributor (ISD) files every month to claim ITC against all taxes central tax (CGST), State tax (SGST)/ Union territory tax (UTGST), and integrated tax (IGST).

If an organization with operations in multiple locations is looking to claim ITC amounts that they are eligible for, then GSTR-6 is really important. If only details are filled in the GSTR-6 statement, they can claim ITC for both ISD and the branches.

But before we understand the details of GSTR-6 like What is GSTR-6, How to file GSTR-6, claiming ITC with GSTR-6, and GSTR-6 components, let’s first understand the Input service distributor (ISD).

What is an Input Service Distributor (ISD) ?

An organization or business that supplies goods or services or both can have operations in many locations, with one office being the head office and the rest of the locations being branches.

Now, many of the same services can be used by both the head office and the branches. The tax invoice for such goods and services will be received at the corporate office/ head office. But since the services and goods are used at all locations, only the head office cannot claim the entire ITC. It needs to be distributed equally to all locations. So, now the head office will act like the ISD and will distribute the credits.

In such a scenario, the tax invoices for used input services of all the locations are received at the common head office. The head office also issues the documents required to distribute the input tax credits on taxes paid.

For example – Let’s take an example to understand this concept. The Corporate office of ABC Ltd. is in Bangalore, with its business locations for selling and servicing goods in Bangalore, Chennai, Mumbai and Kolkata. All locations of ABC use Software licenses and maintenance, but the Corporate Office receives invoices for these services (indicating CGST and SGST). Since all four locations use the software, only the Bangalore location cannot claim the input tax credit for the entire service. The ISD shall distribute the ITC claim among all four locations. For that reason, the Bangalore Corporate office must act as ISD to distribute the credit.

If the corporate office of ABC Ltd, an ISD situated in Bangalore, receives invoices indicating Rs. 4 lakh of Central tax, Rs. 4 lakhs of State tax, and Rs. 7 lakh of integrated tax, it can distribute central tax, State tax, and integrated tax of Rs. 15 lakh as credit of integrated tax amongst its locations at Bangalore, Chennai, Mumbai, and Kolkata through an ISD invoice containing the amount of credit distributed.

What is GSTR 6?

Now that you understand ISD know what GSTR-6 is. If an entity or organization has an Input Service Distributor (ISD), the taxpayer must file a monthly return known as GSTR-6.

Basically, it is a statement that includes details of all the Input tax credits received by the ISD and details of how the ISD has distributed the said ITC amongst all the branches and itself.

When To File/ Due Date of Filling GSTR-6

A taxpayer or the Input Service distributor must file the GSTR-6 before the 13th of the succeeding month. Any delays cause penalties.

Components of GSTR-6

Filling GSTR-6 is easy but one needs to be careful as this return entails 11 sections. GSTR-6 components include the following –

1. Enter the taxpayer’s GSTIN for whom you are filling GSTR-6.

2. Name of the Registered Person.

3. Input tax credit received for distribution.

Here the ISD must enter the invoice-wise details for the inputs received that it has distributed as ITC to the branches.

4. For a tax period, the Total ITC/Eligible ITC/ Ineligible ITC that needs distribution

The Input Service Distributor shall enter the full ITC amount, which it has segregated into the total amount of ITC, eligible ITC, and ineligible ITC.

5. Revised Distribution Mechanism for Input Tax Credit

Table 4 – Input Tax Credit Distribution

Table 4 serves as a crucial avenue. Here the ISD reports comprehensively the distribution of Input Tax Credit (ITC) to the branches. This allocation is pivotal as it determines the eligibility of the recipient dealer to claim the ITC.

6. Amendments to Earlier Returns in Table 3

In case of inaccuracies or mistakes in the invoice details of inward supplies furnished in previous returns, Table 3 offers a corrective mechanism. Here, you can accurately record and rectify any necessary amendments to the invoice particulars.

7. Input Tax Credit Adjustments and Reclaims

This provision allows for modifying the total ITC amount to align with the revised tax liabilities or ITC reclaimed on rectification of mismatch.

8. Revisions in Tables 6 and 7

Table 4 can effectuate changes in the amount of credit distributed to dealers, as originally reported in Tables 6 or 7. This functionality enables dealers to rectify any inaccuracies or discrepancies in the distribution process, ensuring a fair and accurate allocation of ITC among recipients.

9. Redistribution of Misallocated ITC

Through this provision, dealers can rectify any misallocations of ITC and reallocate the ITC to the appropriate recipients.

10. Late Fees Reporting

Dealers must report any late fees incurred and paid within the specified tax period in this section.

11. Refund Claims from Electronic Cash Ledger

This section records details of refund claims to be processed from the electronic cash ledger.

Filing Process for GSTR 6

To create, submit and file details in Form GSTR 6, perform the following steps:

Login and Navigate to Form GSTR 6 page
Enter details in various tiles (sections)
File Form GSTR 6
View Consolidated Summary
Late Fee
File Return

Late filing penalty implications for GSTR-6

Delays in filing GSTR 6 incur a late fee of Rs.50/—for each day. However, filing a NIL return does not result in granting any reduction allowance.

GSTR-6 Filing Penalty on Non-Compliance

GSTR-6 is compulsory, and non-compliance of the filing process leads to GSTR-6 filing penalty. If the taxpayers fail to file GSTR-6 for a continues period of 6 months, the concerned GST officer may cancel the GST registration of the taxpayer. The GST officer can cancel the GST registration of a composition taxable person if the taxpayer fails to file the GST returns continuously for three consecutive tax periods.

Importance of GSTR-6 For Businesses

It becomes important to file GSTR-6 for organizations that have operations in multiple locations. All branches and the head branch rightfully claim Input Tax Credit (ITC) for the common services and goods used across various locations. Now if they don’t file the GSTR-6, the organization cannot claim ITC with GSTR-6, the amounts it is eligible for. So, this causes the importance of GSTR 6 for businesses.

How To Revise GSTR-6

There is no provision that one can revise a filed GSTR-6. You can make corrections to the GSTR 6 in the subsequent month’s GSTR 6 for the previous month.

Conclusion

Filing taxes can be stressful, but with the right guidance, it doesn’t have to be. By understanding GSTR 6 and following the steps in this guide, you’ll be well on your way to staying compliant and avoiding any headaches down the road. Remember, we’re here to help every step of the way!

Also, to keep things even simpler, Try GSTrobo – software that makes filing GSTR 6 easy and simple.