The goods and services tax (GST) appears headed for its biggest procedural overhaul with a panel considering a single-stage return filing process, instead of a three-stage mechanism. The move is aimed at reducing the compliance burden for businesses.

"The committee is looking at 12 filings a year instead of many more at present," a source told TOI, adding staggered filing dates with bigger businesses having to adhere to earlier deadlines were also being examined. While basic principles such as invoice matching—to plug revenue leakage—will be retained, the move will ensure taxpayers are not hobbled by the filing mechanism.
(Also read: What is expected of GST Council meet on Jan 18)

Panel mulls staggered filing in GST

For instance, sources said, those with zero tax liability will be allowed to straightaway move to the last section of the return tool instead of navigating the form. Further, a staggered filing system is being contemplated where the larger players, who account for a majority of the taxes, file first, while smaller businesses come next.

Most businesses will be happy given that complications with return filings were cited as a major hurdle, which prompted the government to opt for quarterly filing apart from giving up on matching of returns for the time being.

Invoice matching is, however, seen as integral to the system, with a source pointing out that this was essential to getting rid of inspector raj. "The choice is to let a system do it or tax inspectors. The online system is obviously better," the source said. The committee headed by GST Network chairman Ajay Bhushan Pandey was earlier looking at two options on the filing mechanism and the final set of proposals are expected to be placed before the GST Council headed by finance minister Arun Jaitley later this week.

A separate committee comprising industry representatives had also recommended simpler compliance norms.

The current three-stage filing process starts with a seller uploading the invoices before the purchaser confirms them. In the third stage, the tax liability is calculated, the tax is paid and returns uploaded. If the invoices are not matched then the returns are not filed.

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As part of the proposed change, the returns will be allowed to be filed, but in subsequent months the tax authorities will present a mismatch return and the purchaser will then have to ensure that all the taxes by its vendors and sub-vendors are paid. A similar system is currently followed in Maharashtra, Gujarat and Karnataka, which results in bunching of payments and manual intervention, explained a tax consultant.
"While matching of invoices as a concept should continue under GST, any measure to reduce the compliance burden on taxpayers by way of backend matching obviating the need for a three-stage return filing process would be welcome," M S Mani, a partner at consulting firm Deloitte India, said.

The new filing will, however, force businesses to rework their systems as GSTN, which provides the technology platform, will have to revamp the process and the forms. Sources said the transition will not be overnight but will be done in a manner that GSTN and businesses get adequate time to adjust.
"Combining three returns into a single quarterly return will surely simplify the system. However, it is important to ensure that the concept of invoice matching through the GSTN platform continues to avoid the need for the businesses to deal with it at the time of audit or assessment. Also, it will again be a major change in the return process, both for GSTN and industry. It is, therefore, important that the new system is implemented after adequate due diligence, industry consultations and testing," Pratik Jain, partner at consulting firm PwC India, said.