GSTN glitches and ad hoc changes in GST rates on certain items have affected the returns filing process

Filing goods and services tax (GST) returns has not been a smooth process.

Despite extending the deadline, the turnout of tax filers has been lower than anticipated, mainly due to technical glitches faced in the GST Network (GSTN).

Ad hoc changes in GST rates on certain items and rules after implementation is another factor.

The 31 October deadline for filing GSTR2 for July is almost here. In this return, businesses are required to upload details of their purchase transactions in the GST Network (GSTN).

The deadline for filing GSTR1 that contains details of sales transactions was 10 October.

GSTR2 is a crucial link in the GST returns filing chain, from the perspective of input tax credit.

Businesses will be able to claim timely credit depending on the accuracy and completeness of data entered in GSTR2, which will be reconciled with that of one’s vendor.

Why this is very important is that the refunds put funds back in the hands of the taxpayer, who can then use it to fund their working capital requirements.

Once this cycle is established, it will instil confidence in the tax system.

While the experience so far with GSTR2 filing has been better than GSTR1, a slew of software issues with GSTN still persist, tax experts said.

For instance, there are many cases where vendors have confirmed reporting invoices in GSTR1, but these are not reflected in the auto-populated GSTR2, Krishan Arora, partner at Grant Thornton India, said.

He fears blockage of funds for companies whose vendors may not have been able to file GSTR1.

In case of a typographical error, no modification can be made in the invoice number or the invoice date uploaded by the supplier in GSTN. The only option is to reject the invoice and add the correct invoice details as “missing invoice”. This, as per tax experts, is quite time-consuming as the data can be voluminous.

There are many such other modifications/rectifications which have to be done manually, making the process tedious.

Also, if a supplier has missed uploading returns, then the buyer will have to make modifications in the GSTR2 form on his behalf.

Another option for the buyer is to keep these invoices in the “pending” state. There is no penalty for keeping an invoice pending, but would result in a delayed tax refund.

“What will be an assessee’s final tax liability depends on GSTR2 filing. It should be noted that GSTR-2A form does not have details of imports made or reverse charge paid on behalf of an unregistered dealer; so these details will have to be included separately,” Archit Gupta, founder and chief executive officer (CEO) of ClearTax added.

With these compliance challenges in GSTR2 filing, some tax experts do not foresee a stabilization of cash flow for businesses anytime soon.

It should be noted that the first cycle i.e., for July of filing comprehensive returns (GSTR1, GSTR2 and GSTR3) ends on 10 November. And here, we are talking about refunds for tax payments made in July only.

For GST to gain better acceptance, more flexibility is required when it comes to refunds.

After all, GST was promoted as a reform that will reduce the effect of cascading taxes, by taxing only the value addition.

“Since the overall concept of invoice matching on a monthly basis is new to all businesses and requires considerable efforts, it would be appreciated if the tax authorities take a sympathetic view to errors and omissions during the first six months,” M.S. Mani, partner-GST, Deloitte India, said.