GSTR-9 is exceedingly complex. Things to consider in simplifying it
October, 04th 2019
Taxpayers have shown preference for a simpler form of compliance. Instead they are saddled by a system that asks for intricate details of transactions.
The Goods and Services Tax has been the most important indirect tax reform of India. GSTwas introduced with a noble objective of making indirect taxes less complex, along with simplifying return filing and integrating India into one single marketplace. With this spirit, the journey of GST has been one of continuous evolution and reform.
An important part of its compliance is the GSTR-9, annual GST Return form. As per last available reports only 15-20% of those who were supposed to file GSTR-9 had filed when only 5 days were left until the due date of 31st August 2019. Ultimately, the government had to push the due date out to 30th November 2019 from the earlier due date of 31st August, 2019. Not to forget, these returns were originally due on the 31st of December 2018.
In the GST Council meeting held on 20th September 2019 it was decided that simplification of GSTR-9 will be considered by a committee of officers. Filing of GSTR-9 has been made optional for those with turnover of less than Rs 2 crores, while GSTR-9A, applicable to composition taxpayers, has been done away with. Both these changes are applicable for the first 2 years of GST i.e. FY 2017-18, FY 2018-19.
Complexities that must be re looked at The GSTR-9 form is an exceedingly complex one. Some of the fields get auto-populated from GSTR-3B, GSTR-1, filed by taxpayers and also GSTR-2A, which is based on what sellers have reported as the taxpayer’s purchases. If an error has been made, there is little opportunity to explain. All one can do is make sure any due taxes are paid. This has been a cause of concern for businesses, who want an option to explain the reason behind their unreconciled balances or at least have an option to amend their GSTR-3B and GSTR-1.
Besides, there are certain details to be reported in GSTR-9 which the taxpayers have not maintained. HSN wise information is required to be reported for inward supplies. However, businesses with a turnover of less than Rs 1.5 crore were not required to mention HSN code while making supplies. Those who have made purchases from them, do not have the HSN details.
GSTR-9 requires the ITC to be split between input goods and input services, if both these ITC are eligible to be claimed; there is no use splitting them. The requirement of GSTR-9C that asks for splitting/bifurcation of the expense ledger into various heads are also very complex. Several small taxpayers run their business from multiple registrations, but do not maintain separate books of accounts. They do not have trial balances split according to GSTIN registrations and are facing a huge challenge in preparing and reconciling their GSTR-9. Taxpayers with turnover of less than Rs 5 crore, may be allowed to report in GSTR-9 on an aggregate basis (instead of GSTIN wise). We are hopeful that these matters will be taken up by the committee.
Taxpayers prefer simple reporting The GSTR-3B is the summarised form, where aggregate sales and purchases are reported, ITC is claimed provisionally and tax payments are made by reporting summary information. GSTR-3B although not in the initial plan, was launched so that taxpayers could report outward supplies and ITC eligible on inward supplies in a summary form. But some taxpayers failed to properly report their numbers. For most taxpayers it simply became a means for payment of taxes. If an error has been found later, one must definitely make tax payments properly and then reconcile ITC claims at the time of filing GSTR-9.
GSTR-1 is a form that is used to report all outward supplies made by a business. As per official data, more than 60% of taxpayers who were required to file GSTR-3B did so, while the same number for GSTR-1 was 30%. Clearly, taxpayers have shown preference for a simpler form of compliance. Thus a simple form which is easy to comply will find favour with taxpayers.
Extension of due date has given more time to do compliance yet businesses are facing several challenges. They have spent many weeks looking at reconciliation in the run up to the preparation of GSTR-9. Filing of GSTR-9 requires one to make sure ITC is claimed according to the law. And also make sure it ties in with what one’s supplier has reported. Many businesses failed to run this kind of matching while paying taxes through GSTR-3B, making their situation more complex and challenging. This is a big learning for these businesses and an opportunity to put the house in order before the new simplified return filing mechanism is launched.
Simplification of GSTR-9 will bring in much needed relief. The CA community and businesses have spent valuable time and resources with reconciling and coming nearer to closure with their GSTR-9. It is time that these are quickly simplified by the government and submitted by taxpayers; so that the ecosystem gets ready for the new GST Return filing system which is due to be launched soon.