GST easy Compliance & Seamless ITC – Fact or a Myth

When GST was proposed in Union Budget, 2015 by the then Union Finance Ministerlate Shri Arun Jaitely, it was supposed to be most easy to comply tax, since number of indirect taxes of central and states were merged in GST and all the compliance activities to be done online. The another and major reason for introducing GST was to allow the registered buyer, seamless Input Tax credit and to remove the obstacles of cascading effect of different indirect tax and the result of which increase in product price.

By the time GST implemented and then after constant changes in the rules related to availing GST Input Tax Credit, it becomes Excise 2.O.Because the GST compliance is getting day by day more complicated. The government was more interested in increase in the tax revenue and not to facilitate the industryto avail seamless Input Tax Credit and Tax Compliance. Number of steps taken by the government to discourage the valid Input Tax credit like step by step reducing the provisional ITC ratio and ultimately blocking provisional ITC compared to GSTR-2B.

Amendment in Sec. 16 and to introduce two additional conditions for availing Input Tax credit, first, the supplier has paidtax of the said goods or service and second, the invoice is appearing in the buyer GSTR-2B. With this, the government is putting the burden of the tax compliance of the supplier on the buyer’s shoulder. Even though the said amendment was notified w.e.f. 1st Jan, 2022.It was unwritten rule followed by the GST department and its officials for the previous period as well and raising notices for GST mismatch compared between GSTR2A/2B v/s GSTR3B to the GST entities numerously.

Change in manner of presentation in GSTR-3B more specifically presentation of ITC, reversal u/s 17(5) and the non-eligible ITC due to Place of supply mismatch. This is introduced so that government will have an accurate data of exact ITC availed by the GST entity and the ITC reversal separately. Then proposal of the new concept paper in which the entire GSTR-3B presentation has been changed and it is required to present complete reconciliation, ITC availed, reversal and re-availed as per 2B. ITC reversal u/s 17(5) separately. Re-avail ITC of earlier reversed ITC separately. All this method of presentation in 3B is made just to make the easy comparison of GSTR-2B v/s GSTR-3B with the help of Artificial Intelligence (AI). The government is more focussing on the maximum use of AI and raising system generated notices based on review by AI. Not only the GST return portal but the AI based review system is also using data of e. waybill, CC TV footage and toll tax data of all the toll plaza of PAN India for tracking actual goods movement, DGFT, and all related government data base.Many GST entities have already received notice for asking GST mismatch of outward supply and or ITC compared based on AI analysis. We have recently seen number of cases where the GST department had taken strong action against defaulter GST entity for dummy Input Tax credit and other GST compliance related fraud. All such investigations are done with the help of AI based analysis of the GST entity.

It is not that government is doing steps only to discourage the ITC, but some steps which will definitely make the GST compliance more widen and systematic. Mandatory e. invoicing, which was started from 500 crore turnover limit. Step by stem now it is brough to 10 crore. As per updates, it is going to be 5 crore from 1st Jan, 2023 and 1 crore w.e.f. 1st April, 2023. Mandatory e. invoicing will force the supplier to comply with the GST rules and pay their genuine tax liability timely and accurately. This will also help the buyers to have assured ITC since e. invoice will reflect within 2 days in the buyer GSTR-2A and immediate next 2B when the supplier file GSTR-1.The only catch is, it is planned to have mandatory invoicing for 1 crore turnover but still the GST entities having turnover upto 5 crores are having option to file GSTR-1 on quarterly basis. That means even though the supplier had issued e. invoice to the buyer, the buyer is still not able to get the ITC in the same month GSTR-3B because supplier is going to file his GSTR-1 after completion of the quarter. This is contradictory to the natural justice to the buyers who had paid the tax amount to the supplier still not getting ITC just because the supplier has no compulsion to file return monthly.It is like government indirectly forcing the buyers that they force to their suppliers of quarterly filer to file their return on monthly basis through IFF, so that the buyer will get the ITC timely. So technically the government is not saying the quarterly filer to file their returns on monthly basis but forcing them indirectly via their buyers.

Somany ambiguities are still prevailing in GST compliance, while the CBIC is busy in tightening the 3B filing procedure and ITC related rules and system driven reporting. Instead of focusing on to streamlining the GST compliance related issues and clarifying all open ambiguities.

Here are few suggestions and measure to smoothen the GST compliance and seamless Input Tax Credit to the genuine buyer.

1.?????Compulsory monthly return filing for all GST registered entities.

2.?????Compulsory tax payment in GSTR-3B for the liabilities derived as per GSTR-1 filed of the same month by the supplier.

3.?????Introduce GSTR-2 which was originally proposed in GST act and the buyer just have to tick the entries appearing in GSTR-2 as per their books of accounts ITC and the GST portal will carry forward the unclaimed ITC to the next month until the validity of the ITC claim is labs as per GST rules. This will help the buyer to maintain systematic records and reconciliation of his ITC as per books in his own records v/s ITC as per GSTR-2 on GST portal.?

4.?????ITC on RCM should be allowed based on actual payment of RCM by the buyer only and not considering the entries appearing in GSTR-2B.

I am still hoping that the government is having some strong road map for GST and the hurdle which we are facing is just a transition period.Probably by next financial year we will see more clarity and more smooth GST compliance.If not, then this is high time for the trade and industry to resist against the unjustified provisions for availing ITC and the more complex upcoming GSTR-3B presentation format and show the objection to the Central Government in the suitable forum.