GST 2.0 - Introduction to New GST Returns

GST 2.0 - Introduction to New GST Returns

India's most significant indirect tax reform, the Goods and Services Tax is on the path to a total revamp with the New Returns System. For those who aren't familiar with the New Returns, these 101 series will help you understand everything you need to know about this new phase of the GST revamp that is scheduled for October 2020.

Let us start at the beginning. The Goods and Services Tax was implemented in India in 2017, and it did not really have the smooth sailing reception that most people hoped it would. Other countries who have levied GST as a tax reform seemed to have faced issues of inflation, initial confusion over tax slabs etc. and the situation was no different for India. But two years into the introduction of GST and the uncertainty around forms and filing of returns and slabs still exists.

In a bid to put to rest most of the issues faced by taxpayers, the GST council in its 31st Council Meet decided that a New Return System under GST would be introduced. This return system will contain simplified return forms, for ease of filing across different types of taxpayers registered under GST. Under this New Return System, there will be one primary return GST RET-1 and 2 annexures GST ANX-1 and GST ANX-2. This return will need to be filed on a monthly basis, except for small taxpayers (turnover up to Rs. 5 crores) who can opt to file the same quarterly. Since this is going to be a profile-based system - two other forms namely GST RET 2 (Sahaj) for businesses involved in B2C supplies and have a turnover up to Rs. 5 crores and GST RET 3 (Sugam) for businesses involved in B2B and B2C supplies and have a turnover up to Rs.5 crore are also going to be introduced.

Unlike their previous attempt, where GST was introduced with no time to transition and adapt to the new tax reform thereby creating a lot of confusion, the Government's aim is to ensure a smooth and efficient transition. This is why a prototype of the offline tool was introduced to the public in May 2019 to allow familiarisation with the new form fields. From July 2019, users were able to upload invoices using the FORM GST ANX-1 offline tool and could also view and download the inward supply of invoices using the FORM GST ANX-2 offline tool under the trial program.

Additionally, a summary of inward supply invoices was made available for viewing on the common online portal. Starting August 2019, taxpayers could also import their purchase register in the offline tool and match it with the downloaded inward supply invoices to find mismatches, if any.

As mentioned earlier in this article, the form GST ANX-1 replaced GSTR-1 and was made mandatory for large taxpayers with aggregate annual turnover over Rs. 5 crores starting October 2019. Smaller taxpayers with turnovers below Rs. 5 crores were required to file GST ANX-1 on a monthly basis.

Why do we need a new returns system?

The New Returns system is designed, keeping in mind the reconciliation process at its core. This new system will encourage transparency, efficiency and will allow faster account reconciliation. It will also help curb tax evasion, thereby curbing revenue leakage. Additionally, the new simplified returns system is going to be profile-based. This means the format of the new GST return will use a profiling algorithm to display only those information fields that are relevant to the taxpayer's profile.

Finally, taxpayers will be able to upload invoices on a continuous and real-time basis, and simpler forms will lower compliance costs of companies.

To help you understand the new GST returns, we have broken down the system in a few essential topics, each answering the most critical questions around the New Returns under GST.

  • What to file under new GST returns system
  • Features of the new GST returns system
  • Changes under the new GST returns system
  • New GST returns vs old GST returns
  • Uploading invoices under the new GST returns system
  • New GST Return Offline Tool
  • Timeline for New GST Return
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