GST Returns filing process

A CFO explained to me that Indians, as a group, tend to succumb to ‘student syndrome mentality,’ i.e., procrastination. This is true for both organizations and government. Now we are seeing student syndrome mentality with the Goods and Services Tax (GST).

Many businesses waited until May or June, or perhaps even later, to start taking preparations for GST seriously. Government, too, released hundreds of pages of rules, circulars, and notifications in late June, mere days before the 1 July launch of GST — some even after the rollout.

To compensate for their student syndrome approach, businesses now need to take calculated risks and concentrate on the most important preparation tasks first, perhaps initially leaving some details unattended, in order to get up to speed with GST.

Businesses will also need to work out a plan B to manage unexpected complications. In the past, some organizations prepared Excel invoices in case ERP invoices failed, while some stopped exports if bond or lookup tables (LUT) were not executed for lack of clarity. Some organizations even stopped stock transfers if there were hassles. Such preparations may make a huge task like GST roll-out much simpler.

The next test for India will start 20 August with the requirement to file GSTR-3B returns. From September on, when GST return filing requirements will be in full force, India’s government systems, the taxpayers’ systems, and taxpayer diligence in recording transactions will all be tested.

GST is ‘systems driven’ both from the government’s side as well from the taxpayers’, and will not allow jugaadu (or, work-around) transactions to continue past the first phase.

For instance, if the vendor does not fill in the correct details — that is, the vendor’s details don’t match the details that customers fill in — the GST Network (GSTN) will throw out the discrepancies, and vendors will need to attend to these discrepancies later.

To avoid unnecessary hassle, such as reconciling discrepancies, in the future, here are five important steps businesses can take to prepare and properly file GST returns.

  • Choose ASP and GSP providers

First, finalise your ASP and GSP provider. While theoretically it is possible to file returns directly on the GSTN portal using utilities made available by GSTN, it would be easier, especially in organisations with a large number of transactions, vendor base, and turnover, to use the services of a GSP and ASP.

A GSP is a ‘GST Suvidha Provider,’ and as such, will make a virtual pipeline that will connect the taxpayer’s IT system with the GSTN. This will help upload data in the form of returns. GSPs are appointed by GSTN and have a robust agreement with the GSTN on data security and other relevant matters. Their services are generally charged on a per-transaction basis.

ASPs are ‘Application Service Providers.’ Simply put, ASPs are like mobile phone apps that monitor the number of steps walked in a day. An ASP takes data from the taxpayer’s ERP system, processes it, and loads it onto the GSTN through the GSP.

One can work without an ASP, just as one can theoretically count every step one walks in a day and still come to the same number of steps that a counting or pedometer app would. Life is much easier with the app, however, as it is more reliable, automates operations, and reduces effort, thereby freeing up time and resources for other activities. For precisely the same reason, ASP services help process information in a much easier and more automated manner, saving efforts and reducing mistakes.

ASPs are not regulated by the GSTN, and one can partner with any ASP or authorised GSP. Often ASPs have internal arrangements with more than one GSP and give a comprehensive services package to the taxpayer.

  • Set up a tax compliance team

Once ASP and GSP providers are in place, businesses will have to set up a tax compliance team. If you have an in-house team, be sure your team is well-trained in GST tax compliance, as the procedures and formats of GST returns are altogether different than the earlier law. Various trade associations, government, professional organisations, and private organisations provide this training. You may also find many consultants provide customized trainings for staff that can be tailored to the specific needs of your organisation.

For a smooth GST return filing process, training your tax compliance team should be a priority in the coming days.

  • Establish a reconciliation team

Data submitted by the vendor must match that of the customer in order to be accepted by the GSTN. Since this system is new and the data requirements are high, initially there may be many discrepancies within the returns.

To resolve these discrepancies, have a separate reconciliation team that can talk to vendors and resolve the discrepancies. ASP services would be able to point out the discrepancies, but human intervention would be required to resolve them.

Similarly, on the output side, customers would likely appreciate businesses that rectify discrepancies. Having a reconciliation team available — at least in the short term — to address these calls, properly process them, and prepare an escalation matrix, would streamline this activity.

Discrepancies are likely to diminish over time, so you may explore whether a temporary team made up of existing employees would be sufficient. Another option could be temporarily outsourcing this job to a third party.

  • Test

Starting 24 July, GSTN has opened its portal for uploading sales and purchase invoice data. It would be useful if businesses filed sample real data and brought any issues to the attention of GSTN. This will help the tax compliance team get used to the compliance work and get ahead of the learning curve faster.

ASPs may also need two to three weeks to properly align their platform/tool with the taxpayer’s ERP. A test run of the data transfer from the ERP to the ASP platform also needs to be carried out before the system is put in the live environment to actually file returns.

  • Prepare GSTR-3B and transitional forms

The first return businesses need to file, GSTR-3B was due before 25 August. Though this return is simpler than GSTR-3, your compliance team needs to prepare to file by compiling information. Similarly, transitionary credits from old laws will flow into GST through transitionary credit forms like GST Tran-1.

The month of September will see two full returns for July and August, so it would be better to complete transitionary work in August than to leave September for the return filing. Service tax returns also need to be filed in the month of August.

Section 140(5) of the Central GST/State GST act requires all inputs and input services received after 1 July, but which have suffered duty under the old law (excise, VAT, service tax), to have been accounted for by 30 July.

Avalara is an experienced application service provider (ASP) and partner of authorized GST Suvidha Providers (GSPs). To understand how our cloud-based application, Avalara TrustFile GST, can help you with GST compliance automation, contact us through https://www.avalara.com/in/products/gst-returns-filing.