The forthcoming GST regime is very different from existing Indirect tax regime. In the existing regime, it is not mandatory for a buyer or supplier to reconcile their returns before finally filing onto the government’s systems. However, with the advent of GST regime 01 July 2017, a buyer will not be able to file his tax returns till the time they are reconciled with his supplier’s tax returns. In case a Buyer files the tax returns without reconciling with his supplier, he will be carrying a risk of loss of Input Tax credit which will impact his cash flow cycle. Hence, it becomes very important for us to understand how and when we need to file and reconcile the returns and invoices.
In this blog, we bring to you a simplified version of a step by step guide on how to file GST return as a Buyer and a supplier. Every registered taxable supplier has to furnish outward supplies details in Form GSTR-1 by every 10th date of second month for sales in first month. On the 11th of second month, the Buyer will be able to see all the details uploaded by supplier in Form GSTR-2A. The linking is established through unique GSTN-IDs of buyers and suppliers.
The buyer now checks the details from 11th to 15th of the second month. In this period, basis the details of the procurement invoices at his end, he is allowed to make modifications to GSTR2A. Finally by 15th date of second month, buyer files his version of procurement in Form GSTR-2. The supplier can now see the buyer’s version of Form GSTR-2 in his Form GSTR-1A. If the GSTR-1 matches with GSTR-2 both buyer and supplier will file their GSTR-3 by 20th of the second month. However, in case there are differences in GSTR-1A and GSTR-2, then buyer and supplier have to mutually agree upon the differences and reconcile before the 20th of second month. If both the parties have accepted the differences, then they will go ahead to file their GSTR-3 by 20th of second month. Also, supplier has to pay the agreed Input tax return to the government by the 20th of the second month. The final acceptance of input tax credit will be communicated in Form GST ITC-1.
In case, the parties don’t accept the differences between GSTR-1A and GSTR-2 between 15th and 20th of the second month, GST prepares GST ITC-1 on the basis of existing information available in the system. In this case, however, because of lack of acceptance by buyer, Input Tax credit is denied to the buyer. Also, the mismatch input tax credit on account of excess claims or duplication claims will be communicated in Form GST ITC-1. Differences not corrected will be added as output tax liability along with interest. However, within the prescribed time, if it is corrected, the buyer will be eligible to reduce this output tax liability.
The cycle of filing closed with GSTR-9 when both buyer and supplier file their annual return by 31st December of next fiscal year.
To illustrate the same let us take you through the flowchart below where the buyer Super Industries transacts with supplier Moglix and both file their GST returns.