The GST Council in its meeting on March 10 decided to continue with relief for exporters, defer reverse charge mechanism as well as defer applicability of TDS and TCS provisions. These measures will reduce hardships to exporters who are already reeling under delay in processing of their refund applications; and also buy time for unregistered dealers before reverse charge mechanism comes into play. E-way bill is now in focus with several changes made to the rules for easy and smooth implementation.
The most surprising outcome has been the announcement that preliminary findings have revealed major data gaps exist between self-declared liability in FORM GSTR-1 and FORM GSTR-3B. The mismatch is to the tune of about Rs 34,000-crore mismatch.
However, as has been understood the two forms are by design not supposed to be a one-on-one match. The GSTR-3B is a summarised return form while GSTR-1 is a reporting of all output invoices and taxes on them. It was originally envisaged that GSTR-3B and information and taxes as per Forms GSTR-1,2,3 will be reconciled via a system based reconciliation (via circular no. 7/7/2017-GST dated 1st September 2017). This had to be then kept in abeyance as it could not be operationalised due to non-implementation of GSTR-2 and GSTR-3 (via circular no. 26/26/2017-GST dated 29th December 2017).
A mismatch may exist due to many reasons – order received last minute and not included, sales erroneously counted twice, inter-state supply inadvertently shown as intra-state supply or vice-versa, sales returns not included or exports wrongly included. Invoices which are not captured via the summarised GSTR-3B are then offered in the next month’s GSTR-3B, and tax due and interest on it must be paid.
Taxpayers though have to report full invoicing of a month in its GSTR-1, including those that may have been missed or erroneously reported in the same month’s GSTR-3B. This is the prevalent mechanism. If a system reconciliation were to take place, any additional tax liability would be throw up on it own with the filing of the 3 forms and will have to be paid up accordingly. Without this mechanism in place, a reconciliation done between GSTR-3B and GSTR-1 is likely to throw gaps which may be due to reasons mentioned above. Assuming this must be investigated for possible evasion could be a foregone conclusion.
Perhaps, the saving grace has been that the communication has been subtle in not elaborating any reasons or possible action – only that these will be ‘further analysed’ and ‘adequate action may be initiated’. Other means may be required to reduce leakages of revenue. A gate-keeping sort of mechanism that prevents anomalous data and reduces dependency on post-submission analysis and aggressive enquiry will be beneficial. When trust is reposed in data input and return filing can be relied upon, overall compliance can be improved.
The government has a tough task ahead of itself, balancing collection targets and making compliance easy. The sweet spot of these two may require further deliberations in the Council and discussion with experts. Meanwhile, the government continues to show resilience in all GST matters that come in its way.
Read more at: https://economictimes.indiatimes.com/small-biz/policy-trends/the-rs-34000-cr-gst-riddle-why-the-differences-in-gstr-3b-and-gstr-1-should-not-alarm-the-government/articleshow/63265992.cms