So much for tax compliance under GST

Deadline ends, after two extensions and only 70% file detailed return for July

Illustration: Dominic Xavier/Rediff.com

About 70 per cent of the assessees under the goods and services tax (GST) had filed detailed sales returns for July as on Tuesday, the official deadline. Low compliance, said officials.

No further extension was given; the deadline had been extended twice earlier. About 4.59 million entities of the eligible 6.5 mn filed the GSTR-1 return, for the first month of GST.

"We will assess why many people have not filed. We have already sent reminders to those who filed GSTR-3B, the summarised return form, but not GSTR-1," said a GST Network GSTN) official.

The deadline to file GSTR-1 was extended by a month from September 10 at the GST Council meeting last month in Hyderabad. Earlier, the deadline was extended from September 5 on account of technical issues with GSTN.

If a taxpayer fails to file GSTR-1 by the deadline, the buyer of his products would face difficulty in availing of input tax credit. Which is why, noted Pratik Jain, partner at consultancy PwC, the number of GSTR-1 returns are much lower than what one would have expected.

It is possible many dealers with GST registration have nil turnover and, hence, did not file the return.

"The government will have to investigate the reasons and take corrective steps," he added.

Three million returns had been filed as of September 10, the day after the announcement of the extension. About 1.5 mn more returns were filed after that.

GSTR-1 has 13 sections containing details of sales transactions of a registered dealer for a month.

A little more than 330 mn invoices were filed and processed by the GST system along with the GSTR-1 of July.

Of this, 73 per cent were uploaded using the Offline Tool developed by GSTN; 16 per cent of the invoices came through GST Suvidha Providers.

The inward supplies return or GSTR-2 for July has to be filed by October 31. And, GSTR-3 for the month by November 10.

Once a taxpayer files GSTR-1, the government utilises the information to verify GSTR-3 for the dealer and GSTR-2A for dealers to whom supplies have been made.

For the transition period, the government has allowed assessees to file self-summary returns for input-output, called GSTR-3B.

The lower-than-expected GSTR-3B returns filed in the first two months of GST implementation had prompted revenue secretary Hasmukh Adhia to ask central and state commissioners to urgently conduct a survey to know why.

Only about 64 per cent of those eligible filed GSTR-3B, for August; 84.2 per cent did so for July. Of the 7.3 mn eligible ones, 4.7 mn filed the summarised return for August.

The questions suggested in the survey on why GSTR-3B was not filed are: The site was not functioning, filing process was too complicated, system didn't allow me to file nil return and 'could not' preview return details before filing returns.

In addition, tax officers will take suggestions for improving the returns filing process.

Last week, the GST Council, chaired by Union finance minister Arun Jaitley, eased compliance rules for small and medium enterprises. Those with annual turnover up to Rs 1.5 crore will from October onward need to file returns and pay taxes only quarterly, not monthly.

It also raised the eligibility limit in terms of annual turnover to Rs 1 crore from the current Rs 75 lakh for the composition scheme, which allows a flat rate and easy compliance. The window will be open until March 31 next year.

Assessees are required to file and pay taxes only quarterly under the composition scheme.

A trader pays at one per cent, a manufacturer at two per cent and a restaurant owner at five per cent but they are not allowed input tax credit. About 90 per cent of taxpayers under GST have annual turnover up to Rs 1.5 crore.