The GST or Goods and Service Tax is a pivotal part of the Indian taxation system. The tax is levied on every service and product generated within the country. Even business owners have to comply with the GST regime to ensure the smooth functioning of the business. However, for a long time, small business owners have raised issues with the complexity of the GST scheme. To address this problem, the government released a new resolution that will help small businesses in successfully filing tax returns.
The Finance Minister of India, Nirmala Sitharaman has announced measures that will simplify and reduce the compliance burden on small business owners. The recommendation was put forth through the 42nd meeting held in the presence of the council officials. Certain new measures have been put in place to ease the compliance on part of these business owners. Read on to know some of the key aspects that were made part of the new system.
GST Filing for Small Businesses – New Framework
The finance minister announced several reformed provisions that will be made through the new GST regime. The most notable aspect is the revision of timelines stated for filing GST forms:
- Since January 2021, the due date for filing GSTR-1 for quarterly taxpayers has been revised. The new due date is the 13th of the following month at the end of each quarter.
- The introduction of this feature allows the auto filing of tax liability through the taxpayer’s GSTR-1. Additionally, monthly tax filers can input the tax credit from the supplier’s GSTR-1.
- Small businesses that have an aggregate turnover of below ₹ 5 crores could file their quarterly returns starting from January 2021. Businesses can also avail of auto-generated challan to make payment of up to 35% of net cash liability for the previous quarter.
As per a statement released by MS Mani, Senior Director of Deloitte India, the continued efforts made by the Finance Ministry towards simplifying the compliance of GST taxpayers is good for businesses. He also mentioned how the auto-population of the various figures during the return filing is of great advantage. However, the director pointed out that there may be certain errors that could erupt during the initial implementation of the system and the same should be effectively managed.
He further added the need for business owners to prepare well and adapt to the revisions. Mani said that the process and system would require some changes, and these must be achieved in time to avoid the delay in filing.
Another field expert, Jigar Doshi, partner at TMSL LLP, added that proposed changes will indeed perk up the compliance structure. It will make it simple for businesspersons and eliminate the need of introducing an entirely new system. He further included that there may be some missing aspects that must be introduced to the system. To quote, “While an auto-populated 3B looks promising, the entire exercise is based on the vendor’s filing of GSTR-1 on time. If this is not done, the input tax credit may get deferred to next month considering the recent amendments in the CGST Rules.”
To capture other details on the type of goods sold in the country, the government asked taxpayers having annual turnover above ₹ 5 crores to declare HSN (harmonized system nomenclature) code at 6 digits for the supply of goods and services in its GSTR-1 form. Businesses having a turnover of below ₹ 5 crores must mention the HSN code at 4 digits for the business-to-business supply of goods and services. The government will separately notify eight-digit HSN code for the notified class of supplies by all taxpayers.
How does the New Framework Benefit Small Business
Now that you know the key aspects of the new GST framework introduced for small businesses, here are the benefits that small businesses will enjoy upon filing furnishing information in time.
- The revised GST framework helps taxpayers view the available tax credit. These include sources such as domestic suppliers, imports or payments on a reverse charge basis in electronic ledger much before the due date for paying tax.
- It enables the GST system to autofill the information in the GSTR-3B return.
Do note that in order to implement this feature, taxpayers will have to file GSTR-1 before the GSTR-3B or summary return to ensure that input tax credit and the tax liability is effectively captured.
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