Best practices for GSTR-6 compliance

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This article presents the best practices for GSTR-6 compliance that every Input Service Distributor (ISD) needs to know. With the ever-changing tax regulations, staying updated and following the right procedures is crucial to avoid penalties and stay on the right side of the law. Whether you’re new to GSTR-6 or looking for a refresher, this article will provide actionable insights and tips to streamline your compliance process and ensure smooth operations for your business.

What is GSTR-6?

GSTR-6 is a monthly return form for Input Service Distributors (ISD) under the GST system. It involves reporting inbound supply purchases and allocating input tax credits among subsidiaries. All ISDs, even if they have no transactions, must file GSTR-6.

Importance of GSTR-6

Organisations must file GSTR-6 because it captures details of the documents involved in distributing Input Tax Credits (ITC) and outlines the process of credit distribution along with the tax invoices used for calculations. Consequently, even when there’s no activity, every ISD must submit GSTR-6.

What is an ISD?

Input Service Distributor or ISD is a taxpayer under GST that receives invoices for the services used by its branches and distributes the tax, also known as Income Tax Credit or ITC under central tax (CGST), State tax (SGST), Union territory tax (UTGST), or integrated tax (IGST) paid on the said services. These branches may have different GSTINs but should be registered under the same PAN number.

Issuing ISD Invoices

The Input Service Distributor must also issue an ISD invoice to the recipient business units for the input tax credit distributed during the period. The invoice issued by the ISD should contain the following information.

  • Amount of credit distributed.
  • Name, address, and GSTIN of the Input Service Distributor.
  • Invoice Tax Serial Number: This number should not exceed 16 characters and must consist of alphabets, numerals, or special characters.

Timely Filing of GSTR-6

  • You can file GSTR-6 for a specific month at the end of that month.
  • The deadline for submission is the 13th of the following month. For instance, if you’re filing for June 2022, the deadline is July 13, 2022.

Where to File GSTR-6?

You can file the GSTR-6 form on the GST Portal. To do this, follow these steps:

  • Log in to the portal.
  • Click on the “Services” tab.
  • Choose “Returns” and then select “Returns Dashboard.”

Distribution of Credit under GSTR-6

  • Credit can be distributed using a specific document with prescribed details.
  • The distributed credit must not exceed the available credit.
  • If the credit is tied to a specific recipient, it should only go to that recipient.
  • If the credit applies to multiple recipients, it’s divided based on their state-wise turnover for a fair distribution.

Revision in GSTR 6

Under the GST Act, GSTR-6 revisions are not permissible. The regulatory framework does not encompass provisions about the revision of GSTR-6. 

In the event of any errors made during the filing of GSTR-6 for a specific month, the correction of these errors can be made while filing the subsequent month’s GSTR-6. 

Also Read: Role And Responsibilities Of An Input Service Distributor (ISD) Under GSTR-6

Requirements for filing GSTR 6

  • You should possess a 15-digit PAN-based GSTIN and be officially registered as a taxpayer under the GST system.
  • Your company’s overall revenue should amount to at least ₹20 Lakhs.
  • All registered Input Service Distributors (ISD) under GST, excluding those under the composition scheme or having a Unique Identification Number (UIN), can file the GSTR 6 return. Learn More about Input Service Distributor
  • Non-resident taxpayers are exempted from the obligation of filing the GSTR 6 return.
  •  It’s essential to comprehensively document all taxable purchases made on behalf of your other businesses or subsidiaries.
  • Additionally, ensure you record the specific allocation details of the input tax credit received for these purchases among your branches using internal transactions.

Understanding GSTR-6A

GSTR-6A is a form automatically generated using information provided by suppliers to an Input Service Distributor in their GSTR-1. It’s essential to understand that GSTR-6A is a read-only document, and any required changes must be made when filing GSTR-6. 

GSTR-6A is not filed separately; it is designed for viewing purposes only. You can access GSTR-6A through the Return Dashboard on the GST Portal by clicking ‘PREPARE ONLINE’ on the GSTR-6A tile.

Good Practices for GSTR-6 Compliance

Maintain Accurate Records:

Keep precise records of all transactions, including purchases, sales, and input tax credits, to ensure the data in GSTR-6 is accurate.

Verify Details Before Filing:

Double-check recipient business GSTINs, and input tax credit amounts and tax periods before submitting GSTR-6 to catch any errors.

Correct Mistakes Promptly:

If you identify errors or omissions in your filed GSTR-6, make corrections promptly by filing an amendment return.

Use Compliance Software:

Utilise compliance software like CaptainBiz to simplify the filing process and minimise mistakes. It allows you to access ready-to-file GST reports and other services like inventory management and invoicing. It is also compatible with Tally. 

With CaptainBiz, you can manage any business anytime, anywhere.

Conclusion

GSTR-6 is mandatory for all businesses that distribute Input Tax Credits (ITCs) under the Goods and Services Tax (GST). Every organisation that distributes ITC should file the GSTR-6 return. This form helps track your ITC credits and shows how much input tax credit you have received to offset the GST paid on items you distributed to your customers.

The specific information you need to provide includes the following.

The deadline for filing a GSTR 6 return is generally the 13th of the following month. This means that if you need to file your GSTR-6 return for June 2022, the deadline is July 13, 2022.

Related read: Late fees and penalties for Non-compliance in GSTR-6

Frequently Asked Questions(FAQs)

       1. Can the date of filing of Form GSTR-6 be extended?

The Government can extend the date of filing of Form GSTR-6 through notification.

      2. What happens when you fail to pay GST late fees?

When it comes to GST late fees, there’s no escape route. These fees automatically carry over to your next GST return. In essence, there’s no option to skip paying late fees. The system will firmly stand its ground, preventing you from filing your GST returns until these fees are settled.

      3. Can I change the credit allocation for earlier tax periods in Form GSTR-6? If possible, how can I do it?

You can allocate the credit via the ISD invoice and furnish the information in Table 5 and Table 8 of Form GSTR-6, highlighting both qualified and disqualified distributions to the units.

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