GST was implemented in India with the aim of simplifying compliance and creating an efficient tax system in the country. Over the years, many changes have been made and stricter norms introduced to check fraudulent transactions and tax evasion. Filing GSTR-9 has more importance as it shows the final values of all the financial dealings of the business during the financial year. It is also a major document of scrutiny for the tax authorities. Therefore, taxpayers must understand the challenges and their solutions for filing accurate annual returns. Let us go through the challenges and issues faced and the best practices to be followed for filing GSTR-9. Accurate and timely filing of GSTR-9 returns is crucial, as it provides transparency and integrity to the business.
Overview of GSTR-9
GSTR-9 is an annual return that is required to be submitted by all taxpayers registered under GST in India, except casual, non-resident taxpayers, and OIDAR and ISD providers It is a comprehensive return that consolidates the data submitted in the periodic returns during the financial year. Filing the annual return is mandatory for businesses with a turnover exceeding a specified threshold limit of 2 crore rupees in a financial year. Taxpayers with an annual turnover of more than Rs 5 crore have to file a self-certified reconciliation statement in Form GSTR-9C along with the annual return.
Due Date and penalties for late filing
GSTR-9 is required to be filed on or before December 31st of the year following the fiscal year. The penalty as per the latest notification issued by GST for delayed filing of the annual return is Rs. 50 per day (CGST-Rs. 25/- SGST-Rs. 25/-). If the turnover of the taxpayer is above 5 crores in a financial year, then the late fee applicable is Rs. 100/- (CGST-Rs. 50/-, SGST-Rs. 50/-).
Read More: Amendments and Revisions in GSTR-9
Importance of GSTR-9
- GSTR-9 provides a comprehensive summary of the taxpayer’s transactions and tax liabilities during the financial year. It provides transparency in the financial activities, input tax credit availed, tax due, and tax paid.
- The annual return helps in the reconciliation of the data in the monthly and quarterly returns, like GSTR-1, GSTR-3B, and GSTR-2A, with the annual financial statements of the taxpayer. The reconciliation helps in identifying the errors and rectifying them within the due date, avoiding late fees and other penalties.
- Filing the annual return is a statutory requirement under GST laws, and non-compliance can result in penalties and other legal consequences.
- GSTR-9 is an important document for the tax authorities to assess the taxpayer’s liabilities and ensure that they have paid the correct amount of tax.
- Filing the annual return also helps taxpayers maintain accurate records of their GST transactions.
Also Read: Understanding the Components of GSTR-9
Challenges in GSTR-9 filing
Many amendments and revisions to the rules have been passed by the government to make the filing of annual returns easy and smooth. But some issues still persist. Some of the challenges faced by taxpayers while filing the annual return in Form GSTR-9 are as follows:
- Mismatch of data in various returns: Ideally, the data in Forms GSTR-1, GSTR-3B, and GSTR-9 and the books of account should match. If they do not match, the reasons can be either that the tax was not paid to the government or that excess tax was paid.
- Rectification of discrepancies: In the first case, the discrepancies can be identified while filing GSTR-9, rectification done, and the difference amount paid through Form GST DRC-03. Refunds, if any, can be applied through Form GST RFD-01A. Input tax credit cannot be reversed or availed through the annual return.
- Editing the auto-populated data: Most of the tables in GSTR-9 are auto-populated with data from GSTR-1 and GSTR-3B. The taxpayer has the option to edit the values. But if the difference is more than 20%, the GST authorities can issue a notice asking the taxpayer to reconcile the ITC claimed in GSTR-3B with the system generated in GSTR-2A and pay the difference amount.
- ITC Reconciliation: The primary challenge faced by taxpayers while filing GSTR-9 is the mismatch of ITC values in GSTR-2A and GSTR-9. This may happen when:
- If the supplier files his GSTR-1 after the due date, the ITC on such invoices will not be reflected in the GSTR-9 of the taxpayer
- Modifications made by the supplier to invoices after the due date will not be reflected in the GSTR-9 of the taxpayer.
- The invoices have the supplier’s place of supply instead of recipient’s place of supply. The ITC pertaining to such invoices will not be reflected in table 8A of GSTR-9 and GSTR-2A of the taxpayer
- The period during which the taxpayer was under the composition scheme ITC pertaining to this period will not be reflected in Table 8A of GSTR-9 for the recipient taxpayer.
- HSN-wise bifurcation in GSTR-9: The HSN summary for taxable and exempt supplies is required to be reported in the annual return form. It is mandatory for businesses with a turnover above Rs 5 crore in a financial year to report the HSN summary for outward supplies in Table 17 at six digits. So the businesses must maintain the reconciliation of the HSN summary with their books. Moreover, the taxpayer has to select the correct HSN codes, as the HSN and SAC codes are linked to GST rates. To claim ITC, invoices must be complete in all respects. So an incorrect selection of HSN code will impact the recipient’s claim for input tax credit.
- Reverse Charge Mechanism (RCM): The supplier cannot avail input tax credit paid under RCM. The recipient can avail ITC on GST paid under RCM only if the goods or services are used for business purposes. The recipient cannot use the ITC to pay his output GST under the reverse charge mechanism and should settle it in cash. There is no bifurcation of reverse charges paid as per sections 9(3) or 9(4) and of unregistered taxpayers in Form GSTR-3B. But in the annual return, the details have to be bifurcated and reported. This causes a lot of confusion for the taxpayers while filing the annual return.
- Exempt Supplies: Taxpayers may include exempt supplies, or supplies used for personal purposes, while filing GSTR-3B. ITC on such exempt supplies is not allowed and will have to be reversed if claimed. It must be added to the tax liability and paid while filing the annual return.
- ITC reversal: ITC reversal can happen due to various reasons, such as non-payment to suppliers within 180 days, the supplier failing to pay tax through GSTR-3B by the 30th of September of the following year, switching to the composition scheme or cancellation of GST registration, or inputs on goods that were lost, stolen, destroyed, or given out as free samples. The ITC reversal amount is added to the tax liability of the taxpayer and has to be paid.
Best practices for GSTR-9 filing
Maintaining accurate records
Accurate records of all financial transactions must be maintained so that correct details are filed in the periodic returns.
Accurate invoice details
The invoices must contain all the important details so that matching the data in the monthly, quarterly, and annual returns is easier. The suppliers must enter accurate invoice details while filing their GSTR-1. Inaccuracies or omissions in invoice details will lead to a loss of ITC for the recipients.
Regular reconciliation of data is important so that discrepancies can be identified and rectified. Monthly reconciliation of GSTR-1 and GSTR-3B ensures accuracy in the annual return filing process.
Communication with vendors
Communication with the vendors is important so that when there are discrepancies, they can be contacted and timely rectification is done.
Liability of past year paid in current year
This information would already have been reported in the previous year’s GSTR-9. It must not be reported again in the current year. The reason for the discrepancy in the tax payable and tax paid in Table 9 of the current year must be recorded in the vendor’s books for future reference.
Negative ITC in GSTR-3B
Negative ITC means tax liability in table 4C of GSTR-9. Proper reconciliation of this value must be done while filing GSTR-9.
Reverse charge mechanism
Details of transactions related to reverse charge must be properly maintained to avoid penalties due to non-payment of reverse charge liabilities.
Timely filing of GSTR-9 returns
Delays in filing GSTR-9 will result in losses due to late fees, interest, and other penalties. Filing all the required returns on time is crucial.
Technology and Software
Advanced technology and GST software solutions help in seamless compliance. Automation helps in reducing manual errors. Investing in them is useful.
Updating with the latest amendments
Taxpayers must regularly stay informed of the latest amendments through notifications and advisories in GST as the government introduces a lot of changes on a regular basis to simplify compliance for taxpayers.
Training and education
The finance and accounting teams that handle transactions and file returns must be given proper training in GST compliance procedures. they also need to be informed of the latest changes in GST laws by regularly updating themselves through the notifications and advisories issued by the GST authorities.
GSTR-9 is a crucial return as it is a reflection of the final values of the transactions, tax liability, tax paid, and input tax credit availed in a financial year by the taxpayer. So it is imperative that correct values are taken and accurate returns filed. Maintaining proper records and documents of the transactions, conducting periodic reconciliations, and updating the rules and regulations regularly are some of the steps to streamline GSTR-9 filing. Following best practices is an essential part of successful compliance.
Frequently asked questions
How can a taxpayer rectify the difference in GSTR-2A and GSTR-3B while filing GSTR-9?
Answer: The difference in the auto-populated values of ITC in GSTR-2A and that declared in GSTR-3B can be shown in GSTR-9 in table 8E if ITC is available but not availed and table 8F if the ITC available is ineligible.
How can I report the value of ITC reversal that was not reported in GSTR-3B while filing GSTR-9?
Answer: The ITC reversal values not reported in GSTR-3B in the previous months can be reported in the subsequent months in GSTR-3B. These values have to be shown in Table 7 of GSTR-9, and the excess liability due to such a reversal must be paid.
Can the outward supply details not reported in GSTR-3B in the previous financial year be reported in the current financial year while filing GSTR-9?
Answer: Yes, the details of outward supply not reported in GSTR-3B of the previous financial year can be reported in the current financial year in table 10 of GSTR-9.
Can the input tax credit wrongly claimed in GSTR-3B be rectified in GSTR-9?
Answer: The excess claimed input tax credit in GSTR-3B can be reversed by reporting the values in table 4(B) of GSTR-3B of the subsequent month. The same has to be shown in point 12 of Part V of GSTR-9.