The introduction of Goods and Services tax has transformed the taxation system in the country. By unifying multiple indirect taxes into a single comprehensive tax, the cascading effect of taxes has been eliminated and reduced the burden on the consumers while enabling compliance and curbing tax evasion. One important component of GST is GSTR-3B, the self-declaratory summary return that provides a consolidated view of a business’s transactions and tax liabilities.
Origin of GST Laws in India
The Government of India introduced the GST laws on 1st July 2017, to replace the prevailing complex web of Central and State Taxes with a unified system to simplify compliance, reduce tax evasion, and promote economic integration. GST is an all-inclusive indirect tax levied on the supply of goods replacing multiple indirect taxes like excise duty, service tax, value added tax (VAT), etc. It aimed at bringing uniformity in the tax structure across India, eliminating the cascading effect of taxes, and reducing the tax burden on the end user or consumer. Where there is tax, there are mandatory returns to be filed. Since the introduction of GST, various forms have been introduced for specific taxpayers and GSTR-3B is one such important form. Let us first understand all about GSTR and the filing process.
What is GSTR?
GSTR is a document that every business registered under the GST Act is required to file. GST returns, containing the details of all sales and supply of goods and services made by the taxpayer during the tax period must be filed by the businesses every month/quarter, irrespective of whether the firms supply goods and services within or outside their state There are various GSTR returns based on the type of taxpayer/type of registration obtained. GSTR-3B is an important form for taxpayers. Filing the GSTR-3B forms in time is important for businesses to claim the input tax credits. Accurate information in the GST returns must be ensured as any errors and mismatches can lead to penalties and interest for the mismatch, and late fees if there is a delay in filing the return.
What is GSTR-3B?
GSTR-3B is a self-assessed summary return of outward supplies and input tax credit claims, that has to be filed by all registered taxpayers every month, or every quarter for taxpayers who have opted for the QRMP scheme. In the original GSTR-3 return, multiple checks between the supplier and purchaser were causing delays and thereby attracting late fees and interest. To simplify the process, Government of India introduced the GSTR 3B which is a self-assessment return filed by the taxpayers, which includes information on their purchases and expenses related to both import and export supplies. It has to be filed monthly regardless of the turnover. In GSTR-3B the two contracting parties can file the 3B separately. On February 21, 2018, Government of India introduced a simplified version of the form with a more user-friendly interface to boost compliance. It is mandatory for all businesses to file GSTR- 3B return and pay tax by the 20th of the month following the month for which the GST is being filed. For example, for the month of April, the form must be filed and tax paid by May 20th.
Purpose of GSTR-3B
GSTR-3B is basically a monthly self-declaration filed by the registered dealer in addition to GSTR-1 and GSTR-2 forms. It is a collective summary of inward and outward supplies. It has to be filed monthly on the 20th day of the following month. The main purpose of the return is for the taxpayers to declare and discharge their GST liabilities for the particular tax period. The other reasons for the introduction of the return were:
- Bridging the Transition Gap: GSTR 3B played an important role during the initial stages of GST implementation. It helped taxpayers bridge the gap between the old tax regime and the new GST framework, easing the burden on businesses during the transition period. It helped them adapt to the new tax structure with ease.
- Tax Liability and Input Tax Credit (ITC): GSTR-3B enables taxpayers to determine the accurate tax liability as it gives the details of outward supplies and the applicable tax rates. The return filing helps businesses claim Input Tax Credit (ITC) paid on purchases by the business. ITC can be set off against the tax liability on their sales.
- Compliance Monitoring and Data Analytics: GSTR-3B enables the tax authorities to monitor compliance and analyze industry trends. All GST registered businesses must file GSTR-3B including ‘NIL’ returns. It helps the tax authorities in tax monitoring to curb tax evasion as it provides a consolidated view of the taxpayer’s activities. It helps in tax audit and formulating risk analysis procedures.
- Is modification allowed in GSR-3B?
Answer: No, the GSTR-3B once filed cannot be modified. Separate GSTR-3B for each of their GSTIN must be filed by the taxpayers.
2. Is there a penalty for late submission of GSTR-3B?
Answer: Delay in filing GSTR-3B attracts late fees and interest.
3. How to file GSTR-3B?
Answer: GSTR-3B can be filed online or offline. The form can also be downloaded online from the portal and then the duly filled return can be uploaded.
Related Read: Common Errors and Mistakes in GSTR-3B Filing
GSTR-3B is an important form and must be filed by all registered businesses. It is a self-declaratory form giving the summary of GST liabilities for a tax period. It was introduced to bridge the transition gap during the initial stages of GST implementation and help the taxpayers to adapt to the new tax structure. It also helps taxpayers to determine the exact tax liability and claim input tax credit paid on their purchases and services used in their business. It helps the tax authorities monitor the taxpayer’s activities and check tax evasion. It is an important tool for tax audit and risk analysis.