GST’s Journey of Change in 2022
2022 was a year of recovery from the Covid pandemic, which had a global impact on businesses for nearly two years. GST collections in 2022 show that businesses are resuming normalcy. GST receipts are an excellent predictor of economic activity. A look at GST revenue in 2022 shows a consistent increase. For the last nine months of 2022, GST collections exceeded 1.4 lakh crore. It does suggest a consistent recovery trend.
The GST Council met twice in 2022, once in June and once in December. GST rates for certain goods and services have been changed, exemptions have been removed, and clarifications have been provided. Small business compliance should be made easier, and changes to the rules and GSTR forms should be made to improve clarity.
GST collections show an absolute increase, which benefits the government. The GST Council has taken several measures to ease compliance and reporting and rationalise rates for the business community and industry. With over hundreds of changes happening to the GST Act this year, we have listed a few important changes for a quick recap.
GSTR 1 and GSTR 3B are inextricably linked now.
While auto-population of tax liability from GSTR 1 to GSTR 3B has been in place for some time, the disclosures have not always been consistent, particularly with regard to supplies to unregistered parties and end customers. The expected impact of the amendment was not disclosed. To ensure consistency in reporting, GST Circular 170/02/2022 has provided clarification.
|Supplies to||Reporting in GSTR-1|
Reporting in GSTR-3B
(Place of Supply-wise)
|Unregistered Person||Table 7B or 5 or 9 or 10||Table 3.2|
|UIN Holders||Table 4A or 4C or 9||Table 3.2|
|Composition Tax Payers||Table 4A or 4C or 9||Table 3.2|
Moreover, in new table 3.1.1, taxpayers will be required to provide information about supplies made through E-Commerce Operators in cases where such ECO pays tax on a reverse charge basis.
Severe Consequences for Non-Compliance
Filing of GSTR1 and GSTR 3B forms was made more orderly and sequential, while rules for suspension and cancellation were tightened. Non-filing of returns for three months in the case of monthly filers and two tax periods in the case of quarterly filers will result in the suspension of the GSTIN.
The government has been continuously monitoring the returns filed and connecting the dots with other information sources. Systems are in place to detect incorrect ITC claims, mismatches in tax liability versus settled amounts, and so on. Taxpayers received suspension notices as a result of a system failure.
Clause for automatic revocation of suspension of registration in cases where suspension of registration was imposed by the system under Rule 21A(2A) of the CGST Rules for non-compliance with clause (b) or clause (c) of Section 29 (2), once the taxpayer has filed all pending returns on the portal.
HSN reporting is Now Mandatory in GSTR 1.
HSN reporting on invoices according to invoicing rules and in GSTR 1 in Table 12 has been linked to the company’s turnover. Taxpayers could report either HSN or description on GSTR 1. HSN reporting in GSTR 1 is now required in order to ensure consistency in reporting and downstream analytics.
While the notification was issued in October 2020, the implementation took place in stages, beginning with large taxpayers and progressing to small businesses. Taxpayers with up to Rs 5 crore in annual revenue will be required to report 4-digit HSN codes in their GSTR-1 beginning November 1, 2022.
Making Returns Filing Process More Efficient
The majority of businesses file GSTR 1 and GSTR 3B monthly or quarterly. GSTR 1 and GSTR 3B were separate returns when GST was introduced in 2017. The returns are linked, however, with the dual goal of making filing easier for businesses and filling GST revenue gaps. GSTR 3B automatically populates the sales and tax liabilities reported in GSTR 1.
In addition to data, return filing is linked. Only if GSTR 1 for the month has been filed can GSTR 3B be filed. GSTR 1 for any month can only be filed if GSTR 1 for the preceding month has already been filed.
Supply reporting through e-commerce operators
E-commerce platforms have benefited from the pandemic, remote workplaces, and hyper-localisation. While large businesses have been part of the e-commerce network, so have small and micro businesses.
Certain rules apply to e-commerce supplies under GST. The online retailer must obtain a separate registration and file GSTR 8. Businesses that supply through an e-commerce operator must be registered and disclose their e-commerce transactions separately. This year, a new section in GSTR 1 and GSTR 3B was added for reporting the same.
At the 48th GST Council meeting, it was decided to allow unregistered businesses and composition taxpayers to make e-commerce purchases under certain conditions.
Furthermore, due dates for filing returns for specific returns for a specific period were extended, interest and late fees were waived, and an extension to claim ITC and issue credit notes before filing Annual Return GSTR 9 was also notified.
GSTR 3B disclosure was a significant update; more is expected in the coming year. A concept paper on the new GSTR 3B has been made available for industry feedback. As a result, more updates to GSTR 3B are likely. Taxpayers who have established their compliance processes and have easy access to insights and views of their compliance activities have greater control over their data returns.
E-invoice is now applicable to small businesses.
E-invoicing was implemented in 2020 for businesses with a turnover of more than 500 cr. Since then, the threshold has been gradually lowered. As of October 1, 2022, e-invoicing is only available to businesses with a revenue of 10 Crore or more.
- There are approximately 1.39 crore GST-registered businesses in India as of now.
- Out of which approximately 5 lakh are currently generating e-invoices
While the mandate is based on turnover, certain industries such as banking and insurance are exempt from using e-invoices. Exempt businesses from the e-invoicing mandate are required by Rule 48(4) to include a declaration on their invoices.
Meeting the GST compliance requirement is required because e-invoicing is mandated, but there is more to it than that. Businesses and the government both stand to benefit from transactional data (such as invoices) that is available in a standard and structured format. With the announcement of private Invoice Registration Portals by the government, all GST-registered businesses will be covered by the mandate sooner or later.
Bye 2022, Hello 2023
We had a very exciting and enriching year in 2022. We hope that our clients, partners, and everyone else involved felt the same way. So, what are the plans for the coming year?
The New Year 2023 is likely to begin with a bang, with us perfecting our current services, expanding our user base, and introducing more interesting products that will assist you in every way possible. Finsights is on its way to become the Best reconciliation tool and much more. We have set our goals & resolutions straight, Have you?