From 2017, GST came into play, changing the traditional model of VAT, Excise Duty and Service. Taxpayers, in general, have become befuddled since then. Some of the provisions of the GST are ambiguous, and others are difficult to become acquainted with. Taxpayers are still trying to figure out how the GST system will impact their businesses and what their duties are under this system.
To fill up the gaps in the GST system previously faced, the GST Council decided to implement the new GST return system from April 2020 onwards. But this new system comes with its own set of difficulties. There are a few challenges facing the implementation of the new GST return system.
Educating the client
It is very essential for the business owners and the taxpayers to get acquainted with the new system, and that will require an ample amount of time. There arises a new obligation and role to be played by them. At the same time, they need to understand the laws that govern their businesses in order to make sound business decisions; this also serves as a good democratic exercise in learning your rights. However, the transition and the complexities that come along with it present their own challenges. Chartered accountants will be required to learn about the new system, and the chartered accountant himself will have a hard time explaining the system.
Under the New GST return system, the taxpayers need to upload the invoices incessantly on a real-time basis in GST ANX-1.
There is an increase in workload which many businessmen and taxpayers are facing difficulty adapting to or even understanding in the first place. To facilitate this system, the taxpayers need to capture and upload all the invoices issued and other documents into the portal. The entire mechanism is new to all the taxpayers as the earlier system did not have the concept of uploading real-time invoices. The extra burden can be strenuous as now there is a duty to upload real-time invoices.
More data is required
In the previous system, we had to provide data in GSTR 3B and GSTR 1, but now the taxpayers have to maintain and provide more data. For example, the new system asks for a mandatory HSN nine-digit code, a PAN number is mandatory for URD suppliers for RCM liabilities, and GSTIN-wise and HSN-wise details should also be provided for RCM liabilities. Earlier, for RCM supplies
The term “frequent matching,” means that once the invoices are uploaded by the supplier on a real-time basis, the recipient has to match the invoices continuously. As the invoices are updated in the GST ANX-1, it will auto-populate the GST ANX-2 of the receipt. And the taxpayers often match their invoices with the book of account while paying their GST.
The problematic point in this system is that the taxpayers either have to allocate time to this activity or appoint a person to do the same.
The new GST system can also impact the relationship between the supplier and the recipient. It is seen many times that invoices are missing from the portal but the recipient has received physical invoices. In this case, the recipient has to continuously check the invoices and inform the supplier in a timely manner, but this creates unnecessary responsibility on the shoulder of the receipt even after paying the tax amount to the supplier. Thus, the excessive burden on the recipients
Vendor communication plays one of the important roles in the new GST system. After the implementation of the new GST return system, the vendor has to focus on receivables and accounts payable. The receivables accounts will determine the value of ITC claims, the value of sales, and debaters. On the other hand, the payable accounts will determine the output tax liability and the value of purchase creditors.
So along with following up for missing following and reconciling differences, vendor communication is vital for the taxpayer’s hassle-free submission of the GST return.
On the other hand, the accounts payable will decide the value of purchases and creditors and the output tax liability. Hence, vendor communication is vital while following up on missing invoices and reconciling differences. Vendor communication is important because it will take care of the hassle-free submission of GST returns by the taxpayers.
Something we could agree upon is that the transition to the new GST return system will need ample time and initial efforts from the taxpayers to adopt the system.
New features such as uploading of invoices in GST ANX-1, taking action in GST ANX-2 for ITC claims, claiming provisional credit for missing invoices, regular reconciliation of differences, and more are to be implemented.
However, the positive side to this matter could be that the use of the latest technologies available in the market makes it easier to adapt to the new GST return system. There has been the introduction of features like tracking of invoices, bulk uploading of invoices, hassle-free communication to bulk vendors, and regular reconciliation of books of accounts with GST return, which are available to facilitate the prima facie strenuous work.