Amendment in GST returns (GSTR 3B and GSTR 1)
In the GST regime previously Amendment in GST Returns was not possible, we saw several changes, including those made under returns. The GSTR-3B (ie, a summary return) was brought in for a short period by the government, while for details of it the FORM GSTR-1 and the FORM GSTR-2 were also introduced. It was clarified that the system will automatically reconcile the data sent in FORM GSTR-3B with FORM GSTR-1 and FORM GSTR-2, and the variations, if any, will be offset by the output tax liability or added to the output tax liability of subsequent months of the registered person.
According to section 37 (3) of the CGST Law, any registered person who has provided details under section 37 (1) for any tax period and who remains unmatched in section 42 or section 43 of the CGST Law, must, after discovery of any error or omission, rectify the error or omission in the manner prescribed and will pay taxes and interest, if any, if there is a short tax payment due to that error or omission, in return to be furnished for such tax period.
Provided that no rectification of errors or omissions in relation to the details provided under section 37 (1) of the CGST Law is permitted after the provision of the return under section 39 for the month of September following the end of the financial year for which those details belong to or provide the relevant annual return, whichever is earlier – first proviso to section 37 (3) of the CGST Law.
The Department issued a detailed circular No. 26/26/2017 = GST of 12/29/2017, giving instructions to correct the mistakes made in the filing of GSTR-3B.
It is clarified that, as the return on FORM GSTR-3B does not contain provisions for the reporting of differential values for the past month (s), these values can be reported more and more together with the values of the current month in appropriate tables, that is, Table 3.1, 3.2, 4 and 5, as appropriate.
It can be seen that, when making adjustments to the output tax liability or the input tax credit, there can be no negative entries on the GSTR-3B FORM. The remaining amount for the adjustment, if any, can be adjusted on the return (s) of FORM GSTR-3B of the subsequent month (s) and, in cases where such adjustment is not feasible, a refund can be requested.
In cases where adjustments have been made to FORM GSTR-3B over several months, the corresponding adjustments to FORM GSTR-1 should also be made preferably in the corresponding months.
Mistakes in GSTR-3B:
GSTR-3B return filing is a four-step process – Step 1 – Confirmed Submission, Step 2 – Cash Ledger Update. Step 3 – Liability offset, Step 4 – Return filed. Before discussing errors, we need to know the stage where we want to correct or modify the data in GSTR 3B
|Stages||Process||Editing Option||Remarks for stage|
|Stage 1||Submit||Available||At this stage tax liabilities and inputs are confirmed and submitted|
|Stage 2||Cash Ledger||Available||Cash is added to the electronic cash ledger as per return liability|
|Stage 3||Offset Liability||Not Available||All tax liabilities are adjusted with credit ledger and cash ledger.|
|Stage 4||Filing of Return||Not Available||Return is filed finally.|
The return can only be edited in step 1 and 2. The return cannot be edited in step 3 and 4.
In this case, the adjustment can only be made in exchange for the next month, as there is no provision to change the return of the GSTR-3B after the submission.
Now, if the errors are known before offsetting and filing, it can be corrected by editing the respective side of the liability / input, etc. in that case we need to do the following as the circular suggest :
Common Errors made while Filing GST Returns & How to avoid them:
1. Errors while uploading data invoice-wise in GSTR-1
- GSTR-1 requires that invoice-wise data be uploaded of all outward supplies such as invoice date, invoice number, place of supply, rate of tax, etc. Due to the vast amount of data to be submitted, taxpayers sometimes make errors while entering such data, and this causes a mismatch between the GSTR-1 and GSTR-3B. A taxpayer needs to be very careful as there is no provision to amend the return once it is filed
2. Claiming the incorrect input tax credit
- GSTR-2A is an auto-generated return in which a taxpayer’s registered purchases and related input tax credit are declared by the respective supplier. A taxpayer, on the other hand, is required to separately disclose their input tax credit when filing returns. While doing so, they should report and claim the right value of input tax credit. If a higher value is disclosed, there is no way to revise the return, and hence the difference needs to be paid along with interest in the following month’s return.
- A GST Health Check Report will give a taxpayer the exact difference of input tax credit declared in the returns filed and the GSTR-2A. Simply download the report and go to the GSTR-3B vs 2A tab to cross-verify data that has been filed.
3. Disclosure and payment of the tax under the wrong GST head
- There are several heads under which tax is reported while filing GST returns. Some taxpayers make the mistake of entering the GST liability or input tax credit under the wrong GST head. Even at the time of making payment, the tax is sometimes paid under the wrong head, or interest is paid under the tax head and so on. One needs to be cautious when making tax payments as the GSTN does not allow inter-utilisation of taxes. This could lead to an unfavourable working capital due to unplanned cash flows.
4. Categorising zero-rated supplies as nil-rated and vice versa
- Several taxpayers confuse zero-rated with nil-rated supplies, though they do not mean the same thing. In the case of zero-rated supplies, usually only exports and supplies to an SEZ fall in this category. However, in the case of nil-rated supplies, all goods and services on which the tax rate in 0% fall in this category. No input tax credit can be taken in the case of nil rated supplies. A taxpayer needs to be careful to not enter exports under the nil-rated category when filing returns.
- The Health Check Report, in its section-level summary tab, gives a taxpayer the differential amount in case any invoices have been entered under the wrong category when filing returns.
5. Not filing your NIL return
- Often taxpayers have the misconception that GST returns do not need to be filed when they have no transactions to report for a tax period. This could result in penalties due to non-filing or delayed filing of returns. A taxpayer should file a NIL return even if they may have no transactions to disclose for any particular period. This would also enable the subsequent filing of returns as the GSTN does not allow returns to be filed in case any previous period’s returns are not filed.
6. Reversal of Input Tax Credit and Blocked Credits
- As per law, Input Tax Credit should be reversed in some instances such as – payments not made to suppliers in 180 days, inputs used partly for personal purposes, capital goods sold, free samples given to customers or business partners, goods destroyed, etc. In addition to this, there are certain goods and services on which credit is ineligible. Taxpayers need to keep in mind the implications of claiming the same. Failure of which could result in the GST department issuing notices, which could ultimately lead to interest and penalty being charged.
- The Health Check Report gives a taxpayer a month-wise breakup of input tax credit that has been reversed, as well as ineligible ITC. The report can be downloaded, and all details pertaining to ineligible and reversed ITC can be found in the is GSTR 3B tab.
7. Understanding the applicability of Reverse-charge mechanism
- The Government recently simplified things for businesses by restricting the applicability of reverse-charge to certain notified goods and services. While this list is yet to be issued, businesses now need to understand and identify whether any of these provisions apply to them. Service providers, on whose services reverse charge is applicable, should be careful to not pay GST on the same, which would lead to the double payment of taxes. Taxpayers should also take note that reverse-charge payments can only be made in cash, and input tax credit cannot be utilised.
8. Amendment in GST Returns
- The concept of Amendment in GST Returns did not exist in the pre-GST era where invoices belonging to a particular period were allowed to be added or amended at a later date. However, not disclosing an invoice pertaining to an earlier period could result in interest being chargeable right from the invoice date. It would be ideal for businesses to issue credit or debit notes rather than amend the original invoices in such cases.
- Through the Health Check Report, a taxpayer can track all invoice-wise amendments made on an annual or monthly basis, in the GSTR-1 vs 3B tab