Introduction of GSTR 1A

GSTR 1A: Insights from the 53rd GST Council Meeting

Navigating the complexities of India’s Goods and Services Tax (GST) system has been a challenging journey for many businesses. From small startups to large corporations, the quest for compliance has often felt like navigating through a maze of regulations and forms. However, a major transformation is upon us, aiming to simplify tax compliance and provide substantial relief to taxpayers across the country. The 53rd GST council meeting has recommended introduction of GSTR 1A as an optional facility to allow taxpayers to amend their outward supply details after the filing of GSTR 1 before the filing of their GSTR3B.

Preparing for GSTR 1A: Insights for Businesses

As the GST Council finalizes GSTR 1A’s implementation details, businesses must remain vigilant about the forthcoming changes. Understanding the amendment process, its implications on tax liabilities, and Input Tax Credit (ITC) and adapting accounting practices are crucial steps. Engaging with GST professionals, leveraging educational resources and using robust platforms which help you handle the new workflows will be key to navigating this transition seamlessly.

Let’s understand in detail as to the changes that it brings to the current flow.

Understanding the Significance of GSTR 1A – From a Supplier’s Lens

Timely Corrections: In the current process if any amendments are required post GSTR 1 filing of a particular month, then the business does those amendments in GSTR1 filing of the next month. With the introduction of GSTR 1A, now the cases where any changes in GSTR1 are identified during any time before filing of GSTR3B, then those can be rectified through GSTR1A. So there will be no need to wait for next month for amendment and same month the filed data can be amended.
Automatic Adjustments in GSTR3B: It is expected that any changes in GSTR 1A will be automatically reflected in GSTR-3B. Thus this new form will not only eliminate the need to wait till next return period for corrections but also will help in ensuring that there are no differences in GSTR1 and 3B for a particular reporting period.
Reduces the chances of getting notices: Many businesses currently follow a practice of filing GSTR3B with correct liability if any differences are identified due to which they do face notices to explain the differences. However with GSTR 1A the GSTR 1 and 3B values will be in sync and thereby reducing the notices for such differences.
Limits on Making Changes: With GSTR 1A, once you’ve made a change to a document, you can’t amend it again. This could be tricky for businesses that have export transactions because currently the businesses are able to amend export documents more than once.

The introduction of GSTR 1A, focused on the supplier’s perspective, aims to streamline liability declarations. However, there are still some aspects from the viewpoint of suppliers that require clarification.

What Happens with E-Invoices After Filing: E-invoices get auto-populated in GSTR 1. It’s important for businesses to understand what will be the treatment of e-invoices for the reporting period that are generated after filing GSTR1. Currently such invoices do not get auto populated for filing as GSTR 1 is already filed.
1. However now will it be auto-populated in GSTR 1A (if not filed yet) if these are generated before filing of GSTR-3B?
2. What if such invoices are already a part of GSTR 1 actual filing? Ideally should not be auto populated in GSTR 1A in such cases.
Amendment of E-Invoices: Auto-populated e-invoices are allowed to be edited or deleted before GSTR 1 filing. For example, if the invoice is cancelled but e-invoice could not be cancelled due to 24 hours lapsed, then the users delete those invoices from GSTR 1. Thus, there are differences in GSTR1 and E-invoice data. What if the taxpayers retain the e-invoices as is and make changes in GSTR 1A? There will be a need for reconciliations with both GSTR1 and GSTR1A in such cases.
Locking of Auto computed Liability in GSTR 3B: Currently, the process flow involves GSTR 3B, being auto populated from GSTR 1, yet the values in GSTR 3B can still be edited. With the introduction of GSTR 1A, will there also be a mechanism to freeze the values in GSTR 3B? The benefit of this new flow would be significant only if the auto-computed values in GSTR 3B are not editable.
Due Date of GSTR1A: Amendments through GSTR 1A can be made only before the filing of GSTR3B. Does this mean the due date of GSTR 1A will also be same as GSTR 3B. Will late filing of GSTR 1A be allowed (till the time GSTR 3B for the period not filed) or will it be like IFF which is not allowed to be filed after 13th of the next month? What if GSTR 1 itself is filed late?

Having explored the significance and unresolved questions from the supplier’s perspective, let’s now focus on the recipient’s viewpoint, particularly in terms of input tax credit. It is known that there will be a significant downstream effect on other returns (2A, 2B, 3B, 4A, 6A, 9 and 11) which are currently auto-drafted directly or indirectly through GSTR 1. The introduction of GSTR 1A will have a ripple effect on ITC claims, which must be carefully analysed.

Recipient’s perspective on the impact of GSTR 1A on ITC

Transactions reported in GSTR 1 reflect in the recipient’s GSTR 2A and subsequently post GSTR1 filing by vendor these are reflected in GSTR 2B. ITC claims are now restricted to transactions appearing in GSTR2B. Thus, any amendments in vendor’s GSTR1 will consequently impact the ITC of the recipient. Some may wonder that happens even now because amendments are anyways allowed in next month and its impact is considered. However, with GSTR1A, the reconciliations and ITC computations will need to account for these changes, adding another layer of complexity. In the council meeting there were no details discussed with respect to the impact on ITC. Below are some points where clarifications could be expected soon.

Reflection in GSTR 2A: GSTR 2A is a dynamic return. So, the transactions reported by vendor in GSTR 1 of the reporting period, those are reflected in GSTR 2A of the recipient in same period irrespective of GSTR 1 being filed late by the vendor. If the vendor opts for amending the details in GSTR 1A of the same month before filing 3B, we feel that this will also be reflected in the same month in GSTR 2A as well.
Impact on GSTR 2B: GSTR 2B is a static return that gets generated on 14th of the next month. For monthly filers of GSTR 1, the due date of filing is 11th but for quarterly filers the due date is 13th, and the recipient could be dealing with both types of vendors. Hence the 2B generation date is kept as 14th. Few open questions with respect to impact in 2B are as follows
1. If GSTR 1A is filed before the 14th of the month, then will the impact be reflected in 2B? If that’s the plan, then in such case would it not be better to change the due date of GSTR 1 itself to 13th for all, so that rectifications can be made without the need to make amendments.
2. If GSTR 1A is filed after the 14th of the month, then the impact will still go in next month’s GSTR 2B as 2B already generated cannot be changed. Or will there be some new mechanism to handle such cases?
3. If GSTR 1 itself is filed early i.e. before 11th and GSTR 1A is filed before 11th will that have a different treatment in 2B?
ITC claim adjustment in GSTR 3B: Input tax credits are now heavily dependent on GSTR 2B as now business cannot claim credits if the transactions do not appear in 2B. So, if any amendments are made through GSTR 1A before 3B filing but say the impact will not be coming in current month 2B, then will the business be still able to claim such ITC? As vendor has rectified the mistake before 3B filing and probably also paid revised liability, ideally the recipient should also be able claim ITC for such cases in same month in our view, this can work only if there is another form introduced even from ITC angle i.e. for example a new form GSTR 2BA where GSTR1A related changes can be reflected if the GSTR 1A is say filed within some due date. But still would add layers of complexity in terms of reconciling with various source of information.

As we stand on the cusp of integrating GSTR 1A into the GST compliance fabric, the path forward invites us to reflect on several crucial considerations:

Addressing Errors and Enhancing Reporting: Is GSTR 1A Necessary?

After seven years of navigating the complexities of GST return filing, businesses are well aware of the practical challenges associated with errors and the need for amendments. These issues call for a shift in how exceptions are currently managed.

With the rapid pace of technological advancement, it is crucial for businesses to integrate advanced technology tools into their processes. Utilizing platforms capable of seamlessly accommodating regulatory changes can ensure that businesses can manage compliance without overhauling their existing accounting systems. This integration can make the amendment process more efficient and less disruptive, raising the question of whether GSTR 1A is the best solution.

Engaging with these questions is vital as we embrace the changes brought forth by GSTR 1A. The essence of this transition lies not just in regulatory compliance but in seizing the opportunity to enhance operational efficiency and foster a culture of transparency and trust. By staying informed and prepared, businesses can fully leverage the benefits of a more streamlined GST regime, marking a significant step towards a cooperative and efficient tax ecosystem in India.

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