Onset of 2021 not just brings E-invoice mandate for taxpayers having aggregate turnover above Rs. 100 Cr. but also a huddle of CBIC notifications on ITC Claim, QRMP Scheme, GSTR-3B auto population, EWB Validity, cancellation of GSTIN and a lot more amendments duly wired with one another having an overall impact on the business processes.
Here in this article, we have compiled a list of changes that have come into effect from 1st January 2021 that you need to be aware of so as to plan and carry out the implementation effectively.
E-invoicing goes live for 100 CR Club:
According to the GST Notification 88/2020, E-invoicing has gone live for taxpayers having aggregate turnover exceeding Rs. 100 Cr from 1st January 2021. The e-invoicing mandate had already gone live for taxpayers having aggregate turnover exceeding Rs. 500 Cr from October 1st and now this is a step ahead in taking the country to digitization. To know more about e-invoicing and its implementation.
- Faster Reconciliation: With E-invoicing coming into place, the details of e-invoice will get auto-populated into GSTR 1, 2A, 2B, 4A, 6A. Auto-drafted returns such as form GSTR-2A and GSTR-2B will help taxpayers to claim their eligible input tax credit via their GSTR-3B.
- E-Way Bill Generation: Now E-Way Bill generation is inter-twined with IRN generation. For taxpayers where e-invoice mandate is applicable, now you will not be allowed to generate EWB for E-Invoices using EWB portal. However, same can be done through E-Invoice Portal. Please note the above restriction is only on generation of EWB and not on other activities related to EWB viz extending validity etc.
QRMP goes LIVE for Small Taxpayers:
From January 1st, 2021 onwards, all the registered persons having aggregate turnover up to Rs 5 crores can choose to furnish their GST returns on a quarterly basis along with monthly payment of tax under the QRMP Scheme. This is according to the Central Board of Indirect Taxes (CBIC)’s GST Notification 82/2020, GST Notification 83/2020, GST Notification 84,2020, and GST Notification 85/2020 Central Tax dated 10-11-2020 and GST Circular 143/2020.
Also, an Invoice Furnishing Facility (IFF) has also been made available for quarterly filers of GSTR-1 to upload documents of their B2B outward supplies.
- Count of Filings Reduced: With the QRMP scheme only 8 returns are to be filed instead of 16 returns in a year. In order to opt for QRMP scheme your aggregate turnover should be up to Rs. 5 Cr. in preceding FY.
- Selective adoption of QRMP Scheme: Additionally, option to avail the QRMP Scheme is GSTIN wise and therefore different GSTINs on the same PAN have the option to avail the QRMP Scheme for one or more GSTINs. Hence, as a taxpayer, if few of your GSTINs have turnover less than 5CR, you may go for QRMP scheme for selective GSTINs and keep monthly GST Return filing for others.
GSTR 3B Auto-Population:
Also while filing GSTR 3B, the details will be auto populated on the basis of data uploaded by the suppliers in the GSTR 1 and as per GSTR 2B data. These auto populated values are just to assist you in filing. However, onus of correctness of GSTR 3B still remains with you.
To know the process of 3B auto population read our blog: Auto-population of GSTR 3B from GSTR 1 and GSTR 2B
QRMP along with auto-drafted returns and e-invoicing will overall impact the ITC Computation for taxpayers. Here is a detailed analysis of the same.
ITC Claim Process from 1st January 2021:
From the collective reading of Latest GST notifications released on 22nd December 2021it appears that the same is a double-edged sword.
On one hand it adorns lots of perks for regular and compliant taxpayers in the form of auto-population of e-invoice details into GSTR 1, 2A, 2B, 4A, 6A followed by auto population of GSTR 3B using GSTR 1 and GSTR 2B and/or availability of invoice details to taxpayers due to use of IFF facility. At the other hand the notifications have a radical flip side for non-compliant taxpayers as well as for taxpayers who are dealing with the suppliers who are non-compliant with GST Regulations.
- Know Your Suppliers’ Turnover Limits
As a taxpayer, you may have suppliers – unregistered, small (turnover less than 5 CR, medium (turnover >5CR and <100CR) or large taxpayers (turnover >100 CR). Hence, you may need to revisit your ITC computation and claim policy from 1st January 2021.
- Supplier is Small Taxpayer: In case your supplier is a small taxpayer and has opted for QRMP, you may no longer need to wait till quarter end for ITC Claims. Being a small taxpayer i.e. having aggregate turnover up to Rs. 5 Cr. in preceding FY, your supplier has an option to upload invoices on monthly basis using Invoice Furnishing Facility (IFF) under QRMP Scheme. Details reported through IFF shall be made available to you correspondingly GSTR-2A, GSTR-2B, GSTR-4A or GSTR-6A. Hence, no more dawdling till quarter end for ITC claim.
- Supplier is Medium Taxpayer:
Cases where suppliers have a mid-way turnover (Rs. >5CR but <100 CR), e-invoice is expected to be applicable for them from 1st April 2021.
- Supplier is Large Taxpayer:
Where your supplier is a large taxpayer, ITC will be available in a span of few days by virtue of auto population of e-invoice details in GSTR 2A & 2B.Large taxpayers, having turnover exceeding Rs. 100 Cr. in any of the FY from 2017-18 to 2019-20 have an obligation to generate Invoice Registration Number (IRN) against each invoice issued. Credit on such invoices shall be reflected in GSTR 1 of supplier in a span of few days (currently it is T+3 days) and corresponding in your GSTR 2A, 2B, 4A or 6A
- Know Your Supplier’s Filing Status (Rule 138 E)
Rule 138E now states that where a supplier fails to file GSTR 3B or CMP-08 for two subsequent tax periods, not just his E-Way Bill but also his GSTR 1 will get blocked.
In case your supplier has opted for the QRMP scheme and has missed to file GSTR 3B for the preceding quarter he will not be permitted to file GSTR 1 or use Invoice Furnishing Facility (IFF) for the subsequent quarter. With GSTR 1 and IFF Facility being blocked, supplier will be in-capacitated to report the invoices which are pending to be reported or in process of being issued.
This provision may require major attention in a scenario where your supplier is a service provider and an invoice issue is scheduled. Or in a situation where PO has been issued and delivery of goods is scheduled. Hence, ITC claim for such invoices will get impacted with supplier’s inability to report the same in form GSTR 1.
- Provisional ITC pegged at 5% and Rule 86B Introduced –Need for Robust ITC computation and Reconciliation
- Know Your Suppliers’ Turnover Limits
Once you have ensured that the suppliers are regular filers, another important task that will need your
attention is vendor reconciliation. The recently released notifications have reduced the provisional ITC
claim to 5% from the previous 10%. Hence, it becomes extremely important to reconcile the ITC which is
received in GSTR 2A and corresponding GSTR 2B. This will require rigorous tracking and tracing with
vendors. The new rule 86B creates more bottlenecks by allowing set-off of only 99% of tax liability
Under Rule 86B, the restriction has been placed on setting off more than 99% of tax liability from ITC where
the value of taxable supplies other than exempt supply and zero-rated supply exceeds Rs. 50 lakhs in a
Rules to Refer for ITC Computation from 1st Jan 2021
With these new amendments, claiming ITC will have to be in line with multiple rules as following:
Section 16(4) – Eligibility and conditions for ITC
Section 17 (5) – Blocked Credit
Reconcile with GSTR 2A and 2B
Rule 36(4) – 5% Provisional ITC
Rule 42 & 43 – Apportionment of ITC
Rule 86B – 1% Output liability to be paid in case, subject to conditions
Rule 86A – Credit blocked by dept. In fraudulent cases
And such other provisions that may be applicable to taxpayers
Also, ITC on debit notes will be available even if issued after 30th September of next Financial Year since section 16(4) of CGST Act is amended thereof.
All in all, taxpayers will be walking on thin ice while preparing the ITC Computations. On one end, you need to ensure that you are compliant at the same time; you also need to ensure that your suppliers stay compliant so that your ITC claim does not get affected.
Rule changes regarding Suspension of GST Registration
ITC reconciliation between GSTR 2A, 2B and 3B will now be a tough monthly activity for taxpayers missing which may result in suspension of GST Registration. Also, with the advantage of having values auto-populated in GSTR 3B , it is critical to reconcile GSTR 1 and 3B. Because, additional powers are bestowed on officer to suspend the GST Registration in case:
- there are significant anomalies in GSTR 2A & GSTR 3B or in GSTR 1 & GSTR 3B.
- Taxpayer avails input tax credit in violation of the provisions of section 16 of the Act or the rules made there under
- Taxpayer violates the provision of rule 86B
- Taxpayer furnishes the details of outward supplies in FORM GSTR-1 under section 37 for one or more tax periods which is in excess of the outward supplies declared by him in his valid return under section 39 for the said tax periods.
Suspension of registration would mean that taxpayer will not be able to issue any invoices till clearance of suspension. Also refund claims will be subject to clearance of suspension.
Updates related to E-Way Bill Generation and Validity
While there have been major updates for taxpayers on GST Compliance, there have been certail changes with reference to E-Way Bill validity etc as well. The validity of e-way bills for cases other than over-dimensional cargo will be calculated based on a distance of 200 km and not 100 km from 1st January 2021 onwards.
This has caused quite a stir in the logistics community because suddenly the cargos need to work double their capacity covering 200 kms in same time that they were covering 100 kms until 31st December 2020.
There have been some other updates related to PIN distance and passing of 96 as ‘State Code’. You may read all latest E-Way bill Updates here
There are certain other changes going LIVE from 1st January 2021 with reference to issuance of TDS certificates, extension of date for application of revocation of cancellation of GST registration and exclusion of certain categories from Composition Scheme. You may read here for details.
The taxpayers will now need to have more strict policies and processes internally for counter-party assessments, for receiving, issuing and processing bulk of invoices. Also have to practice monthly reconciliation of purchase invoices with 2A, comparing with 2B and computing 3B based on GSTR 1, following up with vendors and customers to get discrepancies resolved etc. and to avoid suspension.
With high volumes of invoices, reconciliations and so many activities to be incorporated in Order-to-Cash and Purchase-to-Pay cycle of business, use of proficient tech savvy solution is inevitable.
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Nice information, it update knowledge.