In the new returns, there would be one main form — GST RET-1, which will contain details of all supplies made, input tax credit availed, and payment of taxes. This return will have two annexures — GST ANX-1 and GST ANX-2.
Form GST ANX-1 will have details of all outward supplies and form GST ANX-2 will contain details of all inward supplies.
Currently, taxpayers are filing two returns: GSTR-1, which contains details of all outward supplies made, and GSTR-3B, which is a monthly self-declaration of outward supplies, input tax credit availed, and taxes paid.
Initially, businesses had a fear that their cash flow would be blocked because there was a proposition of only allowing credits to those invoices that were uploaded by vendors and tax discharged. To address the issue, the government had proposed allowing businesses to avail input tax credit on the basis of self-declarations in GSTR-3B for initial months even under the new mechanism.
As such, industry demanded that initially only ANX-1 and ANX-2 forms be allowed to be filled along with the currently used GSTR-3B. Only when industry is used to these forms, filing of RET-1 be made mandatory after GSTR-3B is done away with.
Businesses with annual turnover between Rs 1.5 crore and Rs 5 crore are currently required to report HSN code at two-digit level, while those above Rs 5 crore will have to report the code with four-digit level.
The new return format, however, makes it mandatory for businesses to use HSN code at six-digit level.
Abhishek Jain, tax partner at EY, said companies would need to review the HSN code for all their supplies and execute modification and upgrade their ERP configurations, entailing huge time and efforts from a business perspective. As such, he suggested the current mechanism of reporting HSN code be continued.
“The taxpayers need to very quickly align their ERP and business processes to meet these requirements as the government proposes to introduce the new return format effective April one, 2020,” he said.
There is then this issue of HSN wise reporting of imports and exports.
Harpreet Singh, partner at KPMG, said this should be substituted with consolidated bill of entry wise reporting without HSN details. This arrangement should be made till the GSTN portal gets integrated with Indian Customs Electronic Gateway (ICEGATE), which is a portal of the customs department that provides e-filing services to the trade electronically.
He also wanted reporting of exports be made without HSN details as is the current practice in the form GSTR-1.
HSN code is a six-digit code, developed by the World Customs Organisation to classify products in a systemic and logical way. It contains 21 sections and every section is divided into chapters with each of them having separate heading. The first two digits represent chapter number, the next two are heading number and the last two digits are a product code.