In a major relief to businesses the government plans to do away with monthly filing of Goods and Services Tax (GST) returns after electronic invoices (e-invoices) are fully operationalised. This will reduce compliance burden and check tax evasion, said finance secretary Ajay Bhushan Pandey.
“GSTR-1 and GSTR-3B will ultimately be phased out, once we fully operationalise the electronic invoice (e-invoice),” he said. In the normal course, the two GST returns (GSTRs) means 24 returns filed by GST registered entities every month. The GSTR-1 is a return indicating sales or outward supplies made during the month and the GSTR-3B is the summary return indicating supplies made, input tax credit availed and tax payment made for the month.
E-invoicing is being implemented in a phased manner. It will be mandatory for all from the next financial year as part of the government’s ongoing efforts towards ‘Ease of Doing Business’ and ‘Honouring the Honest’. Once put into operation, both e-way bill system and filing of certain GST returns (GSTR) would eventually be withdrawn, said Pandey, who is also the revenue secretary.
The government has already announced a roadmap to implement e-invoices. Currently e-invoicing is mandatory for companies with turnover of ₹500 crore or more. From January 1, 2021 it will be compulsory for companies with a turnover of more than ₹100 crore, and from April 1, 2020 it will be mandatory for all companies.
“Actually our objective is, once you have an electronic invoice it should ultimately do away with your e-way bills, and also eventually do away with GST returns because from the e-invoice itself your returns can be generated. Then, at the end of the month the taxpayer has to simply validate his return and make the payment of taxes,” the finance secretary said.
The government on October 1 introduced the e-invoicing system for businesses having annual turnover more than ₹500 crore, which replaces the physical invoice and allows buyers and sellers to have real time information of the invoices. Eventually, it will auto-populate GST returns and businesses will not be required to generate e-way bills. To be sure, the introduction of e-invoice was initially scheduled for April 1, 2020, but it was postponed to October 1 due to the sudden outbreak of Covid-19.
“The e-invoice system will lead to a massive reduction in compliance and at the same time it will be good for industry, good for the taxpayers and very-very difficult for the fraudsters,” Pandey said.
The government, which has launched a major drive against GST frauds, believes e-invoices will instantly eliminate fake invoices, currently rampant to fraudulently claim input tax credit. E-invoices will cut the compliance burden.
“If an entity operates in 25 states, it has to file 50 returns per month, hence 600 monthly returns in a year,” Mani said. This is in addition to the two annual returns—GSTR-9 and 9C to be filed for each registration, he added.