5 GST measures your business must take post lockdown

5 GST measures your business must take post lockdown

It is not news that businesses are suffering from the Coronavirus pandemic and subsequent lockdown. India, the world’s largest democracy has now been on lockdown since mid-March 2020 and even though the government recently announced an economic stimulus package that will be beneficial for businesses in this difficult economic slump, it is still not clear when the lockdown will be partially or completely lifted. As the days pass and India (hopefully) manages to flatten the COVID-19 growth curve, the rules are going to eventually be relaxed and businesses will start to slowly function once again.

Yes, the main goal of every business will be to make up for the lost time, lost profits and lost productivity. But at the same time, businesses must not forget that the tax function in a company forms the basis for the rest of the operations. Here are five important tax-based actions to keep in mind once businesses resume operations.

File pending GSTR1 and GSTR3B returns

One of the most significant tasks to be undertaken post lockdown is to file GST returns. While the government has extended the dates for filing of returns till June 30, 2020 and even extended the facility for correction of invoices dated till December 2019, businesses need to first ensure filing of returns. First in line to be filed should be the GSTR1 and GSTR3B returns. The data from GSTR1 is used to populate the Buyers’ Purchase Returns GSTR-2A & GSTR-3B is the final return summarizing the amount of tax liability paid & ITC claimed. Both these returns forms play a significant role in filing the annual return.

Conduct overall reconciliation

The entire GST system has been designed to have each return depend on the previous return for details. Mistakes in one return will lead to mistakes in the following return because of the auto population function of the GST portal. Moreover, the taxpayer’s tax liability is determined based on the details filled by them while filing their returns. This means the taxpayers need to conduct an overall reconciliation exercise to ensure their tax liability and input tax claim are appropriate. Matching mismatched values or data for the correct calculation of the Tax Liability & ITC also helps the government in curbing tax evasion occurring through bogus invoices and transactions.

File annual returns

Although the due date for filing the annual GSTR return for this year has been extended to June 30, businesses need to prepare in advance for filing this return. We redirect your attention back to the first task in this article viz. filing of GSTR1 and GSTR3B. Form GSTR-9 which is the annual return is fundamentally a compilation of all information shared by the taxpayer and a computation of the total tax liability of that year, total ITC claimed & the tax liabilities paid and pending if any. Businesses need to ensure their figures are correct before filing this return.

Prep for an audit

Once a business files their annual return, they will be required to file GSTR9C. This return form consists of the Reconciliation Statement & Audit reports of the accounts of a business. Under this form, the taxpayer will be required to explain any differences that may arise in the values of their tax liability, ITC & tax liability discharged in the data of the annual and reconciliation return forms. Since there is no provision for rectification of GSTR9C, it is important for businesses to thoroughly prepare for filing this return.

Stay on top of new tax developments in 2020

Two important tax developments are likely to be introduced this year - namely e-invoicing and a simplified returns system. Under e-invoicing, businesses will be required to adhere to a prescribed standard of invoice which will then be validated on an invoice reference portal. Taxpayers will also be introduced to a new return filing system which will determine the frequency and forms for filing GST returns basis the turnover of the taxpayer. The number of forms will also significantly reduce under the new returns system. Businesses need to work with their enterprise resource planning solutions provider to adapt to the new tax systems that will be introduced hopefully in this year.

Businesses need to utilise this time to prep for organizing their tax functions in order to ensure there are no interruptions in revenue generation post the lockdown.