GST gets a facelift with the New Returns system, what else is in store?

It's official! Finance Minister Nirmala Sitharaman formally introduced the implementation of GST 2.0 and e-invoicing in her Budget 2020 speech and this article gives you a download of what's in store and how 2020 is going to give India's biggest tax reform, the Goods and Service Tax, that much-needed facelift.

What significant changes can be expected under this facelift?

E-invoicing
For starters, an e-invoicing system with a Government prescribed standard invoice format has already been introduced to taxpayers. This new e-invoicing system is currently available on a voluntary basis for businesses with a turnover above Rs.100 crore. On April 1st 2020, adapting e-invoicing will become mandatory. Let's understand what e-invoicing is and why it will help the filing of GST returns easier.

Unlike what most taxpayers perceive, e-invoicing is not the generation of an invoice on the GST portal. The e-invoicing system facilitates the integration of GST returns and e-way bill systems. Under the new e-invoicing system, business invoices will be electronically authenticated by the GST Network for use on the common GST portal. Information from the invoice will be uploaded to the invoice registration portal in real-time and once authenticated or validated, and the IRP will provide the business with a digital signature and an invoice registration number. This invoice registration number will be unique to that particular invoice and will later be used to match invoices while filing returns or authenticating e-way bills. This means businesses won't have to make manual and/or multiple data entries every time they file their returns. This system will also eliminate the need to generate separate e-way bills used while transporting goods. In a nutshell, e-invoicing will automate multi-purpose reporting with a one-time input of invoice details.

An e-invoicing system will help eliminate manual data entries, thereby ensuring fewer human errors and reduced cases of data reconciliation.

New returns
The most awaited highlight of the GST system this year will be the implementation of a New GST Returns system or GST 2.0. This system will be mandatory from April 1st 2020 and will introduce taxpayers to simplified tax return forms for ease of filing across all taxpayers registered under GST. The New GST Returns System, like e-invoicing, will be introduced in a phased manner, in a bid to familiarise users with the annexure forms of the system.

This forms will follow a workflow-driven mechanism instead of the current supplier driven one that prescribes detailed fields including purchases from unregistered dealers - this could mean firms would be required to alter their Enterprise Resource Planning Systems. Nearly 80% of the tables in the Return forms will be auto-populated, and taxpayers will have to fill in the fields for reporting outward supplies and availing of ITC on the basis of the invoices uploaded by suppliers. In a nutshell, the forms will be limited to three main components -

• Main ReturnForm: GST RET-1 (Monthly/Quarterly (Normal) Return)
• ANX-1 (Annexure of Outward supplies)
• ANX-2 (Annexure of Inward supplies)

This return will need to be filed on a monthly basis, except for small taxpayers who can opt to file the same quarterly. Small taxpayers are taxpayers with a turnover up to Rs 5 crore in the preceding financial year. For those taxpayers reporting nil sales, returns can be filed via SMS, thereby making filing of returns a one-step process that will be verified using a one-time password process. But that's not all! The uploading of an invoice will no longer be limited to a window of opportunity, and taxpayers can upload invoices to the GST portal 24/7 and will even receive acknowledgement or rejection of an invoice in real-time.

A phased introduction of e-invoicing and the New Returns should help ensure that both systems are considerably glitch-free when they are launched as a mandatory requirement for filing your GST returns in April this year.

Learn how Avalara can help your business adapt to the new changes under the GST returns and e-invoicing.