Even though the triplicate transaction-wise goods and services tax (GST) returns remain suspended, businesses are making use of the inward-supplies form, GSTR-2, to guard themselves against audit by the taxman. Taxpayers are now mandated to file only the outward-supply return GSTR-1 and a simple summary interim return GSTR-3B, with which they pay tax and claim input tax credits. However, since the tax authorities are aggressive in verifying the ITC claims by businesses, GSTR-2 helps them provide evidence of tax contents in the goods and services they consumed, and thereby validate the credits claimed. Filing of comprehensive returns with attendant invoice-matching facility was suspended following complaints. Taxpayers had complained of huge compliance burden and also the GST Network’s inability to handle the traffic. The widespread use of GSTR-2 is despite the GST Network not providing the facility of filing it right now.
A tax practitioner, with a large clientele, told FE that several of his clients had been using GSTR-2 functions every month, since the return was suspended in November, 2017. “With the use of GSTR-2 (which gets auto-populated once GSTR-1 is filled), one of my clients found out that some of his suppliers were late in paying their GST in a particular month. When asked, these suppliers said they had faced cash flow issues. The client then extended a short-term loan to these suppliers and made them pay their taxes so that its self-declared ITC claims in GSTR-3B are validated and aren’t disputed by the tax department at a later date,” he said.
“Reconciliation and matching of tax credits could save billions in tax revenue and also ease litigation aspect for bonafide taxpayers. The government should rectify this situation immediately and instruct GSTN to open the portal allowing the voluntary filing of GSTR-2 to ensure prepared and acquiescent taxpayers can come clean,” Rajat Mohan, partner, AMRG & associates, said. The GSTR-2 form provides a business details on the status of suppliers’ tax filing and gives the entity greater control over choosing a vendor. This also allows a firm to ensure that its suppliers are paying taxes on time so that it can claim ITC without any hurdle.
“Some businesses are using GSTR-2 functions primarily to ensure that their vendors are registered with GSTN and are tax compliant as well,” Rashmi Deshpande, associate director at Khaitan & Co, said. She added that businesses are also preparing for an eventual return-filing process and want to ensure that their provision credit claims are backed by suppliers tax compliance which can be assured through GSTR-2.
Some experts, however, said that time lag of 20 days in the deadline for filing GSTR-3B and availability of GSTR-2 defeats the purpose of verification for businesses. While GSTR-3B is to be filed by 20th of subsequent month, GSTR-1 filing for that particular month is mandatory by 10th of the month after that. “This lag often leads to mismatches between details given in GSTR-3B and GSTR-1 as businesses who may have missed an entry in 3B correct the mistake in GSTR-1 filed for the same month,” Archit Gupta, founder and CEO of Cleartax, said.