GSTR 3b is the basic return of GST.
Every registered person except the composition dealer, TDS, and TCS deductor is required to file it.
It is a monthly return and the payment of tax in GST is linked with GSTR 3b. It means we make the payment of tax under GST while filing GSTR 3b.
Earlier GSTR 3 was supposed to be the GST return. This form was introduced as a summary form till the GSTN portal can make the GSTR 3 life
But after the case of AAP & Co, the rules were charged retrospectively. GSTR 3b was mentioned as the return prescribed under section 39 of the CGST Act.
In this article, we will cover recent changes in this tax regime, the consequences of not filing this return, and the best practices for filing GSTR 3b correctly.
Recent Changes In GSTR 3b
Recently there are many changes in GSTR 3b. Earlier a new return filing system was proposed by GSTIN. But after spending around a year, it is decided to scrap it.
Now the requisite changes will be made in this itself to make it the normal GST return.
Let us have a look at those changes.
GSTR 3b will get the auto-populated data from GSTR 1.
In many cases, taxpayers file GSTR 1 with high turnover but skip GSTR 3b. In some cases, they file the latter with very less turnover. It results in passing on the ITC to the buyers but tax is not paid to the government.
Many GST frauds were executed using this pattern. Then CBIC decided to link the two returns.
Now the data filled in GSTR 1 will auto-populate.
Example: M/s ABC Ltd filed their GSTR 1 with a turnover of Rs. 10lac with a tax liability of Rs. 1,80,000. Now at the time of filing GTSR 3b this Rs. 1,80,000 will auto reflect. In case of less deposit of tax, a negative report may be generated and sent to the Department officers.
Consequences For Not Filing The GSTR 3b Correctly
There can be dire consequences for incorrect filing of GSTR 3b. It is linked to the payment of tax.
Any delay or misreporting in GSR 3b affects your liability.
1) GST 3b is non-editable. Once the return is filed, you can’t open it and make any corrections. Although there is no such restriction in the CGST Act. But the GSTN portal does not allow that.
In a circular CBIC suggested the manner of changes in GSTR 3b. They advised me to make a corresponding correction in the return of the next month.
For example, if the turnover of Rs, 200000 is reported as a turnover of Rs. 20,00,000 you can reduce the turnover in the coming months. But this resolution is not viable in every case.
There are many instances when this is not possible to make the exact effect in the upcoming GST returns. E.g. If I reported the turnover of CGST & SGST and IGST.
Now I don’t have any turnover in IGST even in the coming months. How I will be able to correct this error?
2) Specifically in the case of taxpayers making an export supply, a misreporting can be disastrous. The refund in case of export is granted by ICEGATE.
They grant the refund only when the data is transmitted from the GSTN portal to ICEGATE. But in case of any mismatch in GSTR 3b, GSTR 1, and shipping bill details, the data is not transmitted.
It is very difficult to correct the data in the coming months as we report consolidated figures. There is no way out to tell the bifurcation of reported figures.
3) Recovery proceedings – It may also make you liable for the recovery. If you have over-reported in GSTR 1 but paid less tax.
Tips For Filing A Correct GSTR 3b In Changed Scenario
Now GSTR 2b is also auto-drafted by the GSTN portal. Now we should emphasize the correct filing of GSTR 3b.
Here we have compiled some small tips for the correct filing of GSTR 3b.
1) Reconcile the Purchase register with GSTR 2b before availing of an ITC. Now a reconciliation tool is available on the GSTN portal. You can use that tool to reconcile the ITC of your purchase register with the ITC reflected in GSTR 2b.
If there are some small mismatches then you can still claim the ITC. but if some of the ITC is missing in GSTR 2b, you need to leave that ITC. But you can communicate to your supplier to include your invoice in his next return. Once it is reflected, you can claim the ITC.
2) Match your turnover with GSTR 1. You can match your turnover with GSTR 1. It should be a regular practice. Every month your Sales should match with GSTR 1.
In case of a gap, the department may ask you to pay the difference. When we file GSTR 1 we declare the turnover. This declaration makes us liable to pay the tax. But at the time of GSTR 3b, if we pay less tax, recovery proceedings can be initiated.
If you have over-reported a liability in GSTR 1. Correct it immediately in the next return period.
3) Shift from quarterly GSTR 1 to monthly. Despite many new changes, there is no resolution to this issue. Now ITC reflects only when GSTR 1 is filed. But small taxpayers are allowed to file the GSTR 1 quarterly.
The input tax credit on their bills will reflect only after a quarter. But in reality, they have already paid the tax at the time of filing GSTR 3b. But there is no resolution to this issue.
Many large companies avoid making purchases from small suppliers. As they will have to wait for a quarter for Input Tax Credit, they are shifting to large suppliers.
Thus it is advisable to shift your GSTR 1 frequency from quarterly to monthly. This will increase the compliance burden. But it can save you from losing clients.
Also, you may get some new clients as they will get a surety of Input Tax Credit within the same month. It can save them the cost of working capital.
Gradually most of the buyers will try to shift to the monthly return filers. In the long run, the monthly GSTR 1 files will gain an advantage.
A correct and timely filing of GSTR 3b is the backbone of a healthy business. Make sure to file it on time and with the correct details.
I hope the tips we discussed above will help you.
A monthly reconciliation can save many hours of resources. It can also save you from the future consequences. GSTN is changing very fast.
In the future, GSTR 1 and 3b will get linked to each other. The auto-populated data in GSTR 3b is editable but in the future, it may be frozen, GSTIN may ask taxpayers to bring any change via amendment of GSTR1 only.
Any mismatch in GSTR 1 and GSTR 3b may be disallowed in the future. Even if it is not completely disallowed, it may result in liability on the part of the taxpayer.
Reconciliation with GSTR 1 and with the auto-populated data in GSTR 2b can save you. You can use good accounting software like ProfitBooks for complete error-free filing. ProfitBooks is free to use. It will help you put a system in place to ensure that there is no filing without a reconciliation.