Highlighted New Problems for MSMEs in Quarterly GST Returns

Quarterly Goods and Services Tax (GST) return filing is turning to be a bit of pain for small businesses. A major relaxation for micro, small, and medium enterprises (MSMEs) in compliance is resulting in blockage of input tax credit (ITC) A complete guide for understanding the basics of input tax credit and it calculation with detailed examples under GST (Goods and Services Tax) India and cash flow problems for large companies. As large companies have to file GST returns on a monthly basis, this problem is prompting them to change suppliers.

Some of the experts fully aware of the matter responded that Payments to small companies, having an annual turnover of up to 5 crore and filing returns on a quarterly basis, are also getting delayed due to large companies trying to harmonize GST returns issues.

Pratik Jain, a tax partner at PwC India said that “The purchaser can typically claim the input credit on a quarterly basis even though the invoice is paid (including GST) earlier… this leads to cash flow issues for the purchaser”.

This is forcing larger companies to change suppliers and the industry made the Government aware of this issue.

Anil Bhardwaj, secretary-general at the Federation of Indian Micro and Small & Medium Enterprisess Get to know the brief guide of MSME registration process in India with key benefits. Also, we mentioned Indian government schemes those catering MSMEs. Read More said that “Large buyers tend to shirk suppliers filing quarterly returns due to delays in the reconciliation of accounts… several small-scale suppliers are afraid that large companies may not continue supply contracts”. He further said that small companies have started looking for ways around the problem.

Companies having a turnover of up to 1.5 crores have been allowed to file returns on a quarterly basis and the same facility will be available to companies having a turnover up to Rs 5 crore by 2021.

In GST-1, the GST Rules were amended by inserting Rule 36 (4) from October last year defining that the input tax credit to be received by the taxpayer in respect of invoices or debit notes not uploaded by suppliers in Form GSTR-1 return The complete guide for online filing GSTR 1 form in a very easy and step by step manner. We have explained its part 1 to part 13 with the original form screenshots shall not cross over 10% of the eligible ITC available. Industry officials said that most MSMEs and small suppliers had opted for filing quarterly returns.

There are a few things that need to be changed in the GSTN system. However, Harpreet Singh, indirect tax partner at KPMG India said that “As done during Covid, the government may consider relaxing the restrictions under Rule 36(4), and allowing provisional credits to all with a quarterly or half-yearly application of Rule 36(4), so that it takes care of mismatch in the monthly vs quarterly filings”.