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COMPARISON BETWEEN THE OLD & NEW GST RETURN SYSTEM?

COMPARISON BETWEEN THE OLD & NEW GST RETURN SYSTEM?

INTRODUCTION

The Goods and Services Tax (GST) is a value-added tax system adopted by several countries, including India, to simplify and streamline the taxation of goods and services. In India, the GST return filing system underwent a significant overhaul, transitioning from the old system to a new and more simplified system. This transition aimed to make GST compliance easier for taxpayers, reduce complexities, and enhance the efficiency of tax administration. In this comparison, we will introduce and highlight the key differences between the old and new GST return systems in India

The new GST return system was introduced in April 2022. It is a two-tier system that requires taxpayers to file two returns every quarter:

  • Two-Tier System: Under the new GST return system, taxpayers are required to file two returns every quarter. These returns likely include one for reporting outward supplies (sales) and another for reporting inward supplies (purchases).

  • Quarterly Filing: Unlike the earlier system that required monthly filings for most taxpayers, the new system allows for a quarterly filing frequency. This can significantly reduce the frequency of compliance-related activities for businesses.

  • Outward Supplies (GST ANX-1): One of the returns is likely focused on reporting outward supplies, which includes details of sales and invoices issued during the quarter. This return helps tax authorities track the tax liabilities of taxpayers.

  • Inward Supplies (GST ANX-2): The second return is probably centered on reporting inward supplies, which involves recording purchases and invoices received during the quarter. This return facilitates the reconciliation of input tax credit (ITC) and ensures accurate tax claims.

  • Data Validation and Reconciliation: The new system may incorporate robust data validation and reconciliation mechanisms to minimize errors, discrepancies, and mismatches between supplier and recipient data.

ADVANTAGES OF COMPARISON BETWEEN THE OLD & NEW GST RETURN SYSTEM

  • Simplified Compliance: The comparison helps taxpayers understand how the new system simplifies GST compliance, reducing the number of forms and filings. This can lead to less administrative burden and increased ease of compliance.

  • Reduced Frequency of Filings: Highlighting the shift from monthly to quarterly filings for some taxpayers emphasizes the reduced frequency of return submissions, which can free up resources and time for businesses.

  • Improved Accuracy: By comparing the two systems, taxpayers can recognize how the new system incorporates better data validation and reconciliation mechanisms, which can lead to more accurate returns and reduced chances of errors.

  • Automatic Reconciliation: Understanding that the new system includes automatic input tax credit reconciliation showcases the potential for fewer disputes and smoother compliance processes between suppliers and recipients.

  • Flexible Amendments: Pointing out the ease of making amendments and corrections in the new system demonstrates the flexibility it offers, allowing businesses to rectify errors without excessive complexities.

  • Cost Savings: The reduced compliance frequency and enhanced accuracy can lead to cost savings for businesses, as they may require fewer resources for GST compliance-related activities.

  • Threshold Benefits: Recognizing that the new system may introduce thresholds for quarterly filings and offer the option of NIL returns highlights the benefits for smaller businesses, reducing their compliance burden.

  • E-Invoicing Integration: Emphasizing the integration of e-invoicing for larger businesses underscores the advantages of real-time reporting and reduced tax evasion opportunities.

  • Compliance Alignment: Businesses can use the comparison to ensure that their GST compliance practices align with the new system’s requirements, reducing the risk of non-compliance and associated penalties.

  • Better Informed Decision-Making: By understanding the advantages of the new system, taxpayers can make informed decisions about how to adapt their internal processes and systems to align with the updated GST return requirements.

DISADVANTAGES OF COMPARISON BETWEEN THE OLD & NEW GST RETURN SYSTEM

  • Transition Complexity: One potential disadvantage is that the transition from the old to the new GST return system can be complex, especially for businesses that were accustomed to the old system. Adapting to the changes and understanding the new procedures may require time and resources.

  • Educational Efforts: Businesses and tax professionals may need to invest in educational efforts to fully understand the differences between the old and new systems. This can involve training employees, updating accounting processes, and ensuring that everyone is aware of the new requirements.

  • Software and IT Integration: Updating or replacing existing software and IT systems to align with the new GST return system can be a challenge. It may require investments in technology and potential disruptions during the transition.

  • Potential for Initial Errors: During the transition, there is a risk of making errors as businesses adapt to the new procedures. These errors could result in compliance issues or delayed filings.

  • Costs of Compliance: While the new system aims to simplify compliance, there can still be associated costs, such as fees for using compliant GST software or hiring consultants to navigate the transition.

  • Adjustment Period: Businesses may experience an adjustment period as they familiarize themselves with the new return forms, which could lead to slower processing times initially.

  • Data Migration: Moving data from the old system to the new system, if necessary, can be a challenging and time-consuming process. Data migration needs to be accurate to avoid discrepancies in reporting.

  • Communication Challenges: There may be challenges in communication between businesses and tax authorities during the transition, particularly if there are uncertainties or changes in reporting requirements.

  • Potential for Confusion: During the transition, businesses and tax professionals may find themselves navigating both the old and new systems, potentially leading to confusion and mistakes.

  • Compliance Risk: Failure to fully understand and adapt to the new GST return system can result in compliance risks, including penalties and late fees.

CONCLUSION

Overall, the new GST return system is a positive development that will benefit taxpayers in the long run. However, it is important to be aware of the potential challenges that the new system may pose.

HOW AURIGA ACCOUNTING HELP YOU TO COMPARISON BETWEEN THE OLD & NEW GST RETURN SYSTEM

  • Information and Documentation: Auriga Accounting may provide detailed documentation or informational resources explaining the differences between the old and new GST return systems. This could include guides, whitepapers, or articles outlining the changes and their implications.

  • Software Updates: If Auriga Accounting offers accounting or GST software solutions, they may update their software to align with the new GST return system. This can help businesses transition smoothly to the new system and ensure compliance.

  • Consultation Services: The company might offer consultation services to businesses, helping them understand the impact of the changes and how to adapt their accounting and compliance processes accordingly.

  • Training and Workshops: Auriga Accounting may conduct training sessions or workshops to educate businesses and professionals on the nuances of the old and new GST return systems. These sessions can provide practical insights and hands-on experience.

  • Data Migration Support: If data migration is necessary when transitioning to the new system, Auriga Accounting could provide support and tools to facilitate the transfer of data from the old system to the new one.

  • Compliance Checks: They might offer compliance checking services to ensure that businesses are following the updated GST regulations correctly under the new system.

  • Technical Support: For users of their software solutions, Auriga Accounting may offer technical support services to assist with any issues or questions related to the software’s functionality in the context of the new GST return system.

  • Customized Solutions: Depending on the specific needs of businesses, Auriga Accounting might develop customized solutions or provide tailored advice to help them navigate the changes effectively.