The introduced Goods and Services Tax (GST) structure in India has changed the gaming landscape drastically and one of the drastic changes was the filing of regular tax returns. Although this system helps to simplify the taxation process and increase its transparency, it is difficult for small companies with limited budgets. To deal with this issue, the government launched the Quarterly Return Filing Option for Small Businesses. This policy makes it IPO compliant for small businesses so that they can follow GST legislation without struggling with monthly returns.
Analysis of GST Return Filing
But, to know about the quarterly return filing option let me inform you about the basic GST return form first. The businesses under GST are to furnish periodic returns indicating their supplies made, purchases effected, and the input and output tax paid or claimed. These returns assist the government in monitoring the movement of taxes where compliance is concise, and businesses can recover the appropriate input tax credit.
In the case of most requirements, filing GST returns is done on a monthly basis. The return filing cycle is typically as follows:
- GSTR-1: This return is notice of outward supplies or sales and it is done by the 11th of the month following the month of issuance.
- GSTR-3B: This return shows information concerning the inward and outward supplies and is filed to LIB on or before the 20th of the following month.
But as for the monthly filing which can be very much demanding for small businesses, especially micro and small enterprises (MSEs) or those entities with a lower turnover, this has been a problem. Compliance takes time, effort, as well as, in most cases, the input of relevant professionals, and the production of detailed returns also takes time and effort. This is where the Quarterly Return Filing Scheme make the whole process advantageous.
What is the Quarterly Return Filing Option Under GST?
Introduced under the GST Council’s decision in 2019, the Quarterly Return Filing with Monthly Payment Scheme (QRMP) is a simplified approach to GST compliance for small taxpayers. This scheme is specifically designed for businesses with an annual turnover of up to Rs. 5 crore.
Key Features of the Quarterly Return Filing Option
1. Quarterly Return Filing (GSTR-1 and GSTR-3B):
As part of the QRMP scheme, businesses can file GSTR-1 (details of outward supplies) and GSTR-3B (summarized input tax credit claim and tax liability) quarterly.
There are two return forms; GSTR-1 is filed within the 13th of the succeeding month to the quarter; while GSTR-3B is filed on or before 22 or 24th of the succeeding month to the quarter.
2. Monthly Payment of Tax:
While the returns are filed quarterly the businesses have to discharge GST on a monthly basis. They do this by endorsing their responsibility/feasibility and remit the tax through a PMT-06 challan. The payment is to be made on the 20th of every month.
The monthly payment allows the government to continue receiving on a regular basis while in return freeing business people from the normal general returns filing.
3. Simplified Compliance:
So as to overcome the problem of paperwork, the quarterly filing system is more preferred since it will involve less paperwork. Actually, businesses only file returns once per quarter instead of every month in the regular process, which still helped to lessen the burden.
Also, GST Council has ensured that small businesses can directly register on the GST portal or they can register themselves with the GST Suvidha Providers (GSPs) and file their returns and pay taxes for further ease.
4. Eligibility Criteria:
Assuming the aggregate turnover in the previous financial year is Rs 5 crore or less, the QRMP scheme is available to such business entities.
The QRMP scheme, lists some of the taxpayers that cannot register for the scheme, including those under the composition scheme, or those required to file annual returns.
5. Optional Scheme:
It is still an open option which implies that the businessmen can decide to go for the QRMP scheme or remain to go with the monthly filing scheme.
In regard to frequency, the scheme provided concerning the change to quarterly or monthly Sheets and Statements of Tax payable, and Regulations 15 and 17 and the conditions applying under Regulation 15 and paragraph 31 of Schedule 1 for change for more frequent.
6. Increased Ease of Use with the GST Portal:
It further added the ease of filing due to Auto-drafted GSTR-3B entering the scene. The GSTR-3B return is prepared on the portal and furnishes the details of the tax paid for the previous quarter and the input tax credit.
For instance, through the extension of, say, Invoice Furnishing Facility (IFF), the taxpayers can post invoices on a monthly basis, if at all they so wish, which makes reconciliation much easier.
Benefits for Small Businesses
1. Reduced Compliance Burden:
The most obvious advantage of broad registration under the QRMP scheme is that companies get to file less often. To small business operators, the time and effort required to prepare monthly returns may be substantial. Periodic filing is a great relief to business owners in that it provides time to handle organizational tasks.
In addition, the GST portal has made the process easier by enabling the pre-filling of some fields in the returns hence minimizing on the disparities in the returns.
2. Cash Flow Management:
Payment of monthly remittances to the government is one of the biggest concerns faced by small businesses because they often do not know how to manage their cash flows properly. What they have with the QRMP scheme of taxation is that they only pay taxes every three months and have more time to handle the money. While they continue to pay $200 every month, they do not have to file returns every month, as with the previous case, the quarterly filing.
3. Cost-Effective:
However, engaging the services of tax professionals or accountants to help out in this area is costly especially for those small business entities. Consequently, the simplified quarterly filing system minimize the need to seek advice and funds, in the process learning more in the long run.
Also, the auto- generation of returns through the GST portal eliminates the possibility of typing error and substantially minimizing the cost of labour.
4. Easier Reconciliation:
Since, returns are filed at a quarterly basis the businesses have ample time to make the reconciliations of their purchases as well as sales in order to prepare most accurate returns. This means that far less errors and discrepancies occur, which in turn lead to less notices being received from the tax authorities.
Even more convenient is the fact that reconciliation facilities on the GST portal draw data straight from sales and purchases.
5. Better Utilization of Input Tax Credit (ITC):
The quarterly cycle gives enough time for businesses to properly use input tax credits and make sure that they have claimed maximum credits in return. This in turn assists in bringing down their total tax burden.”
6. Improved Transparency and Simplified Filing Process:
Herald for efficient record-keeping and transparency of the quarterly return filing mechanism. When businesses are not put under pressure especially where there are monthly filings it becomes easier for them to remain compliant..
Challenges and Considerations
However, the QRMP scheme has its advantages and disadvantages On the advantages: Some of the key considerations include:
- Limited Flexibility: While businesses can choose the quarterly performance-based QRMP scheme to adopt a monthly filing procedure, the turnover should be over Rs 5crore of a financial year. In a situation where turnovers of businesses may be constantly changing, this lack of flexibility may not be allowed.
- Delays in Credit Reconciliation: Industries involving with numerous suppliers can encounter a problem of time in getting updates on the invoices in order to work on input tax credits. There is potential for differential in the GST return with more effort needed to ensure they are correct.
- Increased Scrutiny: While the GST compliance mechanism is gradually turning into an automated regime, GST registrants who decided to get into the QRMP scheme may face enhanced scrutiny from the authorities. It is simple for such systems to raise alarms on mistakes or discrepancies likely to result in audits or notices.
Conclusion
The GST Quarterly Return Filing Option for Small Businesses is an effective measure having the potential in reducing the taxable compliance canter for the small and medium-sized businesses. The scheme of QRMP has kept business GST compliance easy by lowering the return filings frequency, providing monthly instead of quarterly payments, and designing a tolerable tax regime.
On the flip side, the scheme has greatly reduced the amount of compliance burden and cost implications that businesses have to meet, provided they are keen to file correct returns and administer their input tax credits well. For small businesses to continue to function and create growth as they come out of the COVID-19 pandemic, the opportunities afforded by the QRMP scheme cannot be understated as an easing to the complications that surround taxation.
Broadly speaking, the QRMP scheme is an efficient instrument for raising the levels of GST compliance with the aim of freeing SMEs from concerns over the compliance requirements and allowing the businesses to return to their operations in compliance with the law.
