DECEMBER 2020

QRMP Scheme (Quarterly Return Monthly Payment Scheme) – New GST Return System w.e.f. 01-Jan-2021

Eligibility for QRMP Scheme

•  A registered person who is required to furnish a return in Form GSTR-3B, and who has an aggregate turnover of up to Rs. 5 crores in the preceding financial year, is eligible for the QRMP Scheme.


•  Further, in case the aggregate turnover exceeds five crore rupees during any quarter in the current financial year, the registered person shall not be eligible for the scheme from the next quarter.


•  It is clarified that the aggregate annual turnover for the preceding financial year shall be calculated in the common portal taking into account the details furnished in the returns by the taxpayer for the tax periods in the preceding financial year. If a taxpayer having 2 or more GSTIN’s then the aggregate turnover of all should be taken for eligibility.


•  The option to avail the QRMP Scheme is GSTIN wise and therefore, distinct persons as defined in Section 25 of the CGST Act (different GSTINs on same PAN) have the option to avail the QRMP Scheme for one or more GSTINs. In other words, some GSTINs for that PAN can opt for the QRMP Scheme and remaining GSTINs may not opt for the Scheme.

When & How to exercise the option for QRMP Scheme?

•  A registered person who intends to file his GSTR-3B quarterly should indicate the same on GST portal, from the 1st of the second month of the preceding quarter until the last day of the first month of the quarter for which such option is being exercised.


•  For example: A registered person intending to avail of the Scheme for the quarter ‘July to September’ can exercise his option during 1st of May to 31st of July. If he is exercising his option on 31st July for the quarter (July to September), in such case, he must have furnished the return for the month of June which was due on 22/24th July.
  
  Similarly, for the quarter ‘Oct to Dec’ can exercise his option during 1st of Aug to 31st of Oct.
  
  Similarly, for the quarter ‘Jan to Mar’ can exercise his option during 1st of Nov to 31st of Jan.
  
  Similarly, for the quarter ‘Apr to Jun’ can exercise his option during 1st of Feb to 30th of Apr.


•  Once the registered person has opted for quarterly filing, he will have to continue to furnish his return every quarter for all future tax periods, except in the following situations:
  •  If the taxpayer becomes ineligible for furnishing a quarterly return (for example, if the aggregate turnover crosses Rs.5 crore during a quarter, then from the next quarter he will not be able to file quarterly returns).
  
  
  •  If the taxpayer opts to furnish GSTR-3B on a monthly basis.
  
  
•  A registered person will not be eligible to opt for furnishing quarterly returns if the last return, which was due on the date of exercising such an option has not been furnished.


•  For example: If the person is opting for quarterly GSTR-3B filing on 1st December 2020, he will need to furnish his GSTR-3B return for October 2020, which would have been the last return due on the date of exercising the quarterly filing option.

Deemed Migration

For the first quarter of the Scheme i.e., for the quarter January, 2021 to March, 2021, all the registered persons, whose aggregate turnover for the FY 2019-20 is up to 5 crore rupees and who have furnished the return in FORM GSTR-3B for the month of October, 2020 by 30th November, 2020, shall be migrated on the common portal as below:

The registered persons are free to change the option as above, if they so desire, from 5th of December, 2020 to 31st of January, 2021.

Furnishing of details of Outward Supplies IFF and Form GSTR-1

The registered persons opting for the Scheme would be required to furnish the details of outward supply in FORM GSTR-1 quarterly as per the rule 59 of the CGST Rule.

For each of the first and second months of a quarter, such a registered person will have the option to use the Invoice Furnishing Facility (IFF) to furnish the details of such outward supplies to a registered person, between the 1st day of the succeeding month till the 13th day of the succeeding month.

The said details of outward supplies shall, however, not exceed the Rs. 50 Lakhs in each month. The continuous upload of invoices would also be provided for the registered persons wherein they can save the invoices in IFF from the 1st day of the month till 13th day of the succeeding month.

The facility of furnishing details of invoices in IFF has been provided so as to allow details of such supplies to be duly reflected in the FORM GSTR-2A and FORM GSTR-2B of the concerned recipient.

The said facility is not mandatory and is only an optional facility made available to the registered persons under the QRMP Scheme.

The details of invoices furnished using the said facility in the first two months are not required to be furnished again in FORM GSTR-1. Accordingly, the details of outward supplies made by such a registered person during a quarter shall consist of details of invoices furnished using IFF for each of the first two months and the details of invoices furnished in FORM GSTR-1 for the quarter.

Monthly Payment

The taxpayer has to deposit tax using form GST PMT-06 by the 25th of the following month, for the first and second months of the quarter. The taxpayers can pay their monthly tax liability either in the Fixed Sum Method (FSM) or Self-Assessment Method (SAM).

Fixed Sum Method (FSM):

The taxpayer must pay an amount of tax mentioned in a pre-filled challan in the form GST PMT-06 for an amount equal to 35% of the tax paid in cash.

For Example:

Scenario 1: If GSTR-3B for January 2021 to March 2021 was filed on a quarterly basis

Scenario 2: If GSTR-3 was filed on a monthly basis during the quarter of January 2021 to March 2021

Self-Assessment Method (SAM):

This is the existing method where a taxpayer can pay the tax liability by considering the tax liability on inward and outward supplies and the input tax credit available. The taxpayer has to manually arrive at the tax liability for the month and has to pay the same in form GST PMT-06. For ascertaining the amount of ITC available for the month the taxpayer can use form GSTR-2B.

There are certain instances where no amount may be required to be deposited, such as –

•  For the first month of the quarter – where the balance in the electronic cash/credit ledger is adequate for the tax liability of the said month OR where the tax liability is nil.


•  For the second month of the quarter – where the balance in the electronic cash/credit ledger is adequate for the cumulative tax liability for the first and second months of the quarter OR where the tax liability is nil.

Due date of Filing the returns

The due dates filing quarterly GSTR-3B has been notified as follows:

Applicability of Interest and Late Fees in QRMP Scheme

*22nd or 24th of the month succeeding such quarter based on the state of the taxpayer.

The interest will be applicable as follows if the taxpayer opts for Self-Assessment Method (SAM):

The taxpayer has to pay interest @ 18% on the net tax liability which remains unpaid or paid beyond the due date for the first two months of the quarter.

It is important to note that the taxpayer has to pay interest @18% if there is any late payment of tax in the third month of a quarter. This is applicable irrespective of Fixed Sum Method (FSM) or Self-Assessment Method (SAM).

It is clarified that no late fee is applicable for delay in payment of tax in the first two months of the quarter in form GST PMT-06.

Fake Invoicing: Burning Issue

Background

Large number of GST fraud cases involving the use of fake invoices for wrong availment of input tax credit (ITC), which is further used to pay GST on outward supply have been detected since the rollout of GST by the Central GST authorities as well as State GST authorities. Whereas the intention for the use of such fake invoices appears to be fraudulent availment/encashment of ITC credit, the unscrupulous entities engaged in this also defraud other authorities such as Banks by inflating turnovers, laundering of money etc.

Concept of Fake Invoicing

Fake invoicing involved issuing an invoice without actual supply of goods and/or services and availing of input tax credit (ITC) based on such invoices. Recently, the fraudulent practice of fake invoices is mostly observed in certain types of the industries like MS/ SS Scrap, Articles of Iron and steel, Copper rod and wire, Scrap of non-ferrous metals, Plastic Granules, PVC resin, Construction Services, Readymade Garments, gold and silver etc. Thus, these industries now can be said to be on radar for GST investigation.

The Directorate General of Analytics & Risk Management, DGGI and the Central Board of Direct Taxes collecting the data against entities by using GST Network and artificial intelligence tools. Thus, Government is using various techniques and technology for gathering suspicious transaction and analysis of data details on certain risk parameters as under.

• 1. Multiple GSTIN registrations for a given address
• 2. Multiple GSTIN for a given PAN
• 3. GSTIN using incomplete or wrong addresses
• 4. Taxpayers using sensitive commodities.
• 5. Common e mail, common mobile no’s, common address, common authorized signatories, common promoters for multiple GSTIN.
• 6. Mismatch between the premises declared and the volume of goods transacted.
• 7. Mismatch between the quantum or transactions and the e-way bills generated. If there are no e-way bills or less e-way bills generated compared to the details of transactions as per the GST returns.
• 8. Abnormal ITC utilization (for example above 95%)

Suggested strategy to tackle “fake invoice” fraud in GST

The frauds in question need to be tackled by putting in place a regime that enables to the extent possible the identification of suspect entities at the initial stage itself and in other cases the detection of GST frauds at the earliest. The former becomes especially important as the past experience is that many of such operators have a tendency to operate through impersonation in the name of dummy persons who have no real assets making it virtually impossible to recover any amounts from them, if a case is detected at a later stage. In this direction the following safeguards are suggested as key elements of risk profiling to check such GST frauds:

• a) Scrutiny/Verification of registered taxpayers through risk profiling and verification for early identification of fraudsters indulging in fake invoices.
• b) Historically tax evasion prone sectors.
• c) Maintenance of offence database of those figuring in frauds to prevent their reentry in the System.
• d) Some of the risk indicators of such persons or activities done by them or commodities traded by them or patterns behind their activities are as under:
  • 1. Multiple registrations on same PAN.
  • 2. Common email, common mobile numbers, common address, common authorized signatory, common promoters etc.
  • 3. A person whose registration application is rejected or a person whose registration is cancelled may apply again for registration.
  • 4. Live registration against the said PAN with the CGST jurisdiction where offence has been booked by SGST authorities.

Consequences under GST Law

In case of fake invoices second condition specified in section 16(2) of CGST Act, gets violated and thus Authorities can deny ITC availed against fake invoices.

Further, referring to Section 122 (1) (ii) of CGST Act, issue of any invoice or bill without supply of goods or services or both incurred penalty which ranges from INR 10,000 to an amount equivalent to the tax.

Additionally, Section 132 talks about the punishment in case of these offences. Section 69(1) of CGST Act provides that where the Commissioner has reasons to believe that the person had committed any offence specified in Section 132(1)(a) [Supply of goods or services or both without issue of any invoice in violation of the Act or Rules with intent to evade tax.] or (b) [Issue of any invoice or bill without supply of goods or services or both in violation of the Act or Rules leading to wrongful availment or utilisation of input tax credit or refund of tax.] or (c) [Availment of input tax credit using the invoice or bill referred to in Section 132(1)(b)] or (d) [Collecting any amount of tax but failing to pay the same to the Government beyond a period of 3 months from the date on which such payment becomes due.] which is punishable under Section 132(1)(i) or (ii) or under Section 132(2), he may by order authorise any officer of central tax to arrest such person wherein imprisonment may extend for a term up to 5 years for specified cases. Further, in terms of Section 132(5), offences punishable under this category are cognizable and non-bailable.

Thus, the fraudulent act of fake invoicing can lead to several consequences under GST law including denial of Input Tax credit (ITC), penalty, punishment, etc.

Safeguards to save Genuineness

The person who gets caught for offence may not always be guilty of an offence. In case fake invoices there can be certain instances wherein even genuine taxpayer has searched on account of party to the circular trading.

Thus, it is necessary to have certain precautionary measures by all taxpayers. It is well said that ‘Precaution is always better than cure’.

Thus, every taxpayer should be more careful while maintaining books of accounts as required under Section 35 of CGST Act which substantiate the fact of good and/or services are received, payment of GST has discharged appropriately to Government exchequer etc.

In addition to aforesaid during search and/or investigation certain small steps like reviewing power of Authorities for investigation, producing books of accounts maintained before Authorities, verification of statement recorded before signing, payment of taxes under appropriate section could help to close it appropriately.

The aforesaid trend certainly is worrying as it brings backs the memory of erstwhile era where disputes of hawala transaction were the norms. It is essential to get rid of the practice of fake invoicing as it definitely affects the Government exchequer but additionally it led to fraudulent taxpayer competitive by earning more profit over honest taxpayers. Also, there have been such instances wherein exporters have used fake credit to pay duty and then claim a cash refund.

The Government is taking many initiatives for policing of fake firms and invoices. Recently, introduction of e invoicing can be said to be one more such step taken by Government in curbing evasion. However instead of controlling such transaction it is essential to prevent tax evasion. Minimizing the tax burden could automatically encourage the taxpayer to record the transaction as it is and prevent it from evasion. Thus, eliminating such tread is essential to make transparent tax system.