GST compliance in 2023: Five areas to consider for small businesses

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      With the goal of integrating India’s political borders, Sardar Patel undertook the seemingly impossible job of uniting more than 500 princely kingdoms when he designed “Ek Bharat.” Similarly, the seeds for the GST were planted in 2000, and a committee was established to develop the GST concept. Then, in 2006–2007, the finance minister announced the GST in the budget address. The procedure was accelerated, and in 2014, talks with the states were reopened by the federal government. In July 2017, the GST was finally implemented, making the concept of “One Nation, One Tax” a reality.GST abolished double taxation, established the idea of a consistent tax on the supply of goods and services, and lessened the total burden of indirect taxes on consumers.

      The last five years and six months’ journey have not been easy. Over time, the government’s understanding changed, and the guidelines were modified nearly monthly. Through 135 notifications, the government has introduced almost 950 modifications since July 2017. There are conflicting opinions; while some feel that recent changes will make it more complicated for small businesses and, as a result, increase the number of lawsuits filed by everyone, others feel that the tax has stabilized to a great extent for mid- and large-sized corporations and has been supported by technology platforms as well.

      The government’s strategy for the coming years is broadly indicated by the GST modifications made during the past several months. Let’s take a quick look at the potential five danger zones for 2023:

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      B2B e-invoicing

      Phases IV and V of the government’s implementation saw the restrictions for e-invoicing lowered to Rs 20 crore as of April 1, 2022, and Rs 10 crore as of October 1, 2022, respectively. This pattern suggests that the government will further cut this cap in 2023. It is anticipated that the government would lower the e-invoicing threshold to Rs 1 crore in 2023 and that this threshold will soon apply to all enterprises registered under GST, regardless of the nature and scale of their operations.

      Automated compliance

      The future of compliance will be driven by automation. For individual tax returns, the finance ministry has already adopted many levels of automation (pre-populate some types of income). For GST as well, a comparable layer of automation will be implemented soon. We may soon anticipate that GSTR 1 (Statement of Outward Supplies) and GSTR 3B (GST Returns) will be automated / pre-filled to a significant degree as e-invoicing restrictions are being decreased. Both of the highlighted compliances may no longer be necessary the day that e-invoicing is made a requirement for all registered assessors since the government will be able to get the necessary information automatically.

      GST Appellate Tribunal (GSTAT) establishment

      Appeals against decisions made by the appellate authority or the revisional authority are heard by GSTAT. Additionally, it is the first time the center and states have used a single forum to resolve disputes. Since its beginning, the government has been unable to set it up. In order to assist in the creation of GSTAT, it was resolved to form a Group of Ministers (GoM) at the 47th meeting of the GST Council. The GoM would be in charge of reviewing and suggesting modifications to the rules and regulations. We may anticipate that GSTAT will be established in 2023.

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      Integration of direct and indirect tax portals

      For automated data sharing, little manual involvement for review, and auto-issuance of alerts for data inconsistencies, the government integrated the Income Tax and TDS websites. To guarantee the automatic comparison of revenues supplied for income tax and those disclosed in GST returns, a comparable layer of integration between direct and indirect taxes will shortly be devised and implemented. This would greatly lower tax fraud caused by fictitious invoices.

      As a result of the creation of a single, consolidated data portal made possible by such connections, multiple portal compliances may also significantly decrease as a result.

      Suspension of GST registrations has increased

      Recent months have witnessed an increase in writ petitions filed with the high court challenging the suspension of GST registrations, which are typically the result of late or incomplete reports or compliances. The authorities have become tighter recently and do not hesitate to revoke the GST license from an assessee who persistently violates the law. As authorities work to de-register phony corporations as quickly as feasible, this tendency is anticipated to worsen in 2023. As a result, there would be more disputes between the assessee and the department.

      To prevent any potential for income leakages, the government will keep adding new layers of data analytics and AI/ML. It is increasingly necessary for businesses to use technology and introduce digitalization inside their structures in order to maintain legal compliance.

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