New invoice system in works to curb automated notices

New Delhi: The Central Board of Indirect taxes and Customs (CBIC) is working on a new advanced invoice management system that will prevent system-generated notices being sent automatically to taxpayers for mismatch in the goods and services tax (GST) returns.

The idea is to cut down on unnecessary litigation and allow taxpayers to fix discrepancies in disclosures and details between various GST forms directly on the portal, officials said.

The move will stop about 200,000 GST mismatch notices issued every year, involving nearly Rs 10 lakh crore in disputes, they said.

"This new technical enhancement is going to be a game changer for our litigation management and will prevent all such system-generated notices, which end up in unnecessary litigation...and collections were miniscule," a senior official told ET. The official added that the work on the software is on and the new system will be ready in another 2-3 months.

"We were initially aiming to launch it simultaneously with the implementation of new GST rates, but the software required some more work," the person said.

Mismatch-related notices had been a major pain point for the industry.

For compliances under GST laws, there are multiple data points, such as the details of outward supplies submitted in form GSTR 1, details of inward supplies received in forms GSTR 2A and 2B, form GSTR 6 for distribution of input tax credit, and form GSTR 3B, which is monthly return for payment of taxes, covering all details of supplies, tax payment etc.

In case of any mismatches between disclosures and details in these forms, the tax authorities send a mismatch notice where the taxpayer needs to provide a clear explanation with reconciliations.

"Many of these discrepancies arise due to timing differences or correction of manual errors," said Karthik Mani, partner, indirect tax, at BDO India. "However, the tax authorities send notices for every mismatch, requiring the businesses to spend time providing detailed answers to each notice."

He said such mismatches are generally addressed at the time of preparation of the annual returns, where the taxpayers reconcile all the data as per the GST filings as well as the financial statements.

"It would be more trade friendly, if the mismatch-related reconciliations and options to correct the differences are provided as part of the forms for GST annual returns," Mani said. "This would provide data comfort to the tax authorities and opportunity to amend mismatches to the taxpayer, without having to spend time regularly in responding to mismatches."

Currently there is GSTR form 1A, allowing the users to make changes in the invoice, which is from the outward side. From the inward side is the invoice management system. But the facilities are optional, and both are not properly tuned.