When you file GSTR-1 on or before February 11, 2025, the specified new rules will have to be followed otherwise the return will be considered faulty

New GSTN advisory: GST registered suppliers must take note of these new changes made in GSTR-1 from January 2025 If the supplier's GSTR-1 is faulty then the buyer's GSTR-2B will get populated with wrong details

The Goods and Services Tax Network (GSTN) has implemented multiple changes in Table 12 of GSTR-1 return starting from the January 2025 tax period. The deadline to file GSTR-1 for January 2025 tax period is February 11, 2025. This means on or before February 11, 2025 when you file GSTR-1 the specified new rules will have to be followed otherwise the return will be considered faulty. Needless to say if the supplier's GSTR-1 is faulty then the buyer's GSTR-2B will get populated with wrong details.

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Also, a buyer can't take input tax credit (ITC) on such faulty return and will thus have to wait for the seller to make the necessary corrections. The data inputted by sellers in their GSTR-1 return is populated in buyer's GSTR-2B form which is essentially an input tax credit statement.

Also read | Deadline for GSTR-1 and GSTR-3B extended after GSTN reported technical issues with the portal

However, this can also be resolved but not without wasting more time and effort. To resolve this issue an amended return needs to be filed, which will ultimately end up taking both the buyer's and seller's precious business time.

Read below to find out what GST registered suppliers need to do now for filing a correct and compliant GSTR-1 return.

What did GSTN say about new rules for filing GSTR-1?

According to the advisory by GSTN dated January 9, 2025, after successful implementation of Phase-I & Phase-II now Phase-III regarding Table 12 of GSTR-1 & 1A is being implemented, from the return period of January 2025.

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Changes in GSTR-1 reporting-Phase 3

According to the advisory, "In this phase manual entry of HSN has been replaced by choosing the correct HSN from the given Drop down. Also, Table-12 has been bifurcated into two tabs namely B2B and B2C, to report these supplies separately.

Further, validation regarding values of the supplies and tax amounts involved in the same, have also been introduced for both the tabs of Table-12.

Here's a summary of the changes in GSTR-1 reporting

According to the advisory by GSTN here are the details:

Manual user entry of HSN will not be allowed.
HSN code can be selected from drop down only.
A customized description mentioned in HSN master will auto-populate in a new field called "Description as per HSN Code"

In Table-12 validation with regards to value of the supplies have also been introduced.

"These validations will validate the value of B2B supplies shown in different Tables viz: 4A, 4B, 6B, 6C, 8 (recipient registered), 9A, 9B (registered), 9C (registered), 15 (recipient registered), 15A (recipient registered) with the value of B2B supplies shown in table-12.
Similarly, validations will validate the value of B2C supplies shown in different tables viz: 5A, 6A, 7A, 7B, 8 (recipient unregistered), 9A (export), 9A (B2CL), 9B (unregistered), 9C (unregistered), 10, 15 (recipient unregistered), 15A (recipient unregistered) with the value of B2C supplies shown in Table-12.
In case of amendments, only the differential value will be taken for the purpose of validation."

For the first few months no adverse impact will happen as GSTN will let you go with a warning. This means failing the validation will not be a blocker for filling of GSTR-1 & 1A.

GSTN said: "However, initially these validations have been kept in warning mode only, that means warning or alert message shall be shown in case of mismatch in values, whereas taxpayers will be able to file GSTR-1 in such cases. Further, in case B2B supplies are reported in other tables of GSTR-1, in that case the B2B tab of Table-12 cannot be left empty."

Chartered Accountant Himank Singla explains the changes using an example:

"If B2B Supplies have taxable value of Rs 1000 and SGST CGST Value is Rs 180-180. Then the taxpayer has to be careful to report B2B supplies HSN details in the B2B Table and B2C supplies HSN details in the B2C Table in HSN tile. If such will not match then the GST portal gives red marks, in the same manner whenever the Taxpayer enters RCM Credit in Table 4."

What might be the impact of implementation of phase 3 of table 12 GSTR-1 reporting

ET Wealth Online has asked various experts about what might be the impact of this implementation for GST registered persons. Here's a summary of what they said:

Buyer's input tax credit will now be streamlined as chances of supplier's errors are reduced

"Now the GST portal itself will validate the HSN code inputted by the seller. Earlier this was a manual process of entering the HSN code. Now sellers have to type in the description of the goods and the HSN code will come down in the drop down menu. This will reduce the instances of wrong HSN code entries by the seller and thereby enabling the buyer to claim his input tax credit on time. Overall the process will be streamlined," says Chartered Accountant Bimal Jain, founder, A2Z Taxcorp LLP.

Chartered Accountant Hrishikesh A. Wandrekar, partner, Wandrekar and company, agrees with Jain and adds: "The selection of the HSN Code from a drop-down list will now bring uniformity in the reporting data. The GSTIN has also introduced validation of the HSN Codes which will potentially reduce reporting errors."

Seller now has more responsibility to file a correct GSTR-1 return

Jain says now sellers have to be careful about reporting the correct HSN codes. "If the supplier makes any mistake in inputting the correct description of goods and then selects the correct HSN code subsequently then this will result in incorrect GSTR-1 return. Such an incorrect return needs to be amended by the seller. This will result in delayed claims for input tax credit for buyers as the buyer can't accept the invoice on the IMS portal if the data in his GSTR-2B and invoice is different."

Jain says this situation will arise if the supplier inputs a lower GST rate product in his GSTR-1 while showing a higher GST rate product in the invoice. As a result, the GSTR-2B return will show mismatched data. "GSTR-2B is an auto-drafted input tax credit statement which is generated for every taxpayer on the basis of the information furnished by his suppliers in their respective GSTR-1 return," he says.

Wandrekar says now suppliers will need to configure their reporting systems & software to comply with the new requirements. "Any bona fide errors in the reporting can be rectified through the amendments tab. Suppliers will now have to double-check their HSN Codes to ensure that the appropriate Code and the appropriate rate of GST has been charged on the supplies made," he says.

Buyer needs to pay interest on input tax credit due to fault of seller

Wandrekar due to error in reporting of the HSN code by the seller in his GSTR-1 return the buyer will not face any immediate problem. However, when the seller will amend his GSTR-1 return, then at that time the buyer will be impacted.

He says, "Any consequent amendments have the potential of inflicting an additional tax liability on the part of the supplier as well as the buyer.

Example: If the supplier amends the sales invoice reducing the tax liability, the buyer would be deemed to have claimed a higher ITC, thus potentially resulting in interest & penalty implications (for no apparent fault of his) in addition to the increase in his tax liability."

This story originally appeared on: India Times - Author:Faqs of Insurances