One Nation, Many Returns: Goods and Services Tax

A Shop in Shahupuri

Shirting fabric travels about thirty kilometres from the powerloom sheds of Ichalkaranji to the wholesale lanes of Kolhapur, and for most of the last century the tax on it travelled with it more or less by rumour. A trader I advise, who sells suiting and shirting from a narrow shop in Shahupuri, remembers paying octroi at the city limits, Maharashtra VAT on his sales, and a central excise duty that someone upstream had paid and that he could never quite see. In October 2023 he received a notice from the state GST office proposing to reverse ₹3,12,000 of input tax credit he had claimed in 2021–22. He had paid every rupee of that tax to his supplier. The supplier had not paid it to the government. Under the law that replaced octroi and VAT, that was now his problem too.

The reasons are structural.

Three Taxes on One Invoice

Goods and Services Tax began on 1 July 2017, after the Constitution (One Hundred and First Amendment) Act, 2016 gave Parliament and the state legislatures concurrent power to tax the same supply under the new Article 246A. That concurrency is the source of most of the confusion. GST is three taxes collected through one portal and computed on one invoice.

When the seller and the buyer are in the same state, the supply is intra-state and attracts Central GST under the Central Goods and Services Tax Act, 2017 and State GST under the Maharashtra Goods and Services Tax Act, 2017, in equal halves. Fabric taxed at 5 per cent carries 2.5 per cent CGST and 2.5 per cent SGST. When goods cross a state line, the supply is inter-state and attracts a single Integrated GST under the Integrated Goods and Services Tax Act, 2017, which the Centre collects and later apportions to the consuming state. The test is the place of supply, worked out under Sections 10 to 13 of the IGST Act, and the physical route is not always the deciding factor. A Kolhapur trader who invoices a buyer in Belagavi, eighty-odd kilometres south across the Karnataka border, charges IGST. The same bale sold to a tailor in Sangli carries CGST and SGST.

Who Must Register

Section 22 of the CGST Act requires registration once aggregate turnover in a financial year crosses a threshold. For a supplier dealing only in goods in Maharashtra, that line is ₹40 lakh. For services it is ₹20 lakh. Section 24 then removes the threshold altogether for certain people, among them anyone making inter-state supplies of goods, casual taxable persons and those selling through e-commerce operators who collect tax at source. A weaver with ₹15 lakh of turnover who sends a single consignment to Surat must register.

Registration is by state, against the business's PAN, through Form GST REG-01. The result is a fifteen-character GSTIN whose first two digits name the state. Maharashtra's is 27. A company with a factory in Chakan and a depot in Hosur holds two registrations, files two sets of returns and is, for GST purposes, two persons. Section 25(4) says exactly that, and I have watched finance controllers refuse to believe it until the second set of notices arrived.

The Shahupuri trader registered on 1 July 2017, the first day it was possible. His GSTIN began with 27. So did his supplier's, issued the same week, from an address in Ichalkaranji that by 2023 belonged to a mobile repair shop.

The Return Cycle

The design rests on a simple idea that the portal enforces with some rigidity. The seller declares the sale first, and the buyer's claim follows from that declaration. Everything else in the return cycle hangs off that order.

The seller's declaration is GSTR-1, the statement of outward supplies required by Section 37 of the CGST Act. It lists every invoice issued in the period: invoice by invoice for sales to other registered businesses, and in summary for sales to consumers. A monthly filer submits it by the 11th of the following month. A business with aggregate turnover up to ₹5 crore may opt into the Quarterly Return Monthly Payment scheme, file GSTR-1 by the 13th of the month after the quarter, and upload its business-to-business invoices in the intervening months through an optional Invoice Furnishing Facility, so that its customers are not kept waiting.

GSTR-3B is the return that actually discharges tax. It is filed under Section 39, and it summarises outward liability, claims input tax credit and sets one against the other. The difference is paid in cash from the electronic cash ledger. Monthly filers file by the 20th. Quarterly filers in Maharashtra file by the 22nd of the month after the quarter and pay tax in the first two months by the 25th through challan PMT-06. Late filing attracts a fee of ₹50 a day (₹20 for a nil return), subject to caps, and unpaid tax carries interest at 18 per cent a year under Section 50.

Between those two returns sits GSTR-2B. It is a statement the portal generates on the 14th of each month from the GSTR-1s of everyone who sold to you. It is not filed. It is read. From 1 January 2022, Section 16(2)(aa) has made a supplier's invoice appearing there a condition of claiming credit on it. Since the July 2025 tax period the liability that GSTR-1 carries into GSTR-3B can no longer be edited downward in the return itself. Any correction now goes back through GSTR-1A.

The Shahupuri trader filed monthly, punctually, through a tax practitioner on Station Road. 'Every month 20th, madam, never missed,' he said, and the portal history confirms it. His supplier had filed GSTR-3B for some months of 2021–22 and GSTR-1 for none of them. The trader's return had been right. His supplier's silence made his claim unsupported.

The annual return, GSTR-9, is due by 31 December after the financial year ends. It is currently optional for businesses with turnover up to ₹2 crore. Above ₹5 crore, Section 44 also requires GSTR-9C, a reconciliation statement setting the audited financial statements against the year's returns. Since 1 August 2021 it has been self-certified by the taxpayer rather than certified by an accountant, a change that moved the signature without moving the responsibility. Under amendments made by the Finance Act, 2023 and brought into effect on the portal in 2025, GSTR-1, GSTR-3B and GSTR-9 can no longer be filed once three years have passed from their due dates. I advise clients to treat that as a door that closes, because it does.

Calendar. GSTR-1 for monthly filers is due on the 11th of each following month, and for quarterly filers on 13 July, 13 October, 13 January and 13 April. GSTR-2B becomes available on the 14th. GSTR-3B for monthly filers is due on the 20th, and for quarterly filers in Maharashtra on the 22nd of the month following each quarter, with PMT-06 payments by the 25th in the intervening months. GSTR-9, and where it applies GSTR-9C, is due on 31 December.

When the notice reached Shahupuri, the trader's own 2021–22 GSTR-9 had been filed nineteen months earlier. Table 8A, the line that compares credit claimed against credit reported by suppliers, showed a difference of ₹3,12,000. Nobody had read it.

Input Tax Credit

Input tax credit is the mechanism that makes GST a tax on value added rather than a tax on every transaction in a chain. A business that pays GST on what it buys may set that amount against the GST it collects on what it sells, and it remits only the difference. Without credit the tax would cascade, stacking on itself at each stage until the final price carried several layers of levy. With credit, each business in theory pays tax only on the margin it adds.

The conditions are in Section 16(2) of the CGST Act, and they are cumulative. The buyer must hold a tax invoice. The invoice must appear in GSTR-2B under clause (aa). The goods or services must actually have been received. The tax charged must, under clause (c), have been actually paid to the government by the supplier. The buyer must have filed its own GSTR-3B. Four of these conditions sit within the buyer's control. Clause (c) sits entirely with someone else.

That is the uncomfortable centre of the system. A buyer who pays the supplier in full, by bank transfer, against a proper invoice, has handed over the tax. Whether the tax then reaches the exchequer depends on whether the supplier files and pays. If it does not, the credit is liable to be reversed in the buyer's hands, with interest under Section 50(3) at 18 per cent a year on credit wrongly availed and utilised. Since 1 October 2023, Rule 37A of the CGST Rules has made the reversal self-executing in one respect. Where a supplier has not filed GSTR-3B for an invoice by 30 September following the financial year, the buyer must reverse the credit itself by 30 November, and may reclaim it only if the supplier later files and pays.

Section 16(4) adds a time limit from the other direction. Credit for a year must be claimed by 30 November of the following year or the date of the annual return, whichever is earlier. A buyer who waits for a delinquent supplier to correct itself can therefore lose the credit to the calendar as well.

The law here is not fully settled. In Suncraft Energy (2023), the Calcutta High Court held that the department could not deny credit on a mismatch alone without first proceeding against the defaulting supplier, and the Supreme Court declined to interfere in December 2023. Other benches have been less sympathetic to buyers who cannot show that their supplier was genuine. I tell clients that the argument exists and that it costs a writ petition to make.

The Shahupuri trader received his show cause notice in Form DRC-01 in July 2024, under Section 73, for 2021–22. It demanded ₹3,12,000, interest and a penalty of ten per cent of the tax. He brought me the purchase invoices, the bank statements showing each payment to Ichalkaranji, the transport receipts and a photograph of bales stacked in his godown. All of it was real.

'I paid him GST also, madam. Where it went?'

The portal could not tell him. It showed only a supplier GSTIN whose registration had been cancelled suo motu in March 2023 for continuous non-filing, and a last known contact number that rang through to a man who sold phone covers.

E-Invoicing and E-Way Bills

The Shahupuri trader's papers held one document he had not thought to mention. Every consignment of bales from Ichalkaranji, a drive of some thirty kilometres, had moved under an e-way bill generated against the supplier's GSTIN. He had kept the printouts in a plastic sleeve because the truck drivers handed them over. They turned out to be the strongest evidence he had that the goods were real, because the state had recorded their movement at the moment it happened.

That is the purpose of the two systems this section describes. Both shift the state from reading returns after the month ends to watching transactions as they occur.

The e-way bill comes from Section 68 of the CGST Act, 2017 and Rule 138 of the CGST Rules. Before goods worth more than ₹50,000 are moved, an electronic document must be generated on the e-way bill portal. Part A records the invoice, the parties and the value. Part B records the vehicle. Maharashtra has set its own threshold for movement within the state at ₹1 lakh, so a consignment can need an e-way bill in Karnataka and not need one in Kolhapur, a point that has misled more than one driver at Kognoli. Validity runs at one day for every 200 kilometres for ordinary cargo. Goods found moving without a valid e-way bill may be detained under Section 129, and release requires a penalty of 200 per cent of the tax payable. Officers at a checkpost do not argue about clerical errors for long. They weigh the truck.

E-invoicing reaches further back, to the invoice itself. Under Rule 48(4), a business whose aggregate turnover has exceeded ₹5 crore in any financial year since 2017–18 must report each business-to-business invoice to an Invoice Registration Portal. The portal validates it, returns an Invoice Reference Number and a signed QR code, and only then is the invoice valid. The threshold has fallen in stages, from ₹500 crore in October 2020 to ₹5 crore from 1 August 2023. Once a business has crossed it, the obligation does not lapse when turnover falls. Thresholds, in GST as elsewhere, switch on more readily than they switch off.

The consequence of skipping the step is severe and easy to overlook. Rule 48(5) treats an invoice issued without an IRN as not an invoice at all. The buyer holding it cannot claim credit, however faithfully it has paid. Since 1 April 2025 a business with turnover of ₹10 crore or more must also report each invoice within thirty days of its date, after which the portal refuses it. I have watched an accounts executive in Bhosari try to register forty-one invoices on the thirty-second day. The portal rejected every one with the same error code.

The registered invoice then populates the seller's GSTR-1 and Part A of the e-way bill automatically. One entry now feeds three records, which is efficient and also unforgiving, because an error in the first is copied into the other two before anyone checks it.

The Ichalkaranji supplier had never crossed ₹5 crore and issued paper invoices. Its e-way bills were the only trace it had left on a government system. When I set them beside the trader's bank statements, the amounts matched to the rupee, consignment by consignment, for eleven months of 2021–22.

September 2025: The Rate Change and the Return

On 3 September 2025 the GST Council, at its fifty-sixth meeting, agreed to collapse most of the old four-slab structure into two principal rates, 5 per cent and 18 per cent, with a separate rate of 40 per cent for a short list of goods the Council regards as luxuries or harmful. The 12 and 28 per cent slabs largely disappeared. The rate notifications were issued on 17 September and took effect on 22 September 2025, a Monday, which gave businesses five days to change their billing software. Tobacco products were held back at their old rates and cess until the compensation borrowing is repaid. Textiles moved substantially: man-made fibre and yarn came down to 5 per cent, and the ceiling for ready-made garments at the lower rate rose from ₹1,000 to ₹2,500 a piece.

A rate change looks like a pricing matter. For the person who files, it is a dating problem. Section 14 of the CGST Act, 2017 decides which rate applies when a supply straddles the change, by comparing three dates: when the goods were supplied, when the invoice was issued and when payment was received. Where two of the three fall after 22 September, the new rate generally applies; where two fall before, the old one does. An advance received on 15 September against goods delivered and invoiced on 25 September is taxed at the new rate, and the earlier receipt voucher has to be adjusted. The September 2025 GSTR-1 of most businesses therefore carried the same product at two rates, split at the twenty-first of the month. Those that invoiced on accounting software updated on the twenty-second filed cleanly. Those that updated on the twenty-sixth issued four days of invoices at the wrong rate and then spent October issuing credit notes to correct them.

Input tax credit raised a quieter question. Where an output rate falls but the supply stays taxable, the law does not require credit already taken to be reversed; reversal under Section 17(2) arises only where supplies become exempt. A trader who bought fabric at 12 per cent and now sells it at 5 per cent may, however, find credit piling up faster than output tax can absorb it. That is the inverted duty structure, and the refund route under Section 54(3) exists for it. I advise clients in that position to file the refund claim rather than let the balance sit in the electronic credit ledger as an asset nobody can spend.

The dates that recur are fixed. GSTR-1 is due by the eleventh of the following month for monthly filers and the thirteenth after the quarter for those in the quarterly scheme. GSTR-3B is due on the twentieth for monthly filers; quarterly filers in Maharashtra file by the twenty-second. Rule 37A reversals fall due by 30 November, which is also the last date for claiming the previous year's credit under Section 16(4). GSTR-9 and, above ₹5 crore, the reconciliation statement in GSTR-9C are due by 31 December. A business above ₹10 crore has thirty days to register each invoice.

The Shahupuri trader's appeal did not succeed. The adjudicating officer accepted that the bales were real and confirmed the reversal anyway, because the tax had never reached the government. He paid ₹3,12,000 with interest in February 2025 and verified his suppliers' filing status every month after that. His first invoice at the new 5 per cent rate on synthetic fabric was dated 22 September 2025. When he brought it to me, he had a second question, about the eleven men who load his trucks at the godown.

'Madam, now they are saying I need ESI also?'