Table of contents:

• Understanding GSTR-6
• Eligibility for GSTR-6
• Turnover limit
• Due dates
• GSTR-6 Return filing process
• GSTR-6 Format and Form Screenshots
• Required Information in GSTR-6
• Its Importance for ISDs
• Challenges
• Best Practices
• Comparison with other GSTR Returns
• Recent Updates
• Conclusion

Are you an Input Service Distributor (ISD) grappling with the complexities of GST returns? Look no further! This comprehensive guide will walk you through everything you need to know about GSTR-6, the specialized return form for ISDs under the Goods and Services Tax (GST) regime in India.

Understanding GSTR-6 Return

GSTR-6 is a monthly return form specifically designed for Input Service Distributors (ISDs) under the GST framework. It plays a crucial role in the proper distribution of input tax credit (ITC) across multiple units of a business.

The primary purpose of GSTR-6 is to ensure accurate allocation of ITC to different branches or units of a company based on their respective turnovers. This form helps maintain transparency and accountability in the distribution of tax credits within large organizations.

Who needs to file GSTR-6?

Any entity registered as an Input Service Distributor under GST registration is required to file this return. Typically, these are businesses with multiple units or branches that centralize their invoice processing for input services. It is important to note that ISDs can only distribute ITC related to services, not goods.

Eligibility for GSTR-6

Input Service Distributors (ISDs) are the only entities eligible to file GSTR-6. But what exactly is an ISD?

It is an office of the product or service provider that distributes and gets tax bills for input services and provide credit to other units of the same entity.

The role of ISDs in GST is crucial. They ensure that input tax credit is efficiently distributed across various units of a business, optimizing tax liability and maintaining compliance.

Types of businesses that typically register as ISDs include:

• Large corporations with multiple branches
• Banks with numerous branches
• Insurance companies with widespread operations
• Retail chains with centralized procurement

For example, a national retail chain might have a central procurement office in Mumbai that handles invoices for all advertising services used across India. This office would be registered as an ISD and use GSTR-6 to distribute the input tax credit to individual stores based on their turnover.

Turnover Limit for GSTR-6

Interestingly, there’s no specific turnover limit for filing GSTR-6. Unlike other GST returns, the obligation to file GSTR-6 is based on ISD registration status, not turnover.

To clarify, if an entity is registered as an ISD, it must file GSTR-6 regardless of its turnover. This contrasts with other GST forms like GSTR-1 or GSTR-3B, where turnover thresholds determine filing frequency.

For instance, a small business with multiple units and an annual turnover of just ₹50 lakhs would still need to file GSTR-6 monthly if registered as an ISD. Conversely, a large corporation with a turnover of ₹500 crores but no ISD registration wouldn’t file GSTR-6 at all.

Due Dates

• GSTR-6 follows a monthly filing requirement. The due date for filing GSTR-6 is the 13th day of the month following the tax period. For example, the GSTR-6 for April must be filed by May 13th.
• It’s crucial to adhere to these specific due dates for GSTR-6 to avoid penalties. Late filing can result in a daily penalty of ₹100 (₹50 CGST + ₹50 SGST) up to a maximum of ₹5,000. Additionally, for inter-state transactions, IGST late fees may apply.

GSTR-6 Filing Process

1. Log in to GST website first of all  – https://gst.gov.in 
2. Navigate to Services > Returns > Returns Dashboard
3. Select the financial year and tax period
4. Click on “Prepare Online” for GSTR-6
5. Fill in the required details in each table
6. Validate the entered information
7. Add any additional details if necessary
8. Generate and review the summary
9. Submit the return

Required documents for filing GSTR-6 include:

• Input service invoices
• Debit notes and credit notes related to input services
• ISD invoices issued for credit distribution

While online filing through the GST portal is the primary method, offline tools are also available for bulk data upload.

Common errors to avoid include:

• Mismatches between distributed credit and available credit
• Incorrect GSTIN of recipient units
• Errors in invoice details
  Additionally, ISDs must verify the pre-filled data from their suppliers, as certain details may be auto populated.

Screenshot based guide: follow the link to file GSTR-6 Tutorial with help of step-wise screenshots

Format of GSTR-6

The GSTR-6 form is structured into several key sections:

• GSTIN of ISD
• Legal business registered name of ISD
• Tax period
• Auto-populated details of inward supplies
• Distribution of input tax credit
• Details of debit / credit notes
• Verification

Each section serves a specific purpose. For instance, the “Distribution of input tax credit” section is where ISDs detail how they’ve allocated credit to different units.

Form Screenshots:

Information Required in GSTR-6

• Input tax credit received: This includes all eligible ITC on inward supplies received during the tax period.
• Distribution of input tax credit: Here, ISDs specify how they’ve allocated the ITC to different units.
• Debit and credit note details: Any adjustments made through debit or credit notes must be reported.

For example, if an ISD receives an invoice for ₹1,00,000 with ₹18,000 GST, they would first report this in the ITC received section. Then, in the distribution section, they might allocate ₹10,000 to Unit A, ₹5,000 to Unit B, and ₹3,000 to Unit C based on their respective turnovers.

Importance of GSTR-6 in ITC Distribution

• GSTR-6 plays a vital role in ensuring proper ITC distribution. It creates a clear audit trail of how tax credits are allocated within a business, promoting transparency and reducing the risk of errors or fraud.
• For recipient taxpayers, accurate GSTR-6 filing by their ISD is crucial. It ensures they receive the correct amount of ITC, which directly impacts their tax liability.
• From a compliance perspective, GSTR-6 is a key tool for tax authorities to monitor ITC distribution and prevent misuse of the input tax credit system. Additionally, businesses must ensure that ITC distribution is based on the correct turnover proportions of each branch to avoid discrepancies.

Challenges in GSTR-6 Filing

• Reconciling ITC distribution with recipient units’ records
• Handling partial credit distributions
• Managing time lags between credit receipt and distribution

Reconciliation with other GST returns, particularly GSTR-2A of recipient units, can be complex. ISDs must ensure that the credit distributed matches what recipients report in their returns.

To handle discrepancies and mismatches, regular communication with recipient units and meticulous record-keeping are essential. Additionally, businesses can benefit from using digital tools for real-time reconciliation of ITC data.

Best Practices for GSTR-6 Compliance

• Maintain proper records of all input service invoices and credit distributions
• Conduct regular reconciliations with recipient units’ records
• Utilize GST software for accuracy and efficiency in filing

For instance, implementing a centralized digital system for invoice processing and credit distribution can significantly reduce errors and streamline the GSTR-6 filing process.

Recent Updates and Changes to GSTR-6

• Auto-population of ITC Data: Details regarding input tax credit (ITC) are now auto-populated from suppliers’ GSTR-1 and GSTR-3B into GSTR-6. This minimizes manual entry errors and enhances accuracy.
• Real-Time Invoice Matching: Improved integration between GSTR-1 (suppliers) and GSTR-6 (ISDs) allows for near real-time invoice matching, reducing discrepancies in ITC distribution.
• Extended Filing Timelines: The filing deadline for GSTR-6 has been extended in certain cases, such as the September 2023 deadline, which was extended to October 31, 2023, to allow more time for reconciliation.
• ITC Reversal Mechanism: A faster process has been introduced for reversing ineligible or excess ITC distributed, helping businesses manage ITC more efficiently.
• Key Decision from the 50th GST Council Meeting: During the 50th GST Council meeting held in July 2023, the Council discussed improvements to the overall GST filing system, including further enhancements for GSTR-6. One of the notable outcomes was the push for greater automation, particularly for auto–populated forms, to reduce manual work and errors. The Council also reaffirmed its commitment to extend filing timelines when necessary to support businesses during system upgrades.
• Future Updates: Further automation is expected, including deeper integration with GSTR-2B for automatic reconciliation and the potential introduction of a single-click reconciliation feature.

Comparison with Other GST Forms

Conclusion

GSTR-6 is a crucial monthly return for Input Service Distributors (ISDs) under GST. It ensures accurate distribution of Input Tax Credit (ITC) across different units of a business, promoting tax compliance and transparency. With recent updates like auto-population of data, real-time invoice matching, and extended filing timelines, the filing process has become more efficient. ISDs should stay informed about updates, such as those discussed in the 50th GST Council meeting, to ensure timely and accurate filings.

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Author: Anirban Sinha

A product manager with a writer’s heart, Anirban leverages his 6 years of experience to empower MSMEs in the business and technology sectors. His time at Tata nexarc honed his skills in crafting informative content tailored to MSME needs. Whether wielding words for business or developing innovative products for both Tata Nexarc and MSMEs, his passion for clear communication and a deep understanding of their challenges shine through.