Why the QRMP Scheme is Falling Short: An In-Depth Analysis

The Indian government implemented the Quarterly Return, Monthly Payment (QRMP) scheme under the Goods and Services Tax (GST) system to simplify the tax filing process for small businesses. This plan lets eligible taxpayers file GSTR-3B returns every three months while still making monthly tax payments. This strikes a mix between following the rules and managing cash flow. The QRMP scheme was supposed to make compliance easier, but it hasn’t yet delivered the benefits that were hoped for. Small businesses face numerous challenges, such as difficult-to-follow steps and incorrect distribution of tax credits. It is evident that a thorough review of the plan is necessary.

We’ll examine the issues with the QRMP scheme in this article, including the eligibility requirements, the convoluted process, the management of tax liability, and the numerous compliance challenges small businesses encounter.

Understanding the QRMP Scheme

The QRMP scheme was made to make it easier for small businesses to follow the rules. People who paid taxes as well as made up to ₹5 crores in the last fiscal year can use the plan. The plan lets small companies file their GSTR-3B returns every three months instead of every month, but they still have to pay their taxes every month. This scheme has two payment options, the Fixed Sum Method (FSM) and the Self-Assessment Method (SAM), so that different people can meet their own payment needs.

The idea of doing this sounds easy, but handling monthly tax payments, quarterly returns, and keeping track of B2B supplies has turned out to be harder than expected. Handling B2B transactions, the Input Tax Credit (ITC), and making challan payments through the GST portal have made things more difficult for taxpayers, especially those who don’t know a lot about taxes.

Who is Eligible for the QRMP Scheme?

The QRMP scheme is designed for taxpayers who made up to ₹5 crores in turnover during the preceding financial year. Only companies who fulfill this turnover criterion and have an active GST registration are eligible for the QRMP scheme. This scheme especially benefits taxpayers who regularly submit GSTR-3B returns and engage in B2B supplies. Quarterly filing with monthly payments may help small businesses reduce the frequency of their compliance.

How to Opt for the QRMP Scheme

Eligible taxpayers must use the option on the GST portal throughout certain timeframes at the beginning of each quarter in order to enroll in the QRMP scheme. Because of the flexibility of this option, qualified taxpayers can choose to participate in the scheme or not each quarter, depending on their business requirements.

One way for businesses to handle their monthly payments is the Fixed Sum Method (FSM), which uses an amount already estimated on the basis of past filings; or they can use the Self-Assessment Method (SAM), which lets them figure out their tax dues manually.

It is important to know that if taxpayers don’t make a choice, the GST portal will choose one for them based on how often they have filed returns in the past. Businesses who are unaware of the default option often find this process confusing, which can complicate their tax filing duties throughout that period.

Automatic Monthly or Quarterly Filing of GSTR-3B

Once a company enrolled in the QRMP scheme, it has to file GSTR-3B every three months. But businesses have to pay their tax liability every month, even though they only file their tax report every three months. With the FSM method, they can pay based on past returns, and with the SAM method, they can pay based on real monthly sales. This requirement to make a payment every month can hurt cash flow and makes it harder to balance IGST, SGST, CGST, and Cess credits every three months.

Quarterly GSTR-3B Due Dates

The deadline for quarterly GSTR-3B reporting under the QRMP system is the 22nd or 24th day of the month after the end of each quarter, depending on the taxpayer’s state. Businesses still need to monitor and pay their tax liability on a monthly basis through challan payments, a task that can be challenging for small taxpayers, especially those with limited resources, despite the freedom the quarterly filing provides. Missing these deadlines increases the difficulty of compliance due to penalties and late fees.

Late Fee Under the QRMP Scheme

Both late tax payments and late return files are subject to late costs under the QRMP scheme. If the taxpayer fails to make monthly payments on time, they will accumulate late fees until they settle the tax. Penalties also apply for the late submission of quarterly GSTR-3B filings.

Due to their typically small budgets and potential inability to meet all compliance deadlines precisely, small businesses bear the brunt of these fees. For these people, late fees and interest payments can make it difficult to pay their bills, especially when added to other costs of doing business.

Key Challenges with the QRMP Scheme

Compliance Burden Remains High

The QRMP scheme aims to reduce the cost, small taxpayers are, however, subject to significant compliance requirements. Despite the scheme’s requirement that returns be submitted quarterly, taxpayers need to continue to make monthly tax payments.

Although the FSM option is theoretically beneficial for auto-calculating the tax amount based on previous returns, it often leads to overpayment or underpayment, which complicates the process of submitting the final quarterly return. This imbalance has a significant impact on cash flow, which is a critical factor for small businesses that are eligible for the QRMP scheme.

Complexities with ITC Claims

Another problem is how to handle the Input Tax Credit (ITC). People can view information about their ITC in GSTR-2A, GSTR-2B, GSTR-4A, and GSTR-6A. However, it can be challenging to reconcile these forms on a monthly basis when tax returns are only due quarterly.

In order to avoid having their SGST, CGST, IGST, and Cess computations impacted, businesses must continuously review their credit ledger and make necessary adjustments. In addition to increasing the possibility of errors, this cumbersome reconciliation process also increases the need for tax advisers, which drives up overall costs.

Limited Benefits for Small Taxpayers

The scheme is intended for taxpayers with turnovers of up to ₹5 crores. However, a significant number of these small businesses are ill-equipped to navigate the complex tax regulations. Some taxpayers have begun to query the benefits of the QRMP scheme due to the manual efforts required to manage it, the varying due dates, and the frequent updates on GST filing regulations.

For example, B2B transactions frequently necessitate the reconciliation of invoices and their matching with GSTR-3B and IFF entries, a process that necessitates a high level of attention to detail. Businesses are at risk of having their input tax credits do not show in their partners’ GSTIN records if they fail to submit their Invoice Furnishing Facility (IFF) forms by the due date each month. This can result in the disruption of business relationships.

Issues with the GST Portal

Many people encounter significant problems with the GST portal itself. Technical issues, downtime, and a lack of assistance have become common problems, particularly when attempting to access IFF forms, make PMT-06 challan payments, or reconcile data from various forms such as GSTR-2A and GSTR-2B.

Businesses unfamiliar with online portals may face delays in the filing process and penalties for missing deadlines due to these obstacles.

Confusion over Payment Mechanisms

Under the QRMP scheme, taxpayers have the option to choose either FSM or SAM. However, selecting the appropriate approach is a difficult task. FSM relies on historical tax data, while SAM requires instantaneous calculations of the outstanding tax. FSM frequently represents the current quarter’s transactions inaccurately, resulting in inaccurate payments.

This discrepancy necessitates taxpayers to reassess their decisions on a quarterly basis, which adds to the compliance burden. Furthermore, a single period’s overpayment or underpayment can lead to complications in subsequent periods, potentially impacting the credit ledger and complicating tax reconciliation.

Suggested Improvements for the QRMP Scheme

The GST system and small businesses in India could both benefit from resolving the issues within the QRMP scheme. The following are some proposed improvements:

• Simplified ITC Management: Streamlining ITC reconciliation across GSTR-2A, GSTR-2B, and GSTR-3B forms would significantly reduce the burden on taxpayers. The GST portal’s automated credit matching feature has the potential to simplify compliance and prevent errors.
• Improved Payment Flexibility: Providing taxpayers with additional payment options may mitigate cash flow concerns. For instance, we could prevent over- or underpayment issues by eliminating interest on FSM adjustments.
• Enhanced Portal Functionality: Infrastructure enhancements are required for the GST portal to effectively manage peak periods, particularly during quarterly filings. The enhancement of functionality would enable taxpayers to make monthly tax payments without any delays, manage challans, and access ITC forms.
• Educational Programs and Support: Offering additional resources to help small businesses in understanding the concepts of due dates, GSTR-3B filing, ITC reconciliation, and tax liability calculations would facilitate improved compliance.
• Grace Period for Small Taxpayers: Providing a grace period for taxpayers with limited turnover would assist small businesses in meeting payment and filing requirements without incurring penalties, thereby promoting improved compliance over time.

Summary

Small taxpayers intended the QRMP scheme to simplify rule compliance, but numerous issues prevent it from achieving its objectives. Cash flow problems, complicated ITC reconciliations, and problems with the GST portal are all things that small businesses have to deal with. The lack of clarity in FSM and SAM fees further complicates compliance.

There need to be big changes made to the QRMP scheme for it to really work. To make sure the success of this scheme, we need to enhance the features of the GST portal, simplify the ITC reconciliation process, and provide more assistance to small taxpayers. With these changes, the QRMP scheme can become a useful tool that helps small businesses grow instead of being a burden like it is under the Goods and Services Tax.