Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services in India. GST compliance involves obtaining GST registration, charging GST on sales, claiming input tax credits (ITC) on purchases, and filing regular returns with the GST authorities. Compliance with GST requirements is crucial for businesses to operate legally and avoid penalties, while also providing transparency in tax-related transactions.
Purpose of GST Compliance:
- Legal Requirement: GST registration and filing returns are mandatory for businesses that meet the turnover threshold.
- Input Tax Credit (ITC): GST compliance enables businesses to claim ITC, reducing their tax liability and improving cash flow.
- Transparency in Transactions: Regular GST filings ensure transparency in business transactions, supporting the government’s goal of a uniform tax structure.
- Avoidance of Penalties: Timely compliance helps avoid penalties, interest, and legal action from the GST authorities.
Compliance Requirements:
- GST Registration:
- Businesses with an annual turnover exceeding ₹20 lakh (₹10 lakh for special category states) must register for GST.
- Certain businesses, such as e-commerce operators and inter-state service providers, must register regardless of turnover.
- GST Return Filing:
- Registered businesses must file regular GST returns, reporting sales, purchases, tax collected, and tax paid.
- Different forms are required based on the business type and turnover:
- GSTR-1: Monthly or quarterly return detailing outward supplies (sales).
- GSTR-3B: Summary return for sales, ITC, and tax payment, filed monthly.
- GSTR-9: Annual return summarizing all GST activities of the financial year.
- GSTR-4: Filed quarterly by composition scheme taxpayers.
- Payment of GST:
- Any GST liability must be paid through electronic cash or credit ledger on the GST portal before filing the GSTR-3B.
- Late payment attracts interest, and delayed filings incur late fees.
- Reconciliation and ITC Claims:
- Ensure that purchase details match with suppliers’ filings to claim ITC.
- Any discrepancies in reconciliation can lead to denial of ITC, impacting cash flow.
Documentation Required:
- GST Registration Documents:
- PAN card of the business and owner.
- Proof of business address (electricity bill, rent agreement, etc.).
- Identity and address proof of the business owner (Aadhar card, passport, etc.).
- Bank account details.
- GST Return Filing Documents:
- Sales and purchase invoices for the period.
- Bank statements and payment proofs.
- ITC claims, details of credit or debit notes, and e-way bills, if applicable.
Process:
- GST Registration:
- Submit the application with required documents on the GST portal.
- Verification is done, and a GST Identification Number (GSTIN) is issued upon approval.
- Filing Monthly or Quarterly Returns:
- Prepare sales and purchase data, along with GST collected and paid.
- Log in to the GST portal, upload details in appropriate forms (e.g., GSTR-1, GSTR-3B).
- Pay any outstanding GST liability through electronic ledgers.
- Submit the returns after verifying the accuracy of the data.
- Annual GST Filing:
- Prepare and reconcile all transactions for the year.
- File GSTR-9, providing a summary of sales, purchases, ITC, and tax payments.
- Large taxpayers may also need to file GSTR-9C, which requires GST audit certification.
Charges:
- Professional Fees for GST Registration: ₹500 – ₹2,000, depending on complexity.
- Professional Fees for GST Returns: ₹500 – ₹1,500 per return filing (monthly or quarterly).
- Government Fees: No fees for registration or filing, but late fees are levied for delayed filings.
Timeline:
- GST Registration: Typically completed within 7-10 working days upon application.
- Monthly/Quarterly Returns:
- GSTR-1: Monthly by the 11th or quarterly by the 13th of the following month.
- GSTR-3B: Monthly by the 20th of the following month.
- Annual Return: GSTR-9 by December 31 of the subsequent financial year.
Penalties for Non-Compliance:
- Late Fees: ₹50 per day (₹20 for Nil returns) for each return delayed, capped at ₹5,000 for GSTR-3B and GSTR-1.
- Interest on Late Payment: 18% interest on any unpaid tax liability.
- Loss of ITC: Non-filing or late filing can delay ITC, affecting cash flow.
- Additional Penalties: Continuous non-compliance may lead to suspension of GSTIN, blocking the company from further transactions.
Benefits of Compliance:
- Smooth Operations: Compliance allows for uninterrupted business operations and smooth movement of goods.
- Enhanced Cash Flow: Timely ITC claims reduce the GST payable and improve cash flow.
- Reduced Legal Risks: Avoiding late fees and penalties saves costs and reduces legal risks.
- Transparency: Filing GST returns regularly improves the transparency of transactions, enhancing credibility.
GST compliance, including registration and regular filing, is crucial for businesses to operate within the legal framework. It ensures that companies can claim ITC, avoid penalties, and maintain a compliant status under GST law.