Goods and Services Tax (GST) Compliance


Goods and Services Tax (GST) Compliance

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), and submit returns after verifying accuracy.

Annual GST Filing:

Prepare and reconcile all transactions for the year. File GSTR-9, providing a summary of sales, purchases, ITC, and tax payments.

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.