The introduction of the new GST tax system has ushered in a major tax reform in the nation. The new system brings together a number of state and central taxes into one common, fungible tax. This was a much needed reform that has introduced greater transparency and eased administrative paperwork into the tax collection framework. Since its introduction, the new system has been good news for most businesses -- especially for small and medium sized enterprises that rely on technology to take care of tasks like registration and filing tax returns online.
The new GST regime has introduced compliance guidelines that mandate businesses to remain compliant. All businesses are required to adopt the GST compliance rules set by the government. Although these rules are updated from time to time (based on the requirements set by the govt), these compliance rules can be clubbed into three categories:
Tax Invoice compliance
Return filing compliance
Additionally, there are other compliances that differ based on the nature of business.
The registration of GST is the first step forward in compliance. The registration can be done online on the website – www.gst.gov.in. The process is relatively straightforward; however, there are a few things to keep in mind in order to remain compliant.
GST registration must be done based on a businesses’ annual turnover.
Applicable to businesses that deal with the supply of goods and with a turnover exceeding Rs. 40 Lakhs in the previous FY.
Applicable to businesses that deal with the supply of services and with a turnover exceeding Rs. 20 Lakhs in the previous FY.
Businesses that fall under the annual turnover bracket are mandated to register for GST and are liable to other GST compliance requirements. The CBIC (Central Board of Indirect Taxes and Customs) has issued strict penalties for non-adherence to GST registration. The penalty for delay would lead to a fine of Rs. 100 per day. A further delay in GST registration would lead to a fine of Rs. 200. These penalties are as per section 122 of the CGST act non-compliance rules.
Businesses registered under GST must adhere to invoicing compliance to pass on the input tax credit. With every sale of goods or services, businesses are required to produce an invoice as part of their daily business requirements. These invoices must meet compliance rules by including the following mandatory items:
Invoice number and date
Shipping and billing address
Customer and taxpayer’s GSTIN
Place of supply
HSN code (Harmonized System of Nomenclature/ SAC Code (Services Accounting Code)
Item details i.e. description, quantity, unit, the total value
Taxable value and discounts
Rate and amount of taxes
Whether GST is payable on a reverse charge basis
Signature of the supplier
In order for a business to meet invoicing compliance rules, all the items need to be mandatorily mentioned on the GST invoice. Non-adherence of GST invoicing would incur a penalty as high as Rs. 10,000 or 100% tax due (whichever is higher) for not issuing invoice and Rs. 25,000 for incorrect invoicing.
All registered businesses are required to file returns on a monthly/quarterly/yearly basis. The frequency of the returns depends largely on the type of business activity. The GST returns are required to be filed online on the Returns section of the GST website.
Listed below are the forms required to file GST Returns:
GSTR-1 is a return where details of sales are filed with the government. No tax has to be paid after filing this return.
GSTR-3B is a simplified return to declare summary GST liabilities for a tax period. It needs to be self-declared monthly, for furnishing summarized details of all outward supplies made, input tax credit claimed, tax liability ascertained, and taxes paid. It is filed by all taxpayers registered under GST.
GSTR-9 return is filed annually by taxpayers under GST having turnover of over Rs. 2 Crores in the financial year, containing details of outward sales supplies made, inward purchase supplies received during the previous year under various tax heads along with details of taxes payable and paid. It is a consolidation of all the monthly or quarterly returns (GSTR-1, GSTR-2A, GSTR-3B) filed during that year.
Now that you know how to go about becoming GST compliant, it’s important to keep your business up-to-date with the latest GST compliance requirements and avoid penalties. If you need more information about GST in general, make sure to visit the Finserv MARKETS. The website offers a plethora of information about GST and other finance and taxation-related subjects. You can also get a lot of useful information about business loans, the latest government schemes, eligibility requirements, and so much more.