Key Aspects of GST Compliance:
GST Registration:
- Every business with an annual aggregate turnover exceeding the prescribed threshold (e.g., ₹40 lakhs for goods and ₹20 lakhs for services, as of 2021) must register for GST.
- Registration is mandatory for certain businesses, including those involved in inter-state trade, e-commerce operators, and casual taxable persons.
- After registration, the business receives a GST Identification Number (GSTIN), which must be quoted on all tax invoices.
Invoicing under GST:
- A tax invoice must be issued for every sale of goods or services.
- The invoice should include:
- Supplier’s and buyer’s GSTIN
- Invoice number and date
- Description of goods/services
- Quantity and value
- Taxable value
- GST rate (CGST, SGST, or IGST)
- HSN (Harmonized System of Nomenclature) code for goods or SAC (Services Accounting Code) for services
- Amount of GST charged.
- Businesses must issue B2B invoices for all registered buyers, and a consolidated invoice for B2C supplies below ₹2.5 lakhs.
Filing GST Returns:
- Businesses must file periodic returns with details of their sales, purchases, ITC claims, and tax payments.
- The common GST returns include:
- GSTR-1: Details of outward supplies (sales).
- GSTR-3B: Monthly summary return showing tax liability and ITC claims.
- GSTR-2A: Auto-populated form with inward supplies (purchases) based on supplier returns.
- GSTR-9: Annual return for a consolidated view of all transactions made during the year.
- Composition taxpayers file GSTR-4 annually and CMP-08 quarterly.
Payment of GST:
- GST is paid monthly, along with the filing of GSTR-3B. Taxes include CGST, SGST, and IGST, depending on the nature of the transaction (intra-state or inter-state).
- The payment of taxes should be made using the electronic cash ledger or credit ledger available on the GST portal.
- Any delayed payment attracts interest and late fees.
Input Tax Credit (ITC) Compliance:
- ITC can be claimed only when the supplier has correctly filed the return and paid the tax to the government.
- Businesses must reconcile their purchase data with GSTR-2A/2B to ensure that only eligible ITC is claimed.
- ITC cannot be claimed for certain items such as motor vehicles, personal consumption items, or goods/services used for exempt supplies.
Record Keeping and Documentation:
- Businesses are required to maintain records of all their transactions for at least six years.
- Records to be maintained include:
- Invoices (sales and purchases)
- Credit and debit notes
- Stock records
- Records of advances received and paid
- E-way bills for movement of goods
- Proper documentation is essential for compliance, audit, and scrutiny by GST authorities.
E-Way Bill Compliance:
- An e-way bill must be generated for the movement of goods worth more than ₹50,000 (in most states).
- The e-way bill includes details such as the consignor, consignee, the transporter, and the goods being moved.
- E-way bill compliance is crucial as failure to generate it can lead to penalties, confiscation of goods, or seizure of the vehicle.
Reverse Charge Mechanism (RCM):
- Under RCM, the recipient of goods or services is liable to pay GST, instead of the supplier, in specific circumstances (such as purchases from unregistered dealers or certain categories of services).
- The recipient must issue a self-invoice and pay the GST on a reverse charge basis, which can then be claimed as ITC in subsequent returns.
GST Audit:
- Businesses with an annual turnover exceeding ₹5 crores (subject to threshold changes) must undergo a GST audit.
- A qualified Chartered Accountant or Cost Accountant conducts the audit and submits the GST audit report (Form GSTR-9C), which reconciles the audited financial statements with the filed GST returns.
Annual Return Filing:
- Every taxpayer registered under GST (except certain categories like composition taxpayers) must file an annual return in GSTR-9.
- The annual return provides a consolidated summary of all the monthly/quarterly returns filed during the financial year, along with a reconciliation of tax liabilities and paid taxes.
- For businesses with turnover exceeding ₹5 crores, a GSTR-9C audit report is also required.
GST Notices and Response:
- In case of non-compliance, incorrect return filings, or discrepancies, businesses may receive notices from GST authorities.
- Businesses must respond to GST notices within the stipulated time frame to avoid penalties or interest.
Consequences of Non-Compliance:
Interest and Late Fees:
- Late filing of returns or delayed payment of taxes attracts interest (18% per annum) and late fees (₹50 per day for regular taxpayers, ₹20 for NIL filers, capped at ₹5,000).
Penalties:
- Non-compliance with GST regulations can lead to penalties such as:
- Up to ₹10,000 or 100% of the tax due for tax evasion or filing incorrect returns.
- Penalties for not issuing invoices, incorrect invoicing, or failure to generate e-way bills.
- Non-compliance with GST regulations can lead to penalties such as:
Suspension of GSTIN:
- Consistent non-compliance or failure to file returns for a continuous period may result in the suspension or cancellation of GST registration.
Legal Action:
- In serious cases of tax evasion or fraud, businesses may face prosecution, along with severe penalties or imprisonment, depending on the magnitude of the evasion.
Best Practices for GST Compliance:
Timely Filing of Returns:
- Ensure all GST returns are filed on time to avoid late fees and penalties.
Accurate Invoicing:
- Issue GST-compliant invoices with the correct details to avoid mismatches in returns and problems with ITC claims.
Regular Reconciliation:
- Reconcile sales and purchase data with GSTR-1, GSTR-3B, GSTR-2A/2B regularly to avoid mismatches and ensure accurate ITC claims.
Use of Accounting Software:
- Implement GST-compliant accounting software to automate invoicing, return filing, and reconciliation processes, reducing errors and ensuring timely compliance.
Maintain Proper Records:
- Keep all records, invoices, e-way bills, and other GST-related documents in a systematic and accessible manner for audits and inquiries.
Engage Professional Help:
- For complex GST issues, such as audits, RCM, or dealing with GST notices, it is advisable to consult GST professionals or Chartered Accountants.
Conclusion:
Maintaining GST compliance is vital for the smooth operation of any business under the GST regime. By adhering to the rules and timely fulfilling the required obligations—such as accurate invoicing, filing returns, paying taxes, and claiming ITC correctly—businesses can avoid penalties, ensure cash flow stability, and foster better relationships with their suppliers and tax authorities.
0 Comments