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GST compliance refers to the process of adhering to the provisions of the Goods and Services Tax Act, which involves timely filing of returns, accurate tax payments, maintaining proper records, and abiding by other statutory requirements. Compliance is not just a legal necessity but also a crucial determinant of a business’s financial health, reputation, and access to government contracts.
Why is GST compliance essential?
Compliance under GST is pivotal for businesses due to the following reasons:
- Avoidance of penalties: Failing to comply with GST regulations can lead to heavy fines.
- Claiming Input Tax Credit (ITC): To claim ITC, businesses must be fully compliant.
- Reputation and trustworthiness: Non-compliance could harm a business’s credibility and affect partnerships.
List of GST Compliances
Here is a GST Compliance checklist that businesses should follow to ensure full compliance with the Goods and Services Tax (GST) regulations:
1. GST Registration Compliance
- Ensure your business is registered under GST if the turnover exceeds the threshold (₹40 lakh for goods and ₹20 lakh for services).
- Register even if the threshold is not met for businesses involved in inter-state supplies, e-commerce, or those liable for reverse charge.
2. GST Return Filing Compliance
GST requires the timely filing of multiple forms, primarily GSTR-1 (outward supplies) and GSTR-3B (summary return). Missing deadlines leads to late fees and interest charges.
- File monthly or quarterly returns (GSTR-1, GSTR-3B) as required.
- Annual returns (GSTR-9) must be filed for businesses with a turnover exceeding ₹2 crore.
- Verify all data before submission to avoid late fees and penalties.
3. GST-Compliant Invoicing
- Issue invoices with all necessary information, including GSTIN, invoice number, HSN/SAC code, and correct tax rates.
- Ensure proper documentation for goods and services supplied, including debit and credit notes where necessary.
4. Input Tax Credit (ITC)
- Ensure ITC claims are accurate and supported by invoices.
- Reconcile GSTR-2B with your purchase records to ensure all credits are accounted for.
- Reverse ITC if payment to suppliers is delayed beyond 180 days.
5. Reverse Charge Mechanism (RCM) Compliance
- Comply with RCM provisions by paying GST on specified goods/services where the recipient is liable to pay tax.
- Ensure that ITC is correctly claimed for RCM payments.
6. Record Keeping
- Maintain records of all invoices, credit notes, purchase and sales registers, and other documentation.
- These records must be preserved for at least six years from the date of filing the annual return.
7. GST Compliance Rating
The GST compliance rating is a score assigned by the GST authorities to businesses based on their track record of adhering to GST rules. The rating ranges from 0 to 10, with a higher score indicating better compliance. It serves as a reputation metric for businesses, helping authorities and partners assess their trustworthiness. The following factors affect a business’s GST compliance rating:
- Timely filing of returns.
- Accuracy in reporting and payments.
- Responsiveness during audits.
- Proper record maintenance.
A higher compliance rating brings multiple advantages, including:
- Faster processing of refunds.
- Preference in government tenders.
- Reduced chances of audits.
8. E-Way Bills
- Generate and manage e-Way Bills for goods transported above the prescribed threshold.
- Ensure that the e-Way Bills are reconciled with the GSTR filings.
9. Audit Requirements
- For businesses with an annual turnover exceeding ₹2 crore, ensure a GST audit is conducted by a qualified Chartered Accountant.
10. Reconciliation of Returns
- Regularly reconcile GSTR-1 (sales) with GSTR-3B (summary return) to avoid discrepancies.
- Ensure there is no mismatch between ITC claimed and the details provided by suppliers.
This checklist can help businesses stay on top of their GST obligations, ensuring legal compliance and avoiding penalties. Businesses should conduct GST compliance audits annually or more frequently depending on the size of the business and its turnover. The audit process includes reviewing all GST returns, ITC reconciliation, and tax payment records.
A product manager with a writer's heart, Anirban leverages his 6 years of experience to empower MSMEs in the business and technology sectors. His time at Tata nexarc honed his skills in crafting informative content tailored to MSME needs. Whether wielding words for business or developing innovative products for both Tata Nexarc and MSMEs, his passion for clear communication and a deep understanding of their challenges shine through.
The compliances are important to adhere otherwise heavy penalties are there. Hire someone has experience in GST related filings and can manage regular accounts for the company. This is the best advise.
We once missed a GSTR-1 deadline due to a minor oversight, and the late fees were a wake-up call. Since then, we’ve put a solid system in place for timely filings, and it’s been smooth sailing.
I recommend using online software like Tally etc… to adhere to the compliances. Studies indicate that businesses with automated GST compliance systems reduce discrepancies in filings by over 40%. This highlights the importance of technology in managing compliance effectively.