File GSTR-4 Return for Composition Dealers: Step-by-step process with details

GSTR-4 is a crucial Goods and Services Tax (GST) return form for businesses operating under the Composition Scheme in India. But what is GSTR-4 exactly? It’s a quarterly return that GST composition taxpayers must file to report their business transactions. This form plays a vital role in simplifying GST compliance for small businesses.

Understanding what GSTR-4 is and how it works is essential for composition dealers. This GST return form allows them to report their turnover, pay taxes, and maintain compliance with Goods and Services Tax regulations. By filing GSTR-4, businesses can enjoy the benefits of the Composition Scheme while fulfilling their GST obligations.

Overview of Composition Scheme

The Composition Scheme is a simplified tax structure designed for small taxpayers in India. Under this scheme, eligible businesses can pay GST at a fixed rate on their turnover, reducing their compliance burden. We have created a detailed article to know everything about composition scheme.

Applicable GST charges for composition dealers vary based on the nature of their business:

• Manufacturers: 1% of turnover
• Traders: 1% of turnover
• Restaurants: 5% of turnover
• Serviceproviders: 6% of turnover

To be eligible for the Composition Scheme, businesses must have an annual turnover below ₹1.5 crore (₹75 lakh for special category states). GSTR-4 fits into this scheme by providing a simple quarterly reporting mechanism for these taxpayers.

For example, a small restaurant with an annual turnover of ₹1 crore would pay 5% GST on its turnover under the Composition Scheme, significantly simplifying its tax calculations and reporting.

Who Should File GSTR-4?

GSTR-4 is specifically for taxpayers registered under the Composition Scheme. This includes:

1. Small traders with annual turnover up to ₹1.5 crore
2. Manufacturers with annual turnover up to ₹1.5 crore
3. Restaurant service providers with annual turnover up to ₹1.5 crore
4. Service providers (other than restaurants) with annual turnover up to ₹50 lakh

Special cases for filing GSTR-4 include businesses that have opted out of the Composition Scheme during a financial year. These taxpayers must file GSTR-4 for the period they were under the scheme.

Difference Between GSTR-4 and Other Forms

GSTR-4 differs significantly from other GST return forms:

• GSTR-4 vs. GSTR-1: GSTR-1 is for regular taxpayers to report outward supplies monthly or quarterly, while GSTR-4 is a comprehensive quarterly return for composition dealers.
• GSTR-4 vs. GSTR-3B: GSTR-3B is a monthly summary return for regular taxpayers, whereas GSTR-4 is filed quarterly by composition dealers.
• GSTR-4 vs. GSTR-9: GSTR-9 is an annual return for regular taxpayers, while composition dealers file an annual GSTR-4 along with quarterly returns.

The unique feature of GSTR-4 is its simplicity, allowing composition dealers to report all their transactions in a single form.

Important Dates and Deadlines

Quarterly GSTR-4 filing deadlines are as follows:

• April to June: 18th July
• July to September: 18th October
• October to December: 18th January
• January to March: 30th April

The annual GSTR-4 filing deadline is April 30th of the following financial year.

Late filing of GSTR-4 can result in penalties of ₹200 per day (₹100 CGST + ₹100 SGST), capped at 0.1% of the turnover.

For instance, if a business with a quarterly turnover of ₹10 lakh files GSTR-4 10 days late, they would incur a penalty of ₹1,000 (0.1% of ₹10 lakh).

Details to be Provided in GSTR-4

When filing GSTR-4, taxpayers must provide the following information:

1. Inward supplies: Details of purchases from registered dealers
2. Outward supplies: Summary of sales made during the quarter
3. Reverse charge transactions: Tax paid on purchases from unregistered dealers
4. Tax Deducted at Source (TDS): Any tax deducted by customers
5. Details on imports: Information on goods or services imported
6. Adjustments: Any corrections or modifications to previous returns

For example, a composition dealer selling stationery items would need to report their total sales for the quarter, purchases from registered suppliers, and any imports of goods from other countries.

GSTR-4 Filing Process

To file GSTR-4, follow these steps:

1. Log in to the GST portal (www.gst.gov.in) using your GSTIN and password
2. Navigate to “Returns” > “Returns Dashboard“
3. Select the relevant financial year and quarter
4. Click on “Prepare Online” for GSTR-4
5. Fill in the required details in each section
6. Review the summary and pay any taxes due
7. File the return using Digital Signature Certificate (DSC) or Electronic Verification Code (EVC)

Tax Rates Under Composition Scheme

As mentioned earlier, GST rates for composition dealers vary by business type. Here’s a detailed breakdown:

1. Manufacturers: 1% (0.5% CGST + 0.5% SGST)
2. Traders: 1% (0.5% CGST + 0.5% SGST)
3. Restaurants: 5% (2.5% CGST + 2.5% SGST)
4. Service providers: 6% (3% CGST + 3% SGST)

These rates apply to the total turnover, making tax calculation straightforward. For instance, a manufacturer with a quarterly turnover of ₹20 lakh would pay ₹20,000 (1% of ₹20 lakh) as GST under the Composition Scheme.

Penalties for Non-Compliance

Non-compliance with GSTR-4 filing can lead to severe consequences:

• Late fees: ₹200 per day (maximum 0.1% of turnover)
• Interest: 18% per annum on unpaid tax
• Cancellation of registration: For persistent non-compliance
• Ineligibility for Composition Scheme: Repeated violations may lead to disqualification

For example, if a composition dealer with ₹50 lakh annual turnover fails to file GSTR-4 for a quarter and has a tax liability of ₹50,000, they could face:

• Late fees: Up to ₹5,000 (0.1% of ₹50 lakh)
• Interest: ₹9,000 (18% of ₹50,000 for 1 year)

Claiming Refunds and Adjustments

While composition dealers generally cannot claim input tax credit, there are situations where refunds may be applicable:

1. Excess tax paid: If a dealer has paid more tax than required, they can claim a refund
2. Export of goods: Composition dealers exporting goods can claim a refund of the tax paid on inputs used for exports
3. Transition to regular scheme: When moving from composition to regular scheme, dealers can claim credit for eligible inputs in stock

To claim a refund, file Form GST RFD-01 on the GST portal, providing necessary details and supporting documents.

Reverse Charge Mechanism in GSTR-4

The Reverse Charge Mechanism (RCM) applies to composition dealers when they purchase goods or services from unregistered suppliers. In such cases, the composition dealer must pay GST on behalf of the supplier.

For example, if a composition dealer purchases goods worth ₹1 lakh from an unregistered supplier, they must pay GST on this amount under RCM and report it in their GSTR-4.

E-commerce Supplier Compliance

Composition dealers are generally not allowed to sell through e-commerce platforms. However, if they do engage in e-commerce transactions, they must:

1. Register as a regular taxpayer
2. Collect and pay GST at normal rates
3. File regular GST returns (GSTR-1 and GSTR-3B)

E-commerce operators must collect Tax Collected at Source (TCS) at 1% on the net value of taxable supplies made through their platform.

Documents Required for GSTR-4 Filing

To file GSTR-4 accurately, keep the following documents handy:

1. Sales invoices for the quarter
2. Purchase invoices from registered suppliers
3. Bank statements
4. Details of any reverse charge transactions
5. Records of imports or exports (if applicable)
6. Previous GSTR-4 returns for reference

Maintaining proper documentation ensures smooth filing and helps avoid discrepancies.

How to Amend GSTR-4

If you discover errors in your filed GSTR-4, you can make amendments:

1. Log in to the GST portal
2. Go to “Returns” > “Returns Dashboard“
3. Select the relevant period and click on “Prepare Online“
4. Make necessary corrections in the appropriate sections
5. Submit the amended return

Remember, amendments should be made as soon as errors are discovered to avoid penalties.

Conclusion

Understanding what GSTR-4 is and how to file it correctly is crucial for composition dealers. This simplified return form offers small businesses an opportunity to comply with Goods and Services Tax (GST) regulations without the complexity of regular returns. By following the guidelines outlined in this article, composition dealers can ensure timely and accurate filing of GSTR-4, avoiding penalties and maintaining good standing with tax authorities.

Disclaimer:
This article is for informational purposes only. All are requested to consult with a GST practitioner/CA or relevant for professional advice. visit https://gst.gov.in