The Ultimate Guide to GST Compliance for Indian Businesses

• BPA
• 27-02-23

Introduction:

A comprehensive tax system known as the Goods and Services Tax (GST) was launched in India in July 2017. Many indirect taxes, including excise duty, service tax, and value-added tax, were replaced by it (VAT). The consumption of goods and services is subject to the destination-based GST tax. The Indian taxation system has been simplified thanks to a single tax code.

For all firms doing business in India, GST compliance is crucial. Businesses may be confident they are abiding by government laws and regulations by complying with GST requirements. Heavy fines and legal repercussions may result from violating Tax requirements. Understanding GST Compliance

This manual will give a thorough rundown of GST compliance for Indian companies. Topics including GST registration, GST returns, GST audits, fines for non-compliance and GST rules for e-commerce enterprises will all be covered. You will have a full grasp of GST compliance and how to make sure that your company complies with GST requirements by the conclusion of this tutorial.

Understanding GST Compliance

We shall define GST compliance in this section and discuss its importance. We will also give an overview of GST rates and categories and the procedure for GST registration.

Definition of GST Compliance and Why it’s Necessary

The term “GST compliance” refers to observing the guidelines established by the government for the application of the GST. It entails adhering to the guidelines established by the government for GST registration, filing GST returns, and timely payment of Tax.

The need for GST compliance stems from a number of factors. First of all, it makes sure that companies are abiding by the guidelines established by the government. Second, it makes it possible for companies to claim input tax credits, which are reimbursements for taxes paid on materials used in the creation of goods or services. Lastly, it assists companies in avoiding fines and other penalties for noncompliance.

GST Registration Process

Every firm with an annual revenue of more than Rs. 40 lakhs must register for GST. The turnover criteria for companies in the northeastern states is Rs. 10 lakhs. Regardless of their annual revenue, companies that offer goods and services beyond state boundaries must also register for GST.

The simple GST registration procedure may be finished online. The procedure entails providing the required paperwork, including a PAN card, evidence of business registration, and bank account information. A GST identity number will be given to the company once the application has been confirmed (GSTIN).

Overview of GST Rates and Categories

Several tax rates and categories apply to the GST that is imposed on goods and services. The GST is charged at rates of 5%, 12%, 18%, and 28%. Essential commodities and healthcare services are two examples of items and services that are either excluded from GST or subject to a reduced tax rate.

CGST (Central GST), SGST (State GST), and IGST are the three GST categories (Integrated GST). The national and state governments, respectively, levy CGST and SGST on intrastate transactions. The central government levies the IGST and collects the money from interstate commerce.

GST Returns

This section will describe how to file a GST return, give an overview of the many types of GST returns, and list typical mistakes to avoid.

Explanation of GST Return Filing Process

Procedure for Submitting a GST Return – Explanation

GST returns are a business’s declarations of sales and purchases. It is a means via which companies may inform the government of their tax obligations. Depending on the business’s yearly or quarterly revenue, GST returns must be completed on a regular basis.

The following stages are involved in filing a GST return:

keep records of all company transactions, including sales and acquisitions

Check the records and make any required adjustments.

Determine the tax due and claim the input tax credit.

Online filing of the GST return

Pay the owed taxes.

Overview of Different Types of GST Returns and When They Need to be Filed

According to their annual revenue and kind of company, firms must file several GST filings. There are several popular GST return types, including:

Businesses having annual revenue of up to Rs. 1.5 crore must file GSTR-1 returns, which contain information on all of their outgoing purchases.

Businesses having an annual revenue of above Rs. 1.5 crore must submit GSTR-3B, which is used to give an overview of all outgoing and incoming supplies the company has made.

GSTR-4: Organizations registered under the composition system must submit this return.

Businesses having a turnover of more than Rs. 2 crores must submit GSTR-9 yearly.

It is important for businesses to file their GST returns on time to avoid penalties and legal consequences.

Common Errors to Avoid When Filing GST Returns

Among the mistakes that businesses frequently make while submitting GST returns are:

not disclosing all business transactions, including sales and acquisitions

Making a false input tax credit claim

filing tax filings with inaccurate or insufficient data

not timely paying one’s tax obligations

Businesses should keep thorough records of all transactions in order to prevent these mistakes. They should also double-check the records before filing returns and, if necessary, seek the advice of a tax expert.

GST Audit

The GST authorities may continue to audit you after you have submitted your Tax returns. A GST audit is carried out to make sure that the legislation is being followed and to confirm the veracity of the data included in the returns. You must make sure that your returns are correct and current, and that you have kept adequate books of accounts and records.

Three different kinds of GST audits exist:

General Audit: The GST authorities undertake routine audits of returns submitted by firms to ensure their correctness.

Special Audit: When the GST authorities believe a company is overclaiming input tax credits, underreporting taxable supply, or engaging in other non-compliances, they will undertake a special audit.

Divisional Audit: When the GST authorities feel that there are sizable discrepancies in the levels of compliance across various branches or divisions of a company, they will perform a divisional audit.

In order to confirm the correctness of your returns, the GST authorities will examine your books of accounts, invoices, and other pertinent documents during the audit. Also, they could ask you for clarification or more details on certain transactions. Throughout the audit process, it’s crucial to comply with the authorities and give them all the information they want.

The GST authorities have the right to take additional measures, such as imposing penalties and fines, if any anomalies are discovered during the audit. Thus, it is essential to make sure that your company complies with all GST requirements and maintains accurate records of all transactions.

Input tax credit mistakes, misclassification of goods and services, and non-compliance with invoicing and accounting standards are common problems discovered during GST audits. You can prevent these problems and guarantee GST compliance by making sure you have the right systems and processes in place.

We will talk about fines and the appeals procedure for not adhering to GST requirements in the following section.

Penalties and Appeals

The GST authorities have the authority to levy penalties and fines for non-compliance with its rules. To prevent fines or legal action, it’s crucial to make sure your company complies with the GST law completely.

Penalties that may be levied for violating GST requirements include the following:

Last Filling GST Return: GST returns that are filed late may be subject to a penalty of Rs. 100 per day of delay (up to a maximum of Rs. 5,000).

Incorrect GST Return: Incomplete or erroneous GST returns may result in a penalty of up to 10% of the tax owed or Rs. 10,000 (whichever is greater).

Failure to maintain correct records – If you don’t keep accurate books of accounts and records, you might face a fine of up to Rs. 25,000.

Fraudulent actions – If any fraudulent acts, such as claiming input tax credit on fictitious invoices, are discovered, you may be subject to a fine of up to 100% of the tax owed or to incarceration.

You have the right to challenge any penalty notice you get from the Tax authorities. First, an appeal is made to the Appellate Authority, and then a second appeal is made to the Appellate Tribunal.

You have 30 days from the day you get the penalty notice to file an appeal in order to contest the fine. To support your arguments, you must include an explanation for the appeal as well as supporting documentation. In order to make sure that your appeal is submitted accurately and successfully, it is advised that you seek the assistance of a tax specialist or a legal expert.

In conclusion, it is critical for Indian firms to follow GST requirements. You may prevent fines and penalties levied by the GST authorities by keeping correct records, submitting GST returns on time, and following the rules for invoicing and accounting. If you do receive a penalty notice, it is crucial to follow the right procedures to contest it and, if required, seek professional assistance.

GST and E-commerce

E-commerce has grown in popularity among companies in India over the past several years as a means of selling their goods and services. E-commerce enterprises are subject to GST rules as well, therefore it’s critical to comprehend and follow them.

The following are some crucial considerations for GST compliance in e-commerce:

GST registration is necessary for all online retailers, regardless of their annual sales volume. This is so that other providers may more easily supply goods or services, as they are viewed as providing an internet platform for this purpose.

TCS and TDS – When paying suppliers through their platform, e-commerce firms must subtract TCS (Tax Collected at Source). 1% of the net value of taxable supply is the TCS rate. On the other hand, TDS (Tax Deducted at Source) is applicable for certain specified e-commerce transactions.

GST returns must be filed by e-commerce businesses, including GSTR-8, which is a monthly form for TCS. Depending on their annual revenue, vendors that sell through e-commerce platforms must also submit GST filings.

Place of Supply: The location where items are delivered will serve as the place of supply for e-commerce transactions involving the transportation of commodities. The location of the supply for services will be decided based on the kind of service offered.

The TCS deducted by e-commerce operators may be claimed as an input tax credit, and suppliers may claim an input tax credit for the tax paid on their supply.

Compliance Obligations – E-commerce enterprises are subject to a number of invoicing and accounting regulations, including the need to issue GST invoices, keep accurate books of accounts, and keep transaction records.

E-commerce companies can avoid the GST authorities’ penalties and fines by making sure that these standards are met. To make sure that your e-commerce firm is completely compatible with GST requirements, it is advised to seek the advice of a tax specialist or a legal expert.

Conclusion

To sum up, GST compliance is necessary for Indian businesses to run efficiently and avoid fines. Businesses may expedite processes and prevent mistakes in registration and return filing by knowing GST compliance. As we covered, the procedure for GST compliance entails signing up for GST, submitting GST returns, going through a GST audit, and being aware of fines and appeals. E-commerce companies must also adhere to certain rules for GST compliance.

To make sure that your company stays compliant, it is essential to be informed about any modifications or revisions to the GST requirements. It might be advantageous to seek the advice of a qualified GST expert or advisor, particularly for bigger enterprises with more intricate operations.

In general, GST compliance is an important and required part of operating a business in India. Businesses may make sure they are compliant and functioning successfully in the Indian market by adhering to the rules and regulations provided in this handbook.