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GST Compliance


The Goods and Services Tax (GST) is a single and destination based tax levied on goods & services consumed in an economy. GST as envisaged by the Central Government is a single uniform indirect tax which will treat India as one nation one market. With start of its inception from 1st July 2017, compliance with GST Law has always been challenging issue for business organizations. GST requires greater integration of tax domain knowledge, expertise and technology, as compliance has become vast, paperless and data-intensive, with sector-specific nuances. The digitalization has also created a new paradigm in tax administration and compliances.

The GST Council has laid down rules for the way we have to maintain records, how we have to raise invoices and how we have to report our purchases and sales, and ultimately, the way we have to pay our taxes and file returns. In simple terms, adherence to these rules and regulations is what constitutes GST compliance. Not being compliant, can be a heavy cost for a business. The legislation also imposes higher corrective implications in case of errors resulting in short payment of taxes or incorrect availment of credit.

The GST compliance rating is a score given by the government to a business so that other businesses can see how compliant they are with the tax department. The new GST regime has introduced compliance guidance that mandate businesses to remain compliant. All businesses are required to adopt the GST compliance rules set by the government. These compliance rules can be clubbed into three categories:

  • Registration compliance
  • Tax Invoice compliance
  • Return filing compliance

Additionally, other compliance differs based on the nature of the business.

GST Registration Compliance:
The registration of GST is the first step forward in compliance. The registration can be done online on the website - GST Registration must be done based on a business's annual turnover.

  • Applicable to businesses that deal with the supply of goods and with the turnover exceeding ₹40 Lakh in the previous FY.
  • Applicable to businesses that deal with the supply of services and with the turnover exceeding ₹20 Lakhs in the previous FY.

Businesses that fall under the annual turnover bracket are mandated to take GST registration 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.

Tax Invoice Compliance:
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 proforma invoice as part of their daily business requirements. These invoices must meet compliance rules by including the following mandatory items:

  • Invoice number and date
  • Customer name
  • 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

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.

Gst return compliance

All registered businesses are required to file returns on a monthly/quarterly/yearly basis. The frequency of the returns depends mainly 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, and 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.

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