The introduction of the Goods and Services Tax (GST) regime in India on July 1, 2017, signified a substantial shift in the country’s taxation system. It replaced a complicated network of indirect taxes with a unified tax structure, with the goal of simplifying the tax procedure and promoting economic growth. While GST promised to be a game changer for businesses of all kinds, it also mandated the filing of regular GST returns, which has frequently been a cause of confusion and concern for startups.
Startups are critical to generating innovation, creating jobs, and contributing to economic growth. The intricacies of GST return filing, on the other hand, might be intimidating for new enterprises. We will demystify the GST return filing process for startups in this detailed guide. We will break down the important ideas, provide step-by-step instructions, and provide practical recommendations to help startups confidently navigate the GST landscape.
1. Understanding the Fundamentals of GST
Before getting into the complexities of GST return filing, it’s critical to understand the fundamentals of GST. The Products and Services Tax (GST) is a destination-based tax that applies to the provision of products and services throughout the country. It is imposed at several stages, but the tax paid at each level can be used to offset later stages of the supply chain.
Important terms to know:
a. Supply: In the context of GST, “supply” refers to any transfer, sale, or exchange of goods and services for a consideration (payment) made within the course of business.
b. Input Tax Credit (ITC): Under GST, firms can deduct the GST paid on purchases from their GST due on sales. Input Tax Credit is the name given to this technique.
c. GSTIN: Each GST-registered entity is given a unique 15-digit Goods and Services Tax Identification Number (GSTIN). It is required for all GST transactions and filings.
d. GST Rates: GST is divided into four tax rates: 5%, 12%, 18%, and 28%, with additional charges for specific goods and services. Understanding these rates is critical for calculating taxes correctly.
2. GST Return Varieties
GST return filing provides the tax authorities with information about your sales, purchases, and tax payments on a regular basis. There are various forms of GST returns, each with its own function. The following are the most prevalent forms of returns that startups must file:
a. GSTR-1: This form is used to report outbound supplies of goods and services. It contains information about the company’s sales. Depending on the turnover, GSTR-1 must be reported monthly or quarterly.
b. GSTR-3B: The GSTR-3B is a monthly summary return that covers total sales, purchases, and tax liabilities for the month. It is a self-declaration of taxes owed and tax credits claimed.
c. GSTR-2A and GSTR-2B: These are automatically prepared returns that contain information on company purchases. GSTR-2A is a dynamic document that reflects real-time data, whereas GSTR-2B is a static document that is generated on a particular date.
d. GSTR-4: Businesses who choose the Composition Scheme must file GSTR-4, a quarterly return. It summarises the quarter’s total turnover and tax liability.
g. GSTR-9: This is an annual return that provides a consolidated view of a company’s GST transactions over the course of the fiscal year. It is mandatory for all regular taxpayers.
3. A step-by-step approach to filing your GST return
Filing Goods and Services Tax (GST) returns in India entails various processes to ensure tax compliance. To assist you understand and navigate the procedure, here is a step-by-step guide:
a. Registration for GST
You must be a registered GST taxpayer before you may file GST returns. Here’s how you can sign up:
Go to the GST website (www.gst.gov.in).
Click the “Register Now” button next to “Taxpayers (Normal/TDS/TCS).”
Fill out the GST registration form (GST REG-01) with your company information, PAN (Permanent Account Number), phone number, and email address.
An OTP (Time Password) will be sent to your registered mobile number and email address. Use these OTPs to confirm your identity.
Following successful verification, you will be sent an Application Reference Number (ARN) by SMS and email. You can use this ARN to check the status of your application.
When your application is granted, you will be issued a one-of-a-kind Goods and Services Tax Identification Number (GSTIN).
b.Maintain Correct Records
Keep meticulous records of all your sales, purchases, and costs. Invoices, receipts, and other financial paperwork are included. GST compliance requires accurate record-keeping.
c.Select the Correct GST Return
Based on your business type and turnover, determine which GST return(s) you must file. GSTR-1 (for outward supplies), GSTR-3B (a monthly summary return), GSTR-4 (for Composition Scheme), and GSTR-9 (year return) are the most prevalent returns. The frequency and sort of return you receive are determined by your turnover and the nature of your firm.
d.Gather Information for Filing
Gather all of the information required to file your GST returns. This includes the following:
- Information about your outbound supplies (sales) to registered and unregistered consumers.
- Invoices, credit notes, and debit notes for your inward supplies (purchases).
- Input Tax Credit (ITC) information for your purchases.
- Any adjustments or amendments required in your previous returns.
e.GSTR-3B (Monthly Summary Return) Form
- Access the GST portal.
- Under ‘Services,’ select ‘Returns Dashboard.’
- Choose the fiscal year and month for which you want to file the GSTR-3B.
- Report your total sales, purchases, and tax liability for the month on GSTR-3B.
- Claim the Input Tax Credit (ITC) and determine your net tax liability.
- Pay the tax owed online or by one of the available payment methods.
- GSTR-3B must be submitted after payment.
f.GSTR-2A and GSTR-2B reconciliation
Reconcile the information on your purchase invoices with the information on GSTR-2A (produced automatically by the GST system) and GSTR-2B (a static document). Make certain that you claim the appropriate Input Tax Credit (ITC).
g.Corrections and alterations
If you find problems or discrepancies in your filed returns, you can use the proper forms to make revisions and adjustments. For modifications, submit GSTR-1A and GSTR-3B.
h.Penalties and Late Fees
Keep in mind the deadlines for submitting returns and paying taxes. Late filing results in penalties and interest costs, so make sure to file on time.
i.GSTR-9 Annual Return
File the GSTR-9 annual return at the conclusion of the fiscal year, which consolidates all of your GST transactions for the year.
j.(If applicable) Transition to the New GST Return System
Keep up to speed with the latest guidelines and information from the GST authorities, especially if the GST return filing system changes. The new system is intended to ease the procedure, so make sure you adjust to it properly.
k.Seek Professional Assistance (if Required)
If you are unsure about any aspect of GST return filing, get guidance and support from a tax professional or chartered accountant who specializes in GST.
By following these steps and keeping accurate documents, your company will be able to successfully navigate the GST return filing process, stay in compliance with tax requirements, and avoid penalties or legal difficulties. To maintain continuing compliance, keep up to date on any changes in GST regulations and processes.
4. summary of the numerous GST return types
To report their transactions and comply with tax requirements, businesses in India must file various forms of GST reports under the Goods and Services Tax (GST) system. Each sort of return serves a distinct purpose and has its own set of requirements and due dates. Here’s a rundown of the many GST return types:
a.GSTR-1 (Return of Outward Supplies):
- Monthly (for firms with a turnover of more than Rs. 1.5 crores) or quarterly (for enterprises with a turnover of less than Rs. 1.5 crores).
- GSTR-1 is used to record details of the taxpayer’s outward supplies (sales). It contains details about invoices, debit/credit notes, and advance receipts.
b.GSTR-3B (Monthly Summary Return)
- Monthly for all registered taxpayers.
- GSTR-3B is a simplified form that offers a summary of tax liability and Input Tax Credit (ITC) claimed for a specific month. It is a self-declaration of taxes owed and ITC claimed.
c.GSTR-4 (Composition Scheme Return)
Quarterly is the frequency.
GSTR-4 is for firms registered under the Composition Scheme. It summarises the overall turnover and tax liability for the quarter. Composition system taxpayers are unable to claim ITC.
d.GSTR-5 (Return of Non-Resident Foreign Taxpayers):
The frequency is monthly.
GSTR-5 is used by non-resident foreign taxpayers who do business in India. It provides information about their supply and tax payments.
e.Input Service Distributor Return (GSTR-6):
The frequency is monthly.
Input Service Distributors (ISDs) file GSTR-6 to distribute ITC to their branches or units.
f.TDS Return (GSTR-7):
The frequency is monthly.
GSTR-7 is used by organizations that are obligated to deduct Tax Deducted at Source (TDS) under GST. It shows the amount of TDS deducted and paid to the government.
g.TCS Return (GSTR-8):
The frequency is monthly.
GSTR-8 is used by e-commerce companies who must collect Tax Collected at Source (TCS) on transactions done on their platforms. It contains information on the supplies purchased through the site as well as the TCS collected.
h.Annual Return (GSTR-9):
The frequency is once a year.
The purpose of GSTR-9 is to provide a consolidated view of all GST transactions for the whole fiscal year. It contains information from GSTR-1, GSTR-2A, GSTR-3B, and other returns.
i.GSTR-9A (Annual Composition Scheme Return):
The frequency is once a year.
GSTR-9A is the yearly return for taxpayers enrolled in the Composition Scheme. It summarises their yearly revenue and tax liability.
j.GSTR-9C (Reconciliation and Certification Statement):
The frequency is once a year.
The purpose of GSTR-9C is to be certified by a chartered accountant or cost accountant as a reconciliation statement. It reconciles the financial statements with the GST returns filed and ensures the accuracy of the annual return (GSTR-9).
k.Final Return (GSTR-10):
When a business quits its GST registration, a one-time refund is filed.
GSTR-10 is used to disclose the details of stock held on the day of cancellation as well as any liabilities that must be fulfilled.
L.GSTR-11 (UIN Inward Supplies):
The frequency is monthly.
The purpose of GSTR-11 is to disclose details of inward supply received from foreign embassies and international organizations.
To guarantee compliance with GST laws and regulations, businesses must understand the precise requirements, due dates, and frequencies connected with each GST return type. Furthermore, precise and timely GST return filing is critical in order to collect Input Tax Credit (ITC) and prevent penalties or legal complications.
5. Tips for filing correctly and on time
The timely and accurate submission of GST returns is critical for remaining in compliance with tax legislation and avoiding fines. Here are some pointers to help you file your GST returns correctly and on time:
a.Maintain Orderly Records:
Maintain a detailed account of all your sales, purchases, and expenses. Invoices, receipts, and financial paperwork are examples of this. Organized records make it easier to reconcile data and appropriately file returns.
b.Employ Accounting Software:
Invest in dependable, GST-compliant accounting software. Such software can automate computations, provide reports, and assist you in meeting your GST compliance obligations.
c.Make Reminders
Set reminders for GST return due dates using a calendar or digital tools. Late filing can result in penalties, thus it is critical to file on time.
d.Reconciliation on a regular basis
To identify anomalies, balance your books of accounts on a regular basis with the data contained in GSTR-2A and GSTR-2B. This ensures that you claim the appropriate Input Tax Credit (ITC).
e.Check Your Data Entry
To avoid errors, pay strict attention to data entry. Even minor errors in entering statistics can result in mistakes in your returns. Before submitting, double-check every info.
f.Seek Professional Advice
If you have any questions concerning GST return filing, contact a tax professional or chartered accountant who specializes in GST. They can offer advice and assure compliance.
g.Recognise HSN/SAC Codes
It is critical to classify commodities and services correctly using the Harmonised System of Nomenclature (HSN) or the Service Accounting Code (SAC). Using the incorrect code can result in inaccurate tax calculations.
h.Examine GSTR-1 and GSTR-3B. Carefully
Before filing, carefully verify your GSTR-1 (outward supplies) and GSTR-3B (monthly summary) forms to confirm that all details are correct and correspond to your records.
i.Make a legitimate Input Tax Credit (ITC) claim.
Make certain that you only claim ITC for qualified goods and expenses. Keep proper documentation to back up your ITC claims.
j.If applicable, file a Nil Return.
Consider filing nil returns even if you had no business transactions within a given time. This contributes to keeping a clean compliance record.
k.Keep Up to Date on Changes
GST laws and regulations are subject to change on a regular basis. Keep up to current with the most recent GST notices, revisions, and clarifications.
L. Make use of digital signatures.
If your company is obliged to use a digital signature when filing returns, make sure you have a valid DSC and understand how to use it safely.
m.Backup Your Data
Back up your financial data and GST return submissions on a regular basis. This ensures that you may access historical records in the event of an audit or a dispute.
n.Promptly review and correct errors
If you discover errors or anomalies in your filed returns, respond quickly to correct them by filing the proper amendment forms.
o.Make plans for peak load periods.
The GST portal may encounter excessive usage during peak load periods, such as the last few days before the return due date. To avoid technical issues and delays, plan to file your returns well in advance.
p.Educate Your Group
If you have a team in charge of GST compliance, make sure they are up to date on the filing process and deadlines. Regular training and updates are required.
q.Keep Communication Records
Keep track of all correspondence with the GST department, including acknowledgments, receipts, and letters.
By following these guidelines, you can improve the accuracy and timeliness of your GST return filing, reduce the risk of errors, and ensure that your company remains in compliance with GST laws and regulations.
6. How can entrepreneurs make the billing process considerably easier?
Razorpay Invoices, a clever tool that helps you generate GST-compliant invoices in minutes, is the answer.
This product can be used in three simple steps:
Make the invoice: The simple platform allows you to easily produce multiple invoices. Simply input the specifics of the goods or services provided, as well as the value and GST applicable. When you click the Create Invoice button, the platform will generate a ready-to-use invoice.
Notify your customer: Once you’ve prepared the GST-compliant invoice, you can send the invoice’s unique URL to your clients by SMS or email.
Receive your payments: Your consumers can then create a transaction to make the payment right away.
7. Who Is Eligible to File a GST Return?
Regular businesses with a combined annual revenue of more than 5 crore
Taxpayers who did not opt for the QRMP scheme must file two monthly returns and one annual return under the GST system.
QRMP filers are required to submit nine GSTR files per year, including four GSTR-1 and three GSTR-3B forms, as well as an annual return. It should be emphasized that even if QRMP registrants file quarterly reports, they must pay tax on a monthly basis.
In other cases, separate statements and returns must be filed, such as with composition dealers, who must submit five GSTR files annually (4 statement-cum-challans in CMP-08 and 1 annual return GSTR-4).
8. conclusion
Finally, with a clear grasp of the essential principles, guidelines, and instruments available, the process of GST return filing for startups can be demystified and simplified. As we have shown in this comprehensive guide, startups must understand the importance of GST compliance because it not only ensures legality but also encourages a favorable business environment. In this final section, we will summarise the important insights and emphasize the key advantages of mastering GST return filing for startups.
Furthermore, the advantages of GST compliance go beyond legalities. Efficient GST management can result in significant cost savings by utilizing Input Tax Credits and avoiding fines. It also makes it easier to obtain finance and financial assistance, as compliance enterprises are often seen favorably by banks and investors. Explore gstman.com for more information
Reference links :
1. FILING A GST RETURN
https://edgelegal.in/gst-return-filing/
2. Filing of GST Returns
