On July 1st, 2017, India moved to an indirect tax regime that was designed to convert the entire nation into a single market. This new tax regime has replaced multiple taxes levied by the Central and State Governments. GST compliance is essential for businesses of all sizes to ensure they are meeting their tax obligations and avoiding penalties.
Read on to learn more about GST compliance for businesses.
Understanding GST Compliance
The Goods and Services Tax (GST) is an indirect tax that has replaced many indirect taxes in India, such as VAT, excise duty, services tax, and more. It is levied on the supply of goods and services.
GST is a single domestic indirect tax law for the entire country. It has transformed the tax system, but its complexity can be overwhelming for firms. To ensure your business is GST compliant you need to ensure timely return submission, precise record-keeping, and knowledge of various GST rates and exclusions.
GST Compliance Checklist for Businesses
Here are the basics that you need to understand to make sure your business is GST-compliant:
What Is the Eligibility Criteria for GST Registration?
Annual Income
Registration under GST is mandatory for businesses involved in the supply of goods whose annual turnover is more than Rs 40 lakh in a financial year. This threshold is Rs 20 lakhs for special category states.
It is also mandatory for any business involved in the supply of services and has an annual turnover that exceeds Rs. 20 lakhs. For special category states, the limit is Rs. 10 lakhs.
The special category states are:
- Arunachal Pradesh
- Assam
- Meghalaya
- Manipur
- Mizoram
- Nagaland
- Sikkim
- Tripura
- Himachal Pradesh
- Uttarakhand
GST Registration Is Also Mandatory For:
- Any business that supplies goods from one to another needs to register for GST, irrespective of their annual turnover.
- A casual taxable person ( someone who occasionally supplies goods and/or services in a territory where GST is applicable but does not have a fixed place of business.
- Agents of a supplier
- Those paying tax under the reverse charge mechanism
- Anyone who is registered under an earlier law (i.e., Excise, VAT, Service Tax, etc.)
- Non-resident taxable persons (NRIs who occasionally supply goods/services in a territory where GST applies but do not have a fixed place of business in India)
- E-commerce operators who offer a platform for suppliers to make supplies through it.
- Suppliers who supply goods through an E-commerce operator
- A person who supplies online information and database access or retrieval (OIDAR) services from a place outside India to a person in India
When a registered business has been transferred to someone/demerged, the transferee shall take registration with effect from the date of transfer.
How to Get GST Registration?
You can register online through the GST portal. Once you’ve registered for GST, you will be given a provisional certificate of registration in Form GST REG-25.
Even if you have multiple registrations on the basis of a single PAN under the existing taxation law, you’ll be given one provisional registration under GST.
If you have operations in multiple states, you will need to get separate registrations for the states where you will be providing services.
Within 3 months, you need to submit Form GST REG-24 and documents as prescribed in the GST portal. If the information uploaded is complete, the final registration certificate will be issued to you in Form GST REG-06.
What Documents Are Required for GST Registration?
- PAN of the applicant
- Aadhaar card
- Proof of business registration or Incorporation certificate
- Identity and address proof of Director/promoter with photos
- Address proof of the place of business
- Cancelled cheque/bank account statement
- Digital Signature
- Letter of Authorization/Board Resolution for Authorized Signatory
What is the HSN/SAC Code?
Once you’ve registered for GST, you need to know your HSN/SAC code.
HSN and SAC codes play an important role in classifying goods and services, respectively.
HSN Code
The Harmonized System Nomenclature (HSN) code is an international standardized system for classifying goods. It is a six-digit code that is used globally to identify and classify goods for customs and trade purposes. India adopted the HSN code system in 2017, aligning its classification structure with the international standard.
SAC Code
The Service Accounting Code (SAC) is an 8-digit code used to classify services under the GST regime in India. It is an extension of the HSN code system, specifically designed to categorize services.
Why Do You Need HSN/SAC Codes?
These codes are essential to receiving and giving GST-compliant invoices. They were introduced to ensure efficient tax administration, trade facilitation, taxpayer compliance, data analysis, and international harmonization.
Based on the HSN and SAC codes, GST rates are divided into four slabs: 5% GST, 12% GST, 18% GST, and 28% GST.
The Next Steps
GST-Compliant Invoices: After the registration is complete, you need to provide a Goods and Services Tax Identification Number (GSTIN) to your vendors and track it for your customers. Make sure both your purchase and sale invoices have GSTIN.
Filing GST Returns on Time: This is very important for GST compliance. You can file them online. You’ll have to file them even when there is no business activity for the specified return period.
GST Return Forms
| Form | Purpose |
| FORM GSTR-1 | Furnishing details of outward supplies |
| FORM GSTR-1A | Details Of Auto Drafted Supplies |
| FORM GSTR-2 | Details of inward supplies |
| FORM GSTR-2A | Details Of Supplies (Auto Drafted) |
| FORM GSTR-2B | Details of Input Tax Credit (Auto Drafted) |
| FORM GSTR-3 | GST Monthly Return |
| FORM GSTR – 3A | Notice for Not Filing Return (Default u/s 46) |
| FORM GSTR-3B | Monthly Return to claim ITC and pay Tax Liability |
| FORM GSTR-4 | GST Quarterly Return For Registered Person Opting For Composition Levy |
| FORM GSTR-4A | Auto-Drafted Details For Registered Persons Opting For Composition Levy |
| FORM GSTR-5 | Return by a non-resident |
| FORM GSTR-5A | Details Of Supplies Of Online Information And Database Access Or Retrieval Services By A Person Located Outside India Made To Non-Taxable Persons In India |
| FORM GSTR-6 | Return by Input Service Distributor |
| FORM GSTR-6A | Details Of Supplies of ISD ( Auto-Drafted) |
| FORM GSTR-7 | Return by a Tax Deducted at Source |
| Form GSTR 7A | Tax Deduction At Source Certificate |
| FORM GSTR-8 | Return by an E-commerce operator/Tax collector |
| FORM GSTR – 9 | Annual Return |
| FORM GSTR – 9A | Annual Return (Composition Taxpayer) |
| FORM GSTR – 9C | Statement of audited annual accounts and a reconciliation |
| FORM GSTR-10 | Final Return |
| FORM GSTR -11 | Statement Of Inward Supplies By Persons Having Unique Identification Number (UIN) |
Navigating the complexities of the goods and services tax system can be a daunting task for businesses of all sizes. However, GST compliance is crucial to ensure seamless operations, maintain a positive reputation with tax authorities, and avoid legal consequences. By implementing effective GST compliance practices, you can confidently navigate the GST landscape and reap its benefits.
