How to make your business GST- compliant

18th May 2017
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Perhaps the most important aspect of the Goods and Services Tax is being compliant. Not being compliant can be a heavy cost for a business. It is time to embrace technology for this to happen seamlessly.

The countdown to GST implementation has already begun. Once GST registration has been secured, the next big worry is compliance with GST law and rules. The GST has rules laid down for the way we maintain records, how we raise invoices and how we report our purchases and sales, and ultimately, the way we pay our taxes and file returns.

Raising invoices under GST

Those who are registered under GST have to issue a GST-compliant invoice. GST draft rules specify the fields that are required to be provided at the time of issuing an invoice. There are about 16 fields that must be included; suppliers are free to choose a format of the invoice and affix their logo, so long as it includes the relevant fields.

There has been a lot of confusion about how the GST requires invoices to be ‘uploaded’. However, no pdfs or jpegs are required to be uploaded. The supplier must provide details of the invoice issued by him on the GSTN portal. The serial number of invoices issued should be done electronically through the common portal.

Once an invoice is raised on the GST portal, information is captured about the buyer and seller. With this information, GSTN auto-populates purchases made by a registrant. Providing details of invoices issued is the first critical step towards GST compliance. It links with purchases in the buyer’s profile and allows him to claim benefit of taxes paid on purchases against his total tax outgo.

Return filing under GST

Filing timely returns will be an important aspect of GST compliance. Returns need to be filed even when there is no business activity for the specified return period (nil return), and all returns must be filed online. Once filed, the details cannot be revised, but changes can be made in subsequent filings.

On the 10th of every month, a supplier provides details of all supplies made by her in the previous month in return form GSTR-1. By the 15th, details of purchases have to be provided in GSTR-2. After submission of GSTR-1, GSTR-2 is auto-populated. Sales made by someone are recorded as purchases by someone else. Some mismatches may arise in these returns due to goods in transit or goods damaged or returned. Correction for these can be made online and must be accepted by both parties. GSTR-2 is an important return; based on it, credit for taxes paid on inputs is allowed. By the 20th of the month, GSTR-3 is prepared based on the information in the previous two returns. This return is nothing but a summary of purchases and sales and the tax liability that must be paid.

The table below details the returns forms to be filled and their specific function:

Return FormDue Date Reason for Filing
GSTR 110th of the next monthShow details of outward supplies made by business
GSTR-1AShow details of outward supplies corrected or deleted by the recipient
GSTR 215th of the next monthShow details of inward supplies received by business
GSTR-2AReconciliation of inward supplies received by business based on FORM GSTR-1 furnished by the supplier
GSTR 320th of the next monthMonthly return (other than compounding taxpayer and ISD)
GSTR-3ANotice to a registered taxpayer who fails to furnish returns
GSTR 418th of the month next to quarterQuarterly return for Compounding Taxpayer
GSTR-4AReconciliation of inward supplies made available to a business under composition scheme based on FORM GSTR-1 furnished by the supplier
GSTR 5Last day of registrationReturns for Non-Resident Foreign Taxpayer
GSTR 615th of the next monthReturn for Input Service Distributor (ISD)
GSTR-6AReconciliation of inward supplies received by ISD based on FORM GSTR-1 furnished by the supplier
GSTR 710th of the next monthReturn for Tax Deducted at Source
GSTR-7ATDS Certificate
GSTR 8—-Statement for E-Commerce Operators
GSTR 9By 31st December of next FYGST Annual Return
GSTR 9AAnnual return for Compounding taxable persons
GSTR 10GST Final Return
GSTR 11GST Inward Supplies Statement for UIN
ITC-1AGST ITC Mismatch Report

Thus, we see that, for a normal business, three month returns and one annual return are mandatory (GSTR-1, GSTR-2, GSTR-3, and GSTR-9). This totals up to 37 returns in a single year. The number increases if you operate in more than one state, as you will have to repeat this same process for all states your business is registered in. Supposing you operate and are registered in 10 states, you will have to file at least 370 returns. This magnitude of return submission is unthinkable without a strong technology support. Even if your systems are prone to making five percent invoice errors every month, it translates to a very large number of errors in reconciliation and management, which cannot be achieved without the right backend.

Recurrent return filing may not seem complex, but it is surely going to be tedious. Since many small and medium businesses have so far maintained books of records and filed manual returns, the change to a digital system poses a challenge.

Vendor ratings

Compliance is critical for success in the GST. To keep this under check, the government has put in place a ratings mechanism that would be based on criteria like timely returns, timely payment of tax, and fewer reconciliations made. These would be irrespective of the size or nature of the business, and will be available publicly. This means that before someone does business with you, they are likely to review how you fare on these ratings and take decisions accordingly. This places a lot of importance on GST compliance.

Compliance software – Your best bet

As you see in the table above, the number of returns a business must file and the timelines for doing so are strict. It is impossible to do all of this without making errors. Hence, it is pertinent that businesses small and large use a compliance software that can ease the return filing process for them. Compliance software can also help with reconciliation and alert you to possible mismatches, which can then be rectified immediately. Since we already know how important reconciliation is to allow the claim of taxes on purchases, it would be wise for businesses that do not have the manpower or resources to use a software that can make return filing just another day at the office!

(Archit Gupta is the Founder and CEO of ClearTax)

In the run-up to one of the biggest tax reforms in the country, the market is abuzz with new rules and guidelines about the Goods and Services Tax (GST). How will GST really impact your business? How will your financial reporting change? Find out the answers to all this and more, directly from industry and tax experts who will share their expertise on YourStory’s new series ‘IndiaonGST’.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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Authors
Archit Gupta
Archit Gupta is the Founder and CEO of ClearTax (www.cleartax.com). ClearTax is India's largest Tax and GST platform used by Millions of Individuals, CAs and Businesses. Archit is a Computer Science graduate from IIT Guwahati & Univ. of Wisconsin Madison.

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