GST Compliance Guide for New and Growing Businesses in India

Goods and Service Tax (GST) is one of the most critical indirect tax compliances that businesses need to undertake in India. Whether it is GST registration, issuance of tax invoice, filling of returns, input tax credit reconciliation or record keeping, there are certain GST compliances which businesses have to undertake regularly.

Starting off with a new business, having knowledge about GST compliance from the very start will definitely save the businesses from incurring unnecessary interest, penalties and compliances. While growing as a business, it becomes even more essential to have proper GST compliance mechanisms.

This document covers GST compliances which new and growing businesses have to adhere to in India.

What is GST Compliance?

GST compliance refers to fulfilling the various requirements prescribed under the Goods and Services Tax laws.

Depending on the nature and size of the business, GST compliance may include:

GST registration
Issuing tax invoices
Charging the correct GST rate
Filing GST returns
Payment of GST
Claiming eligible Input Tax Credit (ITC)
Reconciling purchase records with GST data
E-invoicing, where applicable
E-way bill compliance
Maintaining GST records
Responding to GST notices
Filing amendments and cancellation applications, where required

The exact requirements depend on factors such as turnover, nature of business, type of supplies and the applicable GST provisions.

Who Needs GST Registration?

GST registration requirements depend on the nature of supplies, turnover and other conditions prescribed under GST law.

Businesses may need registration when they cross the applicable aggregate turnover threshold. Certain categories of persons may also require registration under specific provisions irrespective of the normal turnover threshold.

Businesses should therefore not determine their GST liability solely by looking at turnover. The nature and location of supplies and other statutory conditions should also be examined.

Examples of businesses that may require GST registration include:

Traders
Manufacturers
Service providers
E-commerce businesses
Consultants
Contractors
Online sellers
Importers and exporters
Businesses making inter-State supplies
Businesses covered under specific compulsory registration provisions

GST Registration for New Businesses

For a new business, GST registration should be evaluated at the time of starting operations.

The registration process is generally completed online through the GST portal.

Basic GST Registration Process

Step 1: Determine GST Applicability

First determine whether GST registration is mandatory or whether voluntary registration may be beneficial.

Step 2: Collect Documents

Common documents include:

PAN of business/proprietor
Aadhaar/identity proof
Photograph
Address proof
Proof of business premises
Bank account details
Constitution documents
Details of authorised signatory
Digital Signature, where applicable

Step 3: Submit Application

The application is filed electronically on the GST portal.

Step 4: Verification

The GST authorities may verify the information and documents submitted.

Step 5: GSTIN

Once approved, the taxpayer receives a GST Identification Number (GSTIN).

After receiving GST registration, the business should ensure that its invoices, accounting system and internal records are configured correctly.

Important GST Compliances

Once a business is registered under GST, several ongoing compliances may become applicable.

A. GST Return Filing

Registered taxpayers generally need to file applicable GST returns within the prescribed timelines.

B. Tax Payment

GST collected from customers must be properly reported and paid after considering eligible Input Tax Credit.

C. Input Tax Credit

Businesses should claim only eligible ITC and maintain supporting documentation.

D. Invoice Compliance

Tax invoices should contain the particulars prescribed under GST law.

E. Reconciliation

Sales, purchase and GST records should be reconciled regularly.

F. E-Invoicing

Businesses covered by the applicable e-invoicing provisions need to generate e-invoices through the prescribed system.

G. E-Way Bills

Where applicable, e-way bills need to be generated for the movement of goods.

GST Invoicing Requirements

A proper tax invoice is an important part of GST compliance.

Depending upon the nature of the transaction, an invoice generally contains details such as:

Invoice number
Invoice date
Supplier’s name and GSTIN
Recipient’s name and GSTIN, where applicable
Address
Description of goods/services
HSN/SAC
Quantity, where applicable
Taxable value
GST rate
CGST/SGST/IGST amount, as applicable
Total invoice value

Businesses should ensure that invoices are issued within the prescribed time limits applicable to their type of supply.

Incorrect invoices can affect both the supplier’s reporting and the recipient’s Input Tax Credit.

GST Return Filing

GST return filing is one of the most important recurring compliances.

Depending upon the taxpayer and applicable scheme, returns/forms may include:

GSTR-1

GSTR-1 contains details of outward supplies and is used for reporting sales-related information.

GSTR-3B

GSTR-3B is a summary return through which taxpayers report taxable supplies, tax liability and eligible ITC and discharge their tax liability.

GSTR-9

GSTR-9 is an annual return that applies to taxpayers covered under the relevant provisions and exemptions.

There could be other forms of GST returns and statements that need to be filed based on the business model and registration of the taxpayer.

The timing could be different and, hence, businesses have to prepare a GST filing calendar rather than having a single date of filing each year.

Input Tax Credit Reconciliation

Input Tax Credit (ITC) allows taxpayers who qualify for ITC to claim tax credits against the GST that is payable on their taxable acquisitions and thereby reduce their GST liabilities, if any, resulting from their business sales.

It becomes even more critical for growing businesses as the growth of the business results in an increased number of purchase invoices.

It should comprise of:

Books of Accounts → Purchase Register → GST Records → Supplier Reporting

Businesses should identify:

Missing invoices
Incorrect GSTIN
Incorrect invoice numbers
Differences in taxable value
Differences in GST amount
Credit notes/debit notes
Invoices not reflected in the relevant GST data
Ineligible ITC

A proper reconciliation process can help reduce the risk of incorrect ITC claims and future tax disputes.

E-Invoicing and E-Way Bill Compliance

E-Invoicing

E-invoicing is applicable to taxpayers who exceed the specified turnover threshold and belong to the notified category.

In the process of e-invoicing, the relevant invoices are uploaded on the Invoice Registration Portal (IRP) that issues the Invoice Reference Number (IRN) along with the QR code.

There are possibilities of changing the threshold and other conditions by means of government notifications.

E-Way Bill

E-way bill is mandatory for goods that are transported after crossing the threshold limit of value of the consignment as per the relevant laws and exceptions.

Businesses should ensure that:

Correct GSTIN is entered
Invoice details are accurate
Vehicle details are updated where required
E-way bill validity is monitored
Changes are updated where permitted

GST Records and Documentation

Businesses should maintain appropriate GST-related records and supporting documents.

These may include:

Sales invoices
Purchase invoices
Debit notes
Credit notes
GST returns
E-invoices
E-way bills
Payment records
ITC reconciliation statements
GST challans
Import/export documents
Agreements and supporting documents

A growing business should ideally maintain a systematic accounting and document-management process instead of handling GST compliance only at the time of return filing.

Frequently Asked Questions (FAQs)

1. Is GST Registration compulsory for all businesses?

No. GST registration depends on the applicable turnover thresholds and the nature of the supplies.

2. What is GSTIN?

GSTIN stands for Goods and Services Tax Identification Number. It is the identification number allotted to a registered taxpayer.

3. What are the basic GST returns?

The common GST returns are GSTR-1 and GSTR-3B. There could be other returns/statements as per the taxpayer and the provisions.

4. What is Input Tax Credit?

It is the credit of GST paid on business inputs which is eligible to be utilized against the output GST liability as per the prescribed provisions under GST Law.

5. What is GST Reconciliation?

GST Reconciliation will help identify the discrepancies between book figures, invoices and GST details and thus avoid errors in GST filing and claiming ITC.

6. Is the filing of e-invoice compulsory for all GST taxpayers?

No. E-invoicing applies to taxpayers who fall within the applicable turnover threshold.

7. What is the penalty for the late filing of GST returns?

There could be penalty and interest as applicable to the nature of the return and the tax liability.

8. Can a newly incorporated business file GST voluntarily?

Yes.

Conclusion

Compliance with GST does not only include the submission of GST returns. In case of a new or growing company, compliance with GST involves passing through the steps of registration, issuing invoices, paying taxes, Input Tax Credit, reconciliations, e-invoicing, e-way bills, and maintaining records.

It is advisable that the company establishes its GST regime at the outset rather than waiting until it receives notices of non-compliance of the regulations. The process of reconciliations and GST return filings will aid in identifying any discrepancies.