Knowledge Base

Filing GST Returns

Introduction to GST

Introduced in India after much debate in July 2017, GST is a unified tax system that subsumes central excise, customs duty, service tax, value added tax (VAT), central sales tax (CST), and other such taxes imposed by the state governments and the government of India. In essence, the whole objective of GST is to simplify the tax payment procedure. Adapted by many countries worldwide, GST reduces computations, record keeping and generally eases trade. This is especially useful for countries like India, which is quite complex in its own way. India has currently adopted dual GST, What this means is that both the central government of India and the individual states charge GST. This benefits both the centre and the states and compensates for the loss of state revenue. Not everything in India is taxed under GST. Food, some raw material and other miscellaneous items are not currently under the purview of GST. The Goods and Services Tax (GST) will be levied at multiple rates ranging from 0 per cent to 28 per cent. GST Council finalised a four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess. GST was mulled for a long time in India, and was finally implemented after a lot of deliberation and changes. GST is expected to make business easier, ease tax compliances, reduce cascading effect of tax-on-tax, reduce tax evasion cases, and overall help in increasing the GDP of India. As GST is filled electronically, it is technology driven and accelerates filing of returns.  

Who needs to Pay GST?
Any entity, whether corporate or individual that supplies goods or services is liable to pay GST. However, the government of India has made certain exemptions based on turnover. As per the current GST provisions, any person or entity that has a turnover of less than Rs. 20 lakh (Rs. 10 lakh in some north eastern states) are not liable to pay GST. There are some exceptions to this. It is best to consult your GST consultant to understand whether you are liable to pay GST or not.

That said, here are some basic norms for those liable to pay GST:

  • The basic GST exemption is not applicable if you make any interstate sale
  • Those liable to pay tax under reverse charge may need to pay GST
  • Casual registrants are liable to pay GST
  • Electronic commerce operators are liable pay GST, as do those who supply digital services from a place outside India to a person in India
  • Non-resident taxable persons

This list is not comprehensive, so seek the advice of your tax or GST consultant to determine your GST status.

GST Registration
If you are liable to pay GST, you need to register your business with the Goods and Service Tax Council of India at their official portal. The entire process of registration is digital, so you need not expend time visiting any government office. Once you register at the GST portal, you get a unique registration number. This is a 15 digit PAN based identification number called as GSTIN – short for Goods and Services Taxpayer Identification Number. This number is essential as it entitles you to collect tax on behalf of the government and to avail input tax credit for any inward supplies or services. Without proper GST registration, an entity can neither collect tax from its customers nor claim any Input Tax Credit of tax paid by them. There is a minimal amount of documentation involved. If you want, you can ask your GST consultant to get it done for you.

Advantages of registration to a taxpayer:
In a nutshell, here are the advantages for registering as a GST payer:

  • The business entity is legally recognized as suppliers of goods or services
  • Tax paid on the input goods or services can be utilized for payment of GST. In other words, registered persons can avail of input tax credit
  • The entity is legally authorized to collect tax from its purchasers
  • Eligible to avail various other benefits and privileges rendered under the GST laws
  • GST registration allows the seamless flow of input tax credit from suppliers to recipients at the national level
  • Increases the credibility of the business entity

Filing GST Returns
A return is nothing but a statement of specified particulars relating to business activity undertaken by the taxable person during a prescribed period. Since a person with GSTIN is legally required to collect tax on behalf of the government, it is the duty of that entity to file GST returns to declare correct tax liability, furnish details about the taxes paid in accordance with that return, and file complete return in the stipulated time frame. Proper filing of GST returns is mandatory as GST is a self -assessed destination based taxation system. The submission and processing of return is an important link between the taxpayer and tax administration. For properly updating the invoices, Indian taxpayers and businesses have to file GST returns with the Government. Any non-compliance towards the same may lead to disallowance of input tax credit, apart from attracting penalties and interests, etc. Proper filing of information and passing the same in the returns is a mandatory process for smooth flow of credit to the last recipient. The returns have been designed so that all transactions are in sync with each other and that no transaction is left unattended between the buyer and the seller. All the data is stored in GSTN, which can be accessed by the users/taxpayers anytime online.

There are various types of GST returns:
GSTR-1: Sales register
GSTR–2: Purchase register
GSTR-3: Monthly return
GSTR-4: Quarterly return
GSTR-5: NRI return
GSTR-6: Return for input service distributor
GSTR-7: TDS Return
GSTR-8: Annual Return

Again, it is best to contact a competent GST consultant to know which kind of return you need to file.

GST Refunds and Cancellation
There are several reasons an entity may need to cancel their GST registration. A few of them include:

  • The person in whose name the GST has been registered has deceased
  • If the business entity has closed down
  • There is a change in PAN
  • If the ownership of the entity was transferred to someone elseIf the person is not liable for GST registration due to income being less than the threshold turnover
  • Change in constitution of business
  • Any other valid reason

There are also instances where an entity has paid extra GST. You may have paid an extra tax amount accidentally, or a GST refund may be due you arising from a court order, or for any other reason. You get 2 years to claim an excess tax; after 2 years your claim lapses. Once the government accepts that you are eligible for a GST refund, the money is credited your bank account in about 60 days.

GST Consultant
Whether GST is better than the earlier tax system or not is a moot question. However, it is to stay here in India. The GST Council has made several rules to ensure that the system is transparent and easy to use. Still, it is not an easy task registering for GST, choosing your return category or filing a return. If you are a small or medium scale enterprise especially, GST compliances are not exactly easy. This is why you need a competent GST consultant. It does not matter whether you are based out of Pune, Ahmedabad Mumbai, or any other place in India, a GST consultant should be your most safe bet to ensure that you fulfill GST compliances without any hitch.