Goods and Services Tax (GST) is indirect taxation in India merging most of the existing taxes into a single system of taxation. GST is undoubted, one of the biggest fiscal reforms in India since Independence impacting each and every business whether small or large. With the introduction of GST, a new regime of business compliance is introduced.
Large enterprises will not face any problems in compliance with the rules and regulations of the GST Act, since they have the required resources and expertise that can facilitate compliance management. On the other hand, small businesses will find it difficult in complying with these provisions. So I am here to discuss some common points to be considered once the GST registration is done.
Here are some of the list of Do’s and Don’t:
A. Don’t under GST:
- Forget to File Your Nil Return: – This is a very important aspect that taxpayers sometimes tend to ignore. If a business does not have transactions for any particular period, a user should not forget to file a NIL return for that period. Forgetting to file GST nil return may hamper the flow of your subsequent return filing.
- Forget To Pay Tax On Goods Sent On Job-work: – If you are a principal manufacturer then you are liable to pay tax with interest if the goods sent for job work are not handed back within the prescribed time period.
- Paying GST under the wrong head:- Taxpayers sometimes make the mistake of paying tax under the wrong GST head, or paying interest under the tax head, and so on. Payments under the wrong tax heads would hence lead to an unfavorable working capital.
- Categorizing Nil Rated Supplies as Zero-rated Supplies (Vice-versa):- This is a common error made by users who categorize zero-rated supplies as nil-rated and vice versa. Zero-rated supplies are export supplies and supplies made to an SEZ, whereas nil-rated supplies are supplies on which the rate of tax is 0%.
- Neglecting provision related to Revere’s charge:- Taxpayer may sometimes make unnecessary GST payment by not recognizing the reverse charge transaction. They need to identify if reverse-charge needs to be paid by the recipient, and not charge GST when issuing the invoice. This can save the double payment of tax, and the unnecessary hardship of depositing the tax when the liability instead lies with the recipient.
- Wrong Tax Rates:- All businesses need to stay updated with these rate changes and pay GST at the rates in force. the government keeps issuing new notifications regarding it. Further, at the time of issuing an invoice, you should also make sure that the tax rate charged is correct to claim the correct ITC.
- Claiming Ineligible ITC – You should never try to claim ITC which is ineligible to be claimed as you may get a notice from the GST authorities. Some of the common cases where ITC cannot be claimed are:
- Car Purchase & Repairs and Maintenance
- Restaurant Bills
- Rent-a-cab, life insurance, health insurance
- Goods/ services used for personal purposes etc.
- Not paying the supplier within 180 days
- Using Input goods partly for the personal purpose
- Distribution of free sample
- Capital goods being sold
- Goods destroyed
- Other goods or services as may be prescribed.
B. Do’s under GST:
o Maintaining Proper Documentation:- Maintaining proper documents is a healthy practice even if your business does not fall under the GST audit criteria. Some of the important document that should be maintained is the sales register, purchase register, payment challans, e-way bills, etc.
o GST Number Board:- Display the number on the board and certificate of registration at a prominent location at the business premises.
o Use GST Number: – While Purchasing or Incurred Expenditure give your GST Number to every vendor, so that vendor will update your GST Number in his record.
o Filing GST Returns in Time: – To avoid notices from the government you should file your GST Returns in time. Moreover, late filing of your GST Return may also attract interest and penalties as may be prescribed.
o Serial Number of Invoices:- Start invoices Serial Number from first after registration and change Numbering after the end of Financial Year every Year.
o Upload Accurate Data In GSTR-1:- There are a lot of fields to be filled in while filing the GSTR-1 return. The GSTN does not allow for the amendment of a return once it is filed.
o E-Way Bill:- E Way Bill is an Electronic Waybill for the movement of goods to be generated on the e-Way Bill Portal. A GST registered person cannot transport goods in a vehicle whose value exceeds Rs. 50,000 for Interstate transfer and Rs.1,00,000 for within-state Transfer of Goods.
o Reconciliation:- Every business should carry out the practice of reconciling their e-way bills issued with that of invoice details under GSTR 1 as well as with other returns and books of accounts. Reconciliation between GST Returns not only helps in filing error-free Annual GST Return but also assist in doing GST audit.
o Reverse-Charge Mechanism:- You must stay updated about all the new notifications issued by the government regarding the reverse charge mechanism. Also, you must note that in case of reverse charge payments you can claim ITC.
o Informing GST Authorities regarding a change in business:- If there is any change in the details of business filled out during registration must be communicated to GST authorities. Moreover, you need to inform the GST Authorities 15 days prior to such a change in the business. However, you need to submit an application for such change on the GST Portal along with all the prescribed documents.
o GST Audit:- When your business turnover exceeds the 2 crores INR mark you should get your books of accounts audited by a CA or CMA. In addition to this, you need to submit audited GST Return together with audited reconciliation statements.
If you follow the above list of do’s and don’ts under GST then you can remain GST compliant and avoid notices from the GST authorities.
For any more information related to compliance, please feel free to contact us at SGR Consultancy OR you can also follow us on Facebook Page
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