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GST Compliance Checklist for Businesses

Small business owners often find it challenging to stay on top of their GST compliance. With constantly changing rules and regulations, staying updated about what you are required to do is hard. However, failing to comply with GST might result in hefty penalties and fines. That is why having a solid understanding of what SME owners must do is essential. In the following sections, we will give you a GST compliance checklist, helping you ensure that your company meets all its GST obligations.

GST Registration

GST registration is the first step in staying GST compliant. If your business’s annual turnover exceeds a specified limit, you must register for GST. You can apply for GST registration and make GST payments using the official GST portal online.

If you sell products or services online, you require GST registration regardless of your turnover. That is because these are e-commerce marketplaces that must collect and remit taxes on behalf of the sellers.

Understanding GST Liabilities

After registering for GST, you must understand your GST liabilities. It largely depends on the type of products or services you supply and the applicable GST rate to them. The latest Goods & Service Tax rate list is accessible on the GST portal.

Different products and services have different GST rates applicable to them. For instance, the GST rate is lower for essential goods like medicines, education, food, etc., while luxury goods like alcohol and cigarettes have a higher GST rate.

Issuance of GST Invoices

Once you become a registered business, you must issue a GST invoice to your clients and customers for all transactions of taxable products or services. You must follow a standard format for GST bills, including the date of issue, GST registration number, customer’s details, GST rate and amount, and description of the product or service being sold. Ensure that each invoice is accurate and complies with GST regulations. Any discrepancies or errors in the invoice result in penalties and fines. 

GST Return Filing

Filing returns for the Goods & Service Tax is mandatory for compliance. Registered businesses must file their GST returns monthly, quarterly, or annually, depending on their turnover. You can use the official GST portal to file your returns online. Ensure filing them on time to avoid any penalties or late fees. Failure to file them on time may also result in the cancellation of the GST registration.

Input Tax Credit Claims

Registered businesses can claim input tax credits on their GST payments for purchases they make for business purposes. It eventually helps them reduce their overall GST payment amount. To claim an ITC, ensure that your suppliers have also filed their GST returns and that the GST payments are included in your GST returns. Maintaining an accurate record of each GST transaction ensures positive results when claiming input tax credit. 

HSN and SAC Codes

Choose an appropriate Harmonised System of Nomenclature (HSN) and Service Accounting Code (SAC) according to the goods or services you supply. Refer to the latest GST regulations for correct classification. Include HSC and SAC codes in all your returns and invoices, as they are crucial for determining your tax liabilities and claiming input tax credits.

Maintenance of Accurate Records

Maintaining accurate records of all GST transactions, including GST returns, receipts, and invoices, is essential. Doing that ensures filing accurate returns while complying with GST regulations. Maintaining digital records is a good idea, making the return filing process easier and more accurate. Keep physical copies of all receipts, invoices, and documents, too, as you might need them during an audit.

Reverse Charge Mechanism (RCM)

If you receive products or services from unregistered suppliers, determine if you are liable to make GST payment under the Reverse Charge Mechanism. Maintain proper records of all RCM transactions, including payment and invoice details. 

E-way Bill Compliance

If you supply goods worth more than Rs 50,000, generate e-way bills for their movement to comply with the e-way bill-related rules. Verify their validity and update them regularly according to the set guidelines.

GST compliance is essential for every business operating in India. It helps avoid legal complications, penalties, and operational disruptions. Following this GST compliance checklist ensures smooth adherence to the latest Goods & Service Tax guidelines. Regularly reviewing and updating your processes helps you stay compliant with the GST regulations, fostering an efficient and transparent tax ecosystem in the country.

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