The most awaited and new tax system in India came into existence on 1st July 2017. After this, most of the businesses were able to continue smoothly as they adopted GST Compliance.
But there are many businesses still that are not very sure about various compliances which can lead to heavy fines and penalties.
Rules are laid down by the committee for the way we maintain our records, how we raise invoices and how we report our purchases and sales, and ultimately, the way we pay our taxes and file returns.
You are GST compliant If your business is adhering to all these above regulations.
So here, we have come up with complete details about how to make your business GST compliant and let your company run towards success.
The various steps that let your business fall under compliance are as follows:
1. Figure out if you are liable to compulsorily register under the GST
As per the registration guidelines, you need to register if your annual turnover is exceeding 10 lakhs in special category states and 40 lakhs in other states.
It is mandatory to get the registration done if you fall under the below suppliers’ categories:
- Casual taxable persons
- Interstate suppliers
- Persons that are taxable under the reverse charge basis.
- If required to deduct TDS or TCS
- Distributors under input service
- Taxable non-resident people.
- Principal or agent who is making sales on behalf of some other person.
- People who are involved in supplying goods via e-commerce operators are further liable for tax collection at the source.
- All the e-commerce operators provide a place where the suppliers can deal with any supplies.
- The service providers online provide service from outside the country to people in India who are not registered.
Once you get clarity on whether you should get registered or not under GST, you can proceed further.
If you are liable to register, you will have to start the registration based on the taxation laws.
You need to follow the below-mentioned steps:
- You need to access the portal and get yourself enrolled by validating the mobile number and e-mail id. The portal is highly user-friendly, and you will be able to get registered easily.
- Once the enrolment is done, a provisional registration certificate will be allotted in Form GST REG-25.
(Keep in mind that even in any case if you have got the registration done multiple times on a single PAN, still you will get one registration certificate. If in case you are supplying services in many states, then it is required to take registration separately for all states.)
A GST compliant invoice is to be issued by the registered business. Draft rules specify the fields that are 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.
A lot of confusion about how the tax requires invoices to be ‘uploaded’ is there. However, no pdfs or jpegs are required to be uploaded. A registered supplier must update the details of the invoice issued by him on the GSTN portal. The issued invoices should be electronically indexed through the common portal.
Information about the buyer and seller of an invoice on the portal is captured. Through this information, GSTN auto-populates purchases made by a registrant.
This is the first critical step towards compliance by providing invoice details. It links with purchases in the buyer’s profile and allows him to claim the benefit of taxes paid on purchases against his total tax outgo.
4. Classifying Transactions
Using HSN/SAC code mapping, you must classify all transactions as either “goods” or “services.”
Some of these classifications have changed from the old valued added tax (VAT) laws. For example, restaurants classified as “goods” under state VAT laws are now classified as “services” under GST.
Besides, we have adopted the integrated GST (IGST) model, which classifies transactions into two categories: interstate transactions and intrastate transactions. You should consider frequent changes in tax rates and exemptions and reclassify items and redefine tax rates as needed.
Learn more about HSN/SAC codes.
Filing timely returns with the correct information is an essential aspect of compliance and ensures a good rating. Returns are to be filed in the subsequent months on a monthly/quarterly/annual basis; incomplete data may result in invalid returns.
Learn everything about various types of GST returns.
6. Systems Transition and Preparedness
Check to see the compliance of the system you have in place and if it can be updated as per current changes. Its laws are expected to undergo many more changes before it stabilizes, hence pay attention to software support.
You must have a clear understanding of the applicable provisions of place and time of supply, as provisions differ with industry, commodities, and location. This can be done with proper accounting software like Profitbooks.
Once you follow all the above-mentioned steps for the GST compliance checklist, you will get compliant with the rules and conduct the business smoothly without any issues or concerns.
New tax laws will reform your taxation and affect almost every aspect of your business operations. As a business owner, it is important to understand this, and its implications, and to adopt a robust system that will help alleviate compliance worries.
Be proactive and face the challenges head-on rather than react to problems arising from noncompliance, and you will likely be much better off.
7. Use GST compliant Accounting System
If you want to make your business GST compliant with minimum effort, it’s advisable to use good accounting software.
For example, the invoices created using ProfitBooks accounting software are GST compliant.
ProfitBooks also lets you file GST returns easily from the application itself.
Apart from this, an audit trail is maintained in ProfitBooks so that you have a record of all the transactions recorded in the system.
It’s free to register with ProfitBooks.
To navigate the complexities of the tax system effectively, follow these essential steps:
Firstly, determine your liability for registration. Find out if you need to register based on your annual turnover.
Next, get registered on the official portal. This process is user-friendly and requires validating your mobile number and email ID.
Ensure that you issue invoices with the required information. There are specific fields that must be included, but you can choose the format and add your logo.
Accurately classify your transactions as either goods or services using HSN/SAC code mapping. Keep in mind that some classifications have changed under the new tax laws.
File your returns on time with the correct information. Incomplete data may lead to invalid returns, so make sure you provide accurate details.
Prepare your systems for the changes brought about by the new tax laws. Stay updated and consider using a reliable accounting system like ProfitBooks to simplify your compliance efforts.
By following these steps, you’ll be able to effectively navigate the tax system and ensure compliance for your business.