10-Point Essential GST Compliance Checklist for Organizations

Goods and Services Tax (GST) is a unified tax system in India that combines various indirect taxes into one.

For organizations, following GST rules is not just a legal requirement but also a way to ensure smooth business operations.

A compliance checklist serves as a handy tool for companies to stay on top of their GST obligations and avoid penalties.

This article presents a 10-point checklist to help organizations manage their GST compliance effectively.

Each point covers a key aspect of GST compliance, providing practical insights and tips for implementation.

1. GST Registration

To begin your GST compliance journey, your organization must first register for GST. Here's what you need to know:

Steps to register for GST

1. Visit the official GST portal (www.gst.gov.in)

2. Click on the 'Services' tab and select 'Registration'

3. Choose 'New Registration' and fill out the application form

4. Upload the required documents

5. Submit the application and note down the Application Reference Number (ARN)

6. Wait for verification and approval

Documents required for registration:

• PAN of the business
• Aadhaar card of the authorized signatory
• Proof of business registration or incorporation certificate
• Identity and address proof of promoters/partners
• Bank account statement or canceled cheque
• Digital signature of the authorized signatory
• Proof of principal place of business

Some businesses must mandatorily register for GST, while others can opt for voluntary registration.

It's important to determine which category your organization falls under and proceed accordingly.

2. Regular Filing of GST Returns

Filing GST returns on time is a key part of maintaining compliance. It's not just about meeting legal requirements; it's about maintaining a healthy cash flow and good relationships with your business partners.

Types of GST returns:

GSTR-1

Details of outward supplies of goods or services. This return provides the government with information about your sales.

GSTR-3B

Monthly summary of all transactions. This includes your sales, purchases, taxes collected, and taxes paid.

GSTR-9

Annual return for regular taxpayers. This consolidates all the information from your monthly or quarterly returns for the entire financial year.

GSTR-9C

Reconciliation statement and certification. This is for businesses with an annual turnover above Rs. 5 crore and needs to be certified by a chartered accountant.

Due dates for different returns:

GSTR-1

11th of the next month (monthly filers) or last day of the month following the quarter (quarterly filers)

GSTR-3B

20th of the next month

GSTR-9 and GSTR-9C

31st December of the next financial year

Missing these deadlines can lead to penalties and interest charges. For example, late filing of GSTR-3B can result in a penalty of Rs. 50 per day, up to a maximum of Rs. 5,000.

Timely filing of returns is also essential for your business ecosystem.

When you file GSTR-1 on time, it allows your customers to claim their input tax credits promptly.

Similarly, when your suppliers file their GSTR-1 on time, you can claim your input tax credits without delay.

To ensure timely filing, consider setting up internal reminders or using GST compliance software that can automate much of the process.

3. Proper Invoice Management

Managing invoices correctly is fundamental to GST compliance. It ensures accurate reporting and smooth tax credit claims.

Essential elements of a GST invoice:

• Invoice number and date.
• Customer's name, address, and GSTIN (if registered)
• Description and HSN code of goods or services
• Quantity and value of goods or services
• Tax rate and amount (CGST, SGST, IGST)
• Place of supply for interstate transactions
• Signature of the authorized person

Importance of maintaining invoice records:

Legal Requirement

The GST law mandates that invoices be kept for at least 6 years.

Input Tax Credit

Proper invoices are necessary for claiming input tax credits. Without them, you might lose out on tax benefits.

Audit Trail

In case of a GST audit, well-maintained invoices provide a clear trail of your business transactions.

Dispute Resolution

If there's a disagreement with a customer or supplier, correct invoices can help resolve issues quickly.

Business Insights

Organized invoice data can provide valuable insights into your sales trends and customer behavior.

To manage invoices effectively, consider using digital tools that can generate GST-compliant invoices automatically.

These tools often integrate with your accounting system, making it easier to track and report your transactions.

Issuing incorrect invoices or failing to issue invoices can lead to penalties under GST law. Therefore, it's worth investing time and resources in setting up a robust invoice management system.

4. Input Tax Credit (ITC) Reconciliation

Input Tax Credit (ITC) is a key benefit of the GST system, allowing businesses to claim credit for taxes paid on inputs. However, claiming ITC correctly requires careful reconciliation.

How to claim input tax credit

• Ensure you have valid tax invoices or debit notes from your suppliers.
• Verify that your supplier has actually paid the tax to the government.
• Receive the goods or services mentioned in the invoice.
• File your GSTR-3B return, declaring the ITC amount.
• The claimed ITC should not exceed the tax amount shown in GSTR-2B (auto-generated purchase return).

Matching input tax credit with supplier invoices

• Download your GSTR-2B from the GST portal. This shows inward supplies as reported by your suppliers.
• Compare this with your purchase records and the tax invoices you've received.
• Identify any mismatches. These could be due to either suppliers not filing their returns or incorrect reporting or record-keeping
• Follow up with suppliers for any discrepancies to ensure they file or correct their returns.
• Only claim ITC for matched invoices to avoid future complications.

Regular reconciliation helps prevent ITC-related issues during assessments or audits. It also ensures you're not missing out on eligible credits or claiming ineligible ones.

Consider using automated reconciliation tools that can compare your purchase data with GSTR-2B, flagging discrepancies for your review.

This can save time and reduce errors in the reconciliation process.

The onus of ensuring correct ITC claims lies with the recipient of goods or services. Therefore, thorough reconciliation is not just good practice, but a necessity for GST compliance.

5. E-way Bill Generation

E-way bills are electronic documents required for the movement of goods valued above Rs. 50,000. They play a vital role in GST compliance for businesses involved in transportation of goods.

When to generate an e-way bill?

• For all inter-state movements of goods, regardless of the value
• For intra-state movements where the value of goods exceeds Rs. 50,000
• When goods are transported for reasons other than supply (like returns, job work)
• For goods sent on approval basis

Information required for e-way bill creation

• GSTIN of supplier and recipient
• Place of dispatch and delivery
• Invoice number and date
• Value of goods and HSN code
• Reason for transportation
• Transport details (vehicle number, transporter ID)

The e-way bill system helps prevent tax evasion by tracking the movement of goods. It also facilitates smooth inter-state movement of goods by removing state border checkpoints.

Businesses should set up processes to generate e-way bills promptly to avoid delays in transportation.

Many GST compliance software solutions offer integrated e-way bill generation, which can streamline this process.

6. Reverse Charge Mechanism Compliance

The Reverse Charge Mechanism (RCM) is a unique aspect of GST where the recipient, rather than the supplier, is responsible for paying the tax.

Understanding reverse charge mechanism

• In normal transactions, the supplier collects and pays GST to the government.
• Under RCM, this responsibility shifts to the recipient of goods or services.
• The recipient must pay the tax directly to the government and can later claim it as input tax credit.

Identifying applicable transactions

• RCM applies to several types of transactions, including services, import of services, specific goods like cashew nuts, silk, yarn etc. Besides this RCM also applied to legal services, sponsorship services and goods transport agency services.
  

How to ensure compliance with RCM?

• Identify all transactions that fall under RCM
• Pay the applicable GST on these transactions
• File a separate return (GSTR-3B) for RCM transactions
• Maintain detailed records of such transactions

Businesses must set up systems to track RCM-applicable transactions separately. This helps in accurate reporting and timely tax payment.

Failing to comply with RCM can result in penalties and interest charges. Moreover, input tax credit cannot be claimed on tax that should have been paid under RCM but wasn't.

Regular training for the finance team on RCM rules and their application is crucial, as these rules can be complex and subject to change.

7. Maintaining Digital Records

Ever since GST has been introduced, keeping digital records has evolved from being just a best practice to a legal requirement.

It ensures easy access to information and smoother compliance processes.

Types of records to be kept digitally

• Purchase and sales registers
• Stock records
• Production records
• Input tax credit availed
• Output tax payable and paid
• All GST returns filed
• E-way bills generated
• Tax invoices, credit notes, and debit notes

Duration for which records should be maintained

The GST law mandates that all records must be kept for at least 72 months (6 years) from the due date of filing the annual return for that year.

This long retention period is to facilitate any future audits or assessments.

Benefits of digital record-keeping

• Easy retrieval of information during audits or assessments
• Quicker preparation and filing of GST returns
• Better data analysis for business insights
• Reduced risk of data loss compared to physical records
• Easier sharing of information with tax professionals or auditors

How to maintain digital records effectively?

• Use GST-compliant accounting software that can generate required reports
• Regularly back up your data to prevent loss
• Ensure your digital records are easily readable and retrievable
• Implement a system for organizing and naming digital files for easy access
• Train your team on proper digital record-keeping practices

Digital record-keeping not only aids in GST compliance but also provides a clear view of your business transactions. This can be invaluable for making informed business decisions.

eQomply, a powerful compliance management platform, can simplify this process.

It offers secure, centralized storage for all GST-related documents and automates record organization, making it easier for businesses to maintain and retrieve digital records as needed for GST compliance.

8. GST Audit Preparation and Checklist

GST audits help ensure that businesses are complying with tax laws and reporting their transactions accurately.

Being well-prepared for these audits is key to avoiding penalties and maintaining a good standing with tax authorities.

Types of GST audits

1. Internal Audit: Conducted by the business itself or hired professionals to check compliance.

2. GST Audit by CA/CMA: Required for businesses with turnover above Rs. 5 crore.

3. Departmental Audit: Conducted by tax officials to verify the accuracy of reported information.

Documents required for GST audits

1. All GST returns filed during the audit period

2. Financial statements (balance sheet, profit and loss account)

3. Income tax returns

4. Bank statements

5. Purchase and sales registers

6. Stock records

7. Input tax credit records

8. E-way bills generated

9. Tax invoices, credit notes, and debit notes

How to prepare for a GST audit?

1. Regularly reconcile your GST returns with your financial records

2. Keep all documents organized and easily accessible

3. Maintain a proper trail of all transactions

4. Conduct periodic internal audits to identify and rectify any discrepancies

5. Address any mismatches in GSTR-1 and GSTR-3B promptly

6. Ensure all reverse charge mechanism transactions are properly accounted for

Good audit preparation not only helps you pass the audit successfully but also gives you insights into your business processes and areas for improvement.

9. Timely Payment of GST

Paying GST on time is the crux of GST compliance. It helps avoid penalties and ensures smooth business operations.

Payment methods

1. Online banking: Direct transfer from your bank account to the government's account.

2. NEFT/RTGS: For larger amounts, these methods can be used for quick transfers.

3. Over the Counter: Cash, cheque, or demand draft payments at authorized banks (for amounts up to Rs. 10,000 per challan).

4. Debit/Credit Card: Convenient for smaller amounts, but may incur additional charges.

Steps for GST payment

1. Log in to the GST portal

2. Navigate to the 'Services' tab and select 'Payments'

3. Generate a challan by filling in the required details

4. Choose your preferred payment method

5. Complete the payment process

6. Save the payment receipt for your records

Consequences of late payment

1. Interest: 18% per annum on the amount of outstanding tax

2. Late fee: Up to Rs. 5,000 for late filing of returns

3. Penalties: Can be levied for repeated non-compliance

4. Business disruption: Late payments can affect your ability to file returns and generate e-way bills

To ensure timely payments

1. Set up reminders for payment due dates

2. Maintain sufficient balance in your designated bank account

3. Reconcile your books regularly to know your tax liability in advance

4. Consider using automated payment systems integrated with your accounting software

eQomply can help streamline this process by providing timely reminders, facilitating easy reconciliation, and offering integration with payment systems, thus reducing the risk of late payments and associated penalties.

10. Staying Updated with GST Changes

GST regulations in India are dynamic, with frequent updates and amendments. Staying informed about these changes is vital for maintaining compliance.

Sources for GST updates

• Official GST Portal: The primary source for all GST-related information and updates.
• CBIC Website: Central Board of Indirect Taxes and Customs provides circulars and notifications.
• GST Council Meetings: Keep track of decisions made in these meetings.
• Professional Bodies: ICAI and other professional associations often provide analysis of GST changes.
• GST Newsletters: Subscribe to newsletters from reputable tax firms or consultancies.
• Social Media: Follow official GST handles on platforms like Twitter for real-time updates.

How to implement new GST rules

• Analyze the impact: Assess how the changes affect your business operations and compliance processes.
• Update systems: Modify your accounting and invoicing software to reflect new rules.
• Train staff: Conduct regular training sessions to keep your team informed about GST changes.
• Seek expert advice: Consult with tax professionals if you're unsure about implementing complex changes.
• Review and adapt: Regularly review your compliance processes to ensure they align with the latest rules.
• Staying updated helps you:
• Avoid non-compliance penalties
• Take advantage of new benefits or simplified procedures
• Make informed business decisions

eQomply can assist in this process by providing timely alerts about GST changes and offering guidance on how these changes impact your compliance requirements.

Its adaptable platform ensures that your compliance processes stay in line with the latest GST regulations.

Conclusion

GST compliance is not just about avoiding penalties; it's about creating a transparent and efficient business environment.

However, managing all these compliance aspects can be complex and time-consuming.

This is where technological solutions like eQomply come into play. eQomply offers a comprehensive platform that automates many of these compliance tasks, from record-keeping to generating timely reminders for filing and payments.

Explore how eQomply can transform your GST compliance management and take the first step towards hassle-free tax compliance today.