GST is a single tax levied on services and goods consumed in the Indian economy. Introduced by the Central Government, GST is an indirect tax treating India as one nation and market. Since its introduction in 2017, most businesses have found adhering to the GST compliance rules challenging.
As per the GST regulations, every business should pay taxes on time. Therefore, companies must compulsorily adopt the GST compliance protocols the government has created to adhere to. It is important to note that GST rules are updated regularly. However, businesses should focus on tax invoice compliance, registration compliance, and return filing compliance. With a reasonable GST compliance rate, any organisation can gain the trust of the tax authorities. And when the business gains the confidence of the government, it becomes easier to target a broad group of customers.
What is GST compliance rating?
The GST compliance rating is a score the government provides to a business. Its primary purpose is to motivate an organisation and others operating in the same industry domain to comply with the tax department. This compliance rating is calculated based on various parameters like timely filing of returns, furnishing proper details of input credits used, taxes paid, etc.
Note that the scores are updated by analysing whether the company has a GST compliance checklist. The details of a company that has received an excellent GST compliance rating will be published in the public domain so that everyone can access them. This also allows small and medium-scale organisations to select the most GST-compliant vendor for their operations.
The reasons for companies to maintain GST tax compliance
Here are some reasons why every company should maintain GST statutory compliance.
Legal obligation and penalties
The GST compliance is a legal duty for businesses in India. Compliance with GST rules and regulations is crucial, as failure to adhere to them may result in strict penalties, interest payments, and even prosecution in worst-case scenarios. Non-conformity with GST provisions, e.g., not getting registration, not filing returns, or not paying taxes on the due date, could lead to financial penalties and legal issues.
Financial implications
Businesses that do not comply with GST will experience severe financial difficulty. Penalties, interest charges, and blocking the Input Tax Credit (ITC) might negatively affect a company's profitability and cash flow. Achieving compliance helps businesses claim eligible tax credits and calculate their tax liabilities correctly, thus improving tax management.
Credibility and reputation
Those businesses that follow the GST compliance calendar are seen to be trusted by their suppliers, customers, and government bodies. One of the results of this reliability is that it helps build trust and creates new business opportunities for compliant businesses, putting them ahead of their competitors.
Operational efficiency
Timely submission of GST returns, issuance of compliant invoices, and proper documentation contribute to a seamless business operation. Non-conformity can disrupt agreed-upon arrangements, auditing, and legal disputes, which might interfere with daily operations and cause unnecessary delays.
Transparency and ethical practices
With the GST system in place, businesses are encouraged to be more transparent and accountable. A compliant business evidences it believes in ethical practices and earns stakeholders' trust, leading to a fair and thriving business environment. This can be a decisive factor in enhancing a company's reputation and attracting new customers and partners.
Through GST compliance, businesses in India can avoid financial losses, maintain credibility, ensure smooth running, and become supportive of transparent and ethical business.
What is the significance of audits for GST compliance?
GST compliance audit is critical for Indian companies as it guarantees that the Goods and Services Tax (GST) rules and legislations are followed. In the audit, the auditor thoroughly examines the company's books and records, transactions, and processes, ranging from GST-related records to the company's financials.
The auditor is an independent chartered accountant or cost accountant. If the companies are non-compliant with GST rules, there will be very serious penalties, interest charges, and legal actions, thus making the compliance audit a key factor.
As a result of the audit, companies may expose and correct all non-compliance issues, including inaccurate tax calculations, misplaced input tax credit claims, and poor record-keeping.
Such a preventative approach reduces the probability of companies being held responsible for GST and keeps them with a clean GST compliance record. Besides that, the audit gives businesses an opportunity to simplify their GST operations, improve efficiency, and reduce possible taxation mistakes.
On top of that, a GST compliance audit strengthens a brand's credibility as an open and ethical company. Such relationships may produce a bond of trust with primary stakeholders, including customers, suppliers, or government institutions. The companies that follow GST advisory and compliance are usually considered highly reliable and trustworthy, which may open new business opportunities and foster long-term relations.
An essential step of GST audit compliance is assisting Indian companies in mitigating risks, filing a correct tax declaration, maintaining a good reputation, improving their operational efficiency, and complying with GST regulations.
Things to know about the GST compliance requirements
Besides getting a GST compliance certificate, knowing the compliance requirements is essential. Listed are the crucial aspects of GST compliance requirements.
Registration
Companies with an annual income worth more than Rs. 20 lakhs (Rs. 10 lakhs for special-category states) need to get GST registered. This is through the provision of the required documents and application for GSTIN (Unique GST Identification Number).
Tax payments and filing of returns
Timely payment of CGST, SGST, and IGST for goods and services is required. Companies are also expected to regularly file GSTR-1 (Outward Supplies), GSTR-3B (Summary Returns), and annual GSTR-9 returns within stipulated time periods.
E-way Bills
Getting e-way bills is necessary to transport goods worth more than Rs. 50,000 within the same state or from state to state. An e-way bill is a document used to monitor the movement of goods and check tax evasion by unscrupulous persons.
Invoicing and record-keeping
Providing GST-compliant invoices that are all-inclusive, such as GSTIN, HSN/SAC codes, and GST rates is paramount. Businesses should likewise ensure that their inward and outward supplies records and ITC claims and payments are kept. They should also be able to generate e-way bills.
Audits and other compliances
Companies that achieve a specified turnover level are required to have their records audited by a chartered accountant or a cost accountant. They must also follow TDS rules and other GST regulations and processes.
Conclusion
You must have understood GST compliance and its importance for organisations by now. It is your first step towards establishing your business. If you want to know more about GST compliance, contact Anil D'Souza & Associates. Visit top CA firm in bangalore to get the best GST compliance services in India.
FAQs
What are the benefits of GST compliance?
The benefits of GST compliance in India include the prevention of penalties, preservation of credibility, simplification of processes, and maximisation of tax administration.
Why is tax compliance necessary?
Tax compliance is required to comply with legal requirements, prevent financial losses, and enhance the transparency of business dealings.
How many types of compliance are there?
There are several types of compliances: registration, tax payment, returns filing, invoicing, record keeping, and audits.
What is GST yearly compliance?
GST yearly compliance involves preparing and filing GSTR-9 returns, GST audits and reconciliation of accounts for the financial year.
