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How to File Tax Return for Small Business with GST

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The economy in India witnessed its biggest ever tax reformation with the introduction of GST (or Goods and Services Tax), which is necessarily a destination-based tax reporting structure. Under this tax regimen, business has to report every transaction of goods and services through the last mile, with a common invoice identifiable to both sellers and recipients.

Since its introduction, the processes of calculating GST and filing tax returns with GST has been simplified to encourage small and medium businesses to streamline their operations and finances.

Are You Liable to File GST File Return?

While large businesses have resources at their disposal to manage their tax-related matters, small businesses often don’t have enough resources to maintain adequate accounting information and tax liability. Keeping this in mind, the Income Tax Department has introduced a more straightforward method known as a presumptive method, where your income is calculated as per gross receipts of your business.  

Moreover, small business owners who have turnovers less than Rs. 2 crores and have opted for the presumptive income scheme depicted under Section 44AD, Section 44ADA and Section 44AE, have to file their return through the ITR-4 Form. On the other hand, business owners who have not opted for presumptive income scheme and have profits exceeding Rs 2 crores, will have to file the ITR-3 form.

Also, businesses must provide a record of their expenses, split between payments made out to GST registered and non-registered entities. The turnover/gross receipt as per GST and GSTIN must be reported while filing ITR-4. Further, details of both CGST and SGST/IGST paid on purchases, sales and expenses must be specified under profit and loss account, by business owners who are filing their returns under ITR-3, ITR-5 and ITR-6.

That said, any amount of input tax credit remaining unclaimed as of 31st of current year must be specified under ‘Schedule OI’ (Other Information) of the relevant ITR form. Overall, any regular business must file one return and two monthly returns. Also, composition dealers and other similar cases have to fill out separate returns. For AY 2019-20, the following tax slab rates are applicable:

Tax Rate Surcharge Health and Education Cess
25% for turnover up to Rs 250 crore 7% for income between Rs 1 crore and Rs 10 crore 4% of income tax plus surcharge
29% for turnover exceeding Rs 250 crore 7% for income between Rs 1 crore and Rs 10 crore (12% in case the income exceeds Rs 10 crore)

 

What Are the Types of GST Returns?

The different types of income tax return forms (subject to change as per notifications or orders) as specified under the CGST Act are depicted below:

Any Regular Business

Return Form Particulars Interval Due Date
GSTR-1 Details of outward supplies of taxable goods and services from July 2018 to March 2019 (if turnover exceeded Rs. 1.5 Crores in the previous year) Monthly 10th of the next month
GSTR-2 Details of inward supplies of taxable goods and services to claim the input tax credit. Monthly 15th of the next month
GSTR-3 Monthly return based on finalisation of both outward and inward supplies along with the paid tax amount Monthly 20th of the next month
GSTR-9 Return Annually 31st December of next fiscal year
GSTR-3B Return for the months leading up to March 2019 Monthly 20th of the next month

 

A small business whose profits were less than Rs. 1.5 Crores in the previous year can file a quarterly GSTR-1, before the end of the next month (for the period from July 2018 to March 2019).

Any Dealers Opting for Composition Scheme

In general, a composition dealer with a turnover exceeding Rs. 1 crore is required to pay tax on total sales and at a specific rate. Further, the dealer pays tax under reverse charge, purchases from unregistered dealers and import of service. However, such dealers enjoy the dual benefit of compliance and inferior returns along with tax payment at nominal rates. Following are the ITR forms that composition dealers have to file for tax returns with GST:

Return Form Particulars Interval Due Date
GSTR-4 Return for compounding taxable person Quarterly 18th of the month in succeeding quarter
GSTR-9A Return Monthly 31st December of next fiscal year

 

Any specifically registered dealers

Return Form Particulars Interval Due Date
GSTR-5 Return for the Non-Resident foreign individual, eligible for taxable Monthly 20th of the next month
GSTR-5A Return for Non-resident individuals providing OIDAR services (services delivered over the Internet, with less or no human intervention) Monthly 20th of the next month
GSTR-6 Return for Input Service Distributor Monthly 13th of the next month
GSTR-7 Return for authorities deducting tax at source Monthly 10th of the next month
GSTR-8 Details of the amount of tax collected from e-commerce service providers and supplies effected through them Monthly 10th of the next month
GSTR-10 Final Return Once, in the case of registration is surrendered or cancelled Within 3 months of the date of cancellation order or that of cancellation, whichever is later
GSTR-11 Details of inward supplies to be provided by an individual claiming a refund, who has UIN and a Monthly 28th of the month after the month for which a return is filed

 

What is the process of Filing Tax Return with GST?

In India, small businesses have to file certain returns mandatorily, and any non-compliance in doing so would result in disallowance of the input tax credit, in addition to penalties and rate of interests.  With the implementation of GST, all returns have been so designed that all transactions are in sync with one another, while the tax return data is saved in GSTN, which is accessible to all users and taxpayers anytime online. Therefore, small businesses can file their returns through Forms ITR-3 or ITR-4 online. The physical or offline filing is allowed only for certain taxpayers including individuals with income less than Rs 5 lakhs and super senior citizens (those above 80 years of age).

Online or e-Filing

There are three ways of filing Income Tax Return online. These include:

  • E-filing the return under digital signature
  • Transmitting the data over an electronic medium and then re-verifying the return
  • Transferring the data over an electronic medium and then submitting a physical copy of ITR-V to CPC Bengaluru

Moreover, you need to get your income tax return verified within 120 days of e-filing the same.

Payment challans

Payment challans are an essential part of the tax return filing process. Without them, it is not possible to claim credit and clear tax dues and payments within the specified timeline.

Challan Name Description
PMT-1 online tax liability register to tabulate either return or non-return related liabilities
PMT-2 Credit balance online as in GSTN
PMT-2A Re-credit addition to the GSTN balance of a taxpayer
PMT-3 Online cash ledger
PMT-4 Challan for payment of GST
PMT-5 Payment register for unregistered taxpayers
PMT-6 Application for claiming missing credit

 

Also, there are ten forms prescribed by the Government of India for businesses to claim a refund in case there is an excess credit available. Out of these, only five apply to the States. The most important of these forms is the RFD-01, which accompanies an application for refund.

Are there any Late Fees for not Filing Tax Return on Time?

Return filing is a mandate under GST. Therefore, in case of no transaction, you must file a Nil return. However, you cannot file a return if you haven’t filed the return for the previous month/quarter. In case, you do not file GST Returns within time; you will be liable to pay additional interest and a late fee. Following are the existing criterion for determining the late fee:

  • The rate of interest is 18% per annum. It would be calculated on the outstanding tax amount, by the taxpayer. Moreover, the period would be from the next day of filing to the date of payment.
  • The late fee is Rs. 100 per day per the CGST Act. Therefore, the late fee under CGST and SGST is Rs. 100. Total fee amount would be Rs. 200/day up to a maximum of Rs. 5,000. There is no late fee on IGST.
  • Late fees for GSTR-3B of July, Aug and Sept, have been waived. Subsequently, any late fees paid for the months above would be credited back to the Electronic Cash Ledger and can be utilised to make GST payments.
  • Late fees for GSTR-5A, which was earlier reduced, now stands withdrawn.
  • Late Fee for filing GSTR-1, GSTR-3B, GSTR-4, GSTR-5 and GSTR-6 has been reduced to Rs. 50 per day, while that for filing NIL returns has been reduced to Rs. 20 per day for GSTR-1, GSTR-3B, GSTR-4 and GSTR-5 (except GSTR-6)

Are there any benefits of filing tax returns?

If you are a small business with a turnover of less than Rs 2 crores, you can opt for the presumptive scheme to avail several benefits. However, you need to pay the taxes and file tax return timely and accurately, if you wish to make use of any tax benefit. Under the presumptive income scheme, small businesses need to file the simplified return form called ITR-4 (Sugam).

Also, small business does not require to pay Advance Tax four times a year. Instead, they can pay the entire amount in one go by the 31st March of the relevant fiscal year.

Under the presumptive scheme, businesses will not need to maintain and provide the mandatory documents relating to the account and P&L Statement for tax saving. Small businesses are also relieved from the need of getting the account books audited.

Under the GST regime, most of the taxes, currently in existence, have been subsumed to form one tax.

Central Taxes subsumed under GST

  • Central Excise Duty (including additional excise duties)
  • Service tax
  • Additional customs duty (CVD)
  • Special Additional Duty of Customs (SAD)
  • Central surcharges and cesses

State Government Taxes subsumed under GST

  • Value Added Tax
  • Central Sales Tax
  • Octroi and Entry Tax
  • Purchase Tax
  • Luxury Tax
  • Taxes on lottery, betting & gambling
  • State cesses and surcharges
  • Entertainment tax
  • GST Exemption for Start-ups and Small Businesses

Conclusion

Filing tax returns with GST is a mandatory exercise for all businesses, whether large or small. While the government is committed to making the filing process more streamlined and hassle-free, private lenders including ABFL Direct have also stepped in to make tax filing with GST more rewarding for small businesses.

These lenders offer a variety of small business loans that would work as new working capital facility for micro, small and medium business, based on the profits reported in their GST returns. With the business loan in place, small businesses can explore a whole new avenue of business expansion and developing pathbreaking innovations.

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