With the introduction of GST in India, the Indian financial establishment is leveraged to a more efficient and unambiguous tax structure. The system follows a complex tax structure specifying different tax rates for different commodities across the supply chain. It brings in an element of ease in business operations plus offers neutral choices irrespective of the organization and its business model.
You can read our comprehensive guide on GST in detail here.
In this article, we will discuss the benefit of GST for the Indian startups and GST returns required to be filed by such startups.
Benefit of GST for Indian startups
Prior to GST, an Indian startup that showcased a turnover of more than Rs 5 lakh had to pay a huge amount of tax in the form of VAT to the tax authorities. However, the threshold limit for registration and payments was increased to Rs 20 lakh under the GST.
The bar was also raised to Rs 40 lakh with effect from the 1st of April 2019. However, the limit remained at Rs 20 lakh for service providers.
Remaining out of the tax bracket has helped small startups to focus on their core competencies and conduct their businesses seamlessly. According to estimates, the presence of startups of India is high, especially among the service sector. It has cut down the costs that previously drained into the tax bracket, thus helping save money from the company’s capital funds.
With technological advancements, the entire process has been upgraded to a smooth online system, right from filing registration forms to GST returns. The trouble of visiting different tax offices is a thing of the past. Dependency on experts to calculate various tax elements like service tax or VAT increased complications. With GST, startups can rely on simple tax calculations and everything in one form and under one roof. Uniform tax rates across different states are a boon for startups having a huge online presence and those into the e-commerce sector.
GST returns filing for startups
GST return is a document that has to be filed by all registered taxpayers under GST. The returns will include sales, purchase, output GST (tax collected on sales) and input tax credit i.e. tax paid on purchases.
There are around 25 returns to be filed by any regular taxpayer registered under GST. The number reduces if the taxpayer is registered under the composition scheme.
If you have a startup whose turnover exceeds Rs 40 lakh in a year, you should register yourself under GST. You can choose to register yourself voluntarily even if your turnover does not exceed the required threshold. Once you are registered, you will have to file GST returns as prescribed under the law.
Let’s understand the types of GST return applicable to you as a startup and how to file it online.
Types of GST returns
|Return form||What do you need to fill?||When do you have to file the return?||Due dates||Applicability to startups in India|
|GSTR-1||Details of sales of taxable goods and/or services made during a period||Monthly||11th of the next month
For example, the due date to file GSTR-1 for January 2020 will be 11th Feb
|To the startups registered as a regular taxpayer|
|GSTR-3B||Monthly summary of all the sales and purchases made during a month. It also shows GST liabilities of a taxpayer for the month in question
In case there are no sale or purchase transactions in a month, a taxpayer will have to file NIL return for that period
Do note that GSTR-3B cannot be revised
|Monthly||20th of the next month
For example, the due date to file GSTR-3B for January 2020 will be 20th Feb
|To the startups registered as a regular taxpayer|
|GSTR-4||Return to be filed by a taxpayer who has opted for composition scheme||Quarterly||18th of the next month following the quarter
For example, a composite taxpayer will have to file GSTR-4 for Jan-Mar 2020 by the 18th April 2020.
|To the startups whose turnover is less than Rs 1.5 crore in a year and has opted for composition scheme|
|GSTR-5||Return to be filed by every non-resident taxable person* with details of sales, purchases, tax payable or paid
*A person who supplies goods or services occasionally in India is a non-resident taxable person. This person does not have a fixed place of business or residence in India. Moreover, he can supply goods or services either as a principal or an agent or in any other capacity
|Monthly||Earlier of the following dates:
1. Within 20 days after end of a month
2. 7 days after the last date of validity of the registration
|Not applicable to Indian startups|
|GSTR-6||Return to be filed by an Input service distributor (ISD) with the details of all the invoices on which credit has been received and are issued by an ISD||Monthly||13th of the next month||To the startups registered as an ISD|
|GSTR-7||Return to be filed by the deductors who are required to deduct TDS under GST.
The return consists of the following details:
1. Tax deducted at source
2. TDS paid to the government
3. Any TDS refund claimed
4. Interest or late fees paid or payable
|Monthly||10th of the next month
For example, the due date for filing GSTR-7 for the month of June 2020 would be the 10th of July, 2020.
|To the startups who has deducted tax at source under GST|
|GSTR-8||Return to be filed by every e-commerce operator who is required to deduct TCS at source
The return consists of details of the supplies made e-commerce portal and the amount of tax collected from suppliers of goods and services
If you are an e-commerce operator, you can make changes to the supply details provided in any of the earlier period statements
|Monthly||10th of the next month in which the TCS was collected
Also, the amount of tax at source collected by the operator shall be deposited by the same date to the government
|To the startups operating in the e-commerce sector and liable to deduct TCS|
|GSTR-9||Annual return to be filed by all the regular taxpayers registered under GST
However, the government has made GSTR-9 filing optional for the taxpayers having turnover of less than Rs 2 crores for FY 2017-18 and FY 2018-19
|Yearly||31st December of next financial year
The due date to file GSTR-9 for FY 2018-19 is extended to June 30, 2020.
|To all startups having turnover of more than Rs 2 crores (only for FY 2017-18 and FY 2018-19)
Otherwise, it is mandatory for the start-ups
|GSTR-9A||Annual return to be filed by the taxpayers who has opted for the composition scheme under GST
However, the government has waived off GSTR-9A filing for FY 2017-18 and FY 2018-19.
|Yearly||31st December of next financial year||To all startups registered under composition scheme|
|GSTR-10||Final return to be filed by a regular taxpayer when GST registration is cancelled or surrendered||Once in a lifetime||Later of the following dates:
1. 3 months from the date of cancellation
2. Date of order of cancellation
|To the startups which have lost its registration number or surrendered it for some reasons|
|GSTR-11||Return to be filed by the person who has been allotted Unique Identification Number (UIN)
UIN is allotted to foreign embassies and diplomatic missions who are not required to pay taxes in India. Using UIN, these organizations can claim a refund for the amount of tax paid to the tax authorities in India. In order to claim the refund on GST paid, these organizations need to file GSTR-11
|Monthly||28th of the next month in which inward supplies are received by an UIN holder||Not applicable to startups|
The entire process right from GST registration to return filing is an automated process and is executed online. Here are the steps to be followed to file GST returns:
- Registration formalities – Any Indian startup should compulsorily register itself under GST law and obtain a registration number. This is a 15 digit number that is derived by means of registering your startup through an online procedure. The 15 digit includes the state code of the state where your startup is located along with your PAN
- Visit the official GST website and look out for the ‘services’ section. Under this, locate the ‘returns dashboard’ and start filling the form with relevant details. Make sure that you enter the financial year for which returns are filed and specify the financial period correctly
- Choose the type of ‘return’ that you want to file
- ‘Prepare’ the return form and click on ‘submit’
An expert would be able to guide the right kind of return filing for your startup and the variations applicable to online and e-commerce set-ups.