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GST return for small business: A comprehensive guide


Why is the GST Return Important for Small Businesses?

There are several reasons why small businesses need to submit their Goods and Services Tax (GST) returns. First, the government has made it a requirement for companies with a specific turnover threshold. There may be fines and legal repercussions for failing to file GST returns. Second, by submitting GST forms, small businesses can claim input tax credits and lower their tax obligations. Doing this ensures that companies only pay taxes on the value they add, not on the entire supply chain. Thirdly, proper GST returns promote credibility and transparency, strengthening relationships between buyers and sellers. Finally, it enables authorities to keep track of compliance, stop tax evasion, and advance a just taxation system.

Key Takeaways

  1. Mandatory Requirement: Small businesses must submit GST returns as per government regulations and turnover thresholds to avoid fines and legal consequences.
  2. Input Tax Credits: GST return filing enables small businesses to claim input tax credits, reducing their tax liabilities by accounting for taxes paid on purchases.
  3. Value-based Taxation: Proper GST filing ensures businesses pay taxes only on value addition, not the entire supply chain, promoting fair taxation.
  4. Credibility and Transparency: Accurate GST returns enhance credibility, transparency, and trust between buyers and sellers, strengthening business relationships.
  5. Compliance Monitoring: Timely GST return filing helps authorities monitor compliance, prevent tax evasion, and establish an equitable tax system.
  6. Filing Frequency: Small businesses’ filing frequency is based on turnover; quarterly for lower turnovers and monthly for higher turnovers to simplify compliance.
  7. Due Dates: GST return deadlines depend on annual revenue and filing frequency; late filing incurs penalties, impacting financial stability.
  8. Late Filing Fees: Late GST filing results in predetermined daily fines, escalating with the delay and interest on unpaid taxes.
  9. Non-Filing Penalties: Non-filing attracts hefty penalties in addition to late filing costs and interest; repeated violations could lead to registration suspension.
  10. Input Tax Credit (ITC): GST’s ITC mechanism allows businesses to offset taxes paid on purchases against sales, aiding in accurate tax calculation.
  11. ITC Eligibility: Businesses must be GST-registered, use purchases for business purposes, and ensure supplier compliance for claiming ITC.
  12. ITC Reconciliation: Accurate buyer and supplier data reconciliation ensures ITC claims align with supplier filings, preventing discrepancies.
  13. GST Audit: Different audits, including professional, authority, special, financial, and internal, ensure compliance, accuracy, and transparency.
  14. Applicability: GST audits are mandatory for businesses exceeding annual turnover thresholds; they promote transparent financial practices.
  15. Due Dates: GST audit deadlines vary by nation; timely submission is crucial to avoid penalties and maintain a positive relationship with tax authorities.
  16. Penalties for Non-Compliance: Failure to meet GST audit requirements results in financial penalties, which escalate with the duration of non-compliance.


Filing GST Returns for Small Businesses

Filing Frequency

For small businesses, the frequency of GST return filing is based on their annual revenue. Small businesses with annual revenue below a predetermined threshold can file their GST returns quarterly in various nations, including India. The purpose of this barrier, which varies from nation to nation, is often to make compliance easier for smaller businesses. But if a small business’s revenue surpasses the cutoff, it might need to submit monthly GST filings. GST returns must be filed on time and accurately to avoid fines, preserve compliance with tax laws, and guarantee smooth operations for small businesses.

Due Dates

Small businesses must submit their GST filings by specific deadlines based on their annual revenue and preferred filing frequency (monthly or quarterly). The following are the due dates in the majority of nations, including India:

Monthly GST Return: Small businesses with greater turnovers must submit monthly GST filings. Typically, the 20th of the next month is when payments are due. As an illustration, the return for July would need to be submitted by August 20th.

Quarterly GST Return: Small businesses with lower annual revenue thresholds may file quarterly. The deadline is Typically the final day of the month after the quarter. For instance, the return for the April–June quarter would need to be submitted by July 31.

Late Filing Fees

Small businesses may be charged late filing costs if their GST returns are filed late. The particular late filing penalties change based on the country’s GST laws. Small businesses are often assessed a predetermined fee for each day of late filing between the due date and the actual filing date. The cumulative penalty increases with the length of the delay. The interest on the unpaid tax balance is in addition to these fees. Small businesses should ensure their GST returns are filed on time and correctly to avoid additional financial strain and preserve compliance.

Penalty for Non-Filing

The penalty for failing to file GST returns can be very high for small businesses. It varies based on non-compliance length and the country’s tax rules. In general, in addition to any late filing costs and interest on the unpaid tax liability, a fixed penalty is assessed for each month of non-filing. Repeated violations might result in more severe penalties, such as the suspension or revocation of the company’s GST registration, making it more difficult to conduct business. It is essential to comply with filing requirements to avoid these fines and legal repercussions.

Input Tax Credit for Small Businesses

The Goods and Services Tax (GST) system’s input tax credit (ITC) mechanism enables firms to claim a credit for the taxes they have paid on their purchases of goods and services. This credit may offset the GST liability on their sales. It makes sure that companies only pay taxes on the value they add to the supply chain and not on the entire amount of taxes that their suppliers have previously paid.

A small business must meet the requirements outlined in the GST laws to receive Input Tax Credit (ITC). The company must first be GST-registered and have a current GSTIN (Goods and Services Tax Identification Number). The second requirement is that the purchases on which the ITC is being claimed be made for business purposes and qualify for credit under the GST regulations. It implies they shouldn’t be utilized for non-business or personal purposes.

Small businesses must ensure the supplier from whom they have made the purchases has accurately updated the invoice details and submitted their GST returns to be eligible for ITC. The buyer’s GST return must accurately reflect all the information on the supplier’s invoice, including the GSTIN, invoice number, and tax amount.

The ITC claim must be compared and reconciled with the information the supplier uploaded in their GST filings. This is crucial for the GSTR-1, the supplier’s GST return, and the GSTR-2A, the buyer’s GST report, both known as GSTR forms. If there are inconsistencies, the buyer must fix them by taking the appropriate steps, such as contacting the supplier to change the details.

Regarding the deadline, smaller businesses may submit their ITC claims for a specific tax period with their subsequent GST return filing. The ITC for the purchases made in a given month can often be claimed in the GST return for the next month. The GST statute does, however, set down specific deadlines for collecting ITC. In general, the ITC claim deadline for a financial year is the earlier of the annual return filing date or the GST return due date for September of the following financial year.

GST Audit for Small Businesses

Types of GST Audit

Many audits are crucial to assure financial correctness, regulatory compliance, and general corporate integrity for small businesses. These audits consist of the following:

  • GST Professional Audit (Section 35(5) Audit): A required audit by a licensed professional for companies with a specific turnover to ensure GST compliance and proper filings.
  • Tax Authority Audit (Section 65 Audit): A tax authority internal audit to review GST conformity and spot any inconsistencies.
  • Special Audit: Tax authorities may request a special audit (Section 66 audit) to look at certain issues or complexities with GST filings.
  • Audit of Financial Statements: Independent auditors examine financial records to confirm their accuracy and compliance with accounting principles.
  • Internal audit: An audit conducted voluntarily by a company to evaluate its internal controls, risk management, and regulation compliance.

Together, these audits defend the interests of small firms and advance openness and confidence in their financial management.

Applicability of GST Audit

The annual turnover of firms determines whether the GST audit is applicable. GST audits are required for companies in many nations, including India, whose annual revenue exceeds a predetermined threshold. The minimum turnover varies depending on the nation. For instance, in India, businesses are liable to a GST audit if their yearly sales exceed a set threshold (currently INR 2 crore for normal taxpayers and INR 5 crore for those under the composition plan). However, businesses that fall below this limit are typically excluded from GST audits. Transparency and fair tax procedures are promoted through GST audits, which guarantee a thorough examination of the company’s financial activities, compliance with tax rules, and accuracy of GST filings.

Due Dates for GST Audit

The tax authorities typically set the deadline for filing a GST audit which may vary from nation to nation. For instance, in India, the GST audit report must be submitted by December 31 of the next fiscal year.

Penalties for Non-Compliance

There may be serious consequences for failing to comply with GST audit obligations. Financial penalties may apply if the GST audit report is incomplete or submitted by the deadline. These fines can increase with the length of non-compliance and can be assessed as a fixed sum or as a percentage of the company’s annual revenue. To avoid these fines and keep a good reputation with the tax authorities, timely adherence to GST audit laws is essential.


For small enterprises looking for financial and regulatory support, Kanakkupillai is a reputable and respected partner. We help businesses get around the intricacies of the GST system with our knowledge of GST compliance and auditing. Our team of experts guarantees prompt and accurate GST return filing online, assisting companies in reclaiming Input Tax Credits and avoiding fines. Additionally, our dedication to honesty and moral behaviour helps to build client trust. Small businesses may concentrate on their main operations with the help of Kanakkupillai, knowing that their financial affairs are in good hands. In terms of being a dependable ally for small businesses in achieving compliance and expansion, Kanakkupillai stands out.


Kanakkupillai is your reliable partner for every step of your business journey in India. We offer reasonable and expert assistance to ensure legal compliance, covering business registration, tax compliance, accounting and bookkeeping, and intellectual property protection. Let us help you navigate the complex legal and regulatory requirements so you can focus on growing your business. Contact us today to learn more.