“Compliance has nuisance value”, is a simple answer we give to the entrepreneurs wondering about necessity of filing tax returns.
Paying taxes and filing tax returns on time won’t add any value to your business. But failure to do so, leads to financial and non-financial challenges for business. Such as:
- Interest must be paid for time-value of delayed deposit of tax;
- Additional costs like fines and penalties will dent business’s profits;
- Frequent default in compliance makes lending banks hesitant;
- Unfavorable remark in investment due diligence may scare away investors;
- Delay in compliance make your suppliers and customers reluctant to deal with your company.
Therefore, an entrepreneur should be aware of compliances applicable to her business. In this article will shed light on compliances under GST law.
Two important compliances under GST law are:
- tax payment; and
- reporting on periodic (monthly/quarterly) basis. This reporting is known as “GST return”.
Below table summarizes periodic compliances under GST Act, 2017:
Therefore, the number and types of GST return that a business must file depends on the type of taxpayer registered. Types of taxpayers include regular taxpayers including QRMP filers, composition taxable persons, e-commerce operators, TDS deductor, non-resident taxpayer, Input Service Distributor (ISD), etc.
Late Fee and Interest
Delayed filing of GST returns attracts late fee upto Rs. 200 per day.
Further, there is interest at rate of 18% p.a. applicable on late payment of tax. Interest will be calculated from the next day of filing due date till the actual date of payment.
Conclusion
Timely and accurate filing of GST returns requires maintenance of proper accounting records. There are few good accounting softwares in market that can help with GST compliance especially to freelancers, small businesses and bootstrapping entrepreneurs having simpler transactions. However, basic knowledge of book keeping is necessary for proper input of accounting data in such software.
We hope this article will help entrepreneurs to enhance their tax literacy which is an essential element of financial literacy. For deeper discussion or queries, feel free to reach us at cakevalm@gmail.com.
GST Clinic is a modest initiative by Bhaskara Consulting Group to help entrepreneurs get practical understanding of GST law and its impact on business processes.