Types of GST Returns

What are GST Returns?

The Goods and Services Tax (GST) system in India requires companies to file GST returns with the tax authorities as mandatory documentation. Particularly about sales, purchases, and the associated GST liabilities, these forms offer a thorough summary of a taxpayer’s financial activity. For a given accounting period—usually monthly, quarterly, or yearly, depending on the taxpayer’s turnover—both output GST (tax collected on sales) and input GST (tax paid on purchases) must be reported as part of the GST return filing process. Different kinds of GST returns are designed to meet the needs of distinct taxpayer categories.

Geeky Takeaways:

• The Goods and Services Tax (GST) system in India mandates companies to file GST returns, detailing sales, purchases, and liabilities.
• These returns help the government calculate tax liabilities, ensure GST compliance, and facilitate tax assessment.
• They also aid in input tax credit reconciliation, allowing companies to reimburse excess taxes.
• Different types of GST returns are designed for different taxpayer categories, and failure to comply can result in legal and penalty consequences.

Types of GST Returns

There are several kinds of Goods and Services Tax (GST) returns under the Indian GST system, each with a distinct function and target audience. The primary categories are as follows:

1. GSTR-1

Registered taxpayers complete this return to provide specifics about sales or out-of-country supply made within a certain tax period. Data at the invoice level, such as invoice numbers, taxable amounts, and GST amounts, are included.

Features:

• Invoice-level Reporting: For all outgoing supplies made during the tax period, taxpayers must provide comprehensive invoice-level information on GSTR-1. This contains specifics like invoice numbers, dates, and recipient information in addition to taxable amounts and appropriate GST rates.
• Complete Data Submission: Outbound supplies to registered taxpayers (B2B), supplies to unregistered taxpayers (B2C), exports, and presumed exports are among the categories of outbound supplies that taxpayers are required to disclose. The information on both intra-state and inter-state suppliers is captured by GSTR-1.
• Reporting Flexibility: In subsequent returns, taxpayers may record revisions, adjustments, or changes to previously reported invoices using GSTR-1. This function guarantees reporting correctness and enables taxpayers to correct any mistakes or omissions.

Advantages:

• Comprehensive Reporting: GSTR-1 makes it easier for registered taxpayers to declare sales or out-of-country suppliers. To ensure complete transaction documentation, it asks taxpayers to submit invoice-level information, such as invoice numbers, taxable values, and GST amounts.
• Reconciling Input Tax Credits: GSTR-1 helps reconcile input tax credits (ITC) claimed by beneficiaries with the outward supply recorded by suppliers by offering comprehensive sales data. The accuracy of ITC claims and adherence to GST laws are enhanced by this reconciliation.
• Accountability and Transparency: By forcing taxpayers to correctly record their sales transactions to the tax authorities, GSTR-1 encourages accountability and transparency in the tax system. In addition to preventing tax evasion, this promotes confidence between tax officials and taxpayers.

Disadvantages:

• Complexity of Reporting: For outgoing supplies made during the tax period, taxpayers must provide complete invoice-level information on GSTR-1. This degree of detail can be laborious and complicated, particularly for companies that handle a lot of transactions or have many locations.
• Errors in Manual Data Entry: Entering invoice information manually into GSTR-1 raises the possibility of mistakes and inaccurate reporting. Inaccurate data entry may result in differences in tax assessments and compliance problems, which may result in fines from tax authorities.
• Technical Difficulties: While submitting a GSTR-1 via the GSTN site, taxpayers may run into technical problems. Taxpayers may experience delays and irritation throughout the filing process due to system errors, sluggish processing times, and internet outages.

Example:

An electronic appliance wholesaler files their GSTR-1 for the month of February 2024, outlining their outbound deliveries at that time. They include details about each transaction involving the selling of electronic products to merchants and customers, such as invoice numbers, taxable values, and GST amounts. They also include information on any export sales that occurred that month. The GSTR-1 functions as an all-inclusive synopsis of their sales activity for the reporting period, facilitating precise tax liability assessments and guaranteeing adherence to GST requirements by tax authorities.

2. GSTR-3B

Providing a combined perspective of a registered taxpayer’s inbound and outgoing supply, input tax credit (ITC) received, and tax due for the period, GSTR-3B is a monthly summary form filed by registered taxpayers.

Features:

• Summary Form: For a certain tax period, usually on a monthly basis, GSTR-3B offers a combined perspective of a taxpayer’s internal and outward supply, input tax credits (ITC) claimed, and tax obligations.
• Simplified Reporting: GSTR-3B is a simplified reporting form that requires taxpayers to submit summary data for sales, purchases, and taxes payable/receivable. It differs from full filings like GSTR-1 in this regard.
• Reconciling Input Tax Credits: In GSTR-3B, taxpayers balance the tax owed on outgoing supply with the input tax credits they have claimed on purchases. The proper amount of tax is paid to the government thanks to this reconciliation.

Advantages:

• Streamlined Reporting: Taxpayers can submit summary data for their sales, purchases, input tax credits (ITC), and tax obligations using the GSTR-3B format, which is a streamlined reporting format. This simplicity eases the burden of compliance and simplifies the process for firms to file returns.
• Reporting Flexibility: GSTR-3B allows for the reporting of provisional sales and purchase numbers. This flexibility helps taxpayers to rapidly comply with their tax responsibilities, especially in situations where final information may not be available prior to the filing date.
• Online Filing: Using the Goods and Services Tax Network (GSTN) site, taxpayers can online submit GSTR-3B. The online filing method guarantees faster return processing, less paperwork, and more convenience, all of which contribute to increased compliance efficiency.

Disadvantages:

• Restricted Information: For a certain tax period, GSTR-3B only offers a summary of sales, purchases, input tax credits, and tax obligations. The correct evaluation and analysis of a taxpayer’s financial activities may be hampered by this lack of comprehensive data.
• Error Potential: There is a greater chance of mistakes and inaccuracies in the return because of the provisional nature of GSTR-3B and the streamlined reporting structure. Taxpayers may unintentionally submit data incorrectly, which might result in problems with compliance and even fines.
• Difficulties with Reconciliation: GSTR-3B does not allow for a thorough reconciliation of input tax credits claimed with the amount of tax due on outgoing supplies. Accurately reconciling their financial records can be challenging for taxpayers, particularly in intricate company situations.

Example:

A network of stores that operates in several states submits its January 2024 GSTR-3B. They give an overview of all of their purchases, sales, and input tax credits (ITC) received throughout the tax year in this return. Subtracting the whole Input Tax Credit (ITC) from the total sales tax payable, the firm determines its net tax burden. They use the GSTN system to pay the required taxes online after confirming the correctness of the data. The timely payment of taxes for the taxable period is facilitated and compliance with GST requirements is ensured by this GSTR-3B filing.

3. GSTR-4

The quarterly report that taxpayers who choose the composition scheme file. Their turnover and tax obligations under the composition system are summed up in it.

Features:

• Quarterly Filing: Under the Composition Scheme, taxpayers submit GSTR-4 on a quarterly basis as opposed to monthly for normal taxpayers. This lowers the frequency with which small enterprises using the Composition Scheme must comply with regulations.
• Summarized Reporting: A taxpayer’s turnover and tax obligations for the quarter are shown in summary form in GSTR-4. It compiles information on outbound supply, taxes due, and paid under the Composition Scheme.
• Details of the Composition Plan: Taxpayers who use the Composition Scheme disclose in GSTR-4 the amount of turnover and tax due under the plan. Through the program, qualifying firms can pay tax at a predetermined rate on their turnover without having to deal with the burden of keeping thorough records, and compliance is made simpler.

Advantages:

• Simplified Compliance: When compared to standard GST returns, GSTR-4 provides a simpler compliance procedure. The composition plan reduces the amount of compliance requirements for taxpayers, which facilitates small enterprises in meeting their tax responsibilities.
• Quarterly Filing: GSTR-4 is filed quarterly, as opposed to the monthly filing that normal taxpayers must do. Businesses are able to concentrate more on their core activities as a result of the reduction in the frequency of compliance-related tasks.
• Predetermined Tax Liability: Regardless of the actual tax owed on specific transactions, taxpayers under the composition system pay a predetermined proportion of their turnover in taxes. For small firms, this makes tax payments predictable and definite, which makes financial planning and budgeting easier.

Disadvantages:

• Restricted Applicability: Only taxpayers who want to use the GST composition system are eligible to use GSTR-4. This program only applies to a certain group of taxpayers because it is intended for small enterprises with a turnover threshold.
• Requirement for Quarterly Filing: Although small firms may find quarterly filing beneficial, timely compliance and cash flow management may present difficulties. It might be challenging for businesses to precisely monitor and record their transactions on a quarterly basis, which could result in filing mistakes or omissions.
• Input Tax Credit Ineligibility: Under the composition scheme, taxpayers are not able to claim input tax credit (ITC) on purchases. Businesses may incur increased tax expenses as a result, as they are unable to deduct input tax from their output tax obligations.

Example:

A local bakery’s small company owner files their GSTR-4, or the taxpayers’ quarterly report under the composition scheme, with the Goods and Services Tax Network. They summarize their quarterly turnover and tax obligations under the composition scheme, which simplifies compliance for small enterprises, in their GSTR-4. They can easily comply with GST legislation and meet their tax responsibilities with this return, all while enjoying the convenience of a composition plan that is customized to meet their specific company requirements.

4. GSTR-5

To report their taxable supply, tax liabilities, and input tax credit, non-resident foreign taxpayers must file this form.

Features:

• Reporting Taxable Supplies: In GSTR-5, non-resident taxable individuals record all sales and purchases they made during the tax period that are taxable. Details of the non-resident entity’s intrastate and interstate supply are captured in this form.
• Tax Liabilities: The GSTR-5 contains details on the non-resident taxable person’s tax obligations, including the amount of Integrated Goods and Services Tax (IGST) that must be paid on sales made in India.
• Input Tax Credit: Non-resident taxable people are not eligible to receive input tax credit (ITC) on the GST paid on purchases made within India, in contrast to regular taxpayers. As a result, input tax credit reporting is not included in GSTR-5.

Advantages:

• Compliance with GST Legislation: By correctly and promptly reporting their taxable supply and tax liabilities, non-resident foreign taxpayers can adhere to India’s GST legislation through the use of GSTR-5. It guarantees that these taxpayers comply with the GST regime’s requirements, which promotes an open and responsible tax system.
• Claim for Input Tax Credit (ITC): Taxpayers who are not residents are entitled to claim an input tax credit (ITC) on GST paid on qualified inputs, such as products and services purchased in India for their commercial operations. With the use of GSTR-5, they may report and collect input tax credits, which lowers their overall tax liability and encourages cross-border transaction efficiency.
• Online Filing: Non-resident taxpayers can easily and conveniently file their GSTR-5 returns by using the GSTN site, which allows for electronic filing. They no longer need to be physically present in India in order to submit returns thanks to this online platform, which allows users to file from any location with internet connection.

Disadvantages:

• Limited Applicability: Foreign taxpayers who do business in India but are not residents are the target audience for GSTR-5. Consequently, its usefulness within the GST system is limited since it does not address the requirements of domestic enterprises or taxpayers with varying registration types.
• Complexity for Non-Resident Taxpayers: Due to variations in tax laws and reporting obligations from their home nations, foreign companies may find GSTR-5 filing confusing and complex. Due to its intricacy, non-resident taxpayers may experience difficulties with compliance and filing mistakes.
• Manual Data Entry: Because they do not have access to automated accounting systems that are compatible with the GSTN site, non-resident taxpayers frequently rely on manual data entry to prepare and file GSTR-5. The filing procedure is more likely to contain mistakes and inconsistencies when data input is done by hand.

Example:

For a limited time, a US-based software development business offers consulting services from India. They report their taxable supply, tax obligations, and input tax credits incurred during their commercial activities in India by filing GSTR-5 as a non-resident foreign taxpayer. This comprises a description of the services provided, the relevant GST rates, and any taxes that have been paid or collected. In order to ensure that non-resident taxpayers properly and transparently meet their GST duties while conducting business transactions inside the country’s jurisdiction, GSTR-5 is an essential compliance document.

5. GSTR-6

Input Service Distributors (ISDs) file GSTR-6 forms to report the disbursement of input tax credits to qualified beneficiaries.

Features:

• Reporting for Input Service Distributors (ISDs): GSTR-6 is intended especially for ISDs, or input service providers, who are companies that process invoices for input services and then allocate the input tax credit (ITC) to their branches or divisions.
• Distribution of Input Tax Credit Declaration: ISDs utilize GSTR-6 to report the specifics of the input tax credits they have received for input services and have disbursed to the branches or units that qualify for them.
• Regarding invoices Details: In accordance with GSTR-6, ISDs must submit invoice-by-invoice information on the input services that are received and disbursed, including date, supplier information, invoice numbers, and the total amount of input tax credits allotted to recipients.

Advantages:

• Effective Distribution of Input Tax Credit (ITC): GSTR-6 permits ISDs to assign input tax credits (ITC) to qualifying individuals who are part of the same legal organization in an effective manner. GSTR-6 makes ensuring the tax burden is distributed fairly across various company units or branches by precisely reporting the ITC distribution.
• Compliance with GST Requirements: By offering an organized method for reporting ITC distribution operations, GSTR-6 assists ISDs in adhering to GST requirements. ISDs are guaranteed to satisfy their regulatory responsibilities under the GST law by reporting GSTR-6 accurately and on time.
• Openness and Accountability: GSTR-6 encourages openness and accountability in the organization’s use of tax credits by outlining the allocation of ITC to different beneficiaries. Through GSTR-6 filings, tax authorities may confirm the correctness of ITC allocation, boosting confidence in the tax system.

Disadvantages:

• Complicated Reporting Requirements: GSTR-6 requires thorough reporting of input tax credits given to different beneficiaries. The amount of transactions and the number of receivers increase the complexity of reporting, making it difficult for ISDs to ensure correct and timely submission.
• Error Potential: There is a greater chance of errors or inconsistencies in GSTR-6 files due to the complexity of reporting input tax credit distribution. Inaccurate reporting might result in compliance problems for the ISD and the recipients as well as an inaccurate allocation of ITC.
• Dependency on Supplier Compliance: In order to make claims for input tax credits, ISDs depend on suppliers to correctly and timely file their invoices. Business operations may be disrupted by delays or inaccuracies in suppliers’ filings, which may affect the ISD’s capacity to disburse ITC through GSTR-6.

Example:

ABC Electronics, a manufacturing business that operates as an input service distributor (ISD) throughout many states in India, submits their GSTR-6 on a monthly basis. ABC Electronics reports the input tax credit (ITC) distribution to its qualified units or branches through this filing. The Goods and Services Tax Identification Number (GSTIN) of the recipient units, the total credit amount allotted to each unit, and other pertinent data are included in the GSTR-6, which contains information on the ITC that was allocated. By submitting this report, ABC Electronics may ensure tax compliance and facilitate smooth operations by precisely allocating and distributing input tax credits among its many units in accordance with GST requirements.

6. GSTR-7

Taxpayers obligated to deduct tax (TDS) at source file GSTR-7. It includes information on TDS obligation, TDS deducted, and payment.

Features:

• TDS Reporting: During the tax period, the taxpayer reports the specifics of the tax deducted at source (TDS) using GSTR-7. This contains the total amount of TDS withheld, the deductee’s GSTIN, and further pertinent data.
• Tax Deducted at Source (TDS): When paying suppliers or service providers more than a certain amount, taxpayers subtract TDS. A portion of the entire payment is subtracted and sent to the government as the TDS amount.
• Filing Frequency: Taxpayers who are obligated to deduct TDS under GST usually file GSTR-7 on a monthly basis. Like other monthly GST reports, it is due by the 10th of the next month.

Advantages:

• Compliance with TDS Regulations: By reporting and remitting the tax withheld at source from supplier payments, taxpayers are able to comply with the TDS regulations under the GST law. This is made possible by the GSTR-7.
• Transparency in Tax Deduction: Taxpayers can offer a clear record of the TDS deductions taken from supplier payments by submitting GSTR-7. In addition to ensuring that the right amount of tax is withheld and sent to the government, this encourages accountability.
• Verification of TDS Deductions: Tax authorities are able to confirm the TDS deductions listed in GSTR-7 by comparing it to the taxpayer’s associated invoices and payments. This promotes compliance with TDS regulations and aids in the prevention of tax avoidance.

Disadvantages:

• Additional Compliance Cost: For taxpayers who must deduct tax (TDS) at source, GSTR-7 adds an extra layer of compliance cost. This entails being accountable for accurately deducting taxes, timely filing returns, and guaranteeing adherence to TDS regulations.
• Complexity of TDS Calculation: Businesses with many transactions and different tax rates may find it difficult to determine the exact amount of TDS to be deducted. To guarantee accurate compliance, a deep comprehension of the GST laws and careful record-keeping are necessary.
• Administrative Difficulties: Businesses may find it difficult to handle the paperwork and documentation related to TDS deduction and GSTR-7 filing. To prevent mistakes and inconsistencies, accurate documentation of TDS deductions, invoices, and payment information must be kept.

Example:

As required by the Goods and Services Tax (GST) system, an Indian IT services business deducts TDS (Tax Deducted at Source) from payments made to its contractors. The business electronically files its GSTR-7 return using the GSTN (Goods and Services Tax Network) portal in accordance with GST laws. The corporation includes information about the TDS responsibilities in this report, such as the amount of tax deducted, the deductee’s GSTIN (Goods and Services Tax Identification Number), and the pertinent invoice or payment data. This filing facilitates transparency and compliance with GST legislation by guaranteeing that the firm satisfies its duties to appropriately deduct and remit TDS.

7. GSTR-9

An annual report that offers a thorough synopsis of every transaction reported in the normal GST returns submitted for the fiscal year.

Features:

• Comprehensive Summary: All transactions reported in the normal GST returns submitted during the fiscal year are summarized in full in GSTR-9. Information from quarterly or monthly returns, such as GSTR-1, GSTR-3B, and others, is combined.
• Annual Reconciliation: Taxpayers utilize GSTR-9 to match the information from their financial records and GST returns with the turnover, input tax credits (ITC) claimed, and taxes paid over the course of the whole fiscal year.
• Consolidated Reporting: GSTR-9 requires taxpayers to disclose yearly numbers for sales, purchases, input tax credits, and tax obligations. This is in contrast to monthly or quarterly filings. It provides a comprehensive picture of the taxpayer’s annual GST compliance.

Advantages:

• Complete Summary: Throughout the fiscal year, taxpayers can obtain a full summary of all transactions recorded in their regular GST returns by utilizing GSTR-9. Input tax credits, tax obligations, sales, and purchases are all combined into one view, which facilitates improved financial analysis and decision-making.
• Compliance Verification: The filing of GSTR-9 certifies the taxpayer’s adherence to the statutory requirements and guarantees compliance with GST laws. It acts as official documentation of the taxpayer’s financial transactions and tax payments, which is useful in the event of an audit or other official evaluation by the government.
• Reconciling Input Tax Credits: Using GSTR-9, taxpayers may match up the taxes paid on purchases with the input tax credits (ITC) they claimed throughout the fiscal year. By identifying inconsistencies or mistakes in ITC claims, this reconciliation ensures correct reporting.

Disadvantages:

• Complexity: GSTR-9 requires comprehensive reporting of every transaction for the whole fiscal year, including supplies made both in and out of the country, input tax credits (ITCs) claimed, tax obligations, and modifications. For taxpayers, the task of gathering and arranging this data can be intimidating, especially for companies with large operations or those without sufficient accounting systems.
• Time-consuming: Preparing and submitting GSTR-9 takes a lot of time and work because of how thorough it is. Taxpayers must verify accuracy in reporting, reconcile data, and carefully check their records. This procedure can take a long time, particularly for big companies that conduct a lot of business in several states.
• Error Risk: Because GSTR-9 is so comprehensive, there is a greater chance that some reporting mistakes or inconsistencies may occur. Inaccuracies in the return might be from data input errors, categorization mistakes, or transaction oversight. After the fact, fixing these mistakes might be difficult and lead to fines or further requirements for compliance.

Example:

For the fiscal year 2022–2023, an Indian manufacturing business with a turnover above the allowed amount prepares and files its GSTR–9. A thorough description of their yearly GST transactions is given in this GSTR-9, together with information on inbound and outgoing supply, input tax credits claimed, tax obligations, and any other liabilities found throughout the reconciliation process. As required by GST laws, the firm makes sure that the data it reports on GSTR-9 correctly corresponds with its audited financial accounts. Completing the GSTR-9 and filing it online by the deadline using the GSTN portal makes it easier to comply with GST rules and regulations.

8. GSTR-9C

Reconciliation statement that taxpayers with turnover exceeding a predetermined threshold file with their GSTR-9. Financial statements, tax paid, and turnover are all reconciled.

Features:

• Financial Data Reconciliation: GSTR-9C compares the taxpayer’s audited financial accounts with the turnover and taxes paid disclosed in the yearly return GSTR-9. It guarantees that the two sets of data do not include any significant differences.
• Certification by a Qualified Cost or Chartered Accountant: A qualified Cost or Chartered Accountant is required to certify GSTR-9C. The certifying expert confirms that the reconciliation statement and the financial information submitted by the taxpayer are accurate and comprehensive.
• Compliance Obligation: For some taxpayer groups, including those with a turnover over the specified amount, GSTR-9C is an obligatory compliance obligation. Penalties and legal repercussions may result from filing an erroneous statement or from failing to file GSTR-9C.

Advantages:

• Assures Correctness: By comparing the financial data submitted by taxpayers with the audited financial accounts, GSTR-9C aids in assuring the correctness and dependability of the information. This lowers the possibility of mistakes and inconsistencies in the yearly GST filings.
• Enhances Compliance: For some taxpayer categories with turnovers over a predetermined threshold, filing GSTR-9C is an obligatory compliance obligation. By guaranteeing that taxpayers follow the GST laws and regulations, it encourages tax system compliance.
• Increases Transparency: GSTR-9C makes the tax system more transparent by revealing any significant disparities found throughout the reconciliation process. Taxpayers are compelled to offer justifications for these disparities, encouraging transparency and confidence.

Disadvantages:

• Added Compliance Burden: The extra obligation to prepare and file a reconciliation statement raises the compliance burden for taxpayers required to file GSTR-9C. It involves compiling and arranging large amounts of financial data, which can take a lot of time and resources.
• Dependency on Outside Experts: In order to certify GSTR-9C, taxpayers must work with certified chartered accountants or cost accountants. This reliance on outside experts raises the expenses associated with compliance and may make it more difficult to recruit and work with qualified experts, particularly for smaller companies.
• Cost Implications: Taxpayers will incur additional expenses if they choose to engage outside experts to certify GSTR-9C. A business’s total compliance costs are influenced by the fees that cost or chartered accountants charge for their services.

Example:

A manufacturing business that files its GSTR-9C and GSTR-9 annual return with the tax authorities together exceeds the yearly turnover threshold. In order to verify that the financial information provided in their GSTR-9 correctly corresponds with the audited financial accounts, the firm hires a certified chartered accountant to validate the reconciliation statement. In order to ensure compliance with GST requirements, the reconciliation procedure entails reviewing the turnover, taxes paid, input tax credits claimed, and other financial facts. Following certification, the GSTR-9C gives stakeholders—including tax authorities—assurance about the dependability and correctness of the business’s financial reporting under the GST system.

Conclusion

In conclusion, GST reports are essential to the functioning of the Indian tax system because they give companies a systematic way to disclose their financial activities and adhere to GST laws. They have advantages like transparent processes, input tax credit programs, and easier compliance, but they also have drawbacks like expense, error-proneness, and technological problems. However, the introduction of online filing, automation, and enhanced infrastructure means that GST returns help create a more effective, transparent, and taxpayer-friendly tax system that promotes accountability and eases national trade and commerce.

Types of GST Returns – FAQs

What is filing a GST return?

Businesses registered under the Goods and Services Tax (GST) system in India report their sales, purchases, and tax liabilities to the tax authorities on a periodic basis through the filing of GST returns.

How often one may submit their GST returns?

Their turnover and registration type will determine how frequently they file GST returns. While small enterprises under the composition system file quarterly taxes, the majority of taxpayers file monthly returns.

What occurs if a person fails to file their GST return by the deadline?

Penalties and legal repercussions might arise from filing GST returns beyond the deadline.

Can someone amend the GST return after it has been filed?

If one finds any mistakes or omissions in the first filing, then they are welcome to make revisions to their GST return within the allotted time frame.