Understanding GST and Preparing Your Entries

Introduction to GST

Goods and Service Tax (GST) is a composite indirect tax implemented in India for goods and services. It unifies and consolidates various taxes like service tax, value-added tax (VAT), and excise duty. GST simplifies the tax system, benefiting small and medium-sized enterprises by reducing the complexity of compliance across multiple tax jurisdictions. It can be described as 'one India, one tax,' although it primarily covers indirect taxes.

How Tax is Accounted

General GST rates for services are 18%, which is further divided into Central Goods and Services Tax (CGST) at 9% and State Goods and Services Tax (SGST) at 9% if the buyer and seller are in the same state. For transactions between states, the entire 18% is accounted for as Integrated Goods and Services Tax (IGST).

The net bill value or invoice value is the net taxable value, which consists of SGST or CGST or IGST. The net taxable value is the total value of goods or services after all discounts but before adding tax. The net invoice value includes all relevant GST amounts, making it the final value after tax.

Key amounts to understand: Net Bill Value / Invoice Value: The value of goods or services after all discounts but before tax. SGST or CGST or IGST: The GST applicable on the sales, depending on the nature of the transaction (intra-state or inter-state). Net Taxable Value: The final value of goods or services after all discounts but before tax. Net Invoice Value: The total value including all relevant GST amounts.

Steps for Filing GST Returns

The process of filing GST returns involves several key steps:

Step 1: Access the GST Portal

Visit the official GST portal.

Step 2: Obtain a 15-Digit GST Identification Number

A 15-digit GST identification number is issued based on your state code and Permanent Account Number (PAN) upon registration.

Step 3: Upload Invoices to the GST Portal

Upload your invoices to the portal using the software. Each invoice will generate a reference number.

Step 4: File GST Returns

After uploading your invoices, you need to file outward, inward, and cumulative monthly returns online. If errors are found, you can correct them and resubmit the returns.

Step 5: Submit Outward Supply Returns in GSTR-1 Form

Furnish the details of outward supplies through the information section at the GST Common Portal (GSTN) via GSTR-1 form before the 10th of the following month.

Step 6: Verify Details of Outward Supplies

The supplier’s details of outward supplies will be available in GSTR-2A to the recipient. The recipient must verify, validate, and modify these details.

Step 7: File Details of Inward Supplies

The details of inward supplies must be furnished in GSTR-2 form by the recipient.

Step 8: Modify Inward Supply Details

The supplier can either accept or reject the modifications made by the recipient in GSTR-1A.

By following these steps, you can ensure that your GST entries are accurate and compliant, helping you to avoid any penalties and save on tax-related issues.