GST Compliance: User-Friendly Guide

GST Compliance: User-Friendly Guide

For FY 2026-27, GST compliance for a regular taxpayer means filing GSTR-1 by the 11th, paying tax via GSTR-3B by the 20th, reconciling ITC against GSTR-2B every month, generating e-invoices if your aggregate turnover ever crossed Rs. 5 crore in a prior year, and filing GSTR-9 (plus GSTR-9C if turnover exceeds Rs. 5 crore) by 31 December 2026. Small taxpayers on the QRMP scheme file quarterly but pay monthly. Miss a step and you face late fees, ITC reversals, or demand notices under Section 73 or 74 of the CGST Act 2017.

Who Must Register: Thresholds and Mandatory Cases

Turnover-Based Thresholds

The registration trigger under the CGST Act depends on the type of supply and your state:

• Goods suppliers: Rs. 40 lakh aggregate turnover in most states; Rs. 20 lakh in special category states (Jammu & Kashmir, Himachal Pradesh, Uttarakhand, and the north-eastern states)
• Service suppliers: Rs. 20 lakh in most states; Rs. 10 lakh in special category states
• Mixed supply: Apply the goods threshold — Rs. 40 lakh for most states

"Aggregate turnover" is computed on a single all-India PAN basis. If your Pune unit turns over Rs. 24 lakh and your Nagpur unit turns over Rs. 18 lakh — combined Rs. 42 lakh — you cross the goods threshold even though each unit is individually below it.

Voluntary registration is permitted at any turnover level. If you incur significant GST on purchases — raw materials, rent, professional fees — voluntarily registering unlocks that Input Tax Credit (ITC) and directly reduces your cost structure.

Mandatory Registration Regardless of Turnover

Certain categories must register even on the first rupee of supply:

1. Inter-state suppliers of taxable goods or services
2. E-commerce operators and sellers supplying through them (for notified goods/services)
3. Casual taxable persons making taxable supplies
4. Non-resident taxable persons
5. Persons liable under the Reverse Charge Mechanism (RCM)
6. Input Service Distributors (ISD)
7. Government entities required to deduct TDS under Section 51
8. Online Information and Database Access or Retrieval (OIDAR) service providers supplying to unregistered Indian recipients

If you supply software services to a Bangalore client from a Hyderabad base — both intra-state — you apply the service threshold. The moment one client is in a different state, mandatory registration kicks in regardless of rupee value.

Monthly Filing Obligations: GSTR-1 and GSTR-3B

GSTR-1: Invoice-Level Outward Supply Details

GSTR-1 is filed on the GST portal (gstin.gov.in) by the 11th of the following month for all monthly filers. It captures every B2B invoice, B2C invoice, debit note, credit note, and advance receipt issued during the month, broken into tables by supply category.

Why accuracy here matters more than any other return: the instant you upload an invoice in GSTR-1, it flows into your buyer's GSTR-2B as available ITC. A wrong GSTIN, wrong invoice date, or wrong taxable value means your buyer cannot claim credit. Expect a correction request — and sometimes a delayed payment — if you file GSTR-1 with errors.

GSTR-1A allows you to add or amend invoices after GSTR-1 is filed but before GSTR-3B is locked. Use it proactively rather than accumulating errors for the annual return.

For QRMP filers, the Invoice Furnishing Facility (IFF) allows uploading B2B invoices in the first two months of a quarter so buyers receive credit on a monthly basis — without waiting for the quarterly GSTR-1.

GSTR-3B: Summary Return and Tax Payment

GSTR-3B is due by the 20th of the following month. It is a self-declared summary return in which you declare:

• Total outward taxable supply and output GST
• ITC available (drawn from reconciled GSTR-2B data)
• ITC utilised against IGST, CGST, and SGST liabilities
• Net cash tax payable
• Actual payment through the Electronic Cash Ledger

Since FY 2023-24, GSTR-3B comes pre-populated from your GSTR-1 and GSTR-2B. Do not accept the pre-fill without review. Supplier amendments, pending invoices from late-filing vendors, and RCM liability are the three most common sources of pre-fill mismatch.

One rule to memorise: pay first, file after. GST liability must be discharged by the 20th. Interest at 18% per annum accrues from the day after the due date on any tax shortfall — even if you file on time but pay short.

The QRMP Scheme: Quarterly Returns, Monthly Payments

Taxpayers with aggregate turnover up to Rs. 5 crore can opt into the Quarterly Return Monthly Payment (QRMP) scheme. Under QRMP:

• GSTR-1 is filed quarterly (by the 13th of the month after the quarter ends)
• GSTR-3B is filed quarterly (by the 22nd or 24th, depending on your state grouping)
• Tax is paid monthly for the first two months of each quarter via Form PMT-06, due by the 25th of the following month

PMT-06 payment options:

1. Fixed Sum Method: Pay 35% of the net tax paid in the immediately preceding quarter — or 100% if that quarter covered only one month
2. Self-Assessment Method: Compute the actual liability for the current month and pay that amount

When QRMP saves time: A local food distributor with steady monthly billing — say Rs. 15 lakh every month — benefits from the fixed sum method. Two PMT-06 payments and one quarterly GSTR-3B replaces three monthly filings.

When QRMP creates a cash problem: Seasonal businesses that generate most revenue in one month of the quarter may overpay under the fixed sum method if the preceding quarter was heavy, leaving money parked as an Electronic Cash Ledger balance. Switch to the self-assessment method in such quarters.

Opt-in or opt-out via the GST portal by the last day of the preceding quarter. You cannot change mid-quarter.

Input Tax Credit Discipline: Section 16 and GSTR-2B Reconciliation

ITC is where most GST compliance disputes originate. Section 16 of the CGST Act sets four non-negotiable conditions for every credit claim:

1. You hold a valid tax invoice (or debit note) addressed to your GSTIN
2. The supplier has filed GSTR-1 so the invoice appears in your GSTR-2B
3. You have received the goods or services (or the first instalment, in the case of staged supply)
4. You have paid the supplier within 180 days of the invoice date

Fail any single condition and the credit must be reversed. The GSTR-2B condition is the one most underestimated. If your supplier habitually files GSTR-1 late, their October invoice may not appear in your GSTR-2B until November — you can only claim it in the November return.

Step-by-Step GSTR-2B Reconciliation

Follow this sequence before every GSTR-3B filing:

1. Download GSTR-2B from the GST portal after the 14th (it is generated on the 14th for the preceding month)
2. Export to Excel or sync with your accounting software
3. Match each GSTR-2B line against your purchase register: supplier GSTIN, invoice number, date, taxable value, and tax amount
4. Flag invoices in your books that are absent from GSTR-2B — do not claim these; call the supplier to rectify
5. Flag invoices in GSTR-2B that are not yet booked — book them, claim ITC
6. Review Part II of GSTR-2B for supplier amendments that reduce previously claimed credit
7. Enter only the reconciled ITC figure into Table 4 of GSTR-3B

Build a payment tracker linked to invoice dates. When a creditor balance approaches 150 days unpaid, escalate internally — paying by day 180 costs nothing; reversing ITC plus 18% interest after day 180 costs real money.

Rule 86B: The 1% Cash Payment Restriction

Rule 86B applies in any month where the value of your taxable supply (excluding exempt and zero-rated supply) exceeds Rs. 50 lakh. In such months, you must pay at least 1% of your output tax liability in cash and cannot offset this portion with ITC from the Electronic Credit Ledger. Exceptions apply if you received a GST refund above Rs. 1 lakh in the preceding two months, or if the promoter/director paid income tax above Rs. 1 lakh in the two preceding assessment years.

E-Invoicing Under Rule 48(4): How It Works in 2026

Who Is Covered

E-invoicing is mandatory for every registered person whose aggregate turnover in any preceding financial year from FY 2017-18 onwards exceeded Rs. 5 crore. If you crossed Rs. 5 crore even once — say in FY 2022-23 — you are covered in FY 2026-27 and every subsequent year.

Exempt categories include banking companies, insurers, NBFCs, Goods Transport Agencies issuing consignment notes, multi-screen cinema operators, and specified passenger transport operators.

The IRP Process (Step by Step)

1. Generate the invoice in your ERP or accounting software using the notified JSON schema
2. Upload the JSON to any approved Invoice Registration Portal (IRP) — NIC IRP, IRIS IRP, Clear IRP, or others — via API or manual upload
3. The IRP validates the data, checks for duplicate IRNs, and digitally signs the payload
4. The IRP returns the Invoice Reference Number (IRN) — a unique 64-character hash — and a QR code containing key invoice fields
5. Print or embed the IRN and QR code on the invoice before dispatch to the recipient
6. The IRP pushes invoice data directly to GSTR-1 and the E-Way Bill system, eliminating double entry

The end-to-end cycle via API integration takes under 30 seconds.

What Happens If You Skip It

Under Rule 48(5), an invoice issued without a valid IRN by a covered taxpayer is treated as not issued at all. Consequences:

• Your customer cannot claim ITC on the supply
• The transaction is not reflected in GSTR-1 unless you manually correct it
• Penalty under Section 122 — the higher of Rs. 10,000 or the tax on the supply — may be imposed per invoice

E-Way Bill Essentials

An E-Way Bill is required for the inter-state movement of goods where the consignment value exceeds Rs. 50,000. For intra-state movement, the threshold varies by state — most have adopted Rs. 50,000, but verify your specific state notification.

• Part A: Consignment details — GSTIN of supplier and recipient, invoice number, HSN code, value, and applicable tax
• Part B: Transport details — vehicle number and transporter ID — required before goods leave the premises
• Validity: One day per 200 km (or part thereof). A 700 km consignment has a validity of four days. Extension is available through the portal for delays caused by exceptional circumstances (natural calamity, transshipment, etc.)

When e-invoicing applies and you include the vehicle number in the IRP upload, the E-Way Bill is generated automatically alongside the IRN — no separate step required.

Reverse Charge Mechanism: Who Pays and How to Track It

Under the Reverse Charge Mechanism (RCM), the recipient pays GST directly to the government rather than the supplier collecting it. This arises under two provisions:

Section 9(3) — Notified categories (current list includes):

• Legal services received from an individual advocate or law firm by any business entity
• Road transport services from a Goods Transport Agency (GTA) where the GTA has not opted for forward charge
• Services provided by a director to the company (for which the company is the recipient)
• Sponsorship services received from any person other than a body corporate
• Security services received from an individual, HUF, or partnership firm by a registered person

Section 9(4) — Supplies received from unregistered persons in specified sectors above the notified threshold.

Accounting for RCM: The Correct Sequence

1. On receipt of the invoice or service, identify the applicable RCM category
2. Compute GST on the taxable value at the applicable rate
3. Pay the RCM liability strictly in cash — ITC from the Electronic Credit Ledger cannot be used to discharge RCM
4. Declare the RCM liability in Table 3.1(d) of GSTR-3B for the month of payment
5. Claim ITC of the same RCM tax amount in Table 4(A)(3) of the same return period, provided all Section 16 conditions are met

RCM is effectively a timing obligation — you pay and recover in the same month — but only if you track it. Missing it means paying the tax late plus 18% interest with no corresponding ITC recovery until you self-correct.

Annual Return: GSTR-9 and GSTR-9C

Who Files What

GSTR-9C is a reconciliation statement that bridges your audited financial statements (Balance Sheet and P&L) to the GST returns filed during the year. Since the 2021 amendment to Sections 35(5) and 44, self-certification by the taxpayer is permitted — a mandatory GST audit by a CA or CMA is no longer a statutory requirement (though independent review remains best practice for large businesses).

For FY 2026-27 returns, the GSTR-9 is due on 31 December 2027. Start the reconciliation by October 2027 at the latest: differences in turnover, unbooked ITC, unreported RCM, or amendments to monthly returns all need resolution before you certify.

Penalties and Late Fees: Worked Examples

GSTR-1 and GSTR-3B Late Fees

The statutory late fee is Rs. 50 per day per return (Rs. 25 under CGST + Rs. 25 under SGST), reduced to Rs. 20 per day for NIL returns. Government notifications cap the maximum fee by turnover bracket:

• Turnover ≤ Rs. 1.5 crore: Rs. 2,000 per return (Rs. 1,000 CGST + Rs. 1,000 SGST)
• Turnover Rs. 1.5 crore to Rs. 5 crore: Rs. 5,000 per return
• Turnover > Rs. 5 crore: Rs. 10,000 per return

Worked Example — GSTR-1 Late Filing:

A textile trader with annual turnover of Rs. 90 lakh files October 2026's GSTR-1 on 30 January 2027 — 80 days late.

• Accrued fee: Rs. 50/day × 80 days = Rs. 4,000
• Applicable cap (turnover ≤ Rs. 1.5 crore): Rs. 2,000
• Late fee payable: Rs. 2,000

If GSTR-3B is filed with the same 80-day delay, the same Rs. 2,000 cap applies — total exposure across both returns: Rs. 4,000, not the uncapped Rs. 8,000.

GSTR-9 Late Fee

GSTR-9 carries a higher fee: Rs. 200 per day (Rs. 100 CGST + Rs. 100 SGST), capped at 0.25% of aggregate turnover in the state for that year.

Worked Example — GSTR-9 Late Filing:

A pharmaceutical distributor in Maharashtra with FY 2025-26 turnover of Rs. 1.2 crore files GSTR-9 on 28 February 2027 — 59 days after the 31 December 2026 deadline.

• Accrued fee: Rs. 200/day × 59 days = Rs. 11,800
• Turnover-based cap: 0.25% × Rs. 1,20,00,000 = Rs. 30,000
• Late fee payable: Rs. 11,800 (accrued fee is the lower figure)

Penalty for Tax Short-Payment

Under Section 73 (non-fraud cases): penalty is the higher of 10% of tax or Rs. 10,000. Under Section 74 (fraud, suppression, or wilful misstatement): penalty equals 100% of tax. The distinction turns on intent. A business that voluntarily amends its GSTR-3B and pays differential tax before receiving a show-cause notice is almost always assessed under Section 73 — plus 18% interest — not Section 74.

Common Mistakes and How to Fix Them

1. Claiming ITC before it appears in GSTR-2B You book an October invoice and claim its ITC in October's GSTR-3B. The supplier files GSTR-1 late — the invoice only reaches your GSTR-2B in November. You have claimed ineligible credit. Fix: Claim ITC only from the downloaded GSTR-2B for the return period. Build a cut-off: GSTR-2B downloaded on the 14th, reconciliation by the 17th, GSTR-3B filed between the 18th and 20th.

2. Missing RCM on freight invoices from a GTA A logistics vendor's freight bill arrives without GST because the GTA has not opted for forward charge. The accounts team books it as a cost and moves on. Fix: For every GTA freight bill, confirm in writing whether the agency has opted for forward charge. If not, compute RCM at the applicable rate, pay in cash, and declare in GSTR-3B Table 3.1(d). Add this check to your vendor onboarding checklist.

3. Losing track of the 180-day ITC window You claim ITC on a large vendor invoice in April 2026. A billing dispute delays payment; you finally settle in November 2026 — 214 days after the invoice date. Fix: In the month you cross day 180, reverse the ITC in GSTR-3B and pay 18% interest from the original claim date. Rebook the ITC in the period you make the actual payment. Document the payment date.

4. Issuing regular invoices instead of e-invoices A covered taxpayer generates e-invoices for taxable B2B supplies but issues ordinary invoices for supplies to deemed-export customers or certain SEZ transactions, mistakenly believing the category is blanket-exempt from IRP. Fix: Map every supply category to the IRP requirement at the ERP level. The exemptions from e-invoicing are category-specific; when in doubt, generate the IRN — it costs nothing and cannot hurt you.

5. Filing GSTR-9 directly from monthly GSTR-3B data without reconciling to audited books The accountant exports totals from the GST portal and fills in GSTR-9 without cross-checking the audited P&L. Turnover differences, timing mismatches on ITC, and unreported RCM all surface later in scrutiny. Fix: Before filing GSTR-9, prepare a formal reconciliation bridge from your audited P&L revenue line to GSTR-9 Table 5. Investigate every rupee of difference. Any under-reported tax should be paid via DRC-03 before you certify the return.

Key Takeaways

• Registration is turnover-based (Rs. 40 lakh for goods, Rs. 20 lakh for services in most states), but inter-state suppliers, RCM recipients, and e-commerce operators must register regardless of scale.
• Monthly discipline is the foundation: GSTR-1 by the 11th, tax paid and GSTR-3B filed by the 20th — both anchored to your GSTR-2B reconciliation, not just your purchase register.
• QRMP reduces filing frequency below Rs. 5 crore turnover but demands monthly PMT-06 payments; choose fixed sum or self-assessment based on your revenue seasonality each quarter.
• ITC under Section 16 is conditional on GSTR-2B appearance, actual receipt of supply, and supplier payment within 180 days — each condition must be tracked separately, every month.
• E-invoicing under Rule 48(4) is mandatory once your aggregate turnover ever crossed Rs. 5 crore in any prior year; an invoice without a valid IRN is legally void and bars your buyer's ITC claim.
• RCM is a cash obligation — you cannot use ITC to pay it — but the same amount is claimable as ITC in the same return period, making accurate tracking the only real compliance cost.
• Late fees are capped by turnover bracket for GSTR-1 and GSTR-3B, but GSTR-9 at Rs. 200/day plus 18% interest on tax shortfalls can compound materially — early reconciliation and on-time payment are always cheaper than remediation.