Even though it seems easy to handle a company on the surface level, only the entrepreneur knows the actual hard work required. While managing your business, you may overlook tax compliance. Clearly, this is far from ideal as any mistakes in your year-end financial planning can mean losing benefits in tax cuts and Job Act provisions.
The introduction of GST (Goods and Services Tax) has helped in making the financial and tax structure more efficient and unambiguous. With the new tax reform in place, tech companies are less likely to make any errors in their tax returns.
As GST covers a wide variety of businesses, each sector will have its own rules regarding tax returns. Thus, as a technology business, it is important for you to know the details concerning your company.
Here are a few general observations on the GST returns procedure specific to the IT industry.
GST Rates For IT Industry
It might be interesting to point out that all IT and telecom services fall under the third tax slab of 18%. This tax rate is levied on all kinds of software supply like services, products, supply on media, electronic download and temporary transfer of intellectual property.
For those in the tech manufacturing sector, goods such as computers, laptops, printers, etc. will also attract 18% GST with full Input Tax Credit (ITC).
If the turnover of your company exceeds the threshold of 40 lakhs, it is mandatory for you to register for GST. If your annual turnover is below 40 lakhs, GST registration is optional.
E-commerce operators are liable to register for GST irrespective of their annual turnover amount. Registration is also mandatory for suppliers that use e-commerce platforms for their business.
Types Of GST Returns
There are around 25 types of GST return forms for taxpayers to choose from. For instance, GSTR-1 is a return form to be filed monthly and requires details of sales of taxable goods or services provided. Similarly, the GSTR-9 return form must be filed yearly, but it has clauses regarding the turnover.
Again, the number of return forms to be filed varies depending on the registration of taxpayers under various composition schemes. To get more clarity on which forms your company needs to file, contact your accountant.
Filing ROC Returns
Once you form a company, you have to register it under the Companies Act, 2013. After doing this, it is mandatory to file an annual return to the Registrar of Companies (ROC).
This is actually a return of the company’s accounts that entails entire details of the balance sheet of a company, profit and loss, etc.
Filing TDS Returns
In your company, when any payment is made, an amount is deducted from that payment as a tax. Be it the salary of an employee, a freelancer, or any payment after completion of work, tax deduction at source (TDS) must be deducted from that payment.
This deducted amount is deposited with the government. Every financial year, the taxpayer receives that amount by filing the TDS returns form.
GST Filing Now Made Simpler
The process of filing GST is fully automated and executed online. Follow these steps to correctly file your taxes under GST:
- Shortly after registering your startup or MNC, you will receive a 15-digit GSTIN which includes details of your business location like state code and PAN.
- After this, visit the official GST portal, and under the services section, locate the return dashboard.
- Enter all your company details and select the type of return and financial year for which you are filing returns.
- Click on submit.
GST Filing Upgrades For 2020
Since taxpayers need to file various GST returns forms, GST will work on only a single return to make the process easier. This may comprise two annexures, ANX-1 and ANX-2, that will contain details of inward and outward supply.
Along with this, there will be three return options, RET-1, RET-2, RET-3 (also called Normal, Sahaj and Sugam). For quarterly filers to pay their timely tax dues, PMT-08 challan has been introduced.
The Impact Of GST On The IT Industry
All in all, the introduction of the GST reform has led to a dramatic increase in the demand for software and IT solutions. In fact, since all taxation under GST is facilitated through the GST Network, an online portal, it would seem that the IT industry is set to make a lot of profit.
Tech companies have to work on redesigning the software in order to enable coordination between tax experts and the technology department. A large part of the tax-paying population in the country relies on gst software to file their returns accurately. Therefore, the ERP and accounting software used in most companies have to be accommodated with the latest rules of GST.
Less Paperwork With E-Invoicing
E-invoicing is a system designed by the GST Network with the capacity to handle around 1 crore invoices daily. It will register in real-time to the Invoice Registration Portal with a unique Invoice Registration Number.
E-invoicing is a major step in removing various flaws caused due to manual entry, errors in transcription, etc. Besides, it will also reduce the task of handling, maintaining, and managing various invoices, bills, and receipts. This will help businesses move towards a paperless system, causing the demand for GST software to increase in the market.
It goes without saying that indirect taxes paid by the IT sector are the backbone of the Indian financial structure. However, as the GST regime is still new, many entrepreneurs are fundamentally misguided on the taxation process. The points in this article will help you correctly file a GST return for your business, thereby maintaining tax compliance obligations.
While filing your tax online, you may need to sign documents digitally. For that reason, it is a good idea to download emsigner for gst. To ease the process of filing GST returns, you can make use of various accounting software like Khatabook for guidance.
Due to the lockdown in our country, the government has extended the date of filing returns and provided financial support to the vast majority of businesses in our country. This helping hand will allow businesses and, in turn, the economy to flourish and prosper.