Businesses with sales under a certain threshold can opt to take advantage of the composition scheme. Under the composition scheme, you pay a set percentage of your revenue in goods and services tax, and often, the GST rate you pay under the composition scheme is lower than you would pay normally. Under this simplified plan, you don’t have to file monthly returns, but you do have to file form GSTR-4, GSTR-4A, and GSTR-9A. Therefore, here is a brief description about GST return for composition scheme taxpayers.
What Is the GSTR-4?
The GSTR-4 is a quarterly return that must be filed by taxpayers who use the composition scheme. This form takes the place of GSTR-1, GSTR-2, and GSTR-3 which most businesses have to file monthly. The GSTR-4 is due on the 18th day of the month following the end of the quarter.
For instance, the return relating to the first quarter of the year (January, February, and March) is due on April 18th. Essentially, you use this form to report your sales and you calculate your GST liability based on that amount.
Filling Out the GSTR-4
You need to include your GST identification number, your business name, and your address. Then, you note your inward supplies, which are goods and services purchased for your business, and you detail your outward supplies, which are sales you made to your customers. You need to note both your intra-state taxable sales as well as any GST-exempt sales that you made. Note that you can’t qualify for the composition scheme if you do interstate sales.
Additionally, you need to detail credit or debit notes that you issued, and you must note if you received payments on credit notes issued in earlier tax periods. On top of that, you have to note goods or services that you imported. Finally, you calculate your tax liability by estimating the GST you collected on outward supplies and subtracting the reverse charges you earned on inward supplies.
The GSTR-4A contains information about your inward supplies and details of credit notes that have been paid. This form is auto-populated.
To explain how that works, imagine you bought supplies from a business that files GST returns monthly. When that business reports its sales, it puts the GST identification number of its customers on its GST return. Then, if your GSTIN appears on one of these returns, the government uses that information to autopopulate your GSTR-4A. In contrast, if you bought goods or services from an unregistered company or another composition dealer, that information cannot be autopopulated and you must add those details yourself.
Everyone who is registered for the GST scheme must complete the GSTR-9 at the end of the year. If you register for the composition scheme, you can file the simplified GSTR-9A. As of 2018, this form is 10 pages long but relatively straightforward. You provide details about your company and your gross turnover for the year, and you note which sales were in your state and which where out of state. You also note your gross profits, profits after tax, and net profits.
Completing these forms accurately requires detailed information about your sales and expenses. Make sure you have the numbers you need by investing in GST-ready cloud-based accounting software such as QuickBooks.