GST Compliance: Registration, Filing, Invoicing (India)

When to Register for GST: Thresholds & Mandatory Requirements

GST registration isn’t mandatory for all businesses. There are clear turnover thresholds. Once you cross them, you must register within 30 days or face penalties.

GST Registration Thresholds 2025 (India)

Special Category States (Lower Thresholds)

• States with ₹20L goods threshold: Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand
• States with ₹10L services threshold: Same as above
• Exception: Assam and Jammu & Kashmir opted for ₹40L (same as normal states)

When Registration is MANDATORY (Regardless of Turnover)

• Interstate supply: If you supply goods/services across state lines, register immediately (any turnover)
• Online marketplace selling: Selling on Amazon, Flipkart, Meesho = mandatory from day 1
• Supply of specific goods: Supply of alcohol, tobacco, motor vehicles = mandatory
• Casual taxable person: Non-resident making occasional supplies into India = must register
• Input Tax Credit requirement: If you need to claim ITC from day 1 = voluntary registration (before threshold)

Voluntary Registration (Below Threshold)

• Can register voluntarily even below threshold. Benefits: claim ITC immediately, B2B credibility increases, appear larger
• Cost of voluntary registration: Must file monthly GSTR-1 + GSTR-3B (more compliance burden)
• When to do it: If your business has high raw material costs (high ITC recovery), register early
• Example: Manufacturing business with ₹30L turnover but ₹8L raw material costs. Register early, claim ₹8L ITC month 1

GST Registration Process: Step by Step

GST registration is online-only through GST portal (gst.gov.in). It’s free. Takes 1-3 days if documents are clean.

Documents Required for GST Registration

• PAN: Permanent Account Number (mandatory)
• Business address proof: Electricity bill, lease deed, property tax certificate (utility bill preferred)
• Bank account details: Account number, IFSC code (same as PAN holder if individual)
• Business details: Nature of business, products/services, turnover estimate
• Authorized signatory: Details of person signing (if business is partnership/company)
• For goods supply: Usually just above docs
• For services supply: Usually just above docs

GST Registration Timeline (Step by Step)

Cost of GST Registration

• GST registration fee: FREE (no cost)
• Time investment: 1-2 hours (form filling + document upload)
• Timeline: 1-3 days if clean documents, up to 7-10 days if GST officer asks questions
• Expedited option: No expedited track (first-come-first-serve)

After Registration: First 21 Days

• You have GSTIN (13-digit number). Valid for life (unless cancelled)
• First GSTR-1 due within 21 days of registration. Report all supplies made on/after registration date
• Must obtain GST certificate from portal. Use this to conduct business (for invoicing)
• Communicate GST number to customers/suppliers. Customers can claim ITC only with valid GSTIN on invoices

Filing Timelines: GSTR-1 & GSTR-3B Deadlines

GST returns have strict deadlines. One day late = penalty. The two main returns are GSTR-1 and GSTR-3B. Both have different filing frequencies based on turnover.

GSTR-1 Filing Deadlines (Outward Supplies) 2025

GSTR-3B Filing Deadlines (GST Liability) 2025

Key Dates to Remember (2025-26 Financial Year)

• GSTR-1 for April 2025: Due 11th May 2025
• GSTR-3B for April 2025: Due 20th May 2025
• GSTR-1 for Jan-Mar 2025 quarter: Due 13th April 2025
• GSTR-3B for Jan-Mar 2025 quarter: Due 22nd April 2025 (state dependent, could be 24th)

What Happens if You Miss the Deadline (Late Filing)

• Late fee: ₹50/day for regular returns, ₹20/day for nil returns (auto-calculated)
• Late fee cap: ₹5,000 per return (regular), ₹500 (nil returns)
• Interest: 18% per annum on unpaid tax (separate from late fee)
• ITC blocked: Input Tax Credit blocked until returns filed and late fees paid
• Example: GSTR-3B filed 15 days late = ₹50 × 15 = ₹750 late fee (capped at ₹5000)

Filing Extensions & Relief

• Standard extension: No automatic extension. GST portal closes sharply at deadline
• COVID/Force majeure relief: Government occasionally announces extensions (rare, case-by-case)
• Best practice: File 1-2 days before deadline. Don’t wait until last minute

Invoicing Requirements: What Must Be on Invoice

Under GST, invoicing is critical. If invoice is wrong, your customer can’t claim ITC. This breaks trust and loses you business.

Mandatory GST Invoice Elements (Section 31 GST Law)

GST Slab Rates 2025 (Standard)

• 5% GST: Most essentials (medicines, food grains, edible oil)
• 12% GST: Most services (consulting, design, IT services)
• 18% GST: Most products (electronics, apparel, software)
• 28% GST: Luxury goods (air-conditioners, high-end cars)
• 0% GST (Nil/Exempt): Services like education, health, agriculture

Invoice Format: B2B vs B2C

B2B Invoices (Business to Business)

• Must have customer GSTIN. If customer is registered GST taxpayer, GSTIN is mandatory
• If customer GSTIN not mentioned: System rejects GSTR-1 (error)
• Customer then claims ITC in GSTR-2B. Buyer cross-verifies invoice in seller’s GSTR-1
• Example: Software company invoicing law firm (both registered) = full GST, customer claims ITC

B2C Invoices (Business to Consumer)

• No customer GSTIN required. Consumer can’t claim ITC anyway
• Customer details optional. Can be “Walk-in customer” or “Retail customer”
• Invoice still shows GST. Consumer pays GST but gets no ITC benefit
• Example: Retail shop selling products to individual customers (no GSTIN) = GST collected

Common Invoicing Mistakes (That Block ITC)

• GSTIN mismatch: Invoice shows one GSTIN, seller’s actual GSTIN different = ITC blocked
• Missing customer GSTIN (B2B): Customer registered but invoice doesn’t show GSTIN = ITC lost
• Wrong HSN/SAC code: Product code doesn’t match description = system flags, ITC blocked
• Invoice date after supply: Invoice dated after delivery = system mismatch
• Duplicate invoice numbers: Two invoices with same number = system rejects both
• GST rate error: Item marked 12% but should be 5% = customer’s ITC wrong, flags in audit

Compliance Framework: Input Tax Credit & Records

GST has complex compliance. Most businesses fail not on filing, but on ITC claims and record maintenance.

Input Tax Credit (ITC): What Can You Claim

ITC Claim Timeline

• When can you claim ITC? In GSTR-3B after filing GSTR-1 (but can adjust in same month)
• Claim window: Can claim ITC within 24 months of GSTR-1 filing (or goods receipt, whichever later)
• After 24 months: ITC lost, can’t be claimed later
• Monthly adjustment: Usually claimed same month as GSTR-1 filing or next month

GST Records You Must Maintain (Audit-Ready)

• All invoices (outward): Copies of all GST invoices issued. Sequential. Retained for 6 years
• All purchase invoices (inward): GST invoices from suppliers. Proof of ITC claims
• Bank statements: Supporting GST payments, vendor payments
• E-way bills: For movement of goods ₹50K+. Mandatory document
• Debit/credit note ledger: If you issue credit notes (returns, discounts)
• GSTR-1 & GSTR-3B copies: Filed returns (auto-saved in GST portal but keep backups)
• Physical goods if applicable: Stock registers, warehouse records (for audit trail)

Record Maintenance Best Practices

• Digital storage (preferred): Cloud backup or accounting software (Tally, Zoho Books). 6-year retention mandatory
• Invoice sequence: Must be chronological + sequential (no gaps like INV-001, INV-003). Gaps raise audit flags
• Backup suppliers list: Keep updated list of all suppliers with GSTIN + TAN. For cross-check
• Monthly reconciliation: GSTR-1 (sales) should match your sales ledger. Catches errors early

Common GST Compliance Mistakes & Penalties

Most penalties come from preventable mistakes. Here are the top 10 compliance errors and how to avoid them.

Mistake #1: Missing Filing Deadlines

• Error: Filing GSTR-1 on 12th instead of 11th (monthly)
• Penalty: ₹50/day late fee = ₹50 for 1 day late (capped ₹5,000)
• Real impact: 15 days late = ₹750 penalty + 18% interest on unpaid tax
• How to avoid: Set calendar reminder 2 days before deadline. File early. Use accounting software for auto-filing

Mistake #2: Filing NIL Returns Without Due Diligence

• Error: No business this month = skip filing GST returns
• Reality: Must file NIL return (₹0 sales, ₹0 tax). Skipping = penalty
• Penalty: ₹20/day for nil returns (capped ₹500). Seems small but 6-month non-filing = ₹3K penalty
• How to avoid: File even if ₹0. Takes 5 minutes. Portal makes it easy

Mistake #3: Wrong HSN/SAC Code on Invoice

• Error: Invoicing software services as “Goods” (HSN 9983 wrong code used)
• Reality: Customer can’t match your GSTR-1 with their GSTR-2B. ITC blocked
• Penalty: Customer loses ITC ₹10K+. They ask why. Relation damaged. Potential GST audit
• How to avoid: Know HSN/SAC before invoicing. Use GST database search. Test codes in ERP first

Mistake #4: Missing Customer GSTIN on B2B Invoice

• Error: Invoice to registered business but forgot to mention their GSTIN
• Reality: Customer’s GSTR-2B doesn’t auto-populate. They lose ITC. Payment delayed
• Impact: Vendor loses credibility. Repeat orders at risk
• How to avoid: Always ask for customer GSTIN upfront (B2B). Verify it matches their PAN

Mistake #5: Not Filing GSTR-2B (Inward Supplies) Timely

• Error: Received invoices from suppliers but forgot to file GSTR-2B on time
• Reality: GSTR-2B auto-generated from suppliers’ GSTR-1. Must be matched in GSTR-3B to claim ITC
• Penalty: ITC blocked if GSTR-2B not accepted before GSTR-3B deadline
• How to avoid: GSTR-2B auto-generated. Accept/reject within 30 days to claim ITC

Mistake #6: Claiming ITC on Non-Compliant Invoices

• Error: Supplier invoice missing key details (GSTIN, HSN code) but you claim ITC anyway
• Penalty: GST audit catches discrepancy. ITC reversed + 50% penalty + 18% interest
• Example: Claimed ₹50K ITC from supplier X, but later audit reveals invoice fake = ₹75K total fine
• How to avoid: Verify invoice completeness before claiming. Check GSTIN validity online (gst.gov.in)

Mistake #7: Not Updating GSTIN Details (Address, PAN Change)

• Error: Moved office, updated PAN, but didn’t update GSTIN
• Penalty: GST officer notices mismatch. Registration can be suspended
• Impact: Can’t generate invoices or e-way bills. Business operations halted
• How to avoid: Update GSTIN details within 30 days of any change (Form GST REG-14)

Mistake #8: Delayed Tax Payment (Without Filing Return)

• Error: File GSTR-3B showing tax liability ₹50K due, but don’t pay for 60 days
• Penalty: 18% per annum interest on ₹50K = ₹7.5K interest (60 days) + late fee if not paid before filing
• Impact: Next GSTR-1 can’t be filed until past dues cleared
• How to avoid: Pay tax BEFORE filing GSTR-3B. Avoids interest

Mistake #9: Poor Record Keeping (Missing Invoices for Audit)

• Error: Filed GSTR-1 claiming ₹100L sales, but during audit can’t find invoices
• Penalty: Deemed fraudulent. Entire return disallowed. Heavy penalties + jail risk
• How to avoid: Maintain digital backup of all invoices. Cloud storage (Google Drive, Dropbox). 6-year retention

Mistake #10: Not Registering When Threshold Crossed

• Error: Annual turnover crossed ₹40L but didn’t register for GST (bought unregistered status)
• Penalty: ₹10K penalty (Section 122) + demands for back tax with interest + potential jail
• How to avoid: Monitor monthly turnover. Register within 30 days of threshold breach

Late Fees & Penalty Rates 2025

GST penalties are automated and strict. Even 1-day delay triggers fees. Here’s the complete penalty framework.

Late Filing Penalties (Section 47)

Interest on Delayed Tax Payment (Section 50)

• Interest rate: 18% per annum on unpaid tax
• Applies when: You file return but don’t pay tax on time
• Calculation: (Unpaid tax × 18% × Days delayed) / 365
• Example: Tax due ₹10,000. Paid 30 days late = (₹10,000 × 18% × 30) / 365 = ₹148 interest
• Note: Interest accrues daily until payment received. Non-negotiable

Real Examples: Late Fee + Interest Combined

Example 1: Small Business – 15 Days Late

• GSTR-3B due date: 20th April 2025
• Actually filed: 5th May 2025 (15 days late)
• Tax liability: ₹20,000 (paid same day)
• Late fee: ₹50 × 15 days = ₹750
• Interest: (₹20,000 × 18% × 15) / 365 = ₹148
• Total penalty: ₹750 + ₹148 = ₹898 (4.5% of tax owed)

Example 2: Larger Business – 45 Days Late

• GSTR-3B due date: 20th April 2025
• Actually filed: 5th June 2025 (45 days late)
• Tax liability: ₹1,00,000 (paid on filing date)
• Late fee: ₹50 × 45 = ₹2,250
• Interest: (₹1,00,000 × 18% × 45) / 365 = ₹2,219
• Total penalty: ₹2,250 + ₹2,219 = ₹4,469 (4.5% again, scales)
• Key lesson: Interest compounds. Long delays expensive

Other Penalties (Section 122, 125, 129)

How Penalties Affect Your Business

• Direct impact: Money out of pocket (late fee + interest)
• Compliance impact: Low compliance score affects credit rating (lenders notice)
• Operational impact: Repeated non-filing can trigger registration cancellation
• Reputation impact: Vendors/customers see low compliance score. Trust erodes
• Audit risk: Multiple penalties trigger deeper GST audit. More scrutiny on future returns