Essential GST Compliance Steps for March 2024: A Business Guide

Introduction

As the financial year draws to a close, it is crucial for businesses to take proactive steps to ensure compliance and streamline processes for filing GST returns for March 2024. Here are ten essential actions to consider.

1. Reconciliation of Outward Supplies (Form GSTR 1 and GSTR 3B)

Businesses must reconcile outward supplies reported in Form GSTR 1 with Form GSTR 3B. If amendments are necessary for any outward invoices already reported in GSTR 1 for FY 2023-24, these should be documented in GSTR 1 for March 2024.

To facilitate this process, it is advisable to email clients, prompting them to verify any amendments needed regarding invoices or credit notes issued throughout the year.

2. ITC and Cash Balance Reconciliation

It is important to match the input tax credit (ITC) and cash balance reflected in the accounting books with the electronic cash ledger and electronic credit ledger as per the GST portal. Ideally, these balances should align without discrepancies. Any necessary corrections should be reflected in the accounting books or March 2024 GST return.

3. Revenue Reconciliation

Revenue reported in the accounting books must reconcile with turnover shown in the GST returns filed during the year. Discrepancies need to be addressed by correcting GST returns or the accounting records. Maintain a reconciliation file to avoid surprises during audits or GST annual return filings.

4. Filing Letter of Undertaking (LUT) for Exporters/SEZ Suppliers

If you export goods or services to a SEZ unit or authority and wish to supply without paying IGST under Section 16 of the IGST Act, you must file an application for LUT on the GST portal. Submissions should be made before 31 March 2024 for the FY 2024-25.

5. Reconciliation of Input Tax Credit Register with GSTR 2B

The ITC reported in GSTR 3B should be reconciled with the auto-populated input tax credit from GSTR 2B. If GSTR 2B shows a greater ITC amount than GSTR 3B, it indicates expenses incurred by the entity that have not yet been recorded in the books. To close the books efficiently, follow up with vendors whose invoices have been booked but are missing from GSTR 2B.

6. Reversal/Reclaim of ITC under Rules 42/43

According to Section 17 of the CGST Act, registered persons supplying exempt goods or services must reverse input tax credit as per Rules 42 and 43. Any ITC reversals or claims must be reported in GSTR 3B for March 2024. Note that if reported in a subsequent month, interest will be charged under Section 50 of the CGST Act.

7. Discharge Reverse Charge Mechanism (RCM) Liabilities

Review expenses incurred throughout the year. Where applicable, report any RCM liabilities in GSTR 3B and claim the eligible ITC in March 2024 if previously missed. Remember, the time of supply for inward supplies subject to RCM is 60 days from the date of invoice or payment, whichever is earlier. For related persons, the time of supply follows the date of payment or credit, whichever occurs first.

8. Handling Non-Payment by Recipients

Under the proviso of Section 16(2), recipients must pay suppliers within 180 days of the invoice date. If ITC has been claimed on any invoices outstanding past 180 days, it must be reversed in GSTR 3B and can only be reclaimed upon payment. Therefore, analyze the aging of creditors for timely action.

9. Opting for Composition Scheme

If eligible, regular taxpayers may file an intimation under Form CMP-02 by 31 March 2024 to opt for the composition scheme for the next financial year.

10. Initiate New Document Series from 01 April 2024

An additional consideration is payments to suppliers who are UDYAM-registered micro and small entities (an essential non-GST aspect).

• Categorize creditors into MSME and non-MSME.
• Create an aging analysis of creditors, identifying any outstanding invoices to micro and small businesses registered with UDYAM.
• Prioritize payments for invoices that are overdue, ensuring these are settled before 31 March 2024.
• For invoices booked during FY 2023-24 but outstanding after 31 March 2024, ensure payments are made on or before the respective due dates.

Conclusion

By carefully reconciling outward supplies, ITC balances, revenue, and RCM liabilities, and undertaking timely actions such as applying for LUTs, businesses can effectively manage their GST obligations. Moreover, selecting the composition scheme and addressing outstanding payments, especially to MSMEs, are crucial for maintaining compliance and optimizing operational efficiency.