New Business GST Compliance

Introduction & Why GST Compliance Matters

The GST regime (by way of Central Board of Indirect Taxes and Customs, CBIC) is India's unified indirect tax regime for goods and services. Proper GST registration and GST compliance are a must for any new business because:

• Non-registration where compulsory can lead to penalties, delayed Input Tax Credit (ITC) claims, risk of audit.

• Incorrect returns or late filings could lead to interest, penalty, and compliance risk.

• With the 2025 reforms, the system is getting tighter – so getting well positions you for less trouble.

• GST also interacts with how you charge, how you bill, how your IT/ERP infrastructure is set up. So it's not just tax-formality, but part of your business process.

GST Registration – What a New Business Must Do

• If you must register

1. Your overall turnover (in India) within a financial year. If it exceeds the registration threshold, you must register.
2. Whether you have interstate supplies (i.e., supply goods or services across states) — in most cases, interstate supply requires mandatory registration regardless of turnover.
3. Whether you are in a business class that must register even where turnover is below the threshold (e-commerce operators, casual taxable individuals, non-residents).
4. If you are supplying via an e-commerce operator, etc.

• Recent reforms making registration easier : In April 2025, CBIC had issued Instruction No. 03/2025‑GST (dated April 17, 2025) which simplifies and streamlines the registration process. Points to note:

1. Only documents specified in Form GST REG-01 are to be requested.
2. Proof of premises (PPOB) acceptable: in case of owned premises one document e.g., property tax/electricity bill; in case of rented premises lease + ownership proof.
3. No extraneous or unnecessary questions should be asked simply because the business is of a specific model or place.
4. Normal processing periods: 7 working days for non-risk applications, 30 days (with physical validation) for "risky" ones.

• Action Item for new business: When you make an application for registration under GST.

1. Be ready with the relevant Constitution of business document (e.g., Certificate of Incorporation, Partnership Deed).
2. Premises document as referred above.
3. Your digital signature / authorising signatory details.
4. Make sure your business model, proposed supplies, etc are well described in REG-01.
5. After the ARN (Application Reference Number) is created, keep a watch for any request for verification by the officer.

• Registration process & things to keep an eye on

1. Post registration, you will be issued GSTIN (Goods & Services Tax Identification Number).
2. Replace all the invoices, letter heads, e-commerce listings, etc. with GSTIN.
3. Make sure you put the correct "place of business", "nature of business" etc in the application so there are no mismatches later.
4. If you have various locations (branches in different states) or separate registrations, you need to make sure you treat them correctly (see ISD below).
5. Continuous compliance begins from the registration date (returns, records, etc).

Ongoing GST Compliance for a New Business

The key areas to be addressed upon being registered are as follows:

• Record keeping & invoices

1. You will need to issue tax invoices for supplies of goods/services if registered (except in the case of particular exempt or composition regime cases).
2. For new businesses, especially: use a new set of invoices from the start of the accounting year (or from the beginning of new business) — that is for clarity. From 1 April 2025, businesses were recommended to use a new set of invoices.
3. Use proper information on invoice: supplier name/address, GSTIN, invoice number, date, HSN/SAC code (if required), description, quantity, value, rate of tax(es), amount of tax, place of supply (if interstate), etc.
4. Keep a record of all inward supplies (what you have purchased) and outward supplies (what you have sold) for availing ITC, matching, reconciliation.

• Input Tax Credit (ITC) & reverse charge

1. You will likely pay GST on purchases (inputs) as a new business and be entitled to claim ITC under due conditions.
2. Make purchases from registered sellers, invoices in proper sequence, payment to the sellers within 180 days (if overdue by more than, the ITC can be reversed).
3. Reverse Charge Mechanism (RCM): If you are getting certain services or goods wherein the responsibility lies with you (e.g., from a non-registered vendor, notified categories), then you have to pay GST under RCM and report accordingly. For 2025-compliance check RCM applicability.
4. If you possess multiple business units/branches and have joint input services, don't miss the new rule: mandatory ISD registration (see next sub-section).

• ISD (Input Service Distributor) mechanism

1. Effective from April 1 2025, for firms with over one registration (under same PAN) and taking common input services (like head-office expenses, common services) you must register as ISD and transfer ITC through the ISD rule rather than cross-charge.
2. Action point: If you foresee your business with multiple registrations (say, different states or different verticals) chart your ISD setup in advance.

• E-Invoicing & E-Way Bill

1. E-Invoicing: Based on 2025 launches, the threshold for mandatory e-invoicing has been reduced and even more companies will need to generate e-invoices by means of IRP (Invoice Registration Portal).
2. E.g., companies with a turnover above a certain amount are required to upload invoices in 30 days from dispatch.
3. E-Way Bill: If you are transporting goods above a certain value/state lines, you may need to generate an e-Way Bill electronically for the movement of goods. The 2025 reforms have stringent timelines and two-factor authentication.
4. Action point: Even being small, plan your invoicing and logistics setup to accommodate e-invoicing & e-way bill requirements — better early than late.

• GST Return Filings : This is the core compliance recurring activity. Core returns for the majority of businesses:

1. GSTR-1: Supplies made outward — sales.
2. GSTR-3B: Liability for tax, ITC, payment, monthly summary return (or quarterly in specific cases).
3. GSTR-9 / GSTR-9C: Annual returns, reconciliation (large taxpayers).
4. Others: In case you are availing a Composition Scheme, or a non-resident, etc.

Essential 2025 changes:

1. From 1st July 2025, once you have paid GSTR-3B it will become non-editable. Mistakes would be irreversible for that period.
2. From July 2025, too, there would be a three-year time frame to file old GST returns. Returns cannot be submitted after three years from the due date.
3. Action point: For your business, put in internal procedures to enable early return filing, reconciliation, validation of data with your books, and cross-checking before final submission.

• Composition Scheme (if eligible)

If your business turnover is under a stipulated limit (and you satisfy conditions), you can opt for the Composition Scheme under GST (pay tax at a fixed lower rate on turnover, with easier returns).

Key notes:

1. Need to file Form CMP-02 within the due date.
2. Under the composition scheme, you cannot avail the entire ITC, and there are some outward supply limitations.
3. If your enterprise is small and uncomplicated (e.g. local retail) this could be useful — weigh your cost/benefit.

• Tax Payment, Ledger & Reconciliation

1. You'll have to pay GST liability before the due date. There is an interest and potential penalty for delayed payment.
2. Keep your electronic Cash Ledger and Credit Ledger in the GST portal — reconcile with books.
3. Reconcile your outward supplies (sales) and inward supplies (purchases) with the ledger and with the portal. For instance, verify if your suppliers have submitted their GSTR-1 and thus your ITC is showing correctly (use GSTR-2B etc).
4. If faulty ITC has been utilised (e.g. for blocked credits, or payment not done within 180 days), reverse through suitable entries.

• Record-Retention & Audit-Readiness

1. You have to maintain the invoices, credit notes, debit notes, GST returns submitted, ledger accounts, evidence of payments, etc for a period of time (typically six years from the annual return filing date).
2. If you are crossing audit thresholds, you might need a GST audit (Form GSTR-9C) — so your books have to be precise.
3. Even if you are new, doing it correctly from the beginning will save you effort later.

Key Changes / Reforms in 2025 – What a New Business Should Know

Because you’re starting a business in 2025, several recent reforms are relevant. Here are major ones:

• Three-year time-bar for returns

1. From the period starting July 2025 (for tax period July 2025 onward) returns outside three years of the due date will not be allowed.
2. For a new company, this will imply: you cannot afford not to file returns; even if you have an idea of dormant or a low level of activity, you ought to file (even if zero) in order to maintain your eligibility and not get blocked.

• Start of a new invoice series / fresh start 1 April 2025

1. It was recommended that businesses begin a new invoice series from April 1 2025. Assists in tracking, auditing and clarity.
2. For a new business starting today, implement a transparent invoice numbering system: e.g., "INV/2025-26/001" and increment sensibly.

• Reduced e-invoice threshold, compulsory ISD, tighter e-Way Bill

1. Major changes: compulsory ISD for multiple registrations (from April 1 2025)
2. The threshold for e-invoicing is lowered, so more taxpayers will be compelled to e-invoice.
3. Tighter e-Way Bill norms and two-factor authentication for e-Way bills.
4. As a new company, see if you will come through the threshold, and design your accounting system as such.

• Simplification in registration procedure

1. As mentioned previously, Instruction 03/2025 is supposed to expedite registration and minimise harassment. Good news for the new company.
2. Utilise this in your favour: apply early, verify documents are accurate, do not delay.

• Updated GST rate structure (operative 22 Sept 2025)

1. While this is more a matter of the tax rate (and thus affects pricing) than compliance itself, it does make a difference in how you structure your business/pricing. From sources: the 4-slab system of 5%,12%,18%,28% is being streamlined to 5% and 18% (and 40% in some instances for sin/luxury items) from 22 September 2025.
2. For your company: if you transact goods/services subject to rate changes, you will need to revise your prices, invoices, catalogue, and ensure the proper tax rate is used from the effective date.

Compliance Calendar for a New Business (Practical)

Here’s a sample “to-do” calendar for a new business starting say mid-2025:

Practical Tips & Pitfalls to Avoid for New Businesses

Tips

1. Hire a capable tax/advisory individual early. The sooner you do it right, the less errors later.
2. Integrate your accounting/ERP system with GST requirements: invoice forms, automatic application of tax rates, e-invoicing if required, and ledger tracking.
3. Reconcile regularly: don't wait for year-end. Monthly shipment/purchase reconciliation prevents nasty surprises (e.g., your supplier didn't file their return so your ITC is missing).
4. Log GST returns filed, payments, and outstanding liabilities.
5. Document properly: the supply chain, your business location, model of business, particularly if new or atypical — useful if GST officer questions.
6. Act proactively on changes in compliance: With 2025 reforms, thresholds, mechanisms, and modalities are shifting — stay up to date.
7. Bill wisely: error in billing (incorrect tax rate, absence of GSTIN, incorrect place of supply) may lead to ITC rejection or back-to-back return mismatches.
8. Train your staff/bookkeeper: Have them learn the basics of GST, appreciate deadlines, and inward/outward reconciliation.

Pitfalls to avoid

1. Postponing registration even though you should register → late fee, interest, credit loss.
2. Late or non-filing of returns (particularly GSTR-3B) → you can end up becoming non-GST, and it does not help your future claims.
3. Taking "nil" business = no compliance — you might still be obligated to file nil returns in case you are registered.
4. Overlooking small bills or service suppliers' bills (unregistered suppliers), which could have a ripple effect on applicability.
5. Not updating your systems when e-invoicing / e-Way bills become relevant — panicking later causes glitches.
6. Conflating invoice series between years, particularly when a new financial year starts.
7. Thinking of "one-time setup" and neglecting regular maintenance — GST compliance is ongoing.
8. Not designing for changes (e.g., several branches, interstate supplies) and therefore not choosing ISD or incorrect place of business environments.

Summary & Action Plan

For your new venture in 2025:

• Verify whether you have to register under GST.

• Register properly with proper documents.

• Implement your accounts/invoice systems from day one with GST compliance inbuilt.

• Follow the right invoice format, numbering, and maintain clear books of purchase & sales.

• Check e-invoicing thresholds, ISD, and composition scheme and calculate whether you should use them or not.

• File returns on time each month/quarter, reconcile, and pay tax.

• Stay current on 2025 reforms (no amendments once filed, three-year filing option, rate changes, etc).

• Establish internal controls so that you can reduce errors.

• Keep records for the specified period.

Following this strategy will make your business all set for GST compliance, minimise the risks of penalty, and ensure smooth functioning of operations.

Disclaimer

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