As FY 2024-25 comes to an end, businesses must take proactive steps to ensure a seamless transition to FY 2025-26 and remain in full compliance with GST regulations. Here’s a comprehensive guide on the key activities to consider:
➤ New Year, New Invoice Series: To maintain an organized system for the upcoming financial year, it’s essential for businesses to start a fresh invoice series from April 1, 2025. This applies to all transactional documents, including invoices, debit notes, credit notes, and bills of supply (for exempted supplies). Proper record-keeping will ensure smooth operations in FY 2025-26.
➤ Revisit GST Registration Requirements: Now is the time for businesses to reassess their aggregate turnover for FY 2024-25 to determine whether they need to adjust their GST registration status. This evaluation also plays a critical role in deciding eligibility for various schemes such as the Composition Scheme, QRMP, and the requirement to generate e-invoices or e-way bills.
➤ Opt for the Composition Scheme (If Applicable): Businesses eligible for the Composition Scheme for FY 2025-26 should submit their intimation via Form GST CMP-02 before the start of the financial year. Additionally, ensure that Form GST ITC-03 is filed by May 30, 2025, to disclose any required ITC reversals and adjustments.
➤ Evaluate Your Eligibility for the QRMP Scheme: If your turnover is less than INR 5 crore, you can opt for the Quarterly Return Monthly Payment (QRMP) scheme, which allows businesses to file returns quarterly while making monthly tax payments. You must make the decision for FY 2025-26 by April 30, 2025, to streamline your compliance requirements.
➤ Letter of Undertaking (LUT) Submission: For businesses dealing in zero-rated supplies (exports or supplies to Special Economic Zones), it’s crucial to submit the Letter of Undertaking (LUT) in Form RFD-11 by March 31, 2025. This will allow you to export goods and services without the need to pay Integrated GST (IGST).
➤ E-Invoice Requirement for Businesses with High Turnover: Any business whose turnover exceeds INR 5 crore in any of the past financial years must generate e-invoices starting from FY 2025-26. This ensures that the GST system can efficiently track your invoices and maintain compliance.
➤ E-Way Bill Compliance: An E-Way Bill is necessary for transporting goods valued above INR 50,000 in a single consignment. Review your transactions and ensure that you are in line with the E-Way Bill requirements, considering any state-specific exemptions. Additionally, the E-Way Bill system now includes provisions for unregistered dealers to generate E-Way Bills using Form ENR-03, effective from February 2025.
➤ Review Reverse Charge Mechanism (RCM) Liabilities: Ensure all transactions subject to Reverse Charge Mechanism (RCM) are accounted for and timely payments are made. Keep self-invoices ready for goods procured from unregistered suppliers, and check Form GSTR-3B for accurate reporting of these liabilities.
➤ Reconciliation of Input Tax Credit (ITC): Conduct a thorough reconciliation of your Input Tax Credit (ITC) between your books of accounts, the credit register, and the GST Portal. This will ensure that only eligible credits are claimed, ineligible ones are reversed, and any discrepancies with GSTR-2B and GSTR-3B are rectified.
➤ ITC Reversal at Year-End: As per CGST Rules, businesses are required to reverse any ITC claimed for inputs and services that were used for purposes other than business or for exempted supplies. Ensure that this is completed as per the prescribed methods before the year-end to avoid penalties.
➤ Compliance with GST TDS/TCS: Review your GST TDS and TCS credits available on the GST portal and ensure these are reconciled with your books of accounts. Any discrepancies should be addressed, and legitimate credits must be claimed.
➤ Credit Notes and Returns: Ensure that any credit notes for returns or refunds are issued within the stipulated time frame. The last date for issuing credit notes for FY 2024-25 is November 30, 2025.
➤ Settling GST Amnesty Dues: The government has introduced an amnesty scheme for businesses to settle outstanding GST dues for FY 2017-18, 2018-19, and 2019-20. This scheme, which offers a waiver of interest and penalties, must be utilized before March 31, 2025, with the submission deadline for forms by June 30, 2025.
➤ Reconcile Outward Supplies and Books: Ensure that your outward supplies recorded in GSTR-1, GSTR-3B, and your financial records match up. If any errors are found, such as incorrect GSTINs, misreported values, or wrong POS details, correct them immediately. This also includes cross-checking E-invoice and E-way Bill records for consistency with the reported supply.
➤ Review Applicability of ISD Registration: As per the recent changes in the Finance Act, 2024, the definition of Input Service Distributor (ISD) now includes the distribution of common ITC. If your business has multiple distinct entities and receives input services, check if you need to register as an ISD and distribute the eligible ITC accordingly, starting from April 1, 2025.
➤ Collect Declarations from Goods Transport Agencies (GTA): For FY 2025-26, businesses must collect declarations from Goods Transport Agencies (GTA) that opt to pay GST under the forward charge mechanism. This documentation is crucial to avoid any complications with non-payment of GST under RCM.
➤ Monitor Compliance with Goods Sent on Approval: If your business sends goods on an approval basis, ensure all documentation is accurate and that the goods are returned on time to avoid unnecessary tax liabilities.
➤ Reassessment of E-Invoice Threshold: It’s important to verify whether your business needs to generate E-invoices based on the prescribed turnover limits. If your turnover crossed INR 5 crore in any of the past financial years, ensure you are in compliance with e-invoicing rules starting from FY 2025-26.
➤ Final Check on the GST Portal for Any Discrepancies: Before closing your books for FY 2024-25, do a final check on the GST portal for any discrepancies in your electronic credit, cash, and ITC ledgers. Reconcile these figures with your books to ensure everything is in order for the upcoming financial year.
➤ Reversal of ITC in respect of Rule 42 and Rule 43 of CGST Act: The reversal done considering the monthly ratio needs to be revisited considering the yearly supply of exempted turnover to the aggregate turnover and corresponding reversal thereof if short needs to be paid along with interest thereon. Further, even reversals with regards to outstanding payments to suppliers beyond 180 days needs to be verified and necessary reversal in this regards needs to be done.
By following these steps and ensuring all GST-related tasks are completed correctly, businesses can avoid penalties and ensure smooth operations as they transition into FY 2025-26.
