GST for MSMEs: registration, composition scheme and returns

When do you need to register?

Registration is generally required once annual turnover crosses the threshold, which is higher for goods than for services and lower in some states. It is also required for certain situations regardless of turnover, such as inter-state sale of goods and many e-commerce sellers. See GST registration.

Regular scheme or composition scheme?

Small taxpayers below a turnover limit can opt for the composition scheme, which charges a low flat rate on turnover and reduces paperwork. The trade-offs are that you cannot charge GST on invoices, cannot claim input tax credit and cannot make inter-state sales of goods in most cases. If your customers are businesses that want credit, the regular scheme is usually better.

What returns do you file?

• GSTR-1 for outward sales and GSTR-3B for the summary and payment, monthly or quarterly under the QRMP option for eligible taxpayers.
• Composition taxpayers file a quarterly statement and an annual return.
• An annual return for eligible taxpayers.

See GST return filing for due dates.

Invoices and e-way bills

Tax invoices must carry specific details such as GSTIN, HSN or SAC code, rate and place of supply. Goods moving above a set value generally need an e-way bill, and larger businesses must also generate e-invoices through the government portal.

Mistakes small businesses make

• Not reconciling purchases with the credit shown in their GST account.
• Filing late and paying avoidable fees and interest.
• Choosing composition without checking the customer impact.
• Ignoring nil returns when there is no activity.