The Goods and Services Tax (GST) was introduced in India to make compliance easy and to avoid the cascading effect of taxes on the consumer. GSTR-5 compliance is important for non-resident taxable persons not only to avoid fines, penalties and other legal consequences but also for them to conduct their business operations smoothly, maintain good relations with the tax authorities, build trust with the customers and maintain transparency and integrity in their business operations.
Non-resident suppliers conducting business temporarily in India come under the purview of GST laws of the country and need to follow the rules and regulations stipulated for compliance. There are a separate set of rules for non-resident taxpayers for registrations, refunds, and filing returns. Filing GSTR-5 with details of outward and inward supplies and paying the tax due within the stipulated due date is a crucial part of compliance for non-resident suppliers. Let us discuss in detail the best practices for GSTR-5 compliance for non-residents taxpayers.
What is GSTR-5 Compliance?
Compliance in GST involves following the rules and regulations laid down by the Goods and Service Act. It includes registering, timely filing of returns, maintaining accurate records of transactions, collecting correct amount of GST from customers, and paying the tax on time. Compliance also involves cooperating with the tax authorities during audits, providing accurate information and following the guidelines as per the notifications, circulars and advisories issued by the tax authorities from time to time.
Related Post: Late Fees and Penalties for Non-Compliance in GSTR-5
Key Factors of GSTR-5 Compliance
- Registration: It is compulsory for non-resident suppliers who occasionally indulge in the business of supplying goods or services or both in India to register under GST, and can conduct their business in India only after the certificate of registration has been issued by the tax authorities.
- Payment of Advance Tax: Non-resident suppliers are also required to make an advance deposit of the estimated tax, late fees, penalties and other charges while applying for registration. This amount can be adjusted with the tax liability while filing GSTR-5 returns
- Filing GSTR-5 Returns: The non-resident taxpayer has to file GSTR-5 returns comprising of details of taxable supplies, tax liability, tax paid and other related details, within the 20th of the subsequent month when the registration extends for many months and within seven days after the validity period when the registration is for short periods.
- Late Fees and Penalties: If the GSTR-5 is not filed within the due date, the taxpayer is liable to pay late fee at Rs.50/- per day and Rs.20/- per day for nil returns, subject to a maximum of Rs.5000/-. Interest is also charged at the rate of 18% per annum, calculated on the number of days from the due date up to the date of filing the return and other penalties and consequences.
- Tax liability: Accurate calculation of tax and remitting to the Government is an important part of compliance. Tax liability is based on the applicable GST rates and is calculated in the portal while filing GSTR-5 after the taxpayer enters the details of outward and inward supplies, amendments and other information.
- Payment of Tax: GSTR-5 can be filed only after the payment of tax, interest, late fee, penalty and other charges through the electronic cash register provided on the portal. Taxpayers have to ensure that the payment of tax is made on time as per the specified rules.
- Maintaining Proper Records: Non-resident taxpayers are required to maintain proper records of invoices, accounts and other documents related to their supplies in India. This helps in accurate tax calculation and ensuring compliance.
- Cooperating with the Tax Authorities during Audit: When the tax authorities wish to conduct audit to ensure compliance, the taxpayer has to cooperate and produce all the required documents and records needed for the scrutiny.
Compliance Challenges faced by Non-Resident Taxpayers
There are many challenges faced by non-resident taxpayers who wish to conduct business in India. They are as follows:
- Registration: Non-resident suppliers sometimes find it difficult to register on the portal and keep up with changes in the rules regarding registration from abroad.
- Input Tax Credit: Non-resident taxpayers are not eligible to avail input tax credit except on import of goods and services. A lot of confusion persists for non-resident taxpayers with regard to the provision of input tax credit in GSTR-5.
- Understanding the Rules and Regulations: Non-residents often find it difficult to understand the rules and regulations due to the amendments and revisions in the tax laws of the country.
- Technical glitches while Filing: GSTR-5 has to be filed online in the GST portal. Non-residents often face technical glitches while filing the returns in the portal.
Best Practices for GSTR-5 Compliance
Non-resident taxpayers can ensure GSTR-5 compliance by adopting the following best practices:
- Appointing a Representative: Non-resident suppliers need to appoint an able person to represent their business and handle compliance for smooth business operations in the country.
- Maintaining Accurate Records: It is important for non-resident taxpayers to maintain accurate records of invoices, accounts and other documents. This makes reconciliation easier and ensures accurate tax computation and provides evidence at the time of audits by the tax authorities.
- Reconciliation of Records: Reconciling the records regularly and rectifying discrepancies helps in accurate computation and timely payment of liabilities. So that penalties and other legal consequences can be avoided.
- Conduct Regular Internal Audits: Regular internal audits can help businesses to identify compliance issues and rectify them and ensure accurate reporting and filing. By this they can mitigate the risk of non-compliance.
- Updating Changes in GST Rules and Procedures: Many changes are announced by the tax authorities with regard to filing, due dates and other related issues. Therefore, regularly updating with the latest circulars, notifications and advisories and implementing the changes is a best practice for compliance.
- Use of Technology: Various automation tools and advanced software can be used for billing, recording invoices and filing returns to minimize errors due to manual entries, and streamline the process of compliance.
- Training Employees on GST Compliance: This is an important best practice that needs to be followed by non-resident taxpayers for staying compliant in GSTR-5. This includes educating the employees about registrations, filing processes, tax payments, maintaining records to avoid non-compliance.
- Seeking Professional Help: Navigating the GST landscape can be complex and confusing for non-resident taxpayers. At such times, seeking professional help from experts ensure compliance is advisable.
Government of India has taken many measures to ensure that the process of registration and filing of returns is easy and user-friendly by providing various tutorials and videos in the GST portal. Also, the government issues regular notifications, circulars, advisories to help taxpayers stay compliant. Taxpayers need to make use of the facilities and educate the persons who handle the payment and filing, ensure accurate maintenance of records, conduct regular internal audit, reconcile the invoices on a regular basis, update and implement changes in the rules and procedures to stay compliant and avoid the consequences of non-compliance.
Frequently Asked Questions
- What are the modes of filing GSTR-5?
Answer: There are two modes of filing GSTR-5. They are:
- Electronically through the GST portal
- Through a facilitation center specified by the tax authorities. 2.
2. What are the prerequisites for filing returns on the GST portal?
Answer: The pre-requisites for filing returns on the GST portal are:
- The taxpayer should be registered in GST and have a valid GSTIN
- The taxpayer should have the required user id and password to login into the portal and file the returns.
- The taxpayer should have digital signature certificate/electronic verification code for verification of GSTR-5 during filing.