GST compliance, annual return and notices

Turnover is the first question and often not the deciding one. Registration is compulsory regardless of turnover for inter-state taxable supply of goods, supply through an e-commerce operator, liability under reverse charge, agents, and casual or non-resident taxable persons. Registration is state wise, so a godown in a second state is a second registration, and the two are distinct persons who invoice each other. A separate registration as an input service distributor is now mandatory where common input services are billed centrally. Aadhaar authentication, and biometric verification where the state requires it, decide how quickly the application moves and whether it lands in the risk queue.

GSTR-1 reports outward supplies invoice by invoice. GSTR-3B is the summary on which tax is actually paid. Between them sits GSTR-1A, now the only clean route to correct an outward supply before the summary is filed, because the liability auto-populated into GSTR-3B is locked and cannot be typed over. GSTR-2B is a static statement of the credit available for that period. Quarterly filers under QRMP use the invoice furnishing facility and pay monthly. Composition dealers, input service distributors, deductors and collectors each file their own return. Returns also become time barred after a notified period, after which the portal will simply not accept them.

Credit is not available merely because an invoice exists. Section 16 requires the invoice, receipt of the goods or services, tax actually reaching the government, and the supplier having filed. The Invoice Management System now sits in front of GSTR-2B. Each inward record is accepted, rejected or kept pending, and inaction is treated as acceptance, so silence is itself a decision. Import bills of entry come through the same dashboard. Section 17(5) blocks credit on a defined list whatever the invoice says. Credit attributable to exempt supplies is apportioned by rule. Failing to pay the supplier within the notified period reverses the credit until payment is made.

GSTR-9 consolidates the year as it was actually filed. GSTR-9C reconciles the audited financial statements to that return, and is self certified by the taxpayer rather than certified by an auditor. Both apply above turnover limits notified for the year, and those limits have moved before. The annual return is not a second chance to file. It is where the year's differences become visible in one place and, in the current format, have to be explained line by line rather than netted off. Credit taken in the wrong period, credit reversed and reclaimed, and turnover in the financials that never reached the returns all surface here. Anything left unexplained is what a scrutiny officer opens with.

The department compares your filings with each other before comparing them with anything else. GSTR-1 against GSTR-3B, GSTR-3B against GSTR-2B, e-way bills and e-invoice reference numbers against reported outward supply, and the annual return against all of them. Two automated intimations run on this. Form DRC-01B where liability declared in GSTR-3B falls short of GSTR-1, and Form DRC-01C where credit availed exceeds credit available. Both have to be answered on the portal or the next return is blocked. Beyond that, GST turnover is compared with the income tax return, Form 26AS and the AIS. Most differences are timing rather than tax, and they close on a reconciliation with working papers attached.

Scrutiny under Section 61 is neither an audit nor an investigation. An officer examines the returns for a period, forms a view on a discrepancy, and issues Form ASMT-10 setting out what does not tie. The notice is generally generated from the system's own comparison, so the parameters are predictable. Credit claimed beyond GSTR-2B, reverse charge liability not declared, turnover falling short of e-way bill data, and credit not reversed against exempt supplies account for most of them. The notice states the period, the discrepancy and the time allowed to reply. It is served on the portal, and that is where the clock runs whether or not anyone logged in.

The reply goes in Form ASMT-11, on the portal, within the period the notice allows or an extension sought before that period expires. A reply is a reconciliation, not a letter. Each discrepancy is answered separately, with the ledger extract, the invoice and the return that explain it attached to it. Where the department is right, the tax is paid in Form DRC-03 with interest and the reply says so plainly. Where it is right in part, pay that part and defend the rest. If the officer accepts the explanation, an order in Form ASMT-12 closes the period, and that order is worth holding on file. Silence is what escalates a file.

An unanswered or unconvincing reply moves the file into demand proceedings. Usually a pre-notice intimation in Form DRC-01A comes first, offering a last opportunity to pay or explain before formal proceedings open. Then the show cause notice in Form DRC-01. Which section it issues under depends on the period. Earlier periods run under Sections 73 and 74, which separate cases with suppression from those without, while later periods run under the single unified Section 74A. The distinction still matters, because the penalty consequence and the limitation period differ. The reply goes in Form DRC-06, a personal hearing is a right and should be taken, and the order issues in Form DRC-07.

Paying before a notice issues is frequently cheaper than defending, and the statute is built to encourage it. Tax paid with interest in Form DRC-03 before a show cause notice, or within the window the section allows after one, reduces or removes the penalty. The judgement is whether the position is genuinely weak. Paying on a defensible position sets a precedent the department will apply to every later year, and to every associated registration. Two practical points. A DRC-03 payment does not by itself extinguish a demand already raised in an order, and has to be linked to it through Form DRC-03A. And credit cannot be used to discharge liability under reverse charge.

Refunds are sanctioned on documents, not on eligibility. Exporters supplying under a letter of undertaking in Form RFD-11 claim accumulated credit, and the letter has to be in force across the whole period claimed. Goods exports turn on the shipping bill, the export general manifest and the invoice reported in GSTR-1 agreeing exactly. Service exports turn on the foreign inward remittance certificate or bank realisation, and on invoice numbers tying back to the return. Inverted duty claims turn on the rate borne on inputs against the rate on outputs, applied through a prescribed formula. A deficiency memo in Form RFD-03 sends the application back to be filed afresh, so the first filing should be the complete one.

Volume matters less than mess. Number of registrations, whether the accounting system produces an outward register the returns can be built from, and whether the credit ledger has ever been reconciled to the books are the three that move the work most. Exports, supplies to and from special economic zones, reverse charge on imported services, e-commerce, job work, and stock transfers between your own registrations each add a workstream. A backlog of open notices, or returns filed by someone else on figures nobody can now reproduce, means reconstruction before compliance. The last filed annual return, the electronic credit ledger and any open notices are reviewed first, then scope is set in writing.