GSTR 4

Introduction

In India, authorities categorize businesses under two types of GST registration: Regular GST registration and Composition Scheme registration. Taxpayers who opt for the Composition Scheme use GSTR 4 as an essential form. This guide will provide you with a detailed understanding of GSTR 4, its relevance, and the filing process.

What is GSTR 4?

GSTR 4 is an annual return form for businesses registered under the Composition Scheme. This scheme simplifies GST compliance for small taxpayers by allowing them to file returns annually instead of monthly or quarterly. Introduced through the Third Amendment, 2019, to GST Rules 2017, GSTR 4 consolidates details of both inward and outward supplies.

Relevance of GSTR 4

By opting for Composition Scheme, taxpayers can benefit from reduced compliance burdens and lower tax rates. Composition dealers file GSTR 4 only once a year, unlike regular GST taxpayers who file returns monthly or quarterly, simplifying the process.

Particulars under GSTR 4

The revised GSTR 4 form consists of nine sections, each catering to specific details about the composition dealer’s transactions. Here’s a breakdown of these sections:

Tables 1-3:

These tables contain basic information about the taxpayer, such as the name, GSTIN, aggregate turnover in the preceding financial year, ARN (Application Reference Number), and date of ARN. This information is auto-populated during the filing process.

Table 4:

This section requires details of inward supplies. It is divided into four subsections:

• Inward supplies from registered dealers.
• Inward supplies from unregistered dealers.
• Supplies attracting reverse charge.
• Import of services.

Table 5:

Auto-populated with details from Form GST CMP-08, this table summarizes the taxpayer’s self-assessed liability, including payments made on inward supplies attracting reverse charge, outward supplies, interest paid, and tax amounts.

Table 6:

This table details outward supplies and inward supplies subject to reverse charge, along with the tax rates and amounts of IGST, CGST, SGST, and Cess.

Table 7:

Contains information on TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) received from suppliers or e-commerce operators. Details include GSTIN of the deductor/e-commerce operator, gross invoice value, and TDS amount.

Table 8:

This section records the tax, interest, and late fee payable and paid. It provides a comprehensive view of the taxpayer’s tax liabilities and payments.

Table 9:

Allows taxpayers to claim a refund for excess taxes paid. This table divides the refund amount into various categories, such as excess IGST, CGST, SGST, and Cess.

Due Date for GSTR 4

GSTR 4 is an annual return that must be filed by April 30th of the financial year succeeding the year for which the return is filed. For example, for the financial year 2022-23, the relevant financial year due date for filing GSTR 4 would be April 30, 2024.

You may also want to know GSTR 2

How to File GSTR 4?

GSTR 4 is a return that taxpayers registered under the Composition Scheme need to file annually. Unlike regular taxpayers who need to file multiple GST returns, composition dealers only need to file GSTR 4 once a year. Here is a step-by-step guide on how to file GSTR 4:

1. Log in to the GST Portal:

Visit the official GST portal and log in using your GSTIN, username, and password.

Navigate to the “Services” section, click on “Returns,” and then select “Annual Return GSTR 4.”

2. Fill in Basic Details:

Add the basic details in your form GSTR 4 and ensure that the taxpayer’s profile information, such as name, GSTIN, and business type, is accurate and auto-filled.

The financial year for which the return is being filed will be displayed.

3. Enter Details of Inward Supplies:

Composition dealers need to provide details of their inward supplies (purchases) from registered and unregistered suppliers. This includes the total value of goods and services purchased, taxable value, and tax paid.

This information can be uploaded manually or via bulk tools if the volume is high.

4. Add Details of Outward Supplies:

Provide information about the outward supplies (sales) made during the financial year. Include the total value of supplies and any tax paid. Composition dealers are not allowed to charge GST on their invoices, so this section helps calculate the total turnover.

5. Enter Details of Import of Services:

The composition taxpayer must separately report any imported services during the financial year, including the total taxable value and the tax paid.

6. Check Input Tax Credit (ITC) Eligibility:

Composition taxpayers cannot claim input tax credit, so GSTR 4 does not facilitate ITC claims. However, they use information on inward supplies to ensure accurate tax calculations.

7. Provide TDS/TCS Credit:

Add any credits from Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) in this section.

8. Make Payment of Tax:

The system will calculate the tax liability based on the total turnover. You need to make the tax payment through net banking or other available options on the portal.

Ensure that the payment covers tax dues, late fees (if any), and interest.

9. Preview and Submit:

Verify all the details entered, and correct any errors before submitting. Once you are satisfied with the information, click “Proceed to File,” then “File GSTR 4.”

The filing will be completed once the digital signature or Electronic Verification Code (EVC) is provided.

10. Download Acknowledgment:

After successful filing, download the acknowledgment receipt for your records. It serves as proof of return filing.

You may also want to know GSTR 2A

Things to Keep in Mind While Filing GSTR 4

1. Correct Turnover Reporting: Ensure the GSTR 4 annual return declared is accurate. Misreporting turnover can lead to incorrect tax calculations and potential penalties.

2. Timely Filing: GSTR 4 is due by April 30th of the following financial year. Late filing attracts a late fee of ₹50 per day (₹20 per day for nil returns) up to a maximum limit.

3. Correct Tax Payment: Make sure that the tax liability is cleared before filing the return. Any shortfall will result in interest charges and may delay the return processing.

4. Reconciliation with Purchases: Verify that all inward supplies are correctly reported. Reconcile with purchase records to ensure there are no mismatches.

5. No Input Tax Credit: Composition dealers cannot claim ITC. Therefore, do not include input tax credit details in the return.

6. Harmonized System of Nomenclature (HSN) Codes: Although the need for HSN codes may be limited for composition dealers, it’s essential to be aware of any updates in compliance requirements.

7. Review and Correction: Once submitted, GSTR 4 cannot be edited. Carefully review the entries before finalizing to avoid any mistakes.

You may also want to know GSTIN

Applicable Tax Rates Under Composition Scheme

Businesses registered under the Composition Scheme are allowed to pay a fixed percentage of their turnover as tax. Here are the tax rates based on the type of business:

1. Manufacturers and Traders:

1% of the turnover: This rate applies to both manufacturers and traders dealing in goods. Businesses should note that this 1% tax rate is split equally between CGST (Central GST) and SGST (State GST), each at 0.5%.

2. Restaurants (Not Serving Alcohol):

5% of the turnover: For businesses running restaurants that do not serve alcohol, the applicable tax rate under the Composition Scheme is 5%. This is also divided equally between CGST and SGST.

3. Service Providers (Up to ₹50 Lakhs Turnover):

6% of the turnover: Service providers, who previously were not included in the Composition Scheme, can now opt for it if their turnover does not exceed ₹50 lakhs. The applicable tax rate is 6%, split equally between CGST (3%) and SGST (3%).

4. Mixed Supply Businesses:

For businesses involved in mixed supplies (goods and services), the tax rate will vary based on the nature of the predominant business. Generally, the same rules apply as outlined above.

The Composition Scheme simplifies tax compliance for small businesses by lowering tax rates and reducing the need for extensive record-keeping. However, businesses must be cautious about the annual turnover limits and ensure that they file their returns correctly to avoid penalties and compliance issues.

Conclusion

GSTR 4 is a vital form for businesses registered under the Composition Scheme, simplifying the tax filing process by allowing annual submissions. Understanding the sections of GSTR 4 and the filing process ensures compliance and helps avoid penalties.