You’ve run your small business in India all year, enjoying the simpler GST rules for composition dealers. Now, the filing deadline for your GSTR-4 is approaching, and you’re wondering if you’ve gathered all the right papers. You might feel a little unsure about where to begin or if you’ve missed a crucial step in the online process.
This feeling of uncertainty is common, especially when dealing with tax forms that seem complicated at first glance. But don’t worry, understanding how to correctly file your GSTR-4 under the Composition Scheme is simpler than you might think. We’ll walk you through each step to make sure your annual filing is smooth and correct.
What Is the Composition Scheme?
The Composition Scheme is a special plan under the Goods and Services Tax (GST) system in India. It’s designed to make tax compliance easier for small businesses and taxpayers. If you opt for this scheme, you pay GST at a much lower, fixed rate on your turnover, rather than the regular, more complex rates.
Who Can Choose It?
To choose the Composition Scheme, your business needs to meet certain conditions. Generally, it’s for businesses with an annual turnover below a specific limit, which is currently ₹1.5 crore for most states and ₹75 lakh for special category states. Service providers can also opt in if their turnover is up to ₹50 lakh.
However, not all businesses can join. For example, if you supply goods or services across different states, or if you manufacture certain goods like ice cream or tobacco, you won’t be eligible. Also, you can’t be an e-commerce operator or a non-resident taxable person.
Benefits of the Scheme
Choosing the Composition Scheme offers several clear advantages. Firstly, you pay GST at a lower rate, which can significantly reduce your tax burden. Secondly, the paperwork is much simpler; you only need to file a quarterly statement (Form CMP-08) and an annual return (GSTR-4), instead of monthly returns. This means less time spent on compliance and more time focusing on your business.
Rules to Remember
While the Composition Scheme offers simplicity, there are important rules you must follow. You cannot claim enter Tax Credit (ITC) on your purchases, which means you can’t reduce your tax liability by the tax you’ve already paid on your raw materials or services. You also cannot collect GST from your customers, and you must clearly mention “Composition Taxable Person” on your bill of supply.
What Is GSTR-4?
GSTR-4 is an annual return form that taxpayers registered under the Composition Scheme must file. It’s a comprehensive overview of all your business activities for the entire financial year, bringing together the information you’ve already provided in your quarterly statements. Think of it as your yearly tax report.
Purpose of the Form
The main purpose of GSTR-4 is to provide a comprehensive overview of your annual turnover and the tax paid under the Composition Scheme. It helps the tax authorities ensure that you’ve correctly followed the scheme’s rules and paid the right amount of tax. It also acts as a final declaration of your yearly sales and purchases.
Who Must File GSTR-4?
Simply put, if you are registered under the Composition Scheme, you must file GSTR-4. This applies to all eligible manufacturers, traders, and service providers who have opted for this simplified tax regime. Even if your business had no transactions during the year, you’re still required to file a “nil” return.
When to File GSTR-4
GSTR-4 is an annual return, which means you file it once a year. The deadline for filing GSTR-4 is 30th April of the financial year following the one you are reporting for. For example, for the financial year 2023-24 (April 2023 to March 2024), you must file GSTR-4 by 30th April 2025.
Common Confusion: Many taxpayers mistakenly believe GSTR-4 is a quarterly return because they make quarterly tax payments. Remember, GSTR-4 is an annual return, while Form CMP-08 is filed quarterly for tax payments.
Things You Need Before Filing
Before you even think about logging into the GST portal, it’s crucial to have all your necessary information and documents ready. Being prepared will save you time and prevent last-minute stress. Gathering these items beforehand makes the entire filing process much smoother.
Your GSTIN Number
Your Goods and Services Tax Identification Number (GSTIN) is a unique 15-digit number assigned to your business. It’s your primary identification for all GST-related activities. You’ll need this number to log in and to identify your business when filing your return. Make sure you have it handy.
Financial Records Ready
This is perhaps the most important step. You’ll need accurate records of your total annual turnover, including all sales and services provided. You also need details of your inward supplies (purchases) from registered suppliers, including those under the composition scheme, and any supplies where you’re liable to pay tax under the reverse charge mechanism. Having these records organised, perhaps in a spreadsheet, will make entering the data much easier.
Digital Signature Certificate (DSC)
If your business is a company or a Limited Liability Partnership (LLP), you will need a Digital Signature Certificate (DSC) to digitally sign and verify your GSTR-4 form. A DSC is a secure digital key that certifies the identity of the holder. Ensure your DSC is valid and correctly configured on your computer before you begin.
Bank Account Details
While you might have already paid your quarterly taxes using your bank account, it’s good to have your bank details accessible. If there’s any additional tax due when you file your annual GSTR-4, or if you need to generate a challan for payment, your bank account will be involved.
Pro Tip: Set up a dedicated folder, either physical or digital, to keep all your GST-related documents throughout the year. This includes sales records, purchase invoices, and previous CMP-08 statements. This habit will make annual filing much quicker.
How to Log In to the GST Portal
The first step to filing your GSTR-4 is to access the official GST portal. This is where all your GST-related tasks, including return filing, are completed. The portal is designed to be user-friendly, but knowing the exact steps helps.
Visiting the Official Website
Open your web browser and go to the official Goods and Services Tax website. The address is www.gst.gov.in. Always ensure you are on the correct, secure government website to protect your sensitive information.
Entering Your Username
Once you’re on the homepage, look for the ‘Login’ button, usually located in the top right corner. Click on it, and you’ll be prompted to enter your username. This is the unique identifier you created when you first registered for GST.
Providing Your Password
After entering your username, you’ll need to enter your password in the designated field. Make sure you enter it carefully, as passwords are case-sensitive. If you’ve forgotten your password, there’s usually a ‘Forgot Password’ option to help you reset it. Once both are entered, click ‘Login’ to access your dashboard.
Finding the GSTR-4 Filing Section
Once you’ve successfully logged into the GST portal, you’ll see your dashboard. This area provides quick access to various GST services. To file your GSTR-4, you need to navigate to the returns section.
Navigating to Services
On your dashboard, you’ll typically find a menu bar at the top or on the left side. Look for the ‘Services’ tab and click on it. This tab opens up a dropdown menu with different categories of services available on the portal.
Selecting Returns Dashboard
From the ‘Services’ dropdown menu, hover over ‘Returns’. This will reveal another sub-menu. Here, you need to select ‘Returns Dashboard’. Clicking this will take you to a page where you can manage all your GST returns.
Choosing the Financial Year
On the Returns Dashboard, you’ll be asked to select the ‘Financial Year’ for which you want to file the return. Use the dropdown menu to pick the correct financial year (e.g., 2023-24). Then, select the ‘Return Filing Period’ as ‘Annual’. After making these selections, click ‘Search’. The system will then display the available return forms, including GSTR-4.
Preparing Your GSTR-4 Details
Now that you’ve reached the GSTR-4 filing section, it’s time to enter your business details for the year. The portal is designed to assist you by pre-filling some information, but you’ll need to add and verify the rest carefully.
Auto-Populated Information
The GST system often auto-populates certain sections of GSTR-4. This usually includes details from the quarterly statements (Form CMP-08) you’ve already filed, showing the total tax paid in each quarter. Always review this auto-populated data to ensure it matches your own records. If there are any discrepancies, you’ll need to investigate them.
Adding Your Turnover
You’ll need to enter your total turnover for the entire financial year. This includes both taxable and exempt outward supplies (sales). Make sure this figure is accurate, as it’s the basis for calculating your tax liability under the Composition Scheme. Double-check your sales registers and financial statements to get this number right.
Rohan from Bengaluru, who runs a small bakery, carefully checks his annual sales figures against the auto-populated data on the portal. He knows getting this right is key to avoiding issues later, so he cross-references his daily sales records with his accounting software.
Reporting Inward Supplies
In this section, you’ll report details of your inward supplies (purchases) from registered suppliers. This includes purchases from regular taxpayers, composition taxpayers, and any supplies where you are liable to pay tax under the reverse charge mechanism. Even though composition dealers can’t claim ITC, reporting these supplies helps the government track the flow of goods and services.
Paying Your Tax
After entering your turnover and inward supplies, the system will calculate your final tax liability for the year. If you’ve already paid your quarterly taxes through CMP-08, this section will show if there’s any balance tax still due. If there’s a shortfall, you’ll need to pay the remaining amount. If you’ve overpaid, there might be options for adjustment, though composition dealers typically don’t get refunds easily.
How to Pay Your GSTR-4 Tax
If the system indicates that you have additional tax due after preparing your GSTR-4 details, you’ll need to make this payment. The GST portal provides a straightforward process for generating a challan and completing your tax payment.
Checking Your Tax Due
Before making any payment, carefully review the ‘Tax Payable’ section on the GSTR-4 form. The system will display the total tax calculated based on your entered turnover and the tax already paid through CMP-08. The difference, if positive, is the amount you still need to pay. Ensure you understand how this figure was arrived at.
Choosing Payment Method
The GST portal offers several convenient ways to pay your taxes. You can typically choose from options like Net Banking (using your bank’s online portal), Credit/Debit Card, or NEFT/RTGS (National Electronic Funds Transfer/Real Time Gross Settlement). Select the method that works best for you.
Generating a Challan
Once you’ve confirmed the amount due and chosen your payment method, the system will allow you to generate a Challan (Form GST PMT-06). This challan is a unique payment document that contains details of your GSTIN, the tax period, and the amount to be paid. It’s essential for making the payment correctly. Download and save this challan for your records.
Completing the Payment
If you chose Net Banking, you’ll be redirected to your bank’s website to complete the transaction. For NEFT/RTGS, you’ll need to take the generated challan to your bank or use your bank’s online NEFT/RTGS service. Follow your bank’s instructions carefully to ensure the payment is successful. After a successful payment, the challan status on the GST portal will update, and the payment will be reflected in your electronic cash ledger.
Submitting Your GSTR-4 Form
After accurately entering all your details and making any necessary tax payments, the final step is to submit your GSTR-4 form. This involves a crucial review and verification process to ensure everything is correct.
Reviewing All Details
Before you click the ‘Submit’ button, take a moment to thoroughly review every section of your GSTR-4 form. Check your turnover figures, inward supply details, and especially the tax calculations. A small error here could lead to issues later. It’s always better to catch mistakes now than after submission.
Signing the Declaration
Once you are confident that all the information is accurate, you’ll need to sign a declaration. This is a formal statement confirming that the details you’ve provided are true and correct to the best of your knowledge. You’ll typically find a checkbox to agree to the declaration.
Using DSC or EVC
To verify your GSTR-4 form, you’ll need to use either a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC). As mentioned earlier, companies and LLPs usually use a DSC. For individuals, proprietorships, and Hindu Undivided Families (HUFs), the EVC option is available.
Quick Context: EVC is a simpler way for individuals and proprietorships to verify their returns. An OTP (One Time Password) is sent to your registered mobile number and email address, which you then enter on the portal to verify your identity.
| Feature | Digital Signature Certificate (DSC) | Electronic Verification Code (EVC) |
| Who Uses It | Companies, LLPs | Individuals, Proprietorships, HUFs |
| Requirement | Valid Class 2 or Class 3 DSC | Registered mobile number/email |
| Process | USB token, specific software | OTP sent to registered contacts |
| Cost | Involves purchase/renewal fees | Free |
| Complexity | Slightly more technical | Very simple |
Receiving Confirmation
Once you’ve successfully verified and submitted your GSTR-4, the GST portal will generate an Acknowledgement Reference Number (ARN). This ARN is proof that your return has been filed. Make sure to note down this ARN or take a screenshot, as it’s your official record of submission. You’ll also usually receive an email and SMS confirmation.
What Happens After Filing?
Submitting your GSTR-4 isn’t quite the end of the process. There are a few important steps you should take and things you should know after your return has been filed. These actions ensure you remain compliant and have proper records.
Tracking Your Status
After receiving your ARN, you can always go back to the ‘Returns Dashboard’ on the GST portal and check the status of your filed GSTR-4. It will typically show as ‘Filed’ or ‘Processed’. This allows you to confirm that your submission was successfully registered with the tax authorities.
Downloading the Receipt
The GST portal allows you to download a copy of your filed GSTR-4 and the acknowledgement receipt. It’s a good practice to download these documents and save them digitally, and perhaps even print a hard copy. These serve as official proof of your compliance for the financial year.
Keeping Records Safe
Even after filing, it’s crucial to keep all your supporting documents safe and organised. This includes your sales invoices, purchase bills, bank statements, and copies of your filed GSTR-4 and CMP-08 forms. Tax laws typically require you to maintain these records for a period of at least six years. This ensures you have everything ready if there’s ever an audit or query from the tax department.
Common Mistakes to Avoid
Filing GSTR-4 can be straightforward, but it’s easy to make small errors that can lead to bigger problems. Being aware of these common pitfalls can help you avoid them and ensure a smooth filing process.
Incorrect Turnover Details
One of the most frequent mistakes is entering an incorrect annual turnover. This figure directly impacts your tax calculation. Always cross-verify your total sales from your books of accounts with the figure you enter in GSTR-4. An under-reported turnover can lead to penalties, while an over-reported one might mean paying more tax than necessary.
Missing Inward Supplies
Although composition dealers cannot claim enter Tax Credit, you are still required to report your inward supplies. Failing to include purchases from registered suppliers or supplies liable for reverse charge can lead to discrepancies. Ensure all relevant purchase details are accurately entered.
Late Filing Penalties
Missing the 30th April deadline for GSTR-4 can result in penalties. For each day of delay, you might have to pay a late fee, which can accumulate quickly. Additionally, interest might be charged on any outstanding tax liability. It’s always best to file well before the due date to avoid these extra costs.
Priya, a small electronics dealer in Chennai, once forgot to reconcile her sales data with the GST portal, causing a delay in filing. This led to a discrepancy notice and a late fee, which she had to spend extra time and money resolving. Now, she sets reminders weeks in advance.
Not Reconciling Data
Always reconcile your internal financial records with the data available on the GST portal. This means comparing your sales figures, purchase details, and tax payments with what the system shows. Any mismatch could indicate an error in your records or in the data entered on the portal, and it’s best to resolve these before filing. Regular reconciliation throughout the year can prevent last-minute surprises.
By understanding these steps and being mindful of common mistakes, you can confidently file your GSTR-4 under the Composition Scheme. It’s all about preparation, careful data entry, and timely submission.
Conclusion
Understanding How to File GSTR-4 Under the Composition Scheme: Step-by-Step Tutorial can help you make informed decisions. By following the guidelines outlined above, you can navigate this topic confidently.
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