Year-End GST Activities & Planning for FY 2025-26

As FY 2024-25 nears its conclusion, it is crucial for taxpayers to complete various GST-related tasks to ensure compliance and a smooth transition into FY 2025-26. These activities encompass outward supplies, Input Tax Credit (ITC), Reverse Charge Mechanism (RCM), and other regulatory obligations that must be handled with care. Below is a comprehensive list of key GST-related actions that businesses must take before the end of the financial year:

1. Outward Supplies

E-invoice Applicability: Businesses that were not required to generate E-invoices in FY 2024-25 should check whether they meet the turnover threshold of Rs. 5 Crore, which would make E-invoicing mandatory in the new financial year.
Renewal of Letter of Undertaking (LUT): The validity of LUTs is applicable for a full financial year. Businesses engaged in zero-rated supplies such as exports or Special Economic Zones must renew their LUT for FY 2025-26.
Fresh Document Series: GST law mandates that each document (tax invoices, bills of supply, debit/credit notes, delivery challans, etc.) be serially numbered and unique for every financial year. Ensure a new document series is established for the upcoming year.
Reconciliation of Outward Supplies: Reconcile outward supplies as per GSTR-1, GSTR-3B, and your books of accounts. Correct any discrepancies such as misreported SGST/CGST, wrongly stated POS, or incorrect GSTIN details before filing the returns for the subsequent months.
E-way Bill and E-invoice Reconciliation: Ensure that your outward supplies match with the E-way bills and E-invoices generated. Reconciliation of this data is critical to maintain accurate records.
Credit Note Issuance: Any credit notes related to FY 2024-25 must be issued by October 30th of the subsequent financial year and reported by November 30th, following the same period.

2. Input Tax Credit (ITC) and Reverse Charge Mechanism (RCM)

Reconciliation of ITC: Cross-check your ITC as per the books and GSTR-3B. Ensure that any discrepancies like missed claims or incorrect reporting are addressed. If there are any missing claims, ensure they are filed by the due date, typically by October 30th.
ITC Reconciliation with GSTR-2B: Cross-check the ITC claimed in GSTR-3B with the details in GSTR-2B. Ensure any missing invoices are reflected in both records to avoid discrepancies.
Reversal of Common ITC: Under Rule 42 and 43, businesses must reverse any ITC related to non-business use or exempted supplies. This should be done at the end of the financial year, with adjustments made in GSTR-3B by the filing due date (i.e., October 30th).
RCM Reconciliation: Ensure that Reverse Charge Mechanism payments and ITC claims for services and goods are reconciled correctly in your books and GSTR-3B.
ITC on Imports: Review the reconciliation of imported goods and check whether the IGST paid on imports is accounted for accurately in your books and GSTR-2B.
Reversal of ITC on Goods Lost, Stolen, or Disposed: If any goods were lost, stolen, or disposed of, ensure the corresponding ITC is reversed.

3. Other Compliance Activities

ISD Registration: If your business involves distributing ITC across different entities, make sure you are registered as an Input Service Distributor (ISD) as per the requirements, particularly for entities beginning operations on April 1, 2025.
Vendor Declarations for E-invoicing: Verify with vendors if they need to comply with E-invoicing based on their turnover. Ensure proper declarations are obtained to ensure compliance.
GTA Vendor Declaration: Goods Transport Agencies (GTAs) must declare if they opt to pay tax under forward charge. If this option is not exercised, the recipient must pay under reverse charge. Seek declarations from your GTA vendors to ensure timely compliance.
GST TDS/TCS Credit: Verify any TDS/TCS credits on the GST portal and reconcile them with your books of accounts to ensure proper claims.
Job Work Material Returns: Check if materials sent for job work are returned within the prescribed time limits (1 year for inputs and 3 years for capital goods) and ensure they are reported in ITC-04.
Goods Sent on Approval Basis: Goods sent on approval must be either returned or invoiced within six months. Ensure compliance with this requirement.

4. Special Schemes and Compliance

Composition Scheme: If your business qualifies for the Composition Scheme, ensure that you file Form CMP-02 by March 31st, 2025, to opt for this scheme for FY 2025-26.
QRMP Scheme: For businesses with a turnover of up to Rs. 5 Crore, the QRMP scheme allows quarterly filing of GST returns with monthly payments. Ensure you opt in or out of the scheme before the deadline.
Compliance of Rule 96A for Exporters: Exporters must ensure compliance with Rule 96A regarding export under bond/LUT. Export of goods must occur within three months, and export of services must be paid for in convertible foreign exchange or Indian rupees within a year.
Refund Claims: Any refund claims for taxes paid should be filed within two years from the relevant date. It is crucial to check for any pending refund claims before the year-end to avoid any gaps.

Conclusion

Executing the above tasks will help businesses ensure compliance and avoid penalties. By completing these activities and addressing any discrepancies, businesses can transition smoothly into FY 2025-26 with accurate records, timely claims, and regulatory compliance.