GST for Small Businesses: The Practical Compliance Guide

GST is the single most complained-about regulatory requirement among Indian small business owners. Not because it's conceptually difficult — it's a value-added tax replacing multiple state and central taxes — but because the compliance burden (registration, invoice requirements, monthly/quarterly filing, reconciliation) feels overwhelming alongside the daily demands of running a business. Here's the practical guide I wish I'd had when navigating GST for my businesses.

Registration: When You Must, When You Shouldn't

Mandatory registration threshold: ₹40 lakhs annual turnover for goods, ₹20 lakhs for services (₹20 lakhs and ₹10 lakhs respectively for special category states). Below these thresholds, GST registration is optional. If your business is below the threshold and your customers don't need GST invoices for input tax credit, staying unregistered reduces compliance burden without legal consequence.

When to register voluntarily: If your customers are B2B and need input tax credit on your invoices. If you sell through e-commerce platforms (mandatory registration regardless of turnover). If you want to claim input tax credit on your own purchases (reducing your net tax liability).

Invoice Requirements: What Actually Matters

A valid GST invoice must include: your GSTIN (GST Identification Number), invoice number (sequential, within a financial year), invoice date, recipient's name and address (and GSTIN for B2B transactions), HSN code for goods or SAC code for services, quantity and unit, taxable value, GST rate and amount (CGST + SGST for intra-state, or IGST for inter-state), and total invoice value.

Missing any of these fields can invalidate the invoice for input tax credit purposes — which means your B2B customers can't claim the tax they paid you as a credit on their own returns. This is the single most common invoice error and the single most common source of B2B customer complaints.

Filing Schedule: Quarterly vs. Monthly

QRMP scheme (Quarterly Return Monthly Payment): available for businesses with turnover up to ₹5 crore. File returns quarterly (GSTR-1 and GSTR-3B), but pay tax monthly using a simple challan. This is the right choice for most small businesses — it reduces filing frequency from 36 returns per year to 8, with 12 simple monthly payments.

Monthly filing: Required for businesses above ₹5 crore turnover. GSTR-1 (outward supplies) by the 11th of the following month, GSTR-3B (summary return with tax payment) by the 20th. Missing these deadlines triggers late fees (₹50/day for GSTR-3B, ₹200/day capped at ₹10,000 per return for GSTR-1) and interest on unpaid tax (18% per annum).

The Composition Scheme: Simplification for Small Business

For businesses with turnover up to ₹1.5 crore: the composition scheme allows you to pay a flat percentage of turnover as tax (1% for manufacturers, 5% for restaurants, 6% for service providers under 50 lakh limit) instead of itemized GST collection and credit claiming. You file one quarterly return (CMP-08) and one annual return. The trade-off: you cannot charge GST on invoices (so B2B customers can't claim input credit on your supplies), and you cannot claim input tax credit on your own purchases.

Best for: B2C businesses (retail, restaurants, personal services) where customers don't need GST invoices. Not suitable for B2B businesses where customers rely on input tax credit from your invoices.

Common Mistakes That Trigger GST Notices

Mismatched data: The GST system automatically compares your filed GSTR-1 (sales reported) against your customers' filed GSTR-2B (purchases reported). Mismatches generate automated notices. Ensure your GSTR-1 data matches actual invoices exactly — invoice numbers, amounts, and GSTINs must be identical to what your customers file.

Late filing accumulation: Missing one filing is a late fee. Missing several triggers system-generated notices and potential registration cancellation. Set calendar reminders for every filing deadline, and use accounting software that alerts you when deadlines approach.

Wrong HSN/SAC codes: Using incorrect product/service codes affects the applicable tax rate and can trigger rate-related scrutiny. Verify HSN codes against the latest notifications and use accounting software that maintains updated code databases.

GST compliance isn't optional, but it doesn't have to be painful. Use accounting software (Tally, Zoho Books, ClearTax) that automates invoice generation, filing preparation, and reconciliation. Hire a GST practitioner for filing if your business is small enough that the filing tools feel overwhelming. And maintain organized records — the businesses that face GST problems are almost always the ones with disorganized invoicing. Keep your records clean, file on time, and pay accurately. GST becomes routine rather than terrifying.