GST: Key Points to Keep in Mind Before the End of Financial Year 2024-25

As the current financial year comes to an end, taxpayers are eager to know what steps they should take before the end of this financial year to make sure they are well-prepared for the upcoming financial year, 2025-26. Here are some points related to GST that taxpayers need to focus on to ensure compliance and avoid any issues.

1. Composition Scheme and Quarterly Return Monthly Payment (QRMP) Scheme

For FY 2025-26, taxpayers with a turnover of less than Rs.5 crores can choose their preferred frequency of GST return, i.e., filing of QRMP Scheme by 30th April 2025. Besides this, those taxpayers who have turnover below Rs.1.5 crore should assess their tax liability under the composition scheme and normal option based on which they should select the option that benefits them.

2. E-Invoicing Requirements for FY 2025-26

Businesses are required to create a new billing series for the financial year 2025-26. Additionally, businesses with an annual turnover above Rs. 5 crores in FY 24–25 need to start generating e-invoices from April 1, 2025.

3. Letter of Undertaking

The Letter of Undertaking (LUT) is a document in which one party gives assurance to the other party that it has fulfilled or will fulfill certain obligations or requirements. For the FY 25-26, all exporters, including those who supply goods or services to a Special Economic Zone (SEZ) without paying for GST, must apply for a Letter of Undertaking (LUT) by submitting Form RFD 11 to the tax authorities.

4. Payment of RCM

The taxpayer should check the RCM liability as per their books of accounts with RCM paid in GSTR 3B. Additionally, the RCM shown in GSTR 2B should also be reviewed.

5. GST Amnesty Scheme

The Amnesty Scheme aimed at cancelling interest and penalties for some tax demands under Section 73 for the financial year 2017-18 to 2019-20. Taxpayers are required to pay the whole amount of tax demanded in the notice by 31/03/2025 and submit the application in Form GST SPL-01 or GST SPL-02 within 3 months from this payment deadline, i.e., by 30/06/2025. This scheme is not for cases including fraudulent activities under Section 74, and any interest or penalties that have already been paid are refundable.

6. Reversal of ITC:

For the financial year 2024-25, analyse the ineligible Input Tax Credit (ITC) u/r 42,43 or section 17(5), etc. that you have already claimed in your GSTR 3B. This includes credits on exempt supplies or blocked credits. If you find any such credits, you must reverse them and pay the required amount along with any interest. Additionally, if you haven’t paid your suppliers within 180 days from the date of their invoice, you need to reverse the ITC claimed under Section 16(2). If you’ve wrongly claimed ITC but haven’t used it, no interest will be charged on the reversal.

7. Reconciliation of ITC for FY 2024-25

For the financial year 2024-25, businesses should prepare a detailed reconciliation of the Input Tax Credit (ITC) recorded in their accounting books with the ITC reported in GSTR 3B and GSTR 2B. In case some transactions are not shown in GSTR 2B, the business must contact their suppliers and request them to update and report these transactions in their GSTR 1, ensuring that the taxes are paid in GSTR 3B. Additionally, if ITC has been claimed and the transactions do not appear in GSTR 2B, the business must reverse the ITC.

8. Multi-Factor Authentication (MFA) for E-Way Bills:

As per the advisory issued on 17th December 2024, users need to log in using credentials like username, password, and OTP for generating an E-way bill. GSTIN has introduced this to improve login security. All taxpayers must comply with this MFA requirement from April 1, 2025, to access the E-Way Bill portal.

9. Reconciliation of Turnover and Outward Tax Liability for FY 2024-25

Make sure that the turnover and the tax liability, as stated in GSTR 1/GSTR 3B, reconcile with the books of accounts for FY 2024-25. If there is any shortfall in filing, taxpayers must pay the tax with interest to avoid any legal penalties.

Taxpayers should take the necessary steps by the end of March to avoid any legal problems with GST. By doing so, they can prevent issues from arising and start the new year without any complications.