GSTR-4 Annual Return Filing: Eligibility, Procedure, and Due Date for Composition Taxpayers

GSTR-4

GSTR-4 Annual Return Filing: Eligibility, Procedure, and Due Date for Composition Taxpayers

GSTR-4

GSTR-4 is an annual return that must be filed by all taxpayers registered under the GST Composition Scheme. If you’re a small business paying GST at a fixed rate and looking for a simplified compliance process, this guide walks you through the entire online filing process for GSTR-4—from prerequisites and deadlines to step-by-step instructions and troubleshooting tips.

What is GSTR-4?

GSTR-4 is an annual GST return specifically designed for composition scheme taxpayers. Until FY 2018-19, it was a quarterly return. However, starting FY 2019-20, it became an annual return while tax payments continue to be made quarterly through CMP-08.

GSTR-4 includes:

  • Summary of quarterly CMP-08 filings

  • Inward supplies (purchases)

  • Outward supplies (sales, if any)

  • Taxes paid under the scheme

📌 Note: Once GSTR-4 is filed, it cannot be revised.

GSTR-4

Latest GSTR-4 Updates

🔹 53rd GST Council Meeting – June 22, 2024

 

The due date to file GSTR-4 has been extended to June 30 for all future years, effective from FY 2024-25 onwards.

🔹 Amnesty Scheme – March 31, 2023

For taxpayers who missed GSTR-4 filings for FY 2017 to 2022:

  • Late fee capped at Rs. 500 (Rs. 250 CGST + Rs. 250 SGST)

  • Nil returns: No late fee

Who Needs to File GSTR-4?

You must file GSTR-4 if:

  • You’re registered under the Composition Scheme for any part of the year

  • You opted out of the scheme mid-year

  • Your GST registration was cancelled, but you had composition status before that

  • You had no business activity (must file Nil GSTR-4)

When to File GSTR-4?

Annual Due Date: 30th June following the end of the financial year
(e.g., For FY 2024-25, the due date is 30th June 2025)

When to File GSTR-4?

  • Annual Due Date: 30th June following the end of the financial year
    (e.g., For FY 2024-25, the due date is 30th June 2025)

Late Filing Penalty

TypeLate FeeMax Penalty
Regular ReturnRs. 200/day (Rs. 100 CGST + Rs. 100 SGST)Rs. 5,000
Nil ReturnRs. 500 total (as per amnesty/notification)Rs. 500

Pre-Filing Checklist

Before filing GSTR-4:

  • Ensure you’re registered under the Composition Scheme

  • File all CMP-08 forms for the financial year

  • Keep turnover details of the previous financial year ready

Step-by-Step Process to File GSTR-4 Online

Step 1: Login to GST Portal

Go to 👉 www.gst.gov.in
Login using your credentials

Step 2: Navigate to GSTR-4

Services > Returns > Annual Return
Click on ‘File Annual Returns’

Step 3: Select Financial Year

Choose the relevant FY (e.g., 2024-25)

Step 4: Click ‘Prepare Online’

Read the on-screen instructions carefully

Step 5: Enter Turnover Details

Input aggregate turnover of the previous year. Enter “0” if there was none. Click ‘Save’

Step 6: File Nil GSTR-4 (If Applicable)

If no purchases or sales:

  • Tick ‘File Nil GSTR-4’

  • Click ‘Proceed to File’

Step 7: Fill Relevant Tables (if Not Nil)

Complete the following sections:

  • Table 4A: Inward supplies from regular dealers

  • Table 4B: Inward supplies under reverse charge

  • Table 4C: Supplies from unregistered dealers

  • Table 4D: Import of services

  • Table 5: CMP-08 summary (auto-filled)

  • Table 6: Outward supplies, if any

  • Table 7: TDS/TCS credit (auto-filled)

Step 8: Preview & Make Payments

  • Click ‘Proceed to File’

  • Download PDF/Excel preview

  • If needed, create a challan and pay via Electronic Cash Ledger

Step 9: File with DSC or EVC

  • Tick the Declaration

  • Select Authorized Signatory

  • File using DSC or EVC

  • Receive ARN confirmation via SMS/Email

Understanding GSTR-4 Tables in Detail

TableDescription
4AInward supplies from registered suppliers (regular)
4BInward supplies under reverse charge
4CSupplies from unregistered suppliers
4DImport of services
5CMP-08 summary (auto-filled)
6Outward supplies and reverse charge summary
7TDS/TCS credits (auto-filled)

How to File Nil GSTR-4

Conditions:

  • No purchases, sales, or other liabilities

  • All CMP-08 returns are Nil

Steps:

  1. Choose ‘File Nil GSTR-4’

  2. Click ‘Proceed to File’

  3. Sign and submit using DSC or EVC
    ✅ No late fee if filed before the due date

GSTR-4

Common Errors and Fixes

IssueSolution
“Records under processing”Wait and refresh page
Upload errorAvoid special characters, check internet
Saved data not visibleUse ‘Records per Page’ or Search
File not submittingEnsure all tables are filled, check DSC/OTP

Read More: GST Compliance Checklist for Financial Year 2025-26

Filing GSTR-4 is crucial for staying compliant under the Composition Scheme. Though it’s an annual return, quarterly CMP-08 payments are mandatory. If you qualify for a Nil return, the filing process is even faster.

Stay ahead of deadlines, avoid penalties, and always keep a copy of your filed return for your records.

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Business Transformation: Takeover of Proprietorship by Private Limited Company

Business

Business Transformation: Takeover of Proprietorship by Private Limited Company

Business

The entrepreneurial journey often begins with a sole proprietorship, offering simplicity and direct control. However, as your business grows, the limitations of this structure may become apparent. Converting your proprietorship into a private limited company can unlock numerous benefits, including limited liability, enhanced credibility, and greater access to funding.

However, this transition isn’t a simple switch. It involves navigating a complex web of legal frameworks spanning the Companies Act, Income Tax Act, and Goods and Services Tax (GST) law. Understanding the interplay of these regulations is crucial for a smooth and tax-efficient conversion.

This guide provides a comprehensive analysis of the key legal considerations involved in the takeover of a proprietorship firm by a private limited company in India.

The Income Tax Angle: Capital Gains Exemption Under Section 47(xiv)

The Income Tax Act, 1961, specifically under Section 47(xiv), offers a significant incentive for proprietorship conversions. It exempts the transfer of capital assets or intangible assets from a sole proprietorship to a company from capital gains tax, provided certain stringent conditions are met:

Complete Transfer: All assets and liabilities of the proprietorship must be transferred to the company. No cherry-picking allowed!

Share Consideration Only: The sole proprietor must receive only equity shares in the company as consideration for the transfer. No cash, property, or other forms of payment are permitted.

Substantial and Sustained Shareholding: The proprietor must hold at least 50% of the total voting power in the company immediately after the transfer. This significant holding must be maintained for a minimum period of five years.

What Happens if These Conditions Aren't Met?

If the conditions of Section 47(xiv) are not met, the tax treatment of the transfer under the Income Tax Act will be as follows:

  1. Slump Sale (Section 50B):

    • If the entire business, including all assets, liabilities, employees, and contracts, is transferred for a lump sum consideration without allocating individual values to the assets, it is classified as a slump sale.

    • The profits from a slump sale are taxed as capital gains.

    • In this case, the cost of acquisition and cost of improvement for capital gains purposes is considered to be the net worth of the business (the difference between assets and liabilities).

    • Indexation benefits (adjustment for inflation to increase the cost base) are not available in the case of a slump sale.

  2. Asset-wise Transfer:

    • If individual assets of the proprietorship are transferred separately (rather than as a lump sum), then the transaction is treated as a transfer of assets, and each asset will be subject to capital gains tax.

    • The tax will depend on the nature of each asset (whether it’s short-term or long-term) and its holding period.

  3. Transfer Below Fair Market Value (Section 56(2)(x)):

    • If shares are issued by the private limited company to the proprietor in exchange for assets at a value lower than the fair market value (FMV), the difference between the FMV and the issue price of the shares is treated as income in the hands of the company.

    • This difference is taxable under the provisions of Section 56(2)(x), which deals with income from other sources when a company issues shares for consideration lower than the FMV of the assets.

The Companies Act, 2013: Ensuring Fair Valuation with Section 247

The Companies Act, 2013 requires the valuation of assets by a registered valuer in specific scenarios, particularly when shares are issued for non-cash consideration. This ensures fairness and transparency in the takeover process.

  1. Issue of Shares for Non-Cash Consideration:
    When a private limited company issues shares to a proprietor in exchange for the assets of the proprietorship, a registered valuer must determine the fair market value (FMV) of those assets. This complies with Section 62(1)(c) of the Companies Act.

  2. Other Corporate Actions:
    Valuation by a registered valuer is also required in mergers, amalgamations, and private placements to ensure that asset values are accurately assessed.

Why is Valuation Necessary?

Justifying Share Allotment:
The valuation report helps determine the number of shares to be issued to the proprietor, ensuring it aligns with the fair value of the transferred assets.

Compliance with Corporate Law:
It ensures adherence to the Companies Act and related rules, promoting corporate governance.

Protecting Shareholder Interests:
Fair valuation protects existing and future shareholders by preventing the overvaluation or undervaluation of assets.

When is Valuation NOT Mandatory Under Section 247?

As highlighted in the provided table, valuation under Section 247 is generally not required in scenarios like:

  • Simple asset takeovers without share issuance.
  • Rights issues at par or predetermined prices.
  • Valuation solely for Income Tax purposes (e.g., avoiding angel tax).
  • Slump sales where no shares are issued.
  • Stamp duty valuation for immovable property.

However, even if not mandated by the Companies Act, a fair valuation is often prudent for Income Tax purposes, especially when claiming exemption under Section 47(xiv).

The GST Perspective: Transfer of a Going Concern

Under the CGST Act, 2017, the transfer of business assets is generally taxable. However, Entry 2 of Notification No. 12/2017 – Central Tax (Rate) provides an exemption for the transfer of a going concern. If the proprietorship is transferred as a going concern to a private limited company, the transaction may be exempt from GST.

What Constitutes a "Going Concern" under GST?

A “going concern” typically implies the transfer of the entire business operation, including assets, liabilities, employees, and ongoing contracts, with the intention that the buyer will continue to operate the business without significant disruption.

Input Tax Credit (ITC) Transfer:

If the transfer qualifies as a going concern, the unutilized Input Tax Credit (ITC) in the proprietorship’s GST credit ledger can be transferred to the private limited company. This transfer is done using Form GST ITC-02 under Rule 41 of the CGST Rules. The proprietorship (transferor) must file the form electronically, and the private limited company (transferee) must accept it on the GST portal, along with uploading the Business Transfer Agreement.

Important GST Considerations

  • Cancellation of Old Registration: The proprietorship’s GST registration must be canceled after the transfer, as per Rule 20 of the CGST Rules.

  • Final Return: A final return in Form GSTR-10 must be filed after the cancellation of the GST registration.

  • Valuation (GST Perspective): While GST law doesn’t require specific valuation for transferring a going concern, fair value may be relevant in case of scrutiny.

The Combined Legal Landscape: A Holistic Approach

Successfully navigating the takeover requires a coordinated approach that considers all three legal frameworks simultaneously. Here’s a cross-referenced summary:

IssueIncome Tax ActCompanies ActGST Law
Exemption on capital gainsSection 47(xiv) – subject to conditions——
Valuation of businessFMV needed to justify exemptionSection 247 + Valuer Rules for share issuanceNot mandatory for GST, but relevant
Consideration for transferShares only for Section 47(xiv) exemptionShare allotment via BTA and Form PAS-3Not taxable if “going concern”
Continuity of business5-year holding required for proprietorBTA + MOA should reflect transfer of businessMandatory for “going concern” exemption
Input Tax Credit (ITC)——Rule 41 + Form ITC-02 for transfer
GST liability——Exempt if “going concern” conditions are met
ROC filings—Allotment forms, MOA changes, etc.—
Business

Essential Documents for a Smooth Transition

A well-documented process is crucial for legal compliance. Key documents with cross-law relevance include:

DocumentPurposeApplicable Law(s)
Business Transfer Agreement (BTA)Legal foundation of the transfer, outlining terms and conditionsAll 3 Acts
Valuation Report (Registered Valuer)Fair market value assessment for share issuance and transfer valueCompanies Act, Income Tax
Share CertificatesEvidence of consideration in the form of sharesCompanies Act, Income Tax
Form ITC-02To facilitate the transfer of GST input tax creditGST
Final Return (GSTR-10)To close the old proprietorship’s GST registrationGST
Form PAS-3For reporting the allotment of sharesCompanies Act
Board ResolutionsApprovals from the company’s board for each stage of the transactionCompanies Act
 

Read More: Navigating GST Changes: 5 Essential Updates on E-Way Bill and E-Invoice

Conclusion: Strategic Planning for a Successful Takeover

Converting your proprietorship into a private limited company is a pivotal step with lasting impact. While the advantages are clear, navigating the legal intricacies demands careful planning and execution. Understanding the nuances of the Income Tax Act, Companies Act, and GST law, along with maintaining thorough documentation, is vital for a smooth and tax-efficient transition.

It’s highly advisable to consult with legal and financial professionals experienced in business conversions to ensure compliance and streamline the process. Taking a proactive approach will set the foundation for a successful transformation and pave the way for your business’s continued growth and success in its new corporate form.

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Navigating GST Changes: 5 Essential Updates on E-Way Bill and E-Invoice

E-Way Bill

Navigating GST Changes: 5 Essential Updates on E-Way Bill and E-Invoice

E-Way Bill

As we step into the new financial year 2025-26, businesses must gear up for key compliance changes in GST, particularly concerning E-Invoicing and E-Way Bills. These aren’t just procedural formalities—they’re critical documents that validate tax liability and the movement of goods.

Failure to comply can attract severe consequences, including denial of Input Tax Credit (ITC), penalties of up to 200% on goods in transit, and post-supply penalties of up to 100%. With changes in invoice series and reporting timelines, it’s crucial to update your systems and internal processes accordingly.

Here’s a quick roundup of 5 significant updates you need to be aware of from April 1, 2025 onward.

Multi-Factor Authentication (MFA) Now Mandatory for All

The government has now made Multi-Factor Authentication (MFA) compulsory for all users accessing the e-Invoice and e-Way Bill portals from April 1, 2025. Previously applicable only to large taxpayers (AATO > ₹100 Cr), the MFA threshold was gradually lowered and is now applicable to all registered taxpayers, regardless of turnover.

MFA requires login via:

  • Username and password

  • OTP sent to the registered mobile number/Sandes app

✅ Action Point:
Ensure your GST-registered mobile numbers are active and up to date. Sub-users must be created with valid mobile numbers to avoid last-minute access issues.

Case-Insensitive IRN Validation Starts June 1, 2025

To streamline the invoice registration process, the Invoice Registration Portal (IRP) will treat invoice numbers as case-insensitive from June 1, 2025. For instance, “abc123”, “ABC123” or “Abc123” will all be considered the same.

This aligns with the treatment in GSTR-1, where invoice numbers are already case-insensitive, and will help avoid IRN duplication due to case mismatch.

✅ Action Point:
Standardize invoice number formats in your accounting system—preferably in uppercase—to prevent mismatches during IRN generation.

30-Day Time Limit for E-Invoice Reporting – Now for AATO > ₹10 Cr

From April 1, 2025, businesses with an Annual Aggregate Turnover exceeding ₹10 Cr will no longer be allowed to report e-Invoices older than 30 days on the IRP portal.

For example, an invoice dated April 1, 2025 must be reported by April 30, 2025. This applies to all document types requiring IRN, including credit and debit notes.

✅ Action Point:

  • Integrate your ERP/accounting systems with IRP to enable real-time e-Invoice generation.

  • Train your internal teams to adhere strictly to the 30-day reporting window, as late filing can result in ITC denial to buyers.

Note: This restriction does not currently apply to businesses with AATO between ₹5 Cr and ₹10 Cr, although e-Invoicing remains mandatory for them.

E-Way Bill Generation Timeframe Restricted to 180 Days

Effective January 1, 2025, E-Way Bills can only be generated for documents issued within the last 180 days.

For instance, from January 1, 2025, you cannot generate an E-Way Bill for documents dated before July 5, 2024.

✅ Action Point:
Check the document date carefully before generating E-Way Bills. Delayed dispatches may need revised documentation.

E-Way Bill Extension Limit: Max 360 Days

Also from January 1, 2025, E-Way Bills can only be extended within 360 days from their original date of generation.

For example, a bill generated on January 1, 2025 can only be extended until December 25, 2025. This restricts the earlier practice of indefinite extension in exceptional cases.

✅ Action Point:
Avoid planning long-term dispatches that could exceed the 360-day validity window.

Read More: Pros and Cons of Presumptive Taxation Scheme for Professionals

Final Thoughts: Compliance is a Team Effort

The latest updates in GST E-Invoicing and E-Way Bill mechanisms emphasize the importance of automation, real-time reporting, and inter-department coordination. Compliance is no longer just the responsibility of finance or accounts—it involves your sales, logistics, and operations teams as well.

👉 Recommendations:

  • Upgrade ERP and accounting software for seamless IRN and E-Way Bill generation.

  • Train staff across departments on new SOPs aligned with legal timelines.

  • Consult GST professionals for a comprehensive compliance roadmap.

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