Chapter 4: Monthly vs Quarterly Returns: What Suits Your Business?

One of the critical decisions GST-registered businesses must make is whether to file returns monthly or quarterly. This choice can significantly impact a business’s cash flow, compliance workload, and overall financial management. This chapter explores the criteria, benefits, and considerations of both options to help businesses make an informed decision.

Understanding the Options

Under the GST regime, taxpayers can opt for monthly or quarterly return filing based on their turnover and the scheme they choose:

• Regular Scheme: Typically requires monthly return filings.
• Composition Scheme: Allows for quarterly filings, targeting smaller businesses with a turnover threshold of up to Rs. 1.5 crores.

Monthly Return Filing

Advantages:

1. Frequent Input Tax Credit (ITC) Reconciliation: Allows businesses to reconcile and claim ITC promptly, improving cash flows.
2. Regular Compliance Cycle: Helps businesses stay on top of compliance, reducing the risk of accumulated errors and non-compliance penalties.
3. Better for High-Volume Businesses: Ideal for businesses with high transaction volumes, providing regular updates on tax liabilities and credits.

Considerations:

• Higher Compliance Burden: Requires more frequent documentation and data preparation.
• Increased Administrative Costs: More frequent filings mean potentially higher costs for accounting and GST compliance services.

Quarterly Return Filing

Advantages:

1. Reduced Compliance Load: Quarterly filings reduce the number of total filings per year, lowering the compliance burden on businesses.
2. Lower Costs: Ideal for small to medium-sized enterprises (SMEs) with limited accounting resources, reducing the frequency of professional fees.
3. Cash Flow Management: Allows businesses more time to manage and allocate funds for tax liabilities.

Considerations:

• Delayed ITC Claims: The slower cycle can affect cash flows due to the delayed claim of input tax credits.
• Bulk Data Handling: Requires handling a larger volume of data at once, which can increase the potential for errors if not managed properly.

Choosing What Suits Your Business

When deciding between monthly and quarterly filings, consider the following factors:

• Business Size and Volume: Large businesses or those with high transaction volumes might benefit more from monthly filings due to quicker ITC claims. Small businesses may prefer the simplicity and reduced cost of quarterly filings.
• Cash Flow: Evaluate how the timing of ITC claims affects your cash flow.
• Administrative Capability: Consider your team’s ability to handle compliance tasks. Monthly filings require robust systems and processes.
• Industry Practices: Sometimes, industry norms or supply chain practices may influence the preferred filing frequency.

Conclusion

The choice between monthly and quarterly GST return filing should align with your business operations, financial management capabilities, and compliance efficiency. It’s advisable to consult with a GST expert or use compliance tools that can automate and streamline these processes, ensuring that regardless of the frequency chosen, your business remains compliant and financially healthy.

In the next chapter, we will dive into a detailed guide on filing GSTR-1, which is crucial for documenting outward supplies and is a fundamental part of the GST filing process.