पाठशाला Pathshala · नियम Niyam, Law and compliance · Lesson 03 · Start

GST: registration, invoicing and the first filings

When registration stops being optional, what an invoice must carry, the two returns that run every month, and the input credit most young companies simply fail to collect.

Pathshala, The Founder Library · 11 October 2026 · 8 min read

GST is the tax a founder meets first and understands last. It arrives as a line on the first invoice, becomes two returns a month, and quietly decides whether the company is collecting the credit it is owed on every rupee it spends. The companies that get it wrong are rarely evading anything. They registered late, invoiced loosely and never reconciled.

This lesson does three things. It settles when registration becomes compulsory and why most startups should register before that. It sets out what an invoice must carry and the two returns that run the month. And it explains input tax credit, the mechanism by which the tax you pay on costs comes back to you, because that is where the money is.

When registration stops being optional

Section 22(1) of the CGST Act makes a supplier liable to register when aggregate turnover in a financial year exceeds ₹20 lakh, or ₹10 lakh in the special category States. For a business supplying only goods, Notification 10/2019-Central Tax raised the figure to ₹40 lakh from 1 April 2019, with two sets of exclusions: ice cream, pan masala and tobacco; and intra-State suppliers in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand, who keep the lower limit. Aggregate turnover means all supplies under one PAN across India, taxable and exempt, so a consultant in Bengaluru and the same person’s small shop in Pune are counted together. These figures were checked on 10 October 2026.

Section 24 then lists the people for whom the threshold does not exist. Anyone making an inter-State taxable supply of goods. Anyone liable to pay tax under reverse charge. Anyone selling through an e-commerce operator that collects tax at source. Every e-commerce operator. Casual and non-resident taxable persons, agents, input service distributors and foreign suppliers of online services to Indian consumers. A D2C brand that ships its first order from Delhi NCR to Mumbai is in this list from that order. Once liable, section 25(1) gives 30 days to apply.

The threshold is the wrong question for most startups anyway. If your customers are registered businesses they want your invoice as input credit, and a supplier who cannot give it is more expensive than one who can. Register in the month you incorporate, which the SPICe+ incorporation form already offers, and treat the compliance as part of being a supplier a company can buy from.

The invoice that survives an audit

Rule 46 of the CGST Rules fixes what a tax invoice carries, and a GST invoice missing a field is a credit your customer may be denied. The supplier’s name, address and GSTIN. A consecutive serial number unique within the financial year. The date. The recipient’s name, address and GSTIN if registered. The HSN code for goods or SAC for services. Description, quantity, total value, taxable value after discount. The rate and the tax amount, with CGST and SGST shown separately for a supply within the State and IGST for a supply across States. The place of supply with the State name whenever it differs from the supplier’s State. Whether tax is payable under reverse charge. A signature, physical or digital.

Place of supply is the field founders get wrong most, because the rule is about where the service is consumed rather than where the invoice is addressed, and because software teams default to the billing address. Wrong tax, say CGST and SGST where IGST was due, is tax paid once to the wrong government and again to the right one before the first is refunded.

Above a line the invoice stops being a document and becomes a transaction. E-invoicing applies once aggregate turnover exceeds ₹5 crore in any financial year since 2017–18, from 1 August 2023: every B2B invoice is reported to the Invoice Registration Portal, which returns a reference number and a QR code that must appear on the document, and since April 2025 the reporting must happen within 30 days of the invoice date. Most billing tools do this with a setting. Switch it on the month you cross the line, not the month a customer refuses your invoice.

The rates, after September 2025

The 56th GST Council on 3 September 2025 replaced the four-slab structure with a standard rate of 18 per cent and a merit rate of 5 per cent, plus a 40 per cent rate for a short list of demerit goods, effective 22 September 2025 for services and most goods. For a software or services startup the working rate is 18 per cent on almost everything you sell and buy. Check the schedule for your goods before you quote a price, and check it again when the Council meets.

The two returns that run the month

GSTR-1 is the statement of everything you sold: each B2B invoice line by line, B2C sales in aggregate, credit and debit notes. For a monthly filer it is due on the 11th of the following month. It is the return that matters to your customers, because what you report here appears in their GSTR-2B as credit they can claim. File it late and every customer’s credit is late.

GSTR-3B is the summary return and the payment: total outward tax, total input credit claimed, the cash difference paid. It is due on the 20th of the following month for monthly filers. Since the July 2025 tax period the outward liability in GSTR-3B is locked to what GSTR-1 reported; a mistake in GSTR-1 is corrected through GSTR-1A before 3B is filed, not by overwriting the figure.

A company with aggregate turnover up to ₹5 crore may opt into the Quarterly Return Monthly Payment scheme under Circular 143/13/2020-GST: GSTR-1 and GSTR-3B become quarterly, tax for the first two months of each quarter is paid through PMT-06 by the 25th of the following month, either 35 per cent of the previous quarter’s cash tax or a self-assessed figure, and the quarterly GSTR-3B is due on the 22nd or 24th of the month after the quarter depending on the State. The Invoice Furnishing Facility lets a quarterly filer upload B2B invoices for months one and two by the 13th of the following month, so customers are not kept waiting for credit until the quarter ends. Use it. A customer whose credit arrives two months late remembers which supplier caused it.

GSTR-1 is for your customers. GSTR-3B is for the government. GSTR-2B is for you, and it is the one nobody reads.

Input credit: the money left on the table

Every rupee of GST you pay on a business cost is, in principle, yours to set against the GST you collect. Section 16(2) of the Act attaches four conditions: you hold a tax invoice; you have received the goods or services; the supplier has paid the tax to the government; and you have filed your return. In practice the third condition is met through GSTR-2B, the auto-drafted statement available on or after the 14th of each month that lists the invoices your suppliers reported in their GSTR-1. If an invoice is not there, the credit is not available, whatever your purchase ledger says. The monthly reconciliation of the ledger against GSTR-2B is the single most valuable hour in a startup’s compliance calendar, because what it finds is a supplier who has not filed, and a phone call fixes that.

Three more rules shape the credit. Under the second proviso to section 16(2), a supplier not paid within 180 days of the invoice means the credit is added back to your liability with interest until you pay. Section 17(5) blocks credit altogether on a list that reads like a startup’s discretionary spend: food and beverages and outdoor catering, motor vehicles for carrying up to thirteen people, club and fitness memberships, employee travel for holidays, works contracts for building your own premises, anything for personal consumption, and goods given away as gifts or samples. And section 16(4), as CBIC Circular 237/31/2024 restates it, closes the window: the last date to claim credit for a financial year is 30 November of the following year or the date of the annual return, whichever is earlier.

Reverse charge runs the other way. On notified purchases, and on services imported from a supplier outside India, the registered recipient pays the tax rather than the supplier. It is paid in cash in that month’s GSTR-3B, cannot be settled from credit, and is then claimable as credit the same month if the purchase is for business. A startup paying foreign cloud and software vendors from an Indian entity should expect this line on every return and should not be surprised by the cash timing.

What late costs

The late fee is daily and it is charged twice, once under the central Act and once under the State Act. Notification 76/2018-Central Tax sets the CGST side of a late GSTR-3B at ₹25 a day, ₹10 for a nil return, so ₹50 and ₹20 a day in total; Notification 19/2021 caps the CGST side at ₹250 for a nil return, ₹1,000 for turnover up to ₹1.5 crore and ₹2,500 for turnover between ₹1.5 crore and ₹5 crore, so ₹500, ₹2,000 and ₹5,000 in total. GSTR-1 carries the same structure under Notification 20/2021. Interest on tax paid late runs under section 50 at a rate the Act caps at 18 per cent a year. The annual return GSTR-9 is due by 31 December for the previous financial year and is exempt for turnover up to ₹2 crore.

Two newer rules have no fee attached and bite harder. Since 1 August 2025 the portal refuses any GSTR-1, GSTR-3B or GSTR-9 more than three years past its due date; an unfiled return becomes a permanent gap in the record. And a registration can be cancelled for non-filing, after which every customer’s credit on your invoices is at risk. The arithmetic of a ₹2,000 cap makes late filing look cheap. The customer who stops buying because your GSTIN shows as cancelled is the real fee.

The monthly ritual, in ninety minutes

On the 10th, close the sales ledger and file GSTR-1 or the IFF, then check that every customer GSTIN on an invoice is valid. On the 14th or the next working day, download GSTR-2B and reconcile it against purchases; call every supplier whose invoice is missing and hold their next payment until it appears. On the 18th, review the 3B draft: output tax from GSTR-1, credit from the reconciled 2B only, reverse charge in cash, blocked credits excluded. File and pay by the 20th. Once a quarter, run the 180-day ageing on suppliers. Once a year, in the second week of November, sweep for any credit of the previous year still unclaimed. That is the whole discipline, and it is the difference between a company that pays GST and a company that merely collects it for everyone else.

Nothing here is legal or tax advice; confirm the current rule with a chartered accountant or lawyer before acting.