More than 16 lakh small businesses that sell directly to consumers could soon be allowed to file just one GST return annually, after the GST Council approved in principle a simplified compliance scheme for taxpayers with turnover of up to Rs 5 crore.
Under the proposed framework, eligible businesses such as retail shops, salons and small eateries would pay GST every quarter but file a single return each year, reducing compliance requirements for a segment that accounts for less than 1 per cent of total GST liability.
The proposal, cleared at the 57th GST Council meeting chaired by Finance Minister Nirmala Sitharaman, will be available as an optional scheme for taxpayers with annual turnover of up to Rs 5 crore.
Under the proposed framework, eligible businesses would file a single GST return each year while paying taxes on a quarterly basis.
Officials said the detailed operational framework and the legislative amendments required to implement the scheme will be placed before the Council at its next meeting. The reforms are slated to take effect from April 1, 2027.
The proposed scheme is expected to benefit a large number of small businesses that deal exclusively with retail consumers, such as neighbourhood shops, salons, restaurants and small eateries.
According to government estimates, out of 1.05 crore active GST taxpayers, around 16.85 lakh report supplies only to consumers. Of these, nearly 16.66 lakh taxpayers, or 99 per cent, have annual turnover below Rs 5 crore.
Despite their large numbers, these businesses account for less than 1 per cent of the overall GST tax liability. Since their customers are individual consumers who do not claim input tax credit, the returns filed by such sellers have limited impact on the broader GST credit chain, making them suitable candidates for a simplified compliance regime.
At present, GST taxpayers are generally required to file monthly returns. Businesses with turnover of up to Rs 5 crore have already been allowed to opt for quarterly return filing since 2021, although they continue to pay taxes every month. The new proposal seeks to simplify compliance further by reducing return filing to once a year while retaining quarterly tax payments.
