One GST return a year? New scheme could ease compliance for 16 lakh small businesses

Small businesses that solely sell to consumers may soon streamline their Goods and Services Tax (GST) compliance by filing a single return per year. The GST Council approved the concept of this optional scheme, which allows taxpayers with a turnover of up to Rs 5 crore to file just one return annually, while still paying GST on a quarterly basis. This decision will be further discussed and finalized during the Council's upcoming meeting.

Approximately 16.85 lakh, or around 16 percent, of the 1.05 crore active GST taxpayers in India report only supplies to consumers. Out of these, 16.66 lakh, representing 99 percent, have a turnover below Rs 5 crore. These businesses, which may include shops, salons, and small eateries catering to individual consumers, account for less than 1 percent of the total tax liability reported under GST.

Currently, all GST taxpayers must file returns monthly. Since January 2021, businesses with a turnover up to Rs 5 crore have had the option to file quarterly returns, paying tax monthly. The proposed scheme goes a step further, requiring eligible sellers to file one return per year and pay tax quarterly.

The GST Council discussed this proposal a year after implementing a two-rate GST structure, with rates of 5 percent and 18 percent, and a 40 percent rate on certain goods, from September 22, 2025. Since then, taxable supplies have increased by 25.8 percent, while the effective tax rate on domestic supply has decreased from 14.55 percent to 13.13 percent.

GST revenue has grown by 11 percent in FY 2026-27 compared to the previous year and by 14.7 percent in June to August 2026 compared to the same period in the previous year.

The Council has also taken other steps to reduce the compliance burden for small businesses. These include removing the power of arrest under GST, raising the prosecution threshold from Rs 1 crore to Rs 5 crore, and reducing the general penalty from Rs 25,000 to Rs 10,000. Additionally, the Council approved an easier registration route for small online sellers, allowing them to use an e-commerce operator's warehouse in another state as their principal place of business, provided the operator consents. This system will automatically grant the registration if the consent is given.