Introduction:
A partnership firm is a business entity formed by two or more persons who agree to share the profits and losses of the business. Under the Goods and Services Tax (GST), a partnership firm is treated as a separate legal entity from its partners. The partners of a partnership firm are considered as distinct persons, and each partner is liable to pay tax on their share of profit in the partnership firm.
GST Registration for Partnership Firms:
A partnership firm is required to register for GST if its aggregate turnover exceeds the threshold limit of Rs. 40 lakhs (Rs. 20 lakhs for some special category states) in a financial year. A partnership firm can also opt for voluntary registration under GST, even if its turnover is below the threshold limit. GST registration can be done online through the GST portal by submitting the required documents.
The documents required for GST registration of a partnership firm are as follows:
PAN card of the partnership firm.
PAN card and Aadhaar card of all partners.
Proof of place of business, such as rent agreement or electricity bill.
Bank account details of the partnership firm.
Digital signature of one of the partners.
Once the partnership firm is registered under GST, it is allotted a unique Goods and Services Tax Identification Number (GSTIN). The GSTIN is a 15-digit alphanumeric number that is used for all GST-related transactions.
Input Tax Credit (ITC) for Partnership Firms:
A partnership firm can claim input tax credit on goods and services purchased for business purposes, provided the goods and services are used for making taxable supplies. However, the ITC cannot be claimed on goods and services used for personal use or for making exempt supplies.
The ITC can be claimed by the partnership firm in the following manner:
The partnership firm must possess a tax invoice or debit note issued by the supplier of goods or services.
The supplier must have filed the GST return and paid the tax due on the supplies made.
The partnership firm must have received the goods or services for business purposes and used them for making taxable supplies.
Invoicing for Partnership Firms:
A partnership firm is required to issue a tax invoice for every taxable supply made. The tax invoice should contain all the details required under the GST law, such as the name, address, and GSTIN of the supplier and recipient, description and quantity of goods or services supplied, value of the supply, and applicable GST rate and amount.
The tax invoice should be issued within 30 days from the date of supply of goods or services. In case of continuous supply of goods or services, the tax invoice should be issued on or before the due date of payment.
Filing of Returns for Partnership Firms:
A partnership firm is required to file GST returns on a regular basis. The returns to be filed include GSTR-1 (for outward supplies), GSTR-2 (for inward supplies), and GSTR-3 (for monthly return). The due dates for filing returns and payment of tax are based on the turnover of the partnership firm. A partnership firm with turnover below Rs. 1.5 crores can opt for the quarterly return filing scheme.
GSTR-1:
GSTR-1 is a monthly or quarterly return that needs to be filed by the partnership firm to declare the details of outward supplies made during the period. The due date for filing GSTR-1 is the 11th of the succeeding month for monthly return and the 31st of the succeeding month for quarterly return.
GSTR-2:
GSTR-2 is a monthly or quarterly return that needs to be filed by the partnership firm to declare the details of inward supplies received during the period. It is auto-populated based on the details furnished by the suppliers in their GSTR-1 return. The partnership firm is required to verify the details of inward supplies and make necessary modifications if required.
The due date for filing GSTR-2 is the 15th of the succeeding month for monthly return and the last date of the succeeding month for quarterly return. However, the filing of GSTR-2 has been suspended by the government until further notice.
Reverse Charge Mechanism (RCM) for Partnership Firms:
Under the RCM, the recipient of goods or services is required to pay the tax on behalf of the supplier. The RCM is applicable in certain cases, such as purchase of goods or services from an unregistered dealer, import of services, and purchase of certain notified goods or services.
In case of a partnership firm, the RCM is applicable when it purchases goods or services from an unregistered dealer. The partnership firm is required to pay the tax under RCM and claim input tax credit for the same.
Composition Scheme for Partnership Firms:
A partnership firm with an aggregate turnover of up to Rs. 1.5 crores can opt for the composition scheme under GST. Under the composition scheme, the partnership firm is required to pay a fixed rate of tax on its turnover and is not required to maintain detailed records of inward and outward supplies.
The rate of tax under the composition scheme is lower than the normal GST rate, but the partnership firm is not eligible to claim input tax credit on purchases made. The partnership firm is also not allowed to make inter-state supplies or supply goods or services through an e-commerce operator.
Conclusion:
In conclusion, partnership firms are required to comply with the Goods and Services Tax (GST) rules and regulations to avoid penalties and legal consequences. They must register for GST if their aggregate turnover exceeds the threshold limit, issue tax invoices for every taxable supply made, claim input tax credit on goods and services purchased for business purposes, file regular returns, pay GST on the supplies made by them, and comply with the reverse charge mechanism (RCM) if applicable. Partnership firms can also opt for the composition scheme if their turnover is below a certain limit. It is important for partnership firms to stay updated with the GST laws and regulations to avoid any legal issues and ensure smooth business operations.
