Chapter 1: First Return (Section 40)

Under the Goods and Services Tax (GST) regime, registration is a fundamental requirement for businesses. A person incurs liability for registration as per Section 22 or Section 24 of the CGST Act. Section 22 delineates general threshold limits for aggregate turnover in a financial year, typically  lakh, or  lakh in specified special category states, with provisions for potential enhancement. Conversely, Section 24 enumerates specific categories of individuals mandated to register irrespective of their turnover, such as inter-state taxable suppliers, casual taxable persons, and those obligated to remit tax under the reverse charge mechanism.

Upon becoming liable for registration, an application must be submitted within  days from the date such liability arises. However, a temporal gap often exists between the date of liability and the actual grant of the registration certificate. This intervening period is critical for compliance considerations.

During this interim phase, a person who has become liable for registration but has not yet obtained their certificate may have engaged in outward supplies. To ensure tax compliance and facilitate the seamless flow of Input Tax Credit (ITC) to recipients, specific provisions are established.

For outward supplies executed during the period spanning from the date of liability for registration to the date the registration certificate is granted, the registered person is permitted to rectify previously issued invoices. In accordance with Section 31(3)(a) read with Rule 53 of the CGST Rules, 2017, the registered person is authorized to issue Revised Tax Invoices against the original invoices issued during this period. This action must be completed within one month from the date of issuance of the registration certificate. This mechanism is crucial for accurately reflecting transaction details for tax purposes.

Section 40 of the CGST Act specifically governs the declaration of these outward supplies made during the intervening period. It mandates that the registered person must declare all outward supplies effected from the date they became liable for registration until the date their registration was granted. This declaration is to be incorporated into the first return filed subsequent to the grant of registration.

The format for this initial return aligns with that of regular returns, ensuring a comprehensive overview for tax authorities of all taxable supplies made by the entity from the moment legal obligation to register commenced, even prior to formal certification. This provision serves two primary objectives:

Compliance: It enables the newly registered entity to accurately declare all its taxable activities.

ITC Availment: It facilitates the claiming of Input Tax Credit by the recipients of these supplies, thereby upholding the integrity of the GST credit chain.

In essence, Section 40, in conjunction with the provisions for issuing revised tax invoices, ensures that no taxable supply made during the period of liability but prior to registration grant is overlooked, thereby promoting the smooth operation of the GST framework for all stakeholders.