The regulatory landscape in India presents persistent challenges for the retail business, particularly after stores become operational. Retailers need the correct information and know-how to understand the compliance requirements for GST, TDS, and other laws required to run a retail store business in India. They need knowledge about regulatory requirements to comply with national, state, and municipal laws. 

Whether you are a small boutique store, a large departmental store, or a supermarket chain, this guidebook will help you to navigate annual compliance requirements for the FY 2023-24 and FY 2024-25. 

Understanding the Regulatory Landscape

The operational phase entails continuous adherence to a multitude of compliance requirements stemming from various central, state, and local regulations. Here’s an overview of the complexities faced by the retail industry:

1. Multifaceted Compliance Requirements: After stores are operational, the retail industry needs to navigate approximately 100+ compliance requirements per store, with slight variations across different states. These compliance requirements span diverse aspects such as licensing, labor laws, taxation, environmental regulations, and other statutory obligations.
2. State-Specific Variations: The regulatory environment in India is characterized by significant variations from state to state, leading to the need for the retail industry to tailor their compliance efforts according to the specific requirements of each state.
3. Challenges of Scale: Managing compliance for a large retail chain with multiple stores across different states increases the complexity owing to a diverse set of regulations across various geographical locations.
4. Non-compliance leads to Penalties: The repercussions of non-compliance for retailers can be severe, including financial penalties, loss of business licenses, closure orders, and legal proceedings. Additionally, non-compliance can tarnish the business’s reputation, leading to a loss of consumer trust and goodwill.

Year-end compliances ensure that your retail store business stays within the regulatory parameters,  and no penalties, fines, or legal action can be taken against you by any authority.

FY 2023-24 Compliance Requirements: A Complete Checklist

#1 Financial and Income Tax Compliance 

Retailers must adhere to various financial regulations and reporting requirements to ensure that their operations are in line with the taxation law in India. This includes accurately recording and reporting sales, expenses, and profits, as well as keeping track of inventory and assets. By maintaining proper financial records, retailers can demonstrate transparency and accountability to tax authorities and investors.

Following the policies and laws set using tax government and monetary regulators is called economic and earnings tax compliance. This way, retailers can report financial data and pay taxes as the regulation requires. 

How can retailers ensure annual tax compliance? 

• Accuracy: Making sure that specific financial statements and tax returns are proper and accurate. 
• On-Time: Filing tax returns and economic reviews via the cut-off date to avoid fees. For retailers with business without audit requirements, the last date to file income tax returns is 31st July 2024 for Financial Year 2023-24. For retailers with audit requirements, the cut-off date to file returns is 31st October 2024. 
• Clear: Being open and honest about financial transactions and reporting. 
• Records: Maintaining digital records of all invoices, bills, expense reports, profit and loss statements, and deductions.

Critical Components of Financial and Income Tax Annual Compliance:

Transaction Tracking  Maintain information on all sales and charges through receipts and invoices.	Taxable Income Calculation Determine the taxable earnings by deducting allowable expenses from total sales revenue.	Tax Optimization Identify and follow applicable deductions and tax credits unique to shops.
Tax Form Preparation Accurately complete all vital tax forms and sales and earnings tax returns.	Tax Filing Submit tax returns and bills to the applicable tax government using the required closing dates.	Financial Review Periodically assesses economic documents to ensure accuracy and compliance with tax regulations.

Pro Tip: Retailers can rely on robust accounting systems. These systems help retailers track their income and expenses, generate necessary financial reports, and facilitate the preparation of GST returns.

#2 Goods and Services Tax (GST) Compliance

To ensure annual Goods and Services Tax (GST) compliance before the financial year-end, retailers in India must undertake several crucial steps to fulfill their regulatory obligations. 

key aspects of annual GST compliance for retailers:

1. Review Annual Turnover: Assess the annual turnover to determine if it exceeds the prescribed threshold for GST registration. Ensure compliance with the threshold for businesses operating within a single state and those operating inter-state.

2. Invoice Compliance: Verify the accuracy and completeness of tax invoices and Bills of Supply issued for taxable sales made to registered and unregistered entities. Ensure that all necessary details, including GSTIN, item description, value, tax rates, and HSN codes, are correctly included in the invoices.

3. Tax Rate Verification: Verify the correct application of GST rates for all products and services to avoid compliance issues. Reconcile the tax rates applied with the prescribed GST rate categories and exemptions.

4. Timely Return Filing: Plan and prepare for the timely filing of various GST returns, including GSTR-1, GSTR-3B, and GSTR-9 as per the prescribed filing dates and frequency. Ensure accurate filing to avoid penalties and facilitate the smooth flow of input tax credits.

5. Input Tax Credit (ITC) Reconciliation: Reconcile purchase records with details available on the GST portal to accurately claim and utilize input tax credit. Verify supplier GST compliance and maintain relevant documents such as tax invoices for ITC claims.

6. Internal Audit Preparation: Proactively conduct internal audits to identify and rectify any compliance gaps. Prepare for periodic audits and assessments by the GST authorities by maintaining accurate records and financial data.

#3 Tax Deducted at Source (TDS) Compliance

Tax Deducted at Source (TDS) Compliance refers to following regulations of tax deduction and remittance at the source of income. Tax is deducted when the taxpayer makes payments to the payee, after that the deducted amount is transferred to the government on the payee’s behalf.

Retailers are required to deduct TDS on payments made to suppliers, contractors, or service providers if the payment exceeds a certain threshold. This ensures that the government receives its due tax revenue at the time of payment itself.

TDS compliance includes deducting and depositing taxes on diverse bills in line with the Income Tax Act of 1961 provisions.

Critical Aspects of Annual TDS Compliance for Retailers:

Identification of TDS Applicability Determine whether TDS applies to specific payments or not based on the type of transaction and the thresholds established by tax authorities.	Correct Deduction and Rates Ensure the precise deduction of TDS at the prescribed costs per the Income Tax Act for diverse bills.	Timely Deposit Deposit the deducted TDS amount on the targeted due dates to avoid interest and consequences.
Filing TDS Returns File TDS returns appropriately and on time, presenting information of TDS deducted and deposited at some point in the relevant period.	TDS Certificate Issuance Issue TDS certificate to deductees (recipients of income) as proof of TDS deduction, containing info and the quantity deducted and deposited.	Compliance with TDS ProvisionsAdhere to the policies and provisions laid down through the Income Tax Act concerning TDS deduction, deposit, and reporting.

#4 Shops and Establishment Act Compliance (Professional Tax) 

The Shops and Establishment Act certificate of occupancy is issued by the Municipal Corporation of the city to every retail shop within the city limits as part of the legal registration process. 

This certificate imposes specific restrictions and requirements on the retail shop, including:

• Shop Opening and Closing Times: It may specify the permitted operating hours for the retail shop.
• Designated Weekly Holiday: The certificate may outline a specific day of the week when the store must remain closed.
• Adherence to Wage and Salary Rules: The certificate may include regulations related to employee wages and salaries.
• Precautions for Storing Hazardous Chemicals: It may detail safety measures for the storage of hazardous chemicals, ensuring the safety of employees and customers.
• Fire Prevention Measures: The document may specify requirements for fire prevention and safety measures within the retail store.
• Housekeeping and Cleanliness Standards: The certificate may include guidelines for maintaining a clean and hygienic environment within the retail establishment.
• Permission for Sale of Certain Merchandise: It may outline specific permissions or restrictions related to the sale of certain types of merchandise.
• Maintenance of Proper Records: The certificate may require the maintenance of accurate records related to business operations.

It is crucial for the Shops and Establishment document to be prominently displayed in the retail store and readily available for inspection by municipal officials during surprise visits to ensure compliance with the specified regulations and standards. 

#5 Professional Tax Compliance 2023-24 

Professional tax is a state-level tax imposed on the income earned by individuals employed in India. Employers are also responsible for deducting and remitting professional tax on behalf of their employees. Retailers, like supermarkets, boutique stores, gift stores, fashion retailers, etc. who employ people on a salary have to pay a fixed amount to the municipal department per employee. The salary should cross a certain threshold for professional tax liability. 

For example, in Gujarat PT is deducted at INR 200 per employee whose salary is above INR 12000. (source) Make sure your retail establishment is compliant with PT rules and pay all dues before the month ends in March to avoid any penalties. Retailers also need to file PT returns (both monthly and annual) to avoid action by authorities. 

Professional tax compliance also involves adherence to the specific rules and regulations laid down by the respective state governments regarding professional tax, including exemptions, deductions, and penalties for non-compliance. Maintaining accurate records related to professional tax deductions, payments, and filings is essential to demonstrate compliance during audits or inspections by the tax authorities.

#6 E-commerce Compliance

For e-retailers, TDS liability may arise in certain cases such as payments made to vendors or service providers for advertising or marketing services. E-retailers need to understand the thresholds and rates at which TDS is applicable and ensure that they deduct and remit the correct amount to avoid any penalties or legal issues.

Critical Aspects of E-commerce Compliance:

Tax Collected at Source (TCS) E-commerce operators must collect TCS on any substances manufactured through their structures.	GST or goods and service taxes Retailers selling online products have to follow GST regulations for generating invoices, serialization, and remittance.
Legal and regulatory standards adherence Retailers need to ensure they follow protocols, and legal statutes and laws  governing consumer protection	Transaction validation The accuracy of online transaction details must be verified for validating collected data at the source and GST filings.

For more details on TDS applicability on e-commerce retailers (e-tailers) read here. 

# 7 Environmental and Municipal Regulations

Retail operations generate a significant amount of waste, including packaging materials, expired products, and food waste. Retailers need to have proper waste management systems in place to minimize their environmental impact and comply with hazardous waste management regulations in India. This may involve implementing recycling programs, properly disposing of hazardous materials, and reducing overall waste generation.

Let’s understand how retailers can comply with environmental and municipal regulatory frameworks 

Waste management

• Separate recyclable, organic, and hazardous material waste into various categories
• Big chain retailers like supermarkets can collaborate with various waste management organizations for the proper disposal and recycling of waste.
• Implement waste reduction strategies that include minimal packaging and promoting the reuse of shopping bags.

 Pollution control

• Focus on curing energy consumption and reducing carbon dioxide emissions by adopting energy-efficient lighting and appliances.
• Implement strategies such as utilizing fuel, efficient vehicles, and optimizing delivery routes
• Ensure proper storage and handling of dangerous goods, chemicals, and substances for contamination prevention

  Compliance with local bodies

• Get a license for retail operations, permits, and signage approvals.
• Follow local bodies’ regulations and signage specifications of retail establishments.
• To mitigate disturbances in surroundings, one must confirm adherence to local ordinances. 

By properly managing waste, controlling pollution, and adhering to local bylaws, retailers can not only meet their legal obligations but also contribute to a healthier environment and a more sustainable community.

How retailers can ensure environmental and local laws compliance? 

• Conduct routine audits to assess compliance with environmental and municipal guidelines. 
• Identify areas for improvement and implement corrective actions to address potential non-compliance issues.
• Educate staff on the importance of quality environmental practices and compliance
• Promote a tradition of environmental responsibility in the organization by encouraging employees to participate in sustainability tasks.
• Contact local governments, online companies, and environmental groups to stay informed about regulatory changes and best practices. 
• Participate in community cleanups and sustainability efforts to demonstrate your commitment to environmental protection.

#8 Record-keeping and Audit Compliance

Audits are conducted to review and assess a retailer’s financial records and processes to ensure compliance with regulations and standards. Compliance with audit requirements is essential for retailers to demonstrate their commitment to financial transparency and regulatory adherence.

Record-keeping is the most crucial aspect for retailers to ensure annual audit compliance. Retailers must establish and maintain effective record-keeping practices to ensure accurate and complete financial information. 

This includes keeping detailed records of:

To comply with audit requirements, retailers must keep records in a systematic and organized manner, using standardized accounting principles, and retail management software that keeps a centralized database of all the above-mentioned types of records.  Retailers should also have proper internal controls in place to safeguard their financial records and prevent any unauthorized access or tampering.

Critical aspects of Record-maintaining and Audit Compliance: 

Recordkeeping procedures Set up standard procedures for documentation of financial transactions, data access, cover validation, and storage. For recordkeeping tasks, assign specific roles and responsibilities to a particular person who is accountable and able to maintain consistency.	Maintain detailed financial records Regularly record financial transactions using accounting software with comprehensive details of each transaction, amounts, and their relevant description to support high-quality documentation and maintenance criteria.	Adhere to retention requirements Gain knowledge about tax returns, how to prepare invoices and financial statements, and ensure that records are retained for a specific duration and stored securely or disposed of when no longer required.
Organize records effectively Implement a systematic filing system to organize information and classify records by type, date, or department. Use cloud storage solutions or physical filing shelves to collect statistics and facilitate near-term retrieval.	Conducting internal audits Review and perform internal audits of financial facts regularly to identify errors, deviations, or anomalies. Document the audit findings and implement corrective actions to resolve identified issues promptly.	Continuous Improvement Continuously evaluate and improve documentation processes based on audit findings, remarks, and modifications in regulatory requirements. Provide education and assets to employees to improve their file-retaining practices.

Other Compliances (For Retailers Registered as Private Limited Companies) 

A. Annual General Meeting

An AGM is a yearly accumulating where shareholders speak, vote, and engage with corporation topics. It is essential to protect transparency, shareholder participation, and desirable governance. 

Private limited retailers must call at least one annual General meeting before September 30th of the end of every financial year as per the Indian Companies Act 2013. 

Purpose: The AGM is a forum for shareholders to discuss employer issues, vote on critical issues, and engage with authority.

Activities: Engage in discussion of corporate affairs, participate in voting in director elections, and open FAQ sessions.

Procedure: Notification before 21 days should be sent to shareholders. If companies come up with any amendment, the relevant documentation or supplementary material should be provided with the manual.

Compliance: The annual general meeting requirement is essential to maintain stakeholder accountability and foster corporate governance practices. 

B. ESI/EPF Compliance 

Employee Provident Fund (EPF) and Employee State Insurance (ESI) compliance are crucial for retailers. Both EPF and ESI compliance are essential to protect employees’ interests and ensure their well-being. Retailers must adhere to these compliance requirements to avoid legal issues and provide a safe and secure work environment for their employees. 

EPF is a government-mandated scheme that ensures employees’ financial security by creating a retirement fund. It requires employers to contribute a certain percentage of their employee’s salary to the EPF account. 

ESI provides medical and health benefits to employees in case of illness, injury, or maternity. 

• Contributions: Both employers and employees help pay for hospital expenses and will provide monetary benefits during illness or loss.

• Compliance: Mandatory: Employers with minimum workforce diversity must comply with EPF and ESI rules.

C. Registrar of Companies (RoC) Compliance  

As a retailer with Private Limited Company status, it is crucial to ensure compliance with the Registrar of Companies (RoC). One of the key requirements is to file annual forms mandated by the Ministry of Corporate Affairs (MCA), including Form AOC-4 and Form MGT-7, with the RoC.

Form AOC-4 pertains to the submission of financial statements, providing a comprehensive overview of the company’s financial performance during the year. This document is essential for stakeholders, investors, and regulatory authorities to assess the financial health of the company. 

Form MGT-7 is the Annual Return that includes details such as the company’s registered office address, directors’ details, shareholding pattern, and other vital information. 

ROC updates: You should report to the registrar of companies if any updates in your business operations include hiring new personal adjustments in capital, distribution, or any other facilities that you have provided

D. Insurance Renewal

By staying compliant with insurance renewals, retailers can have peace of mind knowing that their business is safeguarded against potential financial liabilities.

• Coverage Types: Liability Insurance, Employee Health Insurance, Property Insurance
• Policy Assessment: The evolution of existing insurance policies is the best way to confirm if they align with your current requirements or not. 
• Renewal Process: Renew your policy if you are completely satisfied with your current policy before it expires and also renew policies mandated by law. 

E. Statutory Compliance

Retailers must also comply with industry-specific regulations and licenses. It is important for retailers to regularly review their compliance status and take necessary steps to renew or obtain the required licenses and permits. For example, retailers in the food and beverage industry must adhere to the regulations set by the Food Safety and Standards Authority of India (FSSAI). 

Importance of Annual Compliance for Retailers

Annual compliance holds significant importance for retailers as it ensures legal and financial adherence, thereby contributing to the smooth functioning and reputation of the business. By prioritizing annual compliance, retailers can maintain a strong foundation for sustainable growth and success in the competitive market.

Here are the key points to consider:

Legal Compliance

• Ensures adherence to the regulatory requirements set forth by governing bodies.
• Helps in avoiding legal repercussions and penalties.

Tax Obligations

• Enables timely filing of tax returns and payment of taxes, preventing fines and penalties.
• Helps in claiming eligible tax deductions and credits, optimizing the tax position of the business.

Financial Reporting

• Facilitates accurate financial reporting and auditing processes.
• Provides transparency and accountability in the use of financial resources.

Business Credibility

• Demonstrates commitment to transparency and good governance, enhancing the business’s credibility.
• Builds trust with stakeholders such as customers, suppliers, and investors.

Risk Management

• Identifies and mitigates potential risks related to non-compliance and financial discrepancies.
• Protects the business from reputational damage and financial losses.

Future Planning

• Provides insights for strategic planning and setting realistic business goals.
• Facilitates benchmarking and comparison with industry standards for continuous improvement.

Wrapping Up

At the end of the guidebook, retailers should prioritize annual compliances to navigate the regulatory maze, uphold legal obligations, mitigate risk, and foster the trust of stakeholders. 

Retailers need to manage various compliance requirements during their operational journey, including taxation, licensing, labor laws, and environmental regulations. If you have read the above guidelines, things might be clear in your mind. 

If you have any queries, upgrade to VasyERP software for FY 2023-24 and FY 2024-25 compliance requirements and for seamless GST, TDS, and income tax filings. It’s time to say goodbye to manual hassles and ensure government regulations are met effortlessly.