In finance and business, there are two terms that are often heard — GST and ITR. If you are a startup entrepreneur, small business owner, freelancer, or an individual earning through online portals in India, then you would have certainly heard about both. But whereas everyone thinks they are both the same or one lets you do without the other, that’s a common myth — and a risky one.
So let’s talk about it. In simple terms. No jargon. Honest, simple descriptions of what GST and ITR actually are, are different from each other, and why both are about your money and legal safeguarding.
Understanding the Basics: What is GST?
Let us begin with GST, Goods and Services Tax. It is an indirect tax levied by a business from a customer on a good or service that they are offering. Instead of having different taxes like VAT, service tax, and excise duty, the Indian government merged all into this singular indirect tax called GST in 2017.
Think about this — you sell a product or a service to a customer and, as per the GST act, you charge some percentage of the tax on the price. You don’t own that amount of money. It is government money, and you’re just keeping it temporarily. You’re only supposed to hold it and give it back to the government in the form of monthly or quarterly GST returns.
For instance, if you are a freelance designer and you are charging a logo for ₹10,000 and the GST rate being charged is 18%, your client will pay ₹11,800. The additional ₹1,800 is not yours. It is tax on behalf of the government, which you will pay when you are submitting your GST return.
The most important thing to know is that the GST is worked out on your turnover or business sales, not on your income or profit.
What is ITR?
Okay. Now, let’s talk about the ITR — Income Tax Return. That’s a whole different ball of wax. Whereas GST is calculated on your sales, ITR is calculated on your total income less expenses.
ITR is how you report to the government how much you earned in a financial year, where all — salary, freelancing, rent, business, trading, interest, or anything. Based on that, you pay taxes or get a refund if you’ve already paid excess tax.
Let’s go back to the same design scenario. You earned ₹10,000 on one logo. Imagine you did 10 such projects that year — that’s ₹1,00,000 in earnings. But you also incurred expenses — maybe software subscriptions, internet bills, a new laptop. When you deduct all those expenses, let’s assume your net earnings are ₹60,000.
This is what you’ll declare in your ITR. And based on your total yearly income, you might or might not be paying income tax. But paying ITR doesn’t always mean paying tax — it’s also to make your income clean and legitimate.
Why the Confusion between GST and ITR?
The confusion is due to the fact that both ITR and GST are money and tax-related. All individuals think that if they are paying GST on a monthly basis, then they don’t need to file ITR. Others think that if they are making less than the tax limit, then they don’t need to register under GST. Tax consultants and accountants too don’t explain the difference sometimes.
But this is the fact — they are regulated by two entirely distinct laws, handled by two distinct departments, and they monitor two distinct points of your money.
GST follows your sales and collections.
ITR monitors your profitability and income.
So even if you are a registered GST payer, you still need to file ITR if your income is beyond the basic exemption limit. Similarly, even if you are filing ITR on a period basis, you can still be asked to register for GST depending on your turnover or the nature of your services (e.g., online transactions or interstate supply).
Why You Should File Both — Not Either
It’s here that it becomes important: If you’re running a genuine business in India — be it a part-time business, full-time freelancing, or a full-time firm — you simply can’t afford to miss out on either GST or ITR.
Let’s dissect why both are important and what happens if you don’t do one.
1. Filing GST Separately but Leaving Out ITR? Red Flag.
When you file GST returns, the government knows how much you are selling. If you are selling a lot but you have no income or you are not filing income tax returns, then that is a red flag.
The Income Tax Department refers to information from your GST returns to monitor your activities. If there is a mismatch, prepare to hear from them with a notice demanding explanation.
It is a frequent situation for online sellers and service providers who levy GST but show zero income in their ITR — a huge error that can lead to penalties and unnecessary attention.
2. Filing ITR but Not Registering for GST? That Could Be Illegal.
Let’s turn the situation around. You file your ITR and report a decent income — let’s just say ₹15 lakhs from freelancing. However, you are not GST-registered.
Here’s the twist: the moment your turnover in a year exceeds ₹20 lakhs (or ₹10 lakhs in North Eastern and hilly areas), you are legally obligated to register under GST. Whether you like it or not, it does not matter if your customers do not demand it — the law does not discriminate.
Failure to register may attract severe penalties, sanctions, and even being banned from issuing invoices in the future.
3. One Does Not Cover the Other
One of the most popular myths is that if you’re paying taxes under GST, that’s your income tax too. That’s not true.
GST is collected from your customers and paid to the government.
Income tax is what you pay out of your wages to the government.
They’re both taxes, I guess. But they’re taxes of a different kind and intention. One charge won’t get you out of the other.
Let’s Discuss Real-Life Situations
Suppose you are the owner of a small business operating an online shop. You sell ₹40 lakhs of goods in a year. You are registered under GST, and you piously file your GST returns monthly.
But by July you’ve already decided not to file your ITR, thinking your GST filings are enough.
What you may not be aware of is — after deduction of tax on ₹40 lakhs of sales, your net profit after expenses may be ₹8–10 lakhs. That profit must be reported in your income tax return. Failure to file ITR may lead to late-filing fees, denial of deductions, and tax notices.
Or maybe you are a content creator earning ₹12 lakhs from brand collaborations and YouTube. You file your ITR and pay tax. You do not register under GST, though you cross the ₹20 lakhs of turnover.
Here, you’re breaking GST law. The GST department can register you retrospectively, fine you, and charge interest on every month you’d delayed filing.
It’s Not All About Tax — It’s All About Growth
Besides compliance, return of GST and ITR also offers financial benefits. When you require a business loan, credit card, startup funds, or even a visa, your GST returns and ITR are generally the first to be asked for.
They indicate that you’re operating a sound, financially stable enterprise. They validate your credit worthiness.
Fillet skirting might look affordable in the short run. But in the long run, it could end up costing you a lot more — not just in penalties, but in missed opportunities.
Made Easy Filing — When You Have the Right Help
Most of them avoid filing GST and ITR because the systems are complex. The portals are not user-friendly. The law continues to change. And not all can afford to hire a full-time CA.
That is where services such as Legal Dalal step in. We make it easy for you. We let you know what documents you need, get your returns done on time, remind you of due dates, and even reply to notices that arrive at your doorstep.
Whether you are a freelance working from home or a growing business with GST concerns, the correct guidance can be the key to success or failure.
Final Thoughts: Compliance is Clarity
Here is what you should recall.
GST informs the government how much you sell.
ITR reports to the government how much you earn.
Both tell your money story — and they need to be consistent. They’re not options, and one doesn’t replace the other. Leaving out either one introduces unnecessary financial and legal stress.
The good news? Both filing can be done with ease once you have had the right training and a certain amount of discipline.
So, take control. Get compliant. Stay stress-free. And have your business shine — legally, financially, and proudly.
Looking for GST or ITR Filing Assistance?
At Legal Dalal, we simplify tax compliance to be easy, accessible, and accurate.
- Call us on +91-80942 37237
- Or visit www.legaldalal.com to begin today.
