Many businesses collect more than ₹100000 of GST in a month. But there’s no use in keeping that amount in your bank account. Do you have any fund parking options for that GST?

In today’s KOFFi break, we will learn how you can get good returns on your GST payable amount in just 5-6 days till the GST due date.

What is GST Payable?

GST payable is the taxes that you owe the government on the goods and services you sell to businesses or individuals. In simpler words, GST payable is the final amount of GST that a business is committed to pay to the government.

Let’s understand it with a formula:

GST Payable = Output Tax (GST on your Sale) – Input Tax (GST Tax credit on your purchases)

For Ex. A chemical manufacturer sold his product to another company at ₹100,000 with a GST rate of 12%.

Invoice value = Value of Product + (Value of Product * GST%)/100

Invoice value = 100000 + 12000 = 120000

Also, he buys some raw materials of price worth ₹50,000 with a GST rate of 12%.

Paid Amount = 50000 + 6000 = ₹56000

GST Payable = 12000 – 6000 = 6000

So the manufacturer is liable to pay ₹6000 to the government. 

Now, you might have a clear idea about GST payable but understanding the importance of managing GST payables is crucial.

Importance of Managing GST Payables Efficiently

Managing GST payable efficiently can play an important role for businesses. Here’s the list:

• • Get some returns from your GST: You can get returns from the GST money paid by your customer. If you park these funds in the best place then it will gain few returns.
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  • Maintaining Cash-flow Flexibility: Proper management of GST payables can help in resolving your business cash-flow issues.

How do businesses need to pay GST payables (monthly, quarterly, annually)?

In India, there are specific criteria to pay GST. Mainly the criteria are turnover and the operation type of business. 

Note: As of May 2024, GST Registration is mandatory for all businesses whose annual turnover exceeds 20 lakhs.

GST Payable Frequency

A basic point to be noted is that all GST-registered businesses have to compulsorily file monthly or quarterly GST returns or annual GST returns based on the business type.

1. Quarterly or Monthly Return:
   • Business with an annual turnover of more than 5 crores has to file monthly only.
   • Businesses with an annual turnover of up to 5 crores can file returns every quarter.
2. Annual Return:
   • All businesses that file on a monthly and quarterly basis need to file annual returns.
   • This is optional for businesses with an annual turnover of less than 2 crores.

Look at the table below and understand which GST return you need to file and what should be the frequency.

Now you might have a better idea about GST Payables, returns, and filing. It’s time to understand how arbitrage funds can be beneficial for GST payables fund parking.

What are Arbitrage Funds?

Arbitrage funds are low-risk, short-term investments. It takes advantage of the price difference of the same asset in different markets. Buying assets at lower prices in one market and selling them for a higher price in another market.

Here, we are aiming to park your GST payable in arbitrage funds so that your money works for you till the due date. Read some of the benefits of arbitrage funds for GST Payable parking.

Benefits of Arbitrage Funds for GST Payable Parking

• Earn Interest: Till the time of your due date, you can park your GST payable funds in an arbitrage fund and get a return of 1-2% in a week. Ex, A business has a GST payable of ₹1 Lakh, so investing it in an arbitrage fund, you can get a return of 1% which is ₹1000.
• High Liquidity: You might be afraid of accessing funds before the due date. Don’t worry! Arbitrage funds have high liquidity, which allows quick withdrawals.
• Low Risk: They invest in low-risk, safe, and short-term securities like commercial papers and government treasury bills.

For better clarity, we will explain to you with an example.

Example of B2B Business parking GST Payable Funds in Arbitrage Funds

Assume a B2B manufacturer has a turnover above 5 crore and has a monthly GST payment cycle. Let’s understand their monthly scenario.

This amount might seem too small, but all these small amounts will add up over time. Larger businesses with larger GST liabilities can get better returns through arbitrage funds.

Are you thinking of parking your GST payable funds in arbitrage funds? If yes! Then check the step-by-step process.

Step-by-Step Process for GST Payable Fund Parking in Arbitrage Funds 

Step 1: Research to Choose the Best Arbitrage Fund

• Go through the best arbitrage fund provided by investment platforms. Here are the things that you should study for each arbitrage fund:
  • Last Performance
  • Expense Ratio
  • Minimum Investment
  • Exit Fees

Step 2: Open an Account

• Selecting an authorized broker is important
• After selection, proceed with the online account opening process and upload your required KYC documents.

Step 3:Fund Parking GST Payables

• Do a proper analysis of your transactions. Understand when you are receiving your payments.
• Specific GST payable fund parking in your chosen arbitrage funds. Do this a few days to a week before the due date.

Step 4: Monitor and Track your Funds

• Track the performance of your funds through an online app of your investment platform or broker.
• Plan for the withdrawal date and initiate the withdrawal process.

Step 5: Make your GST Payment

• Transfer the returns to your bank account and transfer the funds to the government for GST payment.

Follow these steps to park your GST Payable amount in arbitrage funds and get a good return. Don’t lose your patience. These small returns will be big one day.

Final thought

Many small to midsize businesses face an issue of managing their cash flow. By GST payable fund parking in an arbitrage fund, can help in better cash-flow management and increase the returns. If you have never given a try, then this is the best time to explore this option. 

Apart from just arbitrage funds, there are various options to park your funds and get small to high returns for your business.

Did you find this information valuable? Share this blog with someone who is a business owner how is looking for optimizing GST payables. Help them make informed financial decisions just as you do! 

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