Section 40 – First Return under the CGST Act, 2017

Section 40 of the Central Goods and Services Tax (CGST) Act, 2017 deals with the first return to be furnished by a registered person in respect of supplies made during the period between the date on which the person became liable to obtain GST registration and the date on which registration was actually granted.

This provision is particularly relevant where there is a gap between the date on which GST registration liability arises and the date on which the GST registration certificate is issued.

A person may become liable for GST registration on one date but receive the GST registration on a later date. Section 40 ensures that outward supplies made during this intervening period are not left outside the GST reporting system. Such supplies must be declared in the first return furnished after registration is granted.

What is Section 40 of the CGST Act?

Section 40 is titled “First return.”

The provision states that every registered person who has made outward supplies during the period:

from the date on which the person became liable to registration until the date on which registration was granted

must declare those supplies in the first return furnished after the grant of registration.

In simple words, if a person was required to obtain GST registration from an earlier date but the registration was granted later, the supplies made during that intervening period have to be reported in the first applicable return after registration.

Why Was Section 40 Introduced?

GST registration does not necessarily become effective on the same day on which the registration application is submitted or the registration certificate is issued.

There can be a period during which:

• The person has already become liable for registration;
• The registration application is being processed; and
• The registration certificate is subsequently granted.

During this period, the person may have made outward taxable supplies.

Section 40 provides a mechanism for bringing those supplies into the GST return system.

Without such a provision, supplies made between the date of liability and the date of grant of registration could create uncertainty regarding their reporting.

Understanding the Time Period Covered by Section 40

The most important part of Section 40 is the period for which the provision applies.

It covers outward supplies made:

From the date on which the person became liable to registration

up to the date on which registration was granted.

The person must declare those supplies in the first return furnished after registration.

Simple Example

Suppose a business becomes liable for GST registration on 1 July.

The business applies for GST registration and its registration is granted on 15 July.

The business made taxable outward supplies between 1 July and 15 July.

Those supplies are required to be declared in the first return furnished after registration.

Therefore, obtaining GST registration on 15 July does not mean that the supplies made from 1 July to 15 July can simply be ignored.

Section 40 Applies to Outward Supplies

The wording of Section 40 specifically refers to outward supplies.

Outward supplies generally refer to supplies of goods or services, or both, made by a taxable person in the course or furtherance of business.

Therefore, Section 40 is primarily concerned with bringing the relevant outward supplies made during the pre-registration period into the taxpayer’s first return.

The provision should not be confused with the separate provisions governing input tax credit on purchases made before registration.

Section 40 and Input Tax Credit

Section 40 itself deals with reporting of outward supplies.

The question of input tax credit relating to supplies received before registration is governed by other provisions of the CGST Act, particularly the special circumstances covered by Section 18, subject to the applicable conditions and restrictions.

Therefore, a taxpayer should distinguish between:

• Reporting earlier outward supplies under Section 40; and
• Claiming eligible pre-registration input tax credit under the applicable provisions.

Section 40 should not be interpreted as an independent provision granting ITC on all purchases made before registration.

What is a “First Return”?

The term “first return” refers to the first applicable GST return that the newly registered person is required to furnish after the registration has been granted.

The exact return and filing mechanism depend on the taxpayer’s category and the applicable GST return framework.

For a normal registered taxpayer, outward-supply details are generally reported through Form GSTR-1, while the taxpayer’s summary tax liability and eligible ITC are reported through the applicable return, generally GSTR-3B.

The GST Portal describes GSTR-1 as the statement of outward supplies furnished by normal and casual registered taxpayers making outward supplies.

Section 40 and GSTR-1

GSTR-1 is particularly important when applying Section 40 because Section 40 specifically requires the relevant earlier outward supplies to be declared in the first return after registration.

GSTR-1 contains details of outward supplies such as:

• B2B supplies
• Applicable B2C supplies
• Export supplies
• Credit notes
• Debit notes
• Advances, where applicable
• Amendments
• Exempt, nil-rated and non-GST supplies
• HSN/SAC summary
• Other prescribed outward-supply information

The GST Portal confirms that GSTR-1 is the statement used by normal and casual registered taxpayers for reporting outward supplies.

Example: Business Starts Before Registration

Consider a business that becomes liable for GST registration on 10 August.

The registration certificate is granted on 20 August.

Between 10 August and 20 August, the business makes the following supplies:

Date	Nature of Supply	Taxable Value
11 August	B2B supply	₹1,00,000
14 August	B2C supply	₹50,000
18 August	B2B supply	₹75,000

Under Section 40, the relevant outward supplies made during the period from the date of liability to the date of grant of registration must be declared in the first return after registration.

The business should therefore maintain the corresponding invoices and supporting records and report the applicable details through the prescribed GST return mechanism.

What Happens After GST Registration Is Granted?

Once registration is granted, the taxpayer becomes part of the GST return system from the applicable effective date and must comply with the applicable filing requirements.

If there were outward supplies during the period covered by Section 40, those supplies must be included in the first return as required by the provision.

The taxpayer should therefore not prepare the first return only by looking at transactions occurring after the date on which the GST certificate was issued.

The earlier period covered by Section 40 must also be examined.

Section 40 and Effective Date of Registration

The effective date of registration is important in determining whether Section 40 applies.

There can be a difference between:

• The date on which the registration application is filed;
• The date on which the person becomes liable for registration; and
• The date on which registration is granted.

Section 40 specifically focuses on the period beginning from the date on which the person became liable to registration and ending on the date on which registration was granted.

Therefore, taxpayers should carefully check their registration order and the effective date of registration.

Example of Different Dates

Suppose:

• GST registration liability arises on 1 January.
• Application for registration is filed on 10 January.
• Registration is granted on 18 January.

If the business made outward supplies between 1 January and 18 January, the relevant supplies falling within the Section 40 period must be declared in the first return after registration.

The filing date of the registration application does not replace the statutory starting point mentioned in Section 40.

Why the Effective Registration Date Matters

The effective date can determine the period from which GST compliance obligations apply.

A taxpayer should therefore carefully review:

• Date of liability to registration
• Date of application
• Effective date mentioned in the registration
• Date of grant of registration
• Dates of invoices issued during the intervening period

This is particularly important for businesses that started making taxable supplies before receiving the GST registration certificate.

Tax Invoice for Supplies Covered by Section 40

Once the person is required to comply with GST law from the applicable effective date, the documentation relating to the relevant supplies should be maintained properly.

Tax invoice requirements are governed principally by Section 31 and the applicable GST Rules.

The taxpayer should ensure that the invoices relating to supplies covered by Section 40 contain the applicable particulars and that the transactions are properly recorded.

The GST Portal’s GSTR-1 guidance also requires invoice-level details for specified categories of outward supplies.

Can Supplies Made Before the Registration Certificate Be Ignored?

No.

If the supplies fall within the period specifically covered by Section 40, they must be declared in the first return after registration.

The fact that the GST registration certificate was issued later does not eliminate the reporting requirement for the covered period.

This is the central purpose of Section 40.

Section 40 and GST Tax Liability

Reporting an earlier outward supply under Section 40 can result in GST liability for that supply where GST is applicable.

The taxpayer must determine:

• Whether the supply is taxable;
• The applicable rate;
• Taxable value;
• Place of supply;
• Applicable type of tax;
• Any exemption or zero-rating provision;
• Applicable tax liability.

The resulting tax liability should then be reported and paid through the prescribed GST return mechanism.

Example of Tax Calculation

Suppose a business becomes liable for registration on 1 September and registration is granted on 15 September.

During the intervening period, it makes a taxable supply having a taxable value of ₹2,00,000.

Assume the applicable GST rate is 18%.

The GST on the supply would be:

₹2,00,000 × 18% = ₹36,000

The applicable outward supply and tax details must be properly reported in the first return in accordance with Section 40 and the applicable return provisions.

The actual tax treatment will depend on the nature and circumstances of the supply.

Section 40 and GSTR-1A

The GST Portal currently provides GSTR-1A, an optional amendment facility for the same tax period.

GSTR-1A allows a taxpayer to amend records already furnished in GSTR-1 or add records that were missed in GSTR-1 for the same tax period. It is available after filing GSTR-1 or after its due date, whichever is later, and can be filed before GSTR-3B for the same tax period.

However, GSTR-1A should not be confused with Section 40 itself.

Section 40 establishes the requirement to declare qualifying pre-registration-period outward supplies in the first return.

GSTR-1A is a separate return-system facility for correcting or adding same-period information.

👉 Read More → Section 41 – Availment of input tax credit

Section 40 and Late Registration

One practical situation where Section 40 becomes particularly important is late registration.

Suppose a person crosses the applicable registration threshold and becomes liable for registration but does not receive the registration certificate immediately.

During the intervening period, the business may continue making supplies.

Once registration is granted, the taxpayer needs to examine the period beginning from the date on which registration liability arose and identify the outward supplies falling within Section 40.

The taxpayer should then report them in the first applicable return.

Section 40 Does Not Mean Registration Is Optional

Section 40 should not be understood as allowing a person to operate without GST registration and later simply include all transactions in a first return.

The taxpayer must comply with the registration provisions applicable to the business.

The provision merely establishes how certain outward supplies made between the date of liability and the date of grant of registration are to be declared once registration has been granted.

Section 40 and Section 25

Section 25 deals with the procedure for registration, while Section 40 deals with the first return after registration.

The relationship can be understood as:

Section 25 → Registration procedure

Section 40 → Reporting of specified outward supplies made before registration was granted

A taxpayer should therefore first determine when the registration liability arose and then examine the return implications of supplies made during the intervening period.

Section 40 and Section 39

Section 39 deals with furnishing of returns generally.

Section 40 provides a special rule for the first return of a newly registered person.

The relationship can be summarised as:

Section	Subject
Section 37	Details of outward supplies
Section 38	Communication of inward supplies and ITC information
Section 39	Furnishing of returns
Section 40	First return
Section 41	Claim of input tax credit

Section 40 therefore forms a specific part of the broader GST return framework.

Section 40 and Section 31

Section 31 deals with tax invoices and other documents, whereas Section 40 deals with reporting qualifying outward supplies in the first return.

For supplies covered by Section 40, the taxpayer should maintain the relevant invoices and supporting records so that the outward-supply details reported in the return can be reconciled with the books of account.

This is particularly important because Section 36 requires GST records to be retained for the prescribed period.

Records to Maintain for Section 40 Compliance

A newly registered business should maintain proper records relating to the period between registration liability and grant of registration.

Important records can include:

• Sales invoices
• Delivery challans
• Customer details
• GST-related correspondence
• Books of account
• Bank/payment records
• Stock records
• Contracts or purchase orders
• Credit notes
• Debit notes
• Other documents supporting the outward supplies

These records can help the taxpayer correctly prepare the first return and respond to any future verification.

Practical Compliance Process Under Section 40

A business can follow these steps after GST registration is granted.

Step 1: Identify the Date of Liability

Determine the exact date on which the business became liable to registration.

Step 2: Identify the Date of Grant

Check the date on which GST registration was granted.

Step 3: Determine the Section 40 Period

Identify the period between the two dates.

Step 4: Extract Outward Supplies

Prepare a list of all outward supplies made during this period.

Step 5: Verify Invoices

Check invoice numbers, dates, customer details, taxable values and tax rates.

Step 6: Determine Tax Liability

Calculate the applicable GST on taxable supplies.

Step 7: Report the Supplies

Declare the relevant outward supplies in the first return after registration through the prescribed mechanism.

Step 8: Reconcile With Books

Compare the reported information with the sales register and accounting records.

Step 9: Pay Applicable Tax

Discharge the tax liability through the prescribed GST payment mechanism.

Step 10: Preserve Records

Retain the invoices and supporting documents for the period prescribed under Section 36.

Common Mistakes Under Section 40

Mistake 1: Assuming GST Liability Starts Only When the Certificate Is Issued

The date on which registration is granted and the date on which the person becomes liable for registration can be different.

Section 40 specifically addresses this gap.

Mistake 2: Ignoring Supplies Made During the Intervening Period

Outward supplies falling within the statutory period should be identified and declared in the first return.

Mistake 3: Reporting Only the Post-Registration-Certificate Transactions

The taxpayer should consider the entire period covered by Section 40 rather than looking only at supplies made after the certificate was issued.

Mistake 4: Not Maintaining Invoices

The taxpayer should maintain supporting documents for the supplies reported in the first return.

Mistake 5: Confusing Section 40 With Pre-Registration ITC

Section 40 concerns declaration of outward supplies. Eligibility for ITC on supplies received before registration is governed by separate provisions.

Mistake 6: Not Reconciling the First Return

The taxpayer should compare the first return with the sales register and invoices to ensure that all applicable transactions have been reported.

Practical Example of Section 40

Consider a newly established business.

The business becomes liable for GST registration on 5 March.

It submits its registration application and receives GST registration on 20 March.

Between 5 March and 20 March, the business makes the following outward supplies:

• 6 March – B2B supply of ₹1,50,000
• 9 March – B2C supply of ₹75,000
• 12 March – B2B supply of ₹2,00,000
• 17 March – B2C supply of ₹50,000

The business should not leave these transactions outside the GST return system merely because its registration was granted on 20 March.

The business should:

1. Identify the supplies made from 5 March until registration was granted.
2. Verify the relevant invoices.
3. Determine the applicable GST treatment.
4. Include the required outward-supply information in the first return after registration.
5. Pay the applicable tax.
6. Preserve the supporting records.

This is the practical application of Section 40.

Special Situations

Section 40 is a short provision, but special registration circumstances can require additional consideration.

Voluntary Registration

Where a person obtains registration voluntarily under the applicable provisions, the facts may differ from a case where registration liability had already arisen.

The taxpayer should determine the effective date and applicable return obligations from the registration details and relevant GST provisions.

Compulsory Registration

Where registration becomes mandatory because the person falls within a compulsory-registration category, the effective date and period covered should be carefully examined.

Casual Taxable Person

A casual taxable person has separate registration and return provisions. The applicable return requirements should therefore be examined according to the taxpayer’s status.

Non-Resident Taxable Person

A non-resident taxable person also follows a separate GST return mechanism.

Therefore, Section 40 should always be read together with the provisions applicable to the taxpayer’s particular registration category.

Section 40 and GST Portal Filing

GST returns are furnished electronically through the GST Portal.

The GST Portal’s current GSTR-1 guidance states that normal and casual registered taxpayers making outward supplies furnish GSTR-1 electronically and provides the prescribed filing process.

A newly registered taxpayer should therefore ensure that the relevant return periods become available on the GST Portal and that the applicable outward supplies are correctly reported.

Importance of Correct First Return

The first return is particularly important because it establishes the taxpayer’s initial reporting position after registration.

Errors in the first return can lead to:

• Incorrect tax liability
• Reconciliation differences
• Customer invoice mismatches
• Incorrect outward-supply reporting
• Interest exposure where tax is short-paid
• Additional compliance work

A newly registered business should therefore not treat the first return as a routine formality.

Section 40 and Customer Records

For B2B supplies, accurate customer GSTIN information is particularly important.

The GST Portal requires the GSTIN of the recipient to be valid for the date of invoice for relevant GSTR-1 reporting.

An incorrect GSTIN can cause the invoice to be reported against the wrong recipient or result in validation and reconciliation problems.

Businesses should therefore verify customer GSTINs before reporting the relevant supplies.

Section 40 and GSTR-1 Reconciliation

A taxpayer should reconcile the first return with:

Sales Register + Tax Invoices + GST Portal Data + GSTR-1 + Tax Liability

The reconciliation should confirm that:

• All applicable outward supplies are reported.
• Invoice numbers are correct.
• Invoice dates are correct.
• Taxable values are correct.
• Tax rates are correct.
• GST amounts are correct.
• Customer GSTINs are correct where applicable.
• Credit and debit notes are properly accounted for.

This is particularly useful for newly registered businesses because the first return establishes the starting point for future GST compliance.

Key Points of Section 40 CGST Act

The major points of Section 40 can be summarised as follows:

• Section 40 deals with the first return of a registered person.
• It applies where a registered person has made outward supplies during the period between becoming liable for registration and the grant of registration.
• Such outward supplies must be declared in the first return furnished after registration is granted.
• The provision specifically concerns outward supplies.
• The date on which registration liability arises is important.
• The date on which registration is granted is also important.
• Supplies made during the intervening period should not simply be ignored.
• GSTR-1 is the principal outward-supply statement for normal and casual taxpayers.
• The applicable tax liability arising from those supplies must be dealt with through the prescribed GST return and payment mechanism.
• Section 40 should not be confused with the separate provisions governing pre-registration input tax credit.
• Proper invoices and accounting records should be maintained for the relevant supplies.
• The first return should be reconciled with the books of account and supporting documents.
• Section 40 works as part of the broader GST return framework under Chapter IX of the CGST Act.

👉 Read More → Section 39 – Furnishing of returns

Conclusion

Section 40 of the CGST Act, 2017 provides a specific mechanism for reporting outward supplies made during the period between the date on which a person became liable for GST registration and the date on which registration was actually granted.

The key requirement is straightforward: where such outward supplies have been made, they must be declared in the first return furnished after registration is granted.

The provision is particularly relevant for businesses where there is a time gap between the date on which registration liability arises and the date on which the GST registration certificate is issued. A business should identify the complete period covered by Section 40, prepare the relevant outward-supply records, verify invoices and tax calculations, and report the supplies through the applicable return mechanism.

It is also important to understand that Section 40 deals with the reporting of outward supplies. It does not itself provide a general entitlement to claim input tax credit on purchases made before registration. Pre-registration ITC is governed by separate provisions and conditions under the CGST Act.

For a newly registered business, maintaining accurate invoices, books of account and customer records and carefully preparing the first return can help establish a proper GST compliance record from the beginning.

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