Common Errors in GST Filing and How to Avoid Them

Filing Goods and Services Tax (GST) returns accurately is crucial for businesses to remain compliant and avoid penalties. Unlike the previous Service Tax and VAT systems, GST does not allow revising or amending returns once filed. Hence, taxpayers must be extremely careful when submitting their GST returns to avoid unnecessary reconciliations.

Key Takeaways:

• Errors in GST filing can lead to penalties, loss of input tax credit (ITC), and compliance issues.

• Returns once filed cannot be revised, making accuracy critical.

• Non-compliance with GST rules may impact cash flow and business credibility.

• Timely and correct filing ensures smoother operations and avoids legal complications.

Common Errors and How to Avoid Them

1. Errors in Uploading Invoice-Wise Data in GSTR-1

GSTR-1 requires invoice-wise data, including invoice date, number, place of supply, and tax rate. Mistakes in these details lead to mismatches with GSTR-3B, affecting ITC claims.

Solution: Cross-check all data before filing, maintain accurate records, and use automation tools to reduce manual errors.

2. Incorrect Input Tax Credit (ITC) Claims and Non-Reconciliation with GSTR-2A

Claiming incorrect ITC or failing to match ITC with GSTR-2A can result in penalties and interest charges.

Solution: Regularly reconcile purchases with GSTR-2A to ensure ITC claims align with vendor-reported invoices.

3. Failure to File NIL Returns

Some taxpayers assume that no GST transactions mean no return filing is required. This misconception leads to penalties.

Solution: File NIL returns even if no transactions occurred to maintain compliance and avoid filing blocks.

4. Misclassification of GST Liabilities

Taxpayers often report tax liabilities under the wrong GST head or make incorrect payments.

Solution: Carefully review GST classifications before submission to avoid unnecessary interest payments and legal issues.

5. Incorrect Categorization of Zero-Rated and Nil-Rated Supplies

Zero-rated supplies (exports, SEZ supplies) differ from nil-rated supplies (tax rate of 0%). Misclassification can result in incorrect ITC claims.

Solution: Understand the differences and ensure proper classification in GST filings.

6. Misunderstanding the Reverse Charge Mechanism (RCM)

Some businesses incorrectly pay GST on services subject to RCM or fail to pay RCM when required.

Solution: Verify the list of services under RCM, ensure compliance, and remember that RCM payments can only be made in cash.

7. Failure to Reverse Ineligible ITC

ITC must be reversed in cases such as unpaid supplier invoices (after 180 days), personal use, and destroyed goods.

Consequences:

• Interest at 24% per annum on excess ITC claimed.

• Penalty of 100% of the tax due or Rs. 10,000 (whichever is higher).

Solution: Track ITC eligibility, reverse ineligible ITC promptly, and maintain proper records.

8. Not Filing Final Return (GSTR-10) on Time

When surrendering GST registration, taxpayers must file GSTR-10 within three months. Delays attract late fees.

Solution: File GSTR-10 promptly after registration cancellation to avoid penalties.

9. Late Filing of GST Returns

Delayed filings lead to penalties and interest charges, harming business reputation.

Penalties:

• GSTR-3B Late Fees: Rs. 20/day for NIL returns, Rs. 50/day for others.

• GSTR-9 Late Fees: Rs. 200/day up to 0.50% of turnover.

• GSTR-10 Late Fees: Rs. 200/day (no upper limit).

• Interest: 18% per annum on unpaid tax liability.

Solution: Set up reminders and automation for timely GST filings.

10. Non-Filing of TCS Returns

E-commerce sellers must file TCS returns to claim credits collected by e-commerce operators.

Solution: Ensure timely TCS return filing to access available tax credits.

11. Failure to File LUT for Exports

Exporters must file a Letter of Undertaking (LUT) to export goods/services without paying IGST.

Solution: Submit LUT (GST RFD-11) online to facilitate tax-free exports.

12. Non-Filing of Annual Return (GSTR-9)

GSTR-9 is mandatory for businesses with an annual turnover exceeding Rs. 2 crore. Filing is optional for others.

Solution: File GSTR-9 for proper reconciliation and compliance.

13. Non-Compliance with E-Way Bill Requirements

Transporting goods without an e-way bill (for applicable cases) can attract penalties.

Solution: Generate e-way bills as required to prevent compliance issues.

Final Thoughts

Avoiding GST filing errors requires vigilance, accurate record-keeping, and an understanding of GST regulations. Businesses should leverage automation tools, maintain reconciliation practices, and ensure timely filings to stay compliant and avoid unnecessary financial burdens.

Reach out to us for GST compliance and solutions. Email us at dinesh_ca_jpr@yahoo.com