10 Common mistakes to avoid in GST Returns
GST is where most errors occur. This is where confusion runs the show mostly in small business. The former system of Service Tax and VAT allowed the revising of returns in case of errors. However GST currently has no such provision to amend or revise a return once it has been filed. While the new system for amending returns is proposed, it has not yet came into force. Until then, a taxpayer cannot amend his returns. Therefore, he has to be extremely alert while filing his GST returns to avoid the hardship of unnecessary reconciliations. This article deals with the most common mistakes in GST done by people due to human errors.
1. Errors while invoice-wise uploading data in GSTR-1
GSTR-1 requires that invoice-wise data be uploaded of all outward supplies such as invoice date, invoice number, place of supply, rate of tax, etc. Due to the vast amount of data to be submitted, taxpayers sometimes make errors while entering such data, and this causes a mismatch between the GSTR-1 and GST-3b. A taxpayer must be very cautious, as no provision exists to revise the return once it is filed.
2. Claiming wrong input tax credit
GSTR-2a is an auto-generated return in which a taxpayer’s purchases and related input tax credit are declared by the respective supplier. On the other hand, a taxpayer is required to disclose the true amount of their input tax credit separately when filing GSTR 3b. If a lower value is disclosed, there is no way to revise the return, and hence the difference needs to be paid along with interest in the return of following month.
3. Non filing NIL return
Many taxpayers have the misunderstanding that when they have no transactions to disclose for a tax period, GST returns need not have to be filed. This could result in penalties for failure to file or delay filing of returns. A taxpayer must file a Nil return even if they may not have any transactions to report for any particular tax period. This would also require the subsequent filing of returns, since the GSTN does not allow GSTR 3b returns to be filed in the case where the returns of any previous period are not filed. ⠀
4. Disclosure and payment of the tax under the wrong head of GST.
There are several head under which tax is reported when GST returns are filed such as IGST, CSGT, SGST etc. Many taxpayers make the mistake of entering the liability for GST or input tax credit under the wrong head of GST. Even the tax is sometimes paid under the wrong head at the time of making the payment, or interest is paid under the tax head and so on. One must be careful when making tax payments, at present the GSTN does not allow taxes to be used interchangeably. This could lead to an unfavourable working capital due to unplanned cash flows.
5. Classifying zero-rated supplies as nil-rated and vice versa
Several taxpayers confuse zero-rated with nil-rated supplies, though they do not mean the same thing. In the case of zero rated supply, usually only exports and supplies to an SEZ fall in this category. However, in the case of nil-rated supply, all goods and services fall in this category on which the tax rate is 0 percent. In the case of nil rated supplies, no input tax credit can be taken.
While filing returns, a taxpayer needs to be careful not to enter exports under the nil-rated category. As they are treated as zero rated supplies.
6. Considering the applicability of the reverse charge mechanism (RCM)
By limiting the applicability of reverse charge to certain notified goods and services, the government has recently simplified things for businesses. The government keeps on updating this list. Businesses need to realize and identify whether any of these provisions apply to them. Suppliers whose goods or services are subject to reverse charge should be careful not to pay GST on the same, which would result in double payment of taxes. Taxpayers should also note that reverse charge payments can only be made in cash and input tax credit can not be used for payment of Reverse Charge liabilities.
7. Reversal of Input Tax Credit and Blocked Credits
As per law, ITC should be reversed in some instances such as – Input goods or services partly used for personal purposes, capital goods sold, free samples given to consumers or business partners, goods lost, goods destroyed, goods or service not received, payment not made to suppliers within 180 days, etc. Besides this, there are certain goods and services on which credit is blocked. Taxpayers need to keep in mind the implications of claiming the same. Failure of complying these provisions could result in the issuance of notices by the GST department, which could eventually result in paying interest and penalty.
8. Place and type of supply
Accordingly, taxpayers are required to aggregate B2Cs, Nil rated, Exempted and Non-GST supplies. Also, Place of Supply should be selected correctly. Since the place of supply is the one that decides whether the supply is Inter-state or Intra-state.
9. Not charging Correct GST Rate.
Every sale (“taxable supply” ) is subject to GST once you are registered, unless it is an export or GST-free sale. Charging higher rate can bring problems and penalties for a person. Charging less GST rate can lead to flow of cash from the pocket on assessment. One must confirm the rate of the goods or services from the CBIC website time to time.
10. Some other small things like HSN, GSTIN, Invoice Number
All invoices should includes HSN / SAC. The number of digits of HSN/ SAC used by the businesses varies on the basis of turnover. Along with HSN/SAC, the taxpayer should ensure that the counterparty’s GSTIN entered is correct or not.
A tax invoice issued by a registered individual should have a sequential serial number, not exceeding sixteen characters, in one or more sequences, containing alphabets or numerals or special characters-hyphen or dash and slash symbolized as “-“and” / “respectively, and any combination thereof, specific for a financial year.
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The author of above article is Vasudha Gupta.
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