10 Common mistakes to Avoid When Filing GST Returns: Taxpayers and tax practitioners have been committing some common mistakes that often result in heavy penalties and late payment fees. Here are some of common mistakes should be avoided which is made by taxpayers while filing GST returns, the penalties that follow after making such mistakes and how can a taxpayer avoid mistakes while filing GST returns.
Here are top 10 mistakes to Avoid When Filing GST Returns
1. Incorrect ITC claim and reversal
Input Tax Credit (ITC) is the amount by which the tax liability of a business can be reduced when making sales. A taxpayer is required to report the correct value of input tax credit when filing GST returns. According to the GST regulations, booking and claiming ITC are subject to specific rules and conditions. The difference must be paid along with the applicable interest in the return for the following month if an incorrect ITC value was claimed or blocked credits under GST were claimed.
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2. Non-Payment of GST under RCM
The Reverse Charge Mechanism (RCM) transfers tax liability from the seller to the buyer, making the purchaser of goods and services responsible for tax payment. RCM on specific supplies under GST is applicable to certain types of businesses. One of the most frequent supplies in RCM that must be made by the buyer is the supply service provided by goods transport agencies. In order to avoid paying taxes twice, the supplier does not need to pay GST on these supplies.
3. Omitting Exempted Turnover in GST Returns
Zero-rate supplies do not have any effect on the GST liability of the taxpayer. However, the same must be reported while filing a GST return. Every business registered under GST must report the exempted or Nil-rated sales in GSTR 3B and GSTR 1 since the non-disclosure of the same would be considered concealment of facts and shall be subject to penalties.
4. Paying taxes under the incorrect GST category
There is a list of different heads in GST, under which the tax amount must be deposited. Taxpayers frequently make the error of submitting their GST liabilities or ITC under the incorrect GST category, though. Furthermore, taxpayers sometimes submit interest and GST payments under the incorrect headings. Such errors when submitting GST returns can result in an unfavourable cash flow as well as other calculation errors.
5. Availing of the Composition Scheme benefits without being eligible
The Composition Scheme under GST was introduced to provide relaxation to small taxpayers so that they can get rid of the complexities of filing GST. This scheme is applicable to taxpayers with a turnover of less than Rs.1.5 Cr. Availing the benefits of the composition scheme in case of ineligibility can lead to unplanned GST liabilities.
Read Also: GST Turnover v/s Income Tax Turnover
6. Non Filing of GSTR-10
It is necessary to file GSTR-10 final return in the event that a registered business decides to give up the GST number. The taxpayer is given 15 days to file the final return in the event that GSTR-10 is not submitted on or before the deadline. If this is not done, final cancellation orders with information on the tax due and late fee are issued.
7. Not making GSTR-3B and GSTR-1 reconciliation
To ensure accuracy in return filing and prevent any mismatches during the filing process, taxpayers must reconcile GSTR-3B with GSTR-1 on a monthly basis. Such data inconsistencies when filing GSTR-3B and GSTR-1 can result in lost revenue and notices from tax authorities, and the taxpayer must carefully evaluate them.
8. TDS and TCS Credit not claimed by Taxpayers
As per the provisions of GST, TDS/TCS credit received is provided for all taxpayers from whom tax has been deducted or collected at source by registered TDS deductors/TCS collectors respectively. After deduction/collection all the deductors/collectors are required to file GSTR-7 or GSTR-8 respectively. The TDS reflects in the Electronic Cash Ledger of the assessee and shall be used to pay the tax liabilities and RCM liability by the taxpayer. Such TDS/TCS needs to be deposited to the credit of the government and shall be claimable by the recipient henceforth.
9. Categorizing zero-rated supplies as Nil-rated
The export supplies made to a SEZ by the taxpayer registered for GST are referred to as zero-rated supplies. On the other hand, nil-rated supplies are those for which the tax rate is zero and are made of both goods and services. When filing returns, taxpayers frequently mistake Nil-rated supplies for zero-rated supplies. When filing GST returns, the taxpayer must not mix up zero-rated and nil-rated supplies.
10. Errors while uploading data invoice-wise in GSTR-1
The taxpayer is required to complete Form GSTR-1, which requests information about each invoice’s outward supplies, including its number, location, tax rate, and other details. Due to the enormous amount of data that must be provided, taxpayers frequently make mistakes when filing GSTR-1 reports, which may result in differences between GSTR-1 and GSTR-3B. As was previously mentioned, such errors can result in reconciliation errors between GSTR-1 and GSTR-3B, which can result in tax penalties.
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