Since the commencement of GST in 2017, taxpayers and tax practitioners have been committing some common errors that often result in heavy penalties and late payment fees. In this blog, we will be discussing some common errors 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.
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. As per the GST norms, booking and availing of ITC is subject to certain rules and conditions, and a taxpayer is required to report the correct value of input tax credit while filing GST returns. In case of claiming the incorrect value of ITC or claiming blocked credits under GST, the amount of difference needs to be paid along with the applicable interest in the following month’s return.
2. Non-Payment of GST in RCM
Under the Reverse Charge Mechanism (RCM), the chargeability of tax gets reversed from the seller to the buyer, i.e. the buyer of goods and services becomes liable to make payment of tax. There are certain types of businesses that are subject to RCM on certain supplies under GST. The supply service by goods transport agencies is one of the most common supplies in RCM, which must be made by the buyer. Moreover, the supplier need not make payment of GST on such supplies to avoid double payment of taxes.
3. Not mentioning 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. 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.
5. Paying tax under the wrong GST category
There is a list of different heads in GST, under which the tax report must be filed. However, taxpayers often make the mistake of furnishing GST liabilities or ITC under the wrong GST category. Moreover, at times the taxpayers make GST payments and interest under the wrong heads. Such mistakes while filing GST returns can lead to unfavorable cash flow and other calculation errors.
6. Not making GSTR-3B and GSTR-1 reconciliation
It is important for taxpayers to reconcile GSTR-3B with GSTR-1 on a monthly basis to ensure accuracy in return filing and avoid any mismatch in the filing process. Such mismatch of data while filing GSTR-3B and GSTR-1 can lead to revenue loss and notices from tax authorities and must be carefully assessed by the taxpayer.
7. Non-Filing of Final Return GSTR-10
In case a registered business decides to surrender the GST number, it is mandatory to file a GSTR-10 final return. In case of not filing GSTR-10 on or before the specified due date, the taxpayer is allotted a time period of 15 days to file the final return. Failure to do the same results in the issuance of final cancellation orders with the details of tax payable and late fee.
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 is reflected 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. Errors while uploading data invoice-wise in GSTR-1
GSTR-1 requires the taxpayer to make invoice-wise data of the outward supplies of the invoice data, invoice number, place of supply, rate of tax, and so on. However, taxpayers often make errors while reporting under GSTR-1 because of the vast amount of data that needs to be furnished, which may cause differences between GSTR-1 and GSTR-3B. As discussed previously, such mistakes can cause reconciliation errors between GSTR-1 and GSTR-3B, leading to tax penalties.
10. Categorizing zero-rated supplies as Nil-rated
Zero-rated supplies refer to the export supplies made to an SEZ by the taxpayer registered under GST. Nil-rated supplies, on the other hand, refer to the supply of goods and services, over which the tax rate is 0%. Taxpayers often confuse zero-rated supplies with Nil-rated supplies when filing returns. The taxpayer must not confuse zero-rated supplies with Nil-rated supplies while filing GST returns.
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