Even after a few years of introduction, many people involved in GST are still making errors while filling out their GST forms. To avoid trouble down the line, it's very important to keep careful records when filing.
A wrong filing of GST returns can lead to huge penalties and interest. Make sure to check your returns before submitting them, there is no opportunity to make any changes afterward. The earlier system of service tax and VAT had provisions for revising returns in cases of errors. However, GST has no such provision as of now.
The new system that proposes to amend GST returns, is not yet into law. Until then, a taxpayer cannot amend his return because it has not been written into the law yet. Although if he files his return carefully and is careful, this will not be a problem.
In this article, we will discuss some common GST return filing issues made while filing GST returns and how to avoid them.
What are some common, avoidable errors in filing GST returns?
- There used to be a VAT system before the GST came about in which cases of mistaken billing could be amended. Though the GST Act has been in effect for three years, If you are registered with the GST, you must file your returns accurately to avoid departmental lawsuits.
- Since there's no provision under GST law to amend a return, it's crucial that we get things right when we file returns.
- Taxpayers need to be very careful in doing their GST returns to avoid any extra consequences in the future.
- Taxpayers are required to file GST returns. However, these are way too complicated for the average person and so it is necessary to pay attention to every entry made on the GSTN provision. Once you make a mistake, there is no way to undo it. Make sure you’re aware of the most popular errors and
Common GST Return Filing Issues that a GST-registered person must avoid while filing GST returns
Here are some of the most common mistakes that people often make while filing their GST returns. To avoid these common GST return filing issues and mistakes, you'll need to ask for advice about your situation.
These types of mistakes mentioned below come under the following areas of GST tax mistakes committed by people in India:-
1. Payment & Disclosure of GST Tax
When filing the GST reports, it is important to note what type of tax you are paying. If your company has different GST heads, like IGST, CSGT, and SGST then it can be tricky to remember which one fits your type of business.
Even if a GST error occurs, such as paying tax under the wrong heading, it's still possible to get corrected. For instance, interest paid on tax is often not corrected properly. The GSTN cannot currently process payments or refunds of taxes as interchangeability is prohibited. The unpredictable cash flows this could lead to could raise your working capital position
2. Wrongly claiming all input tax credit
Suppliers must fill out an auto-generated GSTR-2A return and declare what they’ve bought from the taxpayer with their input tax credit. Conversely, a taxpayer is required to fill out their return form and declare the input tax credit that they want to claim.
They should also be submitting and claiming the right amount of input tax credit. You cannot amend your return or claim any more credit once you submit it, so beware of declaring too high a value. If you do, the difference will need to be paid in your next return with extra interest.
3. Delay while Submitting your GST return
It's important to file an annual GST return on time, otherwise, the tax authorities may cancel your registration. Late filings also attract monetary penalties. Penalties like the ones which can be slapped onto businesses that are constantly late with their returns.
4. Not charging the right GST Rate
If you run a business and you're in Australia, the GST will apply to any sale that is not exported or eligible for input tax credits. Ensure that the correct rate of GST is charged to avoid penalties. Lowering the GST rate before assessment may result in your pocket having less money out at the end of the process. It's worth checking for a list of the GST rate for various items from time to time.
5. Considering Export sales in the column of daily sales
If a person exports a product and declares the sale as general sales instead of zero-rated supply, they may not be eligible for a GST refund. So it's important that while filling in the export sales details, GST traders should keep this in mind.
6. Making errors while uploading data invoice-wise in GSTR-1
GSTR-1 stipulates that all outbound supplies should be delivered with invoice-level information, including date, number, location of supply, and tax rate. Due to the large number of information taxpayers need to input, they sometimes make mistakes. For example, a mismatch can occur between GSTR-1 and GSTR-3B. Correcting it later is not an option so be careful.
7. Delay in making payment of Reverse Charge mechanism (RCM)
Reverse charge tax is required on certain goods or services. Items that require reverse charge tax will have a list of them somewhere on the invoice. Enjoying the benefits of ITC should be high on your priority list when dealing with RCM because if your company doesn't pay this it can cost quite a lot in interest payments and input tax credit reductions.
We can say that GST under the Reverse Charge mechanism is paid via challan only. After payment of the RCM challan, a GST-registered person can claim ITC of the same with their output tax.
8. Avoiding reconciliation of GSTR 3B & GSTR 1
The person needs to make sure the GSTR 3B and GSTR 1 returns are matched before filing the GST Return. This can be accomplished by checking every month the match between your reports.
If a company declares sales of Rs. 2 crores in its GST return for May 2020 and sales of Rs. 2.50 crore in GSTR1 for the same month, it may be at risk of legal action from the GST department
9. Ignoring GSTR 2A before claiming ITC on GSTR 3B return
By GST Rule 36(4) stated in the law, you can only claim an ITC credit of 110 % of your qualifying ITC as shown on form GSTR-2A or as per books, whichever is lower.
10. Separating Zero Rated & Nil rated to supply the matching or vice versa
A lot of people confuse 0-rated and nil-rated supplies. Let's examine their differences. The GST rate for Nil-rated items is 0%. They are taxable, but they are not subject to sales tax because they are exported out of India or located in a Special Economic Zone.
Zero-rated supplies are exempt from GST, they're those that are taxable but have a GST rate of zero (0)% in the GST tariff because they are exported out of India or destined for a Special Economic Zone. If a person supplies the Government with zero-rated supplies but lists them in their tax return as nil-rated items, the refund claim for those items will not be honored
11. Not claiming your TCS & TDS
- On several occasions, it has been noted that taxpayers are not aware of the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) information needed when completing GST returns. Residents often make mistakes when completing them.
- Tax Deducted at Source is deducted by the Central Government, State Governments, Government Agencies, and Local Authorities as well as Notified Persons under the GST Scheme when the total value of supply in a contract exceeds 2.5 lakh Rupees according to invoices.
- The TDS needs to be put directly into the government’s credit account, which can then be claimed. This is recorded as a receipt in your Electronic Cash Ledger, which you can use to pay for any GST liabilities.
- If a supplier delivers taxable supplies through an e-commerce platform that collects the payment for such supplies, then the e-commerce operator is required to collect 1% of the net value of supplies on behalf of the supplier.
- If you own TCS shares, your TCP must be deposited into a government credit account from which the beneficiary can claim reimbursement. This will be reflected in the company's Electronic Cash Ledger. We can then utilize this to pay down their GST liability, including the Reverse Charge Debt.
- Many taxpayers tend to confuse TDS/TCS with Income Tax and estimate them in their filings. This can have a significant impact on your financial standing.
12. Reversal of ITC and Blocked Credits
In certain cases, such as payments not made to suppliers within 180 days, inputs utilized partly for personal reasons, capital goods sold, free samples supplied to consumers or business partners, items destroyed, etc.,
The Input Tax Credit should be revoked. For example, some purchases may not be eligible to receive credit. Taxpayers must consider the consequences of making the same claim. Failure to comply with the regulation could result in notices being sent out by the GST department which may lead to further penalties and interest.
13. Consider a few other things like GSTIN, Invoice No, HSN
GSTIN, Invoice Number, and HSN/SAC must be included on all invoices. The amount of digits used by firms in their HSN/ SAC varies depending on their turnover. Along with the HSN/SAC, the taxpayer should ensure that they enter a GSTIN, which is accurate.
Every tax invoice issued by a registered individual should have a sequential serial number of not more than 16 characters, in one or more sequences, containing alphabets, numerals, or special characters.
14. Paying GST in the wrong Category
Many businesses have been vocal about paying the wrong GST category, with many reports suggesting that they were not aware of how to classify their business while filing their returns. One way to avoid this is by checking with your accountant on how to classify your GST before filing.
Don't file your return under any other category if it is intended to be filed under the State Goods and Services Tax (SGST). This article details how to prepare for the 2010 GST season, including what to do before filing your taxes.
All transactions that are made across state borders will be subject to the IGST tax, while all transactions that are made within a single state will be subject to the CGST+SGST tax.
Advice- The remaining IGST cannot be carried over and applied to future payments.
15. Delay in Submitting your NIL return
Some taxpayers think they don't need to file a GST return on their tax filing if they don't have any transactions. Penalties may be applied if taxes are not filed, even when there are no transactions to report. This would also allow you to submit your taxes (GST) more quickly, as you cannot submit documents to the GSTN if any preceding returns haven’t been made.
Conclusion
It is very important to avoid GST return filing issues and mistakes when filing GST returns. There are several ways you could make a mistake on GST and the examples I gave are just some of them. One obvious mistake is not claiming TDS and TCS, which leads to a loss for whoever pays them.
Before you file your GST return, make sure to consider all the available reports of GST. To avoid financial losses, it's important to enter data with precision and detail wherever necessary when filing taxes. It's always a good idea to consult with Chartered Accountant India before you even start the process
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