Recurring Errors while Filing GST Returns and How to Avoid them


Date: 27 Jan 2023

Recurring Errors while Filing GST Returns and How to Avoid them


The previous Service Tax and VAT systems allowed for the revision of returns in the event of errors. However, GST cannot revise or amend a previously filed return. Even though a new method of amending GST returns has been suggested, it still needs to be implemented. A taxpayer cannot amend his returns until that time. As a result, he must exercise extreme caution when filing his GST returns to avoid the inconvenience of unnecessary reconciliations.


Errors while uploading data invoice-wise in GSTR-1

GSTR-1 requires uploading invoice-level information for all outward supplies, including the invoice's date, number, location, and tax rate. Due to the large amount of data to be submitted, taxpayers occasionally need to correct when entering such data, resulting in a mismatch between the GSTR-1 and GSTR-3B. A taxpayer must exercise extreme caution because there is no provision for amending a return once it has been filed.


Claiming the incorrect input tax credit

GSTR-2A is an auto-generated return in which the supplier declares a taxpayer's registered purchases and related input tax credit. On the other hand, taxpayers must disclose their input tax credits separately when filing returns. They must report and claim the correct amount of input tax credit while doing so. The return cannot be changed if a higher value is disclosed; the difference must be paid along with interest in the subsequent month's return.


The difference between the input tax credit declared in the filed returns and the GSTR-2A can be seen in a GST Health Check Report. Download the report and navigate the GSTR-3B vs 2A tab to cross-check the filed data.


Not filing your NIL return

Many taxpayers believe they only need to file a GST return if they have transactions to report for a tax period. This could result in penalties for failure to file or late filing of returns.


A taxpayer must submit a NIL return regardless of whether there are no transactions to document for any given period. This would also allow for subsequent returns to be filed, as the GSTN only permits the filing of returns if returns for any prior period have already been submitted.


Revealing and paying the tax under the incorrect GST head

When filing GST returns, tax is reported under several headings. The incorrect GST head is sometimes used by taxpayers when entering their GST liability or input tax credit. Even when paying, tax is sometimes paid under a different title. Interest is paid under the wrong heading, and so on.


When making tax payments, one must exercise caution because the GSTN does not permit tax inter-utilization. This could result in negative working capital due to unplanned cash flows.


Categorising zero-rated supplies as nil-rated and vice versa

Several taxpayers mix up zero-rated and nil-rated supplies, which are different. In the case of zero-rated supplies, only exports and supplies to an SEZ are typically included. In the case of nil-rated supplies, however, all goods and services with a tax rate of 0% fall into this category. In the case of nil-rated supplies, no input tax credit can be claimed.


When filing returns, taxpayers must avoid including exports in the nil-rated category. The Health Check Report's section-level summary tab would display the difference amount if any invoices were entered in the wrong category when filing returns.


Understanding the applicability of the Reverse-charge mechanism

The government recently made things easier for businesses by limiting reverse-charge use to certain notified goods and services. While this list has yet to be published, companies must understand and determine whether these provisions apply to them.


Service providers whose services are subject to a reverse charge should exercise caution to avoid paying GST on the same, which would result in double taxation. Furthermore, taxpayers ought to be aware that reverse-charge payments must be made in cash and that the input tax credit cannot be used.


Reversal of Input Tax Credit and Blocked Credits

Per the law, input tax credits must be reversed in several circumstances, including failure to pay suppliers within 180 days, the use of inputs primarily for personal gain, the sale of capital goods, the distribution of free samples to clients or partners in commerce, the destruction of goods, and others.


Furthermore, there are some goods and services that are not creditable. Taxpayers must consider the consequences of claiming the same. If this still needs to be done, the GST department may send out notices, which could result in interest and penalties being assessed.


The Health Check Report provides a month-by-month breakdown of input tax credits that have been reversed and ineligible ITC. The report can be downloaded, and the GSTR 3B tab contains all the details on invalid and reversed ITC.


GST return modifications

Before the GST's introduction, adding or modifying invoices from a particular period to a return was impossible. However, failing to disclose an invoice from a previous period may result in interest being charged from the invoice date. Instead of changing the original invoices in such circumstances, businesses should instead issue credit or debit notes.


Using the Health Check Report in the GSTR-1 vs 3B tab, a taxpayer can keep track of all invoice-by-invoice amendments made on an annual or monthly basis. Though the Government of India implemented GST to simplify the indirect tax system, the return-filing process can sometimes be time-consuming. At the same time, it is the responsibility of each taxpayer to remain 100% compliant with minimal errors for the overall health of their business.