What is necessary in GST
-Today 3 years have passed since the enactment of GST laws, many mistakes are still being committed by GST tax payers while filing GST returns particularly GSTR-3B and GSTR-1 due to negligence, oversight or due to lack of conceptual clarity on various provisions of the GST Acts and Rules.
– This problem of making mistakes is mostly in every business house, whether it is small business or large business. GST IS A TAX WHERE 100% ACCURACY IS NEEDED IN RETURN FILING.
– Therefore, the taxpayer has to be extremely alert while filing his GST returns to avoid the burden of unnecessary reconciliations.
Why it is necessary to file correct return in GST
- In GST, the recipient can claim the ITC only then, when his supplier has paid the entire self-assessed tax and filed his correct return showing all the correct outward supplies since invoice matching is required to be done in GST. So correct return filing is necessary in GST.
- Now we are talking about the most common mistakes in GST which are being done by people due to negligence, oversight or due to lack of conceptual clarity ::-
1. Non filing of NIL return in case of no sales made in month
- The first mistake being done by the taxpayer is the non filing of Nil Return. A taxpayer must file a Nil return even if he may not have any transactions to report for any particular tax period. So make it sure that you file NIL return if there are no transactions for the month. Non filing of return can result in penalties and late fees.
- Always file NIL return if there are no transactions for the month because you will be free from getting unnecessary notices from the department regarding non filing of return. Now nil return can be filed by sms service at GST portal.
2. Not understanding difference between Zero rated and Nil rated sales
- Several taxpayers confuse zero-rated with nil-rated supplies. 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.
- So please ensure that you enter figures in the correct tax column. While filing returns, a taxpayer needs to be careful that export figures will come under the zero rated category.(outward taxable supplies zero rated).
- Always put correct figures in Zero rated sales and Nil rated sales because figures in the wrong columns can create problem for you while reconciling your books with GSTR returns at the time of Annual Return and year end closing.
3. Not entering correct data while uploading invoice-wise data in GSTR -1
- There is a matching mechanism on the GST portal. Data entered in GSTR-1 is auto-populated in GSTR-2A of the recipient. He can take the input tax credit of the bills only if it is reflected in GSTR 2A. If the details are not properly entered, it can cause problems for the buyer. Take every care to fill the details of the invoice properly, special care in entering the GSTN number of recipients.
- If the account books are maintained in some computer package like shkunwin, tally, Busy, quick-books, etc. it is very much important that GSTIN of the recipients are correctly fed at the time of creation of accounts in the software.
4. Not Reconciling the figures given in GSTR-3B and GSTR-1 for the same month
- It is a big mistake on the part of the taxpayer that he does not tally the figures of GSTR-3B with the figures of GSTR-1 for the same month. Suppose you are showing taxable sales of Rs.1.63 crore in your GSTR-1 for month of April 2020, then your taxable sales in GSTR-3B for April 2020 should also be Rs. 1.63 crore.
- This is the first mistake which we do, if we reconcile our returns on monthly basis, then there will never be any difference in the figures between GSTR-3B and GSTR-1.
5. Not claiming correct 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 suppliers.
- But many of the taxpayers are not reconciling their books of accounts with GSTR-2A and are taking the input credit as per their books of accounts only, which is a serious lapse on their part because a taxpayer is required to disclose the true amount of their input tax credit while filing GSTR-3B.The taxpayer should always disclose the correct figures of GST credit because difference can lead to reversal, interest and penalty. So always take correct GST ITC which is eligible and not subject to any reversal.
6. Not paying the tax under the Reverse-charge mechanism
- The Government has recently simplified things for businesses by restricting the applicability of reverse-charge to certain notified goods and services. Businesses now need to understand and identify whether any of these provisions apply to them.
- The taxpayers are not understanding its applicability and are not paying the GST dues on reverse charge. The taxpayer should know that reverse charge mechanism is applicable to their unit or not. If it applies to their unit, they should deposit the GST on reverse charge. One thing more, they can claim GST paid by them on reverse charge in their books.
7. Not entering correct place and type of supply
- Taxpayers are required to fill figures relating to B2B, B2C, Nil rated, Zero 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. During filing the return, place of supply is a important point, so every care should be taken while filing place of supply, because the tax depends on the place of supply whether the GST would be SGST and CGST or whether it would be IGST.
8. Not taking GST credit on proper documents for the return purpose
- In the month-end proper scrutiny of all the documents should be done, on which GST credit has been taken, but in routine, it is not done in our business-houses.
- During the month, there are so many instances when:-
- Driver misses the invoice during transit and we get the invoice on e-mail or whatsApp from the supplier.
- Store keeper misses some invoices during accounting, and we get the photocopy of the invoice from the supplier.
- Is the invoice received on e-mail, whatsApp,or photocopy of the invoice eligible for GST credit? We do not understand this point and take GST credit for all the invoices whether they are proper documents or not.
9. Late filing of monthly returns
- It is a common mistake on the part of many taxpayers that they do not give attention to the due dates of monthly returns.
- It is a serious lapse. If we have taken GST registration, then it is our prime duty to file our monthly returns in time.
- Non filing and late filing both are serious lapses on the part of the taxpayers which should be avoided.
10.Not claiming exact input tax credit
- Sometimes input tax claim is not availed properly due to non availability of purchase invoices at the time of filing of the GSTR-3B return, because the material is received in the premises, but the invoice is missed by mistake. If the taxpayer reconciles the purchases with the inward report generated on e-way bill portal, he can search for such difference.
11. Mistake in taking excess input tax credit than actual in GSTR-3B
- Sometimes the taxpayer claims excess input tax credit by mistake than the actual input tax credit. This results in less payment of tax during that month.
- Such mistakes should be avoided. However, in such cases taxpayer needs to reverse excess claimed ITC of previous month in next month’s GSTR-3B by entering the figures in Table 4(B)(2).
12. Showing IGST sale as CGST & SGST sale
- It is very common mistake that sometimes Interstate sale (IGST sale)is shown as Intra state sale (CGST and SGST sale)in GSTR 3B.
- This mistake can be avoided with little attention while entering data of GSTR-1.
- If such mistake occurs, taxpayer should declare amount of such IGST sale in subsequent month and the amount of intra state sale should be reduced from intra state sale of subsequent month.
13. Showing gross turnover of outward supplies instead of taxable turnover
- It is very common mistake that while showing details of outward supplies in GSTR-3B, instead of taxable turnover, the amount of gross turnover is mentioned. This is a very common mistake which should be avoided, because this creates problem at the time of preparation of Annual Return.
14. Not availing of ITC credit on certain expenses
- In so many cases taxpayers do not avail ITC on the expenses for which they do not get invoices such as :-
- bank charges debited by bank
- Limit renewal charges debited by bank
- Factory inspection charges debited by bank
- In these cases, tax payers can claim the input tax credit on these expenses on the basis of bank statements issued by the bank. Such type of ITC can also be checked from the GSTR-2A of the month, for which you are filing the return.
15. Showing export sales as normal sales
- Sometimes, it is observed that Export sale is shown as normal sale in GSTR-3B and information of export in Table 6A of GSTR-1 is not correctly filled.
- In these cases, IGST refund would not be processed if this wrong entry fails any validation at the level of either GSTN or Customs system.
16. Missed to add HSN summary in GSTR-1
- In some cases, it has also been observed that taxpayers do not enter figures in the table No.12 of GSTR-1 which includes HSN-wise-summary of outward supplies.
- It is a important point that total taxable value entered in GSTR-1 should be tallied with the value entered in table no.12.Usually taxpayers leave this column blank which is a big mistake on the part of the taxpayers.
17. Missed to enter document details in Table no.13 of GSTR-1
- It is generally seen that taxpayers do not pay much attention to fill Table 13 i.e. Documents Issued. Either this Table is left blank or only the details of invoices for outward supply are given in point 1 of this table.
- It is important to note that details of other invoices issued are also needed to be specified, if applicable, e.g. invoices from inward supply from unregistered person, revised invoice, debit note, credit note, receipt voucher, payment voucher, refund voucher, delivery challan for job work, delivery challan for supply on approval, delivery challan in case of liquid gas and delivery challan in cases other than by way of supply.
18. Mistake of entering B2B supply in B2C supply
- Sometimes the clerical staff of the taxpayer enters B2B supplies under B2C supplies. Due to this mistake, the recipient cannot avail the ITC credit as it is not reflected in his GSTR-2A.
- Sometimes, at the time of uploading of the invoice in GSTR-1, the GSTIN of the supplier may not be readily available or wrongly reported in the tax invoice. The person enters the data in GSTR-1 in B2C supply. This mistake can make a loss to the recipient since he will not be able to avail the ITC.
19. Answers to questions A to G are not properly given
- At the time of filing GSTR-3B return, certain questions (A to G) have to be answered by us, based on which relevant applicable Tables open up in GSTR-3B return.
- If any question is answered in the negative, the relevant table will not show up in GSTR-3B. Therefore, even if any data is to be fed in such table, the same would be missed to be uploaded. So, you should be more effective in giving answer to these questions.
20.Mistake in showing ITC under wrong heads
- ITC available is to be shown as per the following details:-
- Import of Goods under -Table 4(A) (1)
- ITC on Import of services under- Table 4 (A) (2)
- Normal ITC available on goods/services/capital under Table 4 (A) (5)
However, it is seen that ITC on import of goods, and/or services is sometimes clubbed with normal ITC i.e. all other ITC under Table 4(a)(5),which is totally wrong.
21.Mistake in reporting of reversal of ITC
- Reversal of ITC as per rule 42 & 43 of CGST / SGST Rules to be shown under Table 4(B)(1) where as ITC reversal due to other reasons is shown under Table 4(B)(2).
- However, due to lack of conceptual clarity, sometimes ITC reversal is shown under Table 4(B)(2) without any distinction being made in reversal of ITC under Rule 42/43 and for other reasons. This should be done properly.
22.Mistake in selecting return frequency option
At the time of filing of first Return in any financial year, the taxpayer has to choose option for filing Quarterly/Monthly filing of GSTR-1. To choose such options, the taxpayer has to answer the following questions:
Whether your aggregate turnover during the Previous financial Year was up to Rs. 1.5 Crores or
Do you expect your aggregate turnover during the Current Financial Year to be up to Rs. 1.5 Crores?
The wordings of these questions often confuse the tax payer and the taxpayer sometime ends up giving wrong answers leading him in selection of wrong filing option.
Utmost care should be taken while answering the questions for selecting the option because option once is exercised, cannot be changed during the entire Financial Year.
23. Mistake in non submission of final return
- A taxable person whose GST registration is cancelled or surrendered has to file a return in the form of GSTR-10. This return is called as final return. GSTR 10 must be filed within three months from the date of cancellation or date of cancellation order whichever is later.
- So whenever you surrender your GST registration number, you should file your final return in time because non filing of return attracts interest and penalty.
- But it is generally observed that such persons fail to submit the Final Return in Form GSTR 10 either due to ignorance or due to inadvertence. Such non filing entails late fee which can be easily avoided if the return is furnished within the due date.
24. Mistake in reporting advance received
- It is a common mistake that taxpayers miss to show advance received amount in table no.11(A)(1).
- You have to calculate tax on advance and pay tax while filing the return for the month, in which advance was received. The advance received should be grossed up. This means that advance received is considered inclusive of GST.
- When the rate of tax cannot be determined during receipt of advance GST @ 18% has to be charged.
- Also if the point of sale cannot be ascertained the advance is considered as interstate supply and IGST has to be paid.
25. Not making reversal of ITC for exempted supplies
- ITC related to exempted supply is disallowed in GST. If we are having a common credit account of ITC for both taxable and exempted supplies, we need to allocate it to taxable and exempted. Then we need to disallow the exempted by reversing it from availed ITC. Following is the formula as per rule 42:-
- Common input tax credit* Exempted turnover ÷Total turnover
- This amount shall be reduced from availed ITC. This calculation is to be done on monthly basis. It is only for ITC on Inputs & Input services.
- This is one of the common mistakes while filing GST returns. If ITC not reversed, later on, it may be demanded by the department with interest.
26. Not checking the health check report of the unit
Taxpayer should in routine check the health check report of his unit from the GST portal after login in his account. The health report includes the following:-
- ITC credit claimed and due
- Liability other than export/Reverse charge
- Liability due to reverse charge
- Liability due to export & SEZ supplies
- The taxpayer should check updated figures from the site every month and should tally the same with their books of accounts before submission of monthly returns and figure out the difference every month to bring uniformity in accounts.
27. Not paying attention to Blocked Credits under GST
- Though the one of the pillars of GST is free flow of credits in order to eliminate cascading of taxes, input tax credit is not available in respect of certain inward supply of goods or services as per Section 17(5) of the CGST Act,2017.
- But the taxpayers do not adhere to this section and take input tax credit on all the goods/services received by them, whereas we should pay attention to section 17(5) while furnishing our monthly return and pass reversal entry in books of accounts, if any entry relates to blocked credits.
28. Mistake in taking credit on goods/services used for personal consumption
- If goods or services or both are used for personal consumption, then ITC is not available on these things.
- ITC is admissible only in respect of supplies taken for business purposes. Thus supplies received for personal purposes are blocked. But in routine practice, this point is not looked after while filing monthly returns.
- This is totally a useful point to be considered before filing the monthly return.
29. Not making reversal of ITC in following cases
- As per law, ITC should be reversed in some instances such as :-
(a) Input goods or services partly used for personal purposes ,
(b) capital goods sold
© free samples given to consumers or business partners ,
(d) goods lost, (e)goods destroyed
(f) goods or service not received ,
(g) payment not made to suppliers within 180 days, etc.
- But due to lack of knowledge, the taxpayers are not adhering to this point. This reversal should be done on monthly basis in books of accounts, because such goods being not used for providing taxable supplies, the ITC thereon is blocked u/s 17(5).
30. Taking credit of tax paid in accordance with provisions of section 74
- Any tax paid in accordance with the provisions of sections 74 (Tax not / short paid due to fraud etc), 129 (Detention, seizure and release of goods and conveyance in transit) and 130 (confiscation of goods or conveyance and levy of penalty) are not liable for Tax credit, since these taxes have been imposed by the department in order to penalize such assessee.
- The credit for such paid taxes should not be taken in books of accounts.
- The taxes so paid should be adjusted through DRC-03 immediately (intimation of voluntary payment).
31. Not reconciling cumulative figures
- It is a big mistake on the part of GST return filer. Whenever you file GST return for the current month, you should check the cumulative figures till that month and then file the return.
- Suppose you are filing the return for the month of June 2020,you should enter all the details in GSTR-1 but before submission you should cross check the figures as per the following details:-(suppose)
- Sales figures as per your books of accounts till June 2020 3,80,70,200
Sales figures as per GSTR-1 April 2020(filed) 1,20,65,670
Sales figures as per GSTR-1 May 2020(filed) 1,65,67,310
- Sales figures as per GSTR-1June2020(to be filed) 94,37,220
- If your figures are reconciled and there is no difference, only then you should file your return.
32.Mistake of showing zero-rated turnover in exempted sale
- Exporters file their returns to get a refund. They have two types of refunds. First is a refund of tax paid at the time of export. The second one is a refund of the input tax credit on purchases. But if you fill the figures of export sales at the wrong place your refunds will never proceed.
- The reason is that data is pushed to ICEGATE from GST returns. In case of wrong entry of data into the return, it is not pushed by the portal. The worst part is that, there is no manual process to inform the department. Also, the return under the form GSTR 3B cannot be amended.
- The export or zero-rated supply should be entered in Table 3.1.b of GSTR 3B.
33.Taking ITC in return without receiving the goods
- RULE 86A has defined the conditions necessary for taking ITC:-
(a)Supplier found non-existent or not conducting business from its registered place.
(b) Taxes not paid into the Government Treasury, i:e the supplier has not paid GST against prescribed documents on which recipient availed credit.
(c) Recipient availed credit without receipts of goods or services.
(d) Recipient is not in possession of tax invoice, debit note or any other document prescribed under rule 36.
But till date, many taxpayers are not adhering to these conditions and are taking ITC without receipt of the material in their factories or units.
Suggestions before filing returns
In the month end, while taking the GST credit, proper scrutiny of all the documents should be done whether all the invoices have been received for all the material received in the month and you should cross check the same with E-way incoming report which is available at your E-Way Portal.
If during the month, there are some reversals which are to be done, they should be done immediately. The reversal also leads to interest and penalty if not done in the same month. So always take correct GST ITC which is eligible and not subject to any reversal.
- In the month end, while taking the GST credit, proper scrutiny of all the documents should be done whether there is any reversal to be done on account of 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. If there arises any reversal on these accounts, that should be done in the same month.
One last suggestion
1. Daily check your books of account with E-way bills outward and inward from your E-way portal.
2. Confirm that all your inward and outward supplies have been properly accounted for in your books.
3. Your little initiative taken on daily basis can be helpful for you.
4. In the month end, always check your purchase and sale invoices properly before filing the returns.
5. Also ensure that the taxable supply figures in GSTR-1 and GSTR-3B are the same for the month. There should not be any difference in the figures given in GSTR-1 and GSTR-3B for any month.
6. Your daily and monthly reconciliation can save you from unnecessary queries from the department.
In case of any query, you can ask me at [email protected] I have done accounts for the last 32 years and now I am doing independent accounts work of my different tax payers.