Even after 3 years of introduction of GST Act, people registered under GST are making many errors while filing their GST returns. It is very important to file GST returns with the most accuracy to avoid litigation from the department. A wrong filing in GST return can impose a huge amount of penalty and interest on a registered person. It is to be noted that there is no provision in GST law to revise the return; therefore, we must ensure the accuracy of GST returns at the time of filing. We are discussing below a few common errors that most people commit while their GST returns.
Most people are of the view that if there are no transactions for sale and purchase then there is no need to file an NIL return. But that’s not true. As per GST Law, even if there is no transaction during any tax period, even then a person registered under GST is required to file NIL return. Non filing of NIL GST return results in monetary file and department and issue notice for cancellation of GST registration due to failure to file GST return.
Many registered treats Zero rated and nil rated supply as same. But in fact, there is a huge difference between zero rated and nil rated supplies. Zero rated supplies are those in which goods and services are exported out of India or to be situated under Special Economic Zone (SEZ) and Nil rated supplies are those which are taxable but GST rate of these supplies is zero (0) % in GST tariff. If a person is supplying zero rated supplies but at the time of filing his GST return he declares it in a column of nil rated supplies then he can suffer problems at the time of claiming a refund of zero rated supplies. On the other hand, if a person declares his nil rated supplies in the column of zero rated then he can suffer problems at the time of audit and scrutiny from the department. Therefore, a person must be vigilant at the time of filing nil and zero rated supplies in his GST return to avoid unnecessary litigation.
In the case of those supplies where the recipient of goods and/or services furnish his GST number to the supplier of goods and/or services, it is mandatory for supplier to enter invoice wise details of the recipient. Invoice wise details furnished by the supplier in GSTR 1 are auto populated in form GSTR 2A which enables the recipient to take input tax credit from GST tax paid to the supplier. If the supplier feeds the wrong particular invoice and/or misses to report the invoice then the recipient may not be allowed to take the input tax credit in respect of invoice wrongly declared in GSTR 1 return. Below are some common mistakes that a supplier can commit while entering an invoice for GSTR 1 return:
The above mistakes in GSTR 1 returns can deprive the right of the recipient to book input tax credit.
If a registered person is not matching his GSTR 3B and GSTR 1 returns on a monthly basis then he is committing a big mistake. Each person should make sure before filing GST returns that their GSTR 3B and GSTR 1 return is matched with each other monthly. For example, if a person has declared sales of Rs. 2 crore in his May 2020 month GST return and sale of Rs. 2.50 crore declared in his GSTR 1 for the month of May 2020 then he could face unnecessary litigation with the GST department.
In terms of rule 36(4) of the GST law, a person can only claim an input tax credit of 110% of eligible ITC appeared in form GSTR 2A OR input tax credit as per books whichever is lower, irrespective of invoices he has. For example if eligible ITC in form GSTR 2A for the month of June 2020 is Rs. 100 and for the same month, ITC as per books is Rs. 130 then a person can claim ITC as follows;
a) 110% of eligible ITC of form GSTR 2A is Rs. 110 (100*110%
b) ITC is per book is Rs. 130.
Lowe of a) and b) is Rs. 110. Therefore, for the month of June 2020 a person can avail ITC of Rs. 110 only.
Avoiding the above rule can result in payment of interest.
The government has prescribed many goods and services in which recipients of goods and/or services are liable to pay a reverse charge (RCM). One must not miss to pay reverse charge tax, otherwise it may result in additional payment of interest and loss of input tax credit. Further, it is to be noted that payment of reverse charge tax cannot be paid using Input Tax Credit (ITC). In other words, it has to be paid through challan. After payment of Reverse Challan (RCM), taxpayers can claim input tax of the same which can be set off with output tax.
Filing of GST returns in time is a key point to remember. Delay in filing GST returns may lead to cancellation of GST registration. It also results in monetary fines.
If a person is declaring export sale in the column of regular sales in place of zero rated supplies then it may lead to denial of GST refund. Therefore, a person must take care while furnishing details of export sales.
Above is only an illustrative list of errors and negligence which a person can commit.