It’s been more than one and half year of GST implementation however, GST has not yet started its settling phase. This is mainly because of two reasons; first, there are continuous amendments and second, non-clarity / confusion regarding applicability of legal provisions. After addressing in more than 200 GST seminars, I observed that due to non-clarity of many legal concepts, companies are making certain errors / mistakes or non-compliance which needs to be rectified before starting GST audit. Based on my GST seminars and interaction with trade, I have identified certain common mistakes in GST compliance, few of them are summarized below. The intention is to highlight common mistakes and precautions to be taken for GST audit so that efforts can be taken to solve / rectify them before starting GST audit and save cost of interest and penalty.
A. OUTWARD SUPPLY
1. Non-payment of GST on recovery from employees
2. Wrong selection of place of supply in case of “Bill To Ship To” transactions specially where Bill To is HO and Ship To is factory located in other State
3. Non-following all the required formalities in case of supply to merchant exporter
4. Non reporting of interest income under non-GST supply
5. Non-payment of GST on commission received in foreign currency under Intermediary Service
6. Non-payment of GST in case of free of cost service transactions with group companies
7. Non-payment of GST on penalties charged by companies – such penalties are recovered by issuing Debit Note instead of Tax Invoice
8. No knock off entries of advance received and its billing
B. REVERSE CHARGE MECHANISM (RCM)
9. Non-payment of GST under RCM specially in case of Govt. fees and ocean freight in case of import of goods
10. In some cases, CHA pays IGST on ocean freight and reimburse the same from importer. This is wrong practice and needs to be stopped
11. Non-payment of GST under RCM on out of pocket expenses of advocate
12. Non-payment of GST on import of services free of cost
C. INPUT TAX CREDIT (ITC)
13. ITC availed without tracking date of payment – condition of payment within 180 days
14. Availment of 100% credit on pre-paid expenses. 100% ITC will not be available in the same month since condition of receipt of service is not satisfied
15. Non-reversal of ITC in case of free sample / write off / gift / personal consumption
16. Non-availment of ITC on banking transactions due to non-receipt of invoices OR ITC is availed on back statement but not on bank invoice
17. Non-payment of GST / non-reversal of ITC in case of receipt of insurance claim.
18. Non-availment of ITC on air tickets since air travel agent provides his GSTIN instead of company. OR in other cases, air travel agent provides GSTIN of the company however, ITC is not availed due to non-availability of tax invoice of airline company.
19. Non-availment of ITC on repairs / renovation of office or factory when such expenses are not capitalised
20. Availment of ITC on canteen / employee transport service from September 2018 without issue of Notification to give effect. ITC on such services will be available w.e.f. 1st February 2019.
21. ITC of CGST and SGST of one State is claimed in other State – e.g. hotel accommodation
22. Availment of ITC on RCM in the subsequent month instead of in the same month
23. Carry forward of credit in TRAN-1 which was not reported in returns filed under excise, service tax and VAT but availed in books
D. E-WAY BILL
24. Supplying goods against which validity of e-way bill is expired.
25. Non-generation of e-way bill in case of return of goods after job work
26. Tax invoice cancelled without cancellation of e-way bill or without rejection of e-way bill
E. REFUND RELATED TO EXPORT OF GOODS / SERVICES
27. Reporting of export under NIL or exempted supply
28. Following points to be considered while exporting on payment of IGST:
a. Correct Shipping Bill number to be mentioned in GSTR-1 return;
b. Export amount should be correctly mentioned in 3.1.b of GSTR-3B;
c. Port code should be correctly mentioned in GSTR-1 return;
d. Invoice number mentioned in GSTR-1 and invoice number mentioned in Shipping Bill should be matched;
e. IGST paid amount indicated in GSTR-1 should match with IGST paid amount indicated in Shipping Bill;
f. Details reported in EGM should match with export details mentioned in Shipping Bill; and
g. Bank account details available with Customs should be correct.
F. DOCUMENTATION / RECORD
29. Non-issue of Tax Invoice (self-invoice) in case of RCM credit
30. Non-fixing / display of GST registration Certificate / GSTIN at the entrance of the office / factory
31. Non-issue of Receipt Voucher / Payment Voucher / Refund Voucher
32. Non-filing of ITC-04 related to job work transactions
33. Non-maintenance of ITC Register in a proper manner. Mainly not updating GSTIN of all suppliers which is essential at the time of reconciliation of ITC with GSTR-2A
34. Raising of Debit Note first in case of purchase return rather than supplier raising Credit Note
35. Issuing of separate delivery challan by job worker for returning of processed goods to the principal manufacturer
G. GST RETURNS
36. Many suppliers file GSTR-3B but not GSTR-1 or vice versa
37. Wrongly reporting outward supply liability under RCM or vice versa
38. Non-reconciliation of GSTR-1 and GSTR-3B for the same month
The above list of common mistakes and precautions is not exhaustive but an attempt to highlight common mistakes so that efforts can be taken to solve / rectify them before starting GST audit and save cost of interest and penalty.
*Author Details –Mr. Manas Joshi, Director at Proficient Partners Consultancy Pvt. Ltd. / GST Committee member of MCCIA and can be reached at email@example.com