Mistake to Avoid While Filing GST Returns: A Comprehensive Guide
Are you one of those taxpayers who find themselves in a maze of confusion when it comes to filing GST returns? You’re not alone. Since the introduction of the Goods and Services Tax (GST) in 2017, many taxpayers and tax practitioners have stumbled upon common pitfalls that can lead to hefty penalties and late payment fees. In this article, we will explore these frequent errors, the consequences they entail, and, most importantly, how you can steer clear of them. Let’s dive into the world of GST and uncover the mistake to avoid while filing GST returns.
Table of Contents
|1||Incorrect ITC Claim and Reversal|
|2||Non-Payment of GST in RCM|
|3||Not Mentioning Exempted Turnover|
|4||Availing Composition Scheme Benefits|
|5||Paying Tax Under the Wrong GST Category|
|6||Neglecting GSTR-3B and GSTR-1 Reconciliation|
|7||Non-Filing of Final Return GSTR-10|
|8||TDS and TCS Credit Not Claimed|
|9||Errors in Uploading Data in GSTR-1|
|10||Confusing Zero-Rated with Nil-Rated|
Now, let’s delve into each of these mistake to avoid while filing GST returns to help you navigate the intricate world of GST returns.
1. Fisrt Mistake to avoid while filing GST returns is “Incorrect ITC Claim and Reversal”
Mistake: Incorrectly claiming Input Tax Credit (ITC) or claiming blocked credits under GST.
GST allows businesses to reduce their tax liability by claiming Input Tax Credit (ITC) on their purchases. However, this should be done correctly and within the framework of GST rules. Claiming the wrong amount or blocked credits can lead to penalties and interest in the subsequent return.
How to Avoid: Ensure you understand the rules and conditions for availing ITC. Regularly review your ITC claims to avoid discrepancies.
2. Second Mistake to avoid while filing GST returns is “Non-Payment of GST in RCM”
Mistake: Failing to pay tax under the Reverse Charge Mechanism (RCM) when required.
Under RCM, the responsibility to pay tax shifts from the seller to the buyer for certain transactions. Forgetting to pay tax under RCM can lead to double taxation and legal issues.
How to Avoid: Be aware of the supplies subject to RCM and fulfill your tax obligations accordingly.
3. Third biggest Mistake to avoid while filing GST returns is “Not Mentioning Exempted Turnover”
Mistake: Omitting to report exempted or Nil-rated sales.
While zero-rate supplies don’t affect your GST liability, they must be reported in your returns. Failing to do so can result in penalties for concealing information.
How to Avoid: Clearly mention exempted or Nil-rated sales in GSTR 3B and GSTR 1 to maintain transparency.
4. Fourth Mistake to avoid while filing GST returns is “Availing Composition Scheme Benefits”
Mistake: Opting for the Composition Scheme without meeting the eligibility criteria.
The Composition Scheme is designed for small taxpayers with a turnover under Rs. 1.5 Crores. Availing it without eligibility can lead to unforeseen GST liabilities.
How to Avoid: Ensure you meet the eligibility criteria before opting for the Composition Scheme.
5. Fifth Mistake to avoid while filing GST returns is “Paying Tax Under the Wrong GST Category”
Mistake: Submitting GST payments and interest under the wrong GST category.
GST has various heads under which tax should be filed. Mistakenly filing under the wrong category can lead to cash flow issues and calculation errors.
How to Avoid: Double-check the GST category under which you should file your taxes.
6. Sixth Mistake to avoid while filing GST returns is “Neglecting GSTR-3B and GSTR-1 Reconciliation”
Mistake: Failing to reconcile GSTR-3B with GSTR-1 regularly.
Reconciliation between these two forms is essential to ensure accuracy and avoid discrepancies that could result in penalties and tax authority notices.
How to Avoid: Perform monthly reconciliation to keep your records consistent.
7. Seventh Mistake to avoid while filing GST returns is “Non-Filing of Final Return GSTR-10″
Mistake: Not filing GSTR-10 when surrendering your GST number.
Failing to file GSTR-10 within the specified deadline can result in final cancellation orders, tax liabilities, and late fees.
How to Avoid: Comply with the filing requirements when surrendering your GST number.
8. Eighth Mistake to avoid while filing GST returns is “TDS and TCS Credit Not Claimed”
Mistake: Neglecting to claim TDS and TCS credits.
Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) credits should be claimed when applicable. Not doing so could affect your tax liabilities.
How to Avoid: Keep track of TDS and TCS credits and claim them as required.
9. Ninth Mistake to avoid while filing GST returns is “Errors in Uploading Data in GSTR-1″
Mistake: Making mistakes while uploading invoice-wise data in GSTR-1.
GSTR-1 requires detailed data on outward supplies, and errors can lead to discrepancies between GSTR-1 and GSTR-3B.
How to Avoid: Pay careful attention to data entry when filling out GSTR-1.
10. Tenth Mistake to avoid while filing GST returns is “Confusing Zero-Rated with Nil-Rated”
Mistake: Mistaking zero-rated supplies for Nil-rated supplies.
Zero-rated supplies are exports to Special Economic Zones (SEZ) with a GST rate of 0%, while Nil-rated supplies have a 0% tax rate. Confusing the two can result in filing errors.
How to Avoid: Understand the distinction between zero-rated and Nil-rated supplies when filing your GST returns.
In conclusion, navigating the world of GST returns can be tricky, but avoiding these mistake to avoid while filing GST returns is crucial to ensuring a smooth and hassle-free experience. Stay informed, double-check your filings, and seek professional guidance if needed to keep your GST compliance in check.
Frequently Asked Questions (FAQs)
What is Input Tax Credit (ITC) under GST, and why is it important?
ITC is the credit that allows businesses to reduce their tax liability by claiming credits on taxes paid on purchases. It’s essential for maintaining accurate tax records and minimizing tax liability.
How can I ensure I’m eligible for the Composition Scheme before opting for it?
To be eligible for the Composition Scheme, your turnover must be less than Rs. 1.5 Crores. Ensure your turnover meets this criterion before availing of the scheme.
What is the significance of reconciling GSTR-3B with GSTR-1?
Reconciliation between these forms helps identify and rectify discrepancies, ensuring accurate and error-free GST return filings.
What happens if I don’t file GSTR-10 when surrendering my GST number?
Failure to file GSTR-10 within the specified deadline can result in final cancellation orders, tax liabilities, and late fees.
How do I differentiate between zero-rated and Nil-rated supplies when filing GST returns?
Zero-rated supplies are exports to SEZ with a GST rate of 0%, while Nil-rated supplies have a 0% tax rate. Ensure you correctly categorize your supplies to avoid errors.