10 Common GST Mistakes and How to Avoid Them

10 Common GST Mistakes and How to Avoid Them

For any MSME Business owners, it is a challenging task to comply with GST law and its provisions and rules made thereunder. Inadvertent mistakes can also attract penalties under the GST Act. Ignorance of law cannot be an excuse given before the officer. 

In this post, I’ll discuss some of the most common GST errors that businesses make and explore strategies to avoid them. By understanding these mistakes you can take proactive measures, you can ensure compliance with GST laws and minimize the risk of facing penalties.

10 Common Mistakes by taxpayer

  1. Mismatch in GSTR-1 and GSTR-3B: Declaring more outward supplies in GSTR-1 and less paid in GSTR-3B, can also attract notice from the department. You are advised to maintain records, if the reason is justifiable. 
  2. Excess availment of input tax credit in GSTR-3B compared to GSTR-2B: Now, it is restricted to avail credit more than GSTR-2B. You have to take input tax credit based on the invoices appearing in GSTR-2B to avoid any notice from the department.
  3. Typographical error or Incorrect filings: Sometimes, your accountant inadvertently makes mistakes while GST returns. You have to remember GST returns cannot be amended once it is filed. In order to rectify the error in returns, you have to make changes in the subsequent returns which impact the proper compliance in GST records. 
  4. Not maintaining proper records as per the Law: Not maintaining the records as per GST law and rules which may attract penalty under Section 124 or 125. This can affect your business financially.  
  5. Failure to take GST registration: Once you cross the threshold limit of Rs.20 lakhs in case of services or Rs.40 lakhs in case of goods, GST registration becomes mandatory and continuing business without GST registration can attract huge interest and penalty as per GST Act.
  6. Delay in filing GST returns: Delaying GST returns can attract interest on the cash component of the tax amount and a late fee is also imposed. It is automatically calculated by the portal and it is not possible to avoid the same. 
  7. Failure to furnish documents to the department: It is very important to reply to the notice or letter from the department requesting important documents for any purpose or audit as per GST Act, otherwise, you can be penalized under Section 124 of the Act.
  8. Availing ITC on fake invoices: Some business owners take input tax credit on invoices where goods or services have never been supplied to avoid cash payment in returns. It may not be a big amount for business owners, but it can attract interest at 18% and penalty up to 100% of the tax evaded.  
  9. ITC on invoices where supplier is not available or not paid the tax to the Government: It is very important to take credit based on GSTR-2B return, this will allow you to check which supplier has not filed the GST returns and based on this data, you can follow up with the supplier to file return and pay tax, otherwise you won’t be allowed to take credit in your GST returns. If found later by the department, you will be issued notice to reverse the same input tax credit, along with applicable interest and penalty. 
  10. Availing ITC on block credit as per Section 17(5): Before taking input tax credit on different supplies of goods and services, check whether that services or goods falls under Section 17(5) or not. Whether that credit is related to your furtherance of business or not. This way you can avoid availing wrong input tax credit in your returns. 

Read More: Recovery Proceedings: GST department issued Instructions

Brief of Penalty provisions under GST

There are different penalty provisions under the GST Act. Penalties under Section 73 and Section 74 have outlined in their respective sections that range from 10% of the tax to 100% of the tax amount

There is a list of offenses mentioned in the Section 122 for which penalties have been defined separately. Any offense committed under Section 122, the officer can impose a penalty accordingly. There is a penalty for hiding information in GST returns under Section 123 and there is penalty for failure to furnish documents under Section 124.

There is a general penalty also of maximum Rs.50,000 (CGST – Rs.25,000 and SGST – Rs.25,000) under Section 125. This section gives full authority to the officer to impose penalty on any person, who contravenes any of the provisions of the GST Act or any rules for which no penalty is separately provided for in this Act.

I'm employed in the GST department and established this blog with the aim of providing financial literacy to my audience. Through the lens of the department, I endeavor to address GST-related queries and uncertainties. Drawing from my decade-long experience in GST, Customs, Business, and Finance, I share insights to empower you in making informed choices.