Common Mistakes While Filing GST Returns

For all GST registered taxpayers, it is mandatory to stay compliant with GST return. GST offers a legal structure framework, despite this structure many businesses face difficulties when it comes to GST Returns filing. It is important to avoid the common mistakes that arise due to incorrect data entry or misunderstanding of GST provision. These minor errors or mistakes in GST return can result in penalties, loss of input tax credit or GST notices. Understanding the reasons for these errors can help you to save from heavy penalties and GST notices. In this blog, we will discuss in detail each error and mistake while filing GST Return. 

Incorrect Invoice Detail 

Incorrect invoice detail is one of the most common errors while filing GST return. Entering wrong GSTIN, invoice number, invoice date, tax value, etc, can create a confusion across GSTR. Mistakes in GSTR-1 outsource supply detail directly impacts the recipient’s ability to claim Input Tax Credit (ITC) in GSTR-2A/2B. 

In such a case, an amendment is needed in the GST invoice which takes months to fix it. It is advisable to double check the details while uploading the GST invoice.

Mismatched Input Tax Credit 

Through the Invoice Management System (IMS), taxpayers can take action on invoices uploaded by their suppliers, which determines the eligibility of input tax credit. Based on these actions, the details are automatically reflected in GSTR-2B. Later, taxpayers disclose their input tax credit in GSTR-3B. 

While doing so, if the right value is not claimed properly then in such cases there can be a difference between the GSTR-2B and GSTR-3B. It is important to note there is no option to revise this mistake later. Also, taxpayers need to pay the difference along with the interest in the following month’s return.  

Ignoring NIL Return 

Considering no transactions as no filing is another misconception among taxpayers. Non-filing or delay in filing could result in heavy penalties. Also, gaps in filing do not allow taxpayers to file next period’s return. It is advised to taxpayers to file the NIL return in case of zero transaction so that their GSTIN remains active and face no errors while filing next period’ return. This NIL Return helps in maintaining the record and keeps GSTIN active.

Difference in GSTR-1 & GSTR-3B 

GSTR-1 is a detailed return which contains details of outward supply while GSTR-3B is a summary return filed every month. Difference between GSTR-1 and GSTR-3B is another common mistake taxpayers make while filing GSTR. This difference can arise due to missing invoices, incorrect tax calculations, or manual entry errors. 

Such errors can trigger system generated Notices and thus need reconciliations. It is advised to cross verify GSTR-3B with GSTR-1 at least every month to avoid disparity in the final accounts. 

Considering Zero-rated Supplies as NIL-rated Supplies 

Zero-rated supplies are the goods and services taxed at 0% GST or VAT rate and allow suppliers to claim a refund of Input Tax Credit (ITC) paid on the raw materials or input to make those supplies. While nil-rated supplies are taxed at 0% rate but are not allowed to claim a refund of Input Tax Credit (ITC) for the GST paid on the inputs used to produce them. 

Treating zero-rated supplies as nil-rated supplies while filing GST return is another common mistake taxpayers make. It is crucial to understand their difference as both are taxed at 0% but zero-rated supplies can be claimed later but not nil-rated supplies. Also it is essential to ensure that LUT is filed in case zero rate supplies are made without payment of taxes.

Failure to Identify Reverse Charge Liability 

Reverse Charge Mechanism (RCM) is a provision under GST where the liability to pay tax is on the buyer of goods or services instead of the seller. It is important for suppliers to understand the liability of this concept. Suppliers should check the applicability criteria for goods and services on which reverse charge mechanism is applicable to avoid double taxation. 

Also, taxpayers should note the payment of reverse charge mechanism is only made in cash and ITC can not be utilised for reverse charge mechanism payments. Disclosure of ITC availed on Import of Services and ITC of inward supplies under RCM to be disclosed separately.  

Incorrect HSN/SAC Code 

Using wrong HSN/SAC Code is another common mistake whose impact is not too common. Using HSN/SAC code from old invoices without verification of new updates or using HSN/SAC codes from outdated data can be the reason for entering wrong HSN/SAC Code while filing GST returns. This can result in penalties, locking your working capital, and even can raise conflicts during audit. It is advised to check the correct list of HSN/SAC code to avoid further consequences. 

Wrong Claim on ITC Reverse or Blocked Credits 

According to the law, the Input Tax Credit should be reversed in certain situations, such as when suppliers are not paid within 180 days, when inputs are partially utilized for personal reasons, when capital items are sold, when customers or business partners receive free samples, when commodities are destroyed, etc.

Furthermore, credit is not available for some products and services. The consequences of making the same claim must be considered by taxpayers. If this isn't done, the GST department may send out notices, which may eventually result in interest and penalties.

Key ITC Reporting Principles to Keep in Mind:

• Eligible ITC (Available Credit): ITC which is fully eligible and available for utilisation shall be reported in Table 4(A) of GSTR-3B (appropriate sub-tables such as imports, RCM, inward supplies etc.).
• Ineligible ITC: ITC which is permanently ineligible under Section 17(5) or other provisions shall not be reported in Table 4(A). Such ITC is to be disclosed in Table 4(D)(1) – Ineligible ITC.
• ITC Reversal (Temporary / Conditional): ITC which is initially availed but required to be reversed due to conditions such as:
  • Non-payment to supplier within 180 days
  • Rule 42 / Rule 43 reversals
  • Provisional reversal under Rule 37, Rule 38, etc.
• All ITC Reversal shall be reported in Table 4(B)(2) as “ITC reversed – others”.
• Re-availment of Reversed ITC:
  ITC which was earlier reversed in Table 4(B)(2) and later becomes eligible (e.g., payment made to supplier) shall be reclaimed in Table 4(A)(5).
• Net ITC Available for Utilisation:
  The net ITC available after reversals is auto-computed and reflected in Table 4(C), which alone can be utilised for payment of output tax.

Important clarification:

The Circular emphasises that temporary reversals and subsequent re-availment must be tracked transaction-wise, and incorrect reporting (e.g., direct netting off without reversal and reclaim) is not in accordance with law.

This clarification ensures uniform reporting, avoids excess availment, and aligns GSTR-3B disclosures with statutory provisions under the CGST Act and Rules.

Applying in Wrong GST Slab

Another frequent error made when submitting GSTR is applying the incorrect GST rate to goods or services. This typically occurs as a result of misclassifying goods or services, having outdated tax rate knowledge. Inaccurate GST rates can result in either excessive or insufficient tax payments, both of which need to be corrected. Accurate tax computation and reporting are ensured by routine examination of GST rate notifications and proper classification.

Treating Export Sales as Domestic Sales 

Many taxpayers classify export sales as domestic sales which is another mistake during GSTR filing. Export sales are subject to special treatment under GST, thus, inaccurate tax obligation and refund-related problems may result from charging GST on export invoices, reporting export transactions incorrectly in GSTR-1, or neglecting to declare them as zero-rated supplies. Exports must be correctly declared as zero-rated supplies, either under LUT or after IGST has been paid and a refund claim has been made. For export compliance, accurate reporting and documentation are essential.

Conclusion 

Filing Goods and Services Tax (GST) returns is a crucial requirement for maintaining compliance under GST registration. However, many taxpayers make avoidable errors that later result in heavy penalties and notices from the GST department. Common mistakes include incorrect invoice details, mismatched input tax credit, ignoring NIL returns, treating zero-rated supplies as nil-rated supplies, applying incorrect HSN or SAC codes, and wrongly claiming or reversing ITC. Avoiding these errors is essential to keep your GSTIN active and ensure smooth compliance. Seeking expert guidance can help taxpayers file accurate returns and prevent costly mistakes.