10 common mistakes made by a Taxpayer in GST

Taxpayers and Tax Practitioners both commit some errors or mistakes in the filing of GST Registration or during GST Return Filings.

So, after consulting with so many GST Consultants in India we have decided to mention some top mistakes that are prevailing in the market.

The general mistakes that we have seen in the market are as follows:

1. Forgetting Filing of GST Returns in case of no business.

• • Many times it had been seen that taxpayers take GST registration to start a business idea or simply to open a current account in a nationalized bank. But to save the money in fees of GST Consultant Services they avoid filing of GST Returns, if they do not have any transaction in the business.
  • Hence we can say that, if GST returns are not filed on time then even NIL GST returns also attracts late fees.

2. Update contact information of taxpayers and not of tax professionals.

• • In the view of saving some time in filing of GST Returns most of the tax practitioners update Phone Number and Email ID of themselves and not of taxpayer’s and hence this may create problem as sometimes it has been seen that department of GST was not able to communicate the taxpayer due to non availability of contact information and ultimately may result to harsh provisions for taxpayers and even for tax practitioners.

3. Booking ITC (Input Tax Credit) without following rules properly.

• • In GST, it is clearly stated that for booking and availing ITC one have to follow some rules and conditions. These are as follows:
  • One of the important rule is that taxpayer should have possessed the Tax Invoice for the purchases on which he is booking ITC.
  • Second main rule is the invoice for which ITC is going to be booked should be visible in GSTR-2A/2B but in many cases this is found that taxpayers takes ITC on the basis of invoices only which may result in dis-allowance of credit so booked.

4. Non Payment of GST in Reverse Charge Mechanism.

• • Reverse charge was imposed by GST as same as it was in VAT or Service Tax previously. There are certain supplies in GST which attracts GST on reverse charge manner, which means GST on those supplies, have to be paid by the receiver or buyer of the supply and not by the supplier or seller of the supply.
  • Most common supply in RCM is supply of services by goods transport agencies; hence one should take care for the payment of GST under reverse charge mechanism. On the other hand supplier of such services has to be cautious that he needs not to pay GST on his supplies otherwise it will be counted as double payment of tax.

5. Non Filing of Final Return GSTR-10.

• • Person takes GST registration in view of starting a business but not everyone gets successful in having a good business. So, they finally decide to surrender the GST number they have taken but in this case they don’t know or they forget to file Final Return, i.e., GSTR-10.
  • GSTR-10 has to be filed within stipulated time after cancellation of GST number otherwise it will attract late fees.

6. Wrong understanding of LUT.

• • LUT (Letter of Undertaking) is a document which is required to be filed by the exporters if they are opting for the export of goods or services without payment of tax.
  • On many websites and many blogs we can read that LUT is valid for 1 year, but that’s not completely true. As per the rules LUT filed during the year is valid till the end of the particular Financial Year.

7. Non- Updation of Additional Place of Business (APOB).

• • Generally we can see that those taxpayers that have more than one business premise in the same state but they show only their main office in the GST Registration. Although non updation of additional place of business does not affect GST revenue or taxability but still this will be considered as non- compliance of GST laws and hence may result to penalties on taxpayer.

8. Not mentioning Exempted Turnover in GST Returns.

• • Exempted supplies or zero rated supplies does not have any effect on the GST liability to be paid, this fact makes taxpayers lenient for the reporting rules for this sale.
  • Every business has to show it’s exempted or nil rated or zero rated sales in its GST returns 3B and GST Return 1. Otherwise it will be considered as concealment of facts. So it is must to report it’s exempted or nil rated or zero rated sales in its GST returns.

9. Enjoying benefits of Composition Scheme without being eligible.

• • Composition Scheme was launched to provide benefits or relaxations to the small tax payers of the Industry, but every benefit have its own conditions. For taking benefits of Composition Scheme one has to follow some conditions otherwise he will be considered as ineligible and may result in unplanned GST liability.

10. Not mentioning HSN summary in GSTR-1.

• • Yes, it is necessary to mention HSN wise summary in the GST Return-1, though it’s not mandatory for all but everyone seems to take this condition as an option which is not good and will take you on the wrong side at the end.