Common mistakes to avoid when filing GST returns

Apr 05, 2024

Given that there is no system for amending GST returns yet it is extremely important for businesses to file GST correctly. If not done right, errors to avoid in filing GST returns can really haunt your finances in the long run.

GST accounting forms the backbone of accounting operations and accounting always begins with bookkeeping. Companies tend to spend a lot of money to ensure filing is done correctly and books are kept in order.

Common mistakes businesses must avoid while filing GST returns

1. Manual input errors

Errors to avoid in filing GST returns also commonly include errors made when doing data entry manually. Human errors are a part of the manual process and are much more common than you might think.

Erroneous data entry can lead to major problems in the GST filing process. Incorrectly entered details can be conceived as misprojectioin of finances and therefore fraud. To ensure accurate GST filing keep a check on such errors.

2. Accurate tax slab calculations

You must also ensure that the calculations for items are made according to the tax slabs they fall under.

Ensure that the tax rates of items are calculated correctly as per the tax slabs as made clear by the GSTN and HSN summary. If you fail to do this you’ll end up calculating tax incorrectly.

3. Filing a NIL return

Even if your business makes no transactions for a particular period you must still file GST. This is called filing a NIL return. Businesses might think no transactions mean no filing, but that is not how it is to be. You must file a NIL return in such cases.

4. Zero-rated supply v/s Nil-rated supply categorization

Businesses often confuse zero-rated supply with nil-rated supply categorization. This Is yet another one of the errors to avoid in filing GST returns.

Nil-rated supply is for goods and services that have 0% applicable GST, whereas zero-rated supply is for goods and services exported to SEZs or Special Economic Zones. When filing GST returns ensure this distinction is maintained.

5. Accurate reverse charge mechanism (RCM) categorization and filing

In certain cases, the buyer of goods pays GST for purchased goods directly to the government. This is called a reverse charge mechanism or RCM.

Make sure your accountants know which goods and services this applies to and file accordingly.

6. Check ITC provisions of reverse-charge mechanism & blocked credit

For businesses who have invoices on which GST is to be paid via the reverse charge mechanism there needs to be a check done on whether the reverse charge needs to be paid by the recipient.

In such cases, GST is not to be charged when issuing the invoice. Doing so can save your business from the troubles of double payment of tax and the unwanted task of depositing tax where instead the liability to do so lies with the recipient.

7. Disclosing under the right GST Heads

Paying GST under the wrong heads is yet another one of the commonly made errors to avoid in filing GST returns.

If you end up disclosing goods and services under the wrong GST heads it can bring a lot of trouble in the future, both legally as well as internally. Make sure you disclose under the right GST heads and pay taxes accordingly.

8. Claiming ineligible ITC

Claiming Input Tax Credit where it is not eligible is a fairly common, yet grave mistake. You must thoroughly check and verify your auto-populated GSTR-2A, GSTR-3B, and purchase books, and claim only the eligible value of ITC.

GST accounting: Quick checklist to review before filing!

Practice maintaining proper documentation & records

There is no substitute for proper paperwork maintenance when it comes to GST accounting. Proper documentation is a mandatory prerequisite for GST audits.

Moreover, regardless of whether you are due for an audit or not maintaining proper documentation is a must-do as a healthy business practice.

Not only can it make reconciliation and accounting easier but it can make your accountants’ job much more efficient.

Reconcile the returns with books of accounts

Reconciling returns filed with the books of accounts is an important practice that businesses should do on a monthly basis instead of putting them off till the end of the year.

Timely reconciliation will make it easier for your teams to identify omissions and errors.

By doing so you get to amend the issues in the next month instead of waiting for the end of the year to deal with the entire year’s errors. This can help you save on time, money, and penalties if any.

GST audit for turnover above 2 Cr

For any registered dealer with a financial year’s turnover that exceeds Rs 2 Cr accounts must be audited by a CMA or CA. The audited returns have to be submitted alongside reconciliation statements and audited accounts.

Stay GST compliant with the right tools

Filing GST for a company is a practice that is easier said than done. There are multiple moving parts and you must keep track of each and every one.

To avoid any penalties or unwanted legal attention in the future you must ensure proper accounting and bookkeeping along with accurate GST recording.

You can do this with the help of a well-assembled team of accountants or you can choose to go for the many automated solutions out there.

Volopay, for example, makes it super easy for companies to reconcile statements, maintain books and keep a tight grip over financial operations.