Goods and Services Tax (GST) compliance is crucial for businesses to avoid penalties, legal hassles, and financial losses. However, many businesses, especially small and medium enterprises (SMEs), often make mistakes due to lack of awareness or oversight.
In this blog, we’ll discuss the top 5 GST compliance mistakes businesses make and how to avoid them to ensure smooth tax filing and legal compliance.
1. Incorrect GSTIN or Invoice Details
Mistake:
Many businesses enter wrong GSTIN (Goods and Services Tax Identification Number) or invoice details while filing returns. This leads to mismatches in GSTR-2A/2B and can trigger tax notices.
How to Avoid It:
- Double-check GSTINs of suppliers and customers before filing returns.
- Use GST verification tools to validate GSTINs.
- Ensure invoices contain mandatory details like:
- Correct GSTIN of supplier & recipient
- Invoice number & date
- HSN/SAC codes
- Taxable value & applicable GST rates
2. Delayed or Incorrect GST Return Filing
Mistake:
Missing due dates for GSTR-1, GSTR-3B, or annual returns (GSTR-9) leads to late fees and interest penalties. Some businesses also file incorrect data, leading to discrepancies.
How to Avoid It:
- Set reminders for GST due dates (monthly/quarterly/annual).
- Use GST software or hire a tax consultant for accurate filing.
- Reconcile books with GSTR-2A/2B before filing to avoid mismatches.
3. Not Reconciling GSTR-2A/2B with Books
Mistake:
Many businesses fail to match purchase data (GSTR-2A/2B) with their books, leading to ITC (Input Tax Credit) claim issues and tax demands.
How to Avoid It:
- Regularly reconcile purchase records with GSTR-2A/2B.
- Communicate with suppliers to ensure they file returns correctly.
- Claim ITC only for eligible invoices as per GST rules.
4. Wrong HSN/SAC Code Classification
Mistake:
Using incorrect HSN (Harmonized System of Nomenclature) or SAC (Services Accounting Code) leads to wrong tax rates and compliance issues.
How to Avoid It:
- Check the latest HSN/SAC list on the GST portal.
- Use 4-digit HSN for turnover below ₹5 crore and 6-digit for above ₹5 crore.
- Verify codes with a GST expert if unsure.
5. Ignoring Reverse Charge Mechanism (RCM) Compliance
Mistake:
Businesses often forget to pay GST under Reverse Charge Mechanism (RCM) for certain services (e.g., legal fees, director services), leading to penalties.
How to Avoid It:
- Identify transactions where RCM applies (Section 9(3) & 9(4) of CGST Act).
- Pay RCM liability in cash (cannot use ITC for RCM).
- File correct details in GSTR-3B.
Conclusion: Stay GST-Compliant to Avoid Penalties
GST compliance is not just about filing returns but ensuring accuracy at every step. By avoiding these common GST mistakes, businesses can:
✔ Prevent tax notices & penalties
✔ Maximize Input Tax Credit (ITC) claims
✔ Maintain smooth business operations
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