India witnessed one of the largest changes in her Income Tax guidelines in 2017 when the Government decided to introduce GST (Goods and Services Tax).
As a mandate amendment applicable for every business in the country, GST brought several of the indirect taxes together, creating a transparent ecosystem where taxpayers enjoyed a better service, zero risks of repeat taxation, and faster grievance handling.
GST In India
- During the financial year 2018-2019, a total of Rs.11.77 lakh crore was collected as GST, indicating an increase of almost 9.2% year on year in the revenue amount.
- There are more than 1.21 crore registered taxpayers under the GST network, responsible for a total of 12.82 crore transactions in the last 3 years.
- Approximately 812 crore invoices were uploaded, along with 109 crore e-way bills.
However, the ever-increasing number of online taxpayers has also contributed to a growing number of irregularities and errors in the filed returns.
Taxpayers should be cautious while filing their GST returns, as forms like GSTR 9 does not allow any rectification once it is filed. The necessity to file Income Tax Return within a pre-defined date also adds to this issue by a significant margin.
Taxpayers have to understand the common mistakes that may occur while filing GST returns after completing GST portal login and take the necessary steps to ensure they don’t face similar issues.
They should also utilise online tools, like GST calculators for wholesalers and retailers, to determine their exact tax liability.
Let’s take a look at some of the common issues faced by individuals.
Irregularities Faced During GST Filing
Paying In Incorrect GST Heads –
One of the most prevailing issues is paying GST for an incorrect tax head. GST is divided into 3 different heads, Central, State, and Integrated GST. Confusion in any one of these can lead to a ripple effect, requiring significant time and effort to correct the return and claim for a refund.
This division brought a positive impact of GST on small and medium businesses; however, it also increased the margin of error from a taxpayer’s end.
Individuals should carefully check their tax bracket, and initiate payment only after allocating the credit for CGST, SGST, and IGST individually.
Otherwise, they will have to initiate a refund in the subsequent month (or financial year) to retrieve the incorrect sum.
Not Withholding Separate GSTR-9 –
If a taxpayer does business in separate states, he or she is likely to have multiple GST Identification Numbers (GSTIN) issued against their organisation.
They will have to file GSTR 9 individually for every state and union territory, as GST returns are filed according to the unique identification number held by a particular business.
Incorrect Monthly And Quarterly Return Filing –
Another way how GST impact businesses are that it requires exact monthly (or quarterly) and annual returns to ensure the authenticity of the income.
It is necessary for every taxpayer to verify all the data provided in their monthly and quarterly return along with their annual returns; any discrepancy will result in immediate rejection of one’s GSTR 9.
Taxpayers might also have to satisfy a show-cause notice issued by the Income Tax Department after such occurrences.
Taxpayers need to provide a variety of documents, including invoices, supply details, approval letter from both seller and buyer while filing their tax returns. It is necessary to reconcile and verify all these documents before submitting them for GST filing. Authorities utilise these documents to verify several different claims of taxpayers; missing or incorrect documents might cause a rejection of the filed return or invalidate any claim or refund initiated by an individual.
Annual return filing should have a bifurcation of all the information under sections such as input field credit, refunds, HSN codes, etc. These details are not required for filing a quarterly or monthly return, which is why it is necessary to file these in the annual GSTR 9 accurately.
Not Filing Nil Return
Registered taxpayers are required by law to file an annual return, even if their annual transaction does not exceed the threshold for tax payment. In this case, he or she will have to file nil return, which can be further utilised as a proof of income in case they require financial support in the form of an advance for their business.
Claiming Incorrect Input Tax Credit
Taxpayers are required to disclose their Input Tax Credit while filing a return, which is documented in GSTR-2A. It is necessary to claim the correct value of ITC while filing the same; if a higher value is disclosed, the taxpayer will have to pay the difference (along with the applicable interest rate) alongside the following month’s return.
One can access their GST Health Check Report to learn about any difference in the ITC declared in the return, and filed with the GSTR-2A. It can be downloaded from the GST portal itself, ensuring easy access for everyone.
Despite its wide reach, the new taxation regime did not affect the regulations related to advances and credits such as business loans. These credits are offered by financial institutions across the nation, and companies like Bajaj Finserv even provide additional benefits like pre-approved offers to prospective customers to simplify the application process.
Following the above-mentioned regulations will ensure minimum irregularities while filing income tax returns, helping a taxpayer pay their tax liabilities in full and in time. Every business owner should be well-versed with the clauses and possible mistakes to benefit the most from the new taxation system.