Common Errors made while Filing GST Returns and How to avoid them!

When it comes to filing GST (Goods and Services Tax) returns in India, even seasoned businesses can find themselves tripping up. Whether it’s a missed number or a misclassified entry, such errors can lead to unexpected fines or hours spent on reconciliations. Here’s a breakdown of common mistakes, real-world scenarios, and practical tips to ensure smooth GST compliance.

Errors while uploading data invoice-wise in GSTR-1

GSTR-1 requires that invoice-wise data be uploaded of all outward supplies such as invoice date, invoice number, place of supply, rate of tax, etc. Consequently, invoice-wise details are to be furnished manually and as a result, there is the likelihood of making errors, particularly while furnishing vital details., and this causes a mismatch between the GSTR-1 and GSTR-3B. A taxpayer needs to be very careful as there is no provision to amend the return once it is filed. Accordingly, it is important to be more precise while filing GSTR-1.

Claiming the incorrect input tax credit

GSTR-2B is an auto-generated static return in which a taxpayer’s registered purchases and related input tax credits are declared by the respective supplier based on actions taken by the buyer in their Invoice Management System (IMS) window. A taxpayer, on the other hand, is required to separately disclose their input tax credit when filing GSTR-3B returns. While doing so, they should report and claim the right value of input tax credit reflected in their GSTR-2B. If a higher value is disclosed, there is no way to revise the return, and hence the difference needs to be paid along with interest in the following month’s return.

Not filing your NIL return

Often taxpayers have the misconception that GST returns do not need to be filed when they have no transactions to report for a tax period. This could result in penalties due to non-filing or delayed filing of returns.

A taxpayer should file a NIL return even if they may have no transactions to disclose for any particular period. This would also enable the subsequent filing of returns as the GSTN does not allow returns to be filed in case any previous period’s returns are not filed.

Disclosure and payment of the tax under the wrong GST head

There are several heads under which tax is reported while filing GST returns. Some taxpayers make the mistake of entering the GST liability or input tax credit under the wrong GST head. For instance,  even while making a payment, the tax is sometimes paid under the wrong head, or interest is paid under the tax head and so on.

One needs to be cautious when making tax payments as the GSTN does not allow inter-utilisation of taxes. This could lead to unfavourable working capital due to unplanned cash flows.

Not Reconciling GSTR-1 with GSTR-3B

While GSTR-3B is a summary return to be filed every month,  GSTR-1 is the detailed return which contains details of outward supplies. The failure to balance these out may result in incongruity.

Solution: Try to cross-verify GSTR-3B with GSTR-1 at least every month to avoid the discrepancy in the compiled accounts.

Categorising zero-rated supplies as nil-rated and vice versa

Several taxpayers confuse zero-rated with nil-rated supplies, though they do not mean the same thing. In the case of zero-rated supplies, usually only exports and supplies to an SEZ fall in this category. However, in the case of nil-rated supplies, all goods and services on which the tax rate is 0% fall in this category. No input tax credit can be taken in the case of nil-rated supplies.

A taxpayer needs to be careful to not enter exports under the nil-rated category when filing returns. Clear's GST solution provides section-level summary tab, giving a taxpayer the differential amount in case any invoices have been entered under the wrong category when filing returns.

Understanding the applicability of the Reverse-charge mechanism

The Government recently simplified things for businesses by restricting the applicability of reverse-charge to certain notified goods and services. While this list is yet to be issued, businesses now need to understand and identify whether any of these provisions apply to them.

Service providers, on whose services reverse charge is applicable, should be careful to not pay GST on the same, which would lead to the double payment of taxes. Taxpayers should also take note that reverse-charge payments can only be made in cash, and input tax credit cannot be utilised.

Reversal of Input Tax Credit and Blocked Credits

As per law, Input Tax Credit should be reversed in some instances such as – payments not made to suppliers in 180 days, inputs used partly for personal purposes, capital goods sold, free samples given to customers or business partners, goods destroyed, etc.

In addition to this, there are certain goods and services on which credit is ineligible. Taxpayers need to keep in mind the implications of claiming the same. Failure of which could result in the GST department issuing notices, which could ultimately lead to interest and penalty being charged.

The Health Check Report gives a taxpayer a month-wise breakup of input tax credit that has been reversed, as well as ineligible ITC. The report can be downloaded, and all details pertaining to ineligible and reversed ITC can be found in the is GSTR 3B tab.

Amendments made to GST returns

The concept of amendment in returns did not exist in the pre-GST era where invoices belonging to a particular period were allowed to be added or amended at a later date. However, not disclosing an invoice pertaining to an earlier period could result in interest being chargeable right from the invoice date. It would be ideal for businesses to issue credit or debit notes rather than amend the original invoices in such cases.

Through Clear GST's reports, a taxpayer can track all invoice-wise amendments made on an annual or monthly basis, in the GSTR-1 vs 3B tab. Though the Government implemented GST in India intending to simplify the indirect tax system, the return-filing process can sometimes seem quite arduous. At the same time, it is up to every taxpayer to stay 100% compliant, with minimal errors made for the overall health of their business.

Not Charging the Right GST Rate 

Let’s be honest, keeping track of GST rates feels like trying to hit a moving target. With multiple slabs—0%, 5%, 12%, 18%, and 28%—and occasional updates, mistakes are bound to happen. 

A Common Scenario: Take a mid-sized manufacturing unit selling packaged food items. They unknowingly charged 18% GST instead of the applicable 5%. The result? Customer complaints, unnecessary tax deposits, and a messy correction process later on. 

Avoid This by: 

- Staying informed about GST rate revisions (follow GST Council updates or use reliable tax apps). 

- Leveraging billing software that auto-calculates rates based on HSN codes. 

- Keeping a laminated sheet or digital reference of applicable GST rates for your products handy in your office. 

Treating Export Sales as Domestic Sales

Here’s where confusion often arises: exports are zero-rated under GST, but they’re sometimes incorrectly included under taxable sales. This not only increases your liability but complicates the refund process. 

Real-World Example: A local garment exporter accidentally included ₹10 lakh worth of exports under domestic taxable sales. This led to an inflated tax payment and a three-month delay in claiming refunds. 

Quick Fixes: 

- Use Table 6A in GSTR-1 to report export sales, ensuring it’s distinct from your domestic turnover. 

- Keep export documents—like shipping bills and LUT (Letter of Undertaking)—updated and readily available. 

- Cross-check with your accountant before submission. 

Missing Out on Critical Details

Mistake #1: Incorrect GSTIN Entries: A single-digit typo in a GSTIN can derail your filing. Imagine entering "07ABCDE1234Z1" instead of "07ABCDE1234Z2." Not only will your payment not reflect, but you might also face notices from the tax department. 

Mistake #2: Invoice Number Mismatches: Skipping or duplicating invoice numbers is a surefire way to invite reconciliation errors. 

Mistake #3: Misclassification of Goods: HSN codes are like fingerprints for your products, and using the wrong one can lead to confusion and penalties. 

How to Avoid These:

- Automate data entry wherever possible to eliminate manual errors. 

- Implement a sequential and clear invoicing system (e.g., INV2024/001). 

- Verify HSN codes using the official GST portal or tax consultancy services. 

Filing GST returns doesn’t have to be a source of stress. By paying attention to details like GST rates, invoice accuracy, and classification, businesses can avoid common pitfalls. Tools like automated software, regular training for staff, and periodic audits can significantly reduce filing errors.