10 Common Mistakes to Avoid While Filing GST Returns

Learn how to avoid common mistakes in GST return filing, save on penalties, and ensure smooth compliance for your business.

Filing GST returns is one of the most important responsibilities for businesses in India. Missing deadlines, submitting incorrect data, or ignoring reconciliation can lead to penalties, interest charges, and other compliance-related issues. Avoiding these errors ensures smoother tax compliance and better financial management.

This comprehensive guide highlights ten common mistakes businesses make while filing GST returns and provides actionable solutions to prevent them. By avoiding these pitfalls, you can optimize your tax filing process and save valuable resources.

Common Mistakes Entrepreneurs Make and Why They Happen

Here’s a quick summary of common mistakes made by entrepreneurs and the reasons behind them, ensuring you can avoid them in your business journey:

Mistake	Why It Happens
Incorrect GSTIN Entry	Manual errors during data entry or lack of attention to detail while filing taxes.
Mismatch Between GSTR-1 and GSTR-3B	Failure to conduct regular reconciliation between sales invoices and tax filings.
Inadequate Market Research	Overconfidence or skipping the crucial step of understanding customer needs.
Underestimating Initial Costs	Poor financial planning or ignoring hidden costs like permits and marketing.
Ignoring Customer Feedback	Focus on product features rather than user experience or satisfaction.
Lack of Legal Compliance	Unawareness of local regulations or rushing to launch without thorough checks.

By understanding why these mistakes happen, you can take proactive steps to avoid them, ensuring a smoother path to success for your business.

Common GST Filing Mistakes 

Navigating Goods and Services Tax (GST) compliance is crucial for businesses in India. Below is a detailed explanation of common GST mistakes, their causes, and how to avoid them, helping you ensure compliance and avoid penalties.

1. Incorrect GSTIN Entry

Why It Happens:

• Manual errors while entering GSTINs in invoices or returns.
• Copy-pasting incorrect GSTINs from vendor documents.

Example Scenarios:

• Typing errors in GSTINs for vendors or customers, leading to mismatched returns.
• Using an incorrect GSTIN format when uploading data.

How to Avoid It:

• Use GST validation tools to verify GSTINs before submission.
• Implement software with bulk upload features and built-in GSTIN checkers to reduce manual effort.

2. Mismatch Between GSTR-1 and GSTR-3B

Why It Happens:

• Sales invoices reported in GSTR-1 are not reconciled with GSTR-3B.
• Amendments or credit notes are not updated in subsequent returns.

Example Scenarios:

• Reporting higher taxable value in GSTR-1 but a lower amount in GSTR-3B, triggering discrepancies.

How to Avoid It:

1. Reconcile invoices monthly using GST software tools.
2. Cross-check sales and purchase reports before filing.
3. Maintain a detailed reconciliation log for amendments or corrections.

Step-by-Step Reconciliation:

1. Download the GSTR-2A/2B and compare it with purchase registers.
2. Match taxable values, tax amounts, and invoice numbers.
3. Resolve mismatches before filing GSTR-3B.

3. Claiming Ineligible Input Tax Credit (ITC)

Why It Happens:

• Misunderstanding provisions like blocked credits under Section 17(5).
• Incorrectly claiming ITC on personal expenses or ineligible goods.

Examples of Ineligible ITC Claims:

• ITC on employee meals, entertainment, or motor vehicles used for personal purposes.
• ITC on goods/services not used for business purposes.

Examples of Valid ITC Claims:

• ITC on raw materials, machinery, or professional services directly related to the business.

How to Avoid It:

• Consult Section 17(5) for ineligible ITC categories.
• Use GST software to automate ITC eligibility checks.

4. Late Filing of Returns

Why It Happens:

• Lack of awareness about due dates.
• Over-dependence on manual reminders.

Cumulative Effects:

• Late fees of ₹50–₹200 per day (based on tax type).
• Interest at 18% per annum on delayed tax payments.

Deadlines to Remember:

• GSTR-1: 11th of the following month.
• GSTR-3B: 20th of the following month.
• GSTR-9: December 31st of the following fiscal year.

How to Avoid It:

• Use GST filing software with auto-reminders for deadlines.
• File nil returns promptly if no business activity occurred.

5. Failure to Report Exempt or Zero-Rated Supplies

Why It Happens:

• Misclassification of taxable and exempt supplies.
• Ignorance of reporting requirements for exports and SEZ supplies.

Example Scenarios:

• Missing exports in returns, leading to inflated tax liability.
• Overlooking reporting exempt supplies, distorting turnover data.

How to Avoid It:

• Segregate exempt and zero-rated supplies in accounts.
• Report exports and SEZ supplies under the relevant sections in returns.

6. Wrong Tax Categorization (CGST, SGST, IGST)

Why It Happens:

• Misunderstanding intra-state and inter-state supply rules.
• Charging IGST instead of CGST and SGST for local transactions.

Example Scenarios:

• Charging IGST for a sale within Telangana instead of CGST and SGST.

How to Fix:

• Amend incorrect invoices immediately.
• Cross-check the place of supply rules before billing.

7. Ignoring GST Notices

Why It Happens:

• Lack of monitoring GST portal notifications.
• Assuming notices are minor or unimportant.

Common Notices:

• GSTR-3A: For non-filing of returns.
• Mismatch Notices: Discrepancies between GSTR-1 and GSTR-3B.

Steps to Respond:

1. Read the notice carefully to understand the issue.
2. File the required return or reply with supporting documents.
3. Use professional help if needed.

8. Improper Reverse Charge Mechanism Reporting

Why It Happens:

• Lack of clarity on when reverse charge applies.
• Missing liability reporting in GSTR-3B.

Examples of Applicability:

• Purchases from unregistered vendors.
• Services like transport of goods by road (except for exempted goods).

How to Report:

1. Report the liability under “Tax Payable on Reverse Charge” in GSTR-3B.
2. Claim ITC on the same in the next month, if eligible.

9. Not Updating Business Turnover Details

Why It Happens:

• Ignorance of annual updates in turnover declarations.
• Failure to monitor turnover for threshold limits.

Impact:

• Incorrect turnover affects GSTR-9 filings and audits.
• Risks penalties for exceeding turnover thresholds without registration updates.

How to Avoid It:

• Regularly update turnover details in the GST portal.
• Cross-verify turnover in financial statements with returns.

10. Failure to Maintain Proper Records

Why It Happens:

• Relying on scattered or manual record-keeping systems.
• Overlooking GST compliance requirements for documentation.

Documents to Maintain:

• Tax invoices, purchase registers, and e-way bills.
• Credit/debit notes and payment receipts.

Tips for Better Record-Keeping:

• Digitize records using cloud-based GST software.
• Conduct periodic audits to ensure completeness and accuracy.

Avoiding these mistakes not only ensures GST compliance but also helps build a transparent and robust business foundation. By leveraging modern tools and staying updated with GST regulations, entrepreneurs can save time, avoid penalties, and focus on growth.

Tips to Avoid GST Filing Mistakes

Filing GST returns accurately is crucial for maintaining compliance and avoiding penalties. Here are some actionable tips to minimize errors during GST filing:

1. Reconcile Returns Regularly

Why It Matters:
Reconciliation ensures that sales and purchase data match across various GST returns, such as GSTR-1, GSTR-3B, and GSTR-2A/2B. Regular reconciliation reduces the risk of mismatches and notices.

Real-Life Example:
If a business reports sales of ₹10,00,000 in GSTR-1 but only ₹9,50,000 in GSTR-3B, this discrepancy could lead to penalties and audits.

Tools for Reconciliation:

• Tally: Enables easy comparison between books of accounts and GST returns.
• ClearTax: Automates reconciliation with GST portal data and highlights mismatches.

Action Point: Schedule monthly reconciliation to catch and resolve discrepancies early.

2. Use Reliable GST Filing Software

Why It Matters:
Manual errors in GST filing are common. Reliable software automates calculations, validates GSTINs, and detects mistakes before submission.

Features to Look For:

• Bulk invoice upload to save time.
• Automated error detection and correction.
• GSTIN validation to avoid incorrect entries.

Popular Tools:

• Zoho Books
• Khatabook GST Software
• GSTHero

Action Point: Invest in GST software that fits your business needs and has good customer support.

3. Train Your Staff on GST Rules

Why It Matters:
GST rules frequently change, and a lack of knowledge among employees can lead to filing mistakes.

Example:
If staff are unaware of blocked credits under Section 17(5), they might claim ineligible Input Tax Credit (ITC), inviting penalties.

How to Train:

• Conduct workshops or online courses on GST compliance.
• Stay updated with GST council notifications and share updates with the team.

Action Point: Make GST training a regular part of employee development programs.

4. Set Reminders for Filing Deadlines

Why It Matters:
Missing filing deadlines results in late fees, interest, and compliance issues.

Example:
Filing GSTR-3B after the 20th of the month attracts late fees of ₹50–₹200 per day, depending on tax type.

How to Avoid:

• Use apps like Google Calendar or Microsoft To-Do for deadline alerts.
• Many GST software tools also provide automatic reminders.

Action Point: Create a filing schedule and stick to it to avoid last-minute stress.

By implementing these tips—regular reconciliation, reliable software, staff training, and deadline reminders—you can streamline GST compliance, reduce errors, and focus on growing your business. Stay proactive and leverage technology to simplify your filing process.

Importance of Filing GST Returns Accurately

Accurate GST return filing is critical for businesses to remain compliant and achieve sustainable growth. Here are the key reasons why filing GST returns correctly is essential:

1. Facilitates Business Growth

Filing accurate GST returns ensures seamless processing of Input Tax Credit (ITC), which helps maintain cash flow and liquidity.

• Example: Timely ITC claims reduce the overall tax burden, allowing businesses to reinvest in operations or expansion.
• Impact: By maximizing tax savings, businesses can allocate funds to strategic growth initiatives.

2. Avoids Audits and Penalties

Errors in GST filings, such as mismatched data or incorrect ITC claims, can raise red flags with tax authorities.

• Risk: Discrepancies may lead to GST audits, which are time-consuming and can disrupt operations.
• Penalty: Filing incorrect returns may result in penalties, interest on unpaid taxes, and even legal notices.
  Accurate filings reduce the likelihood of audits, saving businesses from unnecessary hassles.

3. Builds Credibility with Stakeholders

Timely and accurate GST compliance fosters trust among key stakeholders, including customers, suppliers, and investors.

• Supplier Relationships: Proper ITC claims depend on supplier compliance. Filing accurately signals professionalism and ensures smooth transactions.
• Investor Confidence: Demonstrating a clean tax record enhances the company’s credibility, making it more appealing to potential investors or lenders.

Conclusion

Avoiding mistakes in GST return filing is crucial for maintaining compliance and improving your business’s financial health. By adopting automation, reconciling transactions regularly, and keeping proper documentation, you can ensure error-free submissions. When cash flow becomes a challenge, consider options like a business loan or working capital loan to stay on track. FlexiLoans offers unsecured business loans or collateral-free loans tailored to meet your needs. Entrepreneurs in cities like Bangalore, Chennai, or Ahmedabad can easily apply online and get quick approvals. Take charge of your tax compliance today with reliable financial support and efficient practices.

FAQs

1. What is the penalty for late GST filing?

Fixed Late Fees:

• ₹50 per day for GSTR-3B and GSTR-1 (₹25 each for CGST and SGST).
• ₹20 per day (₹10 each for CGST and SGST) for NIL returns.

Interest on Late Payment:

• An interest rate of 18% per annum is charged on the unpaid tax amount.

Example:
If you delay filing GSTR-3B by 30 days and have a tax liability of ₹10,000:

• Late Fees: ₹1,500 (₹50 x 30 days).
• Interest: ₹148 (₹10,000 x 18% ÷ 365 x 30 days).

Tip: Avoid these charges by setting reminders and filing returns on time.

2. How do I claim ITC correctly?

Conditions for Claiming Input Tax Credit (ITC):

• Possess a valid tax invoice or debit note.
• The supplier must have filed their GSTR-1, and the invoice should reflect in your GSTR-2B.
• Payment to the supplier must be made within 180 days of the invoice date.

Example:
If you purchased goods worth ₹1,00,000 with 18% GST, you can claim ₹18,000 as ITC, provided the supplier reports the invoice in their GSTR-1.

Tip: Regularly reconcile your purchase data with your GSTR-2B to ensure compliance.

3. Can GST errors be corrected?

Amendment Process:

• GSTR-1: You can amend errors in outward supplies in subsequent returns under the “Amendment” section.
• GSTR-3B: Adjustments for errors in tax payments can be made in future filings by offsetting the tax liability.

Limitations:
Corrections are only allowed until the due date of filing the return for September of the following financial year or the filing of the annual return (GSTR-9), whichever is earlier.

Tip: Use reliable GST software with error detection features to minimize recurring mistakes.