Goods and Services Tax is a multifaceted tax system, which has brought a significant transformation in the way transactions are taxed in India. It encompasses concepts such as “Place of Supply” and applies various rates of taxes based on the specific kinds of goods or services offered. Due to such changes, the new tax system seems a bit complex to businesses. The ultimate consequence is that they end up making mistakes in GST payments that result in penalties and other complications.
What type of Consequence you may face for paying the wrong GST?
Making mistakes in GST payments is quite common; however, the consequences may differ depending on the kind of mistakes ranging from miscalculation of taxes or non-payment of taxes. Having a clear idea of the consequences is essential to avoid penalties in future. Through the adoption of a strategic approach you can avoid these mistakes.
Incorrect tax calculation
Businesses frequently make one mistake which is selecting the wrong scheme. This means they get themselves registered under an improper scheme. This results in incorrect calculation of taxes that in turn results in compliance issues. Further, businesses often use wrong Harmonized System of Nomenclature codes for their goods or services Accounting Codes.This further leads to incorrect tax calculation and here the ultimate consequence is penalties. A common error made by most of the businesses is misclassification of a transaction as inter-state instead of intra-state, which further leads to incorrect tax payments. The ratification procedure could be really hazardous!
Errors in entering data manually
Another mistake which is also a bit common is submission of wrong details or incomplete information during registration. The consequence here is rejection of the applications or unexpected delays.
Documentation errors
A GST invoice to be compliant, must mandatorily include information such as GSTIN of the recipient and supplier, unique invoice number, correct HSN/SNC codes, correct date and a few more. If any of these details are overlooked, it would invalidate the GST invoice. The consequence would be the inability of the recipient to claim ITC; i.e INPUT TAX CREDIT. Incorrect ITC claim might potentially lead to the failure of the business to offset the GST liabilities and this would incur additional expenses, which would be a significant financial burden imposed on the businesses.
Delays in Filing
There is a stipulated period within which GST returns must be filed. If the deadline is missed by any chance, the businesses are highly likely to face late fines along with interest charges. It generally happens due to a number of reasons including delays in receiving documents from clients, poor internal coordination and so on.
Not keeping records properly
GST audit requires proper documentation. Without using a separate record keeping system it is almost impossible to maintain the records in a systematic manner. Missing any record can lead to rejection of refund or compliance penalties.
Neglecting or missing any GST notice
The GST portal must be checked on a regular basis to ensure not missing out on any notice. Otherwise it can escalate a small issue into a major legal complication. In a few cases, these are neglected, which can also lead to the cancellation of GST registration.
Compliance issues
The laws are evolving on a continual basis and businesses may not always be able to keep themselves updated with these changes. Due to this, it becomes difficult to ensure compliance with the changed laws and rules.
Ways you can avoid these mistakes
An expert legal consultant can provide the businesses with a clear idea of the schemes they should select for GST registration that reduce the risks of facing compliance issues in future. The legal consultant could further assist the businesses in setting up their GST-compliant accounting system to ensure that the invoices are formatted correctly and every detail is inserted correctly to avoid future complications. The efficient legal experts will act responsibly to set up processes for reconciliation of GSTR-1 and GSTR-38 as well as GSTR-2A/2B that can ensure minimisation of mismatches that would maximise chances of eligible ITC claims.
Delays in filing GST returns generally cause the businesses to face late fines and for this, the businesses must consult a responsible GST service provider to file the returns in a timely and error-free manner. Our legal consulting firm, Lexproadvice keeps on reminding its clients for every return on time that minimizes the risks of late filing and potential late fines. It organises the tax records of all the clients digitally and keeps track of them. Further poorly maintained records can cause difficulties during GST audit leading to compliance penalties. Thus, businesses must consider consulting an expert GST services provider to reduce the risks associated with unorganised or erred record keeping.
We, at Lexproadvice, have been providing top-notch GST registration services to more than 200 businesses since 2017 and at present, we are recognized as the best GST service provider in Kolkata. We organize each client’s GST data in a systematic way using a digital record-keeping system, which alleviates the chances of missing out on any record ensuring less complexities faced during GST audit. We have found businesses whose GST registration was cancelled due to delay or no response to the notices on the GST portal. Thus, we suggest that businesses consult such an expert in the very first place to prevent these kinds of things from happening. A legal expert like Lexproadvice can play a critical role in assisting the businesses in responding to the GST notices in a timely and efficient manner. Further, in case of any dispute, by consulting the legal experts, businesses can resolve the disputes effectively. During GST audits, the businesses face a lot of difficulties if an efficient GST service provider is not consulted by them. An efficient GST service provider assists the businesses throughout the GST audit procedure by reviewing their GST records, returns and invoices and preparing them for the audit. The experts like Lexproadvice can help the businesses to identify and rectify the discrepancies in the records in case there are any and therefore, the chances of facing compliance issues and penalties get significantly low. In addition to this, the changing GST laws also require the businesses to keep themselves updated and in this regard, they could seek help from efficient GST service providers who are aware of the latest amendments or notifications. Thus, this way the businesses could avoid penalties and costly mistakes while streamlining their GST processes.
