GST Dos and Donts: Everything You Need to Know

GST dos and donts are essential for smooth GST compliance. In this guide, we’ll walk you through everything you need to know—from filing returns on time to avoiding common mistakes—to help you stay on top of your tax obligations.

Understanding GST Dos and Donts

Dos

1. File Your GST Returns on Time

   Why It Matters: Timely filing of multiple GST returns and forms helps you avoid interest, late fees, and notices.

2. Upload Accurate Data in GSTR-1

   Key Point: Since the GSTR-1 return contains numerous fields and cannot be amended once submitted, precision is crucial. Tip: Double-check your entries to minimize errors and reduce future rectification needs.

3. Maintain Proper Documentation

   Essential Records: Keep detailed purchase and sale registers, fixed asset registers, payment challans, and e-way bills. Benefit: Accurate documentation not only simplifies audits but also ensures smooth reconciliations.

4. Reconcile Your Returns with Your Books of Accounts

   Best Practice: Perform monthly reconciliations instead of waiting until year-end. Advantage: Early detection of discrepancies allows timely amendments, saving you from penalties.

5. Reconcile E-way Bills with Invoice Details in GSTR-1

   Why It’s Crucial: Mismatches can trigger notices and complicate audits. Tip: Regularly verify that your e-way bill data matches your declared details.

6. Compare and Reconcile Different Returns

   Process: Cross-check your GSTR-3B with GSTR-2A and GSTR-1 to ensure complete alignment. Benefit: This step simplifies annual filing and supports smoother audits.

7. Correct and Amend Returns Before Filing the Annual Return

   Action Item: Resolve any discrepancies in your monthly returns ahead of the annual filing. Result: Timely corrections reduce the risk of penalties and ensure accuracy.

8. Understand the Provisions of the Reverse-Charge Mechanism

   Stay Updated: Keep informed about reverse-charge notifications. Important Note: Remember, input tax credit cannot be claimed on reverse-charge payments, which must be made in cash.

9. Inform GST Authorities of Changes in Your Business

   Requirement: Report any changes in your business details to the GST authorities within 15 days. How To: Submit the necessary documents via the GST portal.

10. Get Your GST Audit Done if Your Turnover Exceeds Rs 2 Crores

    Compliance: Businesses with an annual turnover above Rs 2 crores must have their accounts audited by a CA or CMA. Documentation: Ensure that audited returns and reconciliation statements are submitted on time.

11. Regularly Update Your GST Compliance Software

    Why It Helps: Keeping your GST software up-to-date ensures you have the latest features and are compliant with any regulatory changes.

12. Educate and Train Your Staff on GST Updates

    Best Practice: Regular training sessions help your team stay informed about new rules and avoid common errors.

Donts

1. Pay Tax Under the Wrong GST Head

   Common Mistake: Allocating tax or interest to the wrong GST head. Impact: Misallocation can hinder the inter-utilisation of taxes, adversely affecting your working capital.

2. Categorize Zero-Rated Supplies as Nil-Rated and Vice Versa

   Clarification: Zero-Rated Supplies (exports and supplies to SEZs) differ from Nil-Rated Supplies (tax rate is 0%). Tip: Correct categorization is essential, as input tax credit cannot be claimed on nil-rated supplies.

3. Forget to File Your Nil Return

   Key Reminder: Even in periods with no transactions, filing a NIL return is mandatory. Benefit: Consistent filing prevents your GSTN account from being blocked in the future.

4. Apply the Wrong Tax Rates

   Stay Informed: Keep up with frequent tax rate updates from the GST Council. Action: Ensure you apply the correct rates on your invoices, especially when different rules apply for input tax credits.

5. Pay Tax When It Should Be Paid Under Reverse Charge

   Responsibility: Identify when the reverse-charge mechanism applies to your transactions. Outcome: Correct designation helps prevent double payment and unnecessary cash outflow.

6. Forget to Pay Tax on Goods Sent for Job-work After the Specified Period

   Requirement: For job-work, if goods aren’t returned within the specified period, tax (plus interest) must be paid. Special Note: For items like moulds, dies, or jigs, ensure clarity on tax liability, especially if the job-worker isn’t registered.

7. Claim Ineligible Input Tax Credit

   Watch Out For: ITC is not claimable for payments not made within 180 days or for certain ineligible items. Tip: Stay updated on ITC regulations to avoid wrongful claims that could trigger notices.

8. Forget to Claim Transitional Credit

   Extension Notice: The government has extended due dates for claiming transitional credit from the pre-GST era. Action: Make sure you claim your transitional credit by the extended deadline.

9. Do Not Ignore GST Notifications and Updates

   Important: Keeping track of updates from the GST Council and portal is crucial to avoid non-compliance.

10. Do Not Combine Personal and Business Expenses

    Tip: Maintain clear separation to ensure accurate GST calculations and avoid audit issues.

By following these gst dos and donts, you can ensure robust compliance and avoid pitfalls that may lead to notices or penalties. Keeping your statutory systems and dues in order is not just about compliance—it’s the cornerstone of your enterprise’s success.

For further assistance or tailored solutions for GST compliance, feel free to contact DisyTax. We are dedicated to helping your business navigate the complexities of GST with confidence and ease.