GSTR-1 & GSTR-3B Filing Mistakes to Avoid

The Goods and Services Tax (GST) regime in India mandates businesses to comply with tax regulations by filing two types of GST returns: GSTR-1 and GSTR-3B. These returns play a vital role in providing detailed information about a registered taxpayer’s outward supplies and ensuring proper tax reporting. Let’s delve into the specifics of each return:

GSTR-1:

GSTR-1 is a critical component of the GST return filing system in India. It serves as a comprehensive and detailed account of the outward supplies made by a registered taxpayer during a specific tax period. The purpose of GSTR-1 is to provide the tax authorities with a transparent view of all the supplies made by the taxpayer, be it to other businesses (B2B) or consumers (B2C). The return encompasses a wide range of information, including invoice-wise and rate-wise data on supplies, taxable value, and the amount of GST collected on these supplies.

• For businesses with a substantial turnover, GSTR-1 needs to be filed on a monthly basis.
• Conversely, for businesses with a turnover below the threshold limit, GSTR-1 can be filed on a quarterly basis.
• The threshold limit is subject to change and is determined by the tax authorities based on revenue considerations.
• Timely and accurate filing of GSTR-1 is of utmost importance as it helps in claiming input tax credit (ITC), which is crucial for businesses to offset their tax liabilities against the GST they have paid on their purchases.
• Filing GSTR-1 involves meticulous preparation and verification of data.
• Businesses must ensure that all the transactions are accurately reported under the appropriate sections of the return.
• Correct classification of supplies is vital to avoid any discrepancies, as incorrect reporting can lead to tax audits, penalties, and potential loss of credibility with the tax authorities.
• To facilitate compliance, businesses are required to maintain a detailed record of all invoices issued during the tax period.
• This includes not only business-to-business transactions but also business-to-consumer transactions, making GSTR-1 a comprehensive record of the taxpayer’s overall sales and supplies.
• Additionally, the return must capture invoices issued for both goods and services, and the invoice-level data must be matched with the accounting system to ensure accuracy.

GSTR-3B:

GSTR-3B is another essential return under the GST system, introduced to ease the compliance burden on businesses during the initial implementation phase of GST. Unlike GSTR-1, GSTR-3B is a summarized self-declaration that provides a consolidated view of a registered taxpayer’s outward and inward supplies for a particular month.

• This return aims to capture the total sales, purchases, and the amount of tax payable, tax paid, and eligible input tax credit for the said month.
• While GSTR-1 provides invoice-level details, GSTR-3B takes a more aggregated approach to reporting, which simplifies the filing process for businesses.
• However, it is essential to note that the summarized nature of GSTR-3B does not negate the importance of accurate reporting and compliance.
• GSTR-3B filing is mandatory for all registered taxpayers, and the due date for filing the return is typically the 20th of the following month.
• For example, the GSTR-3B return for the month of July is due on or before the 20th of August.
• Failure to file GSTR-3B within the prescribed timeline can result in the imposition of late fees and interest charges, impacting a business’s financial standing and compliance record.
• As GSTR-3B does not require invoice-level data, it can be considered more straightforward to file compared to GSTR-1.
• However, businesses must not overlook the importance of accurately reporting the total sales, purchases, and tax liabilities. Failure to do so may lead to penalties and non-compliance issues.

Both GSTR-1 and GSTR-3B are crucial components for complying with the GST regulations in India. To ensure smooth and error-free filings, businesses need to be aware of common mistakes to avoid while filing GST returns:

1. Incorrect Reporting of Supplies: Accurate reporting of all supplies, whether taxable or exempt, is imperative. It is essential to allocate transactions correctly, such as correctly documenting sales from a manufacturer to a distributor.
2. Mismatch of Invoice Details: Ensuring that the invoice details in GSTR-1 match those in the accounting system is crucial to prevent potential tax audits or penalties.
3. Late Filing: Timely filing of returns is essential to avoid late fees, interest charges, and compliance issues, along with the risk of losing input tax credit (ITC).
4. Ignoring Amendments: If there are any changes to invoices or supply details after filing GSTR-1, it is crucial to update the returns accordingly.
5. Incorrect ITC Claims: Double-checking the input tax credit (ITC) claimed in GSTR-3B against eligible invoices and expenses helps avoid penalties for incorrect claims.
6. Non-Reconciliation of Data: Regularly reconciling the data between GSTR-1 and GSTR-3B ensures consistency and accuracy in tax reporting.
7. Failure to Report HSN/SAC Codes: Accurate provision of Harmonized System of Nomenclature (HSN) or Services Accounting Code (SAC) for goods and services is essential to avoid classification errors.
8. Omission of Nil Returns: Even during periods with no sales or purchases, filing nil returns is necessary to maintain compliance with GST regulations.
9. Non-compliance with E-way Bill: Proper generation and linkage of e-way bills for goods movement, as required under GST, is essential to avoid non-compliance issues.
10. Non-filing of Annual Return: Filing the annual return (GSTR-9) within the due date is crucial as it provides a consolidated summary of all transactions throughout the financial year.

By adhering to these guidelines and ensuring accurate and timely filings of GSTR-1 and GSTR-3B, businesses can maintain compliance with GST regulations and contribute to the smooth functioning of the tax system in India.