The Goods and Services Tax (GST) system, implemented with the aim of bringing transparency and ease in the Indian tax system, has completely changed the business structure of the country. However, as the tax system is becoming completely digital and modern, the tax department has also become very keen on the financial activities of every small and big businessman in the country. In today’s time, the tax department is closely monitoring every transaction of businessmen through data analytics, artificial intelligence and automated systems. In such a situation, sometimes small traders unknowingly commit some technical and practical mistakes, due to which they suddenly start receiving legal notices from the GST department. It is natural for traders to panic after the arrival of these notices, because if correct information and timely precautions are not taken, it can prove to be dangerous for both the reputation and financial health of your business. Today we are going to tell you in detail what are the 7 major mistakes that small traders should avoid, and what surefire measures should be included in their daily routine to stay safe from GST notices.
Under the GST system, when a businessman receives a notice from the tax department, it is often due to some small but serious compliance related deficiencies. If you are also a small trader, you should avoid repeating these 7 mistakes given below:
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Mismatch of data in GSTR-1 and GSTR-3B returns: This is the most common mistake that many traders make. When you enter your sales figures separately in GSTR-1 (Outward Supplies) and GSTR-3B (Summary of Tax Payments), the department’s automated system catches it immediately and asks for clarification.
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Claiming wrong and ineligible Input Tax Credit (ITC): Many times traders claim ITC on bills that do not conform to the rules, or their suppliers have not filed their returns on time. Due to non-filing of returns by the supplier, your ITC does not get matched and you receive a notice.
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Persistent delay or omission to file returns: Not filing returns on time is considered a major offense in the eyes of the department. The system automatically takes cognizance and issues a notice in case of persistent non-filing of returns or deliberate delay.
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Wide variation in e-way bill and return figures: This is especially true for traders and transporters who move goods. If the records of goods entered in the e-way bill generated by you and the sales figures declared in your GST return do not match, the tax department immediately conducts an investigation.
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Violating the mandatory rules of e-invoicing: Businessmen who are mandated to generate e-invoicing within the turnover limit set by the government may receive a notice with a heavy penalty if they sell goods without following the rules.
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Falling into the trap of fake billing or suspicious transactions: Many times traders unknowingly buy from shell companies or fake firms that issue bills only on paper. Taking or giving fake bills without supply of genuine goods directly comes on the radar of the department.
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Non-payment of tax in full despite filing the return: Many businessmen file the return on time, but do not deposit the full tax liability in the government account. In such cases also, the process of recovery and notice is started by the department.
If you or any of your business colleagues receive a notice from the GST department, then first of all there is no need to panic. Many traders get under mental stress after seeing the notice due to the fear of legal action, whereas the truth is that every notice sent by the department is not a direct penalty or punishment, but is only a legal medium to seek clarification from you on any financial irregularity or mismatched figures of your returns. Provided that you give a proper answer in time. To keep your business completely safe and compliant, you should take these important measures:
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Always do reconciliation of your GSTR-1 and GSTR-3B regularly. Before filing the return, ensure that your sales and tax data are exactly the same in both the forms.
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Maintain all the invoices, bills, bank statements and vouchers of purchases and sales related to your business in a very organized manner, both digitally and physically.
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Claim Input Tax Credit (ITC) only on those invoices that are fully eligible, valid and verified on the GST portal (appearing in GSTR-2B).
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File all your GST returns within the stipulated time limit to avoid late fees and penalties.
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Generate e-way bills timely for every movement of goods and strictly follow all the rules of e-invoicing.
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Keep checking your registered email ID and GST portal dashboard regularly, so that any alert or notice sent by the department does not disappear from your sight.
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Even if you receive a notice from the department, instead of panicking, take the help of a good tax consultant or CA and upload its accurate and document-based reply on the portal within the stipulated time limit (like 15 or 30 days). By adopting these small precautions, you can keep your small business completely safe from any legal crisis.