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GSTR-9 Filing Errors That Can Trigger Audits

  • 11 December, 2024
  • 6 Mins

Highlights

  • Failing to reconcile ITC between GSTR-3B and GSTR-2A/2B can trigger GST audits and compliance risks.
  • Ignoring the 180-day ITC reversal rule leads to errors and penalties in GSTR-9 filing.
  • Misreporting GST refunds in GSTR-9 causes delays and scrutiny during audits.

Filing GSTR-9, the annual return under the Goods and Services Tax (GST), is often a complex and detailed process for businesses. The annual return consolidates information provided in monthly and quarterly returns during the financial year and serves as a summary. However, due to its comprehensive nature, businesses encounter challenges that can lead to reporting errors and potential audits or penalties.

In this blog, we will explore the most common GSTR-9 filing errors and how businesses can prevent GSTR-9 mistakes.

GSTR-9 Filing Errors and Solutions

1. GSTR-9 ITC Mismatches Between GSTR-3B and GSTR-2A/2B

A significant issue faced by taxpayers is the GSTR-9 ITC mismatch when claimed in GSTR-3B and compared with the figures appearing in GSTR-2A or 2B. This mismatch can arise due to various reasons. Instances include late filing by suppliers, incorrect reporting of invoices, suo-moto cancellation of supplier’s GSTIN, or differences in invoice values. For example, if suppliers do not file their GSTR-1 or reports incorrect invoice data, it can affect the buyer’s ITC claim.

To address this, it is essential for businesses to conduct periodic reconciliations between GSTR-3B and GSTR-2A/2B. It will help identify and rectify any discrepancies well before filing the GSTR-9. An effective approach involves utilizing advanced reconciliation tools that highlight mismatches in real-time, enabling prompt resolution. Businesses should also establish a consistent follow-up process with vendors to ensure timely and accurate reporting of invoices.

2. Errors in Reporting Exempt, Zero-Rated, and Non-GST Supplies

Another prevalent challenge is accurately reporting exempt, zero-rated, and non-GST supplies. Misclassifying these categories can have a significant impact on tax calculations and overall turnover reporting. For instance, zero-rated supplies, like exports, may be incorrectly included with taxable supplies, inflating the turnover figures reported in GSTR-9. Similarly, exempt supplies that are wrongly categorized could lead to errors in the return.

To prevent this, businesses should thoroughly review their sales records and understand the differences between exempt, zero-rated, and non-GST supplies. Proper documentation and an updated accounting system that reflects these distinctions can help maintain accuracy. Regular staff training and consultations with professionals can further enhance compliance practices and ensure that complex transactions are appropriately reported. It is also important for businesses to cross-reference GSTR-1 and GSTR-3B filings when reporting these supplies to ensure consistency.

3. Ignoring Amendments Made During the Year

Failing to account for amendments in GSTR-1 or GSTR-3B throughout the year can lead to GSTR-9 filing errors. These amendments often involve corrections to previously reported data and ensure accurate reporting. If a business fails to include such changes in the annual return, it risks underreporting or overreporting its tax liability. You should always follow the GST portal for the latest GST updates.

To avoid this, maintaining an amendment log is essential. This log should record every change made during the year, detailing corrections and its impact on tax liability. Businesses should cross-check the amended data with their books of accounts and ensure accurate reflection in GSTR-9. Moreover, businesses should review adjustments related to credit and debit notes issued during the year. Proper tracking of these adjustments ensures correct reporting and helps avoid discrepancies that might raise red flags during an audit.

4. Relying Solely on Auto-Populated Data

While the auto-populated data in GSTR-9, sourced from GSTR-1, GSTR-3B, and GSTR-2A, provides a helpful baseline, it should not be trusted without thorough verification. Auto-populated figures may include errors or discrepancies due to data changes made after the original returns were filed. This can lead to errors in ITC claims or turnover figures if not carefully reviewed and cause major GSTR-9 filing errors.

Businesses should always cross-check auto-populated data against their financial records and previous GST filings. Verification, although time-consuming, is essential to ensure the accuracy of reported figures. For instance, reviewing ITC claims section by section can help detect any discrepancies that were not rectified in the monthly or quarterly filings. Implementing checks and balances, such as periodic audits of GST data and internal control mechanisms, can prevent reliance on inaccurate auto-populated data.

However, you can avoid this time-consuming verification and opt for automated GST software to help you with instant GST and input tax credit reconciliation for all returns and data filed in such returns. This way, you perform optimal utilization of your resources while also ensuring absolute accuracy in your GST returns.

5. Failure to Report Advances and Adjustments Properly

Advances received for future supplies and the subsequent adjustments made through credit notes or debit notes often create confusion when filing GSTR-9. These components must be reported accurately to ensure the declared turnover and tax liability are correct. For example, failing to report a credit note that offsets an earlier advance can lead to an overstatement of turnover and tax liability.

To avoid such errors, businesses should maintain a detailed ledger of advances and related adjustments. This ledger should reconcile regularly with GSTR-1 and GSTR-3B filings to verify that all transactions are accounted for in the annual return. Using accounting software that supports GST integration can simplify this process by automatically flagging advances and their corresponding adjustments for review.

Proper training and awareness among the accounting team regarding the treatment of advances and adjustments are also crucial. This ensures that the entire process, from recording to reporting, aligns with GST regulations and minimizes the risk of discrepancies.

6. Non-Compliance with the 180-Day ITC Reversal Rule

Failing to comply with the 180-day Input Tax Credit (ITC) reversal rule is a common oversight that can lead to discrepancies in GSTR-9. According to GST provisions, ITC-claimed invoices must be reversed if the supplier’s payment is not made within 180 days from the date of invoice. Such reversals must also be accounted for in the GSTR-9 filing to ensure accurate reporting of ITC and liability.

For example, if a business delays payment to its supplier beyond 180 days and does not reverse the ITC accordingly, this can result in overstated ITC claims, triggering potential audits or penalties. Similarly, failing to adjust ITC reversals when payments are eventually made can lead to underreported claims.

To address this, businesses should maintain a robust tracking system for vendor payments, highlighting invoices nearing the 180-day limit. Automated GST software solutions like GSTrobo®̥ can simplify this process by alerting users about ITC reversal deadlines and updating records accordingly. Regular reconciliations of vendor payments with ITC records can further ensure compliance with the 180-day rule, minimizing errors and audit risks.

By incorporating these practices, businesses can proactively manage ITC claims, improve compliance, and avoid penalties or disputes related to the 180-day rule in their GSTR-9 filing.

7. Errors in Reporting GST Refunds

Errors or omissions in reporting GST refunds in GSTR-9 can lead to discrepancies that attract audits or delays in refund processing. GST refunds may arise from export transactions, inverted duty structures, or excess tax payments. Failing to reconcile refund claims with GSTR-1, GSTR-3B, and corresponding bank credits can result in underreporting or overreporting of refunds, causing compliance issues.

For example, if a taxpayer incorrectly classifies a refund related to zero-rated supplies or does not account for the refund sanctioned by authorities, the mismatch may prompt scrutiny during audits. Similarly, overstating refund claims can lead to rejections or penalties.

To avoid such errors, businesses should reconcile all refund applications with their GST returns and books of accounts. Maintaining proper documentation, such as shipping bills, invoices, and acknowledgement receipts from the GST portal, is crucial for refund claims. Utilizing GST-compliant accounting software that tracks refund applications and auto-populates relevant details can streamline the process and reduce errors.

With accurate reporting of GST refunds in GSTR-9, businesses can ensure compliance and avoid delays or disputes during refund processing.

Simplify GSTR-9 Filing with GSTrobo®̥

Given the multifaceted challenges associated with GSTR-9 filing, adopting a systematic approach is key to preventing GSTR-9 mistakes, minimising errors and ensuring compliance. GSTrobo® offers a suite of automation tools tailored to help businesses streamline their GST return processes. From data reconciliation to seamless filing, GSTrobo®̥’s solutions provide the reliability and accuracy needed to navigate the complexities of GSTR-9. Visit GSTrobo® to learn more about how its innovative platform can enhance your GST compliance journey.