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Over the past few months, several businesses across the nation have been plagued with GST notices from the government. If reports are to be believed, there has been a nearly 34% of GST mismatch or underpayment of GST, amounting to an overwhelming deficit of INR 34,400 Crores. Both taxpayers and firms have been served these notices, in response to all GST returns that have been filed between July and December 2017 – leading to a general feeling of fear surrounding GST compliance. As we start off yet another year as an independent nation, presenting a blog on how we can possibly get freedom from fear – and avoid GST mismatches and GST notices.
To begin with, there are two major reasons, why GST mismatches occur. First, difference between the self-declared GST liability and available input tax credit, after one has filed summary returns in Form GSTR-3B, and provided invoice-wise details of all outward supplies in Form GSTR-1. Second, difference between values appearing in Form GSTR-3B and Form GSTR-2A i.e. the details of purchases from one’s suppliers. Quite understandably, the latter reason is more crucial for the government, as any incorrect ITC allocation against the tax that is actually paid by the supplier, results in GST revenue loss.
With the emergence of these GST mismatches and GST notices, it can be fairly assumed that the tax department’s previous soft approach towards non-compliance may be coming to an end in the GST era. The government has gone about its business in a stern manner indeed, mandating a time of 30 days to all businesses who have received a notice. Upon issue of the notice, if no explanation is received within the stipulated date, it will be assumed that one has no explanation to provide, and the relevant proceedings will be initiated against a business. Not to forget the stringent GST procedures, which have stipulated an 18% interest on wrongly claimed ITC, which is bound to discourage tax evasion or manipulation practices. Thus, it is important that businesses know what is to be done to avoid GST mismatches and in turn, avoid GST penalties.
Under such circumstances, what could a business possibly do to avoid GST mismatches, thus attaining freedom from GST notices?
One of the first steps that can be taken is to work with the right set of GST compliant suppliers. Doing so will ensure, that at no point in time, is there any GST mismatch between the purchase details uploaded by a business and the data uploaded by its suppliers. This will eliminate the possibilities of varying ITC calculations, and could go a long way to ensure that the data in Form GSTR-3B and Form GSTR-2A is consistent.
Another step, is the need for businesses to keep a close watch on the data being fed in while filing summary returns in Form GSTR-3B and while filing final returns in Form GSTR-1. This requires a fairly high degree of GST compliance concentration from businesses, which can only be made possible by adapting a systematic way of maintaining books of accounts and records of transactions. Quite understandably, those businesses who still go about manual records or who maintain business records on spreadsheets, would be finding it a tad difficult to bring in the necessary corrections, and that too within the short time-frame, which is available to respond to such notices. The need of the hour, naturally, is some automated system or GST software system, which enables a business to be compliant.
However, what is encouraging to note is, that even with the original return filing model having given way to a condensed model with Form GSTR-1 and Form GSTR-3B, the government is able to enforce a fair degree of GST compliance across the country. With the simplified return filing model knocking at the door, it will be the right time for businesses to adapt the right technology, and enjoy freedom from GST notices, avoid GST mismatches and stay away from hassles at the end of the day.