10 Common Mistakes in GSTR 1 Return

GST is the landmark reform in indirect taxation in India. It is for the first time that the concept of matching invoices has been introduced. Since most of the return filing process has been made computerized and the scope of clerical errors has reduced considerably. But still, there are many conceptual mistakes which people make during filing of their return. These mistakes not only affect the person making them but also their buyer. Every mistake has its consequences and sometimes they can have huge financial costs. Hence it becomes incumbent upon them to file their returns very carefully.

GSTR 1 is the most important return. We are enumerating the 10 most common errors made by people;

#1. Non filing of return when turnover is zero

Many taxpayers are under the impression that they have to file their return only when they make sales during the taxable period. But that is a wrong notion. A nil GSTR 1 has to be filed to prevent penal charges. The Department has made filing of nil returns very easy. A taxpayer should file a NIL return even if they have no transactions to disclose for any particular period. This would keep their return filing status active. Nil return can be filed via SMS also. There are simple steps to file it via SMS without login into the GSTN Portal.

#2. Treating Zero rated Export  sales as nil / exempt / domestic sales in GSTR 1 and improper matching of export invoice with the Shipping Bill

Any goods or service when exported attracts zero rate of output tax, hence it is called Zero rated. When the same is supplied domestically it will have its usual output tax rate.

Nil rated means whose output tax rate is actually zero or nil. Exempt means, it has an output tax rate but it has been exempted (prevented)  temporarily by the government from attracting that rate. Practically the output tax rate in all the cases is nil but they are totally different categories. There are separate columns for disclosing them. Since the ITC treatment for all these categories is different, hence they have to be shown separately. Sometimes export sales are wrongly clubbed with domestic sales. Also, proper care should be taken that the export sales disclosed in GSTR 1  are matched with the shipping bill and GSTR 3B. Unless they are the same in every respect it will be difficult for the exporter to claim a refund of ITC or Output tax paid.

#3. Feeding wrong information in GSTR 1 regarding sales invoices

Sometimes the information regarding the sales invoice is entered wrongly. The GSTIN of the buyer (though it will be corrected by the software), place of supply (state of the buyer), description of supply, date of invoice, Tax rates, Type of tax levied, etc may be wrong. Like B2B sales are shown as B2C, interstate to intrastate and vice versa, IGST to CGST and SGST. It will cause problems to the buyer in claiming ITC.

#4. Wrong or non mentioning  of HSN code

Sometimes sellers do not mention the HSN code or mention the wrong HSN code in the invoice. Now changes have been made effective from 1st April 2021 in the method of mentioning HSN in the invoice and in GSTR1. Reporting of the HSN code of 6/4 digits is mandatory in the HSN summary i.e., table 12 of GSTR-1. Also, the ‘total value’ in the HSN summary is replaced with ‘Rate of Tax’  meaning you need to furnish HSN-wise rate-wise details now. If any invoice has multiple items having different HSN codes and different rates of tax, then they have to be reported HSN-wise and rate-wise in separate lines.

Type of invoice Turn Over  of the seller in the Previous year No of digits of HSN code Mandatory
B2B Up to 5 crores 4 yes
B2B Above 5 crores 6 yes
B2C Up to 5 crores 4 optional
B2C Above 5 crores 6 yes

#5. Non Disclosure of document summary 

In the Document Summary report, you have to provide the transaction count of sales, purchase from unregistered dealers, debit note, credit note, receipt voucher, payment voucher (including voucher marked for refund), and delivery note recorded for branch transfers. The serial number of the vouchers issued during the taxable period has to be entered in the return. The offline return tool does not have the provision to import Document Summary details. Hence Document Summary details need to be recorded manually on the GST portal itself. All these are those documents that affect the output GST of a person.

#6. Non booking  and  non adjustment of advances received by the seller

Most of the sellers do not include advances received against future supply in their return in table 11A(1) and 11A(2). They do not adjust the invoices against these advances in table 11B(1) and 11B(2). They just disclose the invoices at the time of supply. This may cause problems to them at the end of the year and in their annual return.

#7. Wrong treatment of “Pure Agent Supply”

“Pure Agent Supply” is the concept where a seller apart from making his usual supply also incurs expenditure on some other supply on behalf of the recipient like an agent and does not earn any profit on that. He claims reimbursement (as actual, without adding it to the value of his own supply) of such supply from the recipient. Hence it is not a sale.

Sometimes sellers also include such “Pure Agent Supply” in the value of their invoice while filing GSTR 1, which unnecessarily increases their turnover.

#8. Non disclosure of Debit/ Credit Notes

Some sellers do not show any debit/ credit note in their returns. Previously there was a provision that they had to be matched one to one with the invoice against which they were issued. But now this condition has been dropped and they can easily enter debit/credit notes. It is mandatory as per document summary rules and will also help in showing the correct value of turnover and purchase.

#9. Non Issuance of various vouchers

Many sellers are hesitant in issuing vouchers like receipt vouchers for advance received payment vouchers for advance refund, adjustments made for advances, purchase from unregistered dealers, debit note, credit note etc. This is mandatory even from the department’s point of view. They may land themselves in a soup if they do not disclose the serial number of various vouchers issued by them.

#10. Non Proper disclosure regarding B2C sales

Many sellers do not show large (B2C) sales correctly in Table 5A,5B and small B2C sales in table 7. They also play with the debit/credit notes from unregistered dealers after receiving the payment and try to under-report their turnover.

Some Report a meagre or zero amount of sale against any  B2C invoice for future adjustment or for just transportation purposes. This may cause trouble for them in the long run. Also, they will face problems in reconciliation in their accounting and GST turnover during filing their annual returns.

About CA Shaifaly Girdharwal (Author)

CA Shaifaly Girdharwal is a qualified chartered accountant practicing in GST. She is the co-founder of ConsultEase.Com and a famous YouTuber with more than 2,40,000 subscribers for her channel dedicated to the GST videos. She is also a trainer and author. She has written a book on GST for Taxmann Ltd.

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