7 Common GST Compliance Challenges

Introduction

When operating your business in India, it is essential for you to comply with the goods and services tax (GST). The introduction of the GST system has made it easier for businesses to pay taxes. However, many individuals as well as companies find it challenging to navigate through the GST landscape—even the most seasoned person can make costly blunders during the tax filing process. As GST non-compliance can lead to significant penalties and fines, companies need to know more about the recent GST laws and regulations. Organizations must file their taxes on time and online to avoid any penalty.

This blog will help you to explore seven common challenges that organizations may face and how to avoid such GST compliances challenges. Let’s start with the consequences one may face due to mistakes in GST filing.

Serious Consequences of GST Filing Mistakes

Mistakes in GST filing can lead to serious consequences, ranging from financial penalties to legal actions. Here are some of the common consequences include:

1. Penalties- Non-compliance with GST regulations often leads to financial penalties imposed by tax authorities. Any kind of financial burden can significantly dent the financial health of a business.
2. Interest on late payments- Missing the GST return due dates, delayed filing,  or missing payments can lead to interest charges. It causes additional financial burden on businesses.
3. Loss of input tax credit- A wrong GST submission could result in the loss of an input tax credit. It again can lower the company’s profitability.
4. Legal actions and investigations- In case of continual non-compliance, you may have to face legal actions and investigations, further disrupting business operations.
5. Damage to your business’s reputation- Repeated failures in GST filling can damage a company’s market reputation.

7 Common GST Compliance Challenges

1. GSTIN Notification Handling: One key challenge that company owners face is regarding timely processing notices from Goods and Services Tax Identification Number (GSTIN). A disorganized GSTIN notice management system leads to errors in tax filing and non-compliance. For prompt response to the GSTIN notices, company owners need to keep track of all notices. One must maintain a consolidated data record for internal audit in GST to ensure timely responses and compliance.
2. Errors in Manual GST Processing: As per GST rules, even minor mistakes in your information can lead to financial penalties. When you manually maintain your documents and file your GST returns, there is a chance to occur mistakes while entering data. These mistakes can lead to penalties and other issues, affecting your finances.
3. GST Non-compliant Vendors: One of the biggest mistakes in B2B GST compliance happens when you work with vendors who aren’t following GST rules. This can mess up your business operations. To avoid this, you should have a system to keep track of your vendors and remind them to follow GST rules. To avoid such situation, don’t rely on their verbal information and don’t pay them until they show you proofs ensuring that they’re following GST rules.
4. Late return Filing: Late GST returns filing can cause huge penalties and interest charges – a penalty is charged for letting filling of both GSTR-1 or GSTR-3B. One of the primary cause behind this is unorganized monitoring and tracking system for GST filing due dates. To avoid such a situation, You can use return filing reminders to ensure timely submission before deadlines. You can also outsource your GST return filing process to professionals specializing in automating compliance.
5. Ignoring Reconciliation: Companies often overlook reconciliation notices. Failing to reconcile GST data with financial records may result in filing inaccuracies and mistakes, which draws the attention of tax authorities. To avoid this, you must comparing your books with your GST returns regularly. It will help to identify if any discrepancy is there and rectify them promptly.
6. Inadequate Knowledge of GST Composition Scheme: Not knowing enough about the GST Composition Scheme can be a problem. This scheme offers a simplified tax compliance option for small businesses with an annual turnover below a specified threshold. As a company, if you are not aware of the intricacies of this scheme, you may miss out on its benefits or unconsciously violate its rules.
7. Incorrect ITC Claims: Inappropriate claim of ITC (Input Tax Credit) is a significant concern. This mistake can lead to GSTR-1 and GSTR-3B filing mistakes. Often companies face this issue while filing GST returns.

Best Practices to Avoid GST Compliance Challenges

To avoid any of the above-mentioned issues, you can adopt the follow measures:

• Strategic Compliance Calendar: It is beneficial to maintain a compliance calendar to avoid late return filing. You can maintain a comprehensive compliance calendar to track GST filing deadlines and avoid last-minute rushes. Apart from ensuring compliance, such a calendar also helps to improve operational efficiency.
• Ongoing Staff training: You can arrange regular training sessions for your employees involved in GST compliance will help them to be up to date on regulatory changes and filing procedures.
• Technology integration: Investing in GST compliance software or ERP systems can be a way to automate the taxation processes. It also helps to minimize errors in GST return filing and reporting processes.
• Adaptability to regulatory changes: It is vital to keep up to date with any changes or modifications to the GST regulations. So, you can take prompt action accordingly and prevent fines.
• Sturdy record-keeping system: To stay GST compliance, you must maintain accurate and organized records of all GST-related transactions. It will help you with smooth filing and reconciliation.
• Working together with tax experts: To make your tax filing smooth and effective, you can consider collaborating with tax consultants or experts to get complete guidance on complex GST issues. Working to tax professionals ensures compliance with regulatory requirements.

Conclusion

Following the rules of GST can be tricky. With hard work, adequate knowledge, and planning ahead, you can manage it well. This blog makes your aware of the seven common GST compliance challenges and how to avoid such complications. If keep up with GST rules, file exact tax amount at the right time, and avoid doing manual errors, you can ensure compliance with GST regulations and also improve operational efficiency and mitigate risks. The key to overcoming common GST challenges and protecting the company’s finances and reputation is to adopt technology, stay current on regulatory changes, and work together with tax professionals.