Top Causes of GST Notices Demystified

Simran Gupta |Updated on: May 28, 2024

The system of Goods & Service Tax (GST) was introduced in India to make the tax structure more streamlined, simplified, and error-free. With its adoption, there's been a notable surge in compliance demands, resulting in a marked uptick in GST notifications directed at taxpayers. These notifications serve as red flags for potential discrepancies or non-compliance with GST statutes. A comprehensive grasp of the primary factors driving these notifications is imperative for businesses to adeptly navigate through the intricate tax landscape.

What are GST notices and what are the top reasons taxpayers get GST notices? Keep reading below to get the answers for the same.

Top Eight Reasons for Taxpayers to Get GST Notice

Understanding GST notices is crucial for taxpayers to address any discrepancies or issues in their GST filings promptly. These notices serve as communication from tax authorities, informing taxpayers about mistakes, delays, or non-compliance with GST requirements.

GST notices vary in severity, ranging from simple inquiries to addressing more serious issues. They may highlight non-compliance, incorrect filings, or other important details. In some cases, notices may also include information about penalties for any discrepancies. Here are the top eight reasons why taxpayers may receive GST notices:

Problems with filing – Not Filing or Delayed Filing

Though there may be many reasons for GST notices to be sent to taxpayers, the most common of them is this one. When taxpayers don’t file their GST returns, or when they don’t file the returns within the deadlines, they receive GST notices from the authorities.

Failure to file GST returns properly within the time announced by the authorities may attract an exorbitant penalty fee, as mentioned in the GST notices. This is why all businesses (big or small) should file GST returns within the appropriate timeframe.

ITC Discrepancies

Input Tax Credit (ITC) is one of the main systems of GST. In this, businesses can claim credits if they have paid taxes on their inputs. Businesses should submit all their invoices correctly to claim these credits.

However, when the tax authorities find any mismatches in the invoices submitted, or if they notice that businesses are not eligible for the credits, they have submitted their claims for, they can notices to such businesses. 

Hence, businesses should always double-check their invoices correctly before submitting them to the authorities for claiming input tax credits. This way, they can avoid getting GST notices and the consequent negative impact it may create for their businesses.

GSTR-1 and GSTR-3B Not-Matching

When filing their GST returns, businesses should submit many forms. The GSTR-1 and GSTR-3B are two such important return forms that businesses should submit properly to file their returns without any hassles.

GSTR-1 contains all the details about the outward supplies of the businesses, while GSTR-3B contains everything the tax authorities need to know about the tax liability and ITC (input tax credit) of the businesses.

For the GST returns to be filed successfully, the information furnished on these two reports should reconcile. If the authorities notice any discrepancies, mismatches or inconsistencies in the numbers mentioned in these two reports, they can send GST notices to the businesses. These notices can ask the businesses to provide more clarification, or to submit an audit report to justify the mismatches, or to file the returns properly.

Tax Payment Errors

This is also one of the most common causes of taxpayers receiving GST notices from the authorities. When taxpayers miscalculate their taxes, incorrectly classify their goods & services, use the incorrect tax rates, or underpay their taxes, they can get a GST notice from authorities. 

These notices inform the taxpayers that they must pay penalties or fines for miscalculating their tax payments. To avoid these charges, businesses should always hire an expert to check their tax-filing process to ensure that they file the correct GST returns and pay the right amount of taxes every time.

E-way Bill Non-Compliance

When businesses deal with the movement of goods that exceed the thresholds specified by GST, they must follow the regulations of E-way bills. Failure to comply with the same, or not generating e-way bills for goods that require them can trigger the GST authorities to send them GST notices. To avoid these notices, businesses should always submit the necessary bills when transporting goods that exceed the thresholds specified under GST.

Issues with High-Value Transactions

Tax authorities are always extra careful when it comes to checking transactions that exceed the threshold values specified under the GST Act. When these high-value transactions involve input tax credits or tax claimed by businesses, the authorities check if all regulations are complied with properly. 

When businesses don’t comply with the rules & regulations related to high-value transactions, they receive GST notices from the authorities. These notices could be asking the businesses to pay penalty charges or requiring them to submit a detailed audit report.

GSTIN/PAN Mismatches

Entering PAN (Permanent Account Number) or GSTIN (GST Identification Number) incorrectly are some of the basic mistakes that businesses may make especially when they file GST returns for the first time.

While filing returns, businesses must check if their registration details are check. It is a good idea to cross-check these details on the GST database as well before filing returns. 

GST Audit Compliance Issues

The law requires certain businesses to undergo GST audits at a specified period. When businesses don’t undergo these audits, or don’t submit proper audit reports within the deadlines, they will get GST notices from the authorities.

These notices may ask them to pay penalties for non-compliance with GST audit procedures. Hence, it is important for all businesses that are eligible under the law to undergo regular GST audits to avoid getting notices.

Bottom Line

When businesses get GST notices, it results in extra processing time to take care of the issues mentioned in the notices. If these notices contain penalties and fines, it results in a loss of money for the businesses. So, the prudent thing to do is to take preventive action and ensure that they tick off all these above-mentioned issues before filing GST returns accurately, and on time.