Library / Goods and Services Tax: The Professional's Master Guide

Appendix H: Common Mistakes and How to Avoid Them

These are the errors seen most often in reviews, audits and notices. Most are process failures rather than gaps in knowledge.

Mistake	Consequence	How to avoid
Claiming ITC not in GSTR-2B	DRC-01C; demand with interest	Reconcile with GSTR-2B before filing GSTR-3B
Missing the 30 November ITC cut-off	ITC lost permanently	Year-end review of pending invoices in October
Not reversing ITC after 180 days unpaid	Interest and demand in audit	Monthly ageing of creditors with GST flag
Ignoring rule 37A (supplier not filing)	Demand for ITC with interest	Check supplier filing status before 30 September
ITC on blocked items (cars, food, gifts)	Reversal with interest and penalty	Map GL codes to section 17(5) heads
No reversal on exempt supplies (rule 42)	Demand with interest	Monthly rule 42 working and annual true-up
Missing reverse charge on legal fees, director fees, rent	Tax, interest, penalty	Reverse charge checklist in payables process
Paying reverse charge through credit ledger	Treated as unpaid	Pay reverse charge in cash only
Wrong place of supply (IGST v. CGST and SGST)	Tax paid under wrong head, refund needed	Place of supply check in billing master
Not charging tax on advances for services	Interest on delayed tax	Receipt voucher and tax on advance
Late invoices for services (beyond 30 days)	Interest; mismatch with books	Monthly unbilled revenue review
Wrong HSN digits or code	Rate dispute, GSTR-1 errors	HSN master reviewed by tax team
Wrong rate after GST 2.0	Short payment or excess collection	Update item masters from 22 September 2025
Mixed supply taxed at lower rate	Short payment	Apply section 8(b) highest rate
Stock transfers not invoiced	Demand on distinct person supplies	Invoice every inter-State transfer
Corporate guarantee to group company not taxed	Demand at 1% per year	Group guarantee register and rule 28(2)
Import of services from parent not reported	Reverse charge demand	Review foreign payments and cross-charges
Credit notes issued without recipient reversal	Output tax reduction denied	Track IMS credit note acceptance
Discounts not linked to invoices	Value not reduced	Written scheme agreed before supply
E-invoice not generated or late	Invoice invalid; buyer loses ITC	System-level IRP integration
E-way bill not generated or expired	Detention, 200% penalty	Dispatch checklist; validity monitor
Wrong vehicle number in Part B	Detention	Update Part B on transhipment
GSTR-1 and GSTR-3B mismatch	DRC-01B; blocked GSTR-1	Monthly three-way reconciliation
Not using GSTR-1A for corrections	Wrong liability in locked GSTR-3B	Correct through GSTR-1A before GSTR-3B
Leaving returns unfiled for years	Three-year bar; cancellation	Compliance tracker for all GSTINs
Ignoring portal notices	Ex parte orders	Weekly check of notices tab and email
Replying late to ASMT-10	Proceedings under section 73 or 74A	Reply within 30 days or seek time in writing
Not asking for personal hearing	Order without hearing; appeal needed	Always request hearing in reply
Missing appeal limitation	Appeal dismissed as time-barred	Diary date on order communication
Pre-deposit not paid correctly	Appeal not admitted	Pay through DRC-03 linked to the order
Paying under protest without record	Refund difficult	Letter recording protest and DRC-03 reason
Accepting GTA invoice without declaration	Wrong reverse charge treatment	Obtain GTA option declaration each year
LUT not renewed for new year	Exports treated as taxable	File RFD-11 before 1 April
Export proceeds not realised in time	Refund recovered with interest	Track FIRC or bank realisation per invoice
Refund filed beyond two years	Rejected as time-barred	Quarterly refund cycle
Wrong turnover in refund formula	Short refund or rejection	Reconcile formula inputs with returns
ISD not registered for common services	Credit disputes across States	ISD registration and monthly distribution
Job work goods not returned in time	Deemed supply with interest	ITC-04 and job work ageing
Records not kept for 72 months	Adverse inference in audit	Document retention policy
Composition dealer collecting tax	Penalty; tax recovery	Bill of supply format only