Top 8 Reasons for Getting GST Notices

In the realm of taxation, the Goods and Services Tax (GST) stands as a monumental reform, aimed at simplifying the tax structure and fostering economic growth. However, alongside its implementation came a surge in compliance requirements, leading to a significant increase in GST notices issued to taxpayers. These notices serve as indicators of discrepancies or non-compliance with GST regulations. Understanding the top causes behind these notices is crucial for businesses to navigate the complex tax environment effectively.

In this blog, we delve into the primary reasons behind GST notices, shedding light on key areas that demand attention and compliance.

Understanding GST Notices

Before discussing the causes behind GST notices, it’s crucial to understand what these notices entail. GST notices are official communications from the tax authorities to taxpayers, alerting them to discrepancies or issues identified in their GST filings. These notices can range from simple inquiries seeking clarification to more serious allegations of non-compliance, potentially resulting in penalties and fines.

Top 8 Reasons of Getting GST Notices

Non-filing or Delayed Filing
One of the most common reasons for receiving a GST notice is non-filing or delayed filing of GST returns. GST mandates regular filing of returns, and any delay or failure to file within the stipulated deadlines can trigger a notice from the authorities. Businesses must ensure timely and accurate filing to avoid such repercussions.
Discrepancies in Input Tax Credit (ITC)
Input Tax Credit forms the backbone of GST, allowing businesses to claim credit for taxes paid on inputs. However, discrepancies in claiming ITC, such as mismatched invoices or ineligible claims, can attract the attention of tax authorities. It’s crucial for businesses to meticulously reconcile their ITC claims with the GST returns to avoid discrepancies and subsequent notices.
Mismatch in GSTR-1 and GSTR-3B
GSTR-1 and GSTR-3B are two critical GST returns that businesses are required to file regularly. GSTR-1 contains details of outward supplies, while GSTR-3B summarizes the tax liability and input tax credit. Discrepancies or inconsistencies between these two returns can raise red flags for the authorities, leading to notices for clarification or audit.
Errors in Tax Payment
Incorrect computation or underpayment of GST can also lead to notices from the tax department. Whether it’s miscalculations, misclassification of goods or services, or misinterpretation of tax rates, errors in tax payment can result in penalties and notices. Businesses must ensure thorough review and validation of their tax calculations to prevent such issues.
Non-compliance with E-way Bill Requirements
E-way bills are mandatory for the movement of goods exceeding specified thresholds under GST. Failure to generate e-way bills or non-compliance with e-way bill requirements can attract scrutiny from tax authorities. Businesses must adhere to e-way bill regulations and ensure compliance to avoid receiving notices related to transportation of goods.
High Value Transactions
Transactions above certain thresholds are subject to increased scrutiny under GST regulations. High-value transactions, especially those involving significant amounts of input tax credit or tax liabilities, are closely monitored by the authorities. Any discrepancies or irregularities in such transactions can lead to notices and audits.
Mismatch in GSTIN or PAN
Simple administrative errors such as mismatches in GST Identification Number (GSTIN) or Permanent Account Number (PAN) can also result in notices from the tax department. It’s crucial for businesses to ensure accuracy in their registration details and cross-verify them with the GST database to avoid such issues.
Non-compliance with GST Audit
Certain businesses are required to undergo GST audits as per the law. Failure to comply with audit requirements or submit audit reports within the specified timelines can attract notices and penalties. Businesses falling under the ambit of GST audit must ensure timely completion and submission of audit reports to avoid repercussions.

Recent Cases of Top Companies Falling Under the GST Radar in 2024

Life Insurance Corporation of India (LIC) received demand notices totaling approximately Rs 806 crore for alleged short payment of GST for the fiscal year 2017-18 on the very first day of 2024. The very next day it faced another tax demand, this time for Telangana state.

Likewise, Hindustan Unilever (HUL) announced that it had been issued a GST demand with penalties amounting to Rs 447.5 crore by authorities in five states. Zomato, the food-delivery platform wasn’t spared either. It received notices from tax authorities in Delhi and Karnataka regarding alleged short payments of GST in 2018, totaling Rs 4.2 crore.

Several other major companies, including Asian Paints, Eicher Motors, ICICI Pru, Nestle India, and Dr Reddy’s have also received tax demand notices related to GST payments. The sudden influx of GST notices has caught these corporations off guard. These notices aim to recover tax liabilities stemming from underpayment, non-payment, or wrong claims of ITC for the financial years 2018-19 and 2019-20.

The government has extended the deadline for GST officers to issue demand notices for discrepancies in annual returns for the fiscal years 2018-19 and 2019-20. It announced an extension of the deadline for the 2018-19 fiscal year to January 31, 2024, and for the 2019-20 fiscal year to May 31, 2024.

Navigating the complexities of GST compliance requires diligence and attention to detail from businesses. While receiving a notice from the GST department can be daunting, understanding the common causes behind such notices can help businesses mitigate risks and ensure compliance. By addressing potential pitfalls and adhering to regulatory requirements, businesses can navigate the GST landscape with confidence and minimize the likelihood of receiving notices from the tax authorities.

Simplifying GST Audit and Tax Litigation with IRIS LMS

1. Current Challenges in GST Audits and Litigations

Rising number of GST notices causing pressure on businesses.
Continuous evolution of GST law leading to complexities for businesses.
Lack of preparedness among businesses for facing GST audits and litigations.

2. Need for Effective Solutions

Businesses must be well-prepared to defend their cases to avoid penalties.
Importance of collating, maintaining, and validating data for departmental audits.
It is necessary to track actionable items and monitor litigation progress regularly.

3. Role of IRIS LMS

IRIS LMS offers a solution to seamlessly organize tax data and manage GST audits and litigations.
Cloud-based platform providing collaborative and technology-driven features.
Developed by experienced team to simplify tax litigation processes and departmental audits.

4. Key Features of IRIS LMS

Facilitates seamless facing of departmental audits with features like Transaction Matrix and Tax Position Repository.
Streamlines audit tracking across GSTINs, Divisions, and Legal Entities.
Manages litigation effectively with a single repository, analytics dashboard, proactive alert mechanism, and dataflow design.

5. Benefits of IRIS LMS