GST defaulting suppliers can cost you a fortune & make your ITC claims more painful
Why in the news?
The Honorable Gujarat High Court recently remarked while hearing a case in February 2022 related to the GST taxation system, ‘It’s easier for us to reach the moon than to understand the intricacies and policies of the GST system.’The statement is not an exaggeration but a fact, given the cumbersome and highly laborious process to claim eligible input Tax Credit.
Today’s biggest risk that haunts the business world is the non-compliance of the suppliers or vendors you do business with. In a survey carried out by GSTHero (Govt. of India appointed GST Suvidha Provider), Pune, of around 1125+ enterprises, the most common reason that the businesses stated for a laborious ITC claim was the ‘GST Non-compliance’ either by themselves or their suppliers. The survey also noted that these irregularities are draining the profits as businesses are now paying their outward liabilities in cash in place of utilizing the Input Credit.
A recent incident was unearthed in Surat, Gujarat that involved claiming ineligible Input Tax Credit by a renowned firm based on fictitious tax receipts. This scam amounted to Rs. 482 Crore and this was done based on fake invoices. In this case, no supplies from any suppliers were physically received.
These fake invoices were then passed on to further buyers bringing these buyers too under the radar of the GST authorities now.
This incident highlights the need for robust vendor management where enterprises can identify such fictitious vendors and mitigate the risks beforehand. This is especially true for enterprises involved in cross-industry vendor engagements. Automating their GST related tasks shall save a lot of time, and claiming eligible Input Tax Credit won’t be as difficult as it seems when done manually.
Consequences of GST notices
Frequent errors in the GST return filing and claiming of ineligible ITC may put your business under the radar of the GST department. In addition, many taxpayers are receiving GST notices in 2022 for their irregularities in GST return filing in FY 2018-19. Hence, businesses must adhere to the GST laws, but even if they do attract a GST notice, they should have all the supporting documents to reply to the GST notices.
If a satisfactory reply is not furnished to the GST notice, the GST official has the complete authority to suspend or even cancel your GST registration after due scrutiny. Reputational loss to your business can affect your goodwill and take a toll on your profitability.
GST filing ecosystem can protect your business
GST return filing and other allied activities are closely dependent on each other. Therefore, when businesses opt for a GST return filing software product suite they are at a lower risk of non-compliance with GST laws.
To stay compliant with the dynamic GST laws, businesses must have an efficient technology infrastructure that enables taxpayers to perform all the related GST activities in one place whilst staying 100% compliant with the GST laws.
Mitigating risks at an earlier stage
Risk Mitigation is not left optional anymore for the stable sustenance of your business; it has become more essential than ever.
With the increase in the number of dubious transactions, counterfeit invoices and growth in the volume of transactions, it can be challenging to stay 100% compliant with all the GTS laws & regulations.
Hence, it is helpful when businesses have a GST service provider in place to identify the red-flagged areas and take positive actions upon them to minimise the impact as much as possible.
GST – Way ahead
GST is a complicated affair with multiple intricacies, but this is the taxation system that will lead India towards a better tomorrow. It’s the taxpayer’s responsibility to make their GST return filing infrastructure as user-friendly as possible. Bringing in more and more automation in your GST return filing process will ease the return filing processes and keep a check on the GST defaulting suppliers.
GSTHero’s GST returns filing automation suite has helped thousands of small & medium-sized businesses to 100% comply with the GST laws and claim eligible Input Tax Credit without any hassle. GSTHero, a Government-appointed GST Suvidha Provider (GSP), has complete transparency and authenticity in the GST data fetched directly from the GSTN portal.
Stay aware; stay compliant!
About the Author– GSTHero– Making GST Simple! GSTHero is the best GST filing, ITC reconciliation, e-Way Bill Generation, e-Invoicing and GST notice management software in India. GSTHero is a government authorized GST Suvidha Provider. Both Businesses and Tax Practitioners can file GSTR 1, GSTR 3B, GSTR 9 and GSTR 9C with all supporting reports. 1 Click Auto Reconciliation & report-matching feature helps you in claiming up to 100% ITC and finds your GST Defaulting Suppliers. GSTR2A vs GSTR-3B, GSTR-1 vs GSTR-3B, ‘GSTR-1, GSTR-2A & GSTR-3B’ annual report matching is also provided by GSTHero.