Years ago, the only reason you could have gotten an audit was if an officer thought your books had inaccuracies; however, now, it is more based on an algorithm.
GST Network (or GSTN) is an automated, ~64,000 cross-verification database; its primary purpose is to identify discrepancies. It sends notifications when it detects discrepancies between your numbers and your suppliers’ numbers, or between your numbers and your e-way bills.
Honest business owners at CA Pavan Kumar & Co. sometimes get huge penalties, because people think they are trying to avoid taxes when it’s simply because they made a data entry mistake.
Before you press ‘Submit,’ let’s take a look at four of the most frequent automated audit mistakes and how to correct them.
1. The “Mismatch” Trap (GSTR-1 vs. GSTR-3B)
This is, to date, the single most significant reason we are receiving GST audit notices.
The GSTR-1 is about your sales, and the GSTR-3B is your tax liabilities that need to be paid.
The Mistake: You tell GSTR-1 you made ₹10 Lakhs in sales, and you say to GSTR-3B to reduce taxes for now and enter ₹9 Lakhs. The Consequence: The system catches this right away. You’ll receive an ASMT-10 notice, and you’ll need to explain it. You also need to settle the difference with interest. The Fix: Always ensure the totals in GSTR-1 and GSTR-3B match before filing.
2. Wrong HSN Codes (The Regression)
Every applicable tax item must fall under a single uniform HSN (Harmonized System of Nomenclature) code.
The Mistake: You sell “Safety Helmets” (18% tax) but mistakenly enter the HSN code for “Construction Caps” (12%). Or you just enter a random HSN code in “9999.”
The Consequence: If you collect 12% when you should have collected 18%, you’ll have to pay the 6% out of your own pocket, plus additional penalties.
The Fix: Don’t put yourself under the guesswork. You can look at the HSN directories, or you can ask us to classify your inventory.
3. Ignoring “Reverse Charge” (RCM)
Normally, the seller pays the GST. For some services, such as hiring a Goods Transport Agency (GTA) or a Legal Fees advocate, the receiver (you) pays the tax.
The mistake! You give the transporter 10,000 Rs and forget about it with no receipt.
The consequence! During the audit, an officer reviews the Freight and Legal Expenses accounts and finds no RCM tax has been paid, so he applies the penalty.
The solution! Inspect the expense reports every month for pending RCM.
The E-Way Bill Mistake
When transporting goods worth more than fifty thousand rupees, an E-Way Bill is mandatory.
The mistake! Your truck broke down, and the delivery took 2 days longer than scheduled. The E-way bill has expired.
The consequence! If flagged, the penalty is 200% of the tax value. That’s right! Even if the tax has been paid, an expired bill is a serious offense.
The solution! If a truck is delayed, the E-Way Bill’s validity can be extended before it expires, but once it expires, there’s nothing you can do.
Stay Safe with Automation
The times of manual calculations are over. A single error in a GSTIN or a misplaced decimal point can cause an inquiry. The best safety is a sound checking system.
Stressed about prior submissions? Contact CA Pavan Kumar & Co. We do “Health Check” audits to proactively discover and correct errors before the tax officer flags them.
Schedule your appointment now by visiting our website https://capavankumar.com/
📞 Call us: +91 9844081653
📧 Email: capavankumars@gmail.com