Written by the CA & GST Compliance Team, Rudra Capital — filing GSTR-1, GSTR-3B, and annual returns for businesses across Delhi NCR since 2017. We handle over 300 monthly GST return filings and respond to 40+ GST notices every year.
Last reviewed: June 2026 | References: CGST Act 2017 (Sections 16, 17(5), 43B) · CGST Rules (Rule 36(4), Rule 42, Rule 88C) · CBIC Circular 183/15/2022 · GSTN Zero Mismatch Framework (April 2026) · GST DRC-01A/01C Form Instructions
Covers: GSTR-1 vs GSTR-3B mismatch · Blocked ITC under Section 17(5) · RCM non-compliance · Wrong HSN codes · GSTR-9 discrepancies · Zero Mismatch enforcement from April 2026 · Monthly compliance checklist · How to avoid all 10 mistakes
In 2025-26, India’s GST compliance environment became fundamentally less forgiving. The portal’s AI-driven reconciliation engine cross-checks every GSTR-1, GSTR-3B, and GSTR-2B in near-real time. The Zero Mismatch policy rolled out in April 2026 blocks GSTR-3B filing when ITC exceeds GSTR-2B beyond the permissible tolerance. And the GST department issued over 33,000 automated compliance notices in FY 2024-25 alone — most triggered by errors that were entirely avoidable.
The businesses receiving these notices are not fraudsters. They are ordinary businesses with under-trained accounts teams, suppliers who file late, outdated accounting software, or simply insufficient time to reconcile before deadline pressure hits. The system does not distinguish.
Here are the 10 mistakes generating the most notices in 2026 — with the exact fix for each one.
Zero Mismatch Policy — April 2026: From the beginning of Tax Year 2026-27, the GST portal blocks GSTR-3B filing if ITC claimed exceeds GSTR-2B by more than the permissible 5% variance. There are no manual overrides — the mismatch must be resolved before submission. For businesses that previously filed with provisional ITC claims, this is an immediate operational change requiring new monthly processes.
Why GST Mistakes Are More Dangerous in 2026 Than Ever Before
Three converging enforcement changes make 2025-26 qualitatively different from earlier compliance years:
- Real-time AI cross-validation: The GSTN reconciles GSTR-1, GSTR-3B, and GSTR-2B data automatically. Patterns that suggest systemic under-reporting, excess ITC, or anomalous turnover ratios trigger automated notices without human review.
- Zero Mismatch enforcement: ITC claiming without GSTR-2B support is now operationally impossible for businesses above the tolerance threshold — not just non-compliant in theory.
- Cross-database matching: GST turnover is automatically compared against Income Tax turnover. A 15%+ unexplained difference triggers Section 61 scrutiny notices without a human deciding to send them.
Mistake 1 — GSTR-1 and GSTR-3B Outward Supply Figures Do Not Match
What it looks like: Your GSTR-1 for October declares ₹28 lakh of outward supplies. Your GSTR-3B for October declares ₹25 lakh. The portal flags a ₹3 lakh discrepancy and sends a DRC-01A notice asking you to pay the differential tax or explain the difference.
Why it happens: GSTR-1 and GSTR-3B are often prepared separately by different team members, at different times, from different source reports. Amendments made to GSTR-1 after GSTR-3B is filed create gaps. Credit notes issued after GSTR-1 is filed reduce net supply but are not reflected in the same period’s GSTR-3B.
✓ Fix: Before filing GSTR-3B, generate a report from your accounting software comparing the GSTR-1 outward supply total (by tax rate) against the GSTR-3B summary. The two must match — or the variance must be explicitly explained and documented. Make this a mandatory pre-filing step. If a variance exists, trace it to the specific invoice or credit note causing it before submitting.
Getting GSTR-1 vs GSTR-3B mismatch notices? Call our GST experts for a free compliance review — +91-9953572838
Mistake 2 — Claiming ITC Before It Appears in GSTR-2B
What it looks like: You received a vendor invoice in September, paid it, and claimed the ITC in September’s GSTR-3B. But your supplier filed their GSTR-1 late — only in October. Your September GSTR-2B does not show this invoice. Under the Zero Mismatch framework effective April 2026, this causes your GSTR-3B to be blocked until the discrepancy is resolved.
The legal position: Rule 36(4) of the CGST Rules — as it stands from 2022 — limits ITC claims to what is available in GSTR-2B. The 5% provisional ITC buffer was removed. Every rupee of ITC claimed must be traceable to a corresponding entry in your GSTR-2B for that period.
✓ Fix: Download your GSTR-2B on the 14th of each month. Reconcile your purchase register against GSTR-2B before filing GSTR-3B. Claim only ITC that appears in GSTR-2B. For missing invoices, follow up with suppliers immediately. Build a supplier compliance tracker — rate every vendor by their GSTR-1 filing consistency. Low-compliance suppliers are directly costing you ITC and cash flow.
Mistake 3 — Claiming ITC on Section 17(5) Blocked Credit Items
What it looks like: Your company pays GST on motor vehicle insurance for the company car, employee meal vouchers, health club memberships, and civil construction work for the office renovation. Your accounts team claims ITC on all of these. A GST audit identifies ₹3.8 lakh of blocked ITC and raises a demand with 18% interest plus penalty.
Section 17(5) of the CGST Act lists specific items where ITC is permanently blocked — regardless of whether the expense is for business purposes. The most commonly misapplied items:
| ITEM | ITC Blocked? | EXCEPTION |
|---|---|---|
| Motor vehicles (cars, SUVs) for employee transport | ✗ Blocked | Except: buses carrying 13+ persons, used for business of transport, driving training, or dealing in vehicles |
| Food, beverages, outdoor catering | ✗ Blocked | Except: when the business itself is in the catering/food supply business |
| Works contract for construction of immovable property | ✗ Blocked | Except: plant and machinery; businesses in construction/works contract supply |
| Club membership fees, health services, beauty treatments | ✗ Blocked | No exception available |
| Life insurance, health insurance for employees | ✓ Allowed | Where employer is obligated by law or government notification to provide these benefits |
✓ Fix: Build a blocked credit review into your monthly ITC process. For every expense with GST, ask: does this fall within a Section 17(5) category? When in doubt, mark it blocked and document the reason. Reverse any incorrectly claimed blocked ITC in the next GSTR-3B to prevent compounding interest exposure.
Mistake 4 — Missing Reverse Charge Mechanism (RCM) Compliance
What it looks like: Your company pays ₹8 lakh in legal fees to an individual advocate over the year. GST is not charged by the advocate. Your company does not account for or pay GST under RCM. An audit identifies this as non-compliance — you owe 18% GST on ₹8 lakh (₹1.44 lakh) plus 18% annual interest from each payment date.
RCM applies to specific categories of payments where the recipient of services must pay GST rather than the supplier. The most commonly missed RCM transactions in 2025:
Legal fees — individual advocates
18% RCM on all fees paid. No threshold.
Goods Transport Agency (GTA)
5% RCM on freight. Applies when GTA has not paid GST.
Commercial rent from unregistered landlord
18% RCM payable by GST-registered tenant.
Import of services (any country)
18% RCM on all foreign service payments. Most missed by IT companies.
Director services to company (non-executive)
18% RCM on sitting fees and consultation payments.
Sponsorship services
18% RCM when sponsoring body corporate events, sports events, or conferences.
✓ Fix: Maintain a monthly RCM register. For every payment to an unregistered vendor or to any of the categories above, compute the GST liability, pay it by the 20th of the following month via GSTR-3B’s RCM rows, and claim it as ITC in the same return (if eligible). The net tax impact is often zero for GST-registered businesses — but the compliance step is mandatory.
Unsure whether your payments attract RCM? Require GST compliance support — our experts are available · +91-9953572838
Mistake 5 — Wrong HSN Code in GSTR-1 and E-Invoices
What it looks like: Your business with ₹7 crore annual turnover has been using 4-digit HSN codes in invoices and GSTR-1. For FY 2025-26, businesses above ₹5 crore must use 6-digit HSN codes. The Invoice Registration Portal starts rejecting e-invoices. Buyers cannot claim ITC. You must reissue invoices.
Why it matters beyond the immediate error: Incorrect HSN codes create a classification record that can be used against you in a rate dispute. If you have been applying 12% GST to a product that correctly classifies under a 18% HSN code, the wrong HSN in your returns creates a paper trail of under-collection that is harder to defend than honest over-collection.
| Turnover threshold | HSN digits required | For Services (SAC) |
|---|---|---|
| Up to ₹5 crore | 4-digit (6-digit optional) | 6-digit SAC always required |
| Above ₹5 crore | 6-digit mandatory | 6-digit SAC mandatory |
✓ Fix: Map every product and service to the correct 6-digit HSN/SAC code using the CBIC tariff master. Update this mapping in your accounting software and ERP. For e-invoice eligible businesses, verify the IRP accepts your HSN codes before month-end bulk invoice generation — individual rejections are manageable, but a month’s worth of rejected e-invoices causes serious ITC disruption for all your buyers.
Mistake 6 — Not Filing GSTR-1 on Time and Blocking Your Customers’ ITC
The invisible consequence most businesses miss: When you file GSTR-1 late, you are not just incurring ₹50/day in late fees. You are blocking every B2B customer’s ITC for that month. Their GSTR-2B will not include your invoices until you file. Large buyers now routinely drop suppliers with consistently late GSTR-1 filings — not because of price or quality, but because the ITC loss is a real financial cost.
The late filing penalties (per return per month):
- GSTR-1 late fee: ₹50/day, capped at ₹10,000 per return (₹20/day for nil returns)
- GSTR-3B late fee: ₹50/day, capped at ₹10,000 per return (₹20/day for nil returns)
- Interest on unpaid tax: 18% per annum from the original due date — no cap
✓ Fix: File GSTR-1 by the 9th of each month — two days before the 11th deadline. Use accounting software that auto-generates GSTR-1 data from your sales register to reduce preparation time from hours to minutes. If turnover is below ₹5 crore, consider QRMP scheme to reduce filing frequency to quarterly GSTR-1 while maintaining monthly tax payments.
Mistake 7 — Wrong Place of Supply Causing IGST vs CGST+SGST Error
Place of supply rules determine whether a transaction is intra-state (CGST + SGST) or inter-state (IGST). Getting this wrong creates a specific type of GST compliance problem: you collected the wrong type of tax, your customer’s ITC doesn’t work, and the government of the wrong state received the tax.
Classic error scenario: Your Mumbai-based company invoices a Delhi-based client for IT services. The correct tax is IGST (inter-state service). Your billing team charges CGST + SGST (treating it as Maharashtra intra-state). Your Delhi client cannot use Maharashtra SGST as ITC against their Delhi output tax liability. The entire ITC for that invoice is lost for your customer.
✓ Fix: Build place of supply logic into your invoicing software. The state code in the buyer’s GSTIN (first 2 digits) must match the state code of your own GSTIN for CGST+SGST to apply. Any other combination requires IGST. For service transactions with complex place of supply rules (immovable property, event services, telecom), get specific CA guidance on the applicable rule before billing.
Mistake 8 — GSTR-9 Annual Return Not Matching Monthly Return Totals
GSTR-9 is the annual statement that the GST department treats as your definitive declaration for the year. If GSTR-9 figures differ from the sum of 12 months of GSTR-3B, the portal flags it as a discrepancy and raises a DRC-01A notice. The most common source of this problem: amendments made in one part of GSTR-9 but not reflected consistently across all related tables.
The most expensive version of this mistake: Finding in December that 12 months of GSTR-3B ITC totals don’t match GSTR-9 Table 6, with a ₹15 lakh difference, 7 days before the December 31 deadline. The reconciliation work that should have been done in August must now be done under maximum time pressure, minimum quality, and maximum late filing risk.
✓ Fix: Start GSTR-9 preparation in August (not December). Maintain a running annual reconciliation workbook throughout the year: for each quarter, update the cumulative outward supply total, ITC total, and tax paid total. By October, the GSTR-9 preparation should be 80% complete. See our comprehensive GSTR-9 filing guide for the complete process.
Mistake 9 — Not Reconciling GST Turnover With Income Tax Turnover
What triggers notices: The GST department’s analytics cross-match your GSTR-9 turnover against your ITR-6 revenue. A 15%+ unexplained difference triggers an automated Section 61 scrutiny notice. Common legitimate reasons for the difference include: exempt income not subject to GST, advance receipts recognised in GST differently from income tax, credit notes, and export income.
The problem is not that the difference exists — it is that you have not documented the explanation before the notice arrives. Without a prepared reconciliation, responding coherently to a Section 61 notice within the response window becomes extremely difficult.
✓ Fix: Prepare a GST-to-IT turnover reconciliation statement every year before filing GSTR-9 and ITR. Categorise every difference: exempt income, advance receipts, credit notes, non-GST income, export LUT supplies. Keep this document updated. If a Section 61 notice arrives, this document is your complete and immediate response.
Mistake 10 — Not Monitoring the Portal for Notices and Missing Response Deadlines
GST notices — DRC-01A, DRC-01C, ASMT-10, SCN under Section 73/74 — are posted to the GST portal’s “Notices and Orders” section. They are not sent by email or SMS. If you do not check the portal regularly, you will miss notices entirely.
The consequences of a missed notice are immediate: DRC-01C auto-escalates to a formal SCN. Section 73/74 notices result in ex-parte demand orders. ASMT-10 notices result in best judgment assessments. None of these require the department to re-notify you before taking action — the portal post is sufficient legal service.
✓ Fix: Check the GST portal’s notices section every week — not just when you are filing returns. Designate a specific person in your accounts team as the portal monitoring responsibility owner. At Rudra Capital, we include portal monitoring as part of every monthly GST compliance retainer — our clients receive notice alerts within 24 hours of issue, with strategic response guidance immediately.
Your Monthly GST Compliance Checklist — Avoiding All 10 Mistakes
By the 9th (before GSTR-1)
- Download GSTR-2B (14th of previous month)
- Reconcile purchase register vs GSTR-2B
- Follow up with suppliers for missing invoices
- Verify all HSN codes (6-digit if above ₹5 crore)
- Confirm place of supply for each invoice
- File GSTR-1 by 9th — before portal congestion
By the 18th (before GSTR-3B)
- Cross-check GSTR-3B outward total vs GSTR-1
- Claim ITC only on GSTR-2B-confirmed invoices
- Exclude all Section 17(5) blocked credit items
- Include RCM payable in the RCM row
- Check portal notices section for new notices
- File GSTR-3B by 18th — before 20th deadline
Need end-to-end GST compliance — returns, reconciliation & notice handling? View our GST Return Filing Service or call +91-9953572838 for a free first consultation.
Is your business making any of these 10 mistakes right now?
Rudra Capital’s GST team provides monthly GSTR-1 and GSTR-3B filing with pre-filing reconciliation, ITC verification, RCM compliance, portal monitoring, and notice response — for businesses across Delhi NCR. Most mistakes are found and fixed before they become notices.
FAQs — GST Return Filing Mistakes 2026
Related reading: GST Pain Points 2026 · GST Show Cause Notice · Legal GST Planning · GST Return Filing Services
