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A report by Clear Tax has found that internal system mismatches are the major reason behind Goods and Services Tax (GST) notices served to enterprises, with 80% of firms receiving at least one notice in FY 2025 due to filing discrepancies. The report states that these mismatches occur between the GSTR-1 sales report and GSTR 3B tax payment documents, which are based on different databases and do not connect with each other.
The report highlights that eight out of ten notices received were system-triggered, with 35% of them due to Input Tax Credit (ITC) filing mismatches, which are preventable. GST tax collections increased 9.4% to ₹22.8 lakh crore in fiscal 2025, while the number of tax notices also increased 33.3% to 200,000 notices in the same period.
The study surveyed over 100 chief financial officers of firms with revenues exceeding ₹500 crore, covering five industries: manufacturing, retail, logistics, e-commerce, and FMCG.
The report notes that enterprises receiving the most notices are not necessarily non-compliant, but rather their compliance processes have not kept pace with the system's ability to detect gaps. The threshold for triggering a scrutiny notice is increasingly low, and the response window is getting shorter.
The Clear Tax report is expected to prompt a review of GST compliance processes, with tax authorities and enterprises likely to re-examine their systems to prevent mismatches and reduce the number of notices served.