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Tag: GST

  • Blocked ITC Under GST: What Section 17(5) Really Denies You

    Blocked ITC Under GST: What Section 17(5) Really Denies You

    Blocked ITC Under GST

    A manufacturing company recently renovated its corporate office. It paid GST on premium furniture, decorative lighting, employee lounge interiors, and cafeteria upgrades. Since GST appeared correctly on every invoice, the finance team assumed the entire Input Tax Credit was available. During a routine GST review, they discovered that a significant portion of that credit was blocked ITC under GST, disallowed under Section 17(5) of the CGST Act. The result: additional tax outflow, interest, and avoidable litigation. This is one of the most common and costly misconceptions in GST compliance today.

    What Is Blocked ITC Under GST? Understanding Section 17(5)

    Blocked ITC under GST refers to input tax credit that a business is legally barred from claiming, even though GST was correctly charged and paid on the underlying purchase. Section 17(5) of the CGST Act operates as a negative list: if an expense falls into one of its listed categories, the credit is disallowed regardless of whether the expense genuinely serves the business.

    This is the single biggest misunderstanding finance teams carry into GST filing season. Paying GST on an invoice is not the test for eligibility. Whether the expense appears on the blocked ITC under GST list is the test that actually matters.

    Common Categories of Blocked ITC Under GST

    Some of the most frequently disallowed items under blocked ITC under GST provisions include:

    • Food and beverages, outdoor catering, and health or beauty treatments (subject to limited exceptions)
    • Club memberships, health clubs, and fitness centre subscriptions
    • Motor vehicles and other conveyances for passenger transport, except where specifically permitted
    • Works contract services and goods or services used for construction of immovable property
    • Goods or services used for personal consumption rather than business purposes
    • Employee travel benefits such as leave travel concession and holiday packages
    • Goods lost, stolen, destroyed, written off, or given away as free samples or gifts

    Each of these categories exists in the blocked ITC under GST framework specifically to prevent revenue leakage and stop businesses from using the credit mechanism for expenses that are personal, discretionary, or capital in nature.

    Real Example: How Office Renovation Triggers Blocked ITC Under GST

    Consider a company that spends ₹40 lakh renovating its head office, including ₹12 lakh on furniture, ₹5 lakh on decorative lighting, ₹6 lakh on an employee lounge, and ₹17 lakh on structural civil work and cafeteria upgrades.

    GST paid on the entire ₹40 lakh may appear claimable at first glance. In reality, the works contract and construction-of-immovable-property portions (broadly the ₹17 lakh civil work) fall squarely under blocked ITC under GST because Section 17(5)(c) and (d) disallow credit on construction, except where the expenditure qualifies as plant and machinery. The decorative lighting and lounge interiors attached to the building structure may also be denied on the same ground. Only clearly movable, business-use assets such as standalone furniture may remain eligible, subject to proper documentation.

    Key Distinction

    • Paying GST on an invoice does not automatically make the credit eligible.
    • Blocked ITC under GST applies even when the expense is genuinely used for business.

    Construction of immovable property is blocked except for qualifying plant and machinery

    Blocked ITC Under GST vs Eligible ITC: The Key Test

    Before claiming any credit, businesses should run every expense through three questions to separate genuine ITC from blocked ITC under GST:

    • Is the expense incurred in the course or furtherance of business?
    • Is the credit specifically blocked under Section 17(5) of the CGST Act?
    • Does the business hold the required documentation and satisfy all conditions under GST law?

    If the answer to the second question is yes, no amount of business justification restores the credit. Blocked ITC under GST overrides the general eligibility rule.

    How to Identify Blocked ITC Under GST Before You File

    1: Map Every Expense Category Against Section 17(5)

    Review purchase registers line by line against the Section 17(5) list rather than relying on GST appearing on the invoice.

    2: Cross-Check GSTR-2B for Ineligible Flags

    The auto-drafted ITC statement on the GST Portal separates eligible and ineligible credit, making it a useful cross-check against your books.

    3: Reverse Ineligible Credit in GSTR-3B

    Where blocked ITC under GST has already been claimed in error, it must be reversed in Table 4(B) of GSTR-3B along with applicable interest.

    4: Build a Periodic GST Review Process

    A proactive quarterly review of high-value purchases, especially capital expenditure and employee benefit spends, prevents blocked ITC under GST issues from accumulating into a year-end surprise.

    Consequences of Wrongly Claiming Blocked ITC Under GST

    • Interest liability on the reversed credit from the date of claim
    • Departmental scrutiny and GST notices for incorrect ITC claims
    • Penalty exposure where the claim is treated as suppression of facts
    • Working capital strain from unplanned tax outflow during reversal

    Expert Guidance on Blocked ITC Under GST Compliance

    GST compliance today involves accounting precision as much as legal interpretation, particularly where blocked ITC under GST rules intersect with capital expenditure and employee benefits. Dr. Haresh Adwani, PhD (Commerce) and a law graduate, brings this combined expertise to help businesses correctly classify expenses before they become blocked ITC under GST liabilities.

    At Adwani & Co LLP, businesses receive a structured pre-filing review of high-value purchases, renovation spends, and employee benefit expenses to identify blocked ITC under GST exposure before it becomes a departmental notice.

    Guidance available on the GST Portal and clarifications from the Ministry of Corporate Affairs reinforce why businesses increasingly rely on structured professional review rather than assuming every GST-paid invoice is creditable. As Dr. Haresh Adwani often notes, GST compliance is not just about claiming credits it is about claiming the right credits.

    Learn more about our GST Advisory & ITC Review Services. Read our detailed guide on GST Notice Compliance for Businesses.

    Key Takeaways on Blocked ITC Under GST

    • Blocked ITC under GST applies even when the expense is genuine and business-related.
    • Food, club memberships, motor vehicles, construction, and employee travel benefits are commonly blocked.
    • Cross-check every claim against Section 17(5) before filing, not after a departmental notice.

    Reverse ineligible credit promptly in GSTR-3B to limit interest exposure.

    1.What is blocked ITC under GST?

    Blocked ITC under GST refers to input tax credit that cannot be claimed under Section 17(5) of the CGST Act, even though GST was correctly paid on the purchase.

    2.Is ITC on office renovation always blocked?

    ITC on works contract services and construction of immovable property is generally blocked, except where the expenditure qualifies as plant and machinery.

    3.Can businesses claim ITC on employee food and travel benefits?

    Generally no. Food, beverages, and employee travel benefits such as leave travel concession fall under blocked ITC under GST unless mandated by law.

    4.What happens if blocked ITC is claimed by mistake?

    It must be reversed in Table 4(B) of GSTR-3B along with applicable interest, or it may attract penalty and departmental scrutiny.

    5.Is ITC available on motor vehicles under GST?

    ITC on motor vehicles is blocked unless the vehicle is used for permitted purposes such as further supply, passenger transport services, or driver training.

    6.Where can I check which purchases have ineligible ITC?

    The GSTR-2B auto-drafted statement on the GST Portal separates eligible and ineligible ITC for each return period.

    Conclusion: Claim the Right Credits, Not Just Available Credits

    Blocked ITC under GST catches even well-run finance teams off guard because the invoice itself gives no warning. The safeguard is a disciplined, expense-by-expense review against Section 17(5) before every filing, not a reactive reversal after a departmental notice.

    About the Author
    Nidhi Adwani is the Human Resources Manager at Adwani & Co. She is a Law Graduate and holds an MBA in Human Resources. She manages recruitment, employee engagement, team development, workplace culture, and the firm’s social media and content activities. Passionate about people and organizational growth, she also contributes articles for ITRAdvisor and Adwani & Co. Her writing focuses on HR practices, leadership, workplace engagement, and professional development, offering practical insights for professionals and businesses.

    If you want expert guidance on blocked ITC under GST and a documented review of your ITC position, connect with Adwani & Co LLP today.

    Legal Disclaimer: This article is published for informational and educational purposes only. Nothing contained herein constitutes legal, financial, or tax advice, nor should it be treated as a substitute for professional consultation tailored to your specific circumstances. Tax laws, rates, and provisions are subject to change; readers are strongly advised to consult a qualified Chartered Accountant or tax advisor before acting on any information in this article.

    All content is original. References to government portals and statutory provisions are paraphrased for educational purposes in compliance with fair use principles. No content has been reproduced from third-party sources

  • E-Way Bill Under GST: The Myth That Trips Up Businesses

    E-Way Bill Under GST: The Myth That Trips Up Businesses

    E-Way Bill Under GST

    “We’ve registered on the E-Way Bill portal. So now we need an E-Way Bill for every invoice, right?” That was the first question a client asked us after completing their registration. It’s a common assumption and one that trips up even well-run businesses. The truth is that an E-Way Bill under GST is not automatic, and understanding exactly when one is required can save a business from unnecessary compliance headaches.

    What Registering for an eWay Bill Under GST Actually Means

    As this client’s business grew, more of their consignments began crossing the prescribed value threshold. It was the right moment to register using their GSTIN so they could generate an eWay Bill under GST whenever the law required it.

    Our answer to their question surprised them: registration does not mean every invoice needs an E-Way Bill. Registration simply enables a business to generate one whether an E-Way Bill under GST is actually required depends entirely on the nature of the transaction and the applicable provisions.

    The Four Questions That Decide If an eWay Bill Under GST Is Needed

    Before generating an E-Way Bill under GST for any consignment, we always work through the same four questions with our clients:

    • Is there an actual movement of goods involved in the transaction?
    • Does the consignment value exceed the prescribed limit generally ₹50,000, subject to state-specific notifications?
    • Is the movement covered under any notified exemption?
    • Who is responsible for generating the E-Way Bill the supplier, the recipient, or the transporter?

    Getting a clear answer to each of these before goods move is what separates smooth GST compliance from last-minute scrambling.

    A Common Misconception About eWay Bill Under GST Registration

    One of the biggest misconceptions businesses have is assuming that GST registration itself automatically enables E-Way Bill generation. It doesn’t. A business must complete a separate registration on the E-Way Bill portal before it can generate an E-Way Bill under GST for any consignment the two systems are linked but not the same.

    This distinction is laid out clearly on the official eWay Bill portal, which operates as a separate registration layer connected to a business’s GSTIN rather than an automatic extension of it.

    The 180-Day Rule Every Business Should Know

    Another compliance point that catches businesses off guard: under the current provisions, an eWay Bill under GST cannot be generated for an invoice older than 180 days. Delayed action on eligible consignments can therefore create compliance challenges that are entirely avoidable with timely tracking.

    “Most GST compliance issues we see don’t come from businesses ignoring the law,” says Dr. Haresh Adwani, Founder of Adwani & Co LLP and a PhD holder in Commerce with a law degree. “They come from businesses misunderstanding exactly when the law applies to their specific transaction and the eWay Bill under GST is one of the clearest examples of that gap.”

    A Practical Example: When an eWay Bill Under GST Applies

    Consider a manufacturer dispatching goods worth ₹65,000 to a buyer in another state. Since the consignment value exceeds the ₹50,000 threshold and involves movement of goods, an eWay Bill under GST is required before the vehicle leaves the premises. Now compare that to the same manufacturer sending a sample consignment worth ₹8,000 here, because the value falls below the threshold, an E-Way Bill under GST is typically not required, provided no other notified condition applies.

    This is exactly the kind of transaction-by-transaction judgement that registration alone does not resolve. “Registering on the portal is only step one,” adds Dr. Haresh Adwani. “The real compliance work is in evaluating each consignment against the value threshold, the exemption list, and who bears responsibility for generating the document.”

    Read our detailed guide on: GST Composition Scheme: A Complete Guide for Small Businesses

    Key Takeaway An eWay Bill under GST is not generated automatically just because a business is registered on the eWay Bill portal. It is required only when goods move, the consignment value exceeds the prescribed threshold (generally ₹50,000), and no exemption applies and it cannot be generated for invoices older than 180 days.

    How Adwani & Co LLP Helps With eWay Bill Under GST Compliance

    At Adwani & Co LLP, a Pune-based chartered accountancy practice founded in 1977, we regularly guide growing businesses through E-Way Bill portal registration, threshold assessment, and day-to-day GST compliance. Under the guidance of Dr. Haresh Adwani PhD (Commerce) and LLB our team helps clients build simple internal checklists so that E-Way Bill under GST decisions are made correctly before goods ever leave the warehouse.

    Learn more about our GST Compliance Advisory Services, or read our detailed guide on Responding to GST ITC Notices for a closer look at how documentation gaps like these can escalate into departmental scrutiny.

    Q. Does GST registration automatically allow me to generate an E-Way Bill?

    A. No. GST registration and E-Way Bill registration are two separate steps. Even after obtaining a GSTIN, a business must register independently on the E-Way Bill portal before it can generate an Way Bill under GST for any consignment.

    Q. Is an E-Way Bill under GST required for every invoice?

    A. No. An E-Way Bill under GST is required only when there is a movement of goods and the consignment value exceeds the prescribed threshold, generally ₹50,000, subject to specific state notifications and exemptions.

    Q. Who is responsible for generating the E-Way Bill the supplier, recipient, or transporter?

    A. Responsibility depends on who causes the movement of goods and the terms of the transaction. In practice, it can fall on the supplier, the recipient, or the transporter, so this should be clarified before goods move, not after.

    Q. Can an E-Way Bill under GST be generated for an old invoice?

    A. No. Under current provisions, an E-Way Bill cannot be generated for an invoice that is more than 180 days old, which makes timely action essential to avoid unnecessary compliance complications.

    Q. What happens if goods move without a valid E-Way Bill under GST?

    A. Movement of goods without a valid E-Way Bill under GST, where one was required, can lead to detention of goods and vehicles, along with penalties under the GST law, making it important to verify applicability before dispatch.

    Conclusion: Get Your eWay Bill Under GST Decisions Right the First Time

    Most GST compliance issues don’t arise because businesses ignore the law they arise because businesses misunderstand exactly when the law applies. Registering on the E-Way Bill portal is an important first step, but it doesn’t answer the real question for every invoice: does this specific consignment need an E-Way Bill under GST or not?

    In Part 2 of this series, we’ll walk through some of the most common E-Way Bill mistakes we see in practice including one assumption that nearly caused a compliance issue for this very client. If your business is unsure how E-Way Bill under GST rules apply to your transactions, don’t wait for a mistake to find out. Connect with Adwani & Co LLP today for a practical compliance review.

    About the Author: Sejal Kadam

    Sejal Kadam is an Indirect Tax Associate at Adwani & Co LLP with a strong interest in GST, indirect taxation, and regulatory compliance. She contributes to helping businesses navigate evolving tax laws through practical, research-backed insights. Through her articles, Sejal aims to simplify complex GST and compliance topics, enabling businesses and professionals to make informed decisions with confidence.

    Disclaimer

    This article is prepared for general informational and educational purposes only and does not constitute professional tax, legal, or financial advice. GST provisions, including eWay Bill requirements, depend on individual facts and applicable state notifications; readers should consult a qualified chartered accountant or tax professional, such as the team at Adwani & Co LLP, before acting on any information contained herein.

  • How to Reply GST Notice u/s 73 : Complete Step-by-Step Guide (2026)

    How to Reply GST Notice u/s 73 : Complete Step-by-Step Guide (2026)

    By Dr. Haresh Adwani, PhD (Commerce), Law Graduate, Adwani and Company

    Received a GST notice under Section 73? Don’t panic. Section 73 of the CGST Act, 2017 deals with cases where tax has not been paid, short paid, or input tax credit (ITC) has been wrongly
    availed but without any intention of fraud or wilful misstatement. These are routine tax demand notices and can be resolved smoothly with the right response. This complete 2026 guide walks you through everything: what the notice means, when it is issued, the time limits, a step-by-step reply process, required documents, penalties for ignoring it, and answers to the most common questions taxpayers ask.

    What’s in This Guide

    • What is a Section 73 GST Notice?
    • When is it Issued? (With scenario table)
    • Time Limits to Reply — Key Deadlines
    • Step-by-Step Reply Process (7 Steps)
    • Documents Required
    • What is a Section 73 GST Notice?
    • Penalties if You Ignore the Notice
    • 7 FAQs Answered by CA Experts
    • Case Study: How Adwani & Co Saved a Client

    What is a GST Notice Under Section 73?

    Legal Definition: Section 73 of the CGST Act, 2017 empowers a proper officer to issue a show cause notice (SCN) to a registered taxpayer when tax has not been paid, has been short-paid, erroneously refunded, or when ITC has been wrongly availed or utilised without any element of fraud or intentional misstatement.

    In plain terms: the GST department has identified a mismatch or gap in your returns/tax payment, and they want you to explain or pay up without accusing you of fraud (that would be Section 74).

    When is a Section 73 Notice Issued?

    The GST officer may issue a Section 73 notice in any of these situations:

    ScenarioCommon Reason Risk Level
    GSTR-3B vs GSTR-2A/2B
    mismatch    		ITC claimed but not reflected in supplier’s
    data    		Medium
    GSTR-1 vs GSTR-3B mismatchOutput tax declared in GSTR-1 but not paidMedium
    Short payment of taxTax due > tax depositedMedium
    Excess ITC claimedITC beyond eligible limit claimedHigh
    Erroneous refundRefund granted but conditions not metHigh
    Non-payment by unregistered personTax liability exists but GST not paidHigh
    Annual return discrepancyGSTR-9/9C data doesn’t match returnsMedium

    Time Limits — What You Must Know

    Understanding time limits under Section 73 is critical. Missing a deadline converts a manageable notice into a serious penalty situation.

    ActionTime LimitConsequence if Missed
    Voluntary payment
    BEFORE SCN    		Anytime before SCN is issuedNo SCN issued; no penalty
    Payment after SCN but
    within 30 days    		Within 30 days of SCNNo penalty payable
    Reply / Show Cause responseAs stated in notice (usually 30 days)Ex-parte order passed against you
    Officer’s order issuance (DRC-07)Within 3 years from the due date of annual returnN/A — legal deadline for officer
    SCN issuance deadlineAt least 3 months before order
    deadline
    SCN can be challenged as
    time-barred    		SCN can be challenged as time-barred
    Appeal against order3 months from date of orderForfeiture of appeal right

    Important 2026 Update: The Finance Act 2024 extended the time limit for issuance of orders under Section 73 for FY 2018-19 to FY 2021-22. If you receive a notice for these years now, it is still valid. Always verify the notice date and consult a CA immediately.

    Received a notice and unsure of your deadline? (Consult Adwani & Co — Get Expert Review in 24 Hours)

    Also Read https://www.adwaniandco.com/blog/gst-show-cause-notices

    Step by Step: How to Reply to GST Notice u/s 73

    Step 1: Read the Notice Carefully (DRC-01)
    Identify the financial year, the tax period, the amount demanded (CGST/SGST/IGST/Cess separately), the reason for notice, and the response deadline. Check if it is a SCN (Show Cause Notice) or a pre-SCN intimation (DRC-01A).


    Step 2: Analyse the Discrepancy
    Download your GSTR-1, GSTR-3B, GSTR-2A/2B, and GSTR-9 for the relevant period. Cross check the department’s claim against your own records. Identify whether the demand is correct, partially correct, or incorrect.

    Step 3: Decide Your Response Strategy
    Three options:
    (a) Accept the demand and pay — no penalty within 30 days of SCN
    (b) Partially agree — pay agreed portion and contest the rest
    (c) Fully contest — file a detailed reply with supporting documents

    Step 4 : Prepare Your Reply (GST Notice Reply Format)

    Draft a point-by-point reply addressing each allegation in the SCN. Refer to the specific paragraph numbers in the notice. Use DRC-06 form for filing the reply on the GST portal.
    Attach all supporting documents and a clear reconciliation statement.


    Step 5 : File the Reply on GST Portal
    Log in at gstin.gov.in → Services → User Services → View Notices and Orders → Click on the relevant notice → Submit reply using DRC-06. Attach documents (PDF, max 5MB each).
    Preserve the ARN (Acknowledgement Reference Number) after submission.


    Step 6 : Attend Personal Hearing (If Called)
    If the officer schedules a personal hearing, attend it (or send an authorised representative). Carry original documents and a point-wise argument sheet. Request adjournments in writing via the portal if needed.


    Step 7 : Track the Order & Take Next Steps
    After hearing, the officer issues DRC-07 (Demand Order). If the order is in your favour no further action needed. If you disagree with the order, file an appeal before the Appellate Authority (GST APL-01) within 3 months.

    Documents Required to Reply to Section 73 Notice

    • GSTR-1 for the relevant period
    • GSTR-3B for the relevant period
    • GSTR-2A / 2B reconciliation statement
    • GSTR-9 (Annual Return)
    • Purchase invoices (basis for ITC claimed)
    • Sales invoices for the disputed period
    • Bank statements
    • Previous hearing orders (if any)
    • Supplier correspondence (if disputing ITC)
    • E-way bills (if applicable)
    • Books of accounts / ledgers
    • CA-certified reconciliation statement

    Pro Tip: Always submit a reconciliation statement along with your reply even if the officer didn’t specifically ask for it. It demonstrates good faith and helps resolve the matter faster.

    Penalties if You Ignore the GST Notice u/s 73

    Do NOT ignore a Section 73 notice. Here is what happens:

    Situation Penalty / Consequence
    No reply filed within stipulated
    time     		Ex-parte order passed; demand confirmed automatically
    Demand confirmed via DRC-07Interest @ 18% p.a. on unpaid tax + 10% penalty
    Ignoring confirmed demandRecovery action: bank attachment, asset seizure
    Non-payment after orderCertificate issued to Tax Recovery Officer; property recovery
    Minimum penalty u/s 73Higher of ₹10,000 or 10% of tax dues

    Important: If you voluntarily pay the tax within 30 days of the Show Cause Notice you pay zero penalty. This is the most important window to act quickly.

    Real Case Study – Adwani & Co

    Textile Wholesaler Pune | GST Notice for ITC Mismatch (FY 2021-22)
    A Pune-based textile wholesaler received a Section 73 SCN for ₹18.4 lakhs alleging ITC claimed on invoices not reflecting in GSTR-2B. The client had missed the response deadline and
    an ex-parte order was already issued.

    Demand Raised ₹18.4 Lakhs
    Final Settled Amount ₹2.1 Lakhs
    Demand Waived 89%
    Our team filed a rectification application with full reconciliation proving 87% of the ITC was
    valid with supplier invoices and payment proof. Penalty was fully waived.
    Handled by Adwani & Co, 2023

    Frequently Asked Questions

    01.What is the GST notice reply format PDF / which form do I use?

    You file your reply using Form GST DRC-06 on the GST portal. It allows you to submit a
    written reply, upload supporting documents, and indicate whether you agree/disagree with the demand. There is no separate “PDF format” the reply is filed online through the portal. You
    can prepare a detailed written representation offline and upload it as a PDF attachment with DRC-06.

    02.How to reply to a GST notice — is it the same as an income tax notice?

    No. Income tax notices are handled under the Income Tax Act 1961 via the Income Tax portal
    (incometax.gov.in), while GST notices are handled under CGST Act 2017 via the GST portal (gst.gov.in). The forms, deadlines, and processes are completely different. This guide covers GST notices only.

    03.What is the time limit to reply to a GST notice u/s 73?

    The reply deadline is mentioned in the notice itself — typically 30 days from the date of the
    notice. If you need more time, you can request an extension in writing via the portal. If you
    received an intimation (DRC-01A) before the SCN, you have 30 days to pay or explain before the formal SCN is issued.

    04.Can I avoid paying the penalty under Section 73?

    Yes — if you pay the full tax demand within 30 days of receiving the Show Cause Notice
    (SCN), no penalty is levied under Section 73(8). If you pay voluntarily even before the SCN is
    issued (upon receiving DRC-01A), you pay zero penalty and no SCN is even issued.

    Q5. What if I disagree with the entire demand?

    You file a detailed reply via DRC-06 on the GST portal, contesting each point with evidence
    invoices, ledgers, reconciliation statements, etc. The officer will schedule a personal hearing. If the order still goes against you, you can appeal before the GST Appellate Authority (GST APRIL-01) within 3 months of the order.

    Q6. Is Section 73 notice serious? Will I face criminal action?

    Section 73 notices are civil/tax proceedings — not criminal. Criminal prosecution under GST
    applies only to Section 132 offences involving fraud, fake invoicing, or tax evasion above ₹5
    crore. A Section 73 notice (no fraud element) will not result in criminal action if you respond
    properly. However, ignoring it will lead to demand orders and recovery proceedings.

    Q7. Can I hire a CA or tax consultant to handle the GST notice reply?

    Absolutely and it is strongly recommended for demands above ₹1 lakh or complex ITC
    mismatch cases. A qualified CA can review the notice, identify errors in the department’s claim,
    prepare a legally sound reply, represent you in hearings, and negotiate settlements. Adwani & Co specialises in GST notice handling with a 90%+ success rate in demand reduction

    About the Author
    Dr. Haresh Adwani
    Ph.D. in Commerce | Law Graduate | Managing Partner, Adwani & Co LLP Dr. Haresh Adwani holds a Ph.D. in Commerce and is a qualified Law graduate with over two decades of hands-on experience in GST advisory, direct taxation, and statutory compliance for businesses across Pune and Maharashtra. As Managing Partner of Adwani & Co LLP a firm established in 1977 by Advocate N. T. Adwani Dr. Adwani has guided hundreds of
    SMEs, startups, and corporates through India’s evolving tax landscape. He is a recognised advisor on GST compliance, company formation, and Virtual CFO services, and regularly
    contributes to professional seminars and industry forums in Pune.

  • Complete GST Compliance Checklist for Small Businesses in Pune (FY 2026–27)

    Complete GST Compliance Checklist for Small Businesses in Pune (FY 2026–27)

    By Dr. Haresh Adwani, PhD (Commerce), Law Graduate, Adwani and Company

    Small businesses in Pune with annual turnover above ₹40 lakh (₹20 lakh for services) must register under GST and file GSTR-1 by the 11th and GSTR-3B by the 20th of every month. Key annual obligations include GSTR-9 by 31 December and timely ITC reconciliation. Missing deadlines triggers ₹50/day late fees plus 18% interest on unpaid tax.

    Why GST Compliance Matters for Pune’s Small Businesses

    Pune is one of Maharashtra’s fastest-growing business hubs, home to thousands of MSMEs, startups, and trading firms. Whether you run a manufacturing unit in Pimpri-Chinchwad, a
    services firm in Baner, or a retail shop in Shivajinagar GST compliance directly affects your cash flow, vendor relationships, and legal standing.

    From 1 January 2026, the GST portal enforces stricter validations. Returns older than three years are permanently blocked. Incorrect filings are flagged within days. The cost of non- GST compliance is no longer just a fine it can freeze your ITC, block your e-way bill generation and damage your reputation with buyers.

    Important: Under the new GST compliance rules effective January 2026, businesses cannot file returns more than three years past their original due date. Any pending Input Tax Credit is permanently lost after that window.

    Step 1: Who Must Register for GST in Pune?
    GST registration is mandatory for any business in Pune that crosses these thresholds:


    ▸ Goods suppliers: Annual turnover exceeding ₹40 lakh
    ▸ Service providers: Annual turnover exceeding ₹20 lakh
    ▸ E-commerce sellers: Mandatory registration regardless of turnover
    ▸ Businesses with interstate supply: Mandatory regardless of turnover
    ▸ Reverse Charge Mechanism (RCM) applicants: Mandatory regardless of turnover

    Registration is free and done online at the GST portal (www.gst.gov.in). From 2026, the portal verifies bank account details during registration ensure your business account is
    active and linked before applying.

    Step 2: The GST Filing Calendar — Every Deadline You Must Know
    Missing even one filing deadline has cascading consequences. Use this calendar to set reminders for every key date:

    Return / Action Deadline
    GSTR-1 (Sales invoices upload) 11th of every month
    GSTR-2B (ITC reconciliation) Download by 14th of every month
    GSTR-3B (Monthly tax payment) 20th of every month
    PMT-06 (QRMP quarterly filers)25th of month following each quarter
    GSTR-9 (Annual return) 31st December of following FY
    GSTR-9C (Reconciliation, if turnover > ₹5 cr)31st December of following FY
    ITC Reversal ITC-03 (if switching to Composition)30 May 2026
    QRMP Scheme selection for FY 2026–27 30 April 2026

    Pro Tip: QRMP (Quarterly Return Monthly Payment) scheme is available for businesses with turnover below ₹5 crore. It allows quarterly GSTR-1 and GSTR-3B filing but requires monthly tax deposit via PMT-06.

    Step 3: Your Monthly GST Compliance Checklist

    By the 14th of Each Month
    ▸ Download GSTR-2B from the GST portal
    ▸ Identify missing invoices and ITC discrepancies: Reconcile GSTR-2B against your purchase register
    ▸ Their failure to file GSTR-1 blocks your ITC: Follow up with non-compliant suppliers


    By the 20th of Each Month

    ▸ File GSTR-3B and pay all outstanding GST
    ▸ Unmatched ITC claims trigger notices and reversals: Claim only ITC appearing in
    GSTR-2B
    ▸ Legal services, GTA, director remuneration, and certain imports attract Reverse Charge: Pay RCM tax if applicable
    ▸ Accept valid invoices, reject invalid ones: Check IMS portal

    Step 4: Annual GST Compliance — What Pune Businesses Must Do


    Reset Invoice Numbering : Due: 1 April Each Year
    Every GST registered business must start a fresh invoice number series from 1 April 2026.Invoice numbers must be unique within each financial year per GSTIN. Continuing the old series creates reconciliation errors during audits.


    File GSTR-9 : Due: 31 December 2026 (for FY 2025–26)
    GSTR-9 is the annual return summarising all monthly/quarterly filings for the year. Businesses with turnover above ₹5 crore must also file GSTR-9C, a reconciliation statement certified by a Chartered Accountant. Late filing after 31 December attracts automatic late fees from 1 January.


    ITC Reconciliation :Critical Before September 2026
    Any Input Tax Credit for FY 2025–26 purchases that is not claimed by the due date of the September 2026 GSTR-3B return is permanently lost. This is one of the most common and
    expensive mistakes made by small businesses in Pune. Reconcile your purchase register against GSTR-2B every month do not leave it to the year-end.

    Step 5: Should Your Pune Business Opt for the GST Composition

    If your annual turnover is below ₹1.5 crore (₹75 lakh for service providers), the GST Composition Scheme may significantly reduce your compliance burden.

    Feature Regular vs Composition Scheme
    Return frequencyMonthly vs Quarterly
    Tax rate Standard GST rate vs Flat 1–5% on turnover
    ITC eligibility Available vs Not available
    Opt-in deadline — vs 31 March each year (Form CMP-02)
    Suitable foBusinesses with high ITC vs Small retailers, restaurants, traders

    Note: Under the Composition Scheme, you cannot charge GST from your customers or issue a tax invoice. You must issue a Bill of Supply instead.

    Step 6: Penalties for Non-GST Compliance : Real Numbers
    Understanding the financial cost of non-compliance helps prioritise timely filing. Here are the
    actual penalties under GST law in 2026:

    ▸ GSTR-3B late fee: ₹50 per day (₹25 CGST + ₹25 SGST) for businesses with tax
    liability, capped at ₹5,000 or 0.25% of annual turnover (whichever is higher)
    ▸ Nil return late fee: ₹20 per day (₹10 CGST + ₹10 SGST)
    ▸ Interest on unpaid tax: 18% per annum from the due date
    ▸ Section 73 penalty (non-fraud): 10% of tax due or ₹10,000 (whichever is higher)
    ▸ Section 74 penalty (fraud): 100% of tax evaded
    ▸ E-way bill blockage: Failure to file GSTR-3B can block e-way bill generation, halting all goods movement

    Real example:

    A ₹200 filing fee unpaid for 200 days can accumulate to ₹20,000 with
    late fees and interest more than 100x the original amount.

    Read More

    https://www.adwaniandco.com/blog/gst-show-cause-notices

    Step 7: 6 Common GST Compliance Mistakes by Pune Small Businesses (And How to Avoid Them)

    ▸ Even if there are no transactions in a month, a nil GSTR-1 and GSTR 3B must
    be filed. Missing nil returns accumulates late fees.: Not filing nil returns
    ▸ Claiming ITC without supplier uploading their GSTR1 leads to reversals and
    notices.: Not reconciling ITC monthly
    ▸ Incorrect classification causes tax rate mismatches and audit notices. Update
    your masters at the start of every financial year.: Wrong HSN/SAC codes
    ▸ Services like legal fees, goods transport (GTA), and director salaries attract
    reverse charge. Many small businesses miss this.: Ignoring RCM obligations
    ▸ (Internal note only, remove before publishing): Blocking AI crawlers
    inadvertently via Cloudflare
    ▸ From January 2026, unverified bank accounts can trigger automatic GST
    registration suspension.: Not updating bank details on GST portal
    ▸ GST returns older than 3 years are permanently blocked. If you have any pending old returns, file them immediately: Missing the 3 year time bar

    Frequently Asked Questions

    Q1. What is the GST registration threshold for a small business in Pune?

    Businesses in Pune supplying goods must register if annual turnover exceeds ₹40 lakh.
    Service providers must register at ₹20 lakh. Certain categories such as e-commerce
    sellers, businesses making interstate supplies, and those liable under the Reverse Charge
    Mechanism must register regardless of turnover.

    Q2. How often does a small business in Pune need to file GST returns?

    Monthly filers must submit GSTR-1 by the 11th and GSTR3B by the 20th of each month.
    Businesses with turnover below ₹5 crore can opt for the QRMP scheme and file quarterly
    returns, but must deposit tax monthly via PMT-06. The annual return GSTR9 is due by 31
    December each year.

    Q3. What is the late fee for missing a GSTR-3B deadline?

    The late fee is ₹50 per day (₹25 CGST + ₹25 SGST) for businesses with tax liability, capped
    at ₹5,000 or 0.25% of annual turnover whichever is higher. For nil return filers, the fee is
    ₹20 per day. Interest on unpaid tax is charged at 18% per annum from the original due date.

    Q4. Is the GST Composition Scheme suitable for my Pune business?

    The Composition Scheme suits small traders, retailers, and manufacturers with turnover up
    to ₹1.5 crore (₹75 lakh for service providers) who do not have significant input tax credit to
    claim. It offers quarterly filing and flat tax rates but disallows ITC and collection of GST from
    customers. You must opt in by 31 March each year using Form CMP-02.

    Q5. What happens if my supplier does not file their GSTR-1?

    If your supplier fails to upload invoices in their GST-1, those invoices will not appear in your
    GSTR2B. You cannot legally claim ITC on those invoices until they appear. Regularly follow
    up with non compliant suppliers or consider switching to GST compliant vendors to protect
    your working capital.

    Q6. Do I need to file GST returns even if I have no business in a month?

    Yes. Even if there are zero transactions in a month, you must file a nil GSTR-1 and nil
    GSTR-3B before the respective deadlines. Missing nil returns attracts late fees of ₹20 per
    day and can eventually lead to GST registration suspension.

    Q7. What is the e-invoicing threshold in 2026?

    Businesses with Aggregate Annual Turnover (AATO) exceeding 10 crore must generate e-
    invoices through the Invoice Registration Portal (IRP) within 30 days of the invoice date. IRN
    generation is blocked beyond the 30 day window. Below 10 crore, e-invoicing is optional
    but recommended for accuracy.

    Q8. How can Adwani & Co help with GST compliance in Pune?

    Adwani & Co LLP provides end-to-end GST compliance services for small and medium
    businesses in Pune, including monthly GSTR1 and GSTR3B filing, ITC reconciliation,
    annual return preparation, GST registration, Composition Scheme advisory, andrepresentation before GST authorities.

    About the Author
    Dr. Haresh Adwani
    Ph.D. in Commerce | Law Graduate | Managing Partner, Adwani & Co LLP Dr. Haresh Adwani holds a Ph.D. in Commerce and is a qualified Law graduate with over two decades of hands-on experience in GST advisory, direct taxation, and statutory compliance for businesses across Pune and Maharashtra.