Six Common GST Mistakes in 2026: Place of Supply, ITC, RCM and the Patterns That Drive Notices

Most GST notices come from the same six mistakes

After three GST audits and several dozen ASMT-10 scrutiny notices a season, the structural errors that drive them are surprisingly consistent. This is the working list, with the sections of the CGST Act and IGST Act that govern each, and what the fix looks like in practice.

1. Wrong place of supply — CGST vs IGST mixed up

The single most common error, especially for service businesses. Whether a supply is intra-State (CGST + SGST) or inter-State (IGST) is determined by the place of supply rules under Sections 10 to 13 of the IGST Act, 2017:

• Section 10 — place of supply of goods, other than imports/exports.
• Section 11 — place of supply for imports and exports of goods.
• Section 12 — place of supply of services (supplier and recipient both in India).
• Section 13 — place of supply of services where supplier or recipient is outside India.

Get this wrong and you've charged CGST+SGST when IGST was due (or vice versa); the recipient cannot claim credit cleanly, and the correction route is laid out in Section 77 of the CGST Act and Section 19 of the IGST Act (you can claim back the wrongly-charged tax). It still becomes a reconciliation nightmare at year-end.

Fix: validate the place of supply against the IGST Sections before each invoice — especially for services where the customer is in another State.

2. Time of supply — output tax declared in the wrong month

When tax is payable depends on the time of supply, which is not always the invoice date. Under Section 12 (goods), Section 13 (services) and Section 14 (rate-change) of the CGST Act, time of supply is the earlier of date of invoice (or due date) and date of receipt of payment, with carve-outs for continuous supplies and reverse-charge cases.

A common pattern: a service invoice raised in late March 2026 for work substantially performed in February, with payment received in April. If the invoice is issued late (beyond the 30-day window under Section 31), the time of supply can shift to an earlier month and you've under-declared in the original return.

Fix: raise the invoice within the prescribed period from completion of supply (Section 31); align the GSTR-1/3B period to the time-of-supply month, not the receipt-of-payment month.

3. ITC claimed without GSTR-2B confirmation

The single biggest source of ASMT-10 notices. Section 16 of the CGST Act lays down four conditions for ITC eligibility, and Section 16(2)(aa) (inserted by Finance Act 2021) added the requirement that the supplier must have furnished the details of the invoice in their GSTR-1 and the credit must appear in the recipient's GSTR-2B.

Claiming ITC in GSTR-3B against an invoice not appearing in 2B is the most common trigger of the ASMT-10 ITC-mismatch notice — see our guide to the ASMT-10 reply. CBIC's Circular 183/15/2022-GST set out a structured procedure for proving ITC for older periods, but going forward the rule is simple: reconcile 3B to 2B before filing.

Fix: reconcile every month before the GSTR-3B due date; chase vendors who haven't uploaded their invoices; do not claim ITC in 3B that is not in 2B unless you have documented vendor confirmation.

4. RCM discharged through ITC instead of cash

Reverse-charge mechanism under Section 9(3) and 9(4) of the CGST Act requires the recipient to pay tax in cash on specified inward supplies — including a residential rent paid by a registered tenant since 18 July 2022 (see GST on real estate), security services from non-corporates, GTA services, legal services from individual advocates, and several other notified categories.

The tax under RCM must be paid through the electronic cash ledger (Section 49 read with Rule 86B), not by setting off ITC. ITC on the RCM-paid tax is available to the recipient as their own input tax credit in the same return, but the payment leg must be in cash.

A common error: showing the RCM amount in 3B but discharging it via ITC — which understates the cash liability and over-claims credit at the same time. ASMT-10 flags this consistently.

Fix: discharge RCM in cash via DRC-03 or the cash ledger every month; claim corresponding ITC separately in the same 3B.

5. E-way bill, GSTR-1 and stock register out of sync

The e-way bill data is matched by the department against GSTR-1 outward supplies. Common mismatches:

• Goods moved on an e-way bill that was later cancelled but the GSTR-1 invoice was already filed.
• Goods returned without a credit note in the same period.
• Job-work movements incorrectly reported as outward supplies.

Each of these triggers a discrepancy in the scrutiny module that ends up in an ASMT-10.

Fix: monthly reconciliation between EWB portal data, GSTR-1, stock movements and the books; documented cancellations and credit notes.

6. Wrong HSN / SAC and consequent rate error

Classification errors fall into two buckets:

• Wrong HSN for goods that look similar but attract different rates (textiles, packaged food, certain capital goods).
• Wrong SAC for services that sit close to rate boundaries (residential vs commercial works contract, manpower supply vs job work).

HSN reporting is mandatory at 4-digit (for taxpayers with turnover above ₹5 crore) or 6-digit level, and the GST portal validates against the master list. A wrong HSN is not just a reporting issue — it can drive a wrong rate and, downstream, an under-payment that surfaces in audit.

Fix: anchor HSN to the Customs Tariff for goods and the Scheme of Classification under Notification 11/2017-Central Tax (Rate) for services; flag borderline classifications for advance ruling under Section 97 rather than guessing.

What clean monthly compliance looks like

The fix to all six is a single discipline: a monthly close that reconciles GSTR-1 to GSTR-3B, 3B to 2B, EWB to GSTR-1, and RCM payments to inward-supply registers — before filing. Errors caught at this stage close without notice; errors caught by the department in scrutiny become ASMT-10 cases at best, and Section 65 audits at worst — see our guide to GST Assessment vs Audit.

For founders running multiple structures, our existing piece on the three structural GST mistakes that trigger scrutiny covers higher-level traps (ITC against unregistered vendors, place-of-supply across state borders, reverse-charge oversights).

Pune note: monthly close as part of the engagement

At RDA Tax Advisory Services, Baner, the monthly GST close is part of every regular client engagement. We reconcile GSTR-1 to 3B, 3B to 2B, EWB to GSTR-1 and RCM cash discharge before filing. Where a discrepancy from an earlier period surfaces, we prepare DRC-03 with Section 50 interest and a clean note for the trail. For Pune businesses crossing the ₹5 crore turnover line into mandatory e-invoicing or running multi-State registrations, our compliance support is built around catching errors at the close stage so they never become notices. Office No. 102, Snehraj Apartment, Baner, Pune 411045 · call +91 77570 45059.

Hand us the monthly close — keep the notices at zero

Running GST in Pune? RDA closes your GSTR-1, 3B and EWB monthly with full reconciliation, so you stay in self-assessment territory and out of scrutiny. Book GST compliance support at rdatax.in or call +91 77570 45059 — RDA Tax Advisory Services, Baner, Pune.

Verification note: Material legal positions in this article — place of supply under IGST Act Sections 10-13; time of supply under CGST Sections 12-14; ITC eligibility under CGST Section 16 (and 16(2)(aa) on supplier-side compliance); blocked credits under Section 17(5); RCM under Section 9(3) and 9(4); invoicing under Section 31; cash-ledger discharge under Section 49 read with Rule 86B; Section 77 CGST / Section 19 IGST refund of wrongly-charged tax; classification under Notification 11/2017-Central Tax (Rate); CBIC Circular 183/15/2022-GST on ITC mismatch verification — are sourced from the CBIC Tax Information Portal.