Issues Regarding Late filing of GSTR 1 & 3B

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GST return must be compulsorily filed by all persons having GST registration irrespective of turnover or profit. Even in the cases with no business activity or turnover in a month but if the person is registered with GST, he/she should file GST returns. Regular taxpayers shall file monthly GST returns and dealers registered under Composition Scheme shall file quarterly GST returns. On the other hand, any non-resident taxable persons shall file one return every month. 

In this blog, we’ll look at the various issue regarding not/late filing of two major return i.e GSTR 1 and GSTR 3B and their individual impacts. Let's start this with a short introduction of GSTR 1 and 3B.

GSTR 1 is furnished by taxpayers for providing the details of Outward supplies or sale transactions made and could be filed monthly/ quarterly(if opted under the QRMP scheme). Any amendments have to be recorded in the GSTR-1 like previous tax years and sales invoices. 

The usual due date for filing GSTR-1 is 11th of every month (Monthly filers) and 13th of the month succeeding the quarter (In case for Quarterly return filers) 

GSTR- 3B acts as the summary for Inward and Outward supply. This monthly self-declaration/return is filed by every normal registered person with details about all outward supplies made, tax liability, input tax credit asserted, and payable amount of tax. Details of ITC and sales details must be reconciled with GSTR-1 and GSTR-2B every tax period before filing GSTR-3B.

The usual due date for this return is 20th of the every month (For Monthly Filers) and 22nd or 24th of the month next to the quarter (In case for Quarterly return filers)

Effects of not/late filing of GSTR 3B

➤ Late Fees u/s 47 of the CGST Act, 2017 and interest u/s 50

Late fees is the first consequence you will face for non filing of GSTR 3B and it starts Immediately after the due date. The late fees will increase everyday until it hits the maximum limit of Rs. 500 (if you do not have any Tax Liability) and at Rs. 1,000 (if you have tax liability). This shall be automatically added in the next month’s GSTR 3B. Until you pay the late fees, you can’t proceed to file the return

Moreover, if a taxpayer fails to pay tax within prescribed time, then for the delay in payment, interest at the rate of 18% is levied. The interest will be payable only if you use cash ledger balance to pay taxes. In case of interest, there is no concept of maximum capping.

➤ Restriction of E-Waybill Generation u/s 138E

The restriction of E-Way bill will be applicable only if two consecutive GSTR 3B is not filled then the generation of E-Way Bill will be restricted for all types of outward supply of that person. The restrictions will be lifted once the GST Returns are filled.

➤ Penalty u/s 122(1)(iii) 

If the person does not pay the collected tax amount within 3 months from the due date, the Penalty will be imposed and it will be equal to the amount of tax collected subjected to a minimum of Rs. 20,000. 

➤ Blocking of GSTR-1 filing facility

In the previous GST council meeting , it was confirmed that from 1st January, 2022, the GSTR-1 return filing facility will be blocked for taxpayers who have not filed GSTR-3B for the previous two return periods. In simple words, starting from 1st January,2022, taxpayers will not be able to file GSTR-1 or use the IFF for December,2021 on the GST portal if they have pending GSTR-3B filing. This restriction is applicable to both monthly return filing as well as quarterly filing. 

Moreover, If a taxpayer is unable to file GSTR-1 then the counterparty will not be able to claim the credit on such purchase. Non-uploading of invoices in GSTR-1 will result in the non-reflection of the transaction in the counterparty’s GSTR-2A and GSTR-2B. Hence, the credit will be automatically denied for the particular recipient. 

➤Suspension and subsequent cancellation of GST Registration u/s 29(2) 

If the person does not file a return for a continuous period of six months, then the GST Officer has a right to cancel his/her GST registration. But it isn’t spontaneous . The officer will issue a Notice before cancellation, to seek clarification from such taxpayer and that person is required to reply within 7 working days, giving reasons to the officer for not cancelling the GST registration.

The cancellation of GST Registration will hamper the business activity as the registered person can not supply any Taxable Goods till the time the suspension is revoked . Thus it will hamper the business.

Late Fees and Penalty for not Filing GSTR 1

Initially a late fee for not filing GSTR-1 wass Rs. 200 per day of delay (Rs. 100 as per the CGST Act and Rs. 100 as per SGST Act). However, after that the late fees continue to be levied at a reduced fee . As per CGST notification 20/2021 dated 1st June 2021, the maximum late fee chargeable from the period of June 2021 onwards are as follows -

Registered taxpayers having no outward supplies in the tax period are liable to a maximum late fee of Rs.500 (Rs.250 each of CGST & SGST Act). Whereas, registered persons having a total turnover of up to Rs.1.5 crore in the preceding financial year, other than the nil filers are liable to a maximum late fee of Rs.2,000 (Rs.1,000 each of CGST & SGST Act). 

On the other hand, the registered persons having an aggregate annual turnover of more than Rs.1.5 crore but up to Rs.5 crore in the preceding financial year, other than the nil filers can be charged a maximum late fee of Rs. 5,000 (Rs.2,500 per Act). There is no change in maximum late fee for taxpayers with total turnover more than Rs.5 crore and it remains Rs.10,000. The late fee will be charged from the date after the due date.

However, at the time of assessment of returns, the tax officer may raise a notice demanding late fee for the period of delay.