3-Year window for filing GST Return: Unpacking proposed amendment

 

Ravi Raghavan, Senior Partner, Vishwanath K, Associate Partner & Gopal Sonika, Associate, Lakshmikumaran and Sridharan

 

The Union Government has introduced the Finance Bill, 2023 ('Finance Bill') in the Parliament, proposing certain amendments to the provisions of the Central Goods and Services Tax Act, 2017 (CGST Act). Amongst others, some of the proposed amendment specifically aims to restrict the time limit for filing the GST Forms as mandated by Section 37, Section 39, Section 44 and Section 52 of the CGST Act up to a period of 3 years from their respective due dates which can be extended by Government subject to such conditions and restrictions as may be notified.

 

This article aims to present an overview of the proposed amendment and to provide certain insights into various aspects related thereto which need taxpayers' consideration.

 

Proposed Amendments (simplified)[1]

 

The revised upper timelines for filing FORM GSTR-1, GSTR-3B and GSTR-9 would be as under:

 

 

Analysis:

 

The proposed amendments do not in any way extend the due date but merely provide an upper time limit for filing the relevant GST forms. It must be noted that the return filed beyond or after the due date but within the upper time limit window may be subject to late fee, interest liability and / or penalty, as applicable.

 

Maintenance of data in GST Common Portal

In line with the Government's intention to digitize tax compliance, submission of returns, filing of forms and other compliance, is made completely online through the common GST portal managed by the Goods and Services Tax Network (GSTN). Given the fact that there are more than 1.4 Crores taxpayers registered and filing GST forms through the GST portal, it may be imperative to place a cap or hard stop on the filings of past periods else it may lead to a situation where filing of past periods forms would have an indefinite period.

 

Retention of accounts by taxpayer:

While the submission of details / return for a tax period will not be allowed beyond 3 years from the due date, it must be noted that the taxpayer is still under obligation to keep and maintain the books of account and other records in accordance with the provision of GST law[3] until the expiry of 72 months or 6 years from the due date of furnishing of annual return for a particular financial year to which such record or account relates.

 

The practical paradox:

Although the provision provides that the maximum time within which the details or returns can be filed, there seems practical inconsistency when other provisions are read together, for the following reasons:

 

-     In terms of Section 29(2)(c) of CGST Act, 2017 read with Rule 21, 21A and 22 of CGST Rules, 2017, if the taxpayer does not file GSTR - 3B for a continuous period of six months, GST department has been empowered to cancel the GST registration of such taxpayer after giving him an opportunity of being heard. For instance, if a taxpayer has not filed GSTR - 3B of April-2023 till December 2023, the common portal will not allow the taxpayer to file returns for May - 2023 to December - 2023 as well, considering that returns/forms must be filed sequentially[4] and consequentially making their GST registration liable for cancellation under Rule 21 of CGST Rules, 2017. If the GST registration is not cancelled, it is still possible that the department may still suspend the GST registration. Similarly, if a taxpayer has not filed GSTR - 1 for 6 months, the returns cannot be filed for subsequent months and because the taxpayers will not be allowed to file GSTR - 3B before filing GSTR - 1, this will ultimately attract Rule 21 ibid.

 

-      In case a taxpayer has not filed GSTR-3B, the same attracts the notice in form GSTR-3A as per Section 46 of the Act (ibid) requiring the taxpayer to file GSTR-3B within 15 days. Also, for non-filers of GSTR -3B even after service of notice u/s 46, Section 62 provides for best judgment assessment of their tax liability. In this regard, Central Board of Indirect Taxes & Customs ('CBIC') has issued a Standard Operating Procedure[5]. A combined reading of the above suggests that the proper officer can proceed with best judgment assessment immediately after 50 days[6] of the due date for non-filing of GSTR - 3B by the taxpayer. Further, proceedings for recovery of tax[7] may also be initiated in much lesser time than the three years from the due date.

 

In all such cases, whether the GST department will wait for the proposed three years' timeline to be completed to proceed for cancellation of registration or recovery of tax'

 

Admissibility of input tax credit ('ITC'):

GSTR - 1 and GSTR - 3B of suppliers has direct effect on the ITC of the recipient. In the context of limitation of 3 years for filing GSTR - 1 and GSTR - 3B, following points are worth noting:

 

-      Where the supplier has furnished its GSTR - 1 for a tax period (say April 2023) beyond 11th November 2024 [i.e., the cutoff date for reflection of relevant ITC in GSTR - 2B of the recipient for the month of October 2024[8]), but well within the three years window proposed under the amendment and the ITC is availed by the recipient before 30th November 2024 (the due date for taking ITC of April 2023 - March 2024), can the said ITC be considered as availed in accordance with the law?

 

-      Where supplier timely filed GSTR - 1 but did not file return in GSTR - 3B (say for April 2023) on or before 30th September 2024, but ITC was availed by the recipient, Rule 37A of CGST Rules, 2017 requires the recipient to reverse the said ITC on or before 30th November 2024, which can be reclaimed on subsequent filing of GSTR - 3B by the supplier. However, by restricting the time limit for filing of GSTR-3B of supplier, this may indirectly limit the time for claim of ITC by recipient which is legitimately available under Section 41 and Rule 37A.

 

Ending but not winding up:

 

The amendment for limiting the maximum time within which returns can be filed by taxpayer, seems to have impact on ITC of the recipient and the way the GST departments may take actions due to any non-compliances on the part of the supplier in unclear. Hence a suitable clarification from the government may resolve uncertainty. In any case, taxpayers may have to take precautionary measures for maintaining records of statement and returns filed and take reasonable care to comply with law.

 

[Date: 15/03/2023]

 

(The views expressed in this article are strictly personal.)