Delay in Filing of GST Return even for 1 day may Invite Penalty Notice of ₹ 50000 | Case Study

Delay in Filing of GST Return even for 1 day may Invite Penalty Notice of Rs. 50,000/- | Case Study

Dear friends, as we know that GST Department has issued many notices to GST Registered dealer for the period 2017-18 due to mismatch of GST Credits. And issued show cause notices, either to justify the reason of difference or pay the difference tax amount along with penal interest. Similarly, few months back, GST registered dealers premises verification campaign was also run, where many GST Registrations was cancelled by GST Department, due to various reasons like non existence of business premises at mentioned place or GST Dealers who has taken fake GST Credit without actual delivery of goods. Now, in this series of actions taken by GST Department, new kinds of notices are issued now. In this case study, we will discuss the same.

As per Section 39 (1) CGST Act, 2017 “[(1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time, as may be prescribed:

Provided that the Government may, on the recommendations of the Council, notify certain class of registered persons who shall furnish a return for every quarter or part thereof, subject to such conditions and restrictions as may be specified therein.”

In this case, Mr. A is GST Registered dealer whose annual turnover is Rs.60,00,000/- and dealing in trading business. As per law, every GST Registered Person who has adopted regular filing of GST Returns, has to file Form GSTR-1 on or before 11^th of succeeding month and has to file GSTR-3B on or before 20^th of succeeding month. In case of delay filing of Form GSTR-3B after due date, the dealer has to pay late fee and penal interest. In general practice, many people’s due to casual approach towards GST Compliances or due to unavoidable circumstances like due to cash flow related issues/ fails to file GST Return due to GST System failure and not able to file GST return within specified due date and file GST return later and pay late fee at time of next filing of GST Return.

GST department has the power to levy penalty on any dealer who contravenes the GST provisions/ law. Some contravenes are specifically mentioned in GST Law which may invite penalty and there penalty amount is also mentioned. However, Section 125 of CGST Act, 2017 talks about a General penalty. Extract of Section 125, is as follows:

“Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to twenty-five thousand rupees.”

Mr. A due to any reason is not able to file August Month GSTR-3B on or before due date. In this case proper officer has used his power given by Section 127 (Power to impose penalty in certain cases) of CGST Act, 2017 and issued show cause notice for levy of Penalty of Rs.50000/- (Rs.25000/- under CGST Act and Rs.25000/- under SGST Act) U/s 125 of CGST Act, 2017. Extract of Section 127 of CGST Act, 2017 is given below:

“Where the proper officer is of the view that a person is liable to a penalty and the same is not covered under any proceedings under section 62 or section 63 or section 64 or section 73 or section 74 or section 129 or section 130, he may issue an order levying such penalty after giving a reasonable opportunity of being heard to such person.”

Now, Mr. A who has annual Turnover of Rs.60,00,000/- earning Rs.450000/- as profit on annual basis may have to pay this handsome penalty of Rs.50,000/- if he is not able to file proper justification to the officer for such delay. In this case, Mr. A should draft a strong reply and attach documents related to justification that he mention in his reply.

Key Lessons from this Case Study

• All GST Registered dealers must follow all rules and regulations as specified in GST Act and rules. If dealer is not aware about these regulations then must consult your CA / Tax Consultant to understand the provisions which may attract late fees/ Interest/ Penalty
• Dealers must ensure to file all GST Returns within due date. As we all know, as of now, there is no late fees levied if we file GSTR-1 return after due date. Many small dealers are filing both returns at same time of filing GSTR-3B because if we will GSTR-3B after due date, it attracts late fee. Dealers should change their mindset and file both GSTR return in their specified due date.
• If there is any unwarranted situation which hinder you to file GST Return within due date, you must collect relevant document related to this. For example, in case you are filing GSTR-3B on 20^th and due to high rush or technical glitch you are not able to file your GST Return within due date then you must take snapshot of that error along with date and time. If we have adequate records with us, then we can handle such kind of notices very easily.

Author’s Advise:  All dealers must update their self with at least basic knowledge of GST Law. And they should come out of casual approach towards compliance “Dekh Lenge Rs.50/- per day ki late fees hi to hai”. From above case study, our key take away should be that, we comply with law. If such kinds of penalties are levied on MSME enterprises, then how small dealer can survive in this competitive environment. The GST Department should also take note that, such kind of harshness will destroy the MSME sector which is backbone of our economy and they should maintain lenient approach at least towards such kind of small dealers who are not regular defaulters. 

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Disclaimer: This article is for the purpose of information and shall not be treated as solicitation in any manner and for any other purpose whatsoever. It shall not be used as legal opinion and not to be used for rendering any professional advice. The author will not be held responsible for any lose, if occur after using above information. Kindly consult your professionals before taking any action. This article is written on the basis of author’s personal experience and provision applicable as on date of writing of this article. Adequate attention has been given to avoid any clerical/arithmetical error, however; if it still persists kindly intimate us to avoid such error for the benefits of others readers. The Author “CA. Shiv Kumar Sharma” can be reached at mail –[email protected] and Mobile/WhatsApp–9911303737