GST Amnesty (?) Scheme for providing relief in late fees for pending GSTR 3B

In 43^rd GST Council meeting held as on 28^th May 2021, council has declared an Amnesty Scheme to provide relief to taxpayers regarding late fee for pending returns. The same is notified through Notification No. 19/2021 – Central Tax dated 1^st June 2021.

The scheme is wide enough to cover the tax period from 1^st July 2017 to April 2021. Salient features of the scheme are –

• The Scheme covers the period from 1st July 2017 to April 2021.
• Those taxpayers who have not filed the returns for the above period till 31st May, 2021 are covered under the Scheme.
• Window under the Scheme will be opened from 1st day of June, 2021 to the 31st day of August, 2021
• Maximum Late Fees applicable per return for returns with NIL Liability will be Rs.500/- (CGST Rs.250+ SGST Rs.250 and for the return with Tax Liability Rs.1,000/- (CGST Rs.500 +SGST Rs.500)
• The Scheme is not applicable for the returns filed before 1st June 2021

The scheme is declared as a part of one of the Trade Facilitation measures with intention to provide relief to taxpayer from the burden of late fees. The government is promoting the scheme through various modes like messages on CBIC Portal, e mails form range / divisional offices, whats App messages from authorities, etc.

Definitely The Scheme is useful to the taxpayers but not free from challenges at Departmental and Taxpayers level. The scheme prima facie seems to be very clear but likely to struck with certain hurdles which are as follow –

1. No amnesty given / clarifications issued for Revocation of cancelled GSTIN

First and foremost issue is that there is no amnesty announced or clarification issued by the Government in the cases where GSTIN was cancelled and period for filing application for revocation as well as filing appeal to appellate authority is already lapsed.

As per provisions of GST Act

• if the taxpayer has not furnished returns for a continuous period of six months or

• if taxpayers is paying tax under composition scheme has not furnished returns for three consecutive tax periods,

The proper officer may cancel the registration of a person from such date, including any retrospective date

Taxpayers can file application for revocation within time limit prescribed under Act i.e. 30 days from the service of cancellation order. If proper officer deems fit and subject to conditions prescribed, he can revoke the cancellation of GSTIN. Proper officer can reject the application if he deems fit.

Where such revocation application is rejected, taxpayer can file appeal before appellate authority within three months from the date of communication of order of cancellation.

In such cases there is no clarity that whether the appeal filed after the time limit allowed under act, will be allowed or not? If allowed whether will it be disposed off at least before 15^th August i.e. 15 days before the last date of scheme?

Without activating the GSTIN taxpayer cannot take the benefit of the waiver of late fees scheme and in such case the success ratio of the scheme may be less.

2. No Relaxation in late fees for delay in filing of  GSTR 1

If registration cancelled because of non-filing of GSTR 3B, then filing of GSTR 1 is not possible. No waiver or relief is provided for such eventuality in the scheme.

As we know the system of filing of GST Returns as envisaged in the Act, cannot be implemented practically. As per original scheme of filing of GST returns; monthly GST Return i.e GSTR 3 (currently GSTR 3B) cannot be filed without filing GSTR 1. Now such interlinking is not required in current system of Filing of GST returns.

3. No relief for claiming and utilising ITC which is subject to Section 16(4) of GST Act

Section 16(4) of GST Act, does not allow the taxpayers to avail ITC if GSTR 3B is filed after the due date of furnishing of GSTR 3B for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.

It is possible that majority of the taxpayers have not filed GSTR 3B on account of liquidity issues. On account of this tax authorities may challenge the eligibility of ITC claimed for the period July 2017 to March 2020 where GSTR 3B are filed under this Amnesty Scheme

To sum up the period wise availability of ITC will be as follows –

4. No relief for claiming and utilising ITC to Recipients on Invoices reported by Suppliers in GSTR 3B and GSTR 1 filed under Amnesty Scheme:

As interpreted, the Amnesty Scheme will not provide immunity to the recipient of Goods and / Services to avail the ITC on GST paid by supplier of Goods and / Services under this scheme for the period July 2017 to March 2020.

As already pointed that the GST return filing as envisaged by the Law Makers is not yet implemented. Reason being many taxpayers are not able to claim the ITC though they have already paid GST to the suppliers of Goods and / or Services but supplier is not complying with filing provisions.

One of the examples is that, reflection of Invoice in GSTR 2A / GSTR 2B which became the mandatory condition for claiming ITC. This condition is subject to ambiguity till the insertion of new clause (aa) in Section 16(2) of the GST Act vide Finance Act 2021 dated 28/03/2021.

Accordingly it is possible that the recipient of the Goods and / or Services has not availed and utilised the ITC on invoices which were remained unreported on account of non-filing of return in past.

On the other hand if the recipients of Goods and / Services are allowed to avail and utilise the ITC as mentioned above, they will release the GST amount held up by them on account of  non-payment GST or non-filing GST Returns by Supplier and it will have positive impact on overall liquidity in the economy.

5. Possible Solutions:

It appears that the scheme of waiver of late fee is not an Amnesty in literal sense. It is only “waiver of late fees scheme” and has very specific and pin pointed relaxation in late fees only. It can be named as Amnesty when such relaxation is backed by various administrative and legal reliefs like

• Waiver in late Fees for GSTR 1, GSTR 9 and GSTR 9C, GSTR 10, GSTR 4, etc.
• Allowing ITC for the past period by relaxing the applicability of Section 16(4), Rule 36(4), etc.

Considering such difficulties in the initial era of GST implementation this is the right time to come with the Mega Amnesty which will cover all the above said legal as well as administrative difficulties as one time opportunity to the Taxpayers.

Government can announce such amnesty by issuing Removal of Difficulty Order under Section 174 of GST Act or by passing ordinance or any other legal way it find fit.

Such type of hand holding measure will be helpful to the Taxpayers at large in turn also reduce the burden on Judiciary which help to save the public cost and time and will also help to boost the inner spirit of One Nation One Tax.