GST Late Fees Fiasco And Solution

CA Sudhir Halakhandi

When goods and service tax was introduced in India in July 2017 and first returns were filed in the Month of Aug. 2018, the first most controversial aspect of the GST was surfaced in the form of GST Late fees.  GST was a new Indirect  taxation system and the number of dealers from the small and medium segment was in majority hence they need some time to prepare themselves to follow the GST procedures and at the initial stage the strict penal provisions were unwarranted. The GST experts were also of the same opinion. The GST late fees provisions were too strict to digest by the Trade and Industry due to two reasons. First Late fees is  directly not connected with amount of tax to be paid by the dealer hence in most of the cases the amount of late fees was much more than the amount of tax. Even in case of NIL tax returns the dealers had paid thousands of Rupees as late fees. The composition dealers were also the sufferers.

Second and most important point is that the GSTN, the network accepting the return , was not working properly and its capacity and speed was not supporting the dealers since initial stage of the GST and today also the situation is not improved up to the desired level.

The dealers who failed to file their returns within time due to technical reasons  or their own Financial or business  reasons, ultimately filed their returns by paying the Late fees which in a considerable number of cases was in huge value.  In any case we can say they have followed the law in its true spirit and as law abiding citizens of the country by paying the late fees and filed their returns.

There was a demand from these Dealers who paid the late fees and the legitimacy of their demand was always having the support of GST Experts and Trade and Industrial Associations that the late fees paid by these dealers should be refunded back to their account.

The GST administration is very sensitive and hyperactive   towards collection of Late fees (Later I will explain it in the case of GSTR-10) and sometimes in tax circles it is wider spread talk that GST is only introduced in India to collect Late Fees though it is not the factual position but it shows the frustration of the dealers and tax experts against the strict provisions and huge collection of Late fees.

The problem of late fees is not only with GSTR-3B but in case of GSTR-10 the dimension of problem was too serious.  GSTN has started collecting Late fees on GSTR -10 , the final return of GST dealers whose Registrations are surrendered and cancelled , from 15th December 2018 though the Notified due date was 31st. December . When the Mistake was pointed out they tried to rectify the date but again made a mistake by making it 30th December as against Notified 31st. Dec.2018. The late fees were paid by the dealers since it was Rs.200 per day and it was increasing day by day. It was unlawful collection of late fees and clear lack of coordination between GST Law and GST Network.

Now as per the decision of the GST council, a Notification has been issued by the Government to waive the Late of fees of the dealers who have not filed their return from the July 2017 to Sept. 2019 if they file these returns from 22nd Dec 2018 to 31st. March 2019. This is a welcome step of GST council and the Government but it is clear discrimination to the dealers who filed their return with late fees to follow the Law formulated by the Government.

It is high time for the GST Council and the Government of India to accept the demand of these dealers and Return back their late fees to their accounts to bring back their faith in the GST.