OPTION to file GSTR-9 for Small Taxpayers

The 37th GST Council Meeting held on 20th September 2019 introduced some much needed relief to certain industries. Along with that, the Council also sought to introduce some relief to small taxpayers by easing the compliance burden. One of the major reliefs was doing away with the requirement to file Annual Return in Form GSTR-9, for taxpayers with annual turnover less than Rs. 2 Crores in the FY 2017-18 and FY 2018-19. This was a welcome announcement for almost 75% registered taxpayers who fall under the category.

To introduce the legal amendments required to bring the above into effect, Notification No. 47/2019-CT dt. 9th October, 2019 was released. However, as has been the trend under the GST regime, the Notification was released with confusing provisions. The Notification sought to give an option to the taxpayers with turnover less than Rs. 2 Crores to not file the annual return in Form GSTR-9. Following this option, the Notification provides as below –

“Provided that the said return shall be deemed to be furnished on the due date if it has not been furnished before the due date.”

This means that if a taxpayer opts to avoid filing the annual return in GSTR-9 before the due date, it would be deemed to have been filed. What exactly does this imply?

One interpretation of this proviso is that if a taxpayer does not file the GSTR-9 by the due date, it shall be assumed that the GSTR-9 auto populated on the GST portal, generated from the GSTR-1 and GSTR-3B filed during the financial year, is final and the same shall be deemed to be filed as is by the taxpayer. This could consequently be interpreted as the taxpayer accepting that the GSTR-1 and GSTR-3B filed during the financial years are correct as per the books of accounts.

It is expected and natural for errors to be present, these being the sunrise years of a whole new indirect tax regime. It is, therefore, highly recommended to file the annual return even if the turnover in the relevant financial year does not cross Rs. 2 Crores. Filing the return allows a taxpayer to correct errors that may have inadvertently crept in in the GST returns. In the absence of a revision mechanism, the annual return is the only option left with the taxpayers to correct the errors. This has also been propounded by the various Press Releases of June and July 2019 towards Annual Return and GST Audit.

Secondly, this also gives the taxpayers an opportunity to identify the problems and take the necessary actions to avoid committing the same errors going forward. The burden of interest on output tax liability for the years under discussion is huge, considering Section 50 is being interpreted by the Revenue in a negative light, by demanding interest on the gross tax liability, i.e. without adjustment of ITC. Even in cases of excess payments or liability discharged erroneously or under the wrong tax heads, the only option available to the taxpayers is to disclose the correct position in the annual return and discharge the balance liability or claim a refund of the excess paid.

Additionally, filing the annual return would count towards the taxpayer making a conscious effort to rectify his returns. This could eventually help in avoiding department action as concealment of transactions. This would, undoubtedly, reduce the exposure to possible scrutiny and audit action by the department.

It is an accepted position both by the Authorities and the taxpayers that the Annual Return is difficult to wrap one’s head around. Almost in every Council meeting, there is an item on the agenda for simplification of the GST compliance, specifically annual return and audits. However, there is now a reasonable clarity as to how one should approach and file these statements, what actions are to be taken and how. In view of the above, it is once again highly recommended that the annual returns are filed by all taxpayers, even if the option has been given to avoid it.

Tanmay Mody, M.M.S. (Fin.), B. Com, GST Practitioner