Optional Filing of Annual GST return – Critical possible impact

Filing of Annual return – Option Scheme for MSME – Critical Analysis of the possible impact

Annual return in form GSTR-9 is required to be filed by every registered person (other than an Input Service Distributor, the person paying tax under section 51 or 52, a casual taxable person and a non-resident taxable person) for every financial year. However, considering the challenges faced by small taxpayers, the GST council has introduced various measures to ease the compliance burden of the MSME sector. One such measure announced is the relaxation provided to taxpayer having turnover less than INR2 cr. From filing annual return.

The measure was announced vide press release dated 20 September 2019.

“Relaxation in filing of annual returns for MSMEs for FY 2017-18 and FY 2018-19 as under:

a. waiver of the requirement of filing FORM GSTR-9A for Composition Taxpayers for the said tax periods; and

b. filing of FORM GSTR-9 for those taxpayers who (are required to file the said return but) have aggregate turnover up to Rs. 2 crores made optional for the said tax periods.”

Correspondingly to give effect to the same, notification no. 47/2019-Central Tax dated 9 October 2019, has been issued by the Central Board or Indirect Taxes and Customs (CBIC) on 09-Oct-19. The relevant abstract of the notification is as under:

“In exercise of the powers conferred by section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act), the Central Government, on the recommendations of the Council, hereby notifies those registered persons whose aggregate turnover in a financial year does not exceed two crore rupees and who have not furnished the annual return under sub-section (1) of section 44 of the said Act read with sub-rule (1) of rule 80 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the said rules) before the due date, as the class of registered persons who shall, in respect of financial years 2017-18 and 2018-19, follow the special procedure such that the said persons shall have the option to furnish the annual return under sub-section (1) of section 44 of the said Act read with sub-rule (1) of rule 80 of the said rules: 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.”

If we have close look at the words of the notification issued by the CBIC, it appears that in case those taxpayers whose aggregate turnover does not exceed 2 crores, do not furnish returns within due date it shall be deemed that their returns are furnished within due date.

The following question and probable situation that one may foresee on reading of notification is as under:

1. Does it mean that for the tax payers whose turnover is less than the prescribed limit all the data appearing in GSTR9 based on GSTR1 and GSTR3B filed during the year shall be deemed to final?

2. Will the portal file their GSTR9 based on the auto populated data appearing and assume it to be final and file the returns accordingly?

3. If yes, will those taxpayers get any chance to rectify the errors that might have happened at the time of filing of GSTR1/ GSTR3B?

4. In case, there is a substantial mismatch between the input credit available as per GSTR2A vis-à-vis GSTR3B, what should the taxpayer do?

5. Non-filing of GSTR annual returns may lead to mismatch in the turnover as reported in Income Tax returns vis-à-vis turnover as reported in GST. This may lead to a departmental enquiry seeking reasons for difference in turnover.

The above is few of the questions that need to be answered diligently after taking into consideration all the aspects of the non-filing of GSTR9 and the after effects of the same.

What can taxpayers do –

The taxpayers needs to take an informed decision regarding whether to opt out from filing of the annual returns. Some of the guiding principles which may help taxpayers are enumerated as under:

1. Identify gaps between figures reported in GSTR-1 and GSTR-3B vis-à-vis Financials

2. Verify whether appropriate taxes after utilising eligible ITC has been paid

3. Reconcile ITC availed in 3B vis-à-vis GSTR-2A

4. Reconcile ITC as per books of accounts vis-à-vis GSTR-2A

5. Identify in case there is any error at the time of filing GSTR1 and GSTR3B.

Subsequently, if in case there are any gaps/short payment/mismatches it is advisable to file the annual return and pay appropriate taxes along with interest, rather than paying the same after the inquiry notices are been issued by the department.