Practical Guide to GST Amnesty Scheme 2021

Practical Guide to avail the benefit of Amnesty Scheme 2021

When with the force of nature, the humanity is compelled to stand at the departure lounge of god’s airport and when each of individual are going through the phase of emotional stress – many of them are out to help others including the relief measures being announced by Indian Government in various forms. One of such forms of Relief pertains to GST Laws and Compliances, which were announced on 28th May 2021 through Press release for the decisions taken in 43^rd Meeting of GST Council. The meeting includes various important and relevant matters such as: –

• Relief on GST Rates for items related to Covid medication such as face masks, sanitizers etc.
• Relief to Tax payers regarding late fees for Pending Return from July 2017 to April 2021.
• Reduction in late fees for delay in filing GST Returns.
• Relaxation for Interest on delay in furnishing GST Returns.

Amongst all the relief announced, let us accentuate the amnesty Scheme from to understand analyse the same through Practical Approach.

Here is the extract of Press Release from Amnesty Scheme

To provide relief to the taxpayers, late fee for non-furnishing FORM GSTR3B for the tax periods from July, 2017 to April, 2021 has been reduced / waived as under: –

1. late fee capped to a maximum of Rs 500/- (Rs. 250/- each for CGST & SGST) per return for taxpayers, who did not have any tax liability for the said tax periods;

2. late fee capped to a maximum of Rs 1000/- (Rs. 500/- each for CGST & SGST) per return for other Tax payer;

The reduced rate of late fee would apply if GSTR-3B returns for these tax periods are furnished between 01.06.2021 to 31.08.2021.

Analysis

All the small and middle class tax payer who couldn’t comply with GST Return filling process due to various reasons can now file their GST Returns from July 2017 to April 2021 and get their compliance done with maximum penalty of Rs 500 Per return if there is no tax liability for the said Period; else Maximum penalty of Rs 1000 per for any other scenario.

Let us assume the following scenario for the applicability of the maximum penalty.

1. X is having outward supplies which are nil rated and GST Return not file from July 2017 to April 2021: – Rs 500 Per Return maximum penalty applicable

2. X is having Export Turnover without the payment of GST and GST Return not filed from July 2017 to April 2021: – Rs 500 Per Return maximum penalty applicable

3. X is has not done any kind of Transaction from July 2017 to April 2021 but GST Registration is obtained by Mr. X: – Rs 500 Per Return maximum penalty applicable

4. X has outward supplies liable to CGST & SGST of Rs 1,00,000 and Mr X has input credit of Rs 1,00,000 – no payment is required to be made for the month of December 2020: – Maximum Penalty applicable is Rs 1000 Per return.

5. X has outward supplies liable of CGST & SGST of Rs 1,00,000 and Mr. X has no input credit for the particular tax period. There net tax liability to be paid is cash is Rs 1,00,000 – Maximum penalty applicable is Rs 1000 Per return.

Now, if a tax payer other than composition tax payers fails to file returns for six continuous periods then GST Registration is cancelled by the Proper office of GST Department. Let us say Mr. X has not filled the Returns from July 2017 as there was no business done by him during the said tax period and his GST Registration is cancelled by the Department then in such scenario he is required to follow the following steps to practically available the benefit of amnesty scheme.

1. Prepare the working of Penalty for the period July 2017 to April 2021 and file GST-Reg 21. GST-Reg 21 is an application for revocation of cancelled registration.

2. Approach the concerned jurisdictional officer to expedite the process and get the GST registration number active.

3. The officer will ask to pay the penalty and the challan for the same needs to be paid for activating the registration.

4. It is to be ensured that while paying the penalty for activating the GST Registration number – benefit of amnesty scheme is availed.

5. Once your GST number is activated – GST Returns are to be filed after availing the benefit of amnesty scheme.

But the benefit of amnesty scheme will be futile, if Mr. X has done business from the period July 2017 to April 2021 wherein the total output tax liability for the said Period is Rs 10,00,000 and Input Tax Credit for the said period is Rs 10,00,000 because of the condition mentioned in Section 16(4) of CGST Act, 2012 which is reproduced as under: –

“A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.”

After considering the conditions mentioned in Section 16(4) it is clear that credit pertaining to FY 2017-18, FY 18-19 and FY 19-20 cannot be utilised. Therefore, in our example of Mr. X wherein the total available input tax credit of Rs 10,00,000 pertains to the tax period July 2017 to April 2021. All the input tax credit cannot be utilised for the payment of Tax and therefore the component of credit for which limit is expired needs to be derived and such credit cannot be utilised for the payment of tax.  In such scenario, obviously, the GST registration of Mr. X would have been cancelled and therefore following approach may be adopted to avail the benefit of amnesty scheme.

1. Prepare the working of Output Tax, Input Tax, Interest and Penalty for the period July 2017 to April 2021 and file GST-Reg 21. GST-Reg 21 is an application for revocation of cancelled registration.

2. Approach the concerned jurisdictional officer to expedite the process and get the GST registration number active.

3. The officer will ask to pay the Tax, Interest and penalty and the challan for the same needs to be paid for activating the registration.

4. It is to be ensured that while paying the penalty for activating the GST Registration number – benefit of amnesty scheme is availed.

5. Once your GST number is activated – GST Returns are to be filed after availing the benefit of amnesty scheme.

Considering the above facts, though the small tax payer can avail the benefits of amnesty scheme in form of reduced penalty, but they have to forgo the benefit of input tax credit and unfortunately, the Government has not provided or even clarified such issue in the council meeting. To summarise the facts, if Mr. X has done business, without filing the GST returns, from July 2017 to April 2021 and there is Output Tax liability and Input Tax Credit then following scenario will emerge: –

1. For FY 2020-21 the benefit of Amnesty scheme is Palpable in form of reduced penalty.

2. For Period July 2017 to March 2020 the tax payer will have to forgo the benefit of Input Tax Credit and avail the benefit of Amnesty scheme through reduced Penalty rates.

3. Further for the major of such non-compliers will have to go through the process of revocation of cancelled registration which will led to the compliance cost.