New Restrictive Rule a helpful tool to both Taxpayer & Tax Officer – Implementation of Rule-59(6) on GST Portal
The GST portal is being constantly made more resourceful in line with the principal objective of the Government on the aspect of ease of doing business. Ease of doing business has always been the first in order of importance for the Government. One more such effort was the insertion of a new Rule 59(6) on 01-01-2021 which will be implemented on the common portal with effect from 01st September 2021.
2. Looking back, a new restrictive clause in the form of Rule-59(6) of CGST Rules, 2017 was inserted vide Notification No. 01/2021 dated 1st January 2021, which provides for restriction in filing of Form GSTR-1 electronically in the following situations. Accordingly,
a) a registered person shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B as prescribed under section 39 of the CGST Act 2017, for preceding two months;
b) a registered person, required to furnish return for every quarter under the proviso to sub-section (1) of section 39, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1or using the invoice furnishing facility, if he has not furnished the return in FORM GSTR-3B for preceding tax period;
3. As one may be aware, every registered taxpayer under Section 37 of the CGST Act 2017, is required to file the Form GSTR-1which is a statement of all outward supplies of Goods and Services or both, for each month for a normal taxpayer or quarter for a Composition optee / person who has opted for QRMP scheme, as applicable. The return contains details of all outward supplies made during that particular tax period. It has to be understood that every registered dealer is liable to file this Form GSTR 1 as this is mandatory irrespective of the transactions and supplies for a particular tax period, which means that even if there are no supply or transactions, as a registered taxperson one will have to file Form GSTR 1. The due date for filing Form GSTR-1 is usually 11th of the succeeding month. It was 10th of the next month until September 2018 which was subsequently amended to be 11th. While for quarterly filers, the due date is the 13th of the month following the quarter.
4. Now, it has been confirmed by GSTN through its advisory on the GST Portal (Goods & Services Tax (GST) | News and Updates) that the provisions of this rule in enforcing the restrictions will be implemented on Common Portal from 1st September, 2021. On implementation of the said Rule, the system will do a pre-check before filing of GSTR-1/IFF for a tax-period, whether the following has been filed or not:
Goods & Services Tax (GST) | News and Updates
a) GSTR-3B for the previous two monthly tax-periods (for monthly filers),
b) GSTR-3B for the previous quarterly tax period (for quarterly filers), as the case may be.
5. In case it is found that the GSTR-3B return has not been filed in time the system will restrict further process relating to filing of GSTR-1/IFF and will not allow to proceed till the conditions of Rule-59(6) are complied with.
6. The complete process on the portal will be like, a check will operate immediately on clicking the SUBMIT button of GSTR-1 and the system will give an error message if the condition of Rule-59(6) has been met or not. If the conditions have been fulfilled, the system will allow to proceed with filing the return, while if the conditions are not met, further actions will be made unnavigable. However, one can be stress-free to the extent that records which have been saved in GSTR-1 will remain saved in draft mode and filing of such records will be permitted after Rule-59(6) is complied with.
7. As a next level of technology driven compliance verification mechanism implementation of Rule-59(6) on the Common Portal will be completely automated, similar to the blocking & un-blocking of e-way bill as per Rule-138E and facility for filing of GSTR-1 will be restored immediately after filing of relevant GSTR-3B. No separate approval would be needed from the tax-officer to restore the facility for filing of GSTR-1. All these conveniences have been extended from the best practices and experiences gained while implementation of such regulatory procedure for E-way bill process.
8. The important effect of non-furnishing of Form GSTR-1 or delayed furnishing of Form GSTR-1 are
a) First, there will be a liability to pay late fees which will be an additional expenditure for the registered person.
b) Second, if the supplier does not file his GSTR-1, the supplier’s self-assessed tax dues in liability return in Form GSTR-3B under section 39 will not be auto-populated which may result in short payments leading to interest obligations under Section 50 of the CGST Act 2017.
c) Third, the critical tax payment details in forms GSTR-2A & GSTR-2B as the case may be will not be auto populated for the recipient and such information will not be correctly reflected, if GSTR-1 is not filed.
d) Fourth, on account of the above, recipient of supply will not be able to avail ITC in his GSTR-3B as the provisions of Section 36(4) of the CGST Act 2017, where a restriction to avail credit upto 105% of matched credit will interfere and cause obscurity.
9. Moreover, as per the changes in the GST Legislation, again w.e.f. 01.01.2021, if there are significant deviations or anomalies between data of outward supplies in GSTR-1 & the liabilities declared under GSTR-3B, or inward supplies (ITC) between GSTR-3B & GSTR-2B, which indicates flouting of the obligations under the Act, departmental action can be initiated and the Proper Officer shall Issue a notice to such taxpayer directing his to submit his reasoning why as to why “GSTIN – Registration Certificate” itself should not be cancelled under Section 29 of the CGST Act 2017 suo-motoby the Tax Officer. This will be a highly detrimental action as it could completely jeopardise the business activity of the Registered person because if the Registration certificate is cancelled, he cannot issue a legal Tax invoice for all his taxable outward supplies nor avail the benefits of ITC on his Input Supplies.
10. Therefore, filing of GSTR-1 within the prescribed time lines will definitely save the taxpayer from all the above prejudicial consequences. The Government in order to facilitate the small taxpayers having a turnover of up to Rs. 5 Crore, in the preceding financial year, has introduced a specific scheme called Quarterly Returns Monthly Payment Scheme (QRMP scheme) by which such person can file both GSTR-1 and GSTR-3B on quarterly basis, while continue making monthly estimated payment of taxes. Though the GSTR-1 is filed on quarterly basis under this scheme, in order to pass on the ITC to their prospective recipient of Supplies a special procedure called Invoice Furnishing Facility (IFF) has also been made available for quarterly filers of GSTR-1 to upload documents of their B2B outward supplies. This also has to be complied in time.
11. This restriction by insertion and Implementation of Rule-59(6) on GST Portal will not only help the Taxpayers to discipline them on the compliance aspects as obliged and recognise the efforts of upright and legitimate taxpayers, while coming down heavily on hoaxers, will at the same time also facilitate the department to bring down Non-Files and Stop filers considerably.
12. So, the bottom line is that, in order to ensure no disruption in filing GSTR-1/IFF, and escape from the clutches of the restrictive provisions under Rule 59(6) of the CGST Rules 2017, all taxpayers who have not filed their pending GSTR-3B returns are categorically advised to file them as soon as possible so that they do not feel remorseful later.
Additional Assistant Director of Central Excise & GST
National Academy of Customs Indirect Taxes and Narcotics (NACIN) – Chennai
(The author is a recipient of the prestigious Presidential Award from Government of India for meritorious and specially distinguished service in 2019)