In this world of complex tax systems, adhering to and abiding by the deadline is extremely important. In the case of GSTR-1 return filing, the consequences of non-compliance with the deadlines could be significant. Apart from the late fees, the person will not be able to claim the input tax credit. Also, it will impact not only the registered person as well as the supplier. There would be legal repercussions where your GST registration would be cancelled, and other challenges will be discussed further. This blog will outline the late fees and penalties and other consequences of non-compliance with GSTR-1 in detail. Let us understand the intricacies of complying with the GSTr-1 return and subsequently strategizing the risk mitigation process.
Consequences of non-compliance with GSTR-1 filing deadlines
Let us say you are unable to comply with the filing deadline for the GSTR-1 return. What possibly could happen? Firstly, you do have to pay late fees that we will discuss in the later part of the blog. However, in addition to that, the registered person might have to face massive repercussions. The rudimentary problem to be met will be the ineligibility to claim the Input Tax Credit (ITC). If one has failed to file the GSTR-1 return by the deadline date, you will not be able to claim the ITC for the upcoming return of filing returns of GSTR-3B. What does that really mean? It implies to that it might restrict the recipient’s ability to offset the payment of the tax on the purchases against their output liability of tax which will rise the taxes, which will be an additional problem for you. Also, if you fail to file the GSTR-1 return on time, the ones who have received your supplies will also be unable to claim the Input Tax Credit on the invoices you issued to them. So, the failing result, not only it will create problems for you, but also for the ones who have received invoices from you. Apart from that, failing to file the GSTR-1 return within the deadline will result in legal consequences, including registration cancellation of GST. If your GST registration is cancelled, it will impact your business, and you cannot claim GST. Also, if there is cancellation of GST registration, you will not be able to operate in India since businesses are subjected to GST.
Late fees and penalties for non-timely filing
In the case of “NIL” GSTR-1 return filing:
If an individual has filed a “Nil” GSTR-1 return late, then they will have to pay ₹500 at max.
In case of situations other than “NIL” filling:
|Fee amount (Maximum)
|Upto ₹1.5 Crore
|₹2000 (CGST and SGST: ₹1000 each)
|₹1.5 Crore to ₹5 Crore
|₹5000 (CGST and SGST: ₹2500 each)
|More than ₹5 Crore
|₹10000 (CGST and SGST: ₹5000 each)
Let us see how you will calculate the late fee that you need to pay.
For the “NIL” GSTR-1 return filed:
|Late fee per day
All in all, if an individual misses the filing of GSTR-1 payment by 1 day then they will be subjected to pay ₹20.
For the situation other than that of Nil filing:
|Late fee per day
All in all, if an individual misses the filing of GSTR-1 payment by 1 day then they will be subjected to pay ₹50.
If you fail to file the GSTR-1 return properly, will you go to jail?
Speaking in a generalist way, an individual will not be imprisoned if they are not able to file GSTR-1 return. However, an individual might prosecuted if they commit offences encircling the GSTR-1 return.
- If the amount of tax or Input Tax Credit availed exceeds the amount of ₹50 lakhs, then the person might have to serve 5 years in jail and pay a fine.
- If it exceeds ₹200 lakhs and it is below ₹500 lakhs, then jail time is 3 years, and you have to pay a fine as well.
- span style=”font-weight: 400;”>If it exceeds ₹100 lakhs and it is below ₹200 lakhs then a 1-year jail and fine should be paid.
- If offences are repeated, then the person might be jailed for 5 years and they will have to pay a fine as well.
Impact of non-compliance on assessing tax assessments as well as refunds
The GST department might take several steps due to non-compliance
- Firstly, the GST officer could send a communication request to the registered person to pay the tax that has not been paid and ask for the reasons for such non-payment.
- Secondly, they could allow reasonable time for the payment.
- Thirdly, the registered person can justify the differences in tax GSTR-1 and GSTR-3B payments. As a result, the tax payer might not have to pay tax or else subjected to pay tax.
- Fourthly, if the registered person cannot communicate or is failing to make the payments within the described time, then the recovery process under section 79 could be initiated.
- Finally, if the registered person fails to provide the reason for such differences the explanation provided needs to be more satisfactory. Even then, the GST officer can initiate the recovery process as per the provision underlined in section 79.
Other issues in GSTR filing due to non-compliance of the GSTR-1 filing deadline
First of all, if an individual is unable to furnish the GSTR-1 returns, The GSTR-3B will be not be filed as well. The inability to furnish the GSTR-1 return then they will be prohibited from filing the GSTR-3B from the month preceding to that. Also if GSTR-1 returns are not filed, then it will result in problems in transactions in the case of the recipients, GSTR-2 and GSTR-2B. Thus, It will challenge the recipient to match the details about purchases made with the information suppliers provide. It will lead to issues in reconciliation, thereby resulting in further disputes. So, not only there will be problems will filing GSTR-1 returns but also other GST filings. So failing to file the GSTR-1 returns on time will not only affect that very tax but also will affect the associated other GSTR filing as well.
Also Read: Common errors and mistakes in GSTR-1 filing
Strategies for avoiding GSTR-1 compliance lapses
In the GSTR-1 return, the businesses have to upload the invoice-wise data of all the outward supplies, which will include the invoice number, date, rate of tax, and many more. Since there is a vast amount of data to be submitted, the business makes mistakes, creating a mismatch between GSTR-1 and GSTR-3B. What you can do is to be careful as you will not be able to amend once you file the return.
You might think that there are no transactions to report. Therefore, I will not fill any GSTR-1 return. But that will be a problematic situation because even though you might not have any transactions, you still will have to file the GSTR-1 return where you will disclose that you have no transactions for that period; if you fail to do so, will not be allowed to file for the succeeding periods.
While filing a return, you will find that there are a number of heads under which the tax shall be reported. There could be a situation where a person has entered the wrong details under any of the numerous heads. In such a situation, the registered person will have to face consequences where they might not be able to rectify those mistakes later. One will have to be very cautious about using the GSTN; there is no way one make changes if they have submitted the wrong GSTIN. It will lead to an unfavourable working of capital due to an irregular cash flow.
There might be numerous strategies that could be implemented in order to ensure that the GSTR-1 return has been filed on time. However, it is very important to be attentive to the monthly or quarterly deadline of filing the necessary documents.
Mitigating risks of penalties and legal consequences
Businesses can take various measures to reduce the risk of invoice penalties.
- You must generate the invoices on time: Each and every business should be able to produce the invoices as soon as they can after the taxable supply has been made. It will ensure that the businesses follow the e-invoice regulations correctly.
- The businesses should check the accuracy of the invoices: The companies must check the accuracy of the invoices before making any transfers of the invoices. This will serve the benefit of avoiding any kind of penalties in case the business has made some inaccurate invoices. If there are employees working ensure that they have been properly trained about the ways by which they will not be making any kind of mistakes.
- Businesses can be dependent on invoice software as well: The companies must generate and send the invoices using invoice software. It will help them comply with the invoice standards, thereby avoiding penalties. However, there could be situations where you have provide any kind of wrong invoice information in the software. In such a situation it is best if you are checking the data manually ensuring that each and every data is precise.
Filing the GSTR-1 timely is not only a regulatory obligation but also an important activity concerning the different businesses and organizations in order to carry out tax operations seamlessly. Late fees and the penalties for non-compliance might extend further than just the monetary files. It will affect the ability of the business to claim input tax credit, as well as there could be legal consequences of the business. Also, there could be situations where the person might be sent for imprisonment as well. Nobody would like that, isn’t it? Therefore, every registered tax payer should be aware of the consequences and, thereby, take necessary steps in order to ensure that the GSTR-1 return filing is being done properly and on time. Simply lack of attention might cause severe problems within the business. Hence, in order to ensure that you have a smooth and legally complaint taxation journey, kindly establish and implement strategies that might assist you to do so.
Also Read: GSTR-1 Details: Everything You Need to Know
What will happen if I fail to comply with GSTR-1 filing deadlines?
Firstly, you will be charged late fees and penalties. Also, you will not be eligible for claiming Input Tax Credit. Finally, there could be legal repercussions and you might not be able to conduct any business in India.
How is the late fee calculated?
If you have filed a “NIL” return then ₹10 per day per GST category. If there are other returns, then ₹25-₹50 per GST category per day.
Will I go to jail for not filing GSTR-1?
People do not go to jail normally. However, there is a possibility if the tax inversion exceeds ₹50 Lakhs.
How does non-compliance impact the assessment of tax as well as refunds?
The department of a GST might initiate some recovery proceedings and you have to justify the tax difference between the GSTR-1 and GSTR-3B.
Is there a way to avoid compliance lapse?
Ensure you have entered the correct details and the GSTN is accurate. Also, if there is no transaction, kindly fill in the return file. Also, you may use some software.