Late Fees and Penalties for Non-Compliance in GSTR-10

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Published Date:  27-11-2023   Author:   vidya-sagar
captainbiz late fees and penalties for non compliance in gstr

The objective of introducing GST was to make compliance digital and simpler for businesses. It is mandatory for every business registered under GST to comply with the guidelines specified under the law. Non-compliance can result in late fees and other penalties. Filing returns is part of compliance under GST. GSTR-10 is a return that is required to be filed by a taxpayer whose GST registration is cancelled or surrendered. Filing GSTR-10 late fees ensures closure of the compliance requirements for taxpayers. It also provides transparency of the financial activities, payment of liabilities, and input tax credit of the taxpayer up to the date of cancellation for the tax authorities.

Compliance under GST

Compliance under GST involves the full disclosure of the taxpayer’s information with honesty, keeping accurate records as required by law, and making submissions in a timely manner. The government has taken various measures to ease compliance for taxpayers, like digitalization for processes like registration, payments of tax liabilities, filing returns, input tax credits, and refunds.  These measures enhanced the ease of doing business.

Non-compliance under GST is dealt with with a three-branched approach. They are interest, monetary penalties, and prosecution. Section 122(1) of the CGST Act, 2017 lists the offences that attract a penalty of 10,000 rupees or the amount of tax involved, whichever is greater. The act allows for a reduction in penalties when a person fails to pay or underpays the tax, wrongly avails of or utilizes input tax credits, or tax is wrongly refunded on the supply of goods or services. In such cases, the penalties can be reduced to 10% of the tax owed, subject to a minimum of 10,000 rupees (Section 122(2a)).

if there is an element of fraud, willful misrepresentation, or suppression of facts, then the penalty will be equal to the tax owed, subject to a minimum of 10,000 rupees. But when he gets a summons or an order to produce necessary documents and fails to do so, the penalty would be 25000 rupees (Section 122(3)). A penalty of 25000 rupees is applicable for any GST offense that lacks a specifically prescribed penalty (Section 125).

Compliance under GSTR-10

Compliance under GSTR-10 includes timely filing of the final return and the other regular returns like GSTR-3B and GSTR-1, payment of the tax liabilities, and input tax credit up to the date of cancellation of registration. GSTR-10 is a one-time final return intended to provide the details of ITC pertaining to the closing stock, including inputs and capital goods that are required to be reversed and paid by the taxpayers. The tax computation done at the time of filing GSTR-10 must be paid in full before filing the final return.

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Function of GSTR-10

GSTR-10 is a final return that is required to be filed by taxpayers whose GST registration is either cancelled or surrendered. Its main objective is to assess the inputs held in stock, the inputs contained in semi-finished and finished goods held in stock, and the capital goods, plant and machinery held in stock on which input tax credit is required to be reversed or the amount of tax liability that is required to be paid back to the government. It is a mandatory return and can be submitted online in the GST portal. It can be filed in offline mode also. GSTR-10, once filed, cannot be revised. It can be reviewed, and the summary can be downloaded before final submission.

Read more: Applicability and Eligibility for GSTR-10

Requirements for filing GSTR-10

All taxpayers whose registration under GST has been cancelled or surrendered either voluntarily or by the order of the tax authorities or the government are required to file GSTR-10, except input service distributors, casual taxpayers, non-resident taxable persons, and persons paying tax under TDS/TCS.  The following are the requirements for filing GSTR-10:

  • The taxpayer must have a valid GSTIN and credentials to login to the GST portal.
  • The taxpayer must have applied for cancellation of their GST registration in the portal and received the order of cancellation.
  • GSTR-10 filing is a mandatory requirement for taxpayers after their receipt of the order of cancellation from the GST authorities.
  • All the periodic regular returns, like GSTR-3B and GSTR-1, are filed before filing GSTR-10.
  • The aggregate turnover of the business must be above 20 lakh rupees.

Also read: Filing Process and Due Dates for GSTR-10

Due-date to file GSTR-10

The due date for filing GSTR-10 is three months from the date of cancellation or the date of order of cancellation, whichever is later. Non-filing within the due date can result in late fees and penalties as per GST rules.

Late fees and penalties for non-compliance

Non-filing of GSTR-10 within the due date will result in late fees of 100 rupees per day of delay, subject to a maximum of 0.25% of the taxpayer’s turnover. The taxpayer’s registration will be considered to be active, and they will be required to file all pending returns and pay the outstanding tax liabilities. Along with late fees, taxpayers are liable to pay interest for non-compliance under GSTR-10.

If the registered taxpayer does not file GSTR-10 by the due date, a notice will be sent by the tax authorities. If the taxpayer does not file the returns within 15 days after receipt of the order, he will receive a final order with an assessment of tax, late fees, interest, and other penalties. If they fail to respond to the final order, they may have to face legal consequences.

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Exemptions from filing GSTR-10

Businesses that have obtained registrations under GST but have not made any supplies or received any goods or services during the period from the date of registration until the date of cancellation or surrender are not required to file GSTR-10. Additionally, taxpayers who have registered under GST, not commenced business, and subsequently surrendered the registration are also exempt from filing the final return.

Steps to avoid non-compliance under GSTR-10

GSTR-10 provides a comprehensive summary of the financial activities of the taxpayer up to the date of cancellation, and taxpayers can ensure compliance by following these steps:

  • Submission within the due date

The final return must be submitted within three months of the cancellation or the date of the cancellation order, whichever is later. Delayed or non-submission can lead to monetary loss due to the application of penalties.

  • Non-submission of registration cancellation or non-receipt of cancellation order

Taxpayers who wish to cancel or surrender their GST cancellation must file a cancellation of registration in the common portal. After receiving the cancellation order from the tax authorities, the taxpayers must file their final return. They will not find the link to file the return until the order for cancellation has been passed by the authorities.

  • Accuracy in reporting

Incorrect or false reporting could lead to penalties and even legal consequences. Therefore, accuracy in reporting the value of stocks held and the input tax credit related to them must be ensured.

  • CA certificate submission

For stocks that are held without proper invoices, valuation at the prevailing market rate is required. This must be certified by a chartered or

  • Compliance under GST

cost accountant, and their certificate must be uploaded at the time of filing the final return. Non-submission of the certificate may result in notices from the tax authorities.

  • Maintenance of Records

The taxpayers must maintain proper records of all the financial transactions with accurate details of the invoices and other documents and the regular returns filed.

  • Filing GSTR-3B and GSTR-1

It is mandatory to file GSTR-3B and GSTR-1 before filing GSTR-10. If they have missed filing any such return, they must first file these returns and then file the final return. The system will not allow them to file GSTR-10 unless all the previous periodic returns have been filed.

  • Filing NIL GSTR-10

Taxpayers often miss out in filing GSTR-10 when they have no inputs in stock after their GST cancellation. But it is mandatory for them to file a NIL return even when they have no inputs in stock to report.

  • Non-payment or partial payment of tax

Filing GSTR-10 with partial payment or non-payment of tax is not allowed. It is mandatory for taxpayers to clear their liabilities in full before filing the final return.

  • Authentication

The final return must be properly authenticated by the authorized signatory either through the DSC or EVS for submission.

Conclusion

GSTR-10 is a crucial return and non-compliance can result in penalties and other legal consequences. So it is important for taxpayers who have opted or have received an order for cancellation or surrender of their GST registration to file the final return GSTR-10 within the due date to ensure a smoot exit from the compliance obligations of the GST system.

Frequently asked questions

  1. What is the difference between an annual return and a final return?

Answer: The annual return must be filed by all taxpayers registered under GST once a year, while the final return is the last return that must be filed after the cancellation of the taxpayer’s in GST

  1. Who must file the NIL GSTR-10?

Answer: Taxpayers who have no inputs in stock and no input tax credit available to report must file a NIL GSTR-10 return.

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Vidya Sagar

Vidya Sagar has post graduate and Law graduate qualifications. She has worked in the finance industry for many years. She is passionate about writing and keen on writing articles related to tax, accounting, audit and other finance related topics. She likes to simplify complex financial matters to help her readers understand easily. She reads a lot in her spare time and keeps herself updated with the latest financial news. She likes helping people in all their financial and compliance requirements

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