The most important aspect of GST compliance is the timely submission of GSTR-3B returns. GSTR-3B is a self-declared summary return which reflects supplies, input tax credit, purchases, tax liabilities occurred during the month. It is a mandatory return and has to be filed within the 20th of the month following the month of tax deduction. It is important for businesses to understand thoroughly the processes related to filing GSTR-3B and comply with the filing within the prescribed deadline to avoid late fees and penalties.
Late Fees for Delayed Filing of GSTR-3B
For Regular Taxpayers:
For business with a turnover between 1.5 crores and 5 crores, the late fees for regular taxpayers after the due date is as follows:
Late fee of Rs.50/- per day of delay and for Nil GSTR-3B returns not filed, Rs.20/- per day of delay is applied when returns are filed after the due date. Filing of GSTR-3B and payment of tax has to be done monthly even if GSTR-1 is filed quarterly by the taxpayer. Late fees increase everyday till the capping amount of Rs.5000/- (That is Rs. 2500 per CGST and SGST) is reached. The maximum limit is Rs.2000/- for nil GSTR-3B returns. This late fee will be included in next month’s GSTR-3B, which can neither be edited or filed until the payment of the late fees.
For businesses with a turnover of above 5 crores, the late fees for submitting GSTR-3B after the due date, the maximum is capped at Rs.10000/- (That is Rs. 5000 per CGST and SGST)
For Small Taxpayers under the Composition Scheme
Businesses whose turnover is less Rs.1.5 crores can opt for the GST composite scheme in which they can file the GSTR-3B returns quarterly, by the 18th of the month after the end of the quarter. Late fee for such taxpayers is as follows: If such taxpayers fail to file GSTR-3B within the due date, the late fee is reduced to Rs. 20 per day for CGST and Rs. 20 per day for SGST, amounting to Rs. 40 per day.
Read More: Common Errors and Mistakes in GSTR-3B Filing
Penalties for Non-compliance in GSTR-3B
Interest on Tax: Apart from late fees, delay in filing attracts an interest of 18% per annum on the tax amount, from the due date until the date of payment.
Input Tax Credit Restrictions: One of the major consequences of late filing of GSTR-3B returns is the denial of input tax credit. According to GST Law, suppliers have to report their outward supplies in their respective GSTR-3B within the due date. Suppose the recipient fails to report the inward supplies in their GSTR-3B returns within the due date, the corresponding supplier’s outward supplies are not taken into consideration, for ITC purposes. As a result, the ITC may be denied which in turn increases the taxpayer’s tax liability.
GSTR-1 Cannot be filed: If the GSTR-3B of the previous period is not filed, then GSTR-1 of the present month cannot be filed. If invoices are not uploaded in GSTR-1, the transactions will not be reflected in the recipient’s GSTR-2a and GSTR-2B and the recipient will not be able to claim input tax credit. GST officers can initiate recovery proceedings without any show-cause notice against taxpayers who under-report sales in GSTR-3B compared to GSTR-1 under section 75(2) as per GST notification.
Legal Consequences: When the taxpayer continuously defaults in filing GSTR-3B, legal proceedings may be initiated by the tax authorities against the taxpayer, leading to penalties, fines, and prosecution under GST law. The same applies when taxpayers deliberately evade tax or indulge in fraudulent activities.
Measures to Avoid Late Fees and Penalties
- Proper Records: All invoices, purchase orders, and receipts have to be properly recorded. When the documents are correctly organized, they are easily available while filing and the returns can be filed on time.
- Timely Filing: Due dates should be correctly noted, and reminders enabled so that Timely filing will be easier. Prompt compliance can mitigate risks and losses from fines, interest charges, ITC restrictions and other legal consequences.
- Automation and Use of Technology: Technology driven solutions and automating processes can help streamline the process of returns filing. Advanced tools such as GST compliance software help businesses ensure accuracy and facilitate timely filing of the GSTR-3B returns.
- Accurate Reporting and Timely Tax Payment: Accuracy while reporting sales, purchases, input tax credit, and tax liabilities in GSTR-1 and GSTR-3B and timely payment of tax within the prescribed due date will help to avoid penalties, interest, and other losses.
- Rectification and Reconciliation: When any errors or discrepancies are noticed, they have to be immediately rectified. If noticed before filing, it can be rectified in the GST software in the Reset GST option. If noticed after filing, the errors have to be rectified in the subsequent returns to avoid penalties due to incorrect filing.
- Professional Guidance: Tax laws can be complicated and confusing and compliance difficult. To navigate the GST landscape efficiently, it is advisable for businesses to seek professional help. Expert and qualified tax consultants will be updated with the latest rules and procedures and can help businesses file accurate returns on time.
- What are the methods to ensure compliance in GSTR-3B?
Answer: Enabling a GST Compliance calendar to mark important dates and deadlines for all GST activities including filing; conducting regular reconciliations; maintaining proper records of sales, purchases, ITC, tax liability, ensuring timely and accurate filing of GST are the methods to avoid non-compliance and ensure compliance in GSTR-3B.
- Why is ITC reconciliation important in compliance?
Answer: It is important to reconcile input tax credit claimed in GSTR-3B with purchase invoices uploaded in GSTR-2B and rectify any discrepancies to avoid wrong computation of ITC claimed and tax computed, before filing GSTR-3B to avoid penalties and loss of ITC
GSTR-3B is a self-assessed summary return to declare GST liabilities for a tax period and has to be filed every month, within the due date. Non-compliance in GSTR-3B can result in considerable financial loss and other legal consequences. Apart from late fees, depending on the nature and severity of offense, may attract penalties like interest on tax liability, denial and reversal of input tax credit, prosecution and legal action for repeat offenses and non-compliance. Compliance can be established when businesses follow the prescribed rules, submit returns on time, maintain proper records, ensure accurate reporting, and timely payment of tax liabilities.