All regular taxpayers registered under the Goods and Services Tax GST with an annual turnover of more than Rs. 2 crore are required to file taxes. GSTR-9 is one of the most critical tax returns people must file to show compliance in India.
The GSTR-9 is an annual tax return form that details all the supplies that an individual or a business might have made under various tax heads such as CGST, SGST, and IGST. The government introduced a GSTR 9C audit form that must be filed annually by taxpayers with a turnover of more than Rs. 2 crore. Given that GSTR-9 is filed only once, it acts as a reconciliation statement between the annual returns filed and the audited annual financial statements of taxpayers.
Under the GST laws, there are four types of GSTR-9 that taxpayers have to file.
- GSTR-9 must be filed by regular registered taxpayers that file GSTR-1 and GSTR-3B.
- Registered and composite dealers must file GSTR 9A.
- E-commerce operators who collect tax at source must file GSTR 9B upon filing GSTR 8.
- All taxpayers whose turnover exceeds Rs. 2 crore and are liable to get their annual reports audited must point to GSTR 9c.
All registered taxpayers are required to file GSTR-9 with the correct HSN codes. The only persons exempt from the requirement are casual taxpayers, input service distributors, non-resident taxpayers, and taxpayers deducting or collecting tax at source under Sections 51 and 52.
Requirements for reporting HSN codes on GSTR-9
The Harmonized System of Nomenclature is a unified system that is adopted for the classification of goods for customs purposes in India. While the worldwide system comprises six digits, in India, it comes with an additional two digits, making it an eight-digit system. The other two digits aid in determining the applicable tax rate depending on the goods being transacted.
Since GSTR-9 details the supplies an individual or business makes during a given accounting period, all the goods listed must come with applicable HSN codes. The code helps standardize the classification of supplies while also deterring mining tax rates.
In India, manufacturers, businesses, and individuals filling out GSTR-9 are required to adhere to a 3-tiered structure for the HSN codes on the GSTR-9 form. The requirements include:
- Businesses or individuals with a turnover of less than Rs. 1.5 crore are not required to print any HSN code on GSTR-9 forms.
- Taxpayers or businesses with a turnover that exceeds INR 1.5 crore but less than INR 5 crore must use a 2-digit HSN code on their GSTR-9 fillings.
- It’s mandatory to report the HSN code at 6-digits for taxpayers with annual turnover exceeding Rs. 5 crore.
- Businesses supplying goods with an annual turnover that exceeds INR 5 crores must use a 4-digit HSN code in their GSTR-9 filling.
- Businesses and dealers engaged in imports and exports trades must follow an 8-digit HSN code in their GSTR-9 fillings.
- Details of the HSN summary for inward and outward supplies should always be submitted in Tables 17 and 18.
Also Read: Understanding The Components Of GSTR-9
The preconditions to filing GSTR-9 are:
- One must have an active GSTIN during a given financial year and be a normal GST taxpayer.
- The taxpayer should have filed all GSTR-1 and GSTR-3B for the relevant financial year.
Penalties for failing to report HSN codes correctly on GSTR-9
By law, it is mandatory to report the correct HSN codes in GSTR-9 fillings. It’s the only way businesses and individuals can be compliant with GST regulations, therefore ensuring they end up paying the correct tax rate.
The HSN codes also ensure accurate classification of supplies, therefore reducing disputes and controversies related to tax rates and classification. In the end, precise tax filings mitigate the risks of penalties and fines. Correct HSN codes can allow businesses to claim input tax credits, reducing tax liability.
On the other hand, failing to report the correct HSN codes correctly on GSTR-9 comes with its fair share of risks. Any offense under GST and its respective applicable penalties fall under the CGST Act.
A penalty of Rs. 50,000 applies to anyone who does not mention HSN or SAC codes on their GSTR-9 filling. The penalty, which includes Rs. 25,000 under CGST and Rs. 25000 under SGST, also applies to GST taxpayers who mention the wrong HSN codes in their GSTR-9 fillings or tax invoices.
Any delay in GSTR-9 filling entitles one to a late fee of Rs. 100 per day per act. Therefore, the penalty amounts to Rs. 100 under CGST and Rs. 100 under SGST. The total will be Rs. 200 daily to a maximum of Rs. 5,000.
Failure to file GSTR-9 completely exposes one to the risk of a penalty of 10% of the tax due or Rs. 10,000, depending on the higher one.
Anyone who tries to commit fraud, i.e., by using an incorrect HSN code to reduce their tax bill, would be eligible for a penalty of 100% of the tax due or Rs. 10,000, whichever is higher.
Anyone who tries to help someone else commit fraud by using incorrect HSN codes would face a penalty extending up to Rs. 25,000.
The penalty for wrongfully charging a GST rate, i.e., charging a higher rate, is 100% of the tax due or Rs. 10,000, whichever is higher.
The consequence for invoicing errors amounts to Rs. 25,000, whereas failing to issue an invoice results in a penalty equivalent to 100% of the tax due or Rs. 10,000, whichever is greater.
Frequently Asked Questions
What is GSTR-9 used for?
GSTR-9 is an annual return that must be filled out annually by all registered taxpayers, except a handful, detailing the yearly compilation of outward supplies, inward supplies, and tax liability. It also describes input tax credits availed during a financial year. The filling must be made by December 31st of the year following a particular financial year.
Who is exempt from GSTR-9 filling?
Every registered taxpayer must file GSTR-9, except for casual taxpayers, input service distributors, non-resident taxpayers, and taxpayers who are deducting or collecting tax at source under Sections 51 and 52.
Also Read: Applicability and exemptions for GSTR-9
How does the HSN code work in GSTR-9?
HSN is widely used for taxation purposes as it aids in goods classification, therefore making it easy to determine the applicable tax rate depending on the supplies made in a given accounting period. The code also makes it easy for taxpayers to calculate their tax benefits.
GSTR-9 requires disclosure of how many digits of HSN?
It is optional for taxpayers with an annual turnover of up to INR 1.50 crore to disclose HSN in GSTR-9 fillings. On the other hand, taxpayers with an annual turnover of above 1.5 but less than Rs. 5 crore must stick to 2-digit HSN in GSTR-9 fillings. Taxpayers with an annual turnover above Rs. 5 crore must adhere to a 4-digit HSN code.
Are there penalties for failing to report HSN codes on GSTR-9?
Yes, there are penalties for any taxpayer who commits an offense by using incorrect or omitted HSN codes on GSTR-9 fillings. A fine of up to Rs. 50,000 is applicable for incorrect HSN codes, which could rise if other offenses are committed as part of the filling process.
What is the penalty for helping someone commit fraud in GSTR-9 filling?
Any person who assists a taxpayer in committing fraud under GST or acquires and receives goods and services violating GST rules is subject to a fine of Rs. 25,000. The fine is also applicable to people who fail to issue an invoice according to GST rules or fail to appear in front of the tax authority upon receiving summons.
GSTR-9 is one of the most important annual returns that GST-registered taxpayers should file, as it details the outward and inward supplies made during the relevant financial year. The filling should be accompanied by the correct HSN codes for the supplies, which helps in determining the appropriate tax rate and tax bill. Failure to report accurate HSN codes on GGSTR-9 filling triggers the risk of penalties of up to $50,000. Once a GSTR-9 filling is made, it cannot be revised; therefore, it is crucial to ensure everything is always in order.