The Penalties for Late Filing or Incorrect Filing of GSTR-2A and GSTR-3B

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Published Date:  04-12-2023   Author:   swati-goyal
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In the Indian taxation system, the Goods and Services Tax (GST) stands as a pivotal reform, streamlining the tax structure across the nation. Central to this system are the GSTR-2A and GSTR-3B filings – essential monthly tasks for businesses of all sizes. While these might seem like routine paperwork, their timely and accurate completion is crucial. This is particularly true when considering the penalties for late GSTR-2A filing and the consequences of delayed GSTR-3B submission.

These penalties are not just fines; they represent significant financial and reputational risks for businesses. This article aims to demystify these implications, offering a clear understanding of the charges for incorrect GSTR-2A filing, late filing penalties for GSTR-3B, and the overall importance of maintaining GST compliance.

What is GSTR-2A?

GSTR-2A is a form that reflects the purchases of a business and is automatically generated by the GST portal based on the filings of its suppliers. It plays a key role in ensuring that businesses claim the correct amount of input tax credit (ITC), a significant aspect of the GST process. However, the penalties for late GSTR-2A filing or discrepancies can be stringent.

If businesses fail to reconcile their GSTR-2A in a timely manner, they risk losing out on their ITC, leading to increased tax liabilities. Moreover, the charges for incorrect GSTR-2A filing can also impact a business’s financial standing. Regular monitoring and reconciliation of GSTR-2A with purchase records are essential to avoid such penalties for GSTR-2A errors.

What is GSTR-3B?

GSTR-3B, on the other hand, is a monthly self-declaration that needs to be filed by registered businesses. It summarizes the total value of sales and purchases, tax liability, and the input tax credits that a business intends to claim. The accurate and timely filing of GSTR-3B is crucial for maintaining GST compliance.

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The consequences of delayed GSTR-3B submission can be significant, ranging from late filing fees to interest charges on the tax due. These fees for delayed GSTR-3B filing not only add to the financial burden but also affect the compliance rating of the business, which can have long-term repercussions. To avoid late filing penalties for GSTR-3B, businesses must ensure they are well-prepared and submit their returns within the prescribed deadlines.

Penalties for Late Filing of GSTR-2A

One of the primary concerns for businesses in GST compliance is avoiding the penalties for late GSTR-2A filing. It’s important to note that GSTR-2A is an auto-drafted document reflecting the purchases as reported by the suppliers. While the form itself does not require filing, the timely reconciliation of GSTR-2A with the purchase invoices is crucial. Failure to reconcile and rectify discrepancies can lead to a denial of input tax credit, effectively increasing the tax liability. The penalties for GSTR-2A errors, thus, are indirect but substantial, emphasizing the need for diligence in monitoring and reconciling GSTR-2A data regularly.

Table: Impact of Late Reconciliation of GSTR-2A

Scenario Consequence
Timely Reconciliation Eligibility for full input tax credit
Delayed Reconciliation Risk of partial or total loss of input tax credit
Non-reconciliation Increased tax liability and potential legal complications

Consequences of Delayed GSTR-3B Submission

Delayed GSTR-3B submissions can lead to substantial penalties. The late fees for Normal GSTR 3B Returns amount to ₹50 per day, while for Nil Returns, it’s ₹20 per day. These fees accrue from the day following the due date until the return is filed. For example, if the GSTR-3B due date is January 20th and the return is filed on January 25th, the late fee for a normal return would be 5 days x ₹50 = ₹250. For nil returns, it would be 5 days x ₹20 = ₹100. This system emphasizes the importance of timely GSTR-3B submission to avoid accumulating late filing penalties for GSTR-3B.

Table: Late Filing Penalties for GSTR-3B

Return Type Late Fee Per Day Example Calculation (5 days late)
Normal Return ₹50 ₹250 (₹50 x 5 days)
Nil Return ₹20 ₹100 (₹20 x 5 days)

Charges for Incorrect GSTR-2A Filing

Charges for incorrect GSTR-2A filing primarily revolve around the loss of ITC due to mismatches or inaccuracies in the auto-populated data. It’s crucial for businesses to ensure the data in GSTR-2A aligns with their purchase records. Any discrepancies should be addressed promptly by communicating with suppliers. While GSTR-2A itself does not have a penalty for errors, the financial impact due to incorrect or unrectified entries can be significant.

Table: Consequences of Incorrect GSTR-2A Data

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Type of Error Consequence
Mismatch in invoices Loss of ITC
Overstated purchases Potential legal scrutiny
Understated purchases Reduced ITC claims

Late Filing Penalties for GSTR-3B

Late filing penalties for GSTR-3B are a crucial aspect of GST compliance. As mentioned, the penalties are ₹50 per day for normal returns and ₹20 per day for nil returns. However, these penalties are capped based on the business’s annual turnover. For businesses with an annual turnover less than ₹1.5 Crores, the maximum late fee is ₹2000 per return for both CGST and SGST. For turnovers between ₹1.5 Crores and ₹5 Crores, the cap is ₹5000 per return, and for turnovers exceeding ₹5 Crores, the maximum fee is ₹10,000 per return. This graded structure underscores the significance of timely GSTR-3B submission to mitigate financial impacts.

Table: Maximum Late Fees for GSTR-3B Based on Annual Turnover

Annual Turnover Maximum Late Fee (CGST + SGST)
Less than ₹1.5 Crores ₹2,000 per return
₹1.5 Crores – ₹5 Crores ₹5,000 per return
Over ₹5 Crores ₹10,000 per return

Also Read: Penalties and Late Fees for GSTR-3B Filing

Penalties for GSTR-2A Errors

While GSTR-2A is an auto-generated return, discrepancies in GSTR-2A can lead to penalties for GSTR-2A errors, primarily in the form of denied or delayed input tax credits (ITC). Inaccuracies in GSTR-2A, if not rectified promptly, can lead to significant tax liabilities, thus indirectly penalizing businesses. Timely action and effective communication with suppliers to resolve mismatches are crucial in avoiding such indirect penalties.

Table: Indirect Penalties for GSTR-2A Errors

Error Type Indirect Penalty
ITC Mismatch Denied or Delayed ITC Claims
Inaccurate Entries Increased Tax Liabilities

Also Read: Common Errors In GSTR 2b | Correcting Errors Or Discrepancies In GSTR 2B

Fees for Delayed GSTR-3B Filing

The fees for delayed GSTR-3B filing, as outlined earlier, are a critical aspect of GST compliance. Besides the per-day late fee, businesses should also be aware of the interest charged on late payment of tax liabilities. This interest is calculated at 18% per annum, computed from the next day of the due date till the date of payment. Such fees and interests underscore the importance of timely tax payments and return submissions.

Compliance Strategies

Adhering to GST regulations and avoiding penalties and fees for delayed filings requires proactive compliance strategies. Businesses can leverage tools like GST software to streamline their filing process and ensure timely submissions. Regular monitoring of returns, especially GSTR-2A, for accuracy, and maintaining open communication with suppliers for any discrepancies, are essential practices. Adopting these strategies not only helps in avoiding penalties for late GSTR-2A filing and fees for delayed GSTR-3B filing but also ensures overall smooth financial operations.

Case Study: ABC Manufacturing Pvt. Ltd. – Consequences of Delayed GSTR-3B Submission

Background:

ABC Manufacturing Pvt. Ltd., a mid-sized company with an annual turnover of ₹4 Crores, operates in the electronics sector. The company is diligent in its GST compliance but, in July 2023, encountered an unexpected delay in filing its GSTR-3B due to technical issues in their accounting software.

Scenario:

  • Due Date for GSTR-3B Submission: 20th July 2023
  • Actual Date of Submission: 28th July 2023
  • Delay: 8 days
  • Annual Turnover: ₹4 Crores
  • Type of Return Filed: Normal GSTR-3B Return

Calculation of Penalties:

As per GST regulations, the late fee for normal GSTR-3B returns is ₹50 per day. Since the company’s turnover is between ₹1.5 Crores and ₹5 Crores, the maximum late fee they can incur is ₹5,000 per return.

  • Daily Late Fee: ₹50
  • Total Late Fee for 8 Days Delay: ₹50 * 8 = ₹400

However, since the maximum cap for their turnover slab is ₹5,000 and their actual late fee (₹400) is below this cap, they are liable to pay the calculated late fee of ₹400.

Interest Calculation:

In addition to the late fee, ABC Manufacturing Pvt. Ltd. also faces interest charges on their net tax liability. Assuming their net tax liability for July 2023 was ₹1 Lakh, the interest would be calculated as follows:

  • Net Tax Liability: ₹1,00,000
  • Interest Rate: 18% per annum
  • Interest for 8 Days Delay: (₹1,00,000 * 18% * 8) / 365 = ₹394.52 approximately

Total Penalty:

  • Late Fee: ₹400
  • Interest: ₹394.52
  • Total: ₹794.52

This delay in filing GSTR-3B led to a total penalty of ₹794.52 for ABC Manufacturing Pvt. Ltd. While this amount may not significantly impact a mid-sized company, it highlights the importance of timely GST compliance to avoid unnecessary financial burdens. Additionally, repeated delays could affect the company’s compliance rating and reputation with tax authorities. Therefore, it’s crucial for businesses to have robust systems in place to ensure timely and accurate GST filings.

Conclusion

In closing, handling GSTR-2A and GSTR-3B correctly is not just a requirement—it’s a necessity for your business’s financial well-being. Mistakes or delays in filing these GST forms can lead to hefty penalties, directly hitting your bottom line. Stay ahead: keep accurate records, file on time, and protect your business from unnecessary financial strain. It’s straightforward – good GST practices are key to your business’s financial health.

Also Read: The Importance of Filing GSTR-2A and GSTR-3B on Time

Frequently Asked Questions (FAQs)

  • What are the penalties for late GSTR-2A filing?

Although there are no direct penalties for late GSTR-2A filing, the implications are significant. If you fail to reconcile GSTR-2A in time, you might miss discrepancies in your purchases, leading to a loss of input tax credit (ITC). 

  • What are the consequences of delayed GSTR-3B submission?

Delaying your GSTR-3B submission can be costly. You’re charged a late fee of ₹50 per day for normal returns and ₹20 for nil returns, accumulating each day past the deadline. Moreover, you’ll pay interest on your due taxes, adding to the financial burden.

  • Are there charges for incorrect GSTR-2A filing?

While there are no direct charges for incorrect GSTR-2A filing, errors can lead to a significant indirect financial hit. Inaccuracies in GSTR-2A, like unreported purchases or mismatched invoices, can result in a loss of ITC. This means paying more in GST than necessary. 

  • How are late filing penalties for GSTR-3B calculated?

Late filing penalties for GSTR-3B are calculated based on the delay duration and your return type. For each day your filing is late, you incur a fee of ₹50 for normal returns and ₹20 for nil returns. These fees accrue daily until you submit your return or reach the maximum penalty cap, which varies based on your annual turnover.

  • What penalties are there for GSTR-2A errors?

Penalties for GSTR-2A errors primarily manifest as financial setbacks rather than direct fines. Errors in GSTR-2A, such as mismatched or overlooked transactions, directly affect your ITC claims, leading to a higher GST payment than necessary. This can significantly impact your business’s cash flow and profitability.

  • What are the fees for delayed GSTR-3B filing?

Fees for delayed GSTR-3B filing include a daily late fee and interest on the unpaid tax amount. The late fee is ₹50 per day for normal returns and ₹20 for nil returns. Additionally, interest is charged at 18% per annum on your tax dues from the day after the filing deadline until payment. 

  • How can businesses avoid penalties for late GSTR-2A filing?

Avoiding penalties for late GSTR-2A filing requires diligence in reconciling your GSTR-2A with your purchase records promptly. Regularly check for discrepancies between GSTR-2A and your invoices. If you find mismatches, address them immediately to ensure accurate ITC claims. 

  • What is the impact of late submission of GSTR-3B on businesses?

Late submission of GSTR-3B can severely impact a business financially. The immediate effect is the accumulation of daily late fees and interest on the tax due. These fees can quickly add up, straining your business’s finances. 

  • What steps can prevent charges for incorrect GSTR-2A filing?

To prevent charges for incorrect GSTR-2A filing, thorough and regular reconciliation of your GSTR-2A with purchase records is essential. Ensure all transactions are accurately reported and aligned with your suppliers’ filings. Prompt communication with suppliers to correct any discrepancies is crucial. Additionally, using reliable GST software can help track and match invoices effectively.

  • Is there a way to reduce fees for delayed GSTR-3B filing?

Reducing fees for delayed GSTR-3B filing is achievable by filing as soon as possible after the deadline. While the daily late fee and interest charges are inevitable once the deadline passes, minimizing the delay reduces the overall financial impact.

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Swati Goyal

Swati Goyal is an experienced financial reporter, who writes on the Australian share market (ASX), as well as global equity movements and trends more broadly. She also covers commodities, currencies, bonds, and the private market space. As a business writer and financial analyst, Swati has also published on FX Empire, TipRanks, Inquisitr, and many more. Swati holds a Bachelor of Commerce. She previously worked as a research analyst and trader at Angel Broking and led an accounts team at Cox & Kings.

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