Is mini-amnesty scheme for reducing late fees half-hearted?

[Anish Goyal]

Recently in 40^th GST Council Meeting, late fees for all GST-3B returns have been reduced to ₹ 500/- and in case of NIL GSTR-3B returns late fees are waived.  The benefit of this scheme is available to all taxpayers who have missed the bus to file GSTR-3B returns within due dates since the introduction of Goods and Service Tax, 2017. The taxpayers have to file returns for the period July’ 2017 to January 2020 between the period 01.07.2020 to 30.09.2020 for availing this benefit.

The Hon’ GST Council was kind enough to understand the grievance of the tax-payers particularly those whose amount of late fees was more than the amount of tax to be paid for the period July’ 2017 to January’ 2020 but what about those assesses who had filed the GSTR-3B returns belatedly and have paid late fees in thousands or even in lakhs. The Government waving the late fees should also consider refunding the late fees already paid by the taxpayers. In this current situation, it would really bring some relief to the financial constraint prevailing among the business. Also, this gesture would bring justice to tax-payers who have already paid late fees.

Further, the most important question that would come for filing GSTR-3B now is whether the input tax credit for the period July’ 2017 to March’ 2019 can be taken if the assessee files their returns now. Whether the restriction of section 16(4) of the CGST Act, 2017 applies if returns are filed after the due date. Section 16(4) of the CGST Act, 2017 reads as under:

“4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.:

Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019”

As per the above-mentioned provision, ITC for the F.Y 2017-18 could have been taken up to the due date of furnishing return for the month of March’2019 i.e. 20^th April’ 2019 and for F.Y 2018-19, ITC could have been taken up to the due date of furnishing return for the month of September’ 2019 i.e. 20^th Oct’ 2019.

Let us first go through some portions of the relevant sections in this regard:

Section 16(1) provides that every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

Section 16(2) puts a condition that no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless he has furnished the return under section 39.

Section 35(1) requires every registered person to keep and maintain at his principal place of business a true and correct account of input tax credit availed.

In this regard rule 56(4) of CGST Rules requires every registered person, other than a person paying tax under section 10, shall keep and maintain an account, containing the details of tax payable (including tax payable in accordance with the provisions of sub-section (3) and sub-section (4) of section 9), tax collected and paid, input tax, input tax credit claimed, together with a register of tax invoice, credit notes, debit notes, delivery challan issued or received during any tax period.

Further, section 39(1) provides that every registered person shall furnish the return electronically giving the details of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars in such form and manner and within such time as may be prescribed.

The act of the assessee for putting an entry in his books of accounts (avail) leads to claim of input tax credit by him under section 35(1) r/w rule 56(4) of CGST Rules, 2017. Further, details of input tax claimed/availed in the books of accounts needs to be mentioned in GSTR-3B filed for that period.

When the assessee has claimed the input tax credit in his books of accounts it leads to availing of input tax credit. The entitlement is based on the filing of returns as per section 16(2) of the CGST Act, 2017. Thus, if the assessee has availed input tax credit in the books of accounts maintained as per the provisions of section 35(1) r/w rule 56(4) and have furnished the return u/s 39, the assessee is entitled to input tax credit u/s 16(2).

The provisions of section 16(4) of CGST Act, 2017 should apply in cases wherein the input tax credit has not been availed within the time limit as prescribed therein in the books of accounts.  

Hope the Hon’ GST council clarifies the matter by way of a circular and gives a wholehearted relief to late filers. Also, give refund of late fees paid by genuine taxpayers.

With regards,

CA Anish Goyal

M/s. Goyal Rathi & Associates

Chartered Accountants