Restrictions on Filing of GSTR-1/ IFF in case of GSTR-3B non-filers: Rule 59(6) implemented
- In a yet another moves to ensure timely compliances and to mitigate the cases of GST frauds, the CBIC made Rule- 59(6) of CGST Rules effective from 01st September 2021. This can be seen as a big technical measure of the Government to curb the tax evasion. We all are aware that every GST registered person is required to file GSTR-1 return on monthly/ quarterly basis. GSTR-1 is furnished by the registered person in respect of outward supplies of taxable goods or services made by him/her. Further, the registered person is also required to pay their taxes on monthly basis by filing of GSTR-3B.
- Earlier, the filing metrics (mechanism) of GST returns was misused by tax evaders. It was seen in many instances that certain taxpayers were filing GSTR-1 declaring outward supplies made by them but were not filing GSTR-3B. This led to the situation where such taxpayers escaped from paying taxes while they were able to pass the benefit of input tax credit to their customers. This led to increase in the cases of bogus GST billing and tax evasion.
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- The CBIC took several measures to restrict such practices including the automatic blocking of E-way Bill generation facility for those taxpayers who defaulted in filing of GSTR-3B. This was however found as insufficient by the GST Department. So, the CBIC came out with a Notification on the very first day of the year 2021 inserting sub-rule (6) after sub-rule (5) of Rule 59 of CGST Rules vide Notification No. 01/2021- Central Tax dated 01st January, 2021. Sub-rule 59(6) is intended to restrict the defaulting taxpayers from filing of GSTR-1 if they fail to furnish GSTR-3B. However, the sub-rule 59(6) couldn’t be made effective from that date as GST portal was not technically updated for the same.
Read Notification No. 01/2021 dated 01st January, 2021: https://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-01-central-tax-english-2021.pdf
- However, the sub-rule 59(6) has now been made operational from 01st September, 2021. In this regard, GSTN issued an advisory dated 26th August, 2021 for informational purposes. In next section of the article, advisory issued by GSTN is reproduced as below:
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“Rule 59(6) of CGST Rules, 2017; inserted vide Notification No. 1/2021 dated 1st January, 2021, provides for restriction in filing of GSTR-1 in the following cases: (a) A registered person shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for preceding two months; (b) A registered person, required to furnish return for every quarter under the proviso to sub-section (1) of section 39, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 or using the invoice furnishing facility (IFF), if he has not furnished the return in FORM GSTR-3B for preceding tax period;
This Rule will be implemented on GST Portal from 1st September, 2021. On implementation of the said Rule, the system will check that whether before the filing of GSTR-1/IFF of a tax-period, the following has been filed or not: (a) GSTR-3B for the previous two monthly tax-periods (for monthly filers), OR (b) GSTR-3B for the previous quarterly tax period (for quarterly filers), as the case may be. The system will restrict filing of GSTR-1/IFF till Rule-59(6) is complied with.
This check will operate on clicking the SUBMIT button of GSTR-1 and the system will give an error message of the condition of Rule-59(6) is not met. It may be noted that records which have been saved in GSTR-1 will remain saved and filing of such records will be permitted after Rule-59(6) is complied with.
Implementation of Rule-59(6) on the GST Portal will be completely automated, similar to the blocking & un-blocking of e-way bill as per Rule-138E and facility for filing of GSTR-1 will be restored immediately after filing of relevant GSTR-3B. No separate approval would be needed from the tax officers to restore the facility for filing of GSTR-1.
To ensure no disruption in filing GSTR-1/IFF, taxpayers who have not filed their pending GSTR-3B, especially from period November 2020 and afterwards may do so at the earliest. |
Source: www.cbic.gov.in
Analysis:
- Rule-59(6) states that in case of monthly filers of GSTR-1, GSTR-1 filing facility on the GST Portal shall be automatically blocked if they fail to furnish two preceding monthly GSTR-3B.
- In case of quarterly filers of GSTR-1/IFF facility users, GSTR-1/IFF filing facility on the GST Portal shall be automatically blocked if they fail to furnish the preceding quarterly tax period.
- The defaulting taxpayer shall be allowed to fill the data in GSTR-1 facility on the GST Portal but when he/she will click on ‘SUBMIT’ button, an error message will be displayed reminding him/her of non-compliance of Rule-59(6).
- However, the data filled by the taxpayer will remain saved and will not be lost. He/she can remove the default by filing GSTR-3B. As soon as the GSTR-3B is filed for default period, GSTR-1/IFF facility will be un-blocked without interference of any tax official.
About Author: The Author is a Chartered Accountant with experience of more than 15 years in Direct Tax, International Taxation and GST. He can be reached at: ca.naveen80@gmail.com
Disclaimer: The contents in this article are the opinion of the author and are meant for informative purposes only. Readers are requested to act diligently and in consultation with any professional.
