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No Benefit is provided to Honest Taxpayer in GST

Many taxpayers have voluntarily paid lakhs of Rs. of late fee for late filing of returns

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In the recent meeting Goods and Services Tax (GST) Council have discussed various relief measures in view of the damage caused by the second wave of Corona. This was the 43rd meeting of the GST Council which took place more than 7 months after the last meeting. In this meeting, an important decision was taken to give relief to those taxpayers who have long pending returns to be filed.

These include taxpayers who have defaulted in filing GSTR 3B returns from July 2017 to April this year. For taxpayers who do not have any tax liability, the late fee has been capped at Rs 250 each for CGST and SGST. For taxpayers who have tax liability, the late fee will be Rs 500 each for CGST and SGST.

Under this, relief will be given to those taxpayers who will file returns between June 1 and August 31.

This exemption is not applicable for GSTR 1.

Government has also not clarified whether taxpayers will be able to get input credit in GSTR 3B for this period if they file returns now.

There is no incentive given by the GST Council for those taxpayers who have complied with the law and have already paid late fees.

Late fee exemption is being given to those who have delayed filing of returns, but the additional late fee is not being refunded to those taxpayers who had filed their returns before the declaration of exemption. This cannot be said to treat all taxpayers equally.

There is a limit on late fee under section 47 of CGST :

1- Taxpayers who do not have any tax liability under GSTR 3B and their sales have not been made under GSTR 1. For this, the late fee has been fixed at Rs 500 (Rs 250-250 for CGST and SGST) on every return.

2. A late fee of Rs 2000 will be levied on each return if the total annual turnover is Rs 1.5 crore a year ago. In this, Rs 1000 will be for CGST and Rs 1000 for SGST.

3. A year ago, if the total annual turnover is between Rs 1.5 crore to Rs 5 crore, then the late fee will be Rs 5000 on each return. In this, Rs 2500 will be for CGST and Rs 2500 for SGST.

4. If the total annual turnover is more than Rs 5 crore from a year ago, then the late fee will be Rs 10000 on every return. In this, Rs 5000 will be for CGST and Rs 5000 for SGST.

As per the GST laws, before the change in the rules, there was no cap on late fees. Even as per the old rules, the late fee was levied on the maximum net tax.

Along with this, the data of GST returns shows that 80-90 per cent of the taxpayers filed or did not file the return after the deadline. That means the problem is something else. For the tax system to be successful, it is necessary that taxpayers can use it easily.

When the government implemented the GST law, there was no facility for easy availment of input tax credit in many cases. Whereas this facility was in the earlier tax system. Even after the implementation of the new rules of GST, new Forms like 2A, 2B and Rule 36(4) were implemented to reduce the availment of input tax.

This made it difficult for many taxpayers to get refunds and affected the working capital cycle and hence there is a delay in filing the return. Taxpayers are charged interest ranging from 18 to 24 per cent, while the government pays only 6 per cent tax on refunds.

Even after 4 years of GST implementation, a lot is needed to be done to simplify it so that easy credit, ease of doing business gets increased. If the government is able to do this, the tax collection will automatically increase.


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