The returns under GST are the final stage of compliance which squares off the monthly/quarterly GST transactions. Taxpayers are subject to consequences and penalties for failing to submit their returns, even if everything up to that point has gone smoothly. Sections 37 to 45 govern the various types of returns and ITC matching, reversal, and reclaiming an input tax credit, all of which are important in return filing.   

Section 46, in conjunction with sections 52 and 68, requires that a form be issued electronically to any registered person who FAILS to furnish returns. The registered person must provide such a return within 15 days of receiving such notice.  

If the taxpayer still fails to file the required returns after receiving such notice from the department, he is subject to the penalties under section 47 listed below.  

For GSTR-1, GSTR-2, GSTR-3B or Final Return (Section47(1))

Suppose the taxpayer fails to provide information about any of the returns mentioned above by the due date. Returns that are not filed on time may incur a penalty known as a late fee. According to the act, this fee can be as much as Rs.100 per day. The state GST will be Rs. 100, and the central GST will be Rs. 100, for a total of Rs. 200 per day. A fine of Rs. 5000/- is the maximum amount that can be imposed. However, in the case of late filing, there is no IGST late fee 

For Annual Return (Section47(2))

Suppose the annual return is not filed as required by section 44. In that case, a late fee of Rs.100 is levied against the taxpayer for each day the failure continues, up to a maximum of 0.25 percent of his turnover in the State or Union territory. 

Consequences of Non-filling of Returns

1. Interest on the delayed Tax amount

In addition to the late fees, the total interest payable on such a delayed amount of tax is 18% per year (Section 50). It must be considered by the taxpayer when calculating the tax.  

2. GST Registration can be Canceled

A taxpayer who avoids or fails to provide information or file returns, such as a regular dealer who has not filed returns for the previous six months or returns for the previous three months, has not been provided by a composition dealer. The taxpayer’s registration can then be canceled, including late fees, interest, and other consequences.  

3. Loss of business

Such non-compliance will result in breaking the GST Chain of ITC, which will prevent the customer from utilizing the eligible ITC and impede the repo between the business transaction and customer can switch to competitors and business of loss may occur due to the untimely passing of ITC.  

4. Confiscation of Goods

If a taxpayer has sent goods through delivery to the customer’s specified location but has failed to provide the information due to non-filing of returns to evade taxes, such goods in transit are subject to confiscation and a penalty of Rs. 10,000 or an amount equal to the tax evaded can be imposed on such a taxpayer.  

5. Imprisonment

Section 132 states that if a taxpayer fails to provide any information that is vital and required by law, such as monthly or quarterly returns, they may be sentenced to 6 months in prison.  

Considering all of the factors mentioned in the article, any failure to file a return should be avoided as it has a long list of consequences. It is worth noting that in the majority of cases, improper bookkeeping or an incorrect ITC claim stand out as the cause of intentional or unintentional noncompliance. 

It’s even more intriguing to learn that both issues are clerical in nature and are mostly resolved using technology. Finsights GST Reconciliation Software is a platform that automates and precisely performs these functions. It combines the best of both worlds, industry practice and technical assistance, to optimize the entire GST compliance process and helps the user in avoiding several discrepancies. Visit and take advantage of the 7-day free trial to experience your best partner in compliance.