What is the penalty for late filing of GST returns?

Penalty for Late Filing of GST Returns

Under the Goods and Services Tax (GST) regime in India, failure to file GST returns by the due date attracts penalties. The penalties vary based on the type of return, the duration of delay, and whether the taxpayer has paid the due tax. Below is a detailed explanation of the penalty provisions for late filing of GST returns:

1. Penalty for Late Filing of GST Returns (GSTR-3B and GSTR-1)

Late Fee for Non-Filing of Returns (GSTR-3B and GSTR-1)

Section 47 of the CGST Act governs the penalty for late filing of GST returns.
The penalty for failure to file returns on time is a late fee as follows:
- ₹200 per day (₹100 each for CGST and SGST) for each day of delay, subject to a maximum limit of:
  - 0.25% of the taxpayer’s annual turnover in the relevant state or Union Territory (for GSTR-3B).
  - ₹5,000 (whichever is lower) for GSTR-1 and other returns.

Key Points Regarding Late Fees:

The late fee is charged for each return that is filed late, i.e., GSTR-3B or GSTR-1.
The late fee is only applicable if the taxpayer fails to file the return by the due date, but there is no late fee if the return is filed on or before the due date.
If the taxpayer has no tax liability (for example, during a period of zero sales), the penalty would still apply for late filing.

Late Fee for GSTR-3B:

The late fee for GSTR-3B is charged as ₹200 per day (₹100 for CGST and ₹100 for SGST), subject to the maximum of 0.25% of the taxpayer’s turnover in a financial year. This late fee is calculated for each day of delay in filing the return.
- Example: If a taxpayer’s annual turnover is ₹10 crore, the maximum late fee for delayed filing of GSTR-3B will be ₹25,000 (0.25% of ₹10 crore).

Late Fee for GSTR-1:

The late fee for GSTR-1 is ₹200 per day (₹100 CGST + ₹100 SGST) up to a maximum limit of ₹5,000.
However, this is applicable only for delayed filing of GSTR-1, which is required to be filed for outward supplies (sales) of goods or services.

Interest on Late Payment of Tax (Section 50):

In addition to the late fee, taxpayers are also liable to pay interest on the outstanding tax amount if the GST is not paid by the due date.
Interest is charged at the rate of 18% per annum on the tax payable amount, which accrues from the day after the due date until the actual date of payment.

No Penalty for Late Filing if Tax Paid on Time:

If the taxpayer files the return on time but does not pay the tax by the due date, the penalty will be applicable. However, if both the return and payment are made by the taxpayer, no penalty would be imposed.

2. Acts and Provisions in the Indian Constitution Related to Penalties for Late Filing

While the Indian Constitution itself does not explicitly deal with GST penalties, the Constitutional Amendments and relevant laws passed by Parliament lay down the framework for GST compliance, including the imposition of penalties.

Relevant Constitutional Amendments

101st Amendment to the Constitution of India (2016):
- This amendment introduced the Goods and Services Tax (GST) system in India. It gave the Parliament and State Legislatures the power to legislate GST laws, including rules related to penalties for late filing of GST returns.
- The amendment laid the foundation for creating a unified tax system across the country, which includes provisions for compliance, returns, and penalties.
Article 246A:
- This article provides the Union and State Governments the power to legislate GST laws, including the framework for penalties for non-compliance and late filing of returns.
Article 279A:
- This article provides for the creation of the GST Council, which plays a crucial role in making recommendations regarding the structure and procedures for returns and penalties under GST.

3. Provisions Under the CGST Act (2017)

The Central Goods and Services Tax (CGST) Act outlines the penalty structure for the late filing of returns and the interest on delayed payments.

Section 47 – Late Fee for Failure to File Returns:

Section 47 of the CGST Act prescribes the late fee for failing to file GST returns by the due date.
- The late fee is ₹200 per day (₹100 CGST + ₹100 SGST) for every day of delay, subject to a maximum of 0.25% of the taxpayer’s turnover in the relevant state or Union Territory.

Section 50 – Interest on Late Payment of Tax:

If a taxpayer fails to pay the tax liability (the output tax) by the due date, interest will be charged at 18% per annum.
- The interest is calculated on the outstanding tax amount from the day after the due date until the actual date of payment.

4. Landmark Cases on Late Filing of GST Returns

Several landmark cases have helped interpret the provisions related to the late filing of GST returns and the penalties associated with it.

1. M/s. K. P. S. Sachdeva v. Union of India (2020)

Case Summary: The petitioner in this case challenged the late fee imposed for non-filing of GSTR-3B, arguing that the delay was due to technical issues with the GST portal.
Court’s Ruling: The Delhi High Court held that the penalty for late filing under Section 47 of the CGST Act is mandatory and cannot be waived off, even in the case of technical glitches, unless it can be shown that there was no fault of the taxpayer.

2. M/s. Filco Trade Centre Pvt. Ltd. v. Union of India (2019)

Case Summary: This case dealt with the imposition of a late fee for delayed filing of GSTR-1 and GSTR-3B. The petitioner argued that the late fee was disproportionate to the delay.
Court’s Ruling: The Supreme Court held that the late fee is in accordance with the law under the CGST Act and cannot be waived automatically. The court emphasized the need for strict adherence to GST filing deadlines.

3. Union of India v. M/s. Bharti Airtel Ltd. (2021)

Case Summary: This case examined the application of penalties for late filing of GSTR-1 and GSTR-3B, where the taxpayer contended that the delay was due to a genuine issue.
Court’s Ruling: The court ruled that penalties for delayed returns are enforceable under the CGST Act, and taxpayers must adhere to GST deadlines unless there is sufficient justification for delay, such as technical issues or force majeure.

4. S. R. K. L. R. Enterprises v. Union of India (2019)

Case Summary: The petitioner argued that GST penalties for delayed filing were unreasonable and should be reduced.
Court’s Ruling: The Madras High Court ruled that the late fee for non-filing is a legally prescribed penalty, and the Court cannot interfere in the matter of penalties unless there is manifest injustice or unreasonableness in the application of the law.

Conclusion

Landmark cases have clarified the enforcement of penalties and the mandatory nature of compliance with the GST filing deadlines.

Late filing of GST returns (GSTR-3B, GSTR-1) attracts penalties under Section 47 of the CGST Act, which prescribes a late fee of ₹200 per day (₹100 CGST + ₹100 SGST) for every day of delay.

The penalty is capped at 0.25% of the taxpayer’s annual turnover (for GSTR-3B) or ₹5,000 (for GSTR-1), whichever is lower.

Interest is charged at 18% per annum for delayed payment of taxes.

The Constitution of India (101st Amendment) provides the legislative framework for GST, and the GST Council provides guidance on tax rates, compliance, and penalties.