GST Audit Case Study 2 - Non-Payment Of Late Fee For Delay In Filing Of GST Annual Return Form GSTR-9 And Reconciliation Statement Form GSTR-9C.

Late fee of GSTR- 9 for late filling was not auto populating in form GSTR-9 or in GSTR-3B but Currently Notices for late fees for GSTR-9 are being issued as a part of the department GST Audit the notice issued by the department is below.

Aims and objectives of GST Audit

Audit in GST should intend to evaluate the credibility of self-assessed tax liability of a taxpayer based on the twin test of accuracy of their declarations and the accounts maintained by the taxpayer. Thus, Audit in GST should have the following objectives:

• Measurement of compliance levels with reference to compliance strategy of the tax administration.
• Detection of non-compliance and revenue realization
• Prevention of non-compliance in the future.
• Discovering areas of non-compliance to prevent taxpayers from continuing with such deviations from expected compliance behaviour that results in erroneous declaration of self-assessed liability.
• Providing inputs for corrections in/amendments to the legal framework which are being exploited by taxpayers to avoid paying taxes.
• Encouraging voluntary compliance.
• Any other goals deemed worth pursuing by the GST administration.

What is Form GSTR-9?

 Form GSTR-9 is an annual return to be filed once for each financial year, by the registered taxpayers who were regular taxpayers, including SEZ units and SEZ developers. The taxpayers are required to furnish details of purchases, sales, input tax credit or refund claimed or demand created etc.

GSTR-9 is compulsorily applicable to taxpayers with an annual total turnover of more than Rs. 2 crore PAN India basis. However, the option to file GST Annual Return shall be available and the taxpayers whose turnover is up to 2 crore rupees still can file the Annual Return in Form GSTR-9 on voluntary basis.

What is GSTR-9C?

Is a reconciliation statement between the annual GSTR-9 of a financial year and the audited financial statements of the taxpayer. 

Every registered person under GST whose turnover during a financial year exceeds the prescribed limit of Rs.5 crore must prepare the reconciliation statement in Form GSTR-9C and self-certify it before filing it on the GST portal.

Audit Para No. 2 - Non-Payment Of Late Fee For Delay In Filing Of GST Annual Return Form GSTR-9 And Reconciliation Statement Form GSTR-9C.

During the course of audit of the statutory records, it was noticed that the taxpayer had failed to file the statutory GSTR 9 returns for the period 2019-20 and 2020-21, 2021-22 in time, which was required to be filed along with the GST Annual return in Form GSTR-9C under Section 44 of CGST Act, 2017.

As per Section 44 (2) of CGST Act, 2017 (as applicable upto 01.08.2021):

(2)       Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of Section 35 shall furnish, electronically, the annual return under sub-section (1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed.

As per Section 47 of CGST Act, any registered person who fails to furnish the return required under section 44 (annual return GSTR-9/9C) by the due date shall be liable to pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum of an amount calculated at a quarter percent of his turnover in the State or Union territory.

Section 44 as substituted from 01.08.2021 mandates that “Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person shall furnish an annual return which may include, a self -certified reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statements for every financial year electronically, within such time and in such form and in such manner as may be prescribed”.

It is noticed that the taxpayer filed the GSTR 9 belatedly as per the details given in the table below :

The late fee of Rs.131000/- (Rs. 65500/- each for CGST and SGST) is liable to be paid. The late fee for GSTR 9C is Rs. 60000/- (Rs. 30000/- each for CGST and SGST) as per Notfn. No. 7/2023 dt. 31-03-2023 (Amnesty Scheme).

Author’s Note

Under GST Law late filing of various returns attract levy of late fees as per section 47 of SGST Act. Author’s Note

• CBIC issued notification no: 07/2023%u2013Central Tax to reduce late fee for delayed GSTR-9 filing from FY 2022-23 onwards:

In the above structure of late fee the most alarming issue is with respect to the delay in filing of annual return GSTR 9. Here for the delay late fee comes @ Rs.200/- per day and if the delay prolongs maximum late fee shall be 0.25% of assesses turnover in the respective State.  In short if a tax payer omitted to file an annual return the late fee starting from Rs.200/- and ended up with 0.25% of these turnover in that State/Union territory.  In respect of all other filing of forms like GSTR 1, 3B, GSTR 4, 7, GSTR 9C there is a quantified maximum limit with may be up to Rs.10,000/-, Rs.20,000/- or Rs.50,000/- etc. only.  But in the case of delay in filing of GSTR 9 only there is no such quantification and tax payer may hit with huge late fee amount up to 0.25% of turnover.

Author's Suggestion

Most of the taxpayers have not made the payment for the late fees while filing the returns. But as a prudent practice, auditors and taxpayers should voluntarily pay the late fees while filing GSTR-9 Or GSTR-9c for the delay in filing GSTR-9 And GSTR-9C. Other wise department may issue notices later demanding late fees for delay in furnishing the returns.