Detailed Clarification on Notification No. 23/2024-Central Tax - Waiver of late fees payable by registered persons required to GSTR-7 returns.

Introduction:

The Ministry of Finance, Department of Revenue, issued Notification No. 23/2024-Central Tax on 8th October 2024 (S.O. 4374(E)) under the Central Goods and Services Tax (CGST) Act, 2017. This notification addresses the waiver of late fees payable by registered persons required to deduct tax at source (TDS) under Section 51 of the CGST Act, for delayed filing of their GSTR-7 returns.

This notification supersedes the earlier Notification No. 22/2021-Central Tax dated 1st June 2021, except for actions already completed or omitted under that notification before its supersession. The new provisions will be effective from 1st November 2024.

Key Provisions of the Notification:

The notification primarily provides for the waiver of late fees that are payable for the late filing of FORM GSTR-7. GSTR-7 is a return filed by registered persons who are required to deduct tax at source under Section 51 of the CGST Act. The late fee waivers apply to late filings starting from the month of June 2021 onwards.

1. Waiver of Late Fee for Delay in Filing GSTR-7 (With TDS)

The notification waives the late fee payable under Section 47 of the CGST Act, 2017 for failure to file the GSTR-7 return by the due date. The late fee that is in excess of ₹25 per day during which such delay continues has been waived.

What this means:

• Late fee reduction: Instead of the original higher amount of late fee, the late fee will now be restricted to ₹25 per day (per the provisions of the CGST Act).
• Scope: This waiver applies to the TDS deductors who fail to file their GSTR-7 return for any month starting from June 2021 onwards.

However, there is a cap on the maximum amount of the late fee payable:

2. Maximum Late Fee Cap for Filing GSTR-7 (With TDS)

The total amount of late fee payable under Section 47 of the CGST Act for failure to furnish GSTR-7 for any month from June 2021 onwards is capped at ₹1,000. This means that the registered person cannot be charged more than ₹1,000 in late fees for any given month, regardless of how long the delay continues.

Explanation:

• If the delay in filing GSTR-7 continues, the late fee would continue to accrue at ₹25 per day but would be capped at a total amount of ₹1,000 for that particular month.

3. Late Fee Waiver for Nil TDS Returns (No Tax Deducted at Source)

The notification provides a complete waiver of late fees for any registered person who files a Nil GSTR-7 return after the due date. This applies when the registered person did not deduct any TDS during the month in question.

Key Points:

• If no tax was deducted in the given month (meaning the TDS for that month is Nil), and the GSTR-7 return is delayed, the late fee payable under Section 47 will be completely waived.
• This waiver applies even if the return is filed late, provided no tax was deducted during that month.

Effective Date of the Notification:

The notification will come into force on the 1st of November 2024. Therefore, any late filing of GSTR-7 returns after that date will be subject to the provisions of this notification, including the revised late fee structure and the waivers provided.

Impact of the Notification:

1. Reduction in Late Fees:
   • The notification significantly reduces the financial burden on registered persons who are required to file GSTR-7 returns by limiting the late fee to ₹25 per day of delay. The total late fee payable will not exceed ₹1,000 per month, irrespective of how long the delay persists.
2. Relief for Nil Returns:
   • For those who had no TDS deduction for a particular month, the complete waiver of late fees for filing Nil GSTR-7 returns late provides a major relief. This ensures that businesses that had no TDS obligations during a particular month are not penalized for filing the return late.
3. Clarity on Applicability:
   • The notification applies to the late filing of GSTR-7 returns starting from June 2021 onwards. The reference to previous months provides clarity to taxpayers, ensuring that any overdue GSTR-7 filings from June 2021 will be subject to the revised late fee provisions outlined in this notification.
4. Encouraging Compliance:
   • By reducing the late fees and capping the total amount payable, the government is encouraging compliance with TDS provisions under GST. Registered persons, especially those required to deduct TDS, will find it easier to adhere to filing deadlines due to the reduction in the financial penalty for delays.

Understanding GSTR-7 and TDS under GST:

Under the GST framework, certain registered persons are required to deduct tax at source (TDS) when making specified payments to suppliers of goods or services. The rate of TDS under GST is 2% (1% CGST and 1% SGST or 2% IGST). The TDS deductor must file the GSTR-7 return to report these TDS deductions.

GSTR-7 Return Filing Deadlines:

• The due date for filing GSTR-7 is the 10th of the following month. For example, the return for September must be filed by the 10th of October.

Consequences of Late Filing:

• A late fee under Section 47 of the CGST Act is imposed on registered persons who fail to furnish their GSTR-7 return by the due date. This fee is normally charged on a per-day basis until the return is filed.

Conclusion:

The Notification No. 23/2024-Central Tax provides much-needed relief to registered persons required to file GSTR-7 returns for TDS under the GST system. It reduces the late fee burden by limiting it to ₹25 per day of delay and capping the total amount payable at ₹1,000 for any month. Additionally, the complete waiver of late fees for Nil GSTR-7 returns encourages timely compliance for businesses that do not have any TDS obligations for a particular period.

By implementing these provisions, the government aims to simplify compliance for registered persons while ensuring that penalties for late filing are more reasonable and proportionate. This step is likely to boost overall compliance in the GST ecosystem, particularly for TDS deductors.