Path Breaking or Anti Small Businesses? 

On Late Fees on Filing ‘Nil’ GST return

By Krishna Agarwal

THE current taxation regime has multiplied the complexities for small businesses when these small businesses are already facing financial difficulties due to lack of business transactions because of the ongoing pandemic situation that the world is witnessing. Present taxation regime has been a danger, rather, a nightmare for small businesses. Under the present taxation regime, a person who has no business transaction has to file a ‘nil’ GST return (GSTR3B). To have a better understanding, ‘nil’ GST return means that for a particular month (for which ‘nil’ GST return has to be filed) no transactions were done in the said business.

Therefore, in cases where no transactions were done by businesses (maybe, owing to the pandemic situation viz. buying and selling was done during the said month) they have to file a ‘nil’ GST return. Given the very low literacy rate, many who are not aware of how to file ‘nil’ GST return or couldn’t afford a GST practitioner due to financial difficulties or couldn’t find a GST practitioner or were in difficult health situation or his/her family members were in facing health issues has troubled a lot of small business. A ‘system generated’ notice is issued under Section 46 of Central Goods and Services Tax Act, 2017, if a person fails to submit the monthly GST returns. Thereafter, the individual is charged a per day penalty of Rs. 20 (in case of ‘nil’ return) till the date, GST return is filed. This per day penalty is charged ‘separately’ for every single month for which GST return is not filed.

Also, if an individual wants to file GST return for the latest month, s/he cannot do so, unless and until previous returns are duly filed. If a person wants to continue his/her business, then in such circumstances, individual is left with no option but to file return along with heavy penalty, in case, s/he is not aware of how to file ‘nil’ GST return and couldn’t find a GST practitioner because of the pandemic situation. Given that, a person who is filing nil GST return, it is implied that that the firm is already facing financial crisis and in addition to this crisis – a heavy penalty is levied. The GST penalty keeps on adding and works as a traumatizing gamut for the individual, who has not filed GST returns. If for a reason an individual is not able to submit a GST return for six or more months, then in such circumstances, the individual is served with a notice for Suo-Motu Cancellation of registration. Albeit, a person is given a time-period of 10 days for filing the clarifications. Till the expiry of the time period of notice for Suo- Motu Cancellation of registration – the GST registration status shows ‘Suspended’. If the person files for clarification and GST returns along with late fees then the GST registration status will be changed to Active, but, if in case, fails to file clarification and GST returns along with late fees then it would show the GST registration status as cancelled. Once the GST registration is cancelled, the individual cannot file for another GST registration number.

The GST Council must understand the ground reality and problems faced by the people. The basic intention and aim of the legislators while delegating such power to GST council is to ensure that the act is implemented in its spirit and no or less hurdles are faced by the concerned stakeholders. Because of the abovementioned situation and reasons, it is, therefore, argued that: this very exercise of cancellation of GST registration on such unreasonable grounds is arbitrary and stands violative of Article 19 (1) (g). I reckon (that) it is high-time to give reliefs to such small businesses.


Views expressed in the article are the author’s own and do not necessarily represent the editorial stance of Kashmir Observer 

  • The Author is a Law Student at Narsee Monjee Institute of Management Studies (NMIMS) School of Law, Mumbai. He can be reached at [email protected]

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