GST UPDATE ON RULE 59 RESTRICTING FILING OF GSTR-1 FOR FAILURE TO FILE GSTR-3B

The GST Law was designed in a manner so as to provide a simple and easy tax reform but the amendments made in the law from time to time have proved to the contrary and have all the more complicated the law. The imposition of various kinds of restrictions in availability or utilisation of input tax credit by introducing provision contained in Rule 36(4) of CGST Rules, 2017 is one such example. Another step towards denial of input tax credit to the recipient is the new provision introduced in Rule 59 as regards restricting the taxpayer to file GSTR-1 or file Invoice Furnishing Facility so as to deny reflection of input tax credit in GSTR-2A of the recipient and ultimately deny credit to the recipient. The new sub-section (6) introduced in Rule 59 of CGST Rules, 2017 reads as follows:-

“(6) Notwithstanding anything contained in this rule, -

(a) a registered person shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for preceding two months;

(b) a registered person, required to furnish return for every quarter under the proviso to sub-section (1) of section 39, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 or using the invoice furnishing facility, if he has not furnished the return in FORM GSTR-3B for preceding tax period;

(c) a registered person, who is restricted from using the amount available in electronic credit ledger to discharge his liability towards tax in excess of ninety-nine per cent. of such tax liability under rule 86B, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 or using the invoice furnishing facility, if he has not furnished the return in FORM GSTR-3B for preceding tax period.”

The main intention of introducing the restriction as regards filing of GSTR-1/invoice furnishing facility is to restrict reflection of input tax credit in GSTR-2A of the recipient without supplier filing GSTR-3B. This is for the simple reason that many suppliers file GSTR-1 timely so that the input tax credit is reflected in GSTR-2A of recipient but do not file GSTR-3B which requires tax payment. The government is not receiving any revenue on non-filing of GSTR-3B but has to allow input tax credit to the recipient as GSTR-1 does not require any tax payment.

It is worth mentioning here that the government had made amendment in CGST Rules, 2017 vide notification no. 94/2020-Central Tax dated 22.12.2020 but has deferred implementation of this provision vide notification no. 01/2021-Central Tax dated 01.01.2021. As of now, the assessees may take a sigh of relief.

The above amendment simply reflects the failure of the government to successfully make the matching concept as proposed originally in the form of GSTR-1, 2 and 3 operational. The temporary measure of introduction of GSTR-3B has created chaos and is leading to unwarranted amendments in the law. It is hoped that the government realises their original motto of simple tax so that taxpayers are able to concentrate on running their businesses rather than keeping track record of various compliances to be done by them.

This is solely for educational purpose.

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GST UPDATE ON RULE 59 RESTRICTING FILING OF GSTR-1 FOR FAILURE TO FILE GSTR-3B

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