What is Amnesty Scheme for GST

What is Amnesty Scheme?

GST Amnesty Scheme was initially launched for periods from July 2017 to September 2018 with a deadline of 31 March 2019 for taxpayers to file pending returns. Due to the COVID 19 pandemic there was a call from tax professionals and industry leaders to reopen the scheme. Eventually, in June 2021 the Central Board of Indirect Taxes and Customs reintroduced the scheme extending it to cover pending GSTR-3B returns from July 2017 to April 2021.

In February 2023, during the 49th meeting of the GST Council, it was recommended to expand the scheme to include taxpayers who haven't filed GSTR-4, GSTR-10 and GSTR-9 for past financial years. Additionally, relief was proposed for those with cancelled GST registrations, allowing them more time to reinstate their registrations. It was also decided not to invoke Section 62 for certain taxpayers failing to furnish returns on time provided they do so by June 30, 2023.

Benefits of the GST Amnesty Scheme

Taxpayers must file their GSTR-3B for each tax period before moving on to the next one. If they miss filing for six periods or three quarters straight they risk losing their GST registration. This could hurt their business as clients might avoid dealing with them or cancel contracts. Filing GSTR-3B on time is crucial for smooth business operations.

GST Amnesty Scheme offers relief to taxpayers facing challenges due to the Covid 19 pandemic. It allows for filing pending GSTR-3B without hefty penalties. Additionally, businesses with cancelled GST registrations due to non filing can re-register under this scheme. This initiative aids in easing the economic strain caused by the lockdown particularly benefiting small businesses. Moreover, taxpayers can now clear pending returns without incurring high interest charges.

Late Fee Reduction Under the GST Amnesty Scheme

Under the GST Amnesty Scheme taxpayers are granted concessions on late fees. For GSTR-3B filings with tax liability the maximum late fee is restricted to ₹1,000 per return with ₹500 allocated for CGST and ₹500 for SGST. Similarly for nil GSTR-3B filings the maximum late fee is fixed at ₹500 per return evenly distributed between CGST and SGST. 

Essentially, taxpayers are required to pay the lesser of two amounts the late fee calculated as per the Act for each day of delay or the specified maximum late fee. For instance, if a taxpayer like XYZ & Co fails to file their January 2021 GSTR-3B by the deadline but files it later the late fee under the Act would amount to ₹8,150 for 163 days of delay. However, under the scheme the maximum late fee is capped at ₹1,000. Therefore, XYZ & Co would only need to pay ₹1,000 as the late fee along with the tax liability and applicable interest as per the Act.

Process to File GST Amnesty Form

Under the provisions of the GST Amnesty Scheme taxpayers are required to utilize GST Form APL-01 to lodge appeals against GST tax demand orders. As per subsection (1) of Section 107 of the GST Act, appeals against such orders must be filed using FORM GST APL-01 no later than 31 January 2024 as per the notification issued by CBIC. To initiate appeals under the GST Amnesty Scheme only this specified form is necessary.

To initiate the process of filing the GST APL-01 form under the amnesty scheme a taxpayer needs to assess whether a tax notice is entirely or partially incorrect upon receipt. If a taxpayer disputes GST, they pay 12.5% of the disputed amount to the department. The disputed amount should not exceed ₹25 crore. Furthermore, a minimum of 20% of this deposited amount must be made using an Electronic Cash Ledger.

Validity of the Amnesty Scheme for GST

The most recent update in Central Tax notification number 33/2021 issued on 29 August 2021 announces an extension of the deadline for the GST amnesty scheme. Instead of ending on 31 August 2021 it now continues until 30 November 2021. This extension permits taxpayers with pending GSTR-3B filings from July 2017 to April 2021 to submit these returns by 30 November 2021, with a reduced maximum late fee.

Before, as per the latest notification from the Central Board of Indirect Taxes and Customs specifically number 19/2021 issued on 1 June 2021, GST amnesty scheme was applicable from 1 June 2021 until August 31, 2021. This scheme allowed taxpayers who hadn't submitted their GSTR-3B forms by the due dates for tax periods between July 2017 and April 2021 to do so within that timeframe on the GST portal.

Challenges and Issues Under the GST Amnesty Scheme

Although the GST Amnesty Scheme intends to help non-filers rectify their GST data and continue their businesses lawfully, it faces various challenges and issues.

No relaxation in interest dues

Taxpayers with outstanding tax liability who failed to file GSTR-3B are not granted a waiver of interest. Only the maximum late fee is relaxed for filing before 31 August 2021.

Non-admissibility of input tax credit

Some tax experts are concerned about GST Amnesty Scheme because it doesn't address the issue of claiming Input Tax Credit. Even though the scheme allows for paying overdue taxes from previous periods it doesn't mention anything about claiming ITC for the same period.

According to CGST Act, there's a specific time limit for claiming ITC. You can claim ITC for a tax invoice or debit note issued in a financial year by the due dates of filing GSTR-3B for September of the following year or the annual return whichever comes earlier.

While the government extended the time limit for filing GSTR-3B of previous tax periods by reducing late fees, it didn't extend the time limit for claiming ITC for the same periods. This means taxpayers legally can't report ITC while filing GSTR-3B for past tax periods and they can't claim such ITC under the amnesty scheme.

No relief for late filing of GSTR-1

The scheme does not cover late filing of GSTR-1 returns thus providing no waiver or relief for pending GSTR-1 filings for the same tax periods as GSTR-3B.
 

Revocation of cancelled GST registration

Taxpayers cannot file pending GSTR-3B returns without an active GSTIN. Central Board of Indirect Taxes and Customs issued a press release and Central Tax notification number 34/2021 on 29 August 2021 extending the time limit for applying for the revocation of cancelled GST registration until September 30, 2021 for GSTINs cancelled between 1 March 2020 and 31 August 2021 due to non filing of GSTR-3B.

However, clarification was lacking regarding the revocation or restoration of GSTINs already cancelled due to non filing of past GSTR-3B returns especially concerning situations where the aggrieved taxpayer preferred an appeal.

All about GST Amnesty Scheme 2021

Since the inception of GST in July 2017 there has been a notable level of non compliance due to various factors such as uncertainties in GST regulations, frequent amendments and a lack of understanding among taxpayers. Additionally, the imposition of penalties and late charges dissuaded non filers from adhering to GST requirements.

In response to these challenges GST Amnesty Scheme was introduced to incentivize non filers to voluntarily submit their GST returns. The scheme offers a one time waiver of late fees aiming to encourage compliance among taxpayers.

Recently, Finance Ministry extended the deadline for applying for GST amnesty plan until 30 November 2021. Previously, taxpayers had until 31 August 2021 to file GST returns with reduced late fees.

GST Amnesty Scheme is like a second chance for businesses to fix any mistakes they've made with their taxes without facing harsh penalties. It's an opportunity provided by the government for businesses to come forward admit any errors and pay what they owe without getting into trouble.

This helps businesses get back on track with their tax responsibilities and ensures they're following the rules properly. Ultimately, it's a way for both businesses and the government to work together to improve tax compliance and make the tax system fairer for everyone.