Understanding the Reasons Behind the Non-Filling of GST Returns

Despite the government's earlier assertions that the Goods and Services Tax (GST) would compel taxpayers to be more compliant, the number of returns submitted in the first seven months since its launch has not met expectations. As of the latest statistics, the number of returns filed each month has not exceeded 70 lakh, even though the number of taxpayers registered with the GST Network has surpassed one crore. This indicates a significant gap between the initial claims and the actual submission of returns.

The figures estimated by the GST Network's chief, Prakash Kumar, show that 63 lakh returns were filed in July, 67 lakh in August, and 69 lakh in September. The trend has since declined, with 65 lakh returns filed in October, 64 lakh in November, and 63 lakh in December. The final numbers for January are still pending.

For businesses operating under the Composition Scheme, which requires filing quarterly returns, the situation is even more concerning. Despite the extensions for filing GSTR-1 (due April 11, extended from April 10) and GSTR-3B (due June 30, extended from June 20), the submission rate remains low, highlighting the challenges faced by taxpayers in adhering to GST obligations.

Reasons for the Non-Filling of GST Returns

The non-filing of GST returns can be attributed to several factors, including:

Ignorance and Carelessness: Some individuals and businesses take GST registration but adopt a careless attitude towards compliance. This lack of seriousness can lead to the non-filing of returns, which is a critical aspect of tax compliance. Lack of Financial Resources: Many businesses may not have the necessary funds to deposit the taxes owed, making it difficult for them to submit returns on time. The inability to pay taxes promptly can result in non-compliance and legal penalties. Inadequate Knowledge: A significant number of taxpayers may not have a thorough understanding of the compliance requirements. This lack of knowledge can lead to errors, omissions, or even non-filing of returns. Strategic Non-Compliance: In some cases, taxpayers may take GST registration for purposes other than fulfilling their tax obligations. Once their loan or other financial benefit is obtained, they may stop filing GST returns, prioritizing other financial considerations.

Consequences of Non-Filing GST Returns

The non-filing of GST returns can lead to severe consequences for businesses and individuals, including:

Penalties and Fines: Failure to file GST returns on time can result in hefty penalties and fines. These penalties can escalate quickly, further compounding the financial burden on the taxpayer. Limited Operational Capacity: Non-compliance with GST regulations can restrict a business from receiving payments or engaging in financial transactions, thereby impacting its operational capacity. Legal Action: In severe cases, non-filing of GST returns can lead to legal action, including audits and investigations. This can be a prolonged and costly process, leading to further disruptions and potential impacts on business operations.

Best Practices for Avoiding Non-Filing of GST Returns

To ensure compliance with GST regulations and avoid the issues associated with non-filing, businesses can adopt the following practices:

Stay Informed: Regularly update yourself with the latest GST laws and regulations to ensure compliance. Use Professional Assistance: Engage a certified accounting firm or professional advisor who can help navigate the complexities of GST compliance and ensure timely return filings. Implement Robust Bookkeeping: Maintain accurate and detailed records of all financial transactions and use accounting software to facilitate the filing of GST returns. Set Reminders: Use calendar reminders and alerts to stay on track with return deadlines to avoid delays and non-filings.

Conclusion

The non-filing of GST returns is a significant issue affecting businesses across India. While there may be valid reasons for non-compliance, the consequences of non-filing can be severe, including penalties, limited operational capacity, and legal action. To avoid these issues, businesses should prioritize GST compliance, seek professional assistance, and adopt best practices to ensure timely and accurate filing of GST returns.