Consequences of non-filing of returns under GST

[K Balasubramanian]

01)  Section 62, related provisions such as Section 46 as well as   connected Circular are analysed so as to educate the taxpayer to be more vigilant in filing the returns under GST in time  to buy peace of mind. Why the provisions are so harsh and even principles of natural justice are ignored in Section 62 are the moot questions.

02) Section 46 of the CGST Act is on notice to return defaulters which is effective from 01/07/2017. This section provides for issuing a notice to the taxpayer who has not furnished the return to remind him to file the return within 15 days. CBIC has also issued Standard Operating Procedure in case of non-filers of return vide circular number 129/48/2019 GST dated 24/12/2019. 

03) Section 62 is on assessment of non-filers of return. There are two sub sections and this section is  in force since 01/07/2017 and was amended three times. It would be of paramount importance to understand the Section 62 as the provisions are totally against the concept of GOOD AND SIMPLE TAX which the Honorable Prime Minister of India used while introducing GST to the Nation.

04) Section 62 provides for best judgement assessment by the proper officer when a taxpayer has not furnished the return as required under section 39 or 45 even after the service of the notice under section 46. The issues connected with sub section 1 of Section 62 are that the proper officer has got five years’ time from the due date of the annual return and this sub section is notwithstanding anything contrary to section 73 or 74 or even 74A.(74A inserted with effect from 01/11/2024). What the taxpayer fails to understand is whether Section 62 is not covered under the principles of natural justice. 

05) While Section 73(9) provides for representation by the taxpayer, Section 62 is framed in such a manner that notwithstanding anything to the contrary contained in section 73, which severely affects the basic and fundamental right of the taxpayer from making any representation of the case. 

06) The above view is also endorsed in CBIC Circular dated 24/12/2019. Para 3(1) of the circular is on consequences of non-furnishing of the return within fifteen days which results in best judgement assessment and demand of Tax, interest as well as penalty as applicable

07) Para 3(2) clarifies that no further communication will be issued for assessing the liability.  Para 3 (3) clarifies that this notice shall be withdrawn in case such return is filed before issue of assessment order.

08)The legislature has made the intention of Section 62 in very clear terms to issue notice for furnishing the return within 15 days and to wait for the response for a REASONABLE TIME. This is inferred from the provision which gives five years’ time to pass the assessment order.

09)  The field formation always keeps an eye on the REVENUE TARGET and pass orders under section 62 as there is no minimum waiting time for passing such orders from the time given for furnishing such returns on issuing the notice under section 46.

10) It would be appropriate for field formation to wait at least for a reasonable time by giving an opportunity to the taxpayer to file the return and pay the taxes and interest as and when the funds position of the taxpayer improves. This approach also helps the proper officer from making the exercise of passing such assessment order redundant as contained in the provisions 62(2) which was amended with effect from 01/10/2023.

11) Section 62 (2) gave thirty days’ time up to 30/09/2023 which was subsequently enhanced to sixty days with effect from 01/10/2023 to the taxpayer to furnish the required return to make the assessment order ineffective. Thus, when the taxpayer files the required return in line with the provisions under 62(2), the assessment order shall be deemed to be withdrawn. In addition to the above sixty days, the new proviso added with effect from 01/10/2023 also allows sixty more days (Total 120 days) to file the return, with a late fee of Rs One Hundred per day for the delayed period, which is beyond sixty days, but only up to 120 days. Thus, when the taxpayer files the return within sixty or one twenty days, the assessment order shall be deemed to be withdrawn.

12) Section 62(2) clearly makes the assessment order wholly ineffective when the taxpayer chooses to file the return within the timeline as discussed above. 

13) When Section 62 grants a time up to five years for the proper officer to pass assessment order, why the proper officer should not wait at least for FIVE MONTHS after issuing the notice? This approach helps the proper officer to concentrate his time on other better jobs as the best judgement order passed in line with Section 62 is withdrawn in several cases subsequently.

14) In case any return under GST is not furnished within the time limit prescribed, interest, late fee as well as penalty are attracted as applicable. When the assessment order is passed as provided in 62, the taxpayer is forced to make payment of tax, interest, penalty as well as late fees as applicable within a maximum period of 120 days to ensure that the best judgement order is withdrawn in line with the provisions.

15) Awareness on the serious consequences of invocation of Section 62 as discussed above is required amongst the taxpayers to adhere the timelines specified for filing the returns under GST. Proper Officers may issue notices under Section 46 as per the requirements to remind the taxpayers to file the return but help the taxpayer by not passing the orders under Section 62 immediately as they are having sufficient time to cross the limitation provided on this issue. REVENUE is not affected at all by putting on hold the BEST JUDGEMENT ORDER. Anyway, the delayed filing of return automatically attracts  interest, penalty as well as late fees as applicable