Taxpayers Under Reporting Turnover to Avail GST Compliance Relaxations

The businesses used to under-report their investments and turnovers to continue the benefits meant for MSMEs. Sometimes, they used to float new companies and divert part of businesses to them. To remove this, recently the government enlarged the MSME definition to encourage the start-ups and other employment-intensive units to scale up to the next level.

A similar trend is started by a few Goods and Services Tax (GST) assesses. The GST administration has found that the businesses with annual turnover above Rs 5 crore were wrongfully declared their turnover below that threshold to avail themselves of several compliance-related relaxations.

As the pandemic hit the country, the small GST taxpayers were given further relaxations. The government said that those having the aggregate annual turnover less than Rs 5 crore, their last date for filing the monthly summary return of GSTR-3B for March, April and May would be the last week of June. Further, these taxpayers will not be charged any interest, late fee, and penalty.

Also Read: GSTN Launches GSTR-2B Statement For Easy ITC Reconciliation

To avail these benefits, the businesses who have just gone above Rs 5 crore in the previous financial year may find it attractive to continue to declare the turnover below the threshold of Rs 5 crore. To curb this type practises, the department has sent notices to a large number of such firms stating that their compliance deadlines would be reassessed based on the annual turnover computed by the tax department on its own. 

The notices stated that the aggregate turnover for the financial year FY 2019-20 had been computed by the GST system based on returns filed in Form GSTR-3B by all registrations on the common PAN. The same is more than Rs 5 crore where returns of FY 2019-20 filed up to 25 July 2020, have been considered for the said computation.

It added that the GST system would now use its own computation for several validations in the system such as determining the return filing due date and computation of late fee by the system. The notices also stated that the taxpayer could also use the same for reporting interest on delayed payments based on a self-assessment basis.

Since the inception of the GST, the Council has progressively eased the compliance burden for smaller businesses including the requirement to file the form GSTR-1 only once in a quarter where the taxpayer’s turnover is below Rs 1.5 crore. 

As the current notices have been sent to those who are believed to be above Rs 5 crore turnover but have declared the lower turnover, the department sources said that a similar exercise could be in the offing, concerning the Rs 1.5 crore threshold too.

According to the GST law, the aggregate turnover refers to the total value of all taxable supplies (excluding the inward supplies on reverse charge basis), exports of goods or services or both, exempt supplies, and inter-State supplies of persons having the same PAN.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in