File GSTR-1 in time to avoid litigations in GST

Arjuna (Fictional Character): Krishna, what are the changes notified by government in filing GSTR-1 and GSTR-3B from 1^st January 2022?

Krishna (Fictional Character): Arjuna, Earlier taxpayers (Supplier) were not able to file GSTR-1 or use the IFF on the GST portal if they had pending GSTR-3B filings for the past two months (monthly filer) or for the last quarter (quarterly filer) as per CGST Rule 59(6). From 1st January 2022, taxpayers cannot file GSTR-1 if the preceding month’s GSTR-3B is not filed. For Ex. If a supplier does not file GSTR-1 for the month of Jan 2022, he shall not be allowed to file GSTR-3B for the month of Feb 2022.

Arjuna (Fictional Character): Krishna, what are the consequences of non-filing, late filing, or improper filing of GSTR-1?

Krishna (Fictional Character): Arjuna, The consequences of non-filing, late filing, or improper filing of GSTR-1:

Case 1: If the supplier fails to file GSTR-1 on or before the 11^th of the following month the recipient of the goods or services cannot claim ITC of the same in GSTR-3B for that month as GSTR-1 is not filed and the ITC of the same is not reflected in GSTR-2B of the recipient.

For Ex. If the supplier does not file GSTR-1 for the month of Jan 2022, the recipient shall not be allowed to claim ITC for the same in GSTR-3B of Jan 2022.

Case 2: If supplier files GSTR-1 after 11^th of the following month the recipient of the goods or services cannot claim ITC of the same for that month but can claim in GSTR-3B of the subsequent.

For Ex. If the supplier files GSTR-1 for the month of Jan 2022 after 11^th of the following month, the recipient shall be allowed to claim ITC for the same in GSTR-3B for the month of Feb 2022.

Case 3: If supplier files GSTR-1 on or before 11^th of the following month but mentions incorrect GST number or mentions B2B supplies as B2C, recipient of the goods or services cannot claim ITC of the same in GSTR-3B for that month.

For Ex. If the supplier files GSTR-1 for the month of Jan 2022 incorrectly and if the amendment to the same is made in GSTR-1 of March 2022, the recipient shall be allowed to claim ITC for the same in GSTR-3B for the month of Mar 2022.

Therefore, from 1^st Jan 2022 its mandatory for the supplier to file GSTR-1 correctly and timely.

Arjuna (Fictional Character): Krishna, what are the consequences if the supplier declares excess self-assessed tax i.e., outward tax liability in GSTR-1?

Krishna (Fictional Character): Arjuna, from 1^st January 2022, a new explanation to section 75(12) is inserted to the effect that the output tax relating to any invoices which are reported in GSTR-1 but not included in GSTR-3B shall be considered to be self-assessed tax for the purposes of sec. 75, and the same can be recovered u/s 79 without issuing SCN.

Arjuna (Fictional Character): Krishna, what precautions should the recipient take against the above issues?

Krishna (Fictional Character): Arjuna, the recipient of the goods or services should identify the defaulting supplier for this. The recipient can also check whether his supplier has filed GSTR-1 or not by using search taxpayer option on the GST portal. If supplier does not file GSTR-1 timely and correct it can affect the business relationship adversely and the recipient can also recover interest from supplier as recipient cannot claim ITC of the same.