Mechanism for barring of GST Return on expiry of 3 years to be in motion early next year

Tax experts say not filing outstanding return could result in penalty.

An advisory issued by GST portal said that based on the Finance Act 2023 and implemented with effect from October 1, 2023, the taxpayers shall not be allowed file their GST returns after the expiry of a period of three years from the due date of furnishing.

These returns include GSTR-1, GSTR 3B, GSTR-4, GSTR-5, GSTR-5A, GSTR-6, GSTR 7, GSTR 8 and GSTR 9 and covered under Section 37 (Outward Supply), Section 39 (payment of liability), Section 44 (Annual Return) and Section 52 (Tax Collected at Source) of CGST Act.

“The said changes are going to be implemented in the GST portal from early next year (2025). Hence, the taxpayers are advised to reconcile their records and file their GST Returns as soon as possible if not filed till now,” the advisory said.

The Finance Act 2023 prescribed change in section 39 of the CGST Act and inserted a provision saying “A registered person shall not be allowed to furnish a return for a tax period after the expiry of a period of three years from the due date of furnishing the said return.”

Further, it also provided an enabling provision for extension but subject to certain conditions and restrictions.

Rajat Mohan, Senior Partner, AMRG & Associates says, the GSTN update concerning the barring of GST return filings post a three-year deadline introduces a significant compliance shift. Implemented under the Finance Act, 2023 and effective from October 1, 2023, “this update will enforce a strict deadline across critical returns, including GSTR-1, GSTR-3B, and GSTR-9, among others.”

According to him, this move aligns with a broader intent to ensure timely compliance, enhance data reliability, and potentially reduce the backlog of unfiled returns within the GST system.

By capping the period for delayed filings, taxpayers are motivated to reconcile and rectify their records promptly.

However, it may also create challenges for taxpayers with historically unfiled returns, especially those facing administrative or logistical constraints in consolidating older records.

“Businesses are advised to proactively audit their filing history and address any outstanding returns within the remaining window. This action will prevent future compliance issues and penalties that may arise once the portal enforces this three-year limit,” he said. Further he added that the policy’s digital automated implementation on the GST portal in early 2025 allows some preparation time, but prompt action is still crucial for affected taxpayers.

Commenting on the development, Saurabh Agarwal, Tax Partner at EY said that government is introducing all these measures to streamline GST procedures and data consistency. Moreover, there is no longer any relevance for such facilities to make retrospective changes as the GSTN portal is stable and has been operating seamlessly for quite some time. Recently, “GSTN portal has also implemented the system of archival of data prior to 7 years, which may lead to optimization of data management and operational efficacy,” he said.