The Goods and Services Tax Return-10 (GSTR-10) is a mandatory document that needs to be filed by taxpayers when they cancel their GST registration, whether voluntarily or initiated by GST authorities. It serves as a final declaration of their business transactions and tax liabilities until the cancellation date. This key step ensures compliance with tax laws, helps to conclude remaining tax obligations, and provides a smooth exit from the GST system. Importantly, the GSTR-10 must be filed within three months from the date of cancellation of GST registration.
Who Should File GSTR-10?
GSTR-10 filing is a vital compliance requirement for taxpayers who are cancelling their GST registration, whether it is a voluntary decision or initiated by the GST authorities (GST office). When a taxpayer decides to cancel their GST registration, they are required to file GSTR-10, also known as the Final Return. Lets understand the reasons for GST Cancelation
1. Voluntary Cancellation
This typically happens when a taxpayer decides to cancel their GST registration of their own accord. Various circumstances can drive this decision:
- Closure of Business: In situations where a business entity decides to cease its operations entirely, taxpayers may choose to opt for voluntary cancellation of their GST registration. This might be due to retirement, a decision to discontinue the business for personal reasons, or any other cause leading to the permanent shutdown of operations.
- Change in Business Structure: Significant alterations to the organizational structure of a business, like a merger, amalgamation, or demerger, can warrant the cancellation of the existing GST registration. After cancellation, taxpayers can obtain a new GST registration corresponding to the new business structure. This helps maintain transparency and adherence to the GST framework with respect to the changed business configuration.
- Below Threshold Limit: The GST Act provides a specific turnover limit, exceeding which businesses are required to obtain GST registration. However, if a business’s turnover falls below this prescribed threshold limit, taxpayers may not find it necessary or beneficial to continue with their GST registration and thus, apply for voluntary cancellation.
2. Cancellation by GST Authorities
The GST authorities have the right to initiate the cancellation of a taxpayer’s GST registration under certain circumstances:
- Non-Compliance: Taxpayers are expected to comply with various GST regulations, which include timely filing of GST returns and payment of due taxes. If a taxpayer persistently fails to meet these obligations, the GST authorities may resort to cancelling the registration to ensure compliance with the law.
- Non-Operational Business: If a business registered under GST remains non-operational or dormant for an extended period without any substantial business transactions, GST authorities may take the initiative to cancel the registration. This helps in avoiding unnecessary clutter in the GST system and maintaining accurate records.
- Violation of Rules: Any violation of GST rules or indulgence in fraudulent practices can lead to cancellation of GST registration by the authorities. This step is typically taken to ensure fairness, preserve the integrity of the GST system, and deter non-compliance.
The main purpose of GSTR-10 filing is to ensure that all the financial transactions and tax-related matters are appropriately accounted for and pay any outstanding liabilities before the cancellation of GST registration. This final return is essential to complete the closure of the taxpayer’s GST account and update the tax authorities about the final status of their business. By filing GSTR-10, taxpayers provide a comprehensive summary of their business activities and financial transactions up to the date of cancellation.
Exemption from filing GSTR-10
Indeed, while filing the GSTR-10 is a mandatory requirement for most taxpayers following the cancellation of their GST registration, certain categories of taxpayers are exempt from this requirement. These exceptions include:
Input Service Distributors (ISDs)
These entities distribute the credit of Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), Union Territory Goods and Services Tax (UTGST), and Integrated Goods and Services Tax (IGST) to its branches which are having the same PAN the ISD has.
Non-resident Taxable Persons
These are individuals or entities who do not reside in the taxable territory but nonetheless undertake taxable transactions. They are typically required to file a GSTR-5, not GSTR-10.
Persons required to deduct tax at source under section 51 (TDS Tax Payers)
These are individuals or authorities who are required to deduct tax at source when making payments to suppliers if the value of such a supply, under a contract, exceeds two lakh fifty thousand rupees.
Composition Taxpayers (Section 10)
These taxpayers are small businesses having annual turnover less than Rs.1.5 crore (Rs 75 lakhs for NE and hill states) that have opted for the Composition Scheme and are required to file returns quarterly.
Persons required to collect tax at source under section 52 (TCS Collectors)
These are e-commerce operators who are required to collect tax at source at the time of credit of any amount to the account of the seller or at the time of payment of any amount by any mode, whichever is earlier.
These exceptions help to tailor the GST framework to the specific needs of different types of taxpayers, minimizing their administrative burden and simplifying compliance. However, for all other taxpayers who do not fall under these exemptions, the filing of GSTR-10 upon cancellation of their GST registration remains an important legal obligation.
Key Points to Note for GSTR-10
Timeframe for Filing
The stipulated period for filing GSTR-10 is within three months from the date the GST registration was cancelled. This timeframe has been set to ensure the taxpayers file their returns promptly, thereby helping them adhere to their tax obligations and maintain a clean compliance record.
Reporting of Final Transactions
Upon filing GSTR-10, it is required for taxpayers to detail all inward (purchases) and outward (sales) transactions made from the date of the last return until the cancellation of their GST registration. This information is crucial as it ensures that the tax authorities have a complete record of the taxpayer’s activities up until the point of their GST registration cancellation.
Reversal of Input Tax Credit (ITC)
In the event of GST registration cancellation, taxpayers are obliged to reverse any unused ITC present in their electronic credit ledger. This step is essential as, following the cancellation, taxpayers are ineligible to claim any ITC.
Payment of Tax Liability
Upon detailing all relevant transactions in GSTR-10, the taxpayer must calculate their final GST liability. This includes any tax, interest, or penalty that may be due, and make the necessary payment to the government. This action is significant as it signifies the completion of the taxpayer’s obligations to the government
No Amendment Post Submission
Unlike other GST returns, GSTR-10 does not offer an amendment option once it has been filed. Therefore, taxpayers must exercise utmost caution when filling out the return, ensuring all information provided is accurate, as any error or omission cannot be rectified later.
Penalties for Late Filing
As per Section 45 of the Central Goods and Services Tax Act, 2017, a late filing fee of ₹200 per day (split equally as ₹100 each for CGST and SGST) is levied on non-compliant taxpayers. This late fee is capped at a maximum amount of ₹10,000.
Relief under the GST Amnesty Scheme
To offer some relief to taxpayers, the Central Board of Indirect Taxes and Customs (CBIC) has rolled out an amnesty scheme specifically for GSTR-10 non-filers. As per this scheme, taxpayers who file their GSTR-10 return between April 1, 2023, and August 31, 2023 (the original deadline was June 30, 2023, but it has been extended) are only required to pay a reduced late fee of ₹1,000 per return (₹500 under CGST and ₹500 under SGST). This initiative encourages late filers to become compliant and fulfill their tax obligations.
Default of Not Filing GSTR-10
GSTR-10, also known as the Final Return, is a mandatory document to be filed by taxpayers after the cancellation of GST registration. It serves to disclose their final business transactions and tax liabilities, ensuring a smooth closure of their GST account within three months of registration cancellation. The consequences of non-filing of GSTR-10 are as follows:
Incurrence of a Late Fee
The imposition of a late fee is one of the immediate consequences for taxpayers who fail to file GSTR-10 within the stipulated timeframe. This fee is levied at a rate of ₹200 per day, split between ₹100 for CGST and ₹100 for SGST. The accrual of this fee continues until the date when the return is finally filed. However, there’s a ceiling on the total amount that can be charged as a late fee, which is capped at ₹10,000.
Receipt of a Show-Cause Notice
Another consequence of non-compliance is the issuance of a show-cause notice by the tax authorities. This notice serves as a formal communication seeking an explanation from the taxpayer as to why they have not complied with the requirement of filing GSTR-10. It requires the taxpayer to justify their non-compliance and can be seen as a precursor to further action by the authorities.
Liability for Interest
Non-compliance with GSTR-10 filing requirements can also have financial implications beyond the late fee. Taxpayers who do not file GSTR-10 on time may be liable to pay interest on any outstanding tax liability they have. This interest is charged over and above the principal amount that is due, thereby increasing the overall tax liability.
Imposition of a Penalty
Finally, besides the late fee and interest, taxpayers may also face penalties for not filing GSTR-10. A penalty is a punitive charge imposed by the authorities, intended to deter non-compliance. Unlike late fees and interest, which are directly related to the delay and outstanding tax liability, penalties serve to penalize the act of non-compliance itself. This could further escalate the financial burden on the taxpayer.
The process of filing GSTR-10 is an integral aspect of the GST registration cancellation procedure, regardless of whether the cancellation is voluntary or initiated by GST authorities. This return ensures the precise documentation of all transactions and aids in settling any remaining liabilities, thereby ensuring a seamless discontinuation of the GST account. It is of paramount importance to respect the defined timeline for filing in order to dodge hefty late fees and penalties. Therefore, gaining a thorough understanding of the requirements and meticulously adhering to the GSTR-10 filing procedure is crucial to maintaining compliance with GST regulations throughout the cancellation of registration.