Tax professionals and industry stakeholders have renewed calls for an urgent clarification from the Central Board of Indirect Taxes and Customs (CBIC) on the levy of penalties for delayed filing of GST returns, particularly GSTR-3B and GSTR-9, after instances of double penalisation have come to light.
Under the GST law, late fees are mandatorily levied and collected at the time of filing GSTR-3B or GSTR-9 beyond the prescribed due dates. The late fee mechanism is automated and acts as a statutory consequence for delay, leaving no discretion with the tax authorities or the taxpayer.
Late Fee Regularises the Default
It is a well-settled principle in tax jurisprudence that once a statutory late fee is paid, the underlying default or contravention stands regularised. Payment of late fee signifies acceptance of the lapse and completion of compliance, thereby closing the matter. Any further penal action for the same contravention would amount to double jeopardy, which is impermissible in law.
Despite this settled position, it has been observed that in certain isolated cases, departmental officers have issued show cause notices (SCNs) proposing the imposition of a general penalty under Section 125 of the Central Goods and Services Tax Act, 2017. The penalty in such cases can go up to ₹50,000, solely on the ground of delayed filing of GSTR-3B or GSTR-9, even after late fees have already been paid.
Disproportionate Impact on Taxpayers
Tax experts point out that the quantum of penalty involved often discourages taxpayers from pursuing prolonged litigation. In most cases, taxpayers may at best approach the first appellate authority, where relief is uncertain. Given the limited monetary impact and the small number of such cases, the issue has largely escaped broader representation before the GST Council or the CBIC.
However, the practice raises serious concerns about legal certainty and uniformity in GST administration. Imposing a general penalty after recovery of late fees not only burdens compliant taxpayers but also contradicts the intent of the GST framework to promote ease of doing business.
Need for a Clarificatory Circular
In this backdrop, stakeholders are urging CBIC to issue a clear and unequivocal circular clarifying that no general penalty under Section 125 should be levied for delayed filing of GSTR-3B or GSTR-9 once the prescribed late fee has been paid. Such a clarification would prevent avoidable litigation, ensure uniform implementation across field formations, and reinforce taxpayer confidence in the GST regime.
A timely intervention by CBIC, experts say, would go a long way in addressing this recurring grievance and upholding the principle that a single contravention should not invite multiple penalties.
