GSTR-7 needs to be mandatorily filed by specified taxpayers even if TDS was not deducted

Deadline for filing GSTR-7 is December 10, 2024 for these taxpayers even if TDS was not deducted

The Goods and Services Tax Network (GSTN) through a new advisory, informed GST registered taxpayers, who are liable to file Form GSTR-7 return, about mandatory sequential filing on or before the deadline of December 10, 2024. Now GSTR-7 is required to be filed by every GST registered person who has to deduct TDS under the applicable GST law. TDS under GST is deducted by specified buyers before making payment to the seller if the total value of supply of taxable goods and services or both exceeds Rs 2.5 lakh.

What did the GSTN say about the mandatory filing of the GSTR-7 form?

According to a advisory dated December 4, 2024, "Multiple tickets have been received regarding sequential filing of return in Form GSTR-7. Taxpayers are referencing FAQs for the same, wherein 'it is not mandatory' is mentioned. To clarify, it is to inform that following changes have been introduced in the return filing process for GSTR-7 with effect from 01.11.2024 onwards.

Sequential Filing of GSTR-7: As per Notification No. 17/2024-Central Tax, dated 27th September 2024, effective from the 01.11.2024, GSTR-7 filing has been made sequential from the October tax period. Hence, GSTR-7 return is to be filed in chronological order, beginning with the return period of October 2024. It is pertinent to mention that for a month in which no deduction has been made, deductors need to file NiL return for the same month."

What does this new advisory mean for GST registered taxpayers

This new advisory essentially tells GST registered taxpayers to file GSTR-7 on or before the deadline (December 10, 2024) even if they had not deducted TDS during the given tax period. Needless to say, if a GST registered person deducted TDS during the given tax period, they have to file a GSTR-7 return.

According to Priyal Shah, Partner, GST Advisory at NPV & Associates LLP, "The new advisory issued by GSTN highlights that even if no TDS deductions are made during a given tax period, such deductors must file a Nil GSTR-7 return. This ensures comprehensive compliance, improves data accuracy, and simplifies the overall reconciliation process in the GST system."

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Chartered Accountant Hardik Kakadiya, President, Chartered Accountants Association Surat (CAAS), voices concern over mandatory filing of GSTR-7.

"Filing of GSTR-7, in any month where there were no transactions attracting TDS deductions was not mandatory. This was already displayed on the portal. However, out of the blue an Advisory from 'Team GSTN' comes and makes it mandatory. This will definitely create chaos as to the late fees and penalty that may be levied considering now it is made mandatory, though not legally. Even after more than 7 years of GST implementation, the unwritten law of GSTN Software overrides the GST passed in the parliament, and all stakeholders are mute spectators."

Chartered Accountant Hardik Kakadiya, President, Chartered Accountants Association Surat (CAAS)Source: Chartered Accountants Association Surat (CAAS)

"The GSTN has recently clarified that sequential filing is now a mandatory requirement for all taxpayers filing GSTR-7 returns. Hence, based on this advisory, taxpayers are mandatorily required to file GSTR-7 returns in chronological order. Besides, it is also clarified that the deductors who made no deductions in a specific month must still file a 'Nil' return for that period," says Dipti Nayak, Director, Bhuta Shah & Co. LLP.

Who needs to file GSTR-7?

The central government in its Budget 2024, the finance minister proposed to amend section 39 and mandated filing of returns by TDS deductors for every month. The GST council in its 53rd meeting also made a similar recommendation.

According to Nayak, "Recently, the Goods and Services Tax Network (GSTN) has issued an important advisory requiring mandatory sequential filing of GSTR-7 returns effective from November 1, 2024. As a backdrop, GSTR-7 is a monthly return to be filed by every registered person who is required to deduct Tax at Source (TDS) under GST, capturing all the details of TDS deducted, TDS paid and payable, refund claimed etc."

File GSTR-7 on or before December 10, 2024, if you missed filing previous returns

Advocate Aproorv Philips, senior associate, Sirmacs Consulting (Law Firm), "Earlier if you had not filed GSTR-7 for any month then you could have filed the next month's GSTR-7. However, now the GSTN said you have to sequentially file all the GSTR-7 which means if you miss a month's GSTR-7 filing, you can't file the next month's GSTR-7."

"Failure to furnish the return by the due date attracts a late fee of Rs 100 per day under Central GST and State GST respectively capped at a maximum of Rs 5000 each for CGST and SGST. Non-deposit of TDS will also attract interest at 18% per annum from the due date of filing return till the actual payment," says Nayak from Bhuta Shah & Co. LLP.

Relief for specified TDS registered GST taxpayers filing GSTR-7 in December 2024

GST registered taxpayers who are also registered under TDS have got relief from filing GSTR-7 for the month of October 2024. This relief is applicable only to those GST registered taxpayers who have got their TDS registration in November 2024.

According to another GSTN advisory dated November 26, 2024, "Various tickets have been received on the issue that taxpayers are unable to report TDS deducted in the month October 2024 as they are not able to file return for the month of October 2024. This issue has occurred because while the taxpayers applied for GST registration in October 2024 pursuant to the above notification, their GST registrations were approved only in November 2024. Hence, in the return dropdown the month October 2024 is not visible to such taxpayers. This is as per the existing GSTN system design where returns for tax period prior to registration month are not enabled for taxpayers.

However, to resolve the issue, taxpayers who were granted registration in November 2024, but deducted TDS in October 2024, are hereby advised to report the consolidated amount of TDS deducted for the period from 10.10.2024 to 30.11.2024 in the GSTR-7 return to be filed for the month November 2024."

Chartered Accountant Bimal Jain, founder, A2Z Taxcorp LLP, says, "Under GST specified buyers need to deduct TDS before paying sellers. For example: buyers of metal scrap dealers need to deduct TDS before making the payment. Now the problem which occurred during October 2024 is when the TDS on metal scrap provision was introduced, many buyers had not taken TDS registration or could not get it within the deadline. So, without a TDS registration the specified buyer could not file GSTR-7 for the month of October. In this same context, GSTN said in the advisory that if you had deducted TDS in October 2024 and the TDS registration got approved in November 2024 then GSTR-7 needs to be filed on or before December 10, 2024, for the tax period October 10, 2024, to November 30, 2024. This is because this TDS on scrap metal buyers became effective from October 10, 2024, onwards."

This story originally appeared on: India Times - Author:Faqs of Insurances