Understanding GSTR-1 Filing Restrictions When GSTR-3B is Pending
New regulations, specifically Rule 59(6) of the CGST Rules, now prevent taxpayers from filing GSTR-1 if their GSTR-3B returns for preceding periods are outstanding. This system-automated blocking extends to quarterly filers and impacts e-way bill generation as well. Failure to submit GSTR-1 prevents counter-parties from claiming Input Tax Credit, highlighting the critical importance of timely GSTR-3B compliance for both suppliers and recipients.
A new provision, Sub-rule (6) of Rule 59 under the CGST Rules, has introduced restrictions on filing GSTR-1. This amendment, announced by the Central Board of Indirect Taxes and Customs (CBIC) via notification no. 94/2020 on December 22, 2020, outlines the procedure for declaring outward supplies.
Overview of GSTR-1 and IFF Filing Blocks
Under CGST Rule 59(6), a registered taxpayer will be prevented from furnishing details of outward supplies in GSTR-1 if they have not filed their GSTR-3B return for the two preceding months.
For taxpayers enrolled in the QRMP scheme, the submission of B2B sales data through the Invoice Furnishing Facility (IFF) or GSTR-1 is blocked if the GSTR-3B for the preceding quarter remains unfiled.
Previously, failure to file GSTR-3B primarily led to restrictions on e-way bill generation. However, current regulations now extend this impact to include the blocking of both GSTR-1 and e-way bill (e-way bill blocking). Moreover, if a taxpayer is obligated to file GSTR-3B under Rule 86B but fails to comply, their GSTR-1 will also be blocked.
For instance, if GSTR-3B is not submitted for April and May, the GSTR-1 for June will be restricted. Similarly, quarterly filers face GSTR-1 blockage for the subsequent quarter if their previous quarter's GSTR-3B is outstanding. These measures aim to monitor non-compliant taxpayers and enforce adherence to GST regulations.
Implementation of Rule 59(6) on the GST Portal
The GST portal began enforcing GSTR-1 blocking on September 1, 2021. Consequently, attempts by taxpayers to save or submit GSTR-1 data or utilize the IFF for August 2021 onwards will trigger an error message. This alert indicates outstanding GSTR-3B filings for two consecutive months (up to July 2021) or one full quarter (ending June 30, 2021). To proceed with GSTR-1 filing, taxpayers must first clear all pending GSTR-3B submissions.
This blocking mechanism is fully automated by the system, meaning tax officers are unable to manually override or unblock the filing status.
Consequences of GSTR-1 Filing Restrictions
When a taxpayer cannot file GSTR-1, the recipient of their supplies will be unable to claim Input Tax Credit (ITC) for those purchases. Failure to upload invoices in GSTR-1 means these transactions will not appear in the recipient's GSTR-2A and GSTR-2B, leading to an automatic denial of ITC for the buyer.
Resolution for GSTR-1 Blocking
To resolve the GSTR-1 blocking, taxpayers must file all overdue GSTR-3B returns. These new provisions have been integrated into the existing regulations to promote greater taxpayer compliance with government directives.