Understanding GST Section 45: Final Return Filing Rules, Deadlines & Penalties Explained

Section 45 of the CGST Act mandates that any registered taxpayer whose GST registration is cancelled—whether voluntarily or by a tax officer—must file a final return in FORM GSTR-10 within three months from the date of cancellation or the order of cancellation, whichever is later. This ensures the proper closure of GST obligations by declaring all transactions up to the cancellation date, reversing input tax credit on closing stock, and settling outstanding liabilities.

Non-compliance can lead to late fees, official notices, and best judgment assessments. Exemptions apply to composition taxpayers, and periodic government notifications may offer deadline extensions or fee waivers.

Understanding GST Section 45: The Mandatory Final Return

For any business operating under the Goods and Services Tax (GST) regime in India, compliance is paramount. Among the various returns required, the Final Return, governed by Section 45 of the Central Goods and Services Tax (CGST) Act, 2017, holds significant importance. This return, filed in FORM GSTR-10, marks the official closure of a taxpayer’s GST obligations upon cancellation of their registration.

The Mandate of Section 45

Section 45 clearly states: “Every registered person who is required to furnish a return under sub-section (1) of section 39 and whose registration has been cancelled shall furnish a final return within three months of the date of cancellation or date of order of cancellation, whichever is later, in such form and manner as may be prescribed.”

This provision came into force on July 1, 2017, concurrent with the nationwide implementation of GST, as per Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated June 28, 2017.

Who Needs to File GSTR-10?

Essentially, any registered person who was required to file regular returns under Section 39(1) (typically GSTR-3B) and whose GST registration has been cancelled, is obligated to file a final return. This includes cases where:

• Voluntary Cancellation: The taxpayer applies for cancellation of their registration.
• Suo-Motu Cancellation by Officer: The proper officer cancels the registration due to specific reasons (e.g., non-filing of returns, non-commencement of business).

Important Note: Individuals who have opted for the Composition Scheme (filing GSTR-4) are generally not required to file a final return under Section 45.

Timeline for Filing the Final Return

The final return in FORM GSTR-10 must be filed within three months of the:

1. Date of cancellation of registration, OR
2. Date of the order of cancellation, whichever is later.

This “whichever is later” clause provides a practical window for taxpayers to fulfill their obligations, especially if there’s a delay between the actual cancellation and the issuance of the official order.

Relevant Rules and Forms

To operationalize Section 45, the following rule and form are prescribed:

Rule 81: Final Return: This rule outlines the procedure and manner for furnishing the final return.

FORM GSTR-10: Final Return: This is the specific electronic form to be filed through the common portal (GSTN).

What Information Does GSTR-10 Require?

FORM GSTR-10 is a comprehensive return that requires taxpayers to furnish details regarding:

• Details of outward and inward supplies: This includes transactions up to the effective date of cancellation.
• Input Tax Credit (ITC) reversal: Any ITC related to stock held on the date of cancellation, including capital goods, needs to be reversed. This is a critical aspect, as the taxpayer is no longer a registered person and cannot claim ITC on such stock. The value for reversal is determined as if the goods were supplied on the date of cancellation.
• Payment of outstanding liabilities: Any tax, interest, or penalty due up to the date of cancellation must be paid.
• Other relevant information pertaining to the closure of business operations under GST.

Consequences of Non-Filing or Delayed Filing

Failure to furnish the final return within the stipulated time can lead to significant consequences:

• Late Fee: As per Section 47(1) of the CGST Act, a late fee is leviable for delayed filing of GSTR-10. This fee is Rs. 100 per day for every day during which such failure continues, subject to a maximum of Rs. 5,000.
• Notice to Return Defaulters: If a registered person fails to furnish the final return, the proper officer may issue a notice to return defaulters under Section 46, requiring them to file the return within a specified period.
• Best Judgement Assessment: If the taxpayer still fails to file the return after receiving a notice, the proper officer may proceed to assess the tax liability to the best of their judgment under Section 62 of the CGST Act. This assessment can include tax, interest, and penalties.

Extensions and Waivers

The government has, from time to time, provided extensions to the due date for filing GSTR-10 and waived late fees for certain periods, especially during the initial phases of GST implementation or in response to specific challenges. Taxpayers should always refer to the latest notifications and circulars issued by the Central Board of Indirect Taxes and Customs (CBIC) for any such updates.

Conclusion

Section 45 of the CGST Act, along with Rule 81 and FORM GSTR-10, forms a crucial part of the GST compliance framework, ensuring a proper and accountable exit for businesses whose GST registration has been cancelled. Timely and accurate filing of the final return is essential to avoid penalties, complete all statutory obligations, and ensure a smooth transition out of the GST registration. Taxpayers are advised to maintain meticulous records and consult with tax professionals to ensure full compliance with these provisions.

FAQs on Section 45 of the CGST Act

What is Section 45 of the CGST Act?
Section 45 of the CGST Act mandates that a registered taxpayer whose GST registration has been cancelled must file a final return in FORM GSTR-10.

Who is required to file GSTR-10?
Any taxpayer who was filing regular returns under Section 39(1) and whose GST registration is cancelled must file GSTR-10, except those under the Composition Scheme.

Is GSTR-10 required for Composition Scheme taxpayers?
No, taxpayers who opted for the Composition Scheme and filed GSTR-4 are generally not required to file GSTR-10.

What is the due date for filing GSTR-10?
GSTR-10 must be filed within three months from the date of cancellation or the date of the cancellation order, whichever is later.

What is the purpose of GSTR-10?
GSTR-10 serves as a final return that captures details of all transactions, ITC reversal, and liabilities up to the cancellation date, officially closing GST obligations.

What happens if GSTR-10 is not filed on time?
Late filing of GSTR-10 attracts a late fee of ₹100 per day under CGST (plus ₹100 under SGST), capped at ₹5,000.

Can the government extend the due date for GSTR-10?
Yes, the government can extend deadlines and waive late fees through official notifications, especially in special circumstances.

What details are required in GSTR-10?
GSTR-10 requires details of outward and inward supplies, stock held, ITC reversal, tax liabilities, and any other relevant information up to cancellation.

What is Rule 81 under the CGST Rules?
Rule 81 outlines the procedure for filing the final return under Section 45 using FORM GSTR-10 on the GST portal.

How is ITC reversal calculated in GSTR-10?
ITC on closing stock and capital goods must be reversed as if the goods were supplied on the date of cancellation, using prescribed valuation methods.

Can the tax officer take action for non-filing of GSTR-10?
Yes, the officer may issue a notice under Section 46 and proceed with best judgment assessment under Section 62 if the return is still not filed.

Where can GSTR-10 be filed?
GSTR-10 must be filed electronically through the GST common portal (www.gst.gov.in).

Is there a penalty for delayed GSTR-10 filing?
Yes, apart from late fees, additional penalties and interest may be imposed depending on the assessment by tax authorities.

What if there’s a delay between actual cancellation and official order?
The three-month filing window starts from the later of the two dates—actual cancellation or order of cancellation—giving taxpayers sufficient time.

Is professional help recommended for filing GSTR-10?
Yes, consulting a tax professional ensures accurate reporting, correct ITC reversal, and compliance with all applicable rules.

Does GSTR-10 affect future GST registration?
Failure to file GSTR-10 may hinder future GST registration applications or create legal complications with the tax authorities.

Can GSTR-10 be revised after filing?
No, currently there is no provision to revise GSTR-10 once it has been filed.

What is the consequence of best judgment assessment?
The officer may estimate your liabilities based on available information, which could be higher than actual dues, including penalties and interest.