Blocking of GSTR-1 if GSTR-3B is not filed

The blocking of GSTR-1 filing has been implemented by adding a sub-rule (6) under Rule 59 of the CGST Rules. This update, issued by the Central Board of Indirect Taxes and Customs (CBIC), provides guidelines on the format and process for submitting outward supply details. The notification (no. 94/2020) was issued on 22nd December 2020.

All about blocking of GSTR-1 and IFF filing

If a registered taxpayer fails to file the return in GSTR-3B for the preceding two months, then he would not be allowed to provide the details of outward supplies of goods or services or both in GSTR-1. The CGST Rule 59(6) covers this aspect.

Further, if the taxpayer has opted into the QRMP scheme to file returns on a quarterly basis, then he will not be allowed to file B2B sales on the IFF or file GSTR-1 if GSTR-3B of last quarter is pending for filing.

As per prior provisions, non-filing of GSTR-3B resulted in the blocking of e-way bill generation. But, as per the rules, it will result in the blocking of the e-way bill as well as GSTR-1 of the registered person. Also, if a taxpayer is required to file GSTR-3B due to the applicability of Rule 86B and fails to do so, his GSTR-1 will get blocked.

For example, if a taxpayer hasn't filed GSTR-3B for April and May, their GSTR-1 for June will be blocked. For quarterly filers, if GSTR-3B for the previous quarter is not filed, they won’t be allowed to file GSTR-1 for the next quarter. The government's goal is to track non-filers and ensure compliance.

Rule 59(6) implementation on the GST portal

The GST portal implemented the blocking of GSTR-1 on the GST portal starting from 1st September 2021. Hence, if a taxpayer tries to save data of GSTR-1 or use IFF for August 2021 and attempts to click the ‘Submit’ button for filing, the portal throws an error. It flags any pending GSTR-3B returns for two months in a row (up to July 2021) or one quarter (ending 30th June 2021). The taxpayer should file pending GSTR-3B returns to perform GSTR-1 filing. 
Tax officers cannot intervene to unblock the filing as it is system-automated.

Impact of the blocking of GSTR-1 filing

If a taxpayer is unable to file GSTR-1 then the counterparty will not be able to claim the credit on such purchase. Non-uploading of invoices in GSTR-1 will result in the non-reflection of the transaction in the counterparty’s GSTR-2A and GSTR-2B. Thus, the recipient will be automatically denied credit.

How to resolve the issue?

Filing of pending GSTR-3B returns will result in the unblocking of GSTR-1. The Government wants the taxpayer to be compliant, and thus, these new provisions have been added to the existing rules and regulations.