More than 90% of registered businesses in states such as Gujarat, Rajasthan, Punjab, Uttar Pradesh and Himachal Pradesh have filed their monthly tax returns, according to official data. This high compliance rate has positioned these states at the top of the list for GST return filing, while some northeastern states have lagged behind.
Gujarat has emerged as the leader in GST return filing compliance, with 95% of businesses required to file monthly tax returns through Form 3B meeting the requirement, according to data from GSTN, the company that processes tax returns, for the current fiscal year up to the end of May. Form 3B is a summary of all monthly transactions conducted by a business or individual service provider.
The GSTN data also revealed that Himachal Pradesh and large states such as Tamil Nadu, Uttar Pradesh, Punjab, Haryana, Delhi, Rajasthan and West Bengal have reported more than 90% compliance in monthly tax returns filing. Among union territories, Jammu and Kashmir and Chandigarh have also achieved over 90% compliance.
In contrast, north-eastern states like Arunachal Pradesh and Manipur have reported 74% and nearly 77% tax filing compliance, respectively, while the Andaman and Nicobar Islands have reported nearly 80% compliance. Additionally, 8-18% of taxpayers in all states and union territories filed their returns after the due date.
Compliance in tax returns filing is crucial as it indicates efficiency in the tax collection ecosystem, impacting the overall tax revenue. Successive Finance Commissions consider a state’s tax and fiscal efforts when deciding on the formula for transferring the central government’s divisible pool of tax revenue to the states. This approach rewards states’ tax performance and efficiency while allocating central resources.
Experts emphasise that ensuring compliance and widening the tax base are priorities for central and state GST authorities. Improving compliance in regions like Arunachal Pradesh, Manipur and the Andaman and Nicobar Islands requires a multi-faceted approach.
“Offering incentives for early filing can motivate businesses to comply on time. These incentives could include discounts on penalties for early filers or rebates on subsequent filings,” said Rajat Mohan, executive director at accounting and advisory firm Moore Singhi. He also suggested implementing stricter penalties for late or non-filing of returns to deter delays, along with regular audits and inspections to ensure compliance and identify habitual defaulters.
Mohan highlighted the need to enhance digital literacy, connectivity and infrastructure in remote areas to facilitate easier online filing.
There are 14.6 million registered GST taxpayers, some of whom have signed up for quarterly return filing meant for small businesses. However, not all small businesses have registered for GST. According to official estimates, there are more than 60 million unincorporated, non-agriculture micro, small and medium enterprises in the country, representing a large informal sector.
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