From the July 2025 tax period, Goods and Services Tax (GST) returns will become time-barred after three years from their original due date, the GST Network (GSTN) announced in an advisory dated June 7, 2025. This move, enabled through the Finance Act, 2023, is set to enhance filing discipline but may also pose challenges for businesses with legacy compliance issues.

What Has Changed?

As per the GSTN notification, the following types of GST returns cannot be filed after three years from their statutory due date:

• GSTR-1: Outward supply return

• GSTR-3B: Monthly summary return with tax payment

• GSTR-4: Composition scheme quarterly/annual return

• GSTR-5: Non-resident taxable person return

• GSTR-5A: Online Information and Database Access or Retrieval (OIDAR) return

• GSTR-6: Input Service Distributor return

• GSTR-7: Return for Tax Deducted at Source (TDS)

• GSTR-8: Return for Tax Collected at Source (TCS)

• GSTR-9: Annual return

This restriction will take effect from the July 2025 tax period, meaning returns due in August 2025 onwards will fall under the three-year limit.

Why This Rule Now?

The provision stems from the amendments made under the Finance Act, 2023, which sought to formalise a time-bar mechanism to prevent indefinite delays in filing GST returns. Prior to this change, no such hard deadline existed, and businesses could file returns from past years subject to penalties and interest.

The goal is to:

• Encourage timely compliance

• Improve tax collection accuracy

• Reduce long-pending mismatches

• Bring finality to assessment cycles

Impacted Returns Explained

Let’s understand some of the key returns and what this new rule means:

• GSTR-1: If a taxpayer fails to file outward supply details within 3 years, the system will not accept that data at all. This can lead to mismatches with buyers' Input Tax Credit (ITC) claims.

• GSTR-3B: Monthly tax payment return. Missing this permanently can result in liability gaps and interest penalties.

• GSTR-9: The annual return summarises total tax paid and ITC claimed. If not filed within 3 years, reconciliation issues with books of accounts may arise.

What Should Taxpayers Do?

The GSTN advisory strongly recommends that taxpayers reconcile their records and file any pending returns immediately—especially for previous tax periods.

This is particularly important for:

• Small businesses that may have skipped filing due to oversight or operational challenges

• Enterprises under litigation where filing was deferred pending outcomes

• System-impacted taxpayers who faced technical glitches in earlier years

Filing now, before the 3-year bar becomes active, will avoid permanent loss of Input Tax Credit, penalty exposure, and compliance gaps in audits.

Expert Reactions: Support with Concerns

Rajat Mohan, Senior Partner at AMRG & Associates, welcomed the move for boosting compliance, but raised concerns for exceptional cases:

“While this step enhances system discipline and curtails prolonged non-compliance, it may severely impact taxpayers who, due to litigation, system issues, or genuine oversight, have pending filings.”

“The absence of a redressal mechanism for exceptional cases could lead to permanent denial of Input Tax Credit and financial setbacks.”

Potential Challenges Ahead

1. Litigated Returns: If a taxpayer refrains from filing due to an ongoing dispute, and the window lapses, even a favourable outcome won’t allow filing.

2. System Glitches: Past portal errors or bugs may have caused delays. Without a rectification mechanism, taxpayers will suffer unfairly.

3. No ITC Claims: Buyers lose eligibility to claim Input Tax Credit if suppliers’ GSTR-1 is not filed in time.

For example, if a vendor forgets to file GSTR-1 for July 2025 and fails to do so by August 2028, that return becomes permanently locked, and buyers cannot legally claim credit.

Legal and Policy Implications

This change introduces finality to the GST filing cycle, allowing tax authorities to:

• Close audit cycles faster

• Reduce reconciliation complaints

• Prevent fraudulent claims based on post-facto corrections

However, legal experts caution that taxpayers should be allowed to petition for exceptions, at least in cases of:

• Natural calamities

• Severe health issues

• Court stays or judicial orders

• GST portal failures duly acknowledged

A grievance redressal system is currently absent for this category of cases. Industry bodies like FICCI and CII may soon take this up with the GST Council.

Comparison with Global Tax Regimes

Many countries have fixed limitation periods for tax filings and input claims. For instance:

• UK: Typically allows 4 years to make corrections or claim VAT refunds.

• Australia: BAS (GST return) corrections allowed within 4 years.

• Canada: Input Tax Credit claims allowed up to 4 years from filing.

India’s 3-year deadline is in line with international best practices, although the lack of exception clauses makes it rigid.

What Taxpayers Should Do Now

1. Run a return filing audit for the last five years.

2. Use the GST portal’s history to check pending returns.

3. Coordinate with vendors and customers to reconcile discrepancies.

4. File all old returns before July 2025 deadline.

5. Consult your tax advisor in case any litigation is pending that affects filings.

Will Past Returns Also Be Blocked?

As of now, returns filed before July 2025 are not impacted by this rule. However, returns from July 2025 onward will have a 3-year countdown from their due date.

For instance:

• GSTR-3B for July 2025 (due 20 August 2025) will become non-fileable after 20 August 2028.

• Similarly, GSTR-9 for FY25-26 (due 31 December 2026) will be blocked after 31 December 2029.

Conclusion: A Call for Proactive Compliance

This new rule by GSTN marks a significant shift in India’s GST compliance regime. It brings greater predictability, ensures system efficiency, and reduces prolonged non-compliance.

However, for thousands of taxpayers—especially MSMEs, litigants, and those with technical bottlenecks—it is a warning bell. Time is running out for them to regularise pending filings before the filing window slams shut permanently.

Tax experts urge the government to introduce a redressal mechanism, ensuring genuine cases are not punished, while maintaining system discipline and data integrity.

Disclaimer

This article is for educational and informational purposes only and does not constitute financial advice. Investment decisions should be based on individual risk tolerance and consultation with SEBI-registered advisors. Market conditions are volatile and subject to change. Neither the author nor the platform is responsible for losses arising from use of this information.

The Upcoming IPOs in this week and coming weeks are Eppeltone Engineers, Aten Papers, Patil Automation, Oswal Pumps, Samay Projects Services, Monolithisch India.

The Current active IPO are Jainik Power Cables, Sacheerome Limited.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.