Impact analysis of Important Changes in GST Act, Rules & Rates w.e.f. 01.01.2022:
A. Siva, Superintendent of Customs, Tuticorin
Introduction:
Changes are the ones that never change. This proverb is squarely applicable to any taxation law, particularly GST, which goes a long way to explain the dynamism, with which the concept of GST is being bestowed with. It is of utmost importance to understand the changes and it’s impact whenever any law gets amended. In this article, I am going to discuss the important changes in GST that are going to be effective from 1st January, 2022 which I have divided into three parts i.e. Changes in the Act, Rules & Rate of tax.
Amendments in GST Act:
The Government has issued a Notification No. 39/2021-CT dated 21.12.2021 vide which certain provisions viz. Section 7(1)(aa), 16(2)(aa), 74, 75(12), 83(1), 107(6), 129, 130, 151, 152, 168 of CGST Act, 2017 are brought in to force w.e.f. 01.01.2022. It is pertinent to mention here that these provisions have been amended in the Finance Act, 2021. Let’s discuss the amendments one by one.
Section 7(1)(aa):
Change: A new clause (aa), after clause (a), in sub-section 1 of section 7 has been inserted which reads as:
“(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.
Explanation.––For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;”
Impact: This is an retrospective amendment w.e.f. 01.07.2017. With insertion of the above clause, scope of supply has further been widened so as to include the activities / transaction between a person (other than an individual) to it’s members for consideration. It is pertinent to mention here that the Hon’ble Supreme Court in the case of State of West Bengal & Ors. v. Calcutta Club Limited (https://taxguru.in/service-tax/service-tax-or-vat-cannot-be-levied-on-incorporated-club-association-sc.html) relied on doctrine of mutuality and held that there can not be provision of service between the incorporated private clubs/ associations and its members. To settle the long pending dispute, newly amended section will have over riding effect of the said Judgement.
Section 16:
Change: A new clause (aa), after clause (a), has been inserted in sub-section 2 of section 16.
“(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;”.
Impact: Section 16(2) deals with certain conditions to avail ITC. Presently there are four conditions specified in Sec 16(2) for availing ITC. Now one more condition has been inserted which provides that taxpayers are entitled to avail ITC on purchase invoice only if supplier has uploaded the same on GST portal. It is understood that this amendment has been brought in to avoid the unnecessary litigation as many writ petitions are being filed to challenge the validity of rule 36(4) of CGST Rules, 2017 which prescribes the same condition with some ceiling limit. Hence, hereafter, taxpayers are allowed to avail ITC in respect of invoices details of which are reflected in GSTR 2A/2B.
Section 74:
Change: In section 74, in Explanation 1, in clause (ii), for the words and figures “sections 122, 125, 129 and 130”, the words and figures “sections 122 and 125” shall be substituted.
Impact: Section 74 deals with non-payment of tax on account of fraud, suppression facts etc. Earlier, the relevant portion reads as “(ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded. After this amendment, penal action under section 129 & 130 shall still continue, even if the proceedings against the main person is concluded.
Section 75:
Change: The following explanation has been inserted in sub-section 12 of section 75.
“Explanation.––For the purposes of this sub-section, the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.”
Impact: Earlier, there was a confusion as to whether SCN needs to be issued to recover the tax, if the taxpayer declares his tax liability in GSTR-1 but not included the same in GSTR-3B return. With this insertion of explanation, it has now become crystal clear that such tax liability can straightaway be recovered under section 79 (recovery of arrears).
Section 83:
Change: The following sub-section has been substituted with sub-section (1) of section 83.
“(1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed”
Impact: Section 83 deals with provisional attachment of property up to one year. Earlier, provisional attachment of property could be made while during the proceedings under sections 62, 63, 64 , 67 , 73 & 74 only. Now, the scope for provisional attachment of property has been widened so as to include the taxable person as well as any person under section 122(1a) [Any person who is causing to commit and retaining the benefit of specified offences]
Section 107:
Change: The following proviso has been inserted in sub-section (6) of Section 107;
“Provided that no appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to twenty-five per cent. of the penalty has been paid by the appellant.”.
Impact: While detaining or seizing goods or conveyances, the proper officer will pass an order for payment of tax and penalty. In such cases, if the taxpayer is filing appeal, he has to pay a sum of 25 % of the penalty imposed in the order as a pre-deposit. Earlier there was a requirement of making pre-deposit of 10 % in respect of disputed amount and now the same has been increased to 25 % in respect of cases covered under sec.129(3).
Section 129:
It can be better comprehended if we compare the both the proviso i.e. existing and amended in Section 129 which is as follows
Sec 129(1)(a)
Existing
“(a) on payment of the applicable tax and penalty equal to one hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value ……….;”
Amended
“(a) on payment of penalty equal to two hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value ………”
Impact: Earlier there was a requirement to pay tax and equivalent penalty to get the confiscated/detailed goods/ vehicles. Now, tax component has been omitted but penalty has been increased to 200 %. So, the net effect is nothing but change in payment head only in respect of cases where owner of the goods comes forward for payment.
Sec 129(1)(b)
Existing
“(b) on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent. of the value ……….;”
Amended
“(b) on payment of penalty equal to fifty per cent. of the value of the goods or two hundred per cent. of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent. of the value…”
Impact: Earlier there was a requirement to pay tax and penalty equivalent to 50 % of tax payable reduced by tax already paid. Now, tax component has been omitted and modified as penalty equivalent to 50 % of the value of goods or 200 % of the tax payable on such goods in respect of cases where owner of the goods does not come forward.
Section 129(2):
Change: Sub-Section 2 of Section 129 has been omitted which earlier reads as follows.
(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.
Sec 129(3)
Existing
The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty…
Amended
The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice…
Impact: The provisions of sub-section (6) of section 67 shall NOT, mutatis mutandis, apply for detention and seizure of goods and conveyances the goods seized and therefor such goods shall not be released on provisional basis upon execution of a bond and furnishing security.
Section 129(4):
Sec 129(4)
Existing
“No tax, interest or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.”
Amended
“No penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.”
Impact: The words “tax & interest” are omitted so as to calculate the penalty only under Sec 129(3) by the proper officer.
Section 129(6):
Change: Sub-section 6 of Section 129 has been substituted and the new sub-section is as follows.
(6) Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3):
Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less:
Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer
Impact: The amended sub-section is delinking the proceedings under Section 129 from the proceedings under Section 130. Before this amendment if the taxable person does not pay tax and penalty within 14 days of seizure, the goods along with conveyance is liable for confiscation under Sec. 130. After this amendment, if penalty imposed is not paid within 15 days from the receipt of order, the seized goods is liable to be sold. Also, the conveyance may be released on payment of Rs.1 lakh or imposed penalty whichever is less.
Sec 130
- Non-obstante clause has been removed from Sub-sec 1
- Equal penalty has been inserted in first proviso to Sub-sec 2
- Sub-Sec 3 has been omitted
Impact: Corresponding amendments have been made in Section 130 so as to delink section 130 from section 129.
Section 151:
Change: Section 151 has been substituted as follows.
“151. The Commissioner or an officer authorised by him may, by an order, direct any person to furnish information relating to any matter dealt with in connection with this Act, within such time, in such form, and in such manner, as may be specified therein”
Impact: This amended section with corresponding amendment in Section 168, shifts the power to collect information from the Commissioner in Board to Jurisdictional Commissioner by way of an order by him or by any person authorized by him.
Section 152:
Change: The following amendments have been made in Section 152.
(a) in sub-section (1),––
(i) the words “of any individual return or part thereof” shall be omitted;
(ii) after the words “any proceedings under this Act”, the words “without giving an opportunity of being heard to the person concerned” shall be inserted;
(b) sub-section (2) shall be omitted.
Impact: The amended Section 152 puts a complete bar on disclosure of information so obtained under Section 150 or Section 151 without giving an opportunity of being heard to the concerned person.
(The above amendments are notified vide Notification No.39/2021-CT dated 21.12.2021
Amendments in Rules:
Rule 10B: A new rule 10B has been inserted after rule 10A which provides that the following persons shall undergo Aadhar Authentication in order to file (i) application for revocation of cancelled registration; (ii) refund application under rule 89(4) ; (iii) refund under rule 96 (IGST refund).
1. Proprietorship firm–Aadhar of Proprietor;
2. Partnership firm – Aadhar of Partner;
3. HUF – Aadhar of Karta;
4. Company – Aadhar of Managing Director or Whole Time Director;
5. Trust – Aadhar of Trustee.
Rule 23: Rule 23 has been amended so as to accommodate the corresponding insertion of Rule 10B and thereby makes Aadhar Authentication compulsory for filing application for revocation of cancelled registration.
Rule 89: Rule 89 has been amended so as to accommodate the corresponding insertion of Rule 10B and thereby makes Aadhar Authentication compulsory for filing refund of ITC accumulated on account of export of goods/services made under LUT/Bond.
Rule 96: Rule 96 has been amended so as to accommodate the corresponding insertion of Rule 10B and thereby makes Aadhar Authentication compulsory for refund of IGST paid on export of goods.
(The above amendments in CGST Rules,2017 have been prescribed under Notification No.35/2021-CT dated 24.09.2021 and brought into force w.e.f. 01.01.2022 vide Notification No. 38/2021-CT dated 21.12.2021)
Changes in Rate of Tax:
The changes in rate of tax in respect of supply of goods / services which are coming into force w.e.f. 01.01.2022 are tabulated as under.
| Sl No | HSN | Description of goods/services | Current Rate | New Rate | Remarks |
| GOODS | |||||
| 1 | 5007 | Woven fabrics of silk or of silk waste | 5% | 12% | Notification No. 14/2021-CT (R ) dated 18.11.2021 |
| 2 | 5111 | Woven fabrics of carded wool or of carded fine animal hair | 5% | 12% | |
| 3 | 5112 | Woven fabrics of combed wool or of combed fine animal hair | 5% | 12% | |
| 4 | 5113 | Woven fabrics of coarse animal hair or of horse hair | 5% | 12% | |
| 5 | 5208 | Woven fabrics of cotton, containing 85% or more by weight of cotton, weighing not more than 200g/m2 | 5% | 12% | |
| 6 | 5209 | Woven fabrics of cotton, containing 85% or more by weight of cotton, weighing more than 200g/m2 | 5% | 12% | Notification No. 14/2021-CT (R ) dated 18.11.2021 |
| 7 | 5210 | Woven fabrics of cotton, containing less than 85% by weight of cotton, mixed mainly or solely with man-made fibres, weighing not more than 200g/m2 | 5% | 12% | |
| 8 | 5211 | Woven fabrics of cotton, containing less than 85% by weight of cotton, mixed mainly or solely with man-made fibres, weighing more than 200g/m2 | 5% | 12% | Notification No. 14/2021-CT (R ) dated 18.11.2021 |
| 9 | 5212 | Other woven fabrics of cotton | 5% | 12% | |
| 10 | 5309 | Woven fabrics of flax | 5% | 12% | |
| 11 | 5310 | Woven fabrics of jute or of other textile bast fibres of heading 5303 | 5% | 12% | |
| 12 | 5311 | Woven fabrics of other vegetable textile fibres; woven fabrics of paper yarn | 5% | 12% | |
| 13 | 5402 | Synthetic filament yarn (other than sewing thread), not put up for retail sale, including synthetic monofilament of less than 67 decitex | 12% /18% | 12% | |
| 14 | 5403 | Artificial filament yarn (other than sewing thread), not put up for retail sale, including artificial monofilament of less than 67 decitex | 12% /18% | 12% | |
| 15 | 5404 | Synthetic monofilament of 67 decitex or more and of which no cross-sectional dimension exceeds 1 mm; strip and the like (for example, artificial straw) of synthetic textile materials of an apparent width not exceeding 5 mm | 12% /18% | 12% | Notification No. 14/2021-CT (R ) dated 18.11.2021 |
| 16 | 5405 | Artificial monofilament of 67 decitex or more and of which no cross-sectional dimension exceeds 1 mm; strip and the like (for example, artificial straw) of artificial textile materials of an apparent width not exceeding 5 mm | 12% /18% | 12% | |
| 17 | 5406 | Man-made filament yarn (other than sewing thread), put up for retail sale | 12% /18% | 12% | |
| 18 | 5407 | Woven fabrics of synthetic filament yarn, including woven fabrics obtained from materials of heading 5404 | 5% | 12% | |
| 19 | 5408 | Woven fabrics of artificial filament yarn, including woven fabrics obtained from materials of heading 5405 | 5% | 12% | |
| 20 | 5501 | Synthetic filament tow | 18% | 12% | Notification No. 14/2021-CT (R ) dated 18.11.2021 |
| 21 | 5502 | Artificial filament tow | 18% | 12% | |
| 22 | 5503 | Synthetic staple fibres, not carded, combed or otherwise processed for spinning | 18% | 12% | |
| 23 | 5504 | Artificial staple fibres, not carded, combed or otherwise processed for spinning | 18% | 12% | |
| 24 | 5505 | Waste (including noils, yarn waste and garnetted stock) of man-made fibres | 18% | 12% | Notification No. 14/2021-CT (R ) dated 18.11.2021 |
| 25 | 5506 | Synthetic staple fibres, carded, combed or otherwise processed for spinning | 18% | 12% | |
| 26 | 5507 | Artificial staple fibres, carded, combed or otherwise processed for spinning | 18% | 12% | |
| 27 | 5512 | Woven fabrics of synthetic staple fibres, containing 85% or more by weight of synthetic staple fibres | 5% | 12% | |
| 28 | 5513 | Woven fabrics of synthetic staple fibres, containing less than 85% by weight of such fibres, mixed mainly or solely with cotton, of a weight not exceeding 170 g/m2 | 5% | 12% | |
| 29 | 5514 | Woven fabrics of synthetic staple fibres, containing less than 85% by weight of such fibres, mixed mainly or solely with cotton, of a weight exceeding 170 g/m2 | 5% | 12% | |
| 30 | 5515 | Other woven fabrics of synthetic staple fibres | 5% | 12% | Notification No. 14/2021-CT (R ) dated 18.11.2021 |
| 31 | 5516 | Woven fabrics of artificial staple fibres | 5% | 12% | |
| 32 | 5607 | Jute twine, coir cordage or ropes | 5% | 12% | |
| 33 | 5608 | Knotted netting of twine, cordage or rope; made up fishing nets and other made up nets, of textile materials | 5% | 12% | |
| 34 | 5801 | Woven pile fabrics and chenille fabrics, other than fabrics of heading 5802 or 5806 | 5% | 12% | |
| 35 | 5806 | Narrow woven fabrics, other than goods of heading 5807; narrow fabrics consisting of warp without weft assembled by means of an adhesive (bolducs) | 5% | 12% | |
| 36 | 5808 | Saree fall | 5% | 12% | Notification No. 14/2021-CT (R ) dated 18.11.2021 |
| 37 | 5809, 5810 | Embroidery or zari articles, that is to say,- imi, zari, kasab, salma, dabka, chumki, gota, sitara, naqsi, kora, glass beads, badla, gizai | 5% | 12% | |
| 38 | 6001 | Pile fabrics, including “long pile” fabrics and terry fabrics, knitted or crocheted | 5% | 12% | |
| 39 | 6002 | Knitted or crocheted fabrics of a width not exceeding 30 cm, containing by weight 5% or more of elastomeric yarn or rubber thread, other than those of heading 6001 | 5% | 12% | |
| 40 | 6003 | Knitted or crocheted fabrics of a width not exceeding 30 cm, other than those of heading 6001 or 6002 | 5% | 12% | Notification No. 14/2021-CT (R ) dated 18.11.2021 |
| 41 | 6004 | Knitted or crocheted fabrics of a width exceeding 30 cm, containing by weight 5% or more of elastomeric yarn or rubber thread, other than those of heading 6001 | 5% | 12% | |
| 42 | 6005 | Warp knit fabrics (including those made on galloon knitting machines), other than those of headings 6001 to 6004. | 5% | 12% | |
| 43 | 6006 | Other knitted or crocheted fabrics | 5% | 12% | |
| 44 | 61 | Articles of apparel and clothing accessories, knitted or crocheted, of sale value not exceeding Rs. 1000 per piece | 5% | 12% | |
| 45 | 62 | Articles of apparel and clothing accessories, not knitted or crocheted, of sale value not exceeding Rs. 1000 per piece | 5% | 12% | |
| 46 | 6301 | Blankets and travelling rugs not exceeding Rs. 1000 per piece | 5% | 12% | Notification No. 14/2021-CT (R ) dated 18.11.2021 |
| 47 | 6302 | Bed linen, table linen, toilet linen and kitchen linen not exceeding Rs. 1000 per piece | 5% | 12% | |
| 48 | 6303 | Curtains (including drapes) and interior blinds; curtain or bed valances not exceeding Rs. 1000 per piece | 5% | 12% | |
| 49 | 6304 | Other furnishing articles, excluding those of heading 9404 not exceeding Rs. 1000 per piece | 5% | 12% | |
| 50 | 6305 | Sacks and bags, of a kind used for the packing of goods not exceeding Rs. 1000 per piece | 5% | 12% | |
| 51 | 6306 | Tarpaulins, awnings and sunblinds; tents; sails for boats, sailboards or landcraft; camping goods not exceeding Rs. 1000 per piece | 5% | 12% | |
| 52 | 6307 | Other made up articles, including dress patterns not exceeding Rs. 1000 per piece | 5% | 12% | |
| 53 | 6308 | Sets, consisting of woven fabric and yarn, whether or not with accessories, for making up into rugs, tapestries, embroidered table cloths or serviettes, or similar textile articles, put up in packings for retail sale not exceeding Rs. 1000 per piece | 5% | 12% | |
| 54 | 6309 | Worn clothing and other worn articles; rags | 5% | 12% | Notification No. 14/2021-CT (R ) dated 18.11.2021 |
| 55 | 6310 | Used or new rags, scrap, twine, cordage, rope and cables and worn out articles of twine, cordage, rope or cables, of textile materials not exceeding Rs. 1000 per piece | |||
| 56 | 64 | Footwear of sale value not exceeding Rs. 1000 per pair | 5% | 12% | |
| SERVICES | |||||
| 57 | 9988 | Job Work by way of Dyeing and Printing of Textile and Textile Products for registered principal | 5% | 12% | Notfn. No.15/2021-CT(R), dt. 18.11.2021 |
| Works Contract Service provided to Govt | |||||
| 58 | The wrods “Govt Authority and Govt. Entity” have been removed in entry at Sl.No. 3 ( iii),( vi),( vii), (ix) & (x) of the Notification No.11/2017-CT (R ) dated 28.06.2017 | lower rate of tax viz., 12% / 5% applicable only when such services are provided to CG, SG, UT or Local Authority only | Notfn. No.15/2021-CT(R), dt. 18.11.2021 | ||
| Transport of passenger through E-commerce operator | |||||
| 59 | 9964 | Transport of passengers, with or without accompanied belongings, by – (b) non-air conditioned contract carriage other than radio taxi…….if such services are supplied through an electronic commerce operator, and notified under sub-section (5) of Section 9 | Nil | 5% | Notification No. 16 & 17/2021-CT (R) dt. 18.11.2021 |
| 60 | 9964 | Service of transportation of passengers, with or without accompanied belongings, by— (e) metered cabs or auto rickshaws (including erickshaws) if such services are supplied through an electronic commerce operator, and notified under sub-section (5) of Section 9 | Nil | 5% | |
For more details, the relevant notifications may be referred to by the readers.
Happy Learning!!!
(DISCLAIMER: (i) The views expressed in this article are strictly of author’s personal views only. (ii) The author disclaims all liability in respect of any action taken or not taken based on this article)
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