Changes in GST (Effective from 1st January, 2022)

Many Important Changes in GST has been effective from 1st January 2022. In this article Author have tried to cover  changes vide Notification No. 14/2021-Central Tax) & Notification No. 15/2021-Central Tax dated 18th November 2021 and also change in following provisions-

♦ Provisions as Proposed in Section 108 | 109 | 113 to 122 of Finance Act, 2021 Including Scope of supply, Eligibility of ITC , Provisional Attachment , E-way Bill (Penalty and Confiscation), Appeals, Powers to Call for Information

♦ Bar on Filing of GSTR -1 if GSTR 3B not filled

♦ Aadhaar Authentication for Refund and Revocation of Cancellation of Registration

♦ Clarification regarding supply of ‘Restaurant Service’ through E-Commerce Operators

♦ Decisions regarding Change of GST Rate on Textiles and Related products.

Detailed Analysis is  as follows:-

1. Section 7(1)(aa) Scope of Supply Amended to include supply to its Members

(Finance Act, 2021 – Section 108)

Section 7(1)(aa) of the CGST Act, has been retrospectively inserted from 1^st July,2017 which states that any 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 shall be considered as a Supply.

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;

This basically negates the Honourable SC decision in the case of Calcutta Club Ltd. Where it was held that club/association and its members are not Distinct Persons .

2. Section 16(2)(aa) –  Changes in conditions for taking input tax credit – Transaction in GSTR-2A/2B – Mandatory condition for availment of ITC

(Finance Act, 2021 – Section 109)

ITC claims will be allowed only when the details of such invoice or debit note have been furnished by the supplier in his GSTR-1 and subsequently, it appears in GSTR-2A/2B. So, the taxpayers can no longer claim 5% provisional ITC under the CGST Rule 36(4) and ensure every ITC value claimed was reflected in GSTR-2A/2B.

3. Closure of Proceedings u/s 73/74 (Demand/Recovery) will be independent of Proceedings u/s 129/130(Detention /Seizure)

(Finance Act,2021 – Section 113)

Section 74 stated that where the proceedings against the main person have been concluded under section 73 / 74, the proceedings against all such persons liable to pay penalty under sections 122, 125, 129 and 130 would have been deemed to be concluded. But after the amendment , Section 129 & Sec.130 has been removed and only proceedings under 122 & 125 would be deemed to be concluded thus resulting in proceedings of the detention, seizure & confiscation of goods and conveyances in transit(Sec.129&130) separate from the demand and recovery proceedings u/s 73& 74.

4. Section 75(12) – Self Assessed Tax shall be determined as furnished in Return u/s 37 (GSTR-1) and not as furnished in Return u/s 39 (GSTR-3B)

(Finance Act,2021 – Section 114)

The following Explanation has been inserted in section 75(12) of CGST Act-

‘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.’

Previously the Government could intiate Demand / Recovery Proceedings Only if Liability was furnished in GSTR 3B. Such Practical Difficulty has now been removed vide the Explanation inserted and any Liability as furnished in GSTR 1 and not paid through GSTR 3B Is liable to be recovered.

5. Section 83 – Provisional attachment to protect revenue in certain cases

(Finance Act,2021 – Section 115)

Section 83(1) has been substituted to now read as  –  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.

Vide this Modification Powers of Provisional attachment of the Commissioner have been extended to proceeding under Chapter XII (Assessment), XIV (Inspection, Search, Seizure and Arrest) or XV (Demands and Recovery) for attachment of property including bank account belonging to the taxable person / person who has retained benefits of offences under 122(1A) e.g Fake Invoice Transactions, where he feels that PA is necessary to protect the Interest of the Revenue.

Practically It was necessary to determine the liability and give reasonable time to discharge the obligation. Hopefully the Provisions will strictly be used for Fraud Practices and not for Genuine/Bonafide Mistakes.

6. Section 107 – Appeals to Appellate Authority

(Finance Act,2021 – Section 116)

Following Proviso to Section 107 has been Inserted

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.

Previously payment of 10% of the tax in dispute was enough for the Assessee to file an appeal against an order u/s 129(3) which has now been increased to 25% of the penalty.

7. Section 129 – Detention, seizure and release of goods and conveyances in transit:

(Finance Act,2021 – Section 117)

Provisions u/s 129(1)(a) , 129(1)(b) & 129(4) has been modified to following

129(1)(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 of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty;

129(1)(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 of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty

129(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.

129(3) 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, for payment of penalty under clause (a) or clause (b) of sub-section (1).

129(4) No penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.

129(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.

Post the above-mentioned Amendment only the penalty amount needs to be paid in order to release the goods whereas the tax amount would be paid through GSTR-3B. The Penalty amount has now been increased to 200% of the Tax payable (from earlier 100%) [in case owner comes forward for payment of Penalty] and where the owner of the goods does not come forward for payment of such penalty, the penalty would be higher of 50% of the value of the goods or 200% of the tax payable on such goods.

Sec. 129(6) so inserted has brought in the Provisions that where Penalty is and not paid within 15 days of the receipt of order, the seized goods/Conveyance will be disposed off for recovery of penalty amount.

However, seized conveyance can be released on payment of penalty of Rs. 1 Lac or Penalty, whichever is less.

8. Section 130 – Confiscation of goods or conveyances and levy of penalty

(Finance Act,2021 – Section 118)

Section 130 has been modified so as to no longer override any other provision of the Act. The proceedings of confiscation and the penalty proceedings due to detention of goods stand delinked through the Amendment. Minimum Penalty equivalent to 100% of the tax payable on such goods has now been Prescribed through the Finance Act, 2021.

Section 130(3) has been striked off which leads to removal of the requirement to pay fine u/s 130(2) in addition to the tax, penalty and charges payable u/s 130(1)

9. Section 151 – Power to collect statistics / Information by Commissioner

(Finance Act,2021 – Section 119)

Section 151 has been amended to now read as follow

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.

Presently the Commissioner could ask for Statistics/Information only through issue of Notification which has now been done away with in favour of empower the jurisdictional commissioner to call for information from any person relating to any matter dealt with in connection with the Act, directly without issuance of a notification.

10. Bar on disclosure of information under Section 152

(Finance Act,2021 – Section 120)

Sec 152(1) has been amended now to result in that if any information obtained through return or otherwise has to be disclosed for any proceeding under the Act, the same cannot be done without giving an opportunity of personal hearing .

Sec 152(2) Provision to Access to data so obtained has now been omitted.

11. Schedule II – Rationalized to exclude Supply of goods by any unincorporated Body to Members

(Finance Act, 2021 – Section 121) 

Following Provisions u/s 7 of the CGST Act (Supply of Goods) has been removed as a result of introduction of Section 7(1)(aa) which automatically covers the Provision

– Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.

12. GST Notifications which come into effect from 1^st January,2022

Notification No. 35/2021–Central Tax [G.S.R. 659(E)] Dated: 24/09/2021

A registered taxpayer shall not allowed to file his GSTR-1 in case his GSTR-3B was not filed for preceding month (earlier he wasn’t allowed to file GSTR-1 in case his GSTR-3B was not filed for preceding two months.)

Notification No. 38/2021–Central Tax [G.S.R. 875(E)] Dated: 21/12/2021

Every Proprietor / Karta / MD/ WTD / Member of Managing Committee/ AOP/ BOI/ Society or Trustee or Authorized Signatory has to undergo Aadhar authentication for GST Refund Application under Rule 89 or Rule 96 and For Filling of Revocation of Cancellation of Registration.

Exceptions to above Include any person

-not a citizen of India; or

-a department or establishment of Central Government or State Government; or

-a local authority; or

-a statutory body; or

-a PSU or

– Person registered under Section 25 (9) of the CGST Act, 2017.

13. Clarification issued regarding modalities of compliance in respect of supply of “Restaurant Service” through E-Commerce Operators

• ECOS will no longer be required to collect TCS and file GSTR-8 in respect of ‘restaurant services’ on which it pays tax under section 9(5) but will continue to collect TCS.
• ECOs will be liable to pay GST on restaurant service supplied through them including by an un-registered person and shall pay the entire GST liability in cash on restaurant service (No ITC could be utilized for payment of GST on restaurant service supplied through ECO).
• The aggregate turnover of person supplying restaurant service through ECOs shall be computed as defined in section 2(6) of the CGST Act, 2017 and shall include the aggregate value of supplies made by the restaurant through ECOs.
• ECO shall not be required to reverse ITC on account of restaurant services on which it pays GST in terms of section 9(5) of the Act.
• Registered persons supplying restaurant services through ECOs under section 9(5) will report such supplies in Table 8 of GSTR-1 and Table 3.1 (c) of GSTR-3B, for the time being.
  

14. Revision of GST rates on various textile products and job work on them

Revision of GST rates on various textile products and job work on them will undergo revision w.e.f 1st January,2022 as mentioned in Notification No. 14/2021-Central Tax) & Notification No. 15/2021-Central Tax dated 18th November 2021.

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Declaimer:   The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. The author does not accept any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in Reliance thereon. No part of this document should be distributed or copied without express written permission of the author.