Comments on Changes Proposed in the Finance Bill, 2022
Proposed Amendments in the CGST Act, 2017:
a) Substitution of Section 38: The Erstwhile section 38 was “Furnishing details of inward supplies” which was related to GSTR 2 and we all know that GSTR-2 has never come into force. Now the Government has substituted the entire provision. It seems that GSTR-2 is not part of Law anymore. Now Government has proposed amended section with heading “Communication of details of supply” which says that the details of outward supplies furnished by the supplier in GSTR-1, will be reflected in GSTR-2B of recipient.
Furthermore, Sub-section (2) provides conditions & restrictions on claim of ITC by the recipient. Surprisingly, it seems GSTR-2B would be divided into available credit and restricted credit (wholly or partly).
Restricted credit would be on the default of Supplier which is divided into following six categories:-
(i) Newly registered persons as may be prescribed.
(ii) Supplier who is not paying GST i.e. Defaulted Supplier
(iii) Liability of supplier in GSTR-1 is greater than liability of supplier in GSTR-3B
(iv) Supplier who avails ITC more than the eligible portion as given in GSTR 2-B
(v) Default in payment of tax as per section 49(2) wherein restrictions are imposed on use of Electronic Credit Ledger.
(vi) Such person as may be prescribed.
Eventually, non-compliance on the part of supplier would lead to denial of ITC to the recipient. This may however pave way for considerable litigation as in some genuine cases also, it may not be up to the assessee to make sure that his supplier furnishes the details of every invoice in his statement of outward supplies.
Moreover, it is also against the principle laid down by the court in Arise India Limited and Ors v. Commissioner of Trade & Taxes, Delhi and Ors, W.P.(C) 6093/2017, a judgement of the pre-GST era in which it was held that “as long as the purchasing dealer has taken all the steps required for being eligible for ITC, he could not be expected to keep track of whether the selling dealer has in fact deposited the tax collected with the government or has lawfully adjusted it against his output tax liability.” Hence, the legality of this provision is yet to be determined.
b) Insertion of Clause (ba) After Section 16(2)(b): This clause seeks to insert a new eligibility criterion for the availment of Input Tax Credit (ITC) by an assessee. It is extracted as “the details of Input Tax Credit in respect of the said supply communicated to such registered person section 38 has not been restricted.” With the insertion of this provision, there would now be six conditions within Section 16(2) of the CGST Act, 2017 that have to be satisfied for the successful availment of ITC which are as follows:
- Firstly, the assessee is in possession of a Tax Invoice or Debit Note issued by a registered supplier. 16(2)(a)
- Secondly, the supplier has duly furnished the details of such invoice or debit note in his statement of outward supplies (i.e. GSTR-1) as per Section 37 and has duly communicated these details to the assessee. 16(2)(aa)
- Thirdly, the assessee has actually received the goods or services or both specified in such invoices. 16(2)(b)
- Forthly, the supplier has paid the tax. 16(2)(c)
- Fifthly, the supplier has filed its returns as per section 39.16(2)(d)
- And sixthly, the Input Tax Credit communicated to assessee has not been restricted by Section 38.16(2)(ba)
The section 16(2) was primarily introduced to counter the insidious problem of issuance of fake debit notes/invoices by suppliers for distributing a higher ITC to their recipients. In this regard it is also pertinent to mention that earlier vide Notification 94/2020, Rule 36(4) of the CGST Rules, 2017 was amended to restrict the ITC to 5% in respect of invoices/debit notes which have not been duly furnished by the supplier in his statement of outward supplies (i.e. GSTR-1) but now, with the insertion of these new provisions, the assessee would be able to ‘avail no ITC’ in such cases.
c) Substitution of time limit in sub-section (4) of Section 16: This amendment specifies due-date to avail entitled ITC without linking it with any return. Earlier it was linked to due date of GSTR-3B for the month of September. However, the original section itself was draconian in nature and seems to be beyond the vires of law makers.
d) Omission of proviso (b) & (c) in sub-section (4) of Section 29: This amendment proposes that if the person registered as composite dealer fails to furnish GSTR-4 beyond 3 months from the due date, the proper officer may proceed suo-motu for cancellation of registration. This has been done to make co-ordination between law and its compliance as GSTR-4 is being filed annually, at present.
For Persons registered as Regular Taxpayer:- In clause (c), the period of six months has been substituted by period as may be prescribed which seems that more power has been given to the officers and registration can be cancelled before six months as well, but only after providing opportunity of being heard.
e) Scrapping of sections 42, 43 and 43A: The provisions in these sections were related to GSTR-2 and matching principle in the return filing mechanism which was proposed earlier. It seems that government has given up the idea of originally proposed return filling mechanism and matching principle. Similar omission has been proposed of proviso in Section 37(1) and sub-section (2) of Section 37.
f) Substitution in Sub-section (4) of Section 34:- This amendment prescribes filing of GSTR-1 in a sequence i.e. period-wise. It means any non-filing of GSTR-1 for a period will restrict the registered person to file GSTR-1 for subsequent periods. In view of above provisions, it is clear that GSTR-1 would be the prime basis of assessment.
g) Substitution in Sub-section (10) of Section 39:- This amendment provides GSTR-3B for a period which can be filed with a condition that GSTR 1 and GSTR 3B for the previous period must have already been filed.
h) Section 41 of CGST Act, from “Claim of Input Tax Credit & Acceptance thereof” to “Availment of Input Tax Credit”:- This amendment has proposed to remove the concept of claim of ITC on provisional basis and provided availment of ITC subject to the conditions and restrictions as may be prescribed. Similarly, heading of the said provision has also been changed. According to sub-section (2), Recipient is of the duty to reverse ITC with interest if supplier does not pay tax on its sales.
For Instance, recipient claims ITC ignoring GSTR 2B, then assessment has been made and he is asked to reverse the ITC. Accordingly, he reverses the ITC with applicable interest. Thereafter, in some future, supplier pays the tax. Then, according to Section 41 (post-amendment), he will reclaim the ITC. Then, Question for Interest already paid remains lying.
i) Amendments proposed in Section 49:
Sub-section (10): Earlier, a registered person could transfer its amount available in Electronic Cash Ledger from one head to another. This amendment now provides that it can transfer the amount from one GSTN to another GSTN registered with the same PAN. The only condition is this that there should be no liability reflecting in your Liability Register.
Sub-section (12): Amendment in this provision provides a capping to the utilization of Electronic Credit Ledger. This amendment has been proposed to comply with the provisions of Rule 86B.
j) Substitution of sub-section (3) in Section 50: This amendment would have retrospective effect as it provides interest would be charged on the reversal of wrongful availment as well as utilization of ITC. After so many litigations, Government has realised and proposed this amendment.
Relevant Provision & Judgments:- Rule 14 of CENVAT Credit Rules, 2004, Prathiba Processors v Union of India 1996 (88) ELT 12, Union of India vs Ind-Swift Laboratories Limited 2011 (265) ELT (SC), CCE vs. Bill Forge Private Limited 2012 (26) STR 204
Moreover, interest on reversal of ITC has also been changed from 24% to 18%.
k) Proposed amendments in Section 54 “Refund of Tax”:
Sub section (2): This amendment is for UN Organisations or Entities holding a UIN ‘Unique Identification Number’ who can now claim refund till two years from the quarter the supply was received. Earlier it was only six months.
Sub section (10): Earlier Revenue could withhold Refund Application in cases limited to sub-section 3 only which contained withholding ITC only three conditions viz. Inverted duty Structure, Exports without payment of taxes or supply to SEZ without payment of taxes. However, refund can be of any kind like excess payment, wrong payment etc. Now, Revenue can withhold any refund application irrespective of its nature. Government has just expanded its powers to withhold refund of tax.
Insertion of clause (ba): Earlier, due date to claim refund in case of supply to SEZ was missing. Now they have specified refund in case of SEZ supply which is now linked to the due date of GSTR 3B of every period.
Other Compliance related Amendments in GST
Extension of time from 30 September to 30 November in following sections:
| Section 34 | Declaring the details of Credit Note | ||
| Section 37 | “Furnishing of details of Outward Supplies” | Any changes in GSTR-1 i.e. detail of outward supplies | |
| Section 39 | “Furnishing of Returns” | Any Amendment in GSTR-3B | |
| Section 52(6) | Section for “Collection of tax at source” | Any amendment in Return of E-commerce Operator | |
| Section 39(5) | Due date for filing monthly returns of registered Non-Resident Taxable person from 20th of succeeding month to 13th of succeeding month | ||
| Section 47 | “Levy of Late fee” | Late fee Rs. 100/- per day maximum upto Rs. 5000 on Return of TCS. Relevant form is GSTR – 8 | “Return that shall be filed by the E-Com operators collecting tax at source” |
Other Proposed Amendments related to GST:
Notification No. 25/2019-Central Tax (R), 24/2019-Integrated Tax (R) & 25/2019-UT Tax (R) dated 30.09.2019.
Service by way of grant of alcoholic liquor license, against consideration in the form of license fee or application fee, has been declared as an activity or transaction which shall be treated neither as a supply of goods nor a supply of service. These Notifications have given retrospective effect from 01st of July, 2017. However, no refund would be made of tax which has been collected, but which would not have been collected, had the said notifications been in force at all material times.
Tax on supply of unintended waste generated during the production of fish meal (2301), except fish oil, is being exempted during the period commencing from the 01.07.2017 and ending with 30.09.2019. However, no refund shall be made of tax which has been collected, but which would not have been so collected, had the said notifications been in force at all material times.
Author Bio
