BUDGET 2022 analytical view of GST amendments

Section 16(2)(ba) introduced as “ the detail of input tax credit on said supply communicated to such registered person under section 38 has not been restricted.

16(2) (ba) imposes an additional condition against the principle of seamless credit. Now ITC can be availed only if the same is not restricted in GSTR 2B.

1. Government should consider auto-population in GSTR 2B as conclusive evidence of payment of GST by the selling dealer and delete section 16(2)(C) as there is no mechanism available with the purchaser to ensure the actual payment of GST to Government by the selling dealer.

2. Correction in GSTR 1 (outward supply) resulting lesser liability should not hamper the genuine claim of ITC of purchasing dealer. Queries can be raised to avoid hardship to purchasing dealer.

3. incase purchasing dealer claims excess GST, the same can be called to prove with the other provision of section 16 viz support of payment, invoice, receipt of goods.

4. ITC auto-populated in GSTR 2B should be of cumulative basis by reducing the amount of ITC availed by the assessee in previous returns.

1. It has been settled by many courts in the erstwhile VAT Act and GST Act that bonafide purchasing dealers cannot be punished for the non compliances made by the selling dealer.

2. here would be cascading effect of tax on tax in the chain of transactions due to such restrictions

3. It is the duty of the Government to ensure compliance from the person who has made outward supply. Government has entire machinery to do so and is empowered to penalize.

4. Purchasing dealer cannot enforce law on selling dealer.

Through amendment in Section 16(4) the time limit to avail ITC under section 16(4) has been extended to earlier of filing of the Annual return as per section 39 or 30^th November of the subsequent year instead earlier upto due date of furnishing September month’s return

1. Government should provide the opportunity of claiming missed ITC by the due date or date of filing Annual return.

2. Government should bring the change with retrospective effect from 01.07.2017

1. Vide providing proviso of section 41(2), Government is making provision to reclaim the ITC when the said supplier makes payment.

2. Government is distinguishing purchasing dealers in two categories (1) who claimed ITC and reverse with interest and reclaim when the selling dealer pays tax (2) dealers who don’t claim ITC, force the selling dealer to file return.

3. There was much confusion in the law at the time of inception of GST law. Even experts were not familiar with the provision of law therefore providing a fair chance to assessee to claim missed/escaped ITC by the time of filing his annual return. It will avoid litigations

Section 37 (3) (ii) “ for the words and figures due date of furnishing of the return under section 39 for the month of September” the words “ thirtieth day of November” shall be substituted

Any rectification of error in outward supplies, invoices, debit notes, credit notes and revised invoice to be reported in GSTR1/3B is now permitted upto 30^th November of subsequent financial year.

Government should provide the opportunity of claiming missed ITC by the due date or date of filing Annual return.

To error is human and many mistakes are come into light at the time of reconciliation, preparing annual return. Where there is bonafide intention of the assessee is to correct the mistakes, Government should provide him an opportunity upto the date of filing annual return to correct the mistake and pay/claim refund of due tax with interest

Section 49 (10) A registered person may transfer any amount of tax, interest, penalty or fee or any other amount available in the electronic cash ledger under this Act, to the electronic cash ledger for integrated tax, central tax, State tax, Union Territory tax or cess

Section 49(10) provide freedom to assessee to transfer of amount available in electronic cash ledger to different heads viz CGST cash ledger, SGST cash ledger, IGST cash ledger, UTGST cash ledger and cess ledger if the transfer is for same GSTN.

1. Similar provision is required for electronic credit ledger. Due to restrictions of section 49A, the assessee had to exhaust its entire IGST ITC and CGST before utilizing SGST. It results into forcing assessee to park unutilized ITC under SGST credit ledger

2. At the time of reversal opportunity / arrangements in DRC 03 to be provided to the dealer to reverse entire amount of ITC with the available credit ledger

1. There is no provision of depositing tax under protest or reverse from the electronic credit ledger and reclaim the disputed ITC after settlement of the position by courts in which writs/SLP are pending.

2. Due to section 49A assessee are bound to keep their entire availed and unutilized amount under SGST head.

3. Government has faced similar problems in case of refund and has issued circular no 125/44/2019 dated 18.11.2019 to overcome from this situation and at para 37 mentioned as “After calculating the least of the three amounts, as detailed above, the equivalent amount is to be debited from the electronic credit ledger of the applicant in the following order: a) Integrated tax, to the extent of balance available; b) Central tax and State tax/Union Territory tax, equally to the extent of balance available and in the event of a shortfall in the balance available in a particular electronic credit ledger (say, Central tax), the differential amount is to be debited from the other electronic credit ledger (i.e., State tax/Union Territory tax, in this case).

4. Further at para 38 it has been mentioned as “The order of debit described above, however, is not presently available on the common portal. Till the time such facility is made available on the common portal, the taxpayers are advised to follow the order as explained above for all refund applications”

Fully electronic refund process via Form GST RFD-01 & single disbursement

5. Another circular no 133 dated 23.03.2020 has been issued for apportionment of ITC in case of business demerger. In para C Circular says “ However the transferor shall be at liberty to determine the amount to be transferred under each tax head (IGST, CGST, SGST/UTGST) within this total amount, subject to the ITC balance available with the transferor under the concerned tax head”

Apportionment of ITC in cases of business reorganization

6. Keeping in mind article 14 of the Constitution of India Government should not discriminate the assessees

Section 50(3) where the input tax credit has been wrongly availed ad utilized, the registered person shall pay interest on such ITC at such rate not exceeding 24%

New subsection 50(3) provide for levy of interest only on that portion of ITC which was wrongly availed and utilized

Clarification is required on following issues

1. when the dealer has belief to claim ITC based on judgment of High Courts/ Supreme Courts, the same would not be tantamount to claim as ITC wrongly availed and utilized

2. while framing charge of ITC availed and utilized total balance of electronic credit ledger will be considered as under provision of section 49A it is impossible for assessee to maintain head wise balances in electronic credit ledger

3. provision is required to reverse the ITC under protest and to reclaim the disputed ITC after getting favourable order/notification

4. For reversal the provisions are required in DRC 03 either to transfer the amount from SGST head of electronic credit ledger to different electronic credit ledger or to consider the reversal from any head ignoring head-wise reversal.

1. it is a settled principle that the law doesn’t compel a man to do what he cannot possibly perform. Relevant maxim is, lex non cogit ad impossibilia.

2. If an assessee has reason to believe that he is entitled to claim an ITC based on the judgment of High Court, he will claim the same (because of restriction of section 16(4)) within timeframe and will not avail and utilize to avoid litigation and interest liability. Because of section 49A, the availed but not utilized amount is shifted in SGST head of electronic credit ledger. It is beyond the control of assessee to maintain head-wise balances in electronic credit ledger. Government should clarify the same as neither there is any loss to the revenue nor the intention of assessee is malafide.

3. Different heads are maintained by the Government for its ease not to penalize the bonafide assessee