Recent Updates In GST till 26th June 2022

Government’s Monthly Economic Report (MER), just released has put a word of caution on short-term risks that India faced without sacrificing the hard earned macroeconomic stability. These include fiscal deficit, inflation, sustaining economic growth, value of rupee etc. Despite all challenges posed by external factors, India is still at a lower risk of stagflation. Its medium term prospects remain good as private sector growth continues along with employment generation. India is relatively better placed than many other countries.

In one of the addresses, Chief Economic Advisor has stated that India is likely to become a USD 5 trillion economic by 2033-34 and is better placed than other emerging economies.

In the wake of cut in excise duty on petrol and diesel last month, it is expected that revenue shortfall would be around Rs. one lakh crore (equal to almost one month GST collection) and as such, Government may even resort to cut in revenue expenditure.

Come 1^st July, 2022 and India will complete five challenging years of GST introduction, biggest ever tax reform in the country. The reforms have taken place but there is lot more to be done. What has been done so far is just like digging the excavation for the building. Tax revenues have just started growing and being stable over Rs. one lakh crore mark. Covid played spoil sport for over two years with erratic GST collection growth. Same is the case with GST as a percentage of GDP which hovers in the range of 5-6 percent. Rampant use of fake invoices, tax evasion and technical glitches continue to rule the tax regime on one hand while on other hand, taxpayers and tax professionals continue to struggle with compliances, technical glitches and distorted tax credit mechanism.

GST Council’s 47 meeting is being held on 28-29 June, 2022 at Chandigarh. While official agenda is not yet known, Council may discuss legal changes, easing of compliances, composition scheme for e-commerce, allowing amendments in GSTR-3B, improvements on IT infrastructure to handle e-invoices, rate revision, issuance of show cause notices by both- centre and states, ITC related changes, review of National Anti-Profiteering Authority, continuity of compensating the states for GST short fall, GST on crypto transactions etc.

GSTN has been issuing new functionalities and advisories, latest one on availing ITC as per law & GSTR 2B etc. CBIC also issued procedure relating to sanction, post audit and review of refund claims. States have been demanding continuity of GST compensation to states for 3 to 5 years more. The present promise gets over on 30^th June, 2022, i.e., upto 5 years of GST. Central Government has issued  a Notification for extending the levy of compensation cess upto 31^st March, 2026.

A Group of Ministers (GoM) to look into rate rationalization has not reached any consensus on exemptions, rate and inverted duty issues and as such it may take some more time. It may submit an interim report in the forthcoming meeting of Council.

Guidelines for Refund Claims in GST

• CBIC (GST Policy Wing) has issued guidelines on the procedure relating to sanction, post audit and review of refund claims.
• For the purpose of ensuring uniformity in procedure and enabling effective monitoring of sanction of refund claims in order to safeguard interest of revenue, Board has issued guidelines for sanction, post audit and review of refunds.
• For sanction of refund :
  • While passing the refund sanction order in FORM GST RFD-06, the proper officer should also upload a detailed speaking order along with refund sanction order in FORM GST RFD-06. In order to ensure uniformity in issuance of such speaking order, CBIC has clarified that such speaking order should inter alia contain details as per guidelines.
  • Certain additional details will be required in case of the refund of accumulated ITC (on account of zero-rated supplies/ inverted rated structure) and refund of IGST paid on account of zero-rated supplies, deemed exports, refund of excess balance in cash ledger etc.

• For post audit & review :
  • All refund orders are required to be reviewed for examination of legality and propriety of the refund order and for taking a view whether an appeal to the appellate authority under provisions of section 107(2) of the CGST Act is required to be filed against the said refund order.
  • Post-audit may henceforth be conducted only for refund claims amounting to Rs. 1 lakh or more till further instructions.
  • Till the time the functionality for conducting post-audit online is developed on ACES-GST portal, post-audit of refund orders may be conducted in offline mode.

• The post-audit and review of the refund claims shall be conducted keeping in mind the following guidelines: 

a) All the refund orders passed should be immediately transmitted online to the review  module after issuance of refund order in FORM GST RFD-06. The review and post- audit officers shall have access to all documents/ statements on ACES-GST portal  pertaining to the said refund claims.

b) For the  purpose  of post-audit  of refund  order,  a  Post-Audit  Cell  under  a  Deputy/Assistant Commissioner along with one/ two Superintendents and Inspectors  as required, may be created in Commissionerate Headquarters.

c) The post-audit should be concluded within 3 months from the date of issue of FORM  GST RFD-06 The findings of the post-audit shall be communicated to the review  branch within the said time period of 3 months.

d) The review of refund order shall be completed at least 30 days before the expiry of  the time period allowed for filing appeal under Section 107(2)of the CGST Act. 

(Source: Instruction No. 03/2022-GST dated 14.06.2022  issued by CBIC, GST Policy Wing) 

Advisory on availing ITC as per law and GSTR-2B: GSTN

• For some of the taxpayers, there was an issue in relation to duplicate entries in GSTR-2B which has since been fixed and correct GSTR-2B has been generated.
• In this regard, taxpayers while filing GSTR-3B have been advised to check and ensure that the value of ITC they are availing is correct as per the law.
• They may check the correct ITC value from download of Auto drafted ITC statement GSTR-2B or pdf of System Generated GSTR-3B or on the ITC observed on the mouse hover of Table 4 in GSTR-3B, particularly in any such case where there is any difference observed between the correct figures available at places as stated above and the prefilled GSTR-3B observed on screen.

(Source: GSTN dated 18.06.2022) 

Recommendations to incentivize MSME sector

• A Parliamentary Committee on promotion and regulation of e-commerce in has submitted its report to Rajya Sabha on 15.06.2022 giving suggestions to boost MSME’s participation in e-commerce.
• It has suggested to extend the Goods and Services Taxes (GST) Composition Scheme to online sellers subject to the turnover threshold of Rs 1.5 crore in order to incentivise MSMEs toward e-commerce adoption.
• It may be noted that section 10(2)(d) of the CGST Act, 2017 restricts businesses or individuals registered under the scheme to sell through e-commerce platforms.
• Presently, small businesses opting for the scheme are required to pay 1 per cent tax on their annual turnover, instead of calculating GST liability monthly and are permitted to make only intra-state supplies.
• If accepted, small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of turnover. This scheme can be opted for by any taxpayer whose turnover is less than Rs. 1.5 crore. 

(Source: Parliament Panel Report on MSMEs submitted to Rajya Sabha on 15.06.2022) 

47^th meeting of GST Council

• The 47^th meeting of GST Council is scheduled to be held on 28-29 June, 2022 at Chandigarh.
• This would also be the first meeting of Council in 2022 as the 46^th meeting was held on 31.12.2021.
• This meeting is expected to deliberate upon :
  • Extension of compensation to states beyond June, 2022
  • Fitment Committee recommendations on GST rates
  • Rationalization of inverted duty structure on certain goods
  • Composition scheme for online sellers (e-commerce)
  • Registration norms for small e-commerce businesses
  • Review of National Anti-Profiteering Authority
  • Rationalization of Input Tax Credit (ITC) norms
  • Allowing amendments to GSTR-3B return
  • Issuance of SCNs by both-centre and states …….

Extension of Levy of GST Compensation Cess

• Central Government has extended levy of GST Compensation upto March, 2026.
• The Notification has notified GST (Period of Levy and Collection of Cess) Rules, 2022 and Rule(2) provides for period for levy and collection of cess.
• The period for levy and collection of cess under section 8(1) of the  Goods and Services Tax (Compensation to States) Act, 2017 shall now be upto the  31st March, 2026.
• Compensation Cess shall continue to be levied beyond 30th June, 2022, upto 31st March, 2026 (not 30th June, 2026) i.e., for further 45 months
• This has been done by way of rules as empowered under the law. Though GST (Compensation to States) Act, 2017 is a Central Act, yet it could have been recommended by the Council.
• The notification does not lead to conclusion that w.e.f. 01.07.2022, compensation to states shall continue (Council to decide, old promise gets over on 30th June, 2022)
• The cess collected from citizens can be used to repay debt taken to compensate GST shortfall of states in FY 2021 and 2022.
• Compensation cess can not be appropriated for any other purpose.
• The said rules shall come into force w.e.f. 01.07.2022.

(Source: Notification No. 1/2022-Compensation Cess dated 24.06.2022)