Amendments in CGST Rules Pursuant to 48th GST Council Meeting

Notification No. 26/2022-CT as well as Notification No. 27/2022-CT both dated 26.12.2022 have been issued amending the CGST Rules, 2017 pursuant to the decisions taken at the 48^th GST Council Meeting. The gist of the amendments is as under:

Coming into force

Unless otherwise stated, all the amendments discussed hereinafter shall come into force from 26.12.2022.

Registration

By virtue of Notification No. 26/2022-CT dt. 26.12.2022 amendments have been made in Rule 8 and Rule 9 of CGST Rules, 2017 dealing with the procedure of seeking registration.

Rule 8 has been amended to the effect that the E-mail Id and Mobile Number linked with the PAN shall be auto-populated from the Income Tax database instead of allowing separate furnishing of the said details. This has been done to deter the use of the E-mail Id and Mobile Number of any unrelated party.

Rule 8 has also been amended to the effect that the new applicants who have opted for authentication of their Aadhaar number and are identified on the common portal, based on data analysis and risk parameters, shall also undertake biometric-based Aadhaar authentication and taking photographs of the applicant where the applicant is an individual or of such individuals in relation to the applicant as notified. The said biometric-based authentication shall be conducted at Facilitation Centers notified by the Commissioner.

Further, the physical verification of the premises shall be conducted in cases where (a) the applicant has not undertaken Aadhaar authentication or (b) the applicant has undertaken Aadhaar authentication but has been identified based on data analysis and risk parameters or (c) the proper officer, with the approval of an officer authorized by the Commissioner, not below the rank of Assistant Commissioner, deems it fit. By virtue of Notification No. 27/2022-CT dt. 26.12.2022 the revised procedure for registration shall apply only to the State of Gujarat. As per the Press Release, the said procedure is initiated in Gujarat on a pilot basis. The objective is to tackle the menace of fake and fraudulent registrations.

Amendments have been made in Rule 12 to the effect that the person having TDS/TCS registration can also make a request for cancellation of such registration if he is no longer liable to deduct tax at source under section 51 or collect tax at source under section 52. Prior to the said amendment only the officer upon enquiry or pursuant to any other proceeding was authorized to cancel such registration.

Failure to pay within 180 days

Vide our communication dated 10.10.2022 we indicated several issues in the substituted provisions under Rule 37 of the CGST Rules, 2017 dealing with the payment/reversal of ITC on account of the failure to pay the taxable value along with tax amount to the vendor within 180 days from the date of the issuance of the invoice. Now vide Notification No. 26/2022-CT dt. 26.12.2022 amendments have been made in the said Rule 37 w.e.f. 01.10.2022 (when the substituted provisions came into effect) to remedy certain issues as under:

• Part-payment – Substituted Rule 37 did not expressly provide that only proportionate ITC to the extent of the taxable value along with tax amount remaining outstanding after the period of 180 days from the date of the issuance of the invoice shall be reversed. Now the said Rule has been amended to provide for only proportionate payment/reversal of the ITC.
• Payment or reversal – Second proviso to Sec. 16(2) of the CGST Act, 2017 provides for adding the amount equal to the ITC (on failure to pay within 180 days) to the output tax liability. Substituted Rule 37 on the other hand provided for the reversal of the ITC in GSTR 3B. Hence to correct the anomaly the Rule has been amended to provide that the registered person shall ‘pay or reverse’ the ITC in question.

Reversal of ITC in the case of non-payment of tax by the supplier and re-availment

Sec. 16(2)(c) of the CGST Act, 2017 r/w Sec. 41(2) of the CGST Act, 2017 as substituted vide the Finance Act, 2022 and made applicable w.e.f. 01.10.2022 provides that the recipients shall reverse the self-assessed ITC where the tax has not been paid by the supplier (vendor). The manner for such reversal shall be prescribed. The proviso to Sec. 41(2) further provides that the registered person may re-avail ITC where the vendor makes payment of the tax. Now Rule 37A has been inserted in CGST Rules, 2017 to prescribe the manner for reversal and reavailment. The salient points are as under:

• It may be noted that post 01.01.2022, the ITC can be availed only if the details in respect of the relevant invoice/debit note have been furnished by the vendor in GSTR 1/IFF and the same has been communicated in GSTR 2B. Therefore, Rule 37A operates on the premise that the ITC has been availed based on the reflection of the invoice in GSTR 2B but GSTR 3B has not been furnished by such supplier till the 30^th of September following the end of the financial year in which the ITC in respect of such invoice or debit note has been availed.
• Such ITC (i.e., where GSTR 3B has not been filed by the vendor till 30^th September of the succeeding year) shall be reversed while furnishing a return in FORM GSTR-3B on or before the 30^th of November following the end of the financial year in which the ITC has been availed. It may be noted that interest shall not be payable on such reversal.
• Where the said amount of ITC is not reversed by the registered person in a return in FORM GSTR-3B on or before the 30^th of November following the end of such financial year during which such ITC has been availed, such amount shall be payable by the said person along with interest thereon under section 50. It may be noted that interest shall be payable if the reversal is done after the 30^th of November (belated reversal).
• Where the said supplier subsequently furnishes the return in FORM GSTR-3B for the said tax period, the registered person may re-avail the amount of ITC in the return in FORM GSTR-3B for a tax period thereafter.

The aforesaid Rule can be understood from the following illustration.

Let us say that the vendor issued the invoice in January 2023 and the details thereof have been furnished in GSTR 1/IFF. Hence the recipient will be entitled to avail of the ITC. However, the vendor has not filed GSTR 3B till 30^th September 2023. In such a situation the recipient will be liable to reverse the ITC in GSTR 3B furnished on or before the 30^th of November 2023 without interest. If the said vendor files the pending GSTR 3B in February 2024, then the recipient shall be allowed to re-avail the ITC in GSTR 3B filed for February 2024.

One may however consider the following observations:

• Rule 37A brings certain clarity to apply the ‘actual payment’ condition for availment of ITC as provided u/s 16(2)(c) r/w Sec. 41 of the CGST Act, 2017. The said Rule bases itself on the premise that the ITC reversal will be attracted at the recipient end if GSTR 3B has not been filed by the vendor by 30^th September of the next financial year and the said reversal therefore shall be undertaken before 30^th It may be noted that 30^th November is the last date for undertaking corrections/rectifications in the statements/returns filed for the immediately preceding financial year. The Rule, therefore, avoids the requirement of monthly reversal and hence to that extent can save administrative time.
• Rule 37A applies from 26.12.2022. Hence it will apply to the availment of ITC post the said date.
• Rule 37A applies only in respect of the availment of the ITC based on the invoice or debit note issued by the vendor. It does not apply to availment of the ITC based on other documents (e.g., bill of entry, etc.).
• As stated before, interest shall be payable if the reversal is done after the 30^th of November (belated reversal). However, there is no express provision permitting the refund of the interest paid earlier at the time of belated reversal if the vendor has eventually filed the pending GSTR 3B and hence the recipient has reavailed the reversed ITC.
• Consider a situation where the invoice has been issued dated 31.03.2023 but the ITC thereof has been availed in GSTR 3B filed for April 2023 since the underlying supplies have been received in the said month. The plain reading of Rule 37A suggests that the ITC reversal on non-filing of GSTR 3B by the vendor for March 2023 shall be attracted only if the said GSTR 3B is not filed by 30^th September 2024 and not 30^th September 2023. This appears to be a drafting lacuna in the Rule requiring correction.
• Rule 37A provides for belated reversal of ITC with interest thereon under section 50. The said Sec. 50 does not contain specific provisions providing for the imposition of interest in such a situation. Hence the said lacuna is also required to be corrected.
• Owing to Rule 37(4) of the CGST Rules, 2017 it can be said that there will be no time limits for the reavailment of the reversed ITC.
• The Rule can lead to situations where due to financial difficulty the vendor may not have resources to pay the cash liabilities (after offsetting ITC) leading to non-filing of GSTR 3B and the same further leading to the reversal of the entire ITC (not limited to the liability payable by vendor by cash) for all the recipients. Similar situations may also arise where proceedings under IBC have been initiated against the vendors where relief in terms of reduction of GST liabilities can be expected from NCLT. In such situations, the Judiciary may have to provide the remedy considering the oppressiveness and harshness in question.

Tax invoice

An amendment has been made in Rule 46 vide Notification No. 26/2022-CT dt. 26.12.2022 to the effect that the tax invoice issued for any taxable service supplied by or through an electronic commerce operator or by a supplier of online information and database access or retrieval services to an un-registered recipient shall contain, irrespective of the value of such supply, the name and address of the recipient along with its PIN code and the name of the State and the said address shall be deemed to be the address on record of the recipient. This has been done to avoid the controversy involving the determination of the address on record and consequentially the nature of supply where the recipients may be temporarily located in other States.

Invoice-cum-bill of supply

An amendment has been made in Rule 46A vide Notification No. 26/2022-CT dt. 26.12.2022 to the effect that the “invoice-cum-bill of supply” shall contain all the required particulars as specified under rule 46 (tax invoice) or rule 54 (tax invoice in special cases), as the case may be, and rule 49 (bill of supply).

The discrepancy between GSTR 1 and GSTR 3B

New Rule 88C has been inserted vide Notification No. 26/2022-CT dt. 26.12.2022 to prescribe the manner of dealing with the difference in liability reported in the statement of outward supplies (GSTR 1) and that reported in return (GSTR 3B). The salient features are as under:

• Where the tax payable as per FORM GSTR-1/IFF for a tax period exceeds the tax payable declared in GSTR-3B by such amount and such percentage, as may be recommended by the Council, then such taxpayer shall be intimated of such discrepancy in Part A of FORM GST DRC-01B electronically on the common portal, and a copy of such intimation shall also be sent to his registered e-mail address.
• The taxpayer shall be directed to (a) pay the differential tax liability along with interest under section 50, through FORM GST DRC-03; or (b) explain the aforesaid difference in tax payable on the common portal, within a period of seven days.
• The taxpayer upon receipt of the intimation shall either pay the tax amount through FORM GST DRC-03 or furnish the reply incorporating reasons in respect of that part of the differential tax liability that has remained unpaid, if any, in Part B of FORM GST DRC-01B.
• Where the differential amount either remains unpaid or where no explanation or reason is furnished within the prescribed period (i.e., 7 days) or where the explanation or reason furnished is not found to be acceptable by the proper officer, then the differential amount shall be directly recoverable initiating recovery proceedings u/s 79 of the CGST Act, 2017.

Further Rule 59 has been amended to the effect that a registered person, to whom an intimation has been issued shall not be allowed to furnish GSTR-1/IFF for a subsequent tax period unless he has either deposited the amount specified in the said intimation or has furnished a reply explaining the reasons for any amount remaining unpaid.

One may however consider the following observations:

• The Government is yet to notify the amount and/or percentage of the discrepancy (i.e., tolerance limits) beyond which the aforesaid Rule will become applicable.
• The aforesaid Rule permitting direct recovery in situations where for bonafide reasons the taxpayer may not have been able to file the reply within 7 days or where the reasons are not found to be acceptable contravenes the Rules of natural justice as well as the statutory scheme. The taxpayer should be allowed to have the right to file an appeal in such situations and direct recovery should not be undertaken.

Refund by unregistered persons

Readers may peruse our detailed analysis on the said subject communicated on 04.01.2023 (in the context of CBIC Circulars). Amendments have been made in Rule 89(2) to prescribe the requirements for claiming the refund of the tax paid and borne by the unregistered persons.

Challan Identification Number

An amendment has been made in Rule 87 vide Notification No. 26/2022-CT dt. 26.12.2022 to the effect that where the bank fails to communicate details of Challan Identification Number to the Common Portal, the Electronic Cash Ledger may be updated on the basis of e-Scroll of the Reserve Bank of India in cases where the details of the said e-Scroll are in conformity with the details in challan generated in FORM GST PMT-06 on the Common Portal.

Manner of filing the appeals before the appellate authority

An amendment has been made in Rule 108(3) vide Notification No. 26/2022-CT dt. 26.12.2022 to the effect that final acknowledgement, indicating the appeal number, shall be issued in FORM GST APL-02 where the decision or order appealed against is uploaded on the common portal. Only where the decision or order appealed against is not uploaded on the common portal that the appellant shall submit a self-certified copy of the said decision or order within a period of seven days from the date of filing of FORM GST APL-01 and a final acknowledgement, indicating appeal number, shall be issued in FORM GST APL-02 and the date of issue of the provisional acknowledgement shall be considered as the date of filing of the appeal. Also, where the said self-certified copy of the decision or order is not submitted within a period of seven days from the date of filing of FORM GST APL-01, the date of submission of such copy shall be considered as the date of filing of the appeal. A similar amendment has been made in Rule 109 dealing with the filing of the application to the appellate authority by the Commissioner

The aforesaid amendment relieves the requirement of manually furnishing the certified copy of the decision or order appealed against if the same stands uploaded by the officer on the GSTN portal. This is in line with the observation of the Hon’ble Supreme Court to move towards paperless filings. It may also be noted that the law mandates uploading the adjudication order along with a summary thereof in FORM DRC – 07.

Withdrawal of Appeal

A new Rule 109C has been inserted vide Notification No. 26/2022-CT dt. 26.12.2022 permitting the withdrawal of appeal before the issuance of the order or SCN if the appellant authority desires to enhance the demands by filing the application in FORM GST APL-01/03W. However, in situations where final acknowledgement in FORM GST APL-02 has been issued, the appeal can be withdrawn subject to the approval of the appellate authority and the said appellate authority shall decide the request for withdrawal within seven days of the filing of such application. Also, the fresh appeal filed post-withdrawal must be filed within the statutory time limits. The said amendments will permit the withdrawal of erroneous filings and hence permit fresh filings on the GSTN portal.

E-way bill

An amendment has been made in Rule 138 vide Notification No. 26/2022-CT dt. 26.12.2022 to the effect that the exemption from the generation of the E-way bill for transportation of Imitation Jewellery (HSN 7117) has been rescinded. Hence the transportation of Imitation Jewellery shall require the E-way bill as per the normal Rules.

Recovery proceedings

An amendment has been made in Rule 161 vide Notification No. 26/2022-CT dt. 26.12.2022 to the effect that the reduction or enhancement of any demand pursuant to recovery proceedings u/s 84 shall be communicated through an intimation or notice as opposed to an order.

Changes in Forms

REG-01 (Application for registration)

• Changes have been made to provide for auto-population of E-mail Id and Mobile Number from the Income Tax database as linked with the Permanent Account Number of the applicant. Similarly, the constitution of business shall be auto-populated.

REG-17 (Show cause notice for cancellation of registration)

• Changes have been made to enable the officer to make a reference in the form to the supportive document(s) attached for case-specific details. This has been made as several High Courts have quashed the show cause notices bereft of any specific allegations.

REG-19 (Order for cancellation of registration)

• Entire form has been substituted. The substituted form provides a reference to elaborate reasons for cancelling the registration. Also, the reference in the earlier form indicating the subsisting liabilities at the time of cancellation has been removed from the substituted form. Also, directions to furnish all your pending returns have been incorporated. This has been made as several High Courts have quashed the orders bereft of any specific reasons for cancelling the registration.

GSTR-1 (Details of outward supplies)

• Changes have been made seeking separate reporting of the supplies made through the e-commerce operator.

RFD-01 (Application for refund)

• Statement 8 has been prescribed in the context of refund claims made by unregistered persons.

APL-02 (Acknowledgement for submission of appeal)

• Changes have been made to make APL-02 a common acknowledgement in respect of the appeal filed by the taxpayer or application filed by the Commissioner.

APL-01/03W (Application for Withdrawal of Appeal Application)

• A new form has been prescribed for filing an application for the withdrawal of the appeal.

DRC-01B

• A new form has been prescribed in view of the newly inserted Rule 88C for communicating the discrepancy between GSTR 1 and GSTR 3B (Part A) and filing the reply by the taxpayer (Part B).

DRC-03 (Intimation of payment)

• Entire form has been substituted to provide for reference to shipping bill details where an erroneous IGST refund has been claimed and is now paid back by the taxpayer. Also, instructions have been added to provide that payment is to be made only in cash for deposit of erroneous refund of unutilised ITC and for deposit of erroneous refund of IGST, obtained in contravention of Rule 96(10).

DRC-25 (Continuation of Recover Proceedings)

• Changes have been made in the form to communicate the reduction of any demand pursuant to the decision of Adjudicating authority or Appellate authority under the Insolvency & Bankruptcy Code.