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Analysis of Notifications Issued Pursuant to Recommendations of 47th GST Council Meeting

The first tranche of notifications pursuant to the decisions taken at the 47th GST Council meeting has been issued. The key aspects are as under:

Unless otherwise specified the provisions discussed hereinafter have come into effect from the date of the publication of the notifications in question (i.e. from 05.07.2022).

1. Imposition of interest on wrong availment and utilization of ITC

Sec. 50(3) of the CGST Act, 2017 had been substituted retrospectively (w.e.f. 01.07.2017) vide Sec. 110 of the Finance Act, 2022 to provide for the imposition of interest only where the ITC has been wrongly availed and utilized and not where the ITC has been reversed before utilization. The said provisions have now been brought into effect vide Notification No. 09/2022– Central Tax dt. 05.07.2022.

2. Manner of calculation of interest

A new Rule 88B has been inserted in the CGST Rules, 2017 vide Notification No. 14/2022– Central Tax dt. 05.07.2022 to prescribe the manner for calculation of interest liability as under:

a. Interest liability on delayed payment of the tax u/s 50(1) of the CGST Act, 2017 shall be calculated on the portion of the tax which is paid by debiting the electronic cash ledger, for the period of delay in filing the said return beyond the due date except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period (i.e. benefit of computing interest on net cash liability is not extended to the other than self-assessed liability).

b. In all other cases (i.e. other than self-assessed liability) interest liability on delayed payment of tax u/s 50(1) of the CGST Act, 2017 shall be calculated on the amount of tax which remains unpaid, for the period starting from the date on which such tax was due to be paid till the date such tax is paid. Hence in such other cases, interest shall be payable even on the liability deposited by utilizing the ITC. The said provisions thus appear to be discriminatory when interest is only a consequence of delayed payment (time value of money) irrespective of the reasons for such delay.

c. In case, where interest is payable on the amount of ITC wrongly availed and utilised u/s 50(3) of the CGST Act, 2017, the interest shall be calculated on the amount of ITC wrongly availed and utilised, for the period starting from the date of the utilisation of such wrongly availed ITC till the date of reversal of such credit or payment of tax in respect of such amount. Further, an Explanation has been added to the said new Rule 88B to provide that ITC availed shall be construed to have been utilised, when the balance in the electronic credit ledger falls below the amount of the ITC wrongly availed, and the extent of such utilisation of ITC shall be the amount by which the balance in the electronic credit ledger falls below the amount of the ITC wrongly availed. Further, the date of the utilisation of such ITC shall be taken to be the date, on which the return is due to be furnished under section 39or the actual date of filing of the said return, whichever is earlier, if the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, on account of payment of tax through the said return or the date of debit in the electronic credit ledger when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, in all other cases.

The aforesaid change can be understood with the following illustration:

Month Particulars Credit in the electronic credit ledger Debit in the electronic credit ledger to discharge the tax Balance
July 2022 Erroneous availment of ITC of INR 100 out of the total ITC availed of INR 1000 1000 700 300
August 2022 No erroneous availment of any ITC 500 700 100
September 2022 Delayed filing of the return on 28.10.2022 instead of 20.10.2022 600 700 Nil

Now on 20.12.2022, the taxpayer became aware of erroneous availment of ITC of INR 100 during July 2022 and hence reverses the same via return filed on 20.12.2022 for November 2022. In such a situation the interest shall be calculated as under:

a. The erroneous ITC of INR 100 cannot be said to have been utilized in July 2022 since the balance of INR 300 exceeds the amount of erroneously availed ITC.

b. The erroneous ITC also cannot be said to have been utilized in August 2022 since the balance of INR 100 does not fall below the amount of erroneously availed ITC.

c. The erroneous ITC can be said to have been utilized in September 2022 since the balance (Nil) does fall below the amount of erroneously availed ITC. Further, the date of such erroneous utilization shall be 20.10.2022 (i.e. due date for filing the GSTR 3B) and not 28.10.2022 (actual date of filing of GSTR 3B). This is so because the interest liability on delayed payment of output tax shall not be computed on the tax paid by utilizing the ITC which includes even the erroneous ITC.

Hence the interest liability in the given situation shall be computed for the delay from 20.10.2022 to 20.12.2022.

Analysis of GST Notifications Issued by CBIC on 05th July 2022

3. Extension of several timelines for departmental/taxpayers actions

By virtue of the power granted by Sec. 168A of the CGST Act, 2017  the Government on account of the COVID – 19 pandemic has issued Notification No. 13/2022– Central Tax dt. 05.07.2022 extending the timelines for departmental actions for the recovery of dues and for taxpayers’ actions for the filing of the refund claims as under:

The time limit to issue the order u/s 73(10) of the CGST Act, 2017 to recover tax not paid or short paid or of input tax credit wrongly availed or utilized by reason other than fraud, wilful misstatement or suppression of facts for FY 2017-18 up to 30.09.2023.

The time period from the 1st March 2020 to the 28th February 2022 to be excluded for computation of limitation for recovery of erroneous refund u/s 73(10) of the CGST Act, 2017. As per the law the order for recovery of erroneous refund u/s 73(10) of the CGST Act, 2017 is required to be issued within three years from the date of the said refund.

The time period from the 1st March 2020 to the 28th February 2022 to be excluded for computation of limitation for filing refund application u/s 54 or 55 of the CGST Act, 2017. It may be noted that the said provision is in line with the decision of the Hon’ble Supreme Court granting an extension on a suo motu basis on account of COVID – 19 pandemic.

4. Revocation of suspended registration

Vide Notification No. 14/2022– Central Tax dt. 05.07.2022 a proviso has been added to Rule 21A(4) of the CGST Rules, 2017 to the effect that the suspended registration (owing to non-filing of the returns) that has not been cancelled shall be deemed to be revoked (i.e. registration shall be activated) on furnishing of all the pending returns. It may be noted that there appears to be a drafting lacuna in the newly added proviso as it refers to suspension u/r 21(2A) whereas the suspension on non-filing of returns happens u/r 21(2).

5. No ITC restriction attributable to MEIS supplies

A new clause (d) has been added to Explanation 1 to rule 43 of the CGST Rules, 2017 vide Notification No. 14/2022– Central Tax dt. 05.07.2022 to the effect that the aggregate value of exempt supplies for determination of restricted ITC shall exclude the value of supply of Duty Credit Scrips. Hence the common ITC shall not be restricted on account of such exempt supplies. In our view, the said Explanation will have a retrospective effect (i.e. applicable w.e.f. 13.10.2017 when the duty credit scrips were exempted). Hence taxpayers who have undertaken such reversal can consider the re-availment of the restricted ITC.

6. Particulars on a tax invoice

A new clause (s) u/r 46 of the CGST Rules, 2017 has been added vide Notification No. 14/2022– Central Tax dt. 05.07.2022 to the effect that the particulars required to be stated in the tax invoice shall include a declaration to be stated on the tax invoice indicating that the concerned taxpayer has not issued the invoice as per the manner specified u/s 48(4) (i.e. E-invoice) even though the aggregate turnover of such taxpayer from FY 2017 -18 exceeds the notified limits for E-invoice. The said declaration will therefore apply to those taxpayers (such as an insurer, banking company, GTA, etc.) who have been exempted from issuing the E-invoice even though the aggregate turnover exceeds the specified limits.

7. Re-credit to the electronic credit ledger in respect of erroneous refunds

A new sub-rule (4B) has been inserted in Rule 86 of the CGST Rules, 2017 vide Notification No. 14/2022– Central Tax dt. 05.07.2022  to the effect that where the registered person (refund claimant) deposits the erroneous refund sanctioned u/s 54(3) of the CGST Act, 2017 (i.e. refund of accumulated ITC on account of zero-rated supplies/inverted rate) or u/r 96(3) of the CGST Rules, 2017 (i.e. IGST on the export of goods) or u/r 96(10) of the said Rules (i.e. IGST on the export of goods/services wherein the person has availed the benefits under the specified notifications (e.g. IGST exemption against Advance Authorisation, etc.) along with interest and penalty, wherever applicable, by debiting the cash ledger (on his own or on being pointed out) then an amount equivalent to the amount of erroneous refund deposited shall be re-credited to the electronic credit ledger by the proper officer by an order made in FORM GST PMT-03A. It may be noted that the said provision has been made to avoid a double loss to the refund claimant (in terms of making him deposit the erroneous refund and deny the re-credit of the ITC utilized to pay such amount that has been refunded and now returned). Further, no time limit for re-credit has been prescribed hence in our view the re-credit can be undertaken by the officer at any time post the deposit of the erroneous refund. It may also be noted that the Hon’ble Gujarat High Court in the case of I-Tech Plast India (P.) Ltd. v. The State of Gujarat [2022] 137 taxmann.com 432 (Gujarat) has held that the department is required to re-credit the ITC on deposit of the erroneous refunds.

8. Mode of deposit in the electronic cash ledger

Rule 87 of the CGST Rules, 2017 has been amended vide Notification No. 14/2022– Central Tax dt. 05.07.2022 to provide Unified Payment Interface (UPI) as well as Immediate Payment Services (IMPS) as additional modes for deposit of the funds in the electronic cash ledger.

9. Endorsement of invoice issued to SEZ units/developer

Rule 89(1) of the CGST Rules, 2017 mandates that the refund application in respect of supplies made to SEZ units/developers can be filed after the goods have been admitted in full in the SEZ for authorised operations, as endorsed by the specified officer of the Zone or with such evidence regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone. The term ‘specified officer’ has been defined u/r 2(zd) of the SEZ Rules, 2006 to mean Joint or Deputy or Assistant Commissioner of Customs for the time being posted in the SEZ. Now the said Rule 89(1) has been amended vide Notification No. 14/2022– Central Tax dt. 05.07.2022 to the effect that the invoice can be endorsed even by the “authorised officer” as defined u/r 2(c) of the SEZ Rules, 2006 that includes Inspector or Preventive Officer or Appraiser or Superintendent of Customs posted in the SEZ and authorized by the Specified Officer to discharge any of his functions under these rules. Therefore endorsement even by the officer of lower rank shall be permitted as evidence to support the refund claim.

10. Procedure for refund claim on the export of electricity

Rule 89(2) of the CGST Rules, 2017 has been amended vide Notification No. 14/2022– Central Tax dt. 05.07.2022 to provide that the person seeking a refund of accumulated ITC on account of export of electricity shall submit a statement containing the number and date of the export invoices, details of energy exported, tariff per unit for export of electricity as per the agreement, along with the copy of the statement of scheduled energy for exported electricity by Generation Plants issued by the Regional Power Committee Secretariat as a part of the Regional Energy Account (REA) under clause (nnn) of sub-regulation 1 of Regulation 2 of the Central Electricity Regulatory Commission (Indian Electricity Grid Code) Regulations, 2010 and the copy of agreement detailing the tariff per unit.

11. Export turnover of goods for determination of the eligible refund amount

An Explanation has been added to Rule 89(4) of the CGST Rules, 2017 vide Notification No. 14/2022– Central Tax dt. 05.07.2022 to provide that the value of goods exported out of India shall be taken to be the Free on Board (FOB) or the value declared in the tax invoice or bill of supply, whichever is less. Hence for the determination of the eligible refund amount as per the formula given u/r 89(4), as regards the determination of the export turnover the FOB value or invoice value, whichever is less, is required to be considered.

It must be noted that the said Explanation runs counter to the definition of ‘turnover in the State’ u/s 2(112) read with Sec. 15 of the CGST Act, 2017 which mandates the inclusion of all charges that have been recovered from the recipient in the value of supply till the delivery of the goods to the said recipient. Hence such an Explanation is liable for the challenge on the ground of it being contrary to the law.

12. The revised formula for calculation of eligible refund amount under the inverted rate structure

A portion of Rule 89(5) formula has been substituted vide Notification No. 14/2022– Central Tax dt. 05.07.2022 to provide that only the tax payable attributed to the tax payable from the ITC on inputs will have to be considered for determining the eligible refund amount in terms of the accumulated ITC of inputs under the inverted rate structure. The said attribution shall be based on the proportion of ITC on inputs vis-à-vis ITC on inputs and input services. The amendment can be understood from the following illustration.

Sr. No.

Particulars Amount (INR)
1. Turnover of inverted rated supply 1000
2. Tax payable on such inverted rated supply 50
3. Adjusted total turnover 1000
4. Net input tax credit (only on inputs) 60
5. Input tax credit on inputs as well as input services (inputs – 60 & input services – 20) 80
6. Eligible refund amount (before amendment) ([1*4/3]-2) 10
7. Eligible refund amount (as per the amended formula) ([1*4/3]-[2*4/5]) 22.5

As can be seen from the above, the eligible refund amount as per the amended formula shall increase as compared to the earlier formula. Now the reason for the same is the consideration of the fact that the taxpayers when they discharge the tax on the inverted rated supply utilized not just the ITC in respect of inputs but even the ITC in respect of input services and hence the determination of the accumulated ITC on only inputs (after adjusting the tax payable) requires that such tax payable component shall exclude the tax payable that has been paid by utilizing the ITC on input services. It may be noted that the said anomaly in the old formula was also observed by the Hon’ble Supreme Court in the case of UOI v.  VKC Footsteps India Pvt. Ltd. 2021 (52) G.S.T.L. 513 (S.C.) wherein the Court had directed the GST Council to redress the issue. It is in light of the said development that the GST Council has agreed to amend the formula that has now been prescribed. It may also be noted that the new formula still fails to account for the ITC availed on capital goods that would also have been utilized to discharge the tax liability on inverted rated supply. It may also be noted that in the given background the correction of the said anomaly should apply retrospectively.

13. Duty-Free Shops

Since the supplies from Duty-Free Shops (DFS) at the international terminal to outgoing international passengers are treated as exports by DFS and consequential refund benefit is available to them on such supplies under the normal provisions (Sec. 54(3) of the CGST Act, 2017 read with Rule 89(4)), the Rule 95A of the CGST Rules, 2017 that prescribed a special scheme has been omitted vide Notification No. 14/2022– Central Tax dt. 05.07.2022 from the inception of the said scheme (i.e. from 01.07.2019).

14. Date of filing of refund claim of IGST paid on export of goods in the case of mismatch in the data

Rule 96(1) of the CGST Rules, 2017 provides that the claim of refund of the IGST paid on export of goods shall be deemed to be filed only if the stipulated conditions are satisfied. Clause (b) of the said sub-rule provides the condition that the applicant should have furnished the return (GSTR 3B). Now many cases have arisen wherein the GSTN or the ICEGATE system has found a mismatch between the data furnished in GSTR 1 and/or GSTR 3B with the data furnished in the shipping bill and has therefore not processed the refund claim. It is only after the necessary rectification (through the system or manual intervention) that the refund claims are processed. Since till now the condition in rule only mandated filing of GSTR 3B, the applicants took the view that the identification of the mismatch at a later point in time cannot mean that the refund claim has not been filed and hence also sought interest on the delayed sanctioning of such refunds after rectification of the mismatch. Now vide Notification No. 14/2022– Central Tax dt. 05.07.2022 the said clause (b) is deemed to be retrospectively substituted w.e.f. 01.07.2017 to the effect that the refund claim will be said to be filed only when the mismatch is rectified. Hence the interest can be claimed only if there is a delay in sanctioning the refund claim beyond the stipulated period from such date of rectification.

15. Withheld refunds, Risky exporters & manual processing of the claims

Rule 96(4)(b) of the CGST Rules, 2017 before the amendment permitted the withholding of the refund claim of the IGST paid on exports only where the proper officer of Customs determines that the goods were exported in violation of the provisions of the Customs Act, 1962. Hence before the amendment, no Rule permitted withholding of such refund claims based on data analysis (by categorizing the concerned taxpayer as a risky exporter). Now a retrospective amendment applicable from 01.07.2017 has been made vide Notification No. 14/2022– Central Tax dt. 05.07.2022 by inserting a new clause (c) to the effect that the refund can be withheld where the Commissioner in the Board or an officer authorised by the Board, based on data analysis and risk parameters, is of the opinion that verification of credentials of the exporter, including the availment of ITC by the exporter, is considered essential before granting of refund, to safeguard the interest of revenue.

Further new sub-rule (5A) has been inserted retrospectively w.e.f. 01.07.2017 to the effect that if the refund claim has been withheld on account of clause (a) (on account of non-filing of return or payment of dues without stay or where the grant of refund is likely to adversely affect the revenue since other proceedings are pending) or clause (c) (risky exporter) of sub-rule (4) then the said refund claim will be electronically transmitted to the concerned jurisdictional officer in a system-generated FORM GST RFD-01 (with intimation to the claimant) and such claim shall then be processed by the said officer. Similarly, a new sub-rule (5B) has been inserted retrospectively w.e.f. 01.07.2017 to the effect that if the refund claim has been withheld on account of clause (b) (exports in violation of Customs Act) then the said refund claim will be electronically transmitted to the concerned jurisdictional officer in a system-generated FORM GST RFD-01 (with intimation to the claimant) and such claim shall then be processed by the said officer.

The aforesaid amendments shall therefore enable the claimants to approach the jurisdictional officer to resolve the discrepancies and to get the refund claims processed.

16. FORM GSTR 3B

Vide Notification No. 14/2022– Central Tax dt. 05.07.2022 following changes have been made in FORM GSTR 3B:

a. A separate field (paragraph 3.1.1) has been inserted to report the details of supplies notified u/s 9(5) of the CGST Act, 2017 (i.e. supplies on which the tax shall be payable by the electronic commerce operator). A corresponding change has been made in paragraph 3.2.

b. The ITC reversed and reported at paragraph 4(B)(1) that hitherto covered ITC reversed ‘As per rules 42 & 43 of CGST Rules’ shall now cover ITC reversed as per rules 38 (restricted ITC for banking company or financial institution), 42and 43 of CGST Rules  (restricted ITC on account of exempt supplies) and sub-section (5) of section 17 (blocked ITC).

c. The details in paragraph 4(D) that hitherto included ‘Ineligible ITC’ shall now be renamed as ‘other details’ and shall cover under sub-item (1) “ITC reclaimed which was reversed under Table 4(B)(2) in earlier tax period” and under sub-item (2) “Ineligible ITC under section 16(4)and ITC restricted due to PoS provisions”.

Therefore paragraph 4(D) for the purpose of disclosure shall now only include the reclaimed ITC and ineligible ITC due to limitation or due to PoS in other State. The illustration is as under:

4. Eligible ITC
Details Integrated Tax (only for illustrative purposes)
1 2
(A) ITC Available (whether in full or part)
(1) Import of goods 100
(2) Import of services 50
(3) Inward supplies liable to reverse charge (other than 1 & 2 above) 25
(4) Inward supplies from ISD 5
(5) All other ITC* 500
(B) ITC Reversed
(1) As per rules 38, 42 and 43 of CGST Rules and sub-section (5) of section 17** 50
(2) Others*** 30
(C) Net ITC Available (A) – (B) 600
(D) Other Details
(1) ITC reclaimed which was reversed under Table 4(B)(2) in earlier tax period 10
(2) Ineligible ITC under section 16(4) and ITC restricted due to PoS provisions**** 20

*One view is to include the gross ITC including the ITC restricted/blocked u/s 17(2)/(5) as well as the ITC ineligible/restricted u/s 16(4) or where the POS is in other State to facilitate a comparison of gross ITC as reported in GSTR 2B on a cumulative basis by aggregating the amounts based on the invoice date. Another view is to include the gross ITC including the ITC ineligible/restricted u/s 17(2)/(5) but excluding the ITC ineligible u/s 16(4) or where the POS is in other State as that is only to be disclosed in paragraph no. 4(D)(2). We recommend the latter view.

** This will include the ITC ineligible/restricted as per rules 38 (restricted ITC for banking company or financial institution), 42 and 43 of CGST Rules (restricted ITC on account of exempt supplies u/s 17(2) read with the given Rules) and Sec. 17(5) (blocked ITC).

*** This will include the ITC ineligible/restricted on any other grounds (including Rule 37 (failure to pay within 180 days), Sec. 34 (tax credit note issued by the vendor), etc.). If the entire gross ITC including u/s 16(4) or where the POS is in other State has been reported in paragraph 4(A)(5), then the given paragraph 4(B)(2) shall also include such ineligible ITC to arrive at the correct net ITC available for utilization.

**** The amount of the ITC ineligible/restricted u/s 16(4) or where the POS is in other State will have to be disclosed at 4(D)(2). The said amounts are separately asked to be disclosed to apportion the revenue between the Center and the States as regards the ITC that will not be availed henceforth by the taxpayers.

17. GSTR 9 (Annual Return)

Vide Notification No. 14/2022– Central Tax dt. 05.07.2022 following changes have been made in FORM GSTR 9 for FY 2021-22

a. The instructions to the FORM GSTR 9 have been amended for the filings to be done for FY 2021-22.

b. For FY 2021-22, the registered person shall report Non-GST supply (Table 5F) separately and shall have an option to either separately report his supplies as exempted and nil rated supply or report consolidated information for these two heads in the “exempted” row only. Hence the aggregate value of supplies outside the ambit of GST as well as schedule III transactions shall now be separately reported.

c. Reporting of the HSN Wise Summary of outward supplies at Table No. 17 to be mandatory. From FY 2021-22 onwards, it shall be mandatory to report the HSN code at six digits level for taxpayers having annual turnover in the preceding year above ₹ 5.00 Cr and at four digits level for all B2B supplies for taxpayers having annual turnover in the preceding year up to ₹ 5.00 Cr.

d. All other options/concessions granted in the previous year shall continue.

18. GSTR 9C (Reconciliation Statement)

Except for the change in the year of reference to FY 2021-22 vide Notification No. 14/2022– Central Tax dt. 05.07.2022 no other changes have been made in FORM GSTR 9C. Hence all the options/concessions granted in the previous year shall continue.

19. Exemption from the filing of the annual return

Notification No. 10/2022– Central Tax dt. 05.07.2022 has been issued to provide an exemption from filing the annual return for FY 2021-22 for the registered person whose aggregate turnover in the said year is up to Rs. 2 crores.

20. Transfer of balance available in the electronic cash ledger

Sec. 49(10) of the CGST Act, 2017 had been substituted vide Sec. 110(c) of the Finance Act, 2022 to permit the transfer of the balance available in the electronic cash ledger (under any type) from one head to any other head within the same registration or to the IGST and CGST head of a distinct person. Further, transfer to a distinct person shall not be allowed if the transferor registration has any unpaid liabilities in the electronic liability register. The said provisions have now been brought into effect from 05.07.2022 vide Notification No. 09/2022– Central Tax dt. 05.07.2022. A new sub-rule (14) vide Notification No. 14/2022– Central Tax dt. 05.07.2022 has been inserted u/r 87 to prescribe FORM GST PMT-09 for such transfer.

21. CMP – 08

Notification No. 11/2022– Central Tax dt. 05.07.2022 has been issued to extend the due date for filing FORM GST CMP-08 (containing details of payment for composition taxpayers) for the quarter ending 30th June 2022 till the 31st July 2022.

22. GSTR 4

Notification No. 12/2022– Central Tax dt. 05.07.2022 has been issued to waive the late fees for filing of GSTR 4 (annual return for composition taxpayers) for FY 2021-22 if the said return is filed till 28th July 2022.

(Views are strictly personal)

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