Exhaustive Analysis of The Important Amendments Made Vide Finance Act, 2021 That Are Made Applicable From 01.01.2022

Introduction

Important amendments related to GST have been made vide the Finance Act, 2021 but the same were not notified at the time of receiving the presidential assent. Said amendments are contained from Sec. 108 to Sec. 123 of the said Act. In the said context Sec. 1(2)(b) of the said Act permits the Government to appoint a specified date by way of notification on which the said GST related amendments shall come into force. Few amendments have already been notified and are in force. Now vide Notification No. 39/2021 – CT dt. 21.12.2021 majority of the amendments are now brought into force with effect from 01.01.2022.

In the present write-up, we have undertaken an exhaustive analysis of the amendments have will come into force with effect from 01.01.2022. We have also discussed the amendments that have already come into force as well as the amendments that are yet to come into force. The said write-up, therefore, covers all the GST related amendments that were made vide the Finance Act, 2021 and brought into force at different dates or yet to be brought into force.

Exhaustive Analysis of Important GST Amendments Applicable From 01.01.2022

Amendments brought into force from 01.01.2022

Sr. No. Area Sec. of the FA, 2021 Sec. of the CGST Act, 2017 Changes
1 Levy of tax 108 7(1)(aa)
  • A larger bench of the Hon’ble Supreme Court in the case of Calcutta Club Limited 2019 (29) GSTL 545 (S.C.) held that the principle of mutuality (i.e. one cannot supply goods/services to oneself) shall be applicable in the context of the VAT/Service tax law and hence no VAT/Service tax is leviable on the supplies made by the club/association to their members.
  • The ratio of the aforesaid decision was equally applicable under GST so as to say that GST shall not be payable on the supplies made by the club/association to their members.
  • The legislators in their wisdom have made a retrospective amendment in the GST law by way of inserting clause (aa) to Sec. 7(1) of the CGST Act, 2017 that deals with the scope of supply chargeable to tax to the effect that the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for consideration shall be included in the scope of supply and hence shall be leviable to tax.
  • An Explanation has also been added to introduce a deeming fiction to provide that such person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another.
  • The aforementioned retrospective amendment has been made applicable right from the inception of GST (i.e. w.e.f. 01.07.2017).
  • Therefore the clubs/associations should review their affairs in respect of the given issue and determine the liabilities to be discharged and other consequential issues as regards the claim of ITC as well as the applicability of interest in respect of delayed payment of tax. Hon’ble Supreme Court decision in the case of Star India Pvt. Ltd. vs. Comm. of Central Excise 2006 (1) STR 73 (S.C.) may be seen as regards the issue of applicability of interest.
2 ITC 109 16(2)(aa)
  • Till now there is no condition in the law that stipulates that ITC shall be admissible only if the invoice details have been furnished by the supplier in their GSTR 1. Rule 36(4) provides for the restriction in availment of ITC beyond 5% of the eligible ITC for which the invoice details have been furnished by the supplier in their GSTR 1.
  • Sec. 16(2) of the CGST Act, 2017 deals with the conditions to be fulfilled to be eligible for ITC. Now an amendment has been made in the law by way of inserting a new clause (aa) to the said Sec. 16(2). The new condition mandates that ITC shall be eligible only if the details of the invoice or debit note has been furnished by the supplier in their GSTR 1 and the same have been communicated to the recipient.
  • The said amendment is a prospective amendment and hence shall come into effect from 01.01.2022. Therefore the eligibility of ITC to be availed on and after 01.01.2022 shall be determined taking the new condition into account.
  • The given amendment shall result in transitional issues (wherein the invoice has been issued before 01.01.2022 but ITC has been availed on or after 01.01.2022). Whether such ITC shall be governed by the new condition or not? In our view, such ITC shall continue to be governed by the existing provisions.
  • The given amendment shall also validate that furnishing of the details in GSTR 1 was never a condition to determine the eligibility of ITC prior to 01.01.2022.
  • The fate of Rule 36(4) now is uncertain. It is expected that now the addition of the new condition mandating the furnishing of the details in GSTR 1 in order to be eligible for ITC may lead to the removal of even the 5% limit that is presently available under the given Rule.
3 Recovery of tax 113 73/74
  • Sec. 73/74 of the CGST Act, 2017 grants an option to a person to conclude the proceedings for recovery subject to making the stipulated payment of the tax/interest/penalty within the stipulated time.
  • Clause (ii) of the Explanation 1 to Sec. 74 (that is also made applicable to Sec. 73) clarifies that if the proceedings against the main person are concluded, then proceedings against all persons in respect of penalty (including penalty imposed for E-way bill violations u/s 129 and 130) shall also deem to be concluded.
  • Now the amendment provides that the penalty imposed for E-way bill violations u/s 129 and 130 shall not be deemed to be concluded under the proceedings initiated u/s 73 or 74.
  • Therefore w.e.f. 01.01.2022 the proceedings initiated u/s 129 & 130 for E-way bill violations shall be independent proceedings and closure of parallel proceedings u/s 73 or 74 (in respect of any person including the subject person) shall not result in the deemed closure of the proceedings initiated u/s 129 & 130.
4 Self-assessed tax 114 75
  • W.e.f. 01.01.2022 the term “self-assessed tax” under Explanation to Sec. 75 of the CGST Act, 2017 shall include the tax payable on supplies in respect of which the details have been furnished by the taxpayer in GSTR 1 but the same has not been included in the GSTR 3B and hence not paid.
  • The aforesaid amendment shall allow the department to directly initiate the recovery action as regards the said self-assessed liability.
  • Even before the aforementioned amendment, Hon’ble Madhya Pradesh High Court in the case of Kabeer Reality Pvt. Ltd. v. UOI 2020 (33) G.S.T.L. 27 (M.P.) has held that liability declared in GSTR 1 will be a self-assessed liability.
  • Situations wherein errors have been committed in GSTR 1 (that can be rectified only at the time of filing the next GSTR 1) that results in undue reporting of excess liability are required to be excluded from the said definition as law duly permits rectification of GSTR 1.
5 Provisional attachment 115 83
  • Provisional attachment u/s 83 of the CGST Act, 2017 can be undertaken by the department only during the pendency of the stipulated proceedings. In other words, provisional attachment cannot be undertaken if the stipulated proceedings are not pending.
  • Hon’ble Bombay High Court in the case of Kaish Impex Private Limited v. UOI 2020 (34) G.S.T.L. 3 (Bom.) held that since proceedings in the nature of summons issued u/s 70 are not specified u/s 83, the provisional attachment of the bank account was illegal. Similar judgments have also been rendered by other High Courts (see 2020 (34) G.S.T.L. 592 (P & H) and 2019 (30) G.S.T.L. 15 (Guj.).
  • Now w.e.f. 01.01.2022 Sec. 83(1) is substituted to the effect that the provisional attachment can be undertaken after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV if the Commissioner is of the opinion that the same is necessary to protect the revenue. Hence the sweep of the draconian powers is expanded to permit provisional attachment on mere initiation of the proceedings and that too the proceedings covered under multiple Chapters (that includes assessment, inspection, search, seizure and arrest (that will include summons), demands and recovery).
  • The ratio of the Hon’ble Supreme Court decision in the case of Radha Krishan Industries vs. State of Himachal Pradesh 2021 (48) GSTL 113 (S.C.) shall still be relevant and the given powers cannot be abused.
6 Appeals 116 107
  • In the context of filing of the first appeals (Commissioner), presently Sec. 107(6) of the CGST Act, 2017 provides for making a pre-deposit of 10% of the disputed tax amount for filing the appeal and staying the recovery.
  • Now an amendment has been made in the context of the orders passed levying penalty u/s 129(3) for E-way bill violations to provide that the quantum of the pre-deposit in such cases shall be equal to 25% of the penalty ordered to be paid.
  • It may be noted there will be no further pre-deposit for filing the second appeals (Tribunal) in such cases (i.e. order u/s 129(3)) in view of no amendment u/s 112(8).
  • It may also be noted that practically the conveyance, as well as goods, will not be released unless the payment ordered u/s 129(3) is paid. Hence the mechanism of getting a stay upon the filing of the appeal is only in theoretical remedy and not an efficacious one. It is suggested that the Government must look into making the given remedy practical by allowing the release of the conveyance/goods on an undertaking by the taxpayer of filing the appeal followed by the submission of the acknowledgement of the appeal filed. In absence of actual filing of the appeal, the department can always initiate recovery as per law.
7 E-way bill 117 129
  • Presently clause (a) and (b) u/s 129(1) of the CGST Act, 2017 provides for the following payments to seek release of the conveyance/goods that have been detained on account of E-way bill violations:
Clause Payment
a – where the owner comes forward Taxable goods: Applicable tax + penalty equal to the tax payable

Exempted goods: An amount of 2% of the value of goods or Rs. 25,000/-; whichever is less

b – where the owner does not come forward Taxable goods: Applicable tax + penalty equal to 50% of the value of goods less tax paid thereon

Exempted goods: An amount of 5% of the value of goods or Rs. 25,000/-; whichever is less

  • Now w.e.f. 01.01.2022 the substituted clause (a) and (b) u/s 129(1) shall provide as under:
Clause Payment
a – where the owner comes forward Taxable goods: Penalty equal to 200% of the tax payable

Exempted goods: An amount of 2% of the value of goods or Rs. 25,000/-; whichever is less

b – where the owner does not come forward Taxable goods: Penalty equal to 50% of the value of goods or 200% of the tax payable; whichever is higher

Exempted goods: An amount of 5% of the value of goods or Rs. 25,000/-; whichever is less

  • The option provided under clause (c) in terms of allowing furnishing of security equivalent to the aforementioned liabilities remains unchanged.
  • Presently Sec. 129(2) provides for applying the provisions related to seizure and release of the goods given u/s 67(6) in the context of detention and seizure u/s 129. Hence the same often results in officers seeking another payment of tax/penalty in addition to the amounts provided u/s 129(1). The said anomaly has been corrected by way of omitting the said sub-section (2) w.e.f. 01.01.2022.
  • Consequential amendments have been made u/s 129(3) and 129(4) to grant power to the officer to pass the order imposing the penalty mentioned in the above table and also grant a hearing to the concerned person before passing the order.
  • Presently Sec. 129(6) provides that if neither the owner of the goods nor the transporter pays the amounts referred in the above table within 14 days (period can be further reduced if the goods are perishable/hazardous) of detention or seizure, then further proceedings for confiscation of goods/conveyance will be initiated u/s 130. Now the amendment has been made in the said provisions that are applicable from 01.01.2022. The amendment provides that the goods/conveyance shall be sold/disposed of if the owner or the transporter does not pay the penalty (as specified in the above table) within 15 days (period can be further reduced if the goods are perishable/hazardous) from the receipt of the order. However, the transporter can now seek release of the conveyance by making the payment of the penalty mentioned in the aforesaid table or Rs. 1,00,000/-; whichever is less.
  • The aforementioned amendment u/s 129(6) therefore completely de-links the detention/seizure provisions u/s 129 with confiscation provisions u/s 130. Further, the entire quantum to be paid u/s 129 is in the nature of penalty as the applicable tax will stand collected u/s 73/74 if not paid. Also, transporter is now given an option to seek release of conveyance on making the payment wherein the maximum amount shall be Rs. 1,00,000/- (parallel payment also to be made under SGST or double the amount specified in the above table under IGST).
8 E-way bill 118 130
  • W.e.f. 01.01.2022 Sec. 130 dealing with the confiscation of goods/ conveyance shall be completely de-linked from the provisions related to detention/seizure contained u/s 129. Hence confiscation can be made only if the ingredients specified u/s 130(1) are satisfied independent of Sec. 129(1).
  • An amendment has been made u/s 130(2) to provide that the amount of fine payable by the person in lieu of confiscation shall be as the officer thinks fit but shall not be less than the penalty that is equal to the tax payable on the given goods. However such fine shall not exceed the market value of the goods less the tax chargeable thereon.
  • Presently Sec. 130(3) provides that even if the fine is imposed u/s 130(2), still the owner of goods/conveyance shall in addition pay the tax, penalty and charges in respect of the given goods/conveyance. Said provisions are vague and onerous as it mandates further payment of tax/penalty/charges over and above of what has been paid as a fine. Hence w.e.f. 01.01.2022 the said provisions have been omitted.
9 Calling for information 119 151
  • Presently Sec. 151 of the CGST Act, 2017 grants power to the Commissioner to issue a notification to collect statistics relating to any matter connected with GST. Further, it also grants power to call upon the concerned persons to furnish the requisite information/returns in respect of the statistics that are to be collected.
  • Now w.e.f. 01.01.2022 the said provisions are completely recast to provide a general power to the Commissioner to issue an order and direct any person to furnish information relating to any matter connected with GST within such time, in such form, and in such manner, as may be specified therein.
10 Bar on disclosure 120 152
  • Presently Sec. 152(1) of the CGST Act, 2017 provides that information in respect of any individual return or part thereof obtained by virtue of Sec. 150 (furnishing of information return by specified authorities such as income tax, banks, etc.) or Sec. 151 (power to seek information related to any matter under GST) cannot be published identifying the concerned person without the consent of the said person or cannot be used for any proceedings.
  • Now w.e.f. 01.01.2022 the said provisions shall apply in respect of any information gathered u/s 150 or 151 and not limited to only information in respect of any individual return or part thereof. Further, the information so obtained can now be used for any proceedings under the law but only after giving an opportunity of being heard to the concerned person.
  • In view of the aforesaid amendment u/s 152(1) allowing the use of the information gathered for any proceedings under the law, Sec. 152(2) that presently allows access to the information for the purpose of prosecution stands redundant and hence omitted.
  • The given amendments shall pave way for the department to issue notices merely based on a mismatch with the data gathered from other sources (such as income tax, etc.). Legality of the same will however be questioned.
11 Instructions 121 168
  • Sec. 168(2) provides that the Commissioner specified in the stipulated provisions shall mean the Commissioner or Joint Secretary posed in the Board. In view of the recasting of Sec. 44 (self-certification of annual return as well as reconciliation statement), the present reference u/s 168(2) to Sec. 44(1) is amended to Sec. 44.
  • Presently in view of Sec. 168(2), the Commissioner u/s 151 (to call for information) means the Commissioner or Joint Secretary posed in the Board. Now the reference to Sec. 151(1) is omitted u/s 162(2) and hence the Commissioner u/s 168(2) shall mean the Commissioner u/s 2(24) that means the Commissioner of Central Tax and includes Principal Commissioner.
12 Levy of tax 122 Schedule II
  • Presently paragraph 7 of Schedule II provides that the supply of goods by any unincorporated association or body of persons to a member for consideration shall be treated as supply of goods. In view of the retrospective amendment by way of inserting clause (aa) to Sec. 7(1) to deem every such transaction as supply, paragraph 7 (applying only in respect of unincorporated association or body of persons and not in respect of all associations/clubs) will have resulted in interpretational issues and hence omitted.

Amendments already in force

Following amendments made vide Finance Act, 2021 already stands notified:-

Sr. No. Area Sec. of the FA, 2021 Sec. of the CGST Act, 2017 Changes
1 Certification 110/111 35(5)/44
2 Interest 112 50(1)
  • A retrospective amendment (made applicable from 01.07.2017) providing for the imposition of interest on the delayed payment of tax (other than where the return is furnished after initiation of the proceedings u/s 73 or 74) only on that portion of the tax that is paid by debiting the electronic cash ledger has already been notified vide Notification No. 16/2021-C.T., dated 1-6-2021.

Amendments yet to be brought into force

Following amendments made vide Finance Act, 2021 under the IGST Act, 2017 are yet to be notified:-

Sr. No. Area Sec. of the FA, 2021 Sec. of the IGST Act, 2017 Changes
1 Zero-rated supplies 123 16
  • Presently Sec. 16(1)(b) of the IGST Act, 2017 provides that the term “zero rated supply” shall mean supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit. An amendment has been made to confine the benefit qua the given supplies that are made only for the authorized operations.
  • Presently Sec. 16(3) provides that for two routes for claiming refund of tax in respect of the “zero rated supply” viz. (a) claiming refund of accumulated ITC by making the said supplies without IGST under LUT and (b) claiming refund by making the said supplies with IGST and claiming refund thereof. An amendment has been made to provide that the default route for claiming the refund shall be by way of making the said supplies without IGST under LUT. Further, an amendment has been made by way of a new proviso to Sec. 16(3) to provide for deposit of the refund back along with interest in case of non-realisation of sale proceeds.
  • A new sub-section (4) has been introduced to grant power to the Government to specify the class of persons or class of goods/services that will be allowed to claim the refund by making the said supplies with IGST.
  • All the aforementioned amendments are yet to be notified.

(Views are strictly personal)

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