1. The CBIC vide Notification No. 94/2020-Central Tax dated December 22, 2020, has amended Rule 22 dealing with cancellation of registration by issuing fourteen amendments of CGST Rule 2020.
1.1 Further, CBIC vide twitter dated 23.12.2020 has clarified the facts on recent rule changes against the misinformation on social media that is confusing genuine taxpayers.
1.2 In this article, an attempt has been to explain the existing rule, amendment thereof and facts clarified by CBIC in a simplified manner.
2. RULE 21 OF CGST RULE 2017 – EXISTING PROVISIONS
Rule 21 – The registration granted to a person is liable to be canceled if the said person –
(a) Does not conduct any business from the declared place of business
(b) Issues invoice or bill without supply of goods or services or both
(c) Violates provisions relating to Anti Profiteering.
(d) Violates provisions of rule 10A in respect of furnishing details of the bank account.
2.1 AMENDMENT: Clause e, f & g to Rule 21 has been inserted vide recent amendment Rule 2020
(e) Avails input tax credit in violation of the provisions of section 16 of the Act or the rules made thereunder.
(f) Furnishes the details of outward supplies in FORM GSTR-1 for one or more tax periods which is in excess of the outward supplies declared by him in his GSTR 3B (valid return under section 39 for the said tax periods)
(g) Violates the provision of Rule 86B
SUMMARY: It can be summarized that in addition to the existing provisions, now the registration is liable to be canceled for the following reasons also:-
(a) Non-compliance of Sec 16 of CGST Act – eligibility and conditions of taking
(b) Tax paid vide GSTR 3B is less than output supplies in GSTR 1
(c ) Utilize ITC in excess of 99% of output tax liability
3. Rule 86B has been inserted vide Notification No. 94/2020-Central Tax dated December 22, 2020
A registered person whose value of taxable supply other than exempt supply and export, in a month exceeds fifty lakh rupees. (Rs 50 lakhs limit to be checked for each month) cannot use Input Tax Credit in excess of 99% of output tax liability.
This Rule is not applicable in the following cases:-
1. Where the registered person deposited more than Rs 1 lakh rupees as Income Tax under the Income-tax Act, 1961 in each of the last two financial years
2. Wherein registered person has received a refund more than Rs 1 lakh rupees in the preceding financial year on account of export under LUT or inverted tax structure
3. The registered person has discharged his output tax liability in cash (cumulatively up to the said month ) in the current financial year which is in excess of 1% of the total output tax liability,
4. This rule not applicable to Government department, PSU, local authority
4. RULE 22 A(2) OF CGST RULE
|Rule 22A(2)||Where the proper officer has reasons to believe that the registration of a person is liable to be canceled, he may, after affording the said person a reasonable opportunity of being heard,( removed vide Notification No. 94/2020-Central Tax dated December 22, 2020) suspend the registration of such person with effect from a date to be determined by him, till the completion of the proceedings for cancellation of registration.|
|New subclause inserted vide Rule 21A(2A)
|Where a comparison of the GSTR 3B returns furnished by a registered person with
(a) the details of outward supplies furnished in FORM GSTR-1; or
(b) the details of (GSTR 2A and 2B ) inward supplies derived based on the details of outward supplies furnished by his suppliers in their FORM GSTR-1, or such other analysis, as may be carried out on the recommendations of the Council, show that there are significant differences or anomalies indicating contravention of the provisions of the Act or the rules made thereunder, leading to the cancellation of registration of the said person, his registration shall be suspended and the said person shall be intimated in FORM GST REG-31, electronically, on the common portal, or by sending a communication to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said differences and anomalies and asking him to explain, within thirty days, as to why his registration shall not be canceled
SUMMARY & ANALYSIS: The registration shall be suspended in case of a substantial difference of GSTR 3B Vs GSTR 1 or GSTR 2A and 2B and the registered person need to explain the reason within 30 days of notice ( intimation in Form GST REG 31)
5. RULE 21A(3A) OF CGST RULES
|New Sub-clause 3A to Rule 21A inserted||
A registered person, whose registration has been suspended under sub-rule (2) or sub-rule (2A) or 21(2A), shall not be granted any refund under section 54, during the period of suspension of his registration.
6. CBIC CLARIFICATIONS VIDE TWITTER HANDLE DATED 23.12.2020- Myths vs. Facts on CGST Notification to curb Fake invoice frauds