Key Changes In GST In Finance Bill 2022

It is that time of the year when we have to learn, Unlearn and Re-Learn few things. Yes, the Budget 2022 has brought in few amendments via  Finance Bill, 2022. Though, the changes this year are quite few it is important to keep ourselves abreast with latest updates.

This Article Summarises certain significant amendments brought in GST in Budget 2022.

1. Additional Conditions for Claim of ITC

Clause (ba) to Sec 16(2) has been introduced in the finance bill, whereby the ITC Can be availed only if such credit has not been restricted in the details communicated to the recipient under Section 38 of the CGST Act. The GST Credit has already been restricted by allowing only credits of invoices matched in GSTR-2B. Such further restrictions will only cause further difficulties to tax payers and lead to additional working capital getting blocked.

Sec 38 prescribes that an autogenerated statement containing the details of input tax credit shall be made available electronically containing.

(a) details of inward supplies in respect of which credit of input tax may be available to the recipient; and

(b) details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the recipient.

The credit restricted by the department may be restricted for following reasons as enumerated in Sec 38(2b):

• Inward supplies from a registered person within such period of taking registration as may be prescribed
• Inward supplies from a registered person who has defaulted in payment of tax and where such default has continued for such period as may be prescribed.
• Inward supplies from a registered person where the output tax payable by whom in accordance with the statement of outward supplies furnished by him under the said subsection during such period, as may be prescribed, exceeds the output tax paid by him during the said period by such limit as may be prescribed (supplier whose Output Tax payable as per GSTR-1 exceeds Output Tax Liability in GSTR-3B by a prescribed limit)
• Inward supplies from a registered person who, during such period as may be prescribed, has availed credit of input tax of an amount that exceeds the credit that can be availed by him in accordance with clause (a), by such limit as may be prescribed (Supplier whose ITC Availed in GSTR-3B Exceeds unrestricted credit available in GSTR-2B by a prescribed limit).
• Inward supplies from a registered person who has defaulted in discharging his tax liability in accordance with the provisions of sub-section (12) of section 49 (newly inserted by Finance Bill, 2022) as may be prescribed; or
• Inward supplies from such other class of persons as may be prescribed.

Such Provisions in the Act without any Mechanism/system to check whether the supplier has not contravened any of the conditions mentioned above are impracticable. The reconciliations in addition to the already existing reconciliations would only put additional burden and is not possible without the availability of additional data.

2. Extension of Various Time Limits to 30th November of Next Financial Year

Small Relief has been given to tax payers by extending few time limits to 30^th November of next financial year which were earlier before.

Particular	Earlier Time limit	New Time Limit
Sec 16(4)- Availment of Input Tax Credit	Due date for filing return for the month of September of Succeeding Financial year or the date of filing annual return, whichever is earlier.	30th November of the Next Financial Year.
Rectification or omission in GSTR-1/GSTR-3B for the FY	Due date for filing return for the month of September of Succeeding Financial year	30th November of the Next Financial Year.
Issuance of credit Notes	30th September of the Next Financial Year.	30th November of the Next Financial Year.

3. Concept of Provisional Claim of ITC is Abolished

Section 41 Substituted by new section 41.the new section states that

• Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to avail the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited to his electronic credit ledger.
• The credit of input tax availed by a registered person under sub-section (1) in respect of such supplies of goods or services or both, the tax payable whereon has not been paid by the supplier, shall be reversed along with applicable interest, by the said person in such manner as may be prescribed:

Provided that where the said supplier makes payment of the tax payable in respect of the aforesaid supplies, the said registered person may re-avail the amount of credit reversed by him in such manner as may be prescribed.

Tax payer will have to reverse ITC and pay interest on delayed payment of tax by vendors. however, the tax payer can re-avail such input tax credit upon payment of Tax Liability by the vendors.

Taxpayer is hence liable to pay interest on delayed payment of tax by his vendor as well.

Government is entitled to collect Interest from Both the tax payer as well as his vendor hence, boosting the revenues.

4. Sequential Filing of GST Returns

Hence forth, only sequential filing of GST returns will be allowed.

• Registered person shall not be allowed to furnish form GSTR-1/IFF if he has not filed GSTR-1/IFF for the previous tax period.
• Furnishing of GSTR-1 Mandatory before filing of GSTR-3B for the same period.
• Furnishing of GSTR-1/IFF Not allowed if GSTR-3B is not furnished for preceding two tax periods.

This is a much needed step to ensure timely availability of Input Tax credit.

5. Transfer Of Balance In Electronic Cash Ledger Between Distinct Registration Of Same Person

According to section 49(10), A registered person may, on the common portal, transfer any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger under this Act, to the electronic cash ledger for,

(a) integrated tax, central tax, State tax, Union territory tax or cess; or

(b) integrated tax or central tax of a distinct person as specified in sub-section (4) or, as the case may be, subsection (5) of section 25,

Such transfer shall be deemed to be a refund from the electronic cash ledger under this Act.no such transfer shall be allowed if the said registered person has any unpaid liability in his electronic liability register.

6. Restriction on Usage of ITC by Insertion of Section 49(12)

Section 49(12) has been newly inserted into the Act to provide that, Government may, on the recommendations of the Council, subject to such conditions and restrictions, specify such maximum proportion of output tax liability under this Act or under the Integrated Goods and Services Tax Act, 2017 which may be discharged through the electronic credit ledger by a registered person or a class of registered persons, as may be prescribed.

7. No Interest on ITC Reversed which has been availed but not Utilized-Big Relief to Tax Payers-Section 50(3)

Section 50(3) has been amended retrospectively w.e.f 1^st July 2017 to provide that “Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four per cent. as may be notified by the Government, on the recommendations of the Council, and the interest shall be calculated, in such manner as may be prescribed”.

Thus, Interest shall be payable only for reversal of ITC which is wrongly availed and utilized.