According to RBI study, the state of economy is overall strong with upbeat consumer and business confidence and upticks in several indicators – GST collection, export growth etc. However, the rising inflation is a reason to worry.  Even the Indian corporate sector is also optimistic and positive on economic growth in medium to long term. The Government expects GDP growth in the current fiscal to be 9.2%.

Economists of the country have voiced that any sharp fiscal correction should be avoided and focus should be on public investment in infrastructure to boost consumption and demand besides striving for consistency and stability in tax policies. According to RBI’s Financial Stability report, there appears to be a disconnect between the real economy and equity market.

With new virus making its entry throughout the nation, it can adversely affect various services which are contact related including various labour intensive industries. The industry and agriculture may show a growing trend but services are likely to be down. The challenge before the Government is to keep businesses running and growing so that economy continues moving. Any disruptions, though temporary, will have adverse socio –economic effects. 

Recent Update In GST till 25th January 2022

Translated into economic effect, it may lead to partial and select lock down and curfews in certain areas resulting in lower economic growth than projected. RBI is also concerned for growth in the changed scenario. This may pull down India’s GDP growth by 1-2 percent in financial year 2022. All other economies will also meet the same fate. In almost all states, curbs have been imposed in the form of weekend curfews, night curfew or trimming the business timings and closure of certain activities to avoid contact and spread of virus. This will have an adverse impact on economic activities.

Owing to Omicron, fresh curbs have hit business activities adversely which will dent the economic growth as well as GST collections. This so called third wave induced distraction will also reduce mobility and impact service sector. However, Government has already announced third vaccine dose as precaution dose as well as vaccination for teenagers. It is expected that this time situation may be under control and not as deadly as last one.

States are demanding an extension of Compensation Cess for 5 more years owing to bad economic and fiscal state of affairs. While pandemic has affected revenue collections, their expenses have also gone up resulting in higher deficit.

CBIC has issued a set of guidelines for initiating recovery proceedings under section 79 of the CGST Act, 2017 arising from amendment in section 75 thereof w.e.f. 01.01.2022. Transfer of funds to Consumer Welfare Fund (CWF) will also be made as per guidelines issued. GSTN has issued adversely for reporting of restaurant supplies in Form GSTR-3B and has also introduced new functionality of interest calculation in GSTR-3B.

All field formations have now initiated GST audits, seeking host of information and data. The audits may be mix of desk review and physical onsite audit. The audit date already been extended, and Union Budget round the corner, there has been not much of activity from MOF. The Union Budget on 1st February, 2021 will be an event to watch for though not much of changes in GST are expected except some amendments which may be proposed in relation to tax credits, tax evasion etc. Supreme Court has restored the covid limitation upto 28th February, 2022. 

CBIC Guidelines for Recovery Proceedings in GST

CBIC has issued guidelines for recovery proceedings u/s 79 of the CGST Act, 2017 in relation to cases covered under explanation to section 75(12) of the Act.

  • As per section 75(12) notwithstanding anything contained in section 73 or section 74 of the Act, where any amount of self-assessed tax in accordance with the return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered
  • As per explanation added e.f. 1.1.2022, “self-assessed tax” shall include the tax payable in respect of outward supplies, the details of which have been furnished under section 37, but not included in the return furnished under section 39.
  • Accordingly, where the tax payable in respect of details of outward supplies furnished by the registered person in GSTR- 1, has not been paid through GSTR-3B return, either wholly or partly, or any amount of interest payable on such tax remains unpaid, then in such cases, the tax short paid on such self-assessed and thus self-admitted liability, and the interest thereon, are liable to be recovered under the provisions of section 79.
  • In cases of genuine differences, there could be a mis-match between GSTR-1 and GSTR-3B (liability reported in GSTR-1> tax paid in GSTR-3B) in the current tax period.
  • In such cases, an opportunity needs to be provided to the concerned registered person to explain the differences between GSTR-1 and GSTR-3B, if any, and for short payment or non-payment of the amount of self-assessed tax liability, and interest thereon, before any action under section 79 of the Act is taken for recovery of the said amount.
  • Therefore, the proper officer may send a communication (with DIN) to the registered person to pay the amount short paid or not paid, or to explain the reasons for such short payment or non-payment of self-assessed tax, within a reasonable time, as prescribed in the communication.
  • If the concerned person is able to justify the differences between GSTR-1and GSTR-3B, or is able to explain the reasons of such short-payment or non-payment of tax, to the satisfaction of the proper officer, or pays the amount such short paid or not paid, then there may not be any requirement to initiate proceedings for recovery under section 79.
  • If the said registered person either fails to reply to the proper officer, or fails to make the payment of such amount short paid or not paid, within the time prescribed in the communication or such further period as may be permitted by the proper officer, then the proceedings for recovery of the said amount as per provisions of section 79may be initiated by the proper officer.
  • Where the said registered person fails to explain the reasons for such difference/ short payment of tax to the satisfaction of the proper officer, then the proper officer may proceed for recovery of the said amount as per provisions of section 79.

 (Source: Instruction No. 01/2022-GSTCBEC-20/16/05/2021-GST/23 dated 07.01.2022) 

Consumer Welfare Fund (CWF) Guidelines 

  • Consumer Welfare Fund (CWF) is constituted under section 57 of CGST Act, 2017 and can be utilized as per section 58 by the Central Government for the welfare of consumers in prescribed manner.
  • Rule 97(7A) provides that the Committee, constituted shall make available to the Central Board of Indirect Taxes & Customs (Board) 50 percent. of the amount credited to the Fund each year, for publicity or consumer awareness on Goods and Services Tax.
  • Sub-rule (7A) of rule 97 provides that the Committee, constituted under sub-rule (4), shall make available to the Central Board of Indirect Taxes & Customs (Board) 50 per cent. of the amount credited to the Fund each year, for publicity or consumer awareness on Goods and Services Tax, provided the availability of funds for consumer welfare activities of the Department of Consumer Affairs is not less than twenty-five crore rupees per annum.
  • CBIC has issued guidelines for management and administrations of CWF money in terms of Rule 97 (7A) of CGST Rules, 2017.
  • 50% of the amount credited to the Fund shall be made available to the Board under rule 97(7A) of the CGST Rules, 2017 for publicity and consumer awareness on Goods & Service Tax (GST).

(Source: CBIC Guidelines)

Reporting of restaurant supplies notified under section 9(5) of CGST Act, 2017 by E-commerce Operators in GSTR-3B

  • “Restaurant Service” has been notified under section 9(5) of the CGST Act, 2017 along with other services notified earlier such as motor cabs, accommodation and housekeeping services wherein the tax on such supplies would be paid by Electronic Commerce Operator (ECO) if such supplies made through it, Notification No. 17/2021-Central Tax (Rate) and 17/2021-Integrated Tax (Rate) dated 18.11.2021 have been issued. Accordingly, the tax on supplies of restaurant service supplied through E-commerce operators, shall be paid by the e-commerce operator with effect from the 1st January, 2022.
  • Therefore, E-commerce operators and registered person would report taxable supplies notified under section 9(5) of CGST Act, 2017 and similar provisions in IGST/SGST/UTGST Act in the following manner.
Supplies reported by Reporting in Form GSTR-3B
Supplies under 9(5) reported by ECO Table 3.1(a) of GSTR-3B
Registered person/Restaurant supplying through ECO Table 3.1(c) along-with nil and exempted supply
  • This is effective from 01.01.2022.

(Source: GSTN dated 04.01.2022) 

New GSTN functionality of Interest Calculator in GSTR-3B

  • As a facilitation measure for taxpayers & for assisting the taxpayers in doing a correct self-assessment, a new functionality of interest calculator will soon be released in GSTR-3B.
  • This functionality will arrive at the system computed interest on the basis of the tax liability values declared by the taxpayers.
  • The interest applicable, if any, on the tax liability declared in the GSTR-3B of a particular tax-period will be computed after the filing of GSTR-3B.
  • These system computed interest values will be auto-populated in the Table-5.1 of the GSTR-3B of the next tax-period. The facility would be similar to the collection of Late fees for GSTR-3B, filed after the Due date, posted in the next period’s GSTR-3B.
  • This functionality has a user-friendly interface, which informs the taxpayers regarding the manner of system computation of interest values for each tax-head.
  • It will also assist the taxpayers in doing correct computation of interest for the liability of any past period declared in the GSTR-3B for the current tax period, based on the details furnished by them on the GSTN portal.

 (Source: GSTN dated 08.01.2022)

Recovery of Arrears in GST

  • CBIC has issued consolidated guidelines for recovery and write-off of arrears in indirect taxes and customs
  • There guidelines cover arrears under Customs Act, 1962, Central Excise Act, 1944, Service Tax (Finance Act, 1994 and CGST Act, 2017.
  • It covers various categories of arrears- in litigation, recoverable, untraceable defaulters, settlement cases etc
  • It prescribes detailed procedure for recovery of arrears.
  • Arrears are the overdue payment of the amount of tax, interest, fine or penalty that is confirmed against a person who is liable to pay the same to the exchequer. It arises as a result of Order-in-Original, Order of Appellate forum, like the Commissioner Appeals / ADC/JC Appeals or the CESTAT and the Courts of law.
  • The amount in the case under investigation, unconfirmed demands (i.e. Show Cause Notice, including those in Call Book), the Order-in-Original that has been set aside or remanded for de-novo adjudication by Appellate authority do not fall under the category of ‘arrears’.
  • For recovery, the comprehensive provisions as provided in Chapter XV and XVI under CGST Act read with Chapter 18 of the CGST Rules, 2017 along with relevant circulars shall be referred to and followed.
  • Accordingly, recovery of arrears under GST law shall be governed by sections 73 to 94 of CGST Act, 2017 and Rules 142 to 161 of CGST Rules, 2017.
  • The responsibility to affect actual recovery will continue to vest with Jurisdictional Pr. Commissioners/Commissioners where the cause of arrears took place.

(Source: Circular No. 1081/02/2022-CX, F.No. 296/63/2020-CX9 dated 19.01.2022) 

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