The amendments proposed for CGST Act, 2017 are carried out vide clause(s) 99 – 123 of the Finance Bill, 2022. The clause(s) 99 – 113 will come into effect from a date to be notified and the remaining clauses will be effective from the date of the enactment. The summary of the clause(s) 99 –113 are contained in Part-1 and the remaining clauses dealing with the changes in the Notification(s) will be under Part-II.
The proposed amendment under Part-I is categorized as follows: (I) Input Tax Credit, (II) Registration, (III) Credit Note, (IV) Return, (V) Late Fees, (VI) GST Practitioner, (VII) Payment of tax, interest, penalty and other amounts (VIII) Refund and, (IX) Miscellaneous.
INPUT TAX CREDIT
- Amendment of section 16(2) – A new clause ‘(ba)’ to be inserted u/s. 16(2) [Condition for availing ITC] – Additional restriction mentioned under new section 38 being included u/s. 16(2). S. 38(2)(b) list down the restrictions wherein the credits cannot be availed – Vide this amendment the government has tried to intertwined the provisions (S. 16 and S. 38) so that defence cannot be taken that the substantive provision (S. 16) doesn’t restrict availing of ITC. On a similar line of rationale section 16(2)(aa) was inserted w.e.f. 01.01.2022.
- Amendment of section 16(2)(c) – Omissions of the word ‘section 43A’ (Procedure for furnishing return and availing input tax credit) from 16(2)(c) – As 43A proposed to be omitted thus there was no need of 43A in 16(2)(c). Section 43A was brought for implementing new return system however, that was never brought into force and now proposed to be omitted vide this Finance Bill.
- Amendment of section 16(4) – Extended time for availment of ITC in respect of any invoice or debit note pertaining to a FY upto 30th November of the following FY – previously it was September. Extension of one (1) month – In line with the timeline of the IT Act.
- Amendment of section 41 – substituted entire section 41 – Availment of input tax credit (prior headnote: Claim of input tax credit and provisional acceptance thereof) – new provision has done away with the claim of eligible ITC on ‘provisional basis’ – further proposed the reversal of ITC along with interest in case supplier has not paid the taxes and re-avail ITC whenever the supplier pays – timeline for reversal and re-availment may be prescribed – the new provision is in direct conflict with section 16 and new section 38. Imposition of interest will cause additional hardship.
- Omission of section(s) 42, 43 and 43A – Matching, reversal, reclaim and reduction of ITC – Section(s) 42, 43 and 43A of the CGST Act are being omitted so as to do away with the two-way communication process in return filing.
REGISTRATION
- Amendment of section 29(2)(b) – Composition Taxpayer – Cancellation of Registration if the return (GSTR-4) is not filed beyond 3 months from the due date – Normally, the due date is April 30, thus proper office may cancel the registration after July 30. The use of the word ‘beyond’ show continuity meaning if the Composition Taxpayer files return on August 5, then the officer cannot cancel the registration, if registration is not cancelled before August 5.
- Amendment of section 29(2)(b) – Cancellation of Registration for person other than Composition Taxpayer – return not furnished for continuous 6 months is substituted by such period as may be prescribed. Now, the government will notify the period for which if the return is not furnished then the proper officer may cancel the registration.
- Omission of section(s) 42, 43 and 43A – Matching, reversal, reclaim and reduction of ITC – Section(s) 42, 43 and 43A of the CGST Act are being omitted so as to do away with the two-way communication process in return filing.
CREDIT NOTE
- Amendment of section 34(2) – Declaration of details of Credit Note – extended from September to 30th November. This is for making in sync with the aforesaid proposed amendment u/s. 16(4) and the IT Act.
RETURN
- Amendment of section 37(1) – insertion of ‘subject to such conditions and restrictions and’ – this implies that the conditions/restriction of the details of the outward supply will be as per the Rules. The Rule they meant is R. 59(6) – R. 59(6) doesn’t allow to file GSTR-1 if GSTR 3B is not filed for the preceding month.
- Omission of the first proviso to section 37(1) – In light of bringing the new return provision i.e. section 38. The government may have done away with GSTR-1 and GSTR-3, now these returns might not come.
- Omission of section 37(2) – Section 37(2) envisages that the recipient of the supply shall be provided with an opportunity to accept, reject, amend or delete the details in a two-way communication process – Now omitted.
- Amendment of section 37(3) – rectification of errors in respect of details of outward supplies is allowed till 30th November – previously it was till September following the end of the financial year to which such details pertain.
- Insertion of new section 37(4) – details of outward supply will only be allowed if previous period details are filed – provide for tax period-wise sequential filing of details of outward supplies. The registered person cannot file GSTR-1 with filing the GSTR-1 for the previous period.
- Entire section 38 is to be substituted – new return provision – Section 38 is being substituted for prescribing the manner as well as conditions and restrictions for communication of details of inward supplies and input tax credit to the recipient by means of an auto-generated statement and to do away with two-way communication process in return filing – As per section 38(2) the auto-generated statement will have available and un-available ITC – The conditions and restriction as imposed by section 38(2)(b) will also form part and parcel of section 16 as aforesaid stated.
- Amendment of section 39(5) – Registered non-resident taxable person – filing of return timeline brought down from 20th to 13th after the end of the calendar month – reduction of 7 days for filing return.
- Amendment of section 39(7) – under QRMP scheme – provide an option to the persons furnishing return under proviso to sub-section (1), to pay either the self-assessed tax or an amount that may be prescribed.
- Amendment of section 39(9) – provide for an extended time upto 30th November of the following FY, for rectification of errors in the return furnished under section 39 – earlier it was upto September – the rectification is w.r.t. GSTR 3B (assuming GSTR 3B is section 39 return).
- Amendment u/s. 39(10) – assuming 39(10) return is GSTR 3B then as per the amendment GSTR 3B cannot be filed if GSTR-1 is not filed.
LATE FEES
- Amendment of section 47 – (i) reference to section 38 is being removed consequent to the aforesaid amendment in section 38 of the CGST Act – AND – (ii) added – levy of late fee for delayed filing of return under section 52. The anomaly lies because a statement is filed as per rule 67 not ‘return’ in the case of section 52.
GST PRACTITIONER
- Omission of the phrase ‘the details of inward supplies under section 38’ – As per the new section 38 there will be auto-generated statement thus no need of furnishing the details of inward supply – hence omitted that part – Consequent to the amendment in section 38 of the CGST Act, sub-section (2) of section 48 of the CGST Act is being amended so as to remove reference to section 38 therefrom.
PAYMENT OF TAX, INTEREST, PENALTY AND OTHER AMOUNTS
- Amendment of section 49(2) – the words ‘section 43’ omitted – in light of the aforesaid new changes and omission of section 43.
- Amendment of section 49(4) – added ‘restrictions’ after conditions – provide for prescribing restrictions for utilizing the amount available in the electronic credit ledger.
- Entire section 49(10) is to be substituted – allow transfer of amount available in electronic cash ledger under the CGST Act of a registered person to the electronic cash ledger under the said Act or the IGST Act of a distinct person such transfer is subject to the registered person doesn’t have any unpaid liability in his electronic liability register.
- Insertion of 49(12) – new – provide for prescribing the maximum proportion of output tax liability which may be discharged through the electronic credit ledger- There already exists Rule 86B capping 99% through credit and 1% through cash. First comes Rule then comes the substantive provision.
- Amendment of section 50 – substitution of entire 50(3) – retrospectively w.e.f. July 1, 2017 – the government will notify levy of interest on input tax credit wrongly availed and utilized – such notification will come vide clause 115 wherein the rate is mentioned as 18%. It is to be noted that ‘utilization’ is one of the ingredients hence no interest on unutilized credit.
REFUND
- Amendment of section 54(1) – Refund of cash ledger delinked from section 39 return, assuming section 39 return is GSTR 3B – This delinking is a mere formality, the refund is already claimed on the portal via RFD-01A.
- Amendment of section 54(2) – provide the time limit for claiming refund of tax paid on inward supplies of goods or services or both under section 55 as two (2) years from the last day of the quarter in which the said supply was received – previously it was six (6) months. In case of specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation, Consulate or Embassy of foreign countries or any other person or class of person as notified.
- Amendment of section 54(10) – the scope of withholding of or recovery from refund is now extended to all types of refund.
- Amendment of section 54 – Insertion of new clause (ba) in Explanation 2: relevant date meaning – provide clarity regarding the relevant date for filing refund claim in respect of supplies made to a Special Economic Zone developer or a Special Economic Zone unit by way of insertion of a new sub-clause (ba) in clause (2) of Explanation thereto.
MISCELLANEOUS
- TCS – Rectification of any omission or incorrect particulars of GSTR-8 (statement) shall be allowed till 30th November following the end of the financial year- previously it was September. And late fees to be paid for delayed filing of statement under section 52 as stated before.
- Amendment of section 168 – Consequent to the amendment in section 38 of the CGST Act, sub-section (2) of section 168 of the CGST Act is being amended so as to remove reference to section 38 therefrom.
Disclaimer: The views expressed by the author is personal and academic in nature. Kindly, do not act or refrain from acting based upon the write-up without seeking professional legal advice. The author may be reached at abhishek@gstivy.in