Goods & Services Tax (GST) in IndiaGST Round-Up for 2022: Part II

INTRODUCTION

The Goods and Services Tax (hereinafter referred to as “GST”) levies taxes on the goods and services transactions throughout the country. The GST was enacted in order to unify the indirect taxation regime in India. The model of GST was proposed to be fully automated and technically advanced in order to ensure transparency.

The Goods and Services Network (hereinafter referred to as “GSTN”) was established to supervise the implementation of the same. The idea behind the fully automated operation of the law was to establish interactivity and promote transparency. The GST is a recently introduced law, and hence, there are many gaps and shortcomings that are visible in their implementation.

Hence, the time-to-time changes and amendments are notified through circulars, notifications, judicial interpretation, etc. However, due to technological limitations, the establishment of such interactivity was not possible. But, there are several amendments and changes made in the GST regime, this year.

The previous blog discussed the changes brought in the GST Law vide the Union Budget 2022-23 (Finance Act, 2022). This blog analyses the Recommendations of the GST Council and the Amendments made to the GST law in the year 2022.

47^th GST COUNCIL MEETING RECOMMENDATIONS                                                       

The GST Council is a body constituted under Article 279A of the Constitution of India for recommendations on the matters of GST. The 47^th GST Council Meeting was held in Chandigarh on 28.06.2022 and 29.06.2022. The GST Council issued various suggestions following extensive discussion over the inverted duty structure, change in GST rate, withdrawal of several exemptions, trade facilitation, and GST compliances.

The GST Council waived the mandatory registration for small internet vendors. The online vendors having an annual turnover of Rs. 40 lakhs or Rs. 20 lakhs, depending on which states the vendors are based out of, will no longer be required to register for GST from 01.01.2023.

The GST Council had revised GST rates. For example, instead of the current 12% GST, items like LED lamps, ink, knives, and dairy equipment will now be subject to 18% GST. In addition, the GST rate for finished leather and solar water heaters was increased from 5% to 12%.

The GST Council had suggested to levy a tax rate at 12% for hotel rooms priced up to Rs.1000/-. Exemptions have been withdrawn for several services, including those supplied by the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India (IRDAI), and Securities and Exchange Board of India (SEBI), and hospitals with room rents of above Rs. 5,000 per day (except Incentive Care Units).

The GST Council provided relief to the transportation industry by lowering the cost of renting trucks and freight carriages which included the cost of fuel.

The GST Council has proposed to withdraw the exemption on pre-packaged and pre-labelled retail pack items, in terms of the Legal Metrology Act, 2009 read with Legal Metrology (Packaged Commodities) Rules, 2011, and GST shall be levied on such pre-packaged items. These pre-packaged and pre-labelled items include curd, lassi, and buttermilk, etc.

AMENDMENTS THROUGH NOTIFICATIONS AND CIRCULARS

1. Extension of the Input Tax Credit (ITC) Application Deadline

The Central Board of Indirect Taxes and Customs (hereinafter referred to as “CBIC”) vide Notification No. 20/2022  dated 15.11.2022, extended the filing of claim of Input Tax Credit (hereinafter referred to as “ITC”) to 30^th November of the next financial year, the following can be filed till 30^th November of the succeeding financial year:

• Request ITC for any bill or debit note from the preceding financial year.
• Issuing of credit notes for purchases made within an accounting year.
• Correcting mistakes about GSTR 1, GSTR 3B, and GSTR 8 of the preceding financial year.

The deadline for claiming ITC for a financial year is either November 30 of the year or the date of filing annual returns, whichever is earlier. The annual returns must typically be filed by December 31 of the following fiscal year. The deadline for issuing credit notes has also been extended to the 30^th November of the following fiscal year.

2. New restrictions for claiming ITC

The Government may limit the taxpayer’s ITC if the vendor failed to pay taxes for that period or a fixed percentage of taxes were underpaid or the assessee used more ITC than allowed by this limit or used the ITC to pay taxes that were more than the permitted amount, or other situations that may be required.

The duration, cap, and percentage of such restrictions have not yet been determined and will be confirmed in the due course. Consequently, using ITC requires greater caution. Ensuring that a provider, with legitimate and proven credentials is selected; will be the only way to utilize accumulated ITC without facing legal trouble.

3. Cancellation of GST Registration for failure to file a return

The Tax Authorities are empowered to suo moto cancel registration in the following circumstances:

• A composite taxpayer fails to file a return for a financial year more than three months after the deadline;
• Regular taxpayer fails to submit returns for the length of time that may have been required. Rule 21 of the Central Goods and Services Rules, 2017 (hereinafter referred to as the “CGST Rules”) permits the cancellation of registration, if the registered person filing the returns monthly does not submit a return for a continuous period of six months; or a registered person filing the returns quarterly does not file a return for a continuous period of two tax periods.

The recent reform will ensure strict compliance because various benefits such as the utilizing the ITC, are now dependent on completing returns.

4. Alterations in Statement of Outward Supply- GSTR-1

The GSTR-1 Return, also known as the Statement of Outward Supply, must now be filed in chronological sequence. This implies that the order of returns must be followed. A return for the current month cannot be filed unless the prior return is not filed. Additionally, the Government may impose restrictions or conditions on how recipients are to be notified after providing outward supply details.

5. Self-Assessment ITC Claim

The electronic credit ledger, GST PMT-02, will be credited with each Taxpayer’s self-assessed ITC. The Provisional ITC notion, which has been causing a lot of confusion, has finally been removed. Furthermore, ITC will be reversed along with interest if one’s supplier failed to pay taxes to the Government.

6. Provide additional facilities for GST refunds as part of the refund procedure

• A refund application must be completed if you want to request a refund of the excess amount in the electronic cash ledger GST-PMT-03.
• Refunds for supplies to SEZ Developers or SEZ Units must be processed within two years of the due date on which GSTR 3B is or should have been filed. There were several misunderstandings regarding this topic, particularly regarding the pertinent date. Things are now clear since the situation has been made plain.
• Within two years, a specialized UN agency, consulate, embassy, etc., may request a tax return on entering supplies. Before the implementation of GST, this period was originally set at six months, but was later increased to 18 months and is presently set at two years as of the last day of the quarter in which the supply was made, in keeping with other refunds.

7. Repercussions of failing to pay the vendor on time under GST

If a taxpayer received ITC but did not pay the supplier within 180 days of the invoice date despite doing so, they will now be required to pay tax as well as interest. In the past, it was suggested that if ITC was utilized, the buyer would be required to pay the vendor interest for any payments that were delayed for longer than 180 days.

The new revisions have caused the interest liability to start accruing as well. The buyer can still reclaim the credit after completing the required instalments, but the interest will now be considered a cost.

8. The Additional Condition in availing ITC

The CBIC vide Notification No.40/2021 dated 29.12.2021, introduced Section 16(2)(aa) of the CGST Act, which was given effect from 01.01.2022. The condition for availing ITC states that if the vendor declares invoices or debit notes corresponding in their corresponding GSTR-1 or Invoice Furnishing Facility. The ITC would be found auto-generated under Section 38 of the CGST Act, such as GSTR-2B.  Thus, the ITC would be auto-populated in the recipient’s account.

AMLEGALS REMARKS

The GST law is recently enacted and as it has to keep pace with the growing and changing economy, there are various amendments made to the Act as per the need of the hour. The Ministry of Finance as well as the GST Council make the necessary amendments. These amendments would ensure a smooth and efficient working along with ease of doing business amongst the

It is anticipated that real estate transactions will not only close quickly but will also reduce, if not eliminate, the possibility of disputes and any potential fraudulent deals. Even though there have been numerous modifications made over the years, they have all always been made with the best interests of trade and industry in mind.

In addition, it can be observed from the amendments that the GST Council has taken into account stakeholder ideas and comments to make it easier for laws to be followed. Moreover, as the GST Law is technical in nature, the amendments and modifications done to the CGST Act are difficult to comply with, and hence, it results into either tax evasion or imposition of penalty, which defeats the idea of ease of doing business.

– Team AMLEGALS assisted by Ms. Ishita Jaiswal (Intern)

For any queries or feedback, please feel free to get in touch with aditi.tiwari@amlegals.com or himanshi.patwa@amlegals.com.