RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

According to RBI’s latest bulletin, the Indian economy is poised to regain the ground lost to the pandemic and re-emerge as among the fastest growing countries in the world, supported by the decadal low interest rates, softening inflation and a modest current account surplus. The Indian economy is clearly differentiating itself from the global situation, which is marred by supply disruptions, stubborn inflation and surges of infections in various parts of the world, per article ‘State of the Economy’. The overall economic activity is on the cusp of a strengthening revival. The overall monetary and credit conditions stay conducive for a durable economic recovery to take root. Overall, the growth momentum in digital transactions over the past few months indicates that the economy is gradually shaking off the shackles of the second wave of the pandemic.

According to reports, Central Government may amend the tax laws in the Budget 2022 to tax crypto- currencies in income tax as well as GST. In case of GST, crypto- currencies deals may involve services like brokerages, trading, facilitation and thus be taxed at the rates applicable to such services, i.e., 18 percent.

Supreme Court has finally decided on extended limitation owing to Covid guidelines. The Order dated 23.03.2020 - 2020 (5) TMI 418 - SC ORDER was passed in view of the extraordinary health crisis. On 08.03.2021, the order dated 23.03.2020 was brought to an end, permitting the relaxation of period of limitation between 15.03.2020 and 14.03.2021. While doing so, it was made clear that the period of limitation would start from 15.03.2021. As the said order dated 08.03.2021 was only a one-time measure, in view of the pandemic, apex court was inclined to modify the conditions contained in the order dated 08.03.2021.

The period from 15.03.2020 till 02.10.2021 shall also stand excluded in computing the periods prescribed  under Section 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe periods(s) of limitation for instituting proceedings, outer limits (within which the Court of Tribunal can condone delay) and termination of proceedings.

The CBIC has issued 4 new notifications to amend the rates of various goods and services mainly related to textile industry and footwear industry job works etc. These amendments shall be effective from January 1st, 2022. These changes have been made in order to rationalize inverted duty structure in textile and footwear sector. Inclusion of restaurant services under scope of supply made through E-commerce Operators has also been made.

CBIC has also issued two clarification vide Circular Nos. 165 and 166, both dated 17.11.2021 in relation to applicability of Dynamic Quick Response (QR) Code, refund of excess balance in cash ledger, TDS and TCS etc.

GST rate structure is likely to see a major change in near future. A group of members set up for this purpose will consider GST slabs to be reduced to three, besides pruning the list of exemptions under GST. The new structure may have only three tax rates in place of four rates at present. States have been asking for a review of rates to address the issue of revenue. Also, presently about 150 goods and 80 services are out of GST net.

MoF has decided to release a sum of ₹ 95,082 crores of tax devolution to states in November, 2021 to enable them to step-up their capital expenditure and spur economic growth as per devolving formula of 41% of central taxes in line with 15th Finance Commission.

Though GST Collections have been buoyant in last few months, November, 2021 collections may once again be robust owing to large scale festive buying in first part of November. Infact, it could be highest ever. The same trend can be seen in e-way bills generation. December too could be good for businesses and GST, if new wave does not turn on.

Rate Amendments in Notification No. 1/2017-CT (Rate) dated 28.06.2017

• GST rates have been rationalized in respect of various textile / fabric items and footwear as recommended by GST Council.
• Certain entries have been amended / substituted / inserted or omitted.
• This notification is effective from 01.01.2022.
• (Source: Notification No. 14/2021-Central Tax (Rate) dated 18.11.2021)

Amendment in Notification 11/2017-CT (Rate) dated 28.06.2017

• Amendments have been made in GST rates relating to construction services and services by way of job work for manufacturing services on physical inputs (goods) owned by others (textiles, printing of newspapers).
• Composite supply of works contract to Government Entity / Government Authority to be taxed @ 18%.
• Job works by way of dyeing and printing of textiles / textile products to be taxable @ 12%.
• This notification is effective from 01.01.2022.
• (Source: Notification No. 15/2021-Central Tax (Rate) dated 18.11.2021)

Amendment in Notification 12/2017-CT (Rate) dated 28.06.2017

• Exemptions have been amended / curtailed with reference to pure services and contract carriage / cabs through e-commerce operators
• Pure services excluding works contract service or other composite supplies with goods provided to Government Entity / Government Authority shall not be exempt.
• Supply of non-AC contract carriage or metered cabs or auto or e-rickshaws through e-commerce operators shall not be exempt.
• This notification is effective from 01.01.2022.

(Source: Notification No. 16/2021-Central Tax (Rate) dated 18.11.2021)

Amendment in Notification 17/2017-CT (Rate) dated 28.06.2017

GST shall be payable by electronic commerce operators on:

• Services by way of transportation of passengers by Omnibus or any other motor vehicle.
• Services of accommodation in hotels except where person providing services through e-commerce operator is liable for registration.
• Services of housekeeping etc except where supplier supplying such services through e-commerce operator is liable for registration.
•  Supply of restaurant services other than supply of services by restaurants located at specified location.
• This shall be effective from 01.01.2022.

(Source: Notification No. 17/2021-Central Tax (Rate) dated 18.11.2021)

Quick Response (QR) Code on B2C invoices

• CBIC has further clarified since Circular No. 156/12/2021-GST dated 21.06.2021 to comply with Notification No. 14/2020-CT dated 21.03.2020.
• In some cases, where, though the service recipient is located outside India and place of supply of the service is in India as per IGST Act 2017, the payment is received by the service provider located in India not in foreign exchange, but through other modes approved by RBI.
• CBIC has observed that the intention of clarification as per S. No. 4 in the said circular was not to deny relaxation in those cases, where the payment is received by the supplier as per any RBI approved mode, other than foreign exchange.
• Thus, CBIC has now clarified on Entry at S.No. 4 of Circular No. 150 to the effect that wherever an invoice is issued to a recipient located outside India, for supply of services, for which the place of supply is in India, as per the provisions of IGST Act 2017, and the payment is received by the supplier, in convertible foreign exchange or in Indian Rupees wherever permitted by the RBI, such invoice may be issued without having a Dynamic QR Code, as such dynamic QR code cannot be used by the recipient located outside India for making payment to the supplier.

(Source: Circular No. 165/21/2021-GST dated 17.11.2021)

CBIC clarifications on refund / TDS / TCS issues

CBIC has issued few clarifications related to refund of excess balance in cash ledger such as time limit, TDS / TCS refund, certificate / declaration etc.

• The provisions of section 54(1) of the CGST Act regarding time period, within which an application for refund can be filed, would not be applicable in cases of refund of excess balance in electronic cash ledger.
• Clause (b) of Explanation (2) under Section 54 of CGST Act, 2017 states that in the case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the date on which the return relating to such deemed exports is furnished.
• It is clear that clause (b) of Explanation (2) under section 54 of the CGST Act is applicable for determining relevant date in respect of refund of amount of tax paid on the supply of goods regarded as deemed exports, irrespective of the fact whether the refund claim is filed by the supplier or by the recipient.
• Further, as the tax on the supply of goods, regarded as deemed export, would be paid by the supplier in his return, therefore, the relevant date for purpose of filing of refund claim for refund of tax paid on such supplies would be the date of filing of return, related to such supplies, by the supplier.

• Furnishing of certification/ declaration under Rule 89(2)(l) or 89(2)(m) of the CGST Rules, 2017 for not passing the incidence of tax to any other person is not required in cases of refund of excess balance in electronic cash ledger as unjust enrichment clause is not applicable in such cases.
• The amount deducted/collected as TDS/TCS by TDS/ TCS deductors under the provisions of section 51 /52 of the CGST Act, as the case may be, and credited to electronic cash ledger of the registered person, is equivalent to cash deposited in electronic cash ledger.
• It is not mandatory for the registered person to utilise the TDS/TCS amount credited to his electronic cash ledger only for the purpose for discharging tax liability.
• The registered person is at full liberty to discharge his tax liability in respect of the supplies made by him during a tax period, either through debit in electronic credit ledger or through debit in electronic cash ledger, as per his choice and availability of balance in the said ledgers.
• Any amount, which remains unutilized in electronic cash ledger, after discharge of tax dues and other dues payable under CGST Act and rules made thereunder, can be refunded to the registered person as excess balance in electronic cash ledger in accordance with the proviso to sub-section (1) of section 54, read with sub-section (6) of section 49 of CGST Act.

(Source: Circular No. 166/22/2021-GST dated 17.11.2021)

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