RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

In view of the ongoing and continuous inflation, Reserve Bank of India in a surprise move, raised repo rate by 40 basis points and Cash Reserve Ratio (CRR) by 50 basis points to check rising inflation. Repo ratio has been enhanced after a gap of 45 months, for the first time post Covid. This will result in lending rates going up including for auto and housing loans, besides commercial loans. This will also lead to hike in interest rates of deposits and bond yields. Inflation is expected to continue above 6%. In March, 2022, it was 6.9%. The hike in CRR shall take out excessive liquidity in the system and thus will help in checking higher inflation.

For the financial year 2022-23, the GDP growth forecasts by various agencies have been in the range of 7 to 8.2%. According to India’s Chief Economic Advisor (CEA), such prediction as of now seem to be reasonable. The recent predictions by some of these agencies are- Fitch 8.5%, IMF 8.2 %, World Bank 8%, Morgan Stanley 7.9% and RBI 7.2%. CEA opines that in the present ever changing scenario, policy-makers will have to work with imperfect, incomplete and inadequate set of forecasts. Further, inflation is likely to impact Indian economy.

More recently, Morgan Stanley has cut India’s GDP forecast for financial year 2023 to 7.6% from 7.9% on the grounds of slowdown in economic growth, inflation and risk aversion in global capital market which expose India to downside risks.

GSTC appointed Group of Ministers who met on 2^nd May, 2022 to discuss, inter alia, GST on casinos, online gaming, race courses etc. has recommended a GST rate of 28%. GoM has suggested for 28% GST rate on online gaming, casinos and house races. However, it has not discussed the valuation part of it (gross or net value) on which GST @ 28% will be made applicable. These recommendations shall be further deliberated in next GST Council meeting.

GST collections have been over rupees one lakh crore plus since last nine months. In whole of financial year 2022, GST collection stood at Rs. 14.83 lakh crore as against Rs. 11.37 lakh crore in financial year 2021, a straight growth of 30%. With robust collections favoring government, the much talked about GST rates rationalization in also under consideration and it is expected that this may be one of the major agenda in next GST Council meeting. A Group of Ministers is already seized of this matter who is to submit its recommendation in due course.

Gross GST collection in April 2022 is all time high, Rs 25,000 crore more than the next highest collection of Rs. 1,42,095 crore, last month in March, 2022. The gross GST revenue collected in the month of April, 2022 is Rs 1,67,540 crore of which CGST is Rs 33,159 crore, SGST is Rs 41,793 crore, IGST is Rs 81,939 crore (including Rs 36,705 crore collected on import of goods) and cess is Rs 10,649 crore (including Rs 857 crore collected on import of goods). The revenues for the month of April 2022 are 20% higher than the GST revenues in the same month last year. During the month, revenues from import of goods was 30% higher and the revenues from domestic transaction (including import of services) are 17% higher than the revenues from these sources during the same month last year.

The collections have improved due to technology driven compliances, economic recovery and further lifting of pandemic curbs. The gradual push to mandatory e-invoicing is also one of the factors by which unreported turnover is also coming down and businesses shifting to mainstream.

This shows clear improvement in the compliance behaviour, which has been a result of various measures taken by the tax administration to nudge taxpayers to file returns timely, to making compliance easier and smoother and strict enforcement action taken against errant taxpayers identified based on data analytics and artificial intelligence. Some people attribute the higher collection due to ongoing inflation also.

CBIC believes that there is a bounce –back in the economy, and the inflation and boil in oil prices have helped. Revenues will be under pressure on the Customs side because of rising commodity prices. Excise will take a hit because of the duty cut. New Cestat members recruitment may take place soon now.

Recently Gujarat High Court has ruled that one-third abatement in valuation of composite supply of commercial properties is ultra vires the provisions of GST law and it can not be made mandatory.

This months due filing data for GSTR-3B return is likely to be extended due to technical glitch in generation of April, 2022 GSTR-2B and auto population of GSTR 3B on GSTN portal as reported in CBIC tweets.

GSTN has eased submission of GSTR-1 return on GST portal with introduction of new functionalities. All eyes are now on next GST Council meeting where lot of discussions and decisions are expected on compensation to states, rate rationalization etc.

GSTN Advisory for Composition Taxpayers

GSTN has issued following advisory on negative liability in GSTR-4:

• Composition taxpayers have to pay the liability through Form GST CMP-08 on quarterly basis while return in Form GSTR-4 is required to be filed on annual basis after end of a financial year.
• If no liability is declared in table 6 of GSTR-4, it is presumed that no liability is required to be paid, even though, taxpayer may have paid the liability through Form GST CMP-08. In such cases, liability paid through GST CMP-08 becomes excess tax paid and moves to Negative Liability Statement for utilization of same for subsequent tax period’s liability.
• Taxpayers who do not fill up table 6 of GSTR-4 i.e. no liability is declared, even though, taxpayer may have paid the liability through Form GST CMP-08; since the ‘Tax payable’ in GSTR-4 is computed after reducing the liability declared in GST CMP-08 which is auto-populated in table 5. Thus, if nothing is declared in table 6, then the negative liability entry appears in GSTR-4.
• The taxpayer who have deposited the amount in cash ledger, the debited amount has been adjusted whereas in case the amount of liability has not been deposited through challan, the balance in cash ledger becomes negative. In such cases, the taxpayers are advised to deposit the past liability through challan of equal amount.
• The details of the debit so made have been communicated to all such taxpayers through emails available on the portal. In case, the liability had been paid through adding in the next years’ liability, the same can be claimed as refund through application in Form GST RFD-01.

[Source: GSTN dated 30.04.2022 (www.gst.gov.in/)]

GSTN functionality for Annual Aggregate Turnover

GSTN has released a new functionality on computation of Annual Aggregate Turnover (AATO) for the Financial Year 2021-2022:

• The taxpayers can view the exact Annual Aggregate Turnover (AATO) for the previous Financial Year (FY) as well as the Aggregate Turnover of the current FY based on the returns filed till date.
• The taxpayers will also have facility of turnover updation in case taxpayers feel that the system calculated turnover displayed on their dashboard varies from the turnover as per their records.
• This facility of turnover update is provided to all the GSTINs registered on a common PAN. All the changes by any of the GSTINs in their turnover shall be summed up for computation of Annual Aggregate Turnover for each of the GSTINs.
• The taxpayer can amend the turnover twice within the month of May, 2022.
• Thereafter, the figures will be sent for review of the Jurisdictional Tax Officer who can amend the values furnished by the taxpayer wherever required.

(Source: GSTN (//www.gst.gov.in) dated 02.05.2022)

Mandatory abatement of land held Ultra Vires

• Gujarat high court has declared the mandatory deduction or abatement of 1/3 (33%) towards the consideration of land portion on sale of immovable properties as ultra vires the provisions of CGST / SGST /UTGST laws.
• This mandatory deduction was provided in Entry 2 of Notification No. 11/2017-CT towards cost of land comprised in immovable property. 1/3 value was deemed to be the consideration of land in such composite contracts.
• Such deeming fiction has been held to be arbitrary, discriminatory and violative of article 14 of the Constitution of India in as much as the same is uniformly applied irrespective of the size of plot of land and construction.
• The court commented that even if it is presumed that the Government had the competence to fix a deemed value for supplies, if the deeming fiction is found to be arbitrary and contrary to the scheme of the statute, then it can be definitely held to be ultra-vires.

[Source: MUNJAAL MANISHBHAI BHATT VERSUS UNION OF INDIA - 2022 (5) TMI 397 - GUJARAT HIGH COURT]

SCN can be issued against refund

• Supreme Court has held that a Show Cause Notice can be issued against grant of refund in an order passed after due adjudication.
• A refund was granted / sanctioned to assessee by way of an adjudication order but department issued a show cause notice to recover erroneous refund. It was contended that revenue can prefer an appeal against such order but it can not be reopened by way of issue of SCN under section 74 (1) of CGST Act, 2017.
• High Court of Orissa observed that the provisions of Section 74 do not indicate that an order of refund after adjudication can’t be sought to be reopened thereunder and dismissed the petition.
• On Special Leave Petition filed by assessee before the Apex Court, it was held that it is open to petitioner to urge before concerned authority that show cause notice travels beyond reasons delineated in section 74. The Supreme Court dismissed the petition.

[Source: GANESH ORES PVT. LTD. VERSUS THE STATE OF ODISHA & ORS. - 2022 (4) TMI 755 - SC ORDER]

GST issues in Corporate Insolvency resolution process (CIRP)

• IBBI has issued a consultative paper on 13.04.2022 on issues relating to reducing delays in the Corporate Insolvency Resolution Process (CIRP).
• Accordingly, IBBI has proposed that operational creditor shall furnish copies of GSTR-1 & GSTR-3B along with copy of e-way bill which will lead to the easier verification of claims, information available with the corporate debtor, promoters, employees etc shall be made available to the IRP/RP which will help in timely preparation of information.
• It covers:

1. Substantiating default in admitting applications by Operational Creditors (OCs)
2. Facilitating information availability for preparation of information memorandum and preparation of avoidance applications
3. Dealing with avoidance applications after closure of a CIRP
4. Significant difference in valuation during a CIRP and appointment of a third valuer.

• Once finalized and regulations amended, this may help in reducing the CIRP period and facilitate smooth resolution.

(Source: www.ibbi.gov.in dated 13.04.2022)

SOP for Reimbursement of SGST on films (Haryana State)

Haryana  Government has issued  a uniform procedure to apply for reimbursements of SGST on specific films, which provides for as under:

1. The reimbursement is allowed as per independent executive orders passed after approval of the Chief Minister's in concurrence with the Finance Department.
2. The reimbursement shall not be allowed for B2B supplies.
3.  Only registered person under GST who is issuing the invoice shall  be eligible to apply for such reimbursement.
4. The applicant can only apply for reimbursement after filing FORM GSTR-l and FORM GSTR-3B for the tax period in which he has declared and paid for the invoices for which the  reimbursement has been claimed for.
5. The taxpayer shall apply to the jurisdictional proper officer in the prescribed FORM AR-l.
6. In cases where multiple cinema halls are running on a single GSTIN, the proper officer of the ward in which  the principal place of business lies shall process the application.
7. The proper officer shall check that the said taxpayer was active during the tax period for which the reimbursement is being  applied for.
8. The proper officer shall check that the taxpayer has filed all his returns for the tax period for which the reimbursement is being applied for.
9. Minimum 10 sample tickets shall be verified by the proper officer.
10. All taxpayers while applying for reimbursement shall also enclose a CA certificate in FORM AR-2 certifying the correctness of the reimbursement application.
11. The reimbursement processing authority for such reimbursement shall be the Joint Commissioner (Range).
12.  A report in FORM AR-3 shall be send to the Head Office every month only by the Joint Commissioner (Range).

[Source: Circular F. No.  ETD-070001/42/2022-GST CELL-ETD, dated 20-4-2022 issued by  Excise and Taxation Department, Government of Haryana]

Reporting 6% rate in GSTR-1

• A new tax rate of 6% IGST or 3% CGST+ 3% SGST has been introduced on certain goods vide Notification No. 02/2022 dated 31st March 2022. Changes have been made on the GST portal to include this rate in GSTR-1.
• As a temporary measure, taxpayers who have to report goods at this rate may do so by reporting the entries in the 5% heading and then manually increasing the system computed tax amount to 6%. This can be done by entering the value in the ‘Taxable value’ column next to 5% tax-rate and then increasing the system computed tax-amount to 6% IGST or 3% CGST + 3% SGST in the ‘Amount of Tax’ column under the relevant Table, namely B2B, B2C or Export, as applicable.
• This will ensure that correct tax amount is reported in GSTR-1. Meanwhile, this rate will be made available on the GST portal shortly.

[Source: GSTN dated 10.05.2022]

GSTN advisory on incomplete GSTR-2b in some cases

• GSTN has noticed that in a few cases, certain records are not reflected in the GSTR-2B statement for the period of April 2022. However, such records are visible in GSTR-2A of such recipients.
• GSTN has issued an Advisory that the technical team is working to resolve this issue for the impacted taxpayers and generate fresh GSTR-2B at the earliest.
• In the interim, affected taxpayers interested in filing GSTR-3B have been requested to file the return on self-assessment basis using GSTR-2A.

[Source: GSTN dated 15.05.2022]