Major amendments in GST Law w.e.f 1st January 2022

[Ashwarya Agarwal]

With the start of new calendar year 2022, the GST law also enters into its new era by enacting various amendments in GST Law which was proposed in the Finance Act, 2021. The list of changes being made effective from 1^st of January, 2022 is as below:

1. Service provided to members

There has been long dispute on taxability of services provided by an AOP, Partnership Firm, etc to its members. This matter has been under litigation since service tax regime. In order to avoid any future litigation, the GST law is being amended to include this service under the definition of ‘supply’ by making a specific insertion of clause (aa) in section 7(1) of the CGST Act, 2017. Corresponding amendment is made in Schedule II also by omitting Para 7.

This amendment is made effective from 01.01.2022, however the provision shall be applicable retrospectively from 01.07.2017.

(Refer Note 1 & 12)           

2. GSTR 2A or 2B matching made mandatory

The requirement for matching of Input Tax Credit (ITC) claimed in GSTR 3B with ITC available a per GSTR 2A / 2B has always been argued as there was no such condition in law. There was only a restriction provided in Rule 36(4) which allowed a taxpayer to claim maximum ITC of 105% of GST as per GSTR 2A / 2B of that month, and this restriction has been challenged before various High Courts also.

Now section 16(2) of the Act is being amended to insert Clause (aa) according to which a taxpayer is eligible to claim ITC only if it is communicated to him in GSTR 2A / 2B.

(Refer Note 2)

3. Changes in provision related to Detention, Seizure and Confiscation of Goods

1. Demand made under Section 129 & 130 which relates to detention, seizure and confiscation of goods has been separated from demand made under section 74 of the Act;
2. Penalty applicable in case of detention of goods shall be revised as under:

	upto 31.12.2021	w.e.f 01.01.2022
Where the owner of the goods comes forward for payment	Taxable Goods: Tax – 100% of Tax Penalty - 100% of Tax	Taxable Goods: Penalty - 200% of Tax
	Exempted Goods: 2% of value of Goods or ₹ 25,000, Less	Exempted Goods: 2% of value of Goods or ₹ 25,000, Less
where the owner of the goods does not come forward for payment	Taxable Goods: Penalty - 50% of value of Goods – Tax paid	Taxable Goods: Penalty - 50% of value of Goods or 200% of Tax, Higher
	Exempted Goods: 5% of value of Goods or ₹ 25,000, Less	Exempted Goods: 5% of value of Goods or ₹ 25,000, Less

 

3. Time limit of 7 days is being specified for issuance of notice from date of detention and further time limit of 7 days for issuance of order;
4. Time limit of 15 days is being specified for disposal of goods, from the receipt of order;
5. Provision for release of goods on furnishing of Bond / security as per section 67(6) is done away with;
6. Proviso is inserted to sub-section (6) which allows transporter to release its conveyance on payment of penalty as above or one lakh rupees, whichever is less;
7. Section 130 which deals with confiscation of goods has been made independent of section 129.
8. Appeal against the order issued as above (u/s 129) shall be filed on payment of pre-deposit of 25% of the Penalty demanded.

(Refer Note 3, 6, 7 & 8)

4. Power to recover tax where GSTR 3B not filed

Explanation inserted to section 75(12) by virtue of which department shall have power to recover tax where a taxpayer has furnished GSTR 1 but not filed its GSTR 3B

(Refer Note 4)

5. Attachment of Property and Bank Accounts

As per the current provision, section 83 allows attachment of Property, including Bank Accounts of taxpayer in case of pendency of any demand under specified sections.

However now the amendment shall allow attachment of Property including bank accounts on initiation of any proceeding. It further allows attachment of property and bank accounts of the Beneficiary [u/s 122(1A)] also.

(Refer Note 5)

6. Power to call for Information

Section 150 and 151 of the Act is being amended to provide power to the Jurisdictional Commissioner to call for Information from any Person in connection with this Act.

Further the information received as above can been used for further proceeding only after providing the concerned person with opportunity of being heard.

(Refer Note 9,10 & 11)

7. Filing of GSTR 1 not allowed if GTSR 3B not filed

Currently a taxpayer who has not filed GSTR 3B for preceding 2 months was barred from filing of GTSR 1. However, by virtue of amendment in Rule 59(6), a taxpayer who has not filed his GSTR 3B for the preceding month shall be not allowed to file GSTR 1

(Refer Notification no. 35/2021–CT dated 24.09.2021)

8. Adhaar Authentication made mandatory

New rule 10B is being inserted to make Adhaar authentication mandatory in case of following situation:

• For filing of application for revocation of cancellation of registration in FORM GST REG-21 under Rule 23
• For filing of refund application in FORM RFD-01 under rule 89
• For refund under rule 96 of the integrated tax paid on goods exported out of India

(Refer Notification 38/2021-CT dated 21.12.2021)

9. Changes in rates of GST for Textile Industry to be made effective from 01.01.2022.

NOTES for reference

Note 1:

section 7, in sub-section (1), after clause (a), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of July, 2017, namely:––

“(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.

Note 2:

In section 16 of the Central Goods and Services Tax Act, in sub-section (2), after clause (a), the following clause shall be inserted, namely:––

“(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;”.

Note 3:

In section 74 of the Central Goods and Services Tax Act, in Explanation 1, in clause (ii), for the words and figures “sections 122, 125, 129 and 130”, the words and figures “sections 122 and 125” shall be substituted.

Note 4:

In section 75 of the Central Goods and Services Tax Act, in sub-section (12), the following Explanation shall be inserted, namely:––

‘Explanation.––For the purposes of this sub-section, the expression “self-assessed tax" shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.’.

Note 5:

In section 83 of the Central Goods and Services Tax Act, for sub-section (1), the following sub-section shall be substituted, namely:––

“(1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed.”.

Note 6:

In section 107 of the Central Goods and Services Tax Act, in sub-section (6), the following proviso shall be inserted, namely:––

“Provided that no appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to twenty-five per cent. of the penalty has been paid by the appellant.”.

Note 7:

In section 129 of the Central Goods and Services Tax Act,––

(i) in sub-section (1), for clauses (a) and (b), the following clauses shall be substituted, namely:––

“(a) on payment of penalty equal to two hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty;

(b) on payment of penalty equal to fifty per cent. of the value of the goods or two hundred per cent. of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty;”;

(ii) sub-section (2) shall be omitted;

(iii) for sub-section (3), the following sub-section shall be substituted, namely:––

“(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).”;

(iv) in sub-section (4), for the words “No tax, interest or penalty”, the words “No penalty” shall be substituted;

(v) for sub-section (6), the following sub-section shall be substituted, namely:––

“(6) Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3):

Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less:

Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer.”.

Note 8:

In section 130 of the Central Goods and Services Tax Act,––

(a) in sub-section (1), for the words “Notwithstanding anything contained in this Act, if ”, the word “Where” shall be substituted;

(b) in sub-section (2), in the second proviso, for the words, brackets and figures “amount of penalty leviable under sub-section (1) of section 129”, the words “penalty equal to hundred per cent. of the tax payable on such goods” shall be substituted;

(c) sub-section (3) shall be omitted.

Note 9:

For section 151 of the Central Goods and Services Tax Act, the following section shall be substituted, namely:––

Power to call for information.

“151. The Commissioner or an officer authorised by him may, by an order, direct any person to furnish information relating to any matter dealt with in connection with this Act, within such time, in such form, and in such manner, as may be specified therein.”.

Note 10:

In section 152 of the Central Goods and Services Tax Act,––

(a) in sub-section (1),––

(i) the words “of any individual return or part thereof” shall be omitted;

(ii) after the words “any proceedings under this Act”, the words “without giving an opportunity of being heard to the person concerned” shall be inserted;

(b) sub-section (2) shall be omitted.

Note 11:

In section 168 of the Central Goods and Services Tax Act, in sub-section (2),––

(i) for the words, brackets and figures “sub-section (1) of section 44”, the word and figures “section 44” shall be substituted;

(ii) the words, brackets and figures “sub-section (1) of section 151,” shall be omitted.

Note 12:

In Schedule II of the Central Goods and Services Tax Act, paragraph 7 shall be omitted and shall be deemed to have been omitted with effect from the 1st day of July, 2017.