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RECENT DEVELOPMENTS IN GST

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RECENT DEVELOPMENTS IN GST
By: Dr. Sanjiv Agarwal
January 14, 2022
All Articles by: Dr. Sanjiv Agarwal       View Profile
  • Contents

The Government released its first advance estimate for 2021-22 recently accordingly to which GDP growth may be 9.2% with limited impact of third wave. This estimate is the highest in last 20 years. The industry and agriculture may show a growing trend but services are likely to be down. The challenge before the Government is to keep businesses running and growing so that economy continues moving. Any disruptions, though temporary, will have adverse socio –economic effects.

The third variant of Covid-19 virus in the form of Omicron virus and third wave has just been in. The economic expectations two months back have taken a hit. With new virus making its entry throughout the nation, it can adversely affect various services which are contact related including various labour intensive industries.

Translated into economic effect, it may lead to partial and select lock down and curfews in certain areas resulting in lower economic growth than projected. RBI is also concerned for growth in the changed scenario. This may pull down India’s GDP growth by 1-2 percent in financial year 2022. All other economies will also meet the same fate. In almost all states, curbs have been imposed in the form of weekend curfews, night curfew or trimming the business timings and closure of certain activities to avoid contact and spread of virus. This will have an adverse impact on economic activities.

Owing to Omicron, fresh curbs have hit business activities adversely which will dent the economic growth as well as GST collections. This so called third wave induced distraction will also reduce mobility and impact service sector. However, Government has already announced third vaccine dose as precaution dose as well as vaccination for teenagers. It is expected that this time situation may be under control and not as deadly as last one.

States are demanding an extension of Compensation Cess for 5 more years owing to bad economic and fiscal state of affairs. While pandemic has affected revenue collections, their expenses have also gone up resulting in higher deficit.

There is a proposal being discussed about levy of 5% GST on electricity as per a report commissioned by NTPC, meaning thereby more losses to states.

Through the confusion about allowability of crypto currency in India continues with RBI clearly against it, there have been GST evasion cases reported in relation to crypto business. Crypto’s can be a big tax revenue source, if allowed to be in a legal form. Recently only, a tax evasion of about ₹ 50 crores was detected.

While GST new rates on textiles stand deferred, CBIC claims that GST rates on footwear is not a new but just removal of inverted duty structure which will be beneficial for footwear industry.

CBIC has issued a set of guidelines for initiating recovery proceedings under section 79 of the CGST Act, 2017 arising from amendment in section 75 thereof w.e.f. 01.01.2022. Transfer of funds to Consumer Welfare Fund (CWF) will also be made as per guidelines issued. GSTN has issued adversely for reporting of restaurant supplies in Form GSTR-3B and has also introduced new functionality of interest calculation in GSTR-3B.

Supreme Court has restored the covid limitation upto 28th February, 2022.

CBIC Guidelines for Recovery Proceedings in GST

CBIC has issued guidelines for recovery proceedings u/s 79 of the CGST Act, 2017 in relation to cases covered under explanation to section 75(12) of the Act.

  • As per section 75(12)  notwithstanding anything contained in section 73 or section 74 of the Act, where any amount of self-assessed tax in accordance with the return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered
  • As per explanation added w.e.f. 1.1.2022, “self-assessed tax” shall include the tax payable in respect of outward supplies, the details of which have been furnished under section 37, but not included in the return furnished under section 39.
  • Accordingly, where the tax payable in respect of details of outward supplies furnished by the registered person in GSTR- 1, has not been paid through GSTR-3B return, either wholly or partly, or any amount of interest payable on such tax remains unpaid, then in such cases, the tax short paid on such self-assessed and thus self-admitted liability, and the interest thereon, are liable to be recovered under the provisions of section 79.
  • In cases of genuine differences, there could be a mis-match between GSTR-1 and GSTR-3B (liability reported in GSTR-1> tax paid in GSTR-3B) in the current tax period.
  • In such cases, an opportunity needs to be provided to the concerned registered person to explain the differences between GSTR-1 and GSTR-3B, if any, and for short payment or non-payment of the amount of self-assessed tax liability, and interest thereon, before any action under section 79 of the Act is taken for recovery of the said amount.
  • Therefore, the proper officer may send a communication (with DIN) to the registered person to pay the amount short paid or not paid, or to explain the reasons for such short payment or non-payment of self-assessed tax, within a reasonable time, as prescribed in the communication.
  • If the concerned person is able to justify the differences between GSTR-1 and GSTR-3B, or is able to explain the reasons of such short-payment or non-payment of tax, to the satisfaction of the proper officer, or pays the amount such short paid or not paid, then there may not be any requirement to initiate proceedings for recovery under section 79.
  • If the said registered person either fails to reply to the proper officer, or fails to make the payment of such amount short paid or not paid, within the time prescribed in the communication or such further period as may be permitted by the proper officer, then the proceedings for recovery of the said amount as per provisions of section 79 may be initiated by the proper officer.
  • Where the said registered person fails to explain the reasons for such difference/ short payment of tax to the satisfaction of the proper officer, then the proper officer may proceed for recovery of the said amount as per provisions of section 79.

(Source: Instruction No. 01/2022-GST ; CBEC-20/16/05/2021-GST/23 dated 07.01.2022)

Restoration of Covid Limitation

  • Supreme Court has ordered to revive limitation extension order in view of rising Covid cases. Accordingly, Order dated 23.03.2020 is restored and it has been directed that in continuation of earlier orders dated 08.03.2021, 27.04.2021 and 23.09.2021, the period from 15.03.2020 till 28.02.2022 shall be excluded for the purpose of limitation as may be prescribed under any law – general laws or special laws in respect of all judicial or quasi judicial proceedings.
  • In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply.
  • The court ordered that:
  1.  The order dated 23.03.2020 is restored and in continuation  of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings.
  2. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022.
  3. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply.
  4. It has been further clarified that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under Sections 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 period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.

[Source: Supreme Court Order dated 10.01.2022 In Re: Cognizance for Extension of Limitation (2022) 1 TMI 385 (SC)].

Consumer Welfare Fund (CWF) Guidelines

  • Consumer Welfare Fund (CWF) is constituted under section 57 of CGST Act, 2017 and can be utilized as per section 58 by the Central Government for the welfare of consumers in prescribed manner.
  • Rule 97(7A) provides that the Committee, constituted shall make available to the Central Board of Indirect Taxes & Customs (Board) 50 percent. of the amount credited to the Fund each year, for publicity or consumer awareness on Goods and Services Tax.
  • Sub-rule (7A) of rule 97 provides that the Committee, constituted under sub-rule (4), shall make available to the Central Board of Indirect Taxes & Customs (Board) 50 per cent. of the amount credited to the Fund each year, for publicity or consumer awareness on Goods and Services Tax, provided the availability of funds for consumer welfare activities of the Department of Consumer Affairs is not less than twenty-five crore rupees per annum.
  • CBIC has issued guidelines for management and administrations of CWF money in terms of Rule 97 (7A) of CGST Rules, 2017.
  • 50% of the amount credited to the Fund shall be made available to the Board under rule 97(7A) of the CGST Rules, 2017 for publicity and consumer awareness on Goods & Service Tax (GST).

(Source: CBIC Guidelines)

Reporting of restaurant supplies notified under section 9(5) of CGST Act, 2017 by E-commerce Operators in GSTR-3B

  • “Restaurant Service” has been notified under section 9(5) of the CGST Act, 2017 along with other services notified earlier such as motor cabs, accommodation and housekeeping services wherein the tax on such supplies would be paid by Electronic Commerce Operator (ECO) if such supplies made through it, Notification No. 17/2021-Central Tax (Rate) and 17/2021-Integrated Tax (Rate) dated 18.11.2021 have been issued. Accordingly, the tax on supplies of restaurant service supplied through E-commerce operators, shall be paid by the e-commerce operator with effect from the 1st January, 2022.
  • Therefore, E-commerce operators and registered person would report taxable supplies notified under section 9(5) of CGST Act, 2017 and similar provisions in IGST/SGST/UTGST Act in the following manner.

Supplies reported by

Reporting in Form GSTR-3B

Supplies under 9(5) reported by ECO

Table 3.1(a) of GSTR-3B

Registered person/Restaurant supplying through ECO

Table 3.1(c) along-with nil and exempted supply

  • This is effective from 01.01.2022

(Source: GSTN dated 04.01.2022)

New GSTN functionality of Interest Calculator in GSTR-3B

  • As a facilitation measure for taxpayers & for assisting the taxpayers in doing a correct self-assessment, a new functionality of interest calculator will soon be released in GSTR-3B.
  • This functionality will arrive at the system computed interest on the basis of the tax liability values declared by the taxpayers.
  • The interest applicable, if any, on the tax liability declared in the GSTR-3B of a particular tax-period will be computed after the filing of GSTR-3B.
  • These system computed interest values will be auto-populated in the Table-5.1 of the GSTR-3B of the next tax-period. The facility would be similar to the collection of Late fees for GSTR-3B, filed after the Due date, posted in the next period’s GSTR-3B.
  • This functionality has a user-friendly interface, which informs the taxpayers regarding the manner of system computation of interest values for each tax-head.
  • It will also assist the taxpayers in doing correct computation of interest for the liability of any past period declared in the GSTR-3B for the current tax period, based on the details furnished by them on the GSTN portal.

(Source: GSTN dated 08.01.2022)

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By: Dr. Sanjiv Agarwal - January 14, 2022

 

 

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