GST PROPOSALS IN BUDGET 2022 (PART-I)

[Dr. Sanjiv Agarwal]

The Finance Minister has introduced the Finance Bill, 2022 in Lok Sabha on 1st February, 2022. Changes in Customs, Central Excise, GST law and rates have been proposed through the Finance Bill, 2022.

Highlights

The highlights of major changes are as follows:

• Buoyant GST collections during 2021-22 (Rs. lakh crore)
• Customs administration to be fully IT driven in SEZs
• Phasing out concessional rates in capital goods and project imports gradually and apply a moderate tariff of 7.5%
• Review of customs exemptions and tariff simplification
• Customs duty rates are being calibrated to provide a graded rate structure to facilitate domestic electronics manufacturing
• Rationalization of exemptions on implements and tools for agri sector manufactured in India
• Extension of customs duty exemption to steel scrap
• Reduction of duty on certain inputs required for shrimp aquaculture.

Amendments in GST

Amendments carried out in the Finance Bill, 2022, vide clauses 99 to 113 will come into effect from the date when the same will be notified, as far as possible, concurrently with the corresponding amendments to the similar Acts passed by the States & Union territories with legislature, until stated otherwise.

Clause wise proposals

Finance Bill, 2022 contains claims from 99 to 123 in relation to changes proposed in GST laws:

Additional Conditions for ITC u/s 16 of CGST Act, 2017

Finance Bill 2022 vide Clause 99 seeks to amend section 16 of CGST Act, 2017, which provides for eligibility and conditions for taking input tax credit as follows :

• New clause (ba) is added in sub-section (2) to mean that no registered person shall be entitled to take credit of any input tax in respect of goods or services or both unless the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted. It thus provide that input tax credit with respect to a supply may be availed only when such credit has not been restricted in the details communicated to the registered person under section 38.
• Since section 43A on procedure for furnishing return and availing input tax credit is also being deleted by Finance Bill, 2022, reference to section 43A is deleted.
• In sub-section (4), time limit for taking ITC is extended upto 30^th November of the following financial year.

[Source: Clause 99 of Finance Bill, 2022]

Cancellation of Registration

• Clause 100 of Finance Bill, 2022 proposes to amend section 29 of CGST Act, 2017 so as to :
  1. Amend section 29(2)(b) of the Central I Goods and Services Tax Act so as to provide that the registration of a person paying tax under section 10 is liable to be cancelled if the return for a financial year has not been furnished beyond three months from the due date of furnishing of the said return.
  2. Amend section 29(2)(c) of the CGST Act, 2017 so as to provide for prescribing continuous tax periods for which return has not been furnished, which would make a registration liable for cancellation, in respect of any registered person, other than a person specified in clause (b) thereof.

• Thus, in case of composite dealers, registration may be cancelled if he fails to furnish returns for any Financial Year beyond a period of 3 months from the due date of filing return (in place of presently three consecutive tax period- annual).
• For other tax payers, Government will prescribe the period of non-filing for a continuous period by way of rules (in place of continuous period of 6 months, presently). 

[Source: Clause 100 of Finance Bill, 2022]

More time for credit notes

• Clause 101 of the Finance Bill, 2022 proposes to amend section 34 on credit and debit notes of the CGST Act, 2017.
• This amendment seeks to amend sub-section (2) of section 34 of the Central Goods and Services Tax Act so as to provide for thirtieth day of November following the end of the financial year, or the date of furnishing of the relevant annual return, whichever is earlier, as the last date for issuance of credit notes in respect of any supply made in a financial year.
• Thus, credit notes in relation to supplies made in a financial year can be issued upto 30^th November of following financial year as against 30^th September presently.
• It may be noted that this extension of time is only for credit notes and not debit notes.

[Source: Clause 101 of Finance Bill, 2022]

Communication of Details of Inward Supplies and ITC

• Clause 103 of Finance Bill, 2022 has substituted new section 38 in CGST Act, 2017.
• Sub-section(1) seeks to empower the Central Government to make rules to specify other supplies as well as the manner, time, conditions and restrictions for communication of details of inward supplies and input tax credit to the recipient by means of an auto-generated statement and to do away with two-way communication process in return filing.
• Sub-section (2) seeks to provide details contained in auto generated statement i.e.,
  1. Details of inward supplies in respect of which credit of input tax may be available to the recipient; and
  2. Details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the recipient, on account of the details of the said supplies being furnished under sub-section (1) of section 37.
• This change is going to be harsh on taxpayers and may invite litigation.
• This shall be effective from notified date after enactment of Finance Bill, 2022.

[Source: Clause 103 of Finance Bill, 2022]

Furnishing return under section 39

• Clause 104 of Finance Bill, 2022 proposes to amend section 39 of CGST Act, 2017, relating to furnishing of returns.
• The amendments proposed are:

• Section 39(5)- to provide that the non-resident taxable person shall furnish the return for a month within thirteen days after the end of the month or within seven days after the last day of the period of registration specified under section 27(1), whichever is earlier.
• Section 39(7)- to substitute the first proviso to sub-section (7) so as to provide an option to the persons furnishing return under proviso to sub-section (1) to pay either the self-assessed tax or an amount that may be prescribed.
• Section 39(9)- removing reference of section 37 and section 38 and to amend the proviso to said sub-section (9) so as to provide for thirtieth day of November following the end of the financial year, or the date of furnishing of the relevant annual return, whichever is earlier, as the last date for the rectification of errors in the return furnished under section 39.
• Section 39(10)- to provide for furnishing of details of outward supplies of a tax period under section 37(1) as a condition for furnishing the return under section 39 for the said tax period.

• Accordingly,  it is proposed that :

• Non residents to furnish return by 13^th day of following month (presently 20^th day)
• Option to pay tax as per self assessment or amount prescribed (Rules to come)
• Rectification of errors in return under section 39 can be done upto 30^th November of following financial year (presently upto 30^th September)
• Return under section 39 can not be filed without filing return under section 37 for the relevant period. This is a pre-condition. 

[Source: Clause 104 of Finance Bill, 2022]

Provisional claim of ITC to be withdrawn

• Clause 105 of Finance Bill, 2022 proposes to substitute section 41 of CGST Act, 2017 on availment of input tax credit on provisional basis.
• This amendment seeks to substitute a new section for section 41 of the Central Goods and Services Tax Act so as to do away with the concept of "claim" of eligible input tax credit on a "provisional" basis and to provide for availment of self-assessed input tax credit subject to such conditions and restrictions as may be prescribed.

• Thus, if output tax liability has not been discharged by the supplier, buyer has to revenue the ITC alongwith applicable interest but on payment of output tax liability by the supplier later, ITC can be reavailed by the recipient.

• Conditions and restrictions shall be prescribed by way of rules.

[Source: Clause 105 of Finance Bill, 2022]

Two way communication in returns to go

• Clause 106 of Finance Bill, 2022 has proposed to omit the following section of CGST Act, 2017:

Section	Relating to
42	Matching, reversal and reclaim of ITC
43	Matching, reversal and reclaim of reduction  in output tax liability
43A	Procedure for furnishing return and availing ITC

• This amendment  seeks to omit section 42 of the Central Goods and Services Tax Act relating to matching, reversal and reclaiming of input tax credit so as to do away with the concept of "claim" of eligible input tax credit on a "provisional" basis and subsequent matching, reversals and reclaim of such credit. It further seeks to omit section 43 relating to matching, reversal and reclaim of reduction in output tax liability so as to do away with two-way communication process in return filing. It also seeks to omit section 43 A.

• Thus, with this amendment, two way communication in return filling will be done away with as matching mechanism has been prescribed in section 41 of CGST Act, 2017 now.

[Source: Clause 106 of Finance Bill, 2022]

Levy of Late Fees for TCS Return

• Clause 107 of the Finance Bill, 2022 has proposed to amend section 47 of CGST Act, 2017 dealing with levy of late fees
• It proposes to provide for levy of late fee for delayed filing of return under section 52 and to remove reference of section 38 as there is no requirement of furnishing details of inward supplies by the registered person under the said section 38.
• Now, there will be late fee payable for delay in filling of return of Tax Collected at Source (TCS) in Form GSTR-8 as per section 52 of CGST Act, 2017.
• Further, reference to section 38 and ‘inward supplies’, will get omitted as section 38 has also been amended.
• Late fee shall be ₹ 100 for each day of default subject to a maximum of ₹ 5000.

[Source: Clause 107 of Finance Bill, 2022]

(To be continued….)

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