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RECENT DEVELOPMENTS IN GST

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RECENT DEVELOPMENTS IN GST
By: Dr. Sanjiv Agarwal
January 5, 2021
All Articles by: Dr. Sanjiv Agarwal       View Profile
  • Contents

With the improved trends in agricultural production, manufacturing sector, consumption, GST collections etc, it is most likely that economy will recover from this year itself but India will have to ensure that such recovery is on a sustainable path. The Union Budget 2021-22 is just more than a month from now and offers an great opportunity for comprehensive and objective steps towards this end.

The 2020 has been a recessionary year unlike earlier ones, perhaps the longest one but not due to economic reasons. The sources of recession or slow down is neither financial nor economic one but the economy got adversely affected by Covid-19 pandemic, locally as well as globally. It destroyed social and productive capital badly, also resulting in human crises. The capital markets too reacted globally tanking with rise and spread of Covid and going up on hopes of vaccine.

Today GST completes exactly 42 months and there have been many ups and downs during this period of learning, improving and settling down. The GST collections could breach ₹ 1 lakh crore mark many times but not much beyond this figure. The highest collection is now only in December, 2020.

During 2020, more than three-fourth of the year was disturbed on account of Covid-19 pandemic  in India and elsewhere. Collection figures dwindled to below 35,000 lakh crore with negative growth of -24 percent, and then picked up to over Rs. one lakh crore per month on economic revival and sustained consumption levels. The recent recovery in October-December, 2020 indicates that our economy is more resilient then expected, could recover despite lower fiscal stimulus for country of this size and that economy was slow even in pre-covid times. Also, India has recovered better than many other countries.  However, India will have to find solutions to challenges such as stagnant exports, jobs, quality of education, infrastructure development and so on.

The GST revenue in December, 2020 saw the highest ever collection. The gross GST revenue collected in the month of December 2020 is ₹ 1,15,174 crore of which CGST is ₹ 21,365 crore, SGST is ₹ 27,804 crore, IGST is ₹ 57,426 crore (including ₹ 27,050 crore collected on import of goods) and Cess is ₹ 8,579 crore (including ₹ 971 crore collected on import of goods). The total number of GSTR-3B Returns filed for the month of November up to 31st December 2020 is 87 lakhs.

The GST revenues during December, 2020 have been the highest since the introduction of GST and it is the first time that it has crossed ₹ 1.15 lakh crore. The highest GST collection till now was ₹ 1,13,866 crore in the month of April 2019. The highest tax collecting states are Maharashtra, Karnataka, Tamil Nadu, Uttar Pradesh and Haryana.

GST e-invoicing which was made applicable w.e.f. 01.10.2020 has completed three months whereby more than 37000 tax payers generated more than 16.80 crore invoices (IRNs). This also signals movement of goods including agricultural production. The Government has reduced the aggregate turnover cut off to ₹ 100 Crores per annum for generation of IRN by the tax payers from 1st January 2021.

Central Government has recently made many changes in the GST rules. CBIC has amended CGST Rules vide Notification 94/2020-CT dated 22.12.2020 providing for cancellation of GSTIN, increase in time limit for GST registration, restriction on claim of ITC of 5% in place of 10%, mandatory payment of 1% tax from cash ledger, no refund under section 54 where GSTIN is suspended, one day validity to cover distance up to 200 Kms etc. The last date for filing annual return for FY 2019-20 has been extended upto 28th February, 2021.

GSTN has also enabled auto populated GSTR-3B returns form for ease of taxpayers. It has also issued operational advisory for the same. GSTN also added a new facility for ‘communication between taxpayers’ to provide communication platform for taxpayers whereby a recipient or buyer can ask his supplier to upload any particular invoice that has not been uploaded but is required by the recipient to avail input tax credit.

W.e.f. 1st January 2021, i.e., today, many firsts are being started in GST regime including mandatory e-invoicing for class of taxpayers, stricter ITC rules, QRMP scheme etc.

Today what is needed is a strong and continuous dose of fiscal stimulus across the board and to specific sectors, keeping in mind, both, short and long term goals of economy. The Union Budget should try to ensure balanced economic growth of all sectors of economy and society, besides, squeezing the inequalities.

New Rules / Amendment in CGST Rules

The Central Board of Indirect Taxes and Customs (CBIC) notified changes in CGST Rules which is called the CGST (Fourteenth Amendment) Rules, 2020 vide N.No. 94/2020-CT dated 22.12.2020.

  • The notification has empowered the officer to proceed with the cancellation of GSTIN where a taxpayer avails Input Tax Credit (ITC) exceeding that permissible in Section 16. Clause (e) has been inserted in Rule 21 of CGST Rules, 2017.
  • The CBIC has notified the increase in the time limit for GST Registration from 3 days to 7 days, which means that now the Department shall be required to review and grant registration within 7 days from the date of filing of the registration application. It is further notified that if the applicant does not do aadhaar authentication or where the Department feels fit to carry out physical verification the time limit for grant of registration shall be 30 days instead of 7 days.
  • The notification amended Rule 36(4) (w.e.f. 01.01.2021) in respect of restriction on claim of ITC wherein it has revised the limit to 5% instead of earlier 10%.
  • Mandatory payment of 1% from cash ledger if taxable supply exceeds 50 lakhs. The notification inserted Rule 59(5) which says that a registered person shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 if he has not furnished the return in FORM GSTR-3B for preceding two months.  
  • If the liability declared in GSTR 3B is less than that declared in GSTR 1 in a particular month, the Department may now proceed with the cancellation of GSTIN.
  • There might be some practical difficulties in implementing such a provision as there are a number of corrections that are made in GSTR 3B which may result in lower tax liability as compared with GSTR 1. The clause (f) newly inserted talks about details of outward supply to which we understand that taxable value and tax both should be in synchronization between GSTR 1 and GSTR 3B.
  • The words “opportunity of being heard” has been omitted from clause (2) of Rule 21A, which means now the taxpayer’s registration can be cancelled without the opportunity of being heard, where the proper officer (PO) has reasons to believe that the registration of the person is liable to be cancelled.
  • Significant deviation between details of outward supply between GSTR 3B and GSTR-1 or inward supplies (ITC) between GSTR 3B and GSTR 2B which indicate contravention of Act, the Department shall now serve a notice in FORM GST REG 31 to call explanation as to why GSTIN should not be canceled. Taxpayers shall now be required to submit their reply within 30 days of such notice being served to him.
  • Rule 86B (w.e.f. 01.01.2021) is in respect of restrictions on use of amounts available in electronic credit ledger. Rule 86B is applicable on the registered person whose value of taxable supply other than exempt supply and export, in a month exceeds ₹ 50 lakhs limit to be checked for each month As per said rule, taxpayers cannot use Input Tax Credit in excess of 99% of output tax liability. However, Rule 86B shall not be applicable on a registered person who deposited more than ₹ 1 lakh rupees as income tax under the Income-tax Act, 1961 in each of the last two financial years; the registered person has received a refund of more than ₹ 1 lakh rupees in the preceding financial year on account of export under LUT or inverted tax structure; cumulatively upto the said month in the current financial year registered person has discharged his output tax liability in cash which is in excess of 1% of the total output tax liability and this rule not applicable on Govt. Department, PSU, local authority. It is noteworthy that the taxpayer has to track each month that cumulative discharge of output tax liability in cash in the current Financial Year is more than 1% upto filing of return.
  • Where a GSTIN is suspended, no refund under section 54 of CGST Act 2017 can be availed by the taxpayer. This means that first GSTIN suspension proceedings have to be closed before applying for a refund.
  • Now, w.e.f. 01.01.2021 , only one day validity shall be granted to cover a distance up to 200 kms which was earlier 100 km, under e-way bill provision.

[Source:  Notification No. 94/2020-Central Tax dated 22.12.2020]

GST Annual Return for FY 2019-20

  • Central Government has extended the last date for filing annual return u/s 44 of the CGST Act, 2017 read with Rule 80 of the CGST Rules, 2017 (i.e. Form GSTR-9 and 9C) for the Financial year 2019-20 from 31st December, 2020 (today) to 28th February, 2021.
  • Thus Form 9 and 9C for Financial Year 2020 can now be filed upto 28th February, 2021
  • It has to be filed electronically through the common portal
  • Therefore, there is no change in the date for financial year 2018-19, i.e. it stands at 31.12.2018

[Source: Notification No. 95/2020-Central Tax dated 30.12.2020]

Extension of time limits

The Government has also extended the due date of furnishing of annual return under section 44 of the Central Goods and Services Tax Act, 2017 for the financial year 2019-20 from 31st December, 2020 to 28th February, 2021.

(Source: Press Release dated 30.12.2020)

Auto-population of e-invoice details into GSTR-1/2A/2B/4A/6A

1. Certain notified taxpayers have been issuing invoices after obtaining Invoice Reference Number (IRN) from Invoice Registration Portal (IRP) (commonly referred as ‘e-invoices’). Details from such e-invoices shall be auto-populated in respective tables of GSTR-1. Update on the status of such auto-population was last published on 30/11/2020.

2. For those taxpayers who had started e-invoicing from 1-10-2020, the auto-population of e-invoice data into GSTR-1 (of December 2020) had started from December 3rd, 2020.

In this regard, following is to be noted by those taxpayers:

  • The data in GSTR-1 is now available on T+3 day basis, i.e. for example, the data from e-invoices uploaded on 18-12-2020 would be visible in GSTR-1 on 21-12-2020.
  • The data in GSTR-1 is now available on T+3 day basis, i.e. for example, the data from e-invoices uploaded on 18-12-2020 would be visible in GSTR-1 on 21-12-2020.
  • The corresponding reflection of such e-invoice details in GSTR-2A/2B/4A/6A has also started.
  • The auto-population of e-invoice data into GSTR-1 is based on date of document (as reported to IRP).

For example, a document dated December, 30th, 2020 is reported to IRP on 3rd January, 2021 and where GSTR-1 for December, 2020 is not filed, then the details of that document will be available in the tables of GSTR-1 pertaining to December, 2020.

However, if the GSTR-1 for December was already filed by that date, then, the details of such document will be made available in the consolidated excel file downloadable from GSTR-1 dashboard (with error description as ‘Return already filed’). The taxpayer may thereupon take necessary action.

3. Owing to existing validations in GSTR-1, e-invoices reported with below commonly observed issues are not auto-populated in the tables of GSTR-1 but are made available in the consolidated excel file downloadable from GSTR-1 dashboard (with corresponding error description):

  • Supplier is found to be of type ISD/NRTP/TCS/TDS;
  • Supplier is found to be composition taxpayer for that tax period;
  • Document date is prior to Supplier’s/Recipient’s effective date of registration;
  • Document date is after Supplier’s/Recipient’s effective date of cancellation of registration;
  • Invoices reported as attracting “IGST on Intra-state supply” but without reverse charge;

4. Further, in certain cases, e-invoice details could not be processed (and hence were not auto-populated) due to data structure issues. These errors may be taken note of and shall be avoided while reporting the data to IRP.

  • Serial number of item shall not be reported as ‘0’
  • White space found in POS (Place of Supply State Code), e.g. “8” . Expected values were 08 and 8.

5. The detailed advisory with methodology of auto-population etc. is already made available on the GSTR-1 dashboard (‘e-invoice advisory’) and also e-mailed to relevant taxpayers.

6. It is once again reiterated that the auto-population of details from e-invoices into GSTR-1 is only a facility for the taxpayers. After viewing the auto-populated data, the taxpayer shall verify the propriety and accuracy of the amounts and all other data in each field, especially from the perspective of GSTR-1 and file the same, in the light of relevant legal provisions.

7. The taxpayers are once again requested to verify the documents auto-populated in GSTR-1 tables and consolidated excel and may share feedback on GST Self Service Portal, on below aspects:

1. All documents reported to IRP are present in excel

2. Status of each e-invoice/IRN is correct

3. All the details of document are populated correctly

(Source: GSTN dated 30.12.2020)

GST returns GSTR 1 and GSTR 3B

  • Registered taxpayer shall not be allowed to file return of outward supplies in Form GSTR 1 u/s 37 of CGST Act, 2017, if he has not furnished GSTR-3B return for preceding 2 months
  • Registered person shall not be allowed to file quarterly return u/s 39(1) of outward supplies of goods or services u/s 37 in Form GSTR 1 or under invoice furnishing facility, if he has not furnished GSTR 3 return for preceding tax period.
  • For registered taxpayers who are required to pay atleast 1% of tax in cash as per Rule 86B of CGST Rules 2017, return GSTR 1 u/s 37 or under invoice furnishing facility shall not be allowed to be furnished, if GSTR-3B is not filed for preceding tax period.

(Source: Notification No. 01/2021-Central Tax dated 01.01.2021)

Lowest and Highest ever collection of GST in 2020

Month

GST Collection (Rs. crore)

April , 2020 (lowest)

32,172/-

December, 2020 (highest)

1,15,174/-

 

Landmarks Events in GST in 2020

Month

Events

January

Provisions relating to National Appellate Advance Ruling Authority notified; Appointment of Revisional Authority under GST; Drive to block disputed Input Tax Credit against Fake Invoices

February

Frequent extension of all due dates because of COVID

April

Lowest ever GST collection  (₹ 32172 crore)

May

Application of force majeure clause for first time in contracts / orders etc.

August

Physical verification of business premises for registration; Compensation cess issue boils

September

Recovery of interest on gross tax liability withdrawn

October

E-invoicing made mandatory for businesses with turnover of ₹ 500 crore and above; QR Code made  mandatory for B2C transactions where supplier’s aggregate turnover in a financial year is more than ₹ 500 crore; Filing of annual return made optional for FY 19-20 for small taxpayers whose aggregate turnover less than ₹ 2 crores; Extension of due dates to file GSTR-9 & GSTR-9C for F.Y. 2018-19 to 31.12.2020

November

Borrowing by Centre for the first time to meet compensation cess shortfall; E-invoicing notified for taxpayers having aggregate turnover exceeding ₹ 100 crore w.e.f. 01.01.2021; QRMP Scheme notified w.e.f. 01.01.2021

December

Levy of GST on lotteries upheld by Supreme Court; Curbs on fake invoices; Date for GSTR -9 extended till 28 February, 2021; Highest ever GST collection (₹ 115174 crore)

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By: Dr. Sanjiv Agarwal - January 5, 2021

 

 

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