RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

Economists now expect that economy may grow @ 27%, 10%, 59% and 6% in four quarters of 2021-22. Though pandemic may worsen before getting better, strict lock- downs are unlikely. SBI has also endorsed that Indian economy is now on the path of high growth.

Now UN economic and social commission for Asia & Pacific has stated in a report that Indian economy may grow @7% in FY 2022 against a contraction of 7.7% in last year, despite the Covid vaccine roll out. It says, despite a robust reduction in new Covid cases and start of vaccination, India’s economic output is expected to remain below 2019 bench mark. On Asia Pacific region as a whole, developing economies are expected to grow @5.9% in 2021 and 5% in 2022.

Accordingly to World Bank (WB), backed by private consumption and public investment, Indian economy is now expected to grow by 10.01% in 2021-22. It may be in the broad range of 7.5% to 12.5%. This is higher by 4.7% of WB’s earlier prediction.

RBI’s stance continues to keep inflation target unchanged @4% for next five years, i.e., from 2021 to 2026. However, output of eight infrastructure sectors has contracted by 4.6% in February, 2021 with all the core segments including coal, crude, oil, natural gas / refinery products and fertilizers seeing a decline.

CAG has recently commented that GST system is prone to input tax credit frauds due to complexities in the compliance system and inbuilt glitches in GSTN. CAG  has suggested to fix a definite time frame for rolling out of simplified GST returns forms. It states that GST return system is still a work in progress despite more than three years of its roll out. It has called for on ‘over haul’ of indirect taxation.

Infact further simplification of GST system is needed to boost collections. The states are also expected to step up their efforts to improve GST compliance to make GST functioning effective as well as efficient.

As we start a new financial year w.e.f. 1^st April, 2021 (FY 2021-22), many new changes are going to take place in GST – mandatory e-invoicing by registered persons with aggregate turnover of over ₹ 50 crore, mandatory QR code on B2C invoices, mandatory HSN Code on tax invoices of 4/6 digits etc. CBIC has issued a notification notifying waiver of penalty till 30^th June, 2021 for QR Code on B2C invoices.

The figures of GST collection for March, 2021 are out which are at the record highest so far since inception of GST in India on July, 2017. The gross GST revenue collected in the month of March 2021 is at ₹ 1,23,902 crore of which CGST is ₹ 22,973 crore, SGST is ₹ 29,329 crore, IGST is ₹ 62,842 crore (including ₹ 31,097 crore collected on import of goods) and Cess is ₹ 8,757 crore (including ₹ 935 crore collected on import of goods).

In line with the trend of recovery in the GST revenues over past five months, the revenues for the month of March, 2021 are 27% higher than the GST revenues in the same month last year. During the month, revenues from import of goods was 70% 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.

All states  and UT’s  in India except Daman & Diu and Andaman & Nicobar have shown positive growth. The revenue has grown highest in Ladakh followed by J & K, Arunachal Pradesh, Manipur, West Bengal, Kerala, Tamil Nadu etc.

With March, 2021 GST collection, the net collection has surpassed revised estimates for FY 202021. A sleep hike in GST collection is an indicator of fast economic recovery. GST showed growth of -41%, -8%, 8% and 14% in four quarters of 2020-21 on YoY basis. There is also an additional devolution of ₹ 45000 crores for FY 2020-21 to states which is a positive indicator.

On the other hand, refunds have been to the tune of ₹ 2.5 lakh crore as against ₹ 1.86 lakh crore in 2019-20. This is likely to act as a stimulus. Government claims that system has facilitated honest assessees to pay taxes without any problem and rising GST collection for six months straight can not be termed as a mere coincidence. Now, the number of complaints has reduced significantly. In total, on the one hand, there is greater compliance and, on the other, the economy is picking up, contributing to higher collection.

It is felt that and also claimed by Government that  GST revenues crossed above ₹ 1 lakh crore mark at a stretch for the last six months and a steep increasing trend over this period are clear indicators of rapid economic recovery post pandemic. Closer monitoring against fake-billing, deep data analytics using data from multiple sources including GST, Income-tax and Customs IT systems and effective tax administration have also contributed to the steady increase in tax revenue over last few months.

Penalty waiver for non-compliance with QR Code

• Capturing Dynamic Quick Response (QR Code) in the tax invoice issued by registered person in GST, whose aggregate turnover in a financial year exceeds ₹ 500 crore for B2C transactions was made earlier but penalty waived upto 31^st March, 2021.
• CBIC has notified waiver of monetary penalty in cases of non-compliance of requirement of having Dynamic QR Code in GST invoices. Notification No. 89/2020-CT dated 29.11.2020 has been amended accordingly.
• The waiver of penalty for such non-compliance has been extended from 31st March, 2021 to 30th June, 2021. It will now be applicable from 1st July, 2021.

(Source: Notification No. 6/2021-CT dated 30.03.2021 read with Notification No. 89/2020-CT dated 29.11.2020)

Opting for Composition Scheme for FY 2021-22 under GST

How to opt-in for Composition Scheme:

• The eligible registered taxpayers, who want to opt-in for composition scheme for the FY 2021-22, need to file FORM GST CMP-02 application, on or before 31st March, 2021, post login on GST portal. The taxpayers may navigate as follows:

Log-in>Services > Registration > Application to opt for Composition Levy>Filing form GST CMP-02>File application under DSC/EVC

• Once Form GST CMP-02 application is filed, the composition scheme will be available to the taxpayer, w.e.f. 1st April 2021.
• The taxpayers already opted in for composition scheme earlier are not required to opt in again for FY 2021-2022.
• Taxpayers who were regular taxpayers in previous FY, but are opting-in for composition scheme for 2021-22, must file Form GST ITC-03 for reversal of ITC on stocks of inputs, semi-finished goods and finished goods available with them, within 60 days from the effective date of opting in.

(Source: GSTN dated 24.03.2021)

No GST reporting in Tax Audit Report

• Tax audit clause 44 has been deferred by CBDT till 31st March, 2022.
• Clause 44 requires details of GST in tax audit report.
• The reporting under clause 44 of tax audit  report was kept in abeyance till 31st March, 2019 vide Circular No. 6/2018 dated 17.08.2018, to 31st March, 2020 vide Circular No. 9/2019 and to 31st March 2021 vide Circular No. 10/2020 dated 24.04.2020.
• This date has been further extended now upto to 31st March, 2022 vide Circular No. 5/2021 dated 25.03.2021 in view of the prevailing Covid pandemic across the county.

(Source: CBIC (TPL Division) Circular No. 5/2021 dated 25.03.2021)

Advisory on Tracking of Legacy Arrears

• As per section 142(8) of CGST Act, 2017, if any tax, interest, fine or penalty becomes recoverable under any proceedings of erstwhile laws, the same shall, unless recovered under the said law, be recovered as an arrear of tax under GST laws.
• For recovery of confirmed dues in pre-GST regime, recovery module u/s 142(8) of the CGST Act is now online which is mostly a data entry-specific functionality.
• The module is for recovery of legacy arrears by uploading a summary of demand order in FORM GST DRC-7A electronically on the common portal and creating demand in the Electronic Liability Ledger (Part-II).
• Demand can be rectified or modified, or quashed in any proceedings, including in appeal / review / revision, and a summary of same shall be uploaded in FORM GST DRC-08A and updated in Electronic Liability Ledger (Part-II).
• The CGST officers can create the liability for the legacy arrears of all the assesses who were earlier registered in their jurisdiction as Central Excise/ Service Tax assessees.

(Source: CBIC Advisory No. 02/2021 dated 03.03.2021 issued by Additional Director General of Systems and Data Management, Bengaluru)

Filing GSTR-1 (Q) for Jan-Mar 2021 under QRMP Scheme

• The taxpayers under QRMP scheme have a optional facility to file Invoice Furnishing Facility (IFF) in first two months of the quarter and file Form GSTR-1 in third month of the quarter. It cannot be filed after the end date (13^th of the month succeeding the IFF period). The document saved in IFF, after such date cannot be filed. Taxpayers are advised to declare such document in the GSTR-1 for the quarter.
• Hence, before filing of GSTR-1 for Jan-Mar-2021 quarter, the taxpayer must ensure that:

• Any saved but not filed/submitted IFF records for the first two months of the quarter i.e. Jan-2021 or Feb-2021 must be deleted using RESET button before filing GSTR-1 for Jan-Mar-2021 quarter. The deleted records should be added in GSTR-1 for Jan-Mar-2021 quarter after deleting the saved records from IFF. In future this may not be required as invoices already saved in any of the months on the quarter may be either deleted/moved to quarterly GSTR-1 by a functionality to be introduced shortly.
• Any submitted but not filed IFF for the month of Jan-2021 or Feb-2021 must be filed before filing GSTR-1 for Jan-Mar-2021 quarter.

(Source: GSTN dated 31.03.2021)

HSN Code/ service accounting code mandatory on invoices as per revised requirement from 1^st April 2021 for GST taxpayer with turnover of more than ₹ 5 crore

• With effect from 1st April, 2021, it has been made mandatory for a GST taxpayer, having turnover of more than ₹ 5 crore in the preceding financial year, to furnish 6 digits HSN Code (Harmonised System of Nomenclature Code), or as the case may be, SAC (Service Accounting Code) on the invoices issued for supplies of taxable goods and services. A taxpayer having turnover of upto ₹ 5 crore in the preceding financial year is required to mandatorily furnish 4 digits HSN code on B2B invoices. Earlier, the requirement was 4 digits and 2 digits respectively.
• With effect from 1st April, 2021, GST taxpayers will have to furnish HSN/SAC in their invoices, as per the revised requirement.
• HSN codes for goods at 6 digits are universally common. Therefore, common HSN codes apply to Customs and GST. Accordingly, codes prescribed in the Customs tariff are used for the GST purposes too (as has been specifically mentioned in the GST rate schedule).
• HSN search facility is also available on the GST portal.

(Source: Ministry of Finance PIB Release ID : 1708713  dated 31.03.2021)