Challenge to retrospective amendment in CGST Rules – replacing GSTR-3 with GSTR-3B
This is to apprise you regarding the legal sanctity of the amendment brought vide Notification No. 49/2019-Central Tax dated October 9, 2019 amending Rule 61(5) of the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’). This amendment replaced Form GSTR-3 with Form GSTR-3B retrospectively from July 1, 2017. We discussed the implications of this amendment in our updates dated October 30 and 31, 2019 (reproduced in this link for ready reference).
Section 164 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) empowers the Government to make Rules to carry out the provisions of this Act on the recommendation of the GST Council. Section 2(87) of the CGST Act defines the term ‘prescribed’ as rules made under this Act on the recommendation of the GST Council.
Hence, it is imperative to analyze whether GST Council recommended the retrospective amendment of replacing Form GSTR-3 with Form GSTR-3B or not.
As per Agenda Item 7(vii) of the Minutes of 37th GST Council Meeting dated September 20, 2019 published recently, the GST Council recommended to amend Rule 61(5) of the CGST Rules to prescribe Form GSTR-3B as a return under Section 39(1) of the CGST Act retrospectively with effect from July 1, 2017. This amendment was proposed to eliminate the challenge of the legality of tax or interest liability.
NITYA’s Comments: The Minutes of 37th GST Council brings a clarity as to the fact that the mandatory process of recommendation of GST Council was duly abided by the Central Government while retrospectively amending the CGST Rules. Thus, the taxpayers cannot challenge the legality of the amendment on this ground.
Notably, with regards to interest liability, Section 50 of the CGST Act specifically provides for payment of interest if taxes are not paid within the ‘prescribed period’. Section 49 of the CGST Act, which specifically deals with payment of taxes, does not prescribe any timeline within which taxes need to be paid. Accordingly, the liability to pay interest under Section 50 of the CGST Act can still be contested. Please refer to NITYA’s Insight | Issue 57 | Retrospective amendment in the CGST Rules – impact on liability to pay interest on delayed payment of taxes dated October 31, 2019 for our detailed analysis on this issue.