Amendments proposed in 43rd GST Council Meeting

by | Jan 27, 2022 | Outlook

Recently, Government uploaded Agenda of 43rd GST Council Meeting held on May 28, 2021. Agenda contains various amendments proposed by the Council in the Central Goods and Services Tax Act, 2017 (‘CGST Act’). The changes are likely to be introduced in Budget 2022 or near future. We have tabulated below some important amendments as under:

S. No. Nature of Change Present Provisions Proposed Amendment NITYA Comments
1 Insertion of new condition in Section 16(2) of the CGST Act dealing with availment of ITC on goods or services A registered person needs to fulfil various conditions for availing ITC on goods or services such as possession of invoice, receipt of goods or services, matching of invoices in GSTR-2B, payment of tax by supplier and furnishing GSTR-3B.

The Council has proposed insertion of below condition for availment of ITC:

‘(e) input tax credit in respect of said supply has not been restricted in the details communicated to such registered person under Section 38’.

The Council has also proposed to amend Section 38 to make GSTR-2B a legal statement for availing ITC and disallow ITC on supplies procured from following categories of suppliers:

(i)     Supplier making supply within prescribed period of taking GST registration; or

(ii)    Supplier defaulting in payment of tax for prescribed continuous period; or

(iii)   Supplier paying output tax lesser than tax reported in GSTR-1 beyond prescribed variance limit; or

(iv)   Supplier availing ITC in excess of ITC available in GSTR-2B beyond prescribed variance limit; or

(v)    Supplier defaulting in discharging output tax liability as required under Rule 86B of the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’); or

(vi)   Other class of persons as prescribed

With this amendment, Government would further restrict ITC for any violation by supplier. Format of GSTR-2B is likely to be substantially updated in line with these check points.

If taxpayers will be informed on 13th of succeeding month that ITC on a particular procurement is not available, there will be significant working capital implications (specifically with no buffer being available).

Notably, basis jurisprudence under erstwhile law, bona-fide taxpayers can challenge conditions of denial of ITC even if ITC is not reflected in GSTR-2B or where GSTR-2B reflects any ITC as ineligible.

2 Extension in time limit for availment of ITC under Section 16(4) of the CGST Act

Presently, a registered person can avail ITC on any invoice or debit note by earlier of following dates:

·        Due date of GSTR-3B of September of succeeding Financial Year (‘FY’) to which invoice or debit note pertains; or

·        Furnishing of annual return for relevant FY

The Council has proposed to extend time limit for availment of ITC to 30th November of succeeding FY. Post amendment, ITC for a FY can be availed in any of GSTR-3B filed till 30th November of succeeding FY.
3 Extension in time limit for declaring details of credit notes

Presently, a registered person can declare details of credit notes up to 30th September of succeeding FY in which supply is made.

 

The Council has proposed to extend time limit for declaration details of credit notes to 30th November of succeeding FY.

 

Government has proposed to extend all time limits up to 30th November to bring uniformity under GST law.

 

4 Extension in time limit for rectification of details furnished in GSTR-1 and GSTR-3B

Presently, a registered person can rectify details furnished in GSTR-1 and GSTR-3B up to 30th September of succeeding FY.

 

The Council has proposed to extend time limit for rectification of details furnished in GSTR-1 and GSTR-3B to 30th November of succeeding FY.

 

5 Restriction on filing of GSTR-1 and GSTR-3B

For GSTR-1 – A registered person can furnish GSTR-1 even if GSTR-1 for earlier tax period is not furnished.

For GSTR-3B – A registered person cannot furnish GSTR-3B if GSTR-3B for previous tax period is not furnished.

For GSTR-1 – A registered person shall not be allowed to furnish GSTR-1 if GSTR-1 for previous tax period is not furnished.

For GSTR-3B – A registered person shall not be allowed to furnish GSTR-3B if GSTR-3B for previous tax period or GSTR-1 for said tax period is not furnished.

 

Barring filing of GSTR-3B when GSTR-1 for relevant tax period is not filed, is a logically correct amendment.

 

6 Discontinuation of concept of provisional ITC Section 41 of the CGST Act provides that a registered person can take ITC in GSTR-3B and such ITC is credited in Electronic Credit Ledger on provisional basis. This provision is not in force presently with indefinite postponement of GSTR-2.

The Council has proposed to omit concept of provisional ITC.

Further, the Council has proposed reversal of ITC with interest if supplier has not paid tax. If supplier subsequently pays tax, then recipient can re-claim such reversed ITC.

The concept of provisional ITC is rightly being discontinued.

Further, condition that recipient needs to reverse ITC if supplier has not paid tax clearly indicates that this condition need not be satisfied at time of availing ITC. Re-availment of ITC wherein supplier pays tax subsequently is also welcome amendment which was missing earlier. Time limit of September of next FY will not apply to re-availment of ITC.

 

7 Fresh levy of interest on ITC availed and utilized Presently, interest under Section 50(3) of the CGST Act is levied only on undue / excess claim of ITC and reduction in tax liability as per matching provisions envisaged under Section 42 and 43. The Council has proposed to amend Section 50(3) to levy interest on ITC wrongly availed and utilized (for any reason). As per Press Release issued post 45th GST Council meeting, this amendment will be introduced retrospectively from July 1, 2017. Presently, no interest is leviable on ITC claimed erroneously. If this amendment is brought retrospectively and department proposes to levy interest for past period, the same is amenable to challenge. Further, taxpayers can claim refund for any interest paid for past period (specifically where ITC is availed but not utilized).

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