No two-way communication in GST returns

Section 38 has been substituted whose title is now ‘Communication of details of inward supplies and input tax credit’. The section prescribes the manner, conditions and restrictions for availing input tax credit and also governs the communication of details of inward supplies and input tax credit to the recipient via GSTR-2B and does away with a two-way communication process in return filing. In the original GST law, the seller’s details from GSTR-1 were expected to be populated in the GSTR-2, and the buyer had to accept the same before claiming the same in GSTR-3B. However, since the complexity of the GST return filing process was opposed, new GSTR-2A and GSTR-2B auto-statements were introduced which did away with the process. Since the same has been successful so far, the budget has removed the earlier provisions. 

Additional condition for availing ITC

Section 16(2) has been amended to introduce a new clause (ba) with an additional condition to avail input tax credit. Accordingly, ITC can be availed only if the same is not restricted under Section 38, as per the details communicated to the buyer in GSTR-2B. GSTR-2B is now the legal document for determining input tax credit eligibility.

Amendment of invoices, debit notes and credit notes

Section 16(4) has been amended to provide more time to the taxpayers to amend and claim the input tax credit for invoices and other documents for the financial year concluded until November 30 of the following financial year, as against September 30, currently being followed. A taxpayer cannot utilise ITC on any invoice or debit note after November 30 following the end of the financial year to which such invoice pertains. However, this is subject to the date of filing of annual return, if the same is filed earlier.

Cancellation of GST registration by officers

Section 29 has been amended to provide that the GST registration can be cancelled by the officer if a composition taxable person (paying tax under Section 10) has not filed GSTR-4 for a financial year within 3 months from the April 30 of the following financial year. For all other taxpayers, default in filing returns for any continuous tax period (as may be prescribed by way of rules) can result in cancellation of GST registration.

Stricter filing of tax returns

Section 37 provides for rules to file the return of outward supplies i.e. the GSTR-1. Similarly, section 39 provides rules to file a summary return of inward and outward supplies, i.e. the GSTR-3B. New sub-sections 37(4) and 39(10) have been added to state that taxpayers will be not be allowed to furnish their details of outward supplies for a tax period if the same remains pending for any previous tax period. The amendments aim at ensuring that all pending returns of a taxpayer are filed before filing any new return. Also, taxpayers will have to sequentially file returns without skipping tax periods. Besides, filing of GSTR-1 is now also mandatory for filing GSTR-3B for the same tax period.

Concept of ‘Provisional ITC’ deleted

Central Board of Indirect Taxes and Customs (CBIC) has already stated via a notification that taxpayers can no longer claim provisional ITC from January 1, 2022. The budget further cleans up the law by amending section 41 of the CGST Act to completely do away with the concept of provisional ITC and also omits sections 42, 43 and 43A to corroborate the same. Sections 42 mentioned rules regarding matching, reversal and reclaim of ITC, section 43 mentioned rules regarding matching, reversal and reclaim of reduction in output tax liability and section 43A mentioned rules regarding the procedure for furnishing returns and availing ITC. Thus, the input tax credit can now be claimed only if it reflects in GSTR-2B. Taxpayers will now have to accurately report ITC each month as excess ITC could lead to scrutiny and notices.

Reduction in rate of interest

Notification No. 13/2017 – Central Tax, dated June 28, 2017, Notification No. 6/2017 – Integrated Tax, dated June 28, 2017, and Notification No. 10/2017 – Union Territory Tax are being amended retrospectively with effect from July 1, 2017, to notify rate of interest as 18%, instead of 24% specified earlier. Further, interest shall be levied only if the interest on input tax credit is wrongly ‘availed and utilized’ instead of merely ‘availing’ it. This will be implemented retrospectively from July 1, 2017.

The due date for filing GSTR-5 

A non-resident taxable person is now expected to file a monthly return in GSTR-5 by the 13th of the following month, instead of the 20th of the following month.

Waste generated from fishmeal exempt

The CGST, UTGST and IGST on the supply of unintended waste generated during the production of fish meal (falling under heading 2301), except fish oil, is now exempt for the period from July 1, 2017, to September 30, 2019 (both days inclusive). However, if tax has been already collected, the same cannot be claimed for a refund.

Service of granting liquor license is Non-GST supply

When State Governments grant alcoholic liquor licenses against consideration in the form of license fees or application fees, the activity or transaction will neither be a supply of goods nor a supply of service. Notification No. 25/2019 – Central Tax (R) dated September 30, 2019, and similar notifications in IGST and UTGST already exempt the same prospectively, however, now the provisions shall apply with retrospective effect from July 1, 2017. However, no refund shall be given for tax that has been collected.

Refund of unutilised ITC

Section 54 of the CGST Act has been amended to provide that refund of any balance in the electronic cash ledger will be made as per rules that will be prescribed for this purpose. The time limit for claiming a refund of the input tax credit on inward supplies of goods or services or both under section 55 will also be ‘two years from the last day of the quarter’ in which the said supply was received. The scope of GST officers has been extended to withhold refunds or recover taxes from any refund granted to the taxpayer.

Utilisation of ITC available in the electronic credit ledger

Section 49 of the CGST Act has been amended to provide restrictions for utilizing the amount available in the electronic credit ledger. The rules in this regard will be prescribed later. However, more importantly, the section now allows the transfer of the amount available in electronic cash of a registered person to the electronic cash ledger of a distinct person i.e. another GSTIN of the same person. The amendments also provide that the maximum proportion of output tax liability to be discharged through the electronic credit ledger will be prescribed by way of rules. Currently, a maximum of 99% of the tax liability can be paid by using an electronic credit ledger, while 1% of the outward tax payable must be mandatorily paid by challan, in the case of specified taxpayers.