Changes Related to Input Tax Credit
- Earlier, the due date of availment of Input tax credit for any financial year was provided as the due date of furnishing of the return under section 39 for the month of September i.e. 20th October in case of monthly return filers and 22nd / 24th October in case of quarterly return filers. The due date of availing ITC is now extended upto 30th November.
- In GSTR-2B, if the ITC appears in Restricted category, the same cannot be availed by the registered person. This is a new condition which is to be satisfied for availment of input tax credit.
- The concept of provisional ITC is removed and ITC availed in monthly returns would be considered as final.
- ITC may have to be reversed along with interest (ITC is utilized), if not paid by supplier.
- ITC can be re-availed once the supplier pays the tax.
Cancellation of registration
- Composition Taxpayer – Currently, the registration can be cancelled for a composition taxpayer if they do not furnish their return for three consecutive tax periods. Therefore, the criteria for cancellation of registration is that GSTR-4 has not been filed for three months from the due date of furnishing such return.
- Normal Taxpayer – Currently, the registration can be cancelled for a normal taxpayer if they do not furnish their return for six consecutive months. The criteria for cancellation of registration is that the returns have not been filed for the prescribed period as per the rules. The rules are now prescribing the time period of six consecutive months. For QRMP taxpayers, the said limitation is two tax periods.
Time Limit extended for certain matters
- Currently, the due date for issuance of credit note is September following the end of the financial year to which the supply relates. The said due date for credit note is extended to 30th November following the year in which the supply was made.
- Currently, the last date for rectification of any error or omission for any financial year has been provided as the due date of filing September return of the next financial year i.e. 20th October in case of monthly return filers and 22nd / 24th October in case of quarterly return filers. This date is now being modified to 30th November.
- Earlier, time limit for carrying out any rectification of any omission or incorrect particulars in Form GSTR 8 was kept based on the due date for furnishing of statement for the month of September following the end of the financial year or the actual date of furnishing of the relevant annual statement, whichever is earlier.
- The due date of filing GSTR-5 for registered non-resident taxable person would now be 13th rather than 20th of the next month.
Two Way Communication Process
- The GST law had prescribed for two-way communication process between the supplier and recipient through GSTR-1, 1A, 2A and 2. Such two-way communication could never be brought into force by the government. Consequently, the Government has removed Section 42 and 43 wherein such communication process was provided.
- Section 43A is part of the CGST Act 2017 but has not been notified till date. This provision had been enacted when the new GST returns were in the pipeline. However, the idea of the new returns was scrapped. Therefore, Section 43A is now removed from the GST law.
Transfer of balance in ECL within same PAN and legal provision backing Rule 86B
- The taxpayer can transfer the balance of IGST and CGST in electronic cash ledger to any other GSTIN in the same PAN, subject to that there is no unpaid liability in the electronic liability ledger.
- Provisions have been inserted to provide legal backing for Rule 86B (1% of tax liability mandatory to be paid in cash by specified persons even though ITC is available).
Applicability of interest
- Interest would be applicable only upon ITC wrongly availed and utilized due to any reason and not only due to the matching concept.
- This is a welcome move as it will put to rest those disputes wherein the Department had been charging interest for mere availment of ITC without its utilization. If the balance is present in the electronic credit ledger after its availment, no interest can be charged on it. This amendment is notified with effect from 1st July 2017.
- Further, Interest rate under Section 50(3) of CGST Act, 2017 as per Notification No. 13/2017-Central Tax dated 28th June 2017 is currently 24%. Now, the interest rate is down to 18% with retrospective effect.
Refund Related Changes
- Extension of time-limit for filing of refund application in case of specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation, Consulate or Embassy of foreign Countries. This is a beneficial amendment, and the time-limit is increased to be kept on par with other situations where the refund is granted. In our view, this benefit would be eligible even for the refund applications that are filed for the past period where the time-limit exceeds 6 months provided that the application is filed after the amendment is made effective.
- The scope of withholding of or recovery from refunds is extended for all types of refund.
- Relevant date for refund against supplies made to SEZ units and SEZ developers is provided. Since there was no specific provision in the law providing for the relevant date for computation of 2 years, the taxpayers were facing harassment at the hands of the refund sanctioning officer with each officer interpreting the time-limit as per its whims and convenience. This amendment is a welcome move and would lead to clarity among the taxpayers and also the field formations in granting the refund for taxes paid for supply of goods or services to SEZ.
Sequential filing of GST returns
- Tax period-wise sequential filing of details of outward supplies is required. Taxpayer cannot file returns of subsequent period if the previous period’s returns were not filed. (Amendment in Section 37 of CGST Act,2017)
- Likewise, GSTR 1 for the subsequent month will not be allowed until GSTR 3B for the previous month is filed.
The following is the summary of the new Section 38:
1. Details of GSTR-1 filed / IFF furnished by the supplier would be available to the recipient in such form (GSTR-2B) and manner, and subject to conditions and restrictions as prescribed.
2. GSTR-2B will consist of two parts – ITC available and ITC not available to the recipient.
3. The following may be the reasons for classifying the ITC as ‘Not available’ as per GSTR-2B in the hands of the recipient:
a. Inward supply is received from a supplier having new registration (upto the prescribed time period)
b. Supplier has defaulted in payment of tax and the default has continued for the prescribed time period
c. Tax paid in GSTR-3B Is lower than the output tax shown in GSTR-1 by the prescribed limit
d. Inward supply is received from a supplier who has taken more ITC in GSTR-2B than in GSTR-3B by the prescribed limit
e. Supplier has paid higher proportion of taxes from his electronic credit ledger than what is allowed as per law
f. Other Notified persons
Disclaimer: This Article is only a knowledge sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update etc if any.
Published on: October 6, 2022