Key changes in GST Amendments in Budget 2022

Top Changes made under GST Amendments in Budget 2022

Under Budget 2022, certain relaxation, along with certain strictness were introduced by the Finance Minister for the GST Registered Taxpayers. Starting with the relaxations provided –

1. Govt Proposes for the extension of deadline for claiming ITC.

Now in order to undertake such amendment, section 16(4) of CGST Act would be revised and hence, it will allow the registered taxpayers to claim Input Tax Credit latest by the earlier of 30th November of the following year, or filing of annual return. Earlier, the said due date was September of the following year.

• Hence, such an amendment would provide taxpayers with an additional 40 days, which will help them, secure/reconcile ITC to great extent.

2. Extension of period for issuance of credit note, along with the rectification of outward supplies already reported by a taxable person.

Now in order to undertake such amendment, section 32(2) of CGST Act be amended and hence the deadline to rectify the inaccuracies and record sales return, along with rectification of the deficiency in supply recorded in GSTR 1, by means of issue of Credit Notes stands extended till 30th November of the succeeding financial year.

• Hence, such an amendment would provide taxpayers with an additional period for rectification of their discrepancies and issuance of Credit Note.

3. GST Registered taxpayers would be eligible to transfer their surplus E-Cash Ledger

GST Registered taxpayers would be eligible to transfer their surplus E-Cash Ledger Balance to other GSTIN being registered under same PAN. Hence, under such amendment, the taxpayers would be allowed to transfer their funds from one Distinct Person’s E-Cash Ledger to another Distinct Person’s E-Cash Ledger.

• Hence, individuals with various GSTINs, being registered on same Pan, would now be able to transfer their E-cash balance from one GSTIN to another GSTIN registered under the same PAN.

4. Elimination of the need for two-way communication.

Now in order to undertake such amendment, section 37(2) of CGST Act be removed, thereby removing the requirements of Sections 42, 43, and 43A and hence eliminating the two-way communication procedure at the time of return filing.

4. Lowering of interest rate under certain instances.

So for this, Section 50(3) of CGST Act would be required to be amended retrospectively, and the same shall take effect from July 1, 2017. Under this, the rate of interest levied on the incorrectly claimed and utilized input tax credits stand reduced from 24% to 18% rate of interest.

• Hence, such an amendment would provide a greater clarification about the applicability of interest rate, as it strives to put an end to various lawsuits around the country. Also, such an amendment would strive to provide a sought of confirmation to the taxpayer about the rate of interest that would be livable, wherein ITC is availed but has never been utilized.

6. Changes in the refund procedure.

The Government of India proposes to amend Section 54 of the CGST Act. Hence under this, the form and manner of Refund in respect of excess balance in the E-Cash Ledger has been provided for. Other thing to note is that 2 years be provided from the last day of the quarter in which the supply was received, in order to claim refund of tax paid on such inward supplies.

Also, with the insertion of new clause (2)(ba), further clarification has been provided for the relevant date for filing reimbursement claims, in respect of supplies made to a Special Economic Zone unit or developer.

• Hence, such a regulation strives to provide for separate procedure of refund of cash balance

Relaxations provided to GST Registered Taxable Persons

Strictness or harshness introduced by Govt on GST registration

1. Tightening rules for claiming ITC.

For this, the government is proposing to introduction a new concept of Restricted Credit, and for such an introduction, addition of Section 16(2)(ba) is proposed under CGST Act. Hence, the specific amounts of outward supplies submitted by the registered taxpayers, along with the ITC available with the recipient on such supplies be provided in an auto-generated document, which has been redesigned under Section 38 of CGST Act.

• Such an auto-generated document strives to provide emphasize on transactions in respect of which recipient has restricted credit in the scenarios namely –
  • The transactions wherein credit cannot be availed by any vendor within specified time of registration. Or,
  • Transactions wherein credit cannot be availed by any vendor who defaulted in making payment of tax and the same stands in arrears for the said period. Or,
  • Wherein the credit cannot be availed for transactions by a vendor who has differences in GSTR 1 and GSTR 3B and the same exceeds the limit specified under the act. Or,
  • the transactions where the credit cannot be availed by a vendor who has differences in GSTR 2 and GSTR 3B and the same exceeds the limit specified under the act.
  • Where the credit is not available in respect of transactions made by a person, who failed to settle their export tax debt in the ratio of cash and credit being required under Section 49(12) of CGST Act.

Registered organizations would now be required to select their associated vendors with greater caution. In case of Non-compliance of behalf of vendor, the same will have a proportional influence on company’s ability to claim ITC, and hence, it will impact their operating capital. Now, in order to avoid such difficulties, multiple GST checks be placed by the vendor. Under this, Government attempts to impose further limitations on the process of claim and use of input tax credits.

2. Registered taxpayer would now be able to obtain ITC by self-assessment.

For this, section 41 of CGST Act is proposed to be replaced to eliminate the idea of “claiming” qualifying ITC on a “Provisional” basis and thereby replace the same with availment of “Self-Assessed” ITC in accordance with terms and conditions specified in the act.

• Taxpayers would no longer be able to undertake the advantage of 120% provision credit, which was later decreased to 110% and finally to 105%. Thus, the credit can only be claimed in respect of outward Supplies, as provided under per Section 16(2) (aa) of the Act, which takes effect on January 1, 2022.
  Since individuals will no longer be eligible to claim that Ineligible ITC was claimed by mistake and that they forgot to reverse it, the introduction of the word self-assessment will promote accountability.

3. Certain limitations have been imposed on use of balance of E-credit ledger. Thus, for such a limitation, section 49(4) of CGST Act will propose to provide the taxpayer to use their E-Credit ledger balance for certain specified purposes, which shall include certain limits that would be announced in advance.

• Govt of India would be vested with the authority to impose any limits, which they consider fit, in order to limit taxpayers’ ability to claim ITC.

4. Limitation on the amount of outgoing liability:

which a taxpayer can discharge with the use of credit balance. So, for this, section 49(12) would provide for an optimum percentage of output tax liability, which can be paid by a taxpayer using their E-Credit Ledger, and that too subject to certain rules and conditions.

• Hence, such a proposed enactment will tend to provide legal validity to Rule 86B, which mandates the taxpayers having taxable goods or services exceeding Rs 50 lacs, to pay at least 1% of their outward tax liability in cash.

5. Suo-moto cancellation of registration has been proposed,

wherein the taxpayer undertakes default in complying with GST Act, 2017. For this, sections 29(2)(b) and 29(2)(c) would be required to be amended in order to provide for termination of individual’s registration subject to –

• Registered Person, who is making payment of tax under section 10, fails to file their return for a particular FY and the same exceeds three months from the due date of filing the return;
  • In case of other registered persons, the person failing to file their returns for consecutive tax period would be covered.
• Hence, wherein any taxpayer fails to file their GSTR-4 (annual return) within three months from the due date, their registration under composition scheme would stand revoked. Apart from this, Normal registered taxpayers registration would be terminated, wherein theyr have defaulted for six consecutive months.

6. Imposition of late fees in respect of late submission of TCS returns.

Apart from CGST Act, Section 47 stands amended and the same will allow for the imposition of late fee, wherein the return is filed late in accordance with section 52.

• Hence, wherein delayed submission of TCS returns happens, the same would now attract late fees following the implementation of this rule.

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