The ever-evolving GST laws have been changed once again with important updates in CGST Act, 2017 and CGST Rules, 2017 becoming effective from 1-10-2022.
There are important changes in eligibility of ITC and in the time limit for cancellation of registration based on non-filing of GSTR-3B has been streamlined.
Firstly, let's look at changes in eligibility of ITC
As per section 16(2) of the CGST Act, 2017, certain conditions are imposed on registered person before he is entitled to avail and utilize ITC in respect of an inward supply. There were 4 conditions at the time of launch of CGST Act, 2017, i.e.
- Possession of the invoice/other supporting document with the registered person.
- Receipt of goods or services or both by the registered person.
- Payment of tax involved in such supply by the supplier.
- Furnishing of return (GSTR-3B) by registered person.
Further one condition was added w.e.f. 1-1-2022, i.e. invoice/debit note on the basis of which credit was taken should be appearing in GSTR-2B of the registered person.
Now, w.e.f. 1-10-2022, one more condition has been inserted namely, ITC in respect of supplies stated in GSTR-2B shall not be restricted. The government has introduced one more column in GSTR-2B which states "ITC Availability" and "Reason". Further government has re-written Sec 38 of the CGST Act, 2017 w.e.f. 1-10-2022, whereby the government has restricted the availability of the ITC in 6 circumstances which are as follows -
- by any registered person within such period of taking registration as may be prescribed;
- by any registered person, who has defaulted in payment of tax and where such default has continued for such period as may be prescribed;
- by any registered person, the output tax payable by whom in accordance with the statement of outward supplies furnished by him under the said sub-section during such period, as may be prescribed, exceeds the output tax paid byhim during the said period by such limit as may be prescribed;
- by any registered person who, during such period as may be prescribed, has availed credit of input tax of an amount that exceeds the credit that can be availed by him in accordance with clause (a), by such limit as may be prescribed;
- by any registered person, who has defaulted in discharging his tax liability in accordance with the provisions of subsection(12) of section 49 subject to such conditions and restrictions as may be prescribed;
- by such other class of persons as may be prescribed.
Restrictions placed under section 38 are ending with "as may be prescribed". Meaning thereby that the government will frame rules to lay down the parameters. No such rules have been prescribed thus provisions of Sec 38 are not actually effective as on 1-10-2022.
Secondly, let's have a look at the applicability of Second Proviso to Sec 16(2) of the CGST Act, 2017
Second proviso to Sec 16(2) of the CGST Act, 2017 is to be read with Rule 37 of the CGST Rules, 2017. Rule 37 of CGST Rules, 2017 has been substituted vide NN 19/2022-CT, dt 28-9-2022, w.e.f. 1-10-2022. The effect of this substitution is that mention of GSTR-2 has been omitted and thereby making Rule 37 of the CGST Rules, 2017 and Second proviso to Sec 16(2) effective from 1-10-2022.
Second proviso to Sec 16(2) of the CGST Act, 2017 states that recipient is liable to pay the amount of invoice (on which ITC has been claimed) along with tax to the supplier within 180 days from date of invoice. Failure to comply with the provisions will make recipient liable to reverse the GST amount along with interest in the return filed after the said period of 180 days is over.
Thirdly, last date for Claiming eligible ITC/Issuance of Credit Note/Rectification of Errors has been altered
Section 16(4) of the CGST Act, 2017 which states the last date of claiming eligible ITC for the financial year, Section 34(2) of the CGST Act, 2017 which states the last date of issuance of credit note, Sec 39(9) of the CGST Act, 2017 which states the last date for rectification of errors of GSTR-3B and Section 37(3) of the CGST Act, 2017 which states the last date of rectification of errors of GSTR-1 has been altered. New last date for all these sections are -
- 30th November following the end of the financial year or
- Furnishing of the relevant annual return,
- Whichever is earlier.
Fourthly, registration can be cancelled for non-filing of return
Sec 29(2) of the CGST Act, 2017 and Rule 21 of the CGST Rules, 2017 has been amended w.e.f. 1-10-2022 to enable the proper officer to cancel the registration of a person from such date, including any retrospective date, as he may deem fit -
- In case of Composition dealer, on failure to furnish GSTR-4 for a financial year beyond 3 months from the due date of furnishing of the said return. (Note - GSTR-4 is to be filed annually till the 30th day of April following the end of such financial year)
- In case of Regular dealer furnish return under QRMP Scheme, on failure to furnish GSTR-3B for 2 consecutive tax periods.
- In case of Regular dealer furnish return under Monthly-Filing Scheme, on failure to furnish GSTR-3B for 6 consecutive tax periods.
Fifthly, Requirement to furnish GSTR-3B and GSTR-1
- A registered person is not allowed to furnish GSTR-1 of a particular tax period if GSTR-1 of previous tax periods have not been furnished by him. [Restrictions inserted vide The Finance Act, 2022, w.e.f. 1-10-2022]
- A registered person is not allowed to furnish GSTR-3B of a particular tax period if GSTR-1 or GSTR-3B of previous tax periods have not been furnished by him. [Restrictions expanded vide The Finance Act, 2022, w.e.f. 1-10-2022, earlier onlyGSTR-3B was stated to be furnished]
Lastly, turnover limit for issuance of E-Invoice has been lowered to Rs. 10 crores
The invoice shall be prepared by registered persons, other than
- A government department, a local authority [Inserted vide NN 23/2021-CT dt 1-6-2021]
- Special Economic Zone units and those referred to in [Inserted vide NN 61/2020-CT dt 30-7-2020]
- Rule 54 (2) - Insurer, Banking Company, financial institution including a NBFC
- Rule 54(3) - Goods Transport Agency
- Rule 54(4) - Passenger Transport Service Supplier and
- Rule 54(4A) - Supplier of services by way of admission or exhibition of cinematograph films in multiplex screens,
whose aggregate turnover in any preceding financial year from 2017-18 onwards exceeds Rs. 10 crore, in respect of supply of goods or services or both to a registered person (i.e. B2B) or for exports, prepare invoice and other prescribed documents, by including such particulars contained in FORM GST INV-01 after obtaining an Invoice Reference Number (i.e. IRN) by uploading information contained therein on the Common GST E-Invoice Portal.
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