GST Proposals in Union Budget 2022

Changes in GST proposed in The Finance Bill, 2022

Summary of the Union Budget 2022 proposals for GST

The Union Finance Minister while presenting the Union Budget 2022 on 1^st of February 2022, made few important changes in the GST Laws. Below is the summary of such proposals -

1. Tightening of the Input Tax Credit availment mechanism
2. Interest payable when both Availment AND Utilization of Input Tax Credit is made (not on availment only)
3. Additional time for availment of Input Tax Credit
4. Additional time for rectification of error while furnishing GST Returns
5. Additional time for issuance of Credit notes
6. Late fees for filing of Return by Tax Collection at Source (TCS)
7. Time limit to claim refund by UIN holders enhanced from 6 months from end of quarter to 2 years from end of quarter.

Detailed changes proposed in GST Laws in the Union Budget 2022 is presented below

1. Input Tax Credit (Section 16(2)(ba) of the CGST Act, 2017)

A. Restriction in availing Input Tax Credit

Insertion of a new sub clause (ba) in Section 16(2) of the CGST Act, 2017 ("CGST Act") to provide that provide that input tax credit with respect to a supply can be availed only if such credit has not been restricted in the details communicated to the taxpayer under section 38

B. Extension of Time limit to avail Input Tax Credit

Further, sub-section (4) of section 16 of the CGST Act is being amended so as to provide for an extended time for availment of input tax credit by a registered person in respect of any invoice or debit note pertaining to a financial year upto 30^th (thirtieth) day of November of the following financial year. [Clause 99 of Finance Bill, 2022].

Earlier the due date for availment of Input Tax Credit due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier

Comment - Time period for claiming ITC has been extended to 30^th November of the following financial year.

2. Cancellation or suspension of registration

Sec 29 Clause (b) and (c) of sub-section (2) of section 29 of the CGST Act are being amended so as to provide that the registration of a person is liable for cancellation, where

A. Composition Scheme - Sec 29(2)(b)

A person paying tax under section 10 has not furnished the return for a financial year beyond three months from the due date of furnishing of the said return (Earlier the said period was returns for three consecutive tax periods);

B. Other Than composition Scheme - Sec 29(2)(c)

A person, other than those paying tax under section 10, has not furnished returns for such continuous tax period as may be prescribed (Earlier the said period was continuous period of 6 months)

Comment - Anomaly in non-filing of returns by Composition taxpayer has been removed by this amendment and provision has been now aligned with Annual filing of Return in Form - GSTR 4

3. Credit and debit notes (Section 34 of the CSGT Act, 2017)

Sub-section (2) of section 34 of the CGST Act is being amended so as to provide for an extended time for issuance of credit notes in respect of any supply made in a financial year upto 30^th (thirtieth) day of November of the following financial year.

Earlier the date allowed for issuance of Credit Notes was due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier. Now the same has been extended to 30^th Nov of the following financial year or filing of Annual Return, whichever is earlier.

4. Furnishing details of outward supplies (Sec 37 of the CGST Act, 2017)

Section 37 of the CGST Act is being amended so as to:

1. provide for prescribing conditions and restrictions for furnishing the details of outward supply and for communication of the details of such outward supplies to concerned recipients;
2. do away with two-way communication process in return filing;
3. provide for an extended time upto thirtieth day of November of the following financial year for rectification of errors in respect of details of outward supplies furnished under sub-section (1);
4. provide for tax period-wise sequential filing of details of outward supplies under sub-section (1).

Comments - Time limit to rectify details in GSTR 1 has been extended to 30^th November of the following financial year. Two way communication of match/mismatch as embodied in Sec 42 and 43 has been done away with.

5. Furnishing details of inward supplies (Sec 38 of the CGST Act, 2017)

Section 38 of the CGST Act is being substituted for prescribing the manner as well as conditions and restrictions for communication of details of inward supplies and input tax credit to the recipient by means of an auto-generated statement and to do away with two-way communication process in return filing

Sec 38 shall read as under -

"38. (1) The details of outward supplies furnished by the registered persons under sub-section (1) of section 37 and of such other supplies as may be prescribed, and an autogenerated statement containing the details of input tax credit shall be made available electronically to the recipients of such supplies in such form and manner, within such time, and subject to such conditions and restrictions as may be prescribed.

(2) The auto-generated statement under sub-section (1) shall consist of- -

(a) details of inward supplies in respect of which credit of input tax may be available to the recipient; and

(b) details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the

recipient, on account of the details of the said supplies being furnished under sub-section (1) of section 37,-

 (i) by any registered person within such period of taking registration as may be prescribed; or

(ii) by any registered person, who has defaulted in payment of tax and where such default has continued for such period as may be prescribed; or

(iii) by any registered person, the output tax payable by whom in accordance with the statement of outward supplies furnished by him under the said subsection during such period, as may be prescribed, exceeds the output tax paid by him during the said period by such limit as may be prescribed; or

(iv) 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; or

(v) by any registered person, who has defaulted in discharging his tax liability in accordance with the provisions of sub-section (12) of section 49 subject to such conditions and restrictions as may be prescribed; or

(vi) by such other class of persons as may be prescribed."

6. Furnishing of Returns (Sec 39 of the CGST Act, 2017)

Section 39 of the CGST Act is being amended so as to -

1. provide that the non-resident taxable person shall furnish the return for a month by thirteenth day of the following month;
2. provide an option to the persons furnishing return under proviso to sub-section (1), to pay either the self-assessed tax or an amount that may be prescribed;
3. provide for an extended time upto 30^th (thirtieth) day of November of the following financial year, for rectification of errors in the return furnished under section 39;
4. provide for furnishing of details of outward supplies of a tax period under subsection (1) of section 37 as a condition for furnishing the return under section 39 for the said tax period (precondition of Filing of GSTR 3B before filing of GSTR 1 for subsequent period/month)

7. Claim of input tax credit and provisional acceptance thereof (Sec 41 of the CGST Act, 2017)

Section 41 of the CGST Act is being substituted so as to do away with the concept of "claim" of eligible input tax credit on a "provisional" basis and to provide for availment of self-assessed input tax credit subject to such conditions and restrictions as may be prescribed

Sec 41 shall read as under -

"41. (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to avail the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited to his electronic credit ledger.

 (2) The credit of input tax availed by a registered person under sub-section (1) in respect of such supplies of goods or services or both, the tax payable whereon has not been paid by the supplier, shall be reversed along with applicable interest, by the said person in such manner as may be prescribed:

Provided that where the said supplier makes payment of the tax payable in respect of the aforesaid supplies, the said registered person may re-avail the amount of credit reversed by him in such manner as may be prescribed.".

8. Omission of Sec 42, 43 and 43A of the CGST Act, 2017

Sections 42, 43 and 43A of the CGST Act are being omitted so as to do away with two-way communication process in return filing

9. Levy of late fee (Sec 47 of the CGST Act, 2017)

Section 47 of the CGST Act is being amended so as to provide for levy of late fee for delayed filing of return under section 52 (Collection of TCS). Further, reference to section 38 is being removed consequent to the amendment in section 38 of the CGST Act.

10. Goods and services tax practitioners (Sec 48 of the CGST Act, 2017)

Consequent to the amendment in section 38 of the CGST Act, sub-section (2) of section 48 of the CGST Act is being amended so as to remove reference to section 38 therefrom

11. Payment of tax, interest, penalty and other amounts (Sec 49 of the CGST Act, 2017)

Section 49 of the CGST Act is being amended so as to -

1. provide for prescribing restrictions for utilizing the amount available in the electronic credit ledger;
2. allow transfer of amount available in electronic cash ledger under the CGST Act of a registered person to the electronic cash ledger under the said Act or the IGST Act of a distinct person;
3. provide for prescribing the maximum proportion of output tax liability which may be discharged through the electronic credit ledger

Substitution of Sec 49(10) - transfer of amount available in electronic cash ledger to the electronic cash ledger of a distinct person

"(10) A registered person may, on the common portal, transfer any amount of tax, interest, penalty, fee or any

other amount available in the electronic cash ledger under this Act, to the electronic cash ledger for, -

(a) integrated tax, central tax, State tax, Union territory tax or cess; or

(b) integrated tax or central tax of a distinct person as specified in sub-section (4) or, as the case may be, subsection (5) of section 25,

in such form and manner and subject to such conditions and restrictions as may be prescribed and such transfer shall be deemed to be a refund from the electronic cash ledger under this Act:

Provided that no such transfer under clause (b) shall be allowed if the said registered person has any unpaid liability in his electronic liability register.";

Insertion of Sec 49(12) - Restriction on Quantum of usage of Electronic Credit ledger for output tax liability -

"(12) Notwithstanding anything contained in this Act, the Government may, on the recommendations of the Council, subject to such conditions and restrictions, specify such maximum proportion of output tax liability under this Act or under the Integrated Goods and Services Tax Act, 2017 which may be discharged through the electronic credit ledger by a registered person or a class of registered persons, as may be prescribed.".

12. Interest on delayed payment of tax (Sec 50 of the CGST Act, 2017)

Sub-section (3) of section 50 of the CGST Act is being substituted retrospectively, with effect from the 1st July, 2017, so as to provide for levy of interest on input tax credit wrongly availed and utilized.

Substitution of Sec 50(3) - Interest only on ITC availed and utilised -

"(3) Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four per cent. as may be notified by the Government, on the recommendations of the Council, and the interest shall be calculated, in such manner as may be prescribed."

Notes - this is a welcome move which was recommended by the GST Council but the implementation was pending. Now, Interest is payable only on the amount of ITC which is availed and UTILISED. This shall provide much needed relief to the taxpayers who has erroneously availed excess ITC and were asked to pay interest even if the same was not utilised against payment of output tax liability.

13. Collection of tax at source (Sec 52 of the CGST Act, 2017)

Sub-section (6) of section 52 of the CGST Act is being amended so as to provide for an extended time upto 30^th (thirtieth) day of November of the following financial year for rectification of errors in the statement furnished under sub-section (4).

Please note that Annual Return is not applicable for TCS Returns.

14. Refund of tax (Sec 54 of the CGST Act, 2017)

Section 54 of the CGST Act is being amended so as to:

1. explicitly provide that refund claim of any balance in the electronic cash ledger shall be made in such form and manner as may be prescribed;
2. provide the time limit for claiming refund of tax paid on inward supplies of goods or services or both under section 55 (for UIN Holders) as two years from the last day of the quarter in which the said supply was received (Earlier the period to claim refund was before the expiry of six months from the last day of the quarter in which such supply was received);
3. extend the scope of withholding of or recovery from refunds in respect of all types of refund;
4. provide clarity regarding the relevant date for filing refund claim in respect of supplies made to a Special Economic Zone developer or a Special Economic Zone unit by way of insertion of a new sub-clause (ba) in clause (2) of Explanation thereto.

The Explanation, in clause (2), after sub-clause (b), the following sub-clause shall be inserted, namely -

"(ba) in case of zero-rated supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit where a refund of tax paid is available in respect of such supplies themselves, or as the case may be, the inputs or input services used in such supplies, the due date for furnishing of return under section 39 in respect of such supplies;".

15. Retrospective changes in Interest at 18% u/s 50(3) of the CGST Act,2017

Retrospective changes are being made to Central Tax, Integrated Tax and United Territory Tax notifications notify rate of interest under sub-section (3) of section 50 of the CGST Act as 18%, with effect from the 1st day of July, 2017.

Note - Amendments carried out in the Finance Bill, 2022 will come into effect from the date when the same will be notified, as far as possible, concurrently with the corresponding amendments to the similar Acts passed by the States and Union territories with Legislature