Important changes in GST w.e.f 1st January 2022

Important changes in GST Regime with effect from 1^st January, 2022

Central Government has brought into effect the provisions of Finance Act, 2021 effective from 1^st January, 2022. In the Budget of 2021-22, changes in Finance Bill,2021 were proposed to make changes in CGST Act, 2017. Accordingly, CGST Act, CGST Rules and IGST Act, 2017 has been amended.

We have examined the proposed changes in summary form for ease of understanding -

1. Mandatory Aadhaar Authentication in certain cases - Rule 10B of the CGST Rules, 2017

1. Filing of application for revocation of cancellation of registration in Form GST REG-21 under Rule 23;
2. Filing of refund application in Form RFD-01 under rule 89
3. Rwfund under Rule 96 of the integrated tax (IGST) paid on goods exported out of India

a) Authentication of Aadhar is must for every registered person and it shall be of Aadhaar number of authorized signatory of:

• Proprietorship Firm - by the proprietor
• Partnership Firm - any partner
• HUF - Karta
• Company - Managing Director or any whole-time director
• AOP, Body of Individuals or Trust - Any member of managing committee
• Trust - Any trustee in Board of Trustee

b) Provided that, if Aadhaar number has not been assigned to the person required to undergo authentication of the Aadhaar number, such person shall furnish the following identification documents, namely: -

• Her/his Aadhaar Enrolment ID slip; and
• Bank passbook with photograph or voter identity card or passport or driving license issued under the Motor Vehicles Act, 1988

Such person shall undergo the authentication of Aadhaar number within a period of thirty days of the allotment of the Aadhaar number

2. GST ITC Credit available when reflected in GSTR 2A/2B

Section 16(2) - Eligibility and conditions for taking input tax credit - Section 109 of the Finance Act, 2021

"(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37."

A new clause '(aa)', after clause (a), in Section 16(2) of the CGST Act, that provides an additional condition to claim ITC based on GSTR-2A and newly introduced GSTR-2B, i.e., ITC on invoice or debit note can be availed only when details of such invoice/debit note have been furnished by the supplier in his outward supplies (GSTR-1) and such details have been communicated to the recipient of such invoice or debit note

Hence, with effect from 1^st January, 2022 the conditions for availment of Input tax credit as per CGST Act, 2017 is as follows -

1. The recipient is in possession of tax invoice or debit note issued by a supplier;
2. The details of the above-mentioned invoice or debit note have been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient in the manner specified under Section 37 of the CGST Act;
3. The recipient has received the goods or services or both;
4. The tax charged in respect of such supply has been actually paid to the Government, and
5. The recipient has furnished the return under Section 39 of the CGST Act.

Earlier Rule 36(4) of the CGST Rules, 2017 was implemented to cap 5% limit on ITC availment as per GSTR 2A/2B. With the aforesaid proposed amendment, there is no relevance to Rule 36(4) with effect from 1^st January,2022.

3. Notification of provisions on Recovery of self-assessed tax

In section 75 of the Central Goods and Services Tax Act, in sub-section (12), the following Explanation has been inserted -

Explanation - For the purposes of this sub-section, the expression "self-assessed tax" shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39

Widening of the scope of the term "self-assessed tax"

The ambit of the term "self-assessed tax" is proposed to be widened. Now recovery can be initiated by the officer even for the outward supply liability shown in the GSTR-1 filled under Section 37 of the CGST Act.

It is important to note that the recovery proceedings, in respect of 'self-assessed tax' on outward supplies which have been declared in Form GSTR-1 but not included in Form GSTR-3B, can be initiated straightaway under Section 79 (i.e. through various modes like detaining/selling goods belonging to defaulter which are under control of the department, garnishee proceedings, distaining and selling of movable or immovable property belonging to the defaulting person, etc.) without even resorting to proceedings under Section 73 or Section 74 of the CGST Act.

4. Amendment to Sec 7 - Definition of "Supply"

This amendment has made transactions between clubs/ associations and its members taxable.

A new sub-clause has been inserted in Section 7 of the Central Goods and Services Tax Act, 2017 -

Section 7(1)(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.

Explanation - For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;

Expanded the scope of 'supply' to levy GST on supplies between the club/association and its members, to overcome the principle of mutuality:

A retrospective amendment (w.e.f. July 1, 2017) is made by inserting a new clause '(aa)' after clause (a), in Section 7(1) of the CGST Act to widen the scope of term 'supply' by including therein activities or transactions of supply of goods or services or both between any person (other than individual) to its members or constituents or vice versa for cash, deferred payment or other valuable consideration.

Further, an explanation is included that the person and its members or constituents shall be deemed to be two separate persons and overriding effect has been given to the said explanation over anything contained in any other law for the time being in force and even to the judgments of any Court, Tribunal or any other authority.

Consequently, Para 7 of Schedule II of the CGST Act has been proposed to be deleted retrospectively (w.e.f. July 1, 2017) which is related to 'supply of goods by unincorporated associations or body of persons to a member thereof for cash, deferred payment or other valuable consideration' being activity/ transaction treated as supply of goods.

5. Amendment to Sections 74 and 107 of the CGST Act, 2017

The CBIC vide Notification No. 39/2021- Central Tax dated December 21, 2021 notified the below mentioned amendments w.e.f. January 01, 2022

a) Recovery of tax vs. Seizure and Confiscation

Amendment has been made in Explanation 1(ii) of Section 74 of the CGST Act so as to make seizure (Section 129 of the CGST Act) and confiscation of goods and conveyances in transit (Section 130 of the CGST Act), a separate proceeding from recovery of tax under Section 73 (determination of tax in non-fraud cases) or Section 74 (determination of tax in fraud cases) of the CGST Act.

b) Pre-deposit for Appeal before Appellate Authority

Amendment has been made to insert a proviso to Section 107(6) of the CGST Act, to provide that appeal against order passed under Section 129(3) of the CGST Act in Form MOV-09, can be filed before the Appellate Authority only after depositing 25% of the penalty imposed to the department (the limit has been enhanced from 10% of the pre-deposit).

6. Amendment to Sections 129 and 130 of the CGST Act, 2017 (Provisions related to E-Way Bills)

The CBIC vide Notification No. 39/2021- Central Tax dated December 21, 2021 notified certain amendments in Section 129 and 130 of the CGST Act, 2017 w.e.f. January 01, 2022.

A. Amendment to Section 129 - detention, seizure and release of goods and conveyances in transit

a) Enhancement of Penalty

b) Non release of goods on provisional basis upon execution of bond or security

Section 129(2) has been omitted: Now the goods seized shall not be released on provisional basis upon execution of a bond and furnishing security and the penalty imposed by the officer will have to be paid in cash by the taxpayer.

c) Period of issuance of notice and passing of order under Section 129(3) of the CGST Act

The proper officer detaining/seizing the goods, have to issue a notice (GST MOV-07) within 7 days specifying the penalty payable and pass an order (GST MOV-09) within next 7 days after service of such notice (earlier there was no such time limit)

d) Opportunity of being heard before determination of penalty

No penalty shall be determined without giving opportunity of hearing, where the penalty is payable on detention or seizure of goods or conveyance

B. Amendment to Section 130 - confiscation of goods or conveyances and levy of penalty

Section 129 and Section 130 of the CGST Act, 2017 has been delinked.

Prior to amendment, if the person does not pay tax and penalty within 14 days of seizure, the conveyance and goods detained were liable for confiscation as per Section 130.

But, post current amendment, the goods or conveyance detained or seized shall become liable to be sold or disposed off in the manner prescribed, in case the payment of imposed penalty is not made within 15 days from the date of receipt of copy of the order imposing such penalty.

Further, conveyance used for transportation of the goods may be released on payment of penalty or Rs 1 Lakh whichever is less

7. Amendment to the definition of Zero-Rated Supplies - Sec 16 of the IGST Act, 2017

a. Insertion of the word "authorized operations" in Sec 16(1)(b)

"Zero rated supply" means any of the following supplies of goods or services or both, namely:

(a) export of goods or services or both; or

(b) supply of goods or services or both for Authorized Operations to a Special Economic Zone developer or a Special Economic Zone unit.

b. Substitution of sub - Sec (3) to Sec 16 - Realization of exports proceeds

"(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed:

Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 for receipt of foreign exchange remittances, in such manner as may be prescribed.

(4) The Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification, specify- -

(i) a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid;

(ii) a class of goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim the refund of tax so paid."