The central government has decided to introduce some amendments to the existing Goods and Services Tax (GST) regime to prevent fraudulent activities related to billing and recovery. The new rules will come into effect from January 1, 2022.
The amendments, announced as part of the Finance Act 2021, are aimed at making the indirect tax regime stricter. The changes are related to issues such as taxable supply, eligibility for input tax credits and rules for filing appeals in some cases.
While the new amendments are unlikely to impact customers, they will tighten norms for businesses.
I have tried to summarize a few of among them in short below:
Section 7
- Scope of supply
- Nature of Amendment: Harsh as retrospective
- Impact on Entities: Association, Club, Housing Society
Crux
Supply of activities or transactions inter se between a person & its members or constituents shall be deemed to take place from one such person to another - hence shall be treated as a supply. Paragraph 7 of Schedule II specifying supply (of goods) by any unincorporated association or body of persons to a member as a supply of goods accordingly has been omitted retrospectively due to inclusion of the same in Section 7.
Section 16
- Eligibility and conditions for taking input tax credit.
- Nature of Amendment: Most Dangerous
Crux
Input Tax Credit regarding invoices and debit notes shall be available only to the extent they are furnished in GSTR-1 by the vendors and thus appear in GSTR-2A / 2B of the recipient. The mismatch will now cause more trouble.
Section 74
- Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized because of fraud or any willful misstatement or suppression of facts.
- Nature of Amendment: Painful
Crux
The proceedings initiated u/s 129 & 130 for E-way bill violations, i.e. detention, seizure and confiscation of goods or conveyances shall be independent proceedings and closure of parallel proceedings u/s 73 or 74 (in respect of any person including the subject person) shall not result in the deemed closure of the proceedings initiated u/s 129 & 130.
Section 75
- General provisions relating to the determination of tax.
- Nature of Amendment: Most Dangerous
Crux
An explanation has been inserted to clarify that 'self-assessed tax' shall include only the amount of tax payable regarding details of outward supplies furnished in GSTR-1, but not included in GSTR-3B, and hence not paid.
Due to this amendment, the department officials will be empowered to initiate recovery action directly based on the supply shown in the GSTR 1 Return provided that corresponding GSTR 3B Return not appropriately filed, i.e. tax in whole or in part not discharged. He will not even need to issue notice. For example, more trouble would be in cases where even inadvertently 1 is shown as 10 or the amount will be reflected in the wrong tax head.
So correct filing of returns is essential now.
Section 83
Provisional attachment to protect revenue in certain cases.
Nature of Amendment: Draconian powers extended to Department
Crux
Powers of provisional attachment have been extended to proceeding under Chapter XII (Assessment), XIV (Inspection, Search, Seizure and Arrest) or XV (Demands and Recovery) for attachment of property including bank account belonging to the taxable person or person who has retained benefits of offences under 122(1A).
Due to this amendment, the Commissioner has been empowered to initiate provisional attachment proceedings even during the assessment, investigation etc., if he feels that PA is necessary to protect the revenue. However, for the time being, the rule is that for initiating the PA proceedings, it is necessary to determine the liability and give reasonable time to discharge the obligation.
Section 107
- Appeals to the Appellate Authority
- Nature of Amendment: Cost increase
Crux
In the context of filing the first appeals (Commissioner), presently, Sec. 107(6) of the CGST Act, 2017 provides a pre-deposit of 10% of the disputed tax amount for filing the appeal and staying the recovery. However, An amendment has been made in the context of the orders passed levying penalty u/s 129(3) for E-way bill violations to provide that the quantum of the pre-deposit in such cases shall be equal to 25% of the penalty ordered to be paid.
Section 151
- Power to collect statistics
- Nature of Amendment: May be used as a weapon in assessment, investigation cases to gather more information and data from the third person.
Crux
At present, the Commissioner has the right to demand the Statistics only by issuing a notification. But from 1st January, he will be empowered to direct any person to furnish information relating to any matter dealt with in connection with this Act, within such time, in such form, and such manner, as may be specified therein. And the person in front will be obliged to give that information.
From The Author's Desk
GST has been never being an easy law to understand due to frequent changes and newer rules and notifications that come up after each and every GST council meeting, GST being in growing phase is not a stagnant law and by passing of each every day more stringent amendments are being made in order to curb evasion of tax to some extent.
Every effort has been taken to make this article short and precise so that one can get an idea of recent changes to be implemented with effect from 01.01.2022 only having a glance through it , any suggestions and improvements will be welcomed and highly appreciated.
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