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Legal Changes in GST Return and Precautions Taken

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Legal Changes in GST Return and Precautions to be taken From January 2022

From 1st January 2022, several proposed amendments will significantly impact all taxpayers. Two crucial changes are related to the legal modifications for availing of the Input Tax Credit (ITC) and filing GSTR-1 and GSTR-3B. These changes have been notified through Notification No 39/2021-Central Tax, dated 21st December 2021. This article aims to delve into these two amendments and guide taxpayers in preparing for the upcoming GST return filing for December 2021.

Key Takeaways

Changes in Availing Input Tax Credit (ITC):

  • Supreme Court ruling states that ITC can be claimed based on booked books and records.
  • Effective from January 1, 2022, a new criterion (Clause 16(2)(aa)) is added for claiming ITC, requiring the recipient to receive and validate the invoice details communicated by the supplier via GSTR-1 and GSTR-2A.
  • ITC can be claimed based on GSTR-2A from January 1, 2022.
  • Rule 36(4), allowing a 5% excess claim over GSTR-2A/2B value, will no longer be applicable.

Amendments to Form GSTR-1:

  • Section 75(12) allows recovery proceedings under Section 79 if any self-assessed tax remains unpaid, including tax payable on details of outward supplies not included in the return filed under Section 39.
  • Ensure GSTR-1 is filed accurately to avoid recovery proceedings under Section 79.
  • Exercise caution when uploading Credit Notes to avoid discrepancies between GSTR-1 and GSTR-3B.

Other Important Changes:

  • Liability of e-commerce operators to pay tax on services provided through their platforms.
  • Correction in the inverted duty structure for footwear and textile sectors.
  • Exemption for offline/manual mode in passenger transport services by auto-rickshaw drivers.
  • Compliance responsibilities for food delivery platforms for deposit and invoicing.
  • Implementing anti-evasion measures, including mandatory Aadhaar authentication for claiming GST refunds and blocking GSTR-1 filing if GSTR-3B is not filed for two preceding months.
  • Enhanced recovery powers granted to GST officers without prior show-cause notice.

Changes In Case of Availing ITC from 1st of January 2022

It’s worth noting that the Supreme Court recently answered the following key questions in the matter of UNION OF INDIA Vs BHARTI AIRTEL LTD & ORS:

  1. According to the requirements of the CGST Act 2017, a taxpayer can claim an ITC on the booked books and records (Section 16)
  2. RTP is required to conduct an ITC self-assessment under Section 59.
  3. RTP calculates its eligibility for ITC and production tax liabilities, including any cash or credit ledger balance, principally using its office records and books of accounts.
  4. The everyday portal is merely a conduit for feeding or retrieving such data; it is not required to be the primary source for self-assessment.
  5. Inserted by the Finance Act of 2021, dated March 28, 2021, with effect from January 1, 2022, as amended by Notification No 39/2021-Central Tax, dated December 21, 2021.

With effect from January 1, 2022, the above-mentioned judgement has been overturned because Section 16 of the CGST Act has been changed to include Clause 16(2) (aa), which adds a fifth criterion to claiming ITC:

(2) Notwithstanding or considering anything that is provided in this particular section, no registered person or taxpayer shall be entitled to an input tax credit in respect of any supply of goods or services or both to him until {(aa) the description and data of the debit note or invoice referred to in clause (a) have been provided by the supplier in the record of outward sales or supplies made, and such details have been communicated to the recipient of such invoice or debit note in the manner that is prescribed under section 37.}

As a result of the foregoing, it may be determined that the entire GST period will be separated into two halves to claim ITC via GSTR-2A:

  1. From July 1, 2017, to December 31, 2021 – The ITC may be based on the purchase register.
  2. Beginning January 1, 2022, ITC can only be claimed using GSTR 2A.

The following are further implications of the revisions for taxpayers:

  1. Beginning January 1, 2022, five conditions must be met to claim ITC –
  2. The tax invoice/Debit Note must be in the recipient’s possession.
  3. The goods/services must have been delivered to the recipient.
  4. The tax levied must be paid to the government.
  5. The recipient must submit a GSTR 3B form.
  6. The provider must file a GSTR-1 and inform the recipient of the facts via GSTR 2A.
  7. Rule 36(4) states that an excess of 5% may be claimed over and above the value of GST recorded in GSTR 2A/2B, which will be changed and no longer applicable.

(4) A registered person’s input tax credit for invoices or debit notes for which the details have not been provided by the seller or the supplier under section 37(1) in FORM GSTR-1 or using the invoice providing facility shall not exceed 5% of the eligible credit available in respect of invoices or debit notes for which the details have been provided by the sellers or the dealers under sub-section (1) of section 37 in FORM GSTR-1 or using the invoice furnishing facility.

Because the amendment is retroactive, taxpayers will only be eligible to claim the amount of ITC available in GSTR 2A starting in January 2022, i.e., when submitting GSTR 3B for December 2021.

The CGST Rules 2017, Explanation to Rule 69, has provided and given GSTR 2A as the return for matching ITC between suppliers and recipients:

The following is the explanation of Rule 69:

Explanation:

For the purpose and reason of this rule, it would be provided hereby that:

(i) ITC or Input tax credit claims in respect of invoices and debit notes in FORM GSTR-2 that the recipient accepted based on FORM GSTR-2A without the amendment or change shall be treated as matched if the supplier corresponding has provided or filed a valid return;

(ii) ITC or Input tax credit claims regarding debit notes and the bills or invoices in FORM GSTR-2 that the recipient accepted based on FORM GSTR-2A.

  1. If there is a discrepancy between GSTR2A and GSTR 2B, e.g., if suppliers file their GSTR1 late but still claim the ITC under Rule 69, the ITC may be claimed using GSTR 2A.
  2. Remembering Section 42(3), which requires the government to match input tax credits is crucial. Although legal action against the recipient cannot be initiated immediately, the deficiency should be disclosed to “both” the supplier and the recipient. The following is what section 42(3) says:

Sec 42(3), where a recipient’s input tax credit for an inward supply exceeds the tax declared by the supplier for the same collection, or the outward supply is not stated by the supplier in his valid returns; the disparity must be communicated to both parties in the manner required.

vii. At the end of the year, i.e., when submitting the return for September 2022, the ITC for the previous year, 2020-21, will be limited to the GSTR 2A Balance.

viii. What happens once the recipients file GSTR 3B for September 2022, and the suppliers file their returns or change their invoices? In this regard, our legal opinion is that if the suppliers submit GSTR 1 and it is reflected in the recipients’ GSTR2A, then ITC should be available.

  1. The Hon’ble Calcutta High Court held in the case of M/s LGW INDUSTRIES LIMITED & ORS. that taxpayers have a legal obligation to check the identification of their suppliers. The following is the wording –

Also, assess whether the petitioners have met their legal obligation to verify the suppliers’ identities (RTP).

As a result, we recommend that recipients establish procedures to demonstrate that steps have been made to ensure that suppliers can be identified.

Amendments to Form GSTR-1

The following explanation has been added to Section 75(12):

The General terms and provisions of Section 75 relating to tax determination say that:

(12) Where any amount of self-assessed tax by a return provided under section 39 remains due and unpaid, either on a whole or partial basis or any amount of interest payable on such tax remains due and unpaid, the same shall be recovered under the provisions of section 79, notwithstanding anything contained in sections 73 or 74.

Explanation:

The term “self-assessed tax” includes the tax payable on details of outward supplies supplied under section 37 but not included in the return furnished under section 39 for the purposes of this subsection.

The proper officer shall proceed to recover any tax payable without issuing a Show Cause Notice by deducting from refunds, holding and selling goods or immovable property, and collecting from debtors, according to Section 79 on tax recovery.

The measures to be taken from January 2022 are as follows:

  1. File GSTR 1 to calculate the actual tax liability based on GSTR-1. Any discrepancy between GSTR-1 and GSTR-3B may result in recovery proceedings under Section 79 of the CGST Act without the issue of an SCN.
  2. Uploading Credit Notes should be done with caution. There may be a variation between GSTR-1 and GSTR-3B if a CN is not uploaded in the GSTR-1. This could result in recovery proceedings under Section 79 of the CGST Act without needing an SCN.

iii. In a significant discrepancy between GSTR 1 and GSTR 3B, one may offer evidence to the Jurisdictional Officer regarding the causes for the difference to avoid recovery actions.

  1. Another alternative is to pay the extra tax this month and modify it in the following month’s GSTR 3B to avoid any recovery proceedings.

Significant Changes in GST Law

Starting from January 1st, 2022, the GST regime will witness a range of tax rate adjustments and procedural modifications. Here are some of the important changes that will be implemented:

  1. Liability of e-commerce operators: E-commerce operators will be liable to pay tax on services such as passenger transport or restaurant services provided through their platforms.
  2. Correction in inverted duty structure: There will be a correction in the inverted duty structure for the footwear and textile sectors. All footwear, regardless of price, will attract a GST rate of 12%.
  3. Exemption for offline/manual mode: Passenger transport services provided by auto-rickshaw drivers through offline or manual mode will continue to be exempt from GST.
  4. Compliance for food delivery platforms: Food delivery platforms will now be responsible for the deposit and invoice-raising compliance.
  5. Anti-evasion measures: Several anti-evasion measures will be implemented from January 2022, including mandatory Aadhaar authentication for claiming GST refunds and blocking the facility of GSTR-1 filing if a business fails to file GSTR-3B for the preceding two months.
  6. Enhanced recovery powers: The GST Law has been amended to grant GST officers the authority to visit premises and recover tax dues without a prior show-cause notice.

2022 Updates in GST

December 1st, 2022

The 48th GST Council meeting is scheduled for Saturday, December 17th, 2022, with a diverse agenda containing several important items.

November 10th, 2022

  1. Circular 181 has been issued to clarify that refund-related amendments will be applied prospectively.
  2. Circular 182 provides the verification procedure for allowing transitional credit claims made by taxpayers from October 1st, 2022, to November 30th, 2022.

September 28th, 2022

  1. Amendments related to Input Tax Credit (ITC) conditions in the Finance Act of 2022 have been notified.
  2. The due date for claiming ITC and making amendments to sales/credit-debit notes for a financial year has been extended until November 30th of the following year.

September 1st, 2022

The recent changes in Table 4 concerning reporting ineligible input tax credits have been implemented on the GST portal or government portal.

August 1st, 2022

(a) The e-invoicing system will be extended to businesses with an annual aggregate turnover (AATO) exceeding Rs. 10 crores from October 1st, 2022, as per Central Tax notification no. 17/2022.

(b) Businesses with a turnover of over Rs. 5 crores must now provide a six-digit HSN code in Table 12 of GSTR-1.

July 5th, 2022

The Central Board of Indirect Taxes and Customs (CBIC) has notified six new CGST notifications, including modifying the GSTR-3B format to include a new table for reporting e-commerce sales and related taxes. Section 110 of the Finance Act 2022 has also been notified, enabling taxpayers to transfer CGST from one GSTIN to another. Additionally, the due dates for filing GSTR-4 and CMP-08 have been extended with late fee waivers.

June 29th, 2022

The 47th GST Council meeting occurred on June 28th and 29th, 2022, in Chandigarh. Key recommendations were made regarding revisions in rates for goods and services, trimming down the GST exemption list, and opening up modifications to the GSTR-3B format for public suggestions.

May 26th, 2022

Late fees for the delay in filing GSTR-4 for the financial year 2021-22 have been waived if the filing is done between May 1st and June 30th, 2022, as per CGST Notification No. 7/2022.

February 24th, 2022

  1. The e-invoicing system will be extended to businesses with an annual aggregate turnover ranging from Rs. 20 crores to Rs. As per notification no; 50 crores, starting April 1st, 2022. 1/2022.
  2. Composition taxable persons and those interested in opting for the scheme for 2022-23 must submit a declaration through Form CMP-02 on the GST portal by March 31st, 2022.

February 1st, 2022

The Union Budget 2022 introduced significant changes to the GST law. For more information, you can find the highlights of the Budget 2022 [here](insert link).

Please note that the information provided is a summary of the updates, and it’s advisable to refer to official notifications and sources for detailed and up-to-date information regarding these GST updates in 2022.

Related Services

  1. GST Return Filing Online
  2. Income Tax Return Filing Online
  3. GST Annual Return Filing

FAQs

What are the new changes in annual GST return filing?

Currently, there are no new changes in annual GST return filing. However, late fee waivers for the delayed filing of GSTR-4 for the financial year 2021-22 have been extended till June 30th, 2022. Additionally, businesses with an annual aggregate turnover ranging from Rs. 20 crores to Rs. 50 crores are now included in the e-invoicing system starting April 1st, 2022. If any further updates are made, it’s advisable to refer to official notifications and sources for detailed and up-to-date information regarding these.

What are the changes in GST law?

The Union Budget 2022 introduced significant changes to the GST law. Some key updates include extending the e-invoicing system to businesses with an annual aggregate turnover ranging from Rs. 20 crores to Rs. 50 crores and the requirement for taxable composition persons and those interested in opting for the scheme for 2022-23 is to submit a declaration through Form CMP-02 on the GST portal by March 31st, 2022. It’s advisable to refer to official notifications and sources for detailed and up-to-date information regarding these updates.

What are the new changes in GST 2023?

As of now, there have been no official announcements regarding changes in GST for 2023. However, it’s always advisable to stay updated through official notifications and sources for any updates or changes that may be introduced in the future. As per the current information, businesses should focus on complying with the existing GST regulations and filing their returns diligently to avoid penalties or legal issues.

What is new in GST returns?

The latest update in GST returns is the extension of waivers for delayed filing of GSTR-4 for the financial year 2021-22 till June 30th, 2022. Additionally, businesses with an annual aggregate turnover ranging from Rs. 20 crores to Rs. 50 crores are now included in the e-invoicing system starting April 1st, 2022. It’s important to stay updated with official notifications and sources for any further updates or changes that may be introduced.

What are the Legal Issues in GST?

There have been various legal issues in GST, ranging from registration and compliance to refund claims and input tax credits. Some common issues include non-compliance with filing returns, incorrect GSTIN inclusion on invoices, and disputes regarding the classification of goods or services for tax purposes. Businesses must be aware of these issues and take necessary steps to ensure compliance with the GST law to avoid legal repercussions. Seeking professional advice and staying up-to-date with official notifications can help mitigate these legal issues effectively.

What happens once the recipients file GSTR-3B for September 2022, and the suppliers file their returns or change their invoices?

The GST system will automatically reconcile the data once the recipients file GSTR-3B for September 2022 and suppliers file their returns or change their invoices. The next step involves generating the liability and input tax credit ledger, which will reflect any adjustments or corrections made by the suppliers. In case of any discrepancies, the recipient may receive a notice from the GST department to rectify the errors. Therefore, businesses must maintain accurate records and comply with GST regulations to avoid legal issues or penalties.

What is my legal option if a seller refuses to give me a GST bill?

If a seller refuses to give you a GST bill, you may file a complaint with the GST department. As per GST regulations, businesses must issue a tax invoice or bill of supply for all taxable supplies made. Failure to do so can result in penalties and legal repercussions. Therefore, it is advisable to report any non-compliance by the seller to the appropriate authorities to ensure that your rights as a buyer are protected under the law.

Who is required to file GSTR-5?

Non-resident foreign taxpayers registered under the Goods and Services Tax (GST) in India are required to file GSTR-5.

Which entities need to file GSTR-8?

E-commerce operators are required to file GSTR-8 under the Goods and Services Tax (GST) regime.

What is the purpose of filing GSTR-2?

GSTR-2 was previously used to report details of inward supplies received by a taxpayer. However, the filing of GSTR-2 has been suspended.

When is GSTR-9 filed?

GSTR-9 is an annual return that is filed by taxpayers on a yearly basis to provide a summary of their GST-related activities for the financial year.

What is GSTR-2B used for?

GSTR-2B is a statement generated for taxpayers to provide them with information about their inward supplies as reflected in the GST portal.

When is GSTR-10 filed?

GSTR-10, or the Final Return, is filed by taxpayers who have cancelled their GST registration or whose registration has been deemed cancelled. It is filed within three months from the date of the cancellation order.

What is the difference between the previous and new GST return forms?

The previous GST return forms required taxpayers to provide detailed information about their outward and inward supplies, along with tax paid and input tax credit availed. However, the new GST return forms have been simplified and streamlined to make the process easier for taxpayers. The new forms allow for the auto-population of certain fields, such as supplier details and tax liability calculations. Additionally, there are fewer return forms to be filed under the new system.

What are the types of assessments under GST law in India?

Under GST law in India, there are three types of assessments: self-assessment, provisional assessment, and best judgment assessment. Self-assessment is when taxpayers themselves assess the tax payable and file their returns accordingly. Provisional assessment is when the tax officer determines a temporary tax liability based on the information provided by the taxpayer. Best judgment assessment is used when a taxpayer fails to file returns or provide the necessary information, and the tax officer determines the tax liability based on available information.

What are the key highlights of the Model GST Law?

The Model GST Law, which serves as a framework for the implementation of GST in India, has several key highlights. Some of these include the inclusion of both goods and services under one tax regime, the introduction of input tax credit for all goods and services used in the course of business, the provision for a threshold limit below which businesses are exempt from GST registration, and the creation of a GST Council to oversee the implementation and functioning of the GST system. Additionally, there are provisions for anti-profiteering measures to ensure that businesses pass on any benefits gained from GST to consumers.

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