Home GST Legal Changes in GST Return and Precautions Taken
Legal Changes in GST Return and Precautions Taken

Legal Changes in GST Return and Precautions Taken


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

From the date of 1st of January 20211,a number of adjustments have been proposed. The most important two, which would have an impact on all taxpayers, are the legal changes for claiming ITC and submitting GSTR-1 and GSTR-3B, which were announced in Notification No. 39/2021-Central Tax dated 21st of December2021. In this piece, we’ll go over the two amendments and how taxpayers should prepare for them starting with the December 2020 return filing.

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 balance in cash or credit ledger, principally using his office records and books of accounts.
  4. The common portal is merely a conduit for feeding or retrieving such data; it is not required to be the primary source for self-assessment.

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 criteria 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.}

  1. 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.

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

  1. From July 1, 2017 to December 31, 2021 – During this time, 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 in order to claim ITC –
  2. The tax invoice/Debit Note must be in the possession of the recipient.
  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), which states that an excess of 5% may be claimed over and above the value of GST recorded in GSTR 2A/2B, will be changed and will no longer be applicable going forward

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

  1. 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 to Rule 69:
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 were accepted by the recipient on the basis of 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 in respect of debit notes and the billsor invoices in FORM GSTR-2 that were accepted by the recipient on the basis of 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. It’s crucial to remember Section 42(3), which requires the government to match input tax credits. Although legal action against the recipient cannot be initiated right away, 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 supply, 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 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, it is our legal opinion 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 identities of the suppliers (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 says that:
(12) Where any amount of self-assessed tax in accordance with 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.
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 the GSTR 1 so that the actual tax liability is calculated based on the 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 a 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 the need for a SCN.

iii. In the event of a significant discrepancy between GSTR 1 and GSTR 3B, one may offer evidence to the Jurisdictional Officer as to the causes for the discrepancy in order 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.




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