Finance Bill, 2022 Proposed changes in GST

The Union Budget for FY 2022-23 was announced on February 1, 2022. While the Budget Speech of the Hon’ble Finance Minister did not indicate any major changes in the GST Laws, the Finance Bill, 2022 proposes many significant changes in GST. These have been summarized below

1. Effective date of Amendment

The proposed changes will be effective after

• Finance Bill is passed in Lok Sabha + Rajya Sabha and receives the President Assent

• All-State Governments amend the corresponding provisions under the SGST Act

• A notification under CGST and another under SGST is issued to notify a common date from when such amendments come into effect

• Few proposed amendments also require rules to be prescribed / amendment / New Forms to be issued or existing forms to be amended - These Rules will have to need to be notified

Effectively, these proposed changes will not come into effect immediately. However, the taxpayer will have to prepare himself to ensure that he is able to meet the compliance with the proposed changes as and when they come into effect.

2. Availment of Credit

• The Government finally waves goodbye to the two-match credit matching system and have proposed amendments/deletions of various provisions to give effect to the same
  

• The new credit system shifts the entire onus on to the recipient to ensure that his supplier is compliant with the GST Law else the recipient will lose the credit
  

• The recipient will not be entitled to claim the credit if his supplier

  • is newly registered in GST (criteria to be notified)

  • has not paid the taxes beyond a specified period

  • has not paid the tax reported in GSTR 1 (beyond a prescribed limit)

  • has availed credit in excess of the credit available to him as per Form GSTR 2A / 2B (beyond a prescribed limit)
    

• who has discharged tax by utilizing credit beyond the permissible limit (currently Rule 86B provides that certain categories of suppliers are allowed to discharge 99% of their tax liability by utilizing credit and balance 1% needs to be discharged compulsorily by cash even if they have sufficient credit balance)
  

• is a person notified by the Government (allows Government to black list new categories of suppliers)
  

• The above mechanism will be operationalized by way of an auto-generated report that may be on the lines of GSTR 2A / 2B which will bifurcate the credits into

  • Credits available

  • Credits not available
    

• Additionally, the recipient would be required to reverse the credit if the tax has not been paid by the supplier. However, the same can be re-availed once the tax is deposited by the supplier – There appears to be a conflict between this proposed provision and the condition for availment of credits under the existing provisions. Further, the mechanism to implement this proposal needs to be notified

3. Restriction on Filing of Returns

• Restriction on the filing of GSTR 1 for a month if the GSTR 1 for the earlier month(s) is not filed

• Restriction on the filing of GSTR 3B for the month if the GSTR 1 of the same month / GSTR 3B for the earlier month(s) is not filed

4. Cancellation of Registration

• GST Registration can be cancelled in the following cases

  • Composition Dealer does not file the Annual Return beyond 3 months from the due date of filing Annual Returns

  • Other than Composition Dealer, does not file their monthly returns for continuous tax period as may be prescribed (presently 6 months. Now Government can increase/decrease it by issuing a Notification)

5. Extension of Time Limit

• Currently, the due date for filing of returns for the month of September is considered as the last date for giving effect to any missed out transaction related to the previous Financial Year. This last date is proposed to be extended to November 30 following the end of the Financial Year to which the transaction relates.
  

• The proposed amendment provides one-month additional time for

  • The claim of Input Tax Credit on Invoices / Debit Notes

  • Reporting of Credit Notes (credit notes to be raised latest by October 31)

  • Amendment of details furnished in GSTR 1

  • Corrections in GSTR 3B

  • Corrections in GSTR 8 – Returns filed by E Com Operators

It should be noted that the time limit has been extended upto November 30. Hence, all the compliances need to be observed before this date and hence technically the last date for observing these compliances would be the return to be filed for the month of October which is due by November 20

6. Refunds

• Enabling provision introduced to provide legal backing for applying refund of excess balance in electronic cash ledger outside monthly returns
  

• Withholding of or deduction of tax from the refund due to a defaulter register person extended to all types of refunds. This was hitherto applicable only to refund due on account of zero-rated supply and refund under inverted duty structure
  

• Relevant date of 2 years for filing refund on SEZ supplies (both with payment and without payment of tax) to be computed from the due date of filing return u/s 39 in respect of such supplies

7. Retrospective Amendments (w.e.f July 1, 2017)

• The current GST portal www.gst.gov.in has been notified as a common portal for all purposes other than E-Invoicing and E Way Bill generation
  

• Exemption from GST under RCM on Liquor License charges collected by Government

8. Other Proposals

• Retrospective reduction in the rate of interest for wrong availment and utilization of input tax credit from 24% to 18% - No interest if the credit has not been utilised
  

• Facility to transfer of balance in electronic cash ledger in IGST and CGST to another branch (having separate GST Number)
  

• Enabling Provision to provide legal backing to Rule 86B which restricted usage of ITC in certain cases

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