How Budget 2022 Will Affect the GST?

On the basis of the GST Council's recommendations, several revisions to the GST Acts have been enacted. These adjustments are aimed at enhancing compliance and facilitating/simplifying the process. These changes include the rationalisation of the return filing procedure, sequential filing of GSTR-1, cancellation of registration of return non-filers/ stop-filers, the elimination of the two-way communication process in return filing and the resulting changes, certain conditional restrictions on the use of input tax credit, allowing transfer in an electronic cash ledger of a distinct person, extending the relevant date for rectification of errors, and the availability of input tax credit.

Following amendments made to the Finance Bill, 2022, vide Clauses 99 to 113, which will take effect from a date to be notified, as close as feasible, concurrently with matching amendments to identical GST Acts passed by state(s) and union territories with the legislature.

Furthermore, amendments made to the Finance Bill, 2022, pursuant to Clauses 114 to 123, will take effect on the bill's enactment date.

Clause 99

• Only if the credit has not been restricted in the details disclosed to the receiver under Section 38 of the CGST Act, i.e. GSTR 2B, the input tax credit can be claimed in relation to a supply of goods or services.
• Section 43A of the CGST Act, which was included pursuant to Section 8 of the CGST (Amendment) Act, 2018, but was never implemented, is now proposed to be removed.
• An extension of the time limit for a registered person to claim input tax credit for any invoice or debit note issued during a fiscal year until the 30th day of November of the following fiscal year.

Clause 100

• Clauses (b) and (c) of sub-section (2) of Section 29 of the CGST Act are being revised to provide that a person's registration may be cancelled if –
  • The person paying tax under Section 10 (Composition Dealer) who has failed to file a return for a financial year more than three months after the due date;
  • Except for those who pay tax under Section 10, no one has filed returns for a continuous tax period as may be required.

Clause 101

[Amended Sub-section (2) of Section 34 of the CGST Act.] An extended time limit for the issue of credit notes in respect of any supply made in a financial year up to the 30th day of November of the following financial year

Clause 102

The CGST Act's Section 37 is being amended to:

• Prescribe the rules and restrictions for providing external supply details in GSTR 1 and communicating outward supply details to concerned receivers in GSTR 2B
• Remove the two-way communication procedure from the return filing process.
• Allow for corrections of inaccuracies in details of external supplies furnished under sub-section (1) of Section 37 of the CGST Act (GSTR 1) till the 30th day of November of the next financial year.
• Under sub-section (1) of Section 37 of the CGST Act (GSTR 1), provide for tax period-by-tax-period sequential filing of details of outward supplies.

Clause 103

Section 38 of the CGST Act is being repealed in order to eliminate the two-way communication process in return filing and to prescribe the manner, conditions, and restrictions for communicating details of inward supplies and input tax credit to the recipient via an auto-generated statement in GSTR 2B.

Clause 104

The CGST Act's Section 39 is being amended to:

• The non-resident taxable person must file the monthly return (GSTR 5) by the 13th day of the following month.
• Persons filing returns under the proviso to sub-section (1) should have the choice of paying either the self-assessed tax or a prescribed amount.
• Allow for rectification of inaccuracies in the return filed under Section 39 of the CGST Act until the 30th day of November of the following financial year.
• Subsection (1) of Section 37 requires the provision of details of outward supplies (GSTR 1) for a tax period as a prerequisite for furnishing the return under Section 39 for that tax period.

Clause 105

Section 41 of the CGST Act is being replaced to eliminate the concept of a "provisional" "claim" of eligible input tax credit and to allow for the use of self-assessed input tax credit subject to the limitations and restrictions that may be imposed.

Clause 106

Sections 42, 43, and 43A of the CGST Act have been removed from the bill in order to eliminate the two-way communication procedure in return filing.

Clause 107

Section 47 of the CGST Act will be revised to provide for the imposition of a late fee for late submission of a return (GSTR 8) under Section 52 of the Act. Furthermore, as a result of the revision to Section 38 of the CGST Act, the reference to Section 38 of the CGST Act is being eliminated.

Clause 108 

Subsection (2) of Section 48 of the CGST Act is being revised to eliminate the reference to Section 38 as a result of the amendment to Section 38 of the CGST Act.

Clause 109

The CGST Act's Section 49 is being amended to:

• Allow for constraints on how the money available in the electronic credit ledger can be used.
• Allow for the transfer of funds from a registered person's electronic cash ledger to a separate person's electronic cash ledger under the CGST Act or the IGST Act.
• Prescribe the maximum percentage of output tax due that can be discharged using the electronic credit ledger.

Clause 110

Section 50 of the CGST Act does not levy interest on input tax credits that are incorrectly claimed but not used retroactively from July 1, 2017.

Clause 111

Correction of inaccuracies in the statement submitted under Section 52(4) of the CGST Act, i.e., GSTR-8, has been extended till the 30th day of November of the next financial year.

Clause 112

The CGST Act's Section 54 is being amended to:

• Make it clear that any reimbursement claim for any balance in the electronic cash ledger must be made in the form and manner specified.
• Allow 2 years from the last day of the quarter in which the said supply was received to obtain a refund of tax paid on inward supplies of goods or services or both under Section 55 of the CGST Act (i.e., Refund for specialised Agency).
• Extend the scope of refund withholding and recovery to include all sorts of refunds.
• Clarify the deadline for making a refund claim in relation to supplies supplied to a SEZ developer or unit.

Clause 113

Section 168(2) of the CGST Act has been revised to eliminate the reference to Section 38 as a result of the amendment to Section 38 of the CGST Act.

Clause 115, 118, 121

Proposed to amend Notification No. 13/2017 – Central Tax, Notification No. 6/2017 – Integrated Tax, and Notification No. 10/2017 – Union Territory Tax, all dated June 28, 2017, retroactively w.e.f. July 1, 2017, to notify the rate of interest on delayed CGST, IGST, and UTGST payments from 24 per cent PA to 18 per cent PA under Section 50(3) of the CGST Act read with Section 20 of the IGST Act & Section 21 of the UTGST Act viz. Credit mismatch.

Clause 116, 119, 122

To amend the following pertinent notices issued under the Central Tax, Union Territory Tax, and Integrated Tax Acts, as amended, as follows: Notification No. 01/2017 – Central Tax (Rate), Notification No. 01/2017 – Integrated Tax (Rate), and Notification No. 01/2017 – Union Territory Tax (Rate), all dated June 28, 2017, on the supply of unintended waste generated during the production of fish meal (falling under heading 2301), except fish oil, is being exempted during the period beginning July 1, 2017, and ending September 30, 2019 (both days inclusive), subject to the condition that if said tax has been collected, the same would not be eligible for reimbursement.

Clause 117, 120, 123

The following Notifications No. 25/2019- Central Tax (Rate), No. 24/2019- Integrated Tax (Rate), and No. 25/2019- Union Territory Tax (Rate) dated September 30, 2019, have declared service by way of grant of alcoholic liquor licence for consideration in the form of licence fee or application fee or by whatever name it is called by the State Governments as an activity or transaction that shall be treated neither as a supply of goods nor a supply of service.

These notifications are effective as of July 1, 2017. However, no refunds will be given for tax that has been collected but would not have been if the aforementioned notices had been in effect at all relevant times.