Indirect Tax News Letter

 

GST Calendar –Compliances for the month of January’2022

Nature of Compliances	Due Date
GSTR-7 (Tax Deducted at Source ‘TDS’)	February 10,2022
GSTR-8 (Tax Collected at Source ‘TCS’)	February 10,2022
GSTR-1 January 2022	February 11,2022
IFF- Invoice furnishing facility (Availing QRMP)	February 13,2022
GSTR-6 January 2022 Input Service Distributor	February13,2022
GSTR-2B (Auto Generated Statement)	February 14,2022
GSTR-3B January 2022	February 20,2022
GSTR-5 January 2022 (Non-Resident Taxable Person)	February 20,2022
GSTR-5A January 2022 (OIDAR Service Provider)	February 20,2022
PMT-06 (who have opted for QRMP scheme)	February 25,2022

1. Budget Highlights “2022-2023”

GST Related Amendments

Input Tax Credit ‘ITC’

• Removal of ‘Provisional Credit’ provisions u/s 41 of the Act:  Section 41 has been substituted to remove allowance of ‘provisional ITC’, thereby now taxpayer can avail only self-assessed eligible ITC. Further it provides that the taxpayer needs to reverse ITC along with interest on supplies wherein tax has not been paid by the supplier (ITC may be re-availed upon payment of tax by supplier).
• Matching mechanism of ITC:
• Section 42, 43 and 43A of the CGST Act to be omitted for doing away with two-way communication process of returns filing’s i.e., online matching, reversal and reclaim of ITC of invoices vide GST Forms GSTR1, GSTR-2, GSTR-2A, GSTR-1A, GSTR-3.

• Section 37 has been amended in order to remove the communication process of acceptance, rejection and keep pending of inward supply details (invoices).

• Extension of time limit to avail ITC: Time limit for claiming ITC has been extended till 30th November (from current September GST Return or filing of Annual Return whichever is earlier) following the end of the Financial Year to which such Invoice or Debit Note pertains.

• New restrictions / conditions for availing ITC: Amendment in Section 16(2) has been proposed for inserting a new clause ‘(ba)’ which provides for additional restrictions as provided under the newly substituted Section 38 (summarized in next slide) of the CGST Act, 2017 ‘the Act’.

RNM Comments: Amendments have been carried out to tighten and restrict ITC availability, thereby controlling frauds and misuses of ITC vide fake invoicing mechanism. Relaxation has been provided in timelines for availing ITC. Present provisions has been done away of online matching of ITC.

• A new auto-generated statement with details of Inward Supplies and ITC (other than GSTR-2B): Proposal to substitute Section 38 in entirety.

It provides that taxpayer shall get an additional auto-generated statement (other than GSTR-2B) which shall contain details of ITC. The said statement shall be made available electronically to the recipients. Further, the new additional auto-generated statement shall be divided into two parts:

1. Details of inward supplies in respect of which ITC may be available to the    recipient; and
   1. Details of supplies in respect of which ITC cannot be availed, whether wholly or partly, by the recipient, based on the details furnished by the supplier in its GSTR-1 enlisted as below:

i. Any registered person within such period of taking registration as may be prescribed; or

ii. Any registered person, who is a continuous defaulter in payment of tax (continuous period as may be prescribed); or

iii. Any registered person, who short pays the output for a period by such limit as may be prescribed; or

iv. Any registered person who claims excess ITC in accordance with Sec38(2)(a) by such limit as may be prescribed; or

v. Any registered person, who has defaulted in discharging his tax liability in accordance with Sec49(12) subject to such conditions and restrictions as may be prescribed; or

vi. Such other class of persons as may be prescribed.

RNM Comments: Section 16 and Section 38(2)(b) has been interlinked, thereby eliminating the argument of taxpayers i.e., substantive provision of Section 16 doesn’t restrict availment of ITC. Going forward ITC shall not be allowed in the instances for e.g.: defaulter suppliers in terms of non-payment / short-payment of taxes, excess availment of ITC; newly registered suppliers; such class of persons as may be notified. The above judgment is contrary to the judgment of Hon’ble Madras HC in the matter of D.Y. Beathel, wherein it was held that buyer should not be made suffer on account of supplier’s fault to deposit taxes to the ex-chequer.

GST Returns: GSTR-1

• Extension of time limit for rectification(s) in outward supplies GSTR-1:

Amendment in Section 37 of the Act has been proposed, to extend time limit for rectification of errors in respect of details of outward supplies upto 30th November of the following Financial Year (currently the last date for rectification is return for the month of September of following Financial Year or filing of Annual return whichever is earlier).

• Mandatory filing of GSTR1 of previous tax period: A new sub-section has been inserted ‘(4)’ under Section 37 which provides for tax period-wise sequential filing of details of outward supplies, i.e., the registered person cannot file GSTR-1 with filing the GSTR-1 for the previous period.

GST Returns: GSTR 3B

• Extension of time limit for rectification(s) in GSTR-3B: Amendment in Section 39 of the Act has been proposed, to extend time limit for rectification of errors and omissions upto 30th November of the following Financial Year (currently the last date for rectification is return for the month of September of following Financial Year or filing of Annual return whichever is earlier).

• Mandatory filing of GSTR1 before filing of GSTR-3B: Restriction has been inserted by amending Section 39 of the Act to enable mandatory filing of current tax period GSTR-1 as a condition before the filing of current tax period GSTR-3B (Presently, the restriction is limited to mandatory filing of previous tax period GSTR-3B).

RNM Comments: Proposed extension in time lines shall provide relief to many taxpayers and enable them for rectification of any errors or omissions. Further, few provisions has been proposed to tighten compliance’s of the GST returns.

Refund of Tax

• Refund of Electronic Cash Ledger Balance: A provision has been inserted which provides that refund claim of any balance in the E-Cash Ledger to be made in the prescribed form and manner.
• Extension of time limit for International Organizations: Time limit has been increased for refund claim on inward supplies from 6 months from the last day of the quarter in which inward supplies were received, to 2 years from the last day of such quarter.

RNM Comments: Presently, the time period to claim refunds for international organizations is 6 months.

• Adjustment of refunds vis-à-vis tax demand: An amendment has been proposed in Section 54(10) of the Act, wherein scope has been widened for recovery or withholding amount from all types of refunds vis-à-vis adjustment against tax demands (if any).

RNM Comments: Presently, only refund of unutilized ITC was allowed for adjustment or withholding vis-à-vis tax demands.

• Clarification w.r.t. ‘relevant date’ for filing of refund claims for SEZs: It has been clarified by amending Section 54 of the Act, that the relevant date for filing refund claim in respect of supplies made to a SEZs Developer / SEZ unit shall be 2 years from the due date of furnishing of return in respect of such supplies.

RNM Comments: Presently, the said limit of 2 years is from the date of payment of tax. Further, the retrospective effect of aforesaid clarification is yet to be clarified by authorities.

Transfer of Inter-unit E-Cash Ledger Balances

An amendment has been proposed in Section 49(10) of the Act, which now allows transfer of amount available in Electronic Cash Ledger of one GSTIN to the Electronic Cash Ledger of another GSTIN having same PAN. Further, transfers may be done from CGST cash balance to CGST/IGST or or SGST cash balance to SGST/IGST cash balance of another branch having same PAN. It may also be noted that transfer of CGST balance of one branch to SGST balance of another branch and vica-versa shall not allowed.

RNM Comments: Presently, there is no such provision to transfer credits between distinct persons (one business unit to another business unit of a taxpayer having same PAN). Current provisions are limited to transfer of electronic cash ledger balance between inter-heads (CGST/ SGST/IGST) within the same GSTIN.

Thresholds for cancellation of Registration

 

• Composition Taxpayers: An amendment has been proposed in Section 29(2)(b) for changing the threshold limit for cancellation of registration for Composition taxpayers from the default of returns for three consecutive tax periods to ‘return for a Financial Year beyond three months from the due date of furnishing the said return’.

• Other than Composition Taxpayers (Normal taxpayers): An amendment has been proposed in Section 29(2)(c) of the Act, wherein the time limit of default of non-furnishing of returns for continuous period of 6 months has been substituted by ‘such continuous tax period as may be prescribed’.
• RNM Comments: CBIC needs to prescribe the frequency of continuous period. Ex-chequer needs to keep align the said limits in correlation to the turnovers of the taxpayers.

Late fee for TCS

Rectification of any omission or correction in form GSTR-8 to be allowed till 30th November following the end of the financial year. Further, late fee has been imposed on delayed filing of TCS return.

RNM Comments: Presently the last date for correction / omission is 30th September following the end of financial year or filing of Annual return whichever is earlier. Further, there is no late fee prescribed for delayed filing of TCS returns.

Issuance of Credit Notes

 

Time limit for issuance of credit notes has been increased to 30th November of the following Financial Year with respect to previous year invoices.

RNM Comments: This is a welcome move and is in specific relief to industries where majority sales are effected in the fourth quarter of the Financial Year.

Interest On Delayed Payments

 

An amendment has been proposed in Section 50 with retrospective effect (July 1, 2017) which provides that interest shall be payable only on ITC availed and utilized and that there shall be no interest payable on mere wrong availment of ITC. Further, interest shall be applicable at the rate of 18% on such wrong availment and utilization, however the said interest rate may be increased upto 24% by way of notification.

RNM Comments: Interest would not be payable until restricted / blocked ITC has been both availed and utilized. Similar amendment was carried out in Sec 50(1) of CGST Act. It shall also put an end to Revenue’s proposition of charging interest at the rate of 24% on ITC related demands. However, nothing is provided in respect of interest already paid by the taxpayer.

CUSTOMS

Widening of Powers

• Inclusion of officers of Director General of Revenue Intelligence and Customs Preventive Department: Amendments has been carried out in various sections of Customs Act, 1962 to widen the powers conferred to Proper Officers of Customs including granting of concurrent powers and functions to two or more proper officers. Further, by amending Section 3 of the Customs Act, Proper Officers of Director General of Revenue Intelligence and Customs Preventive Department shall also be deemed to be Proper Officers under Customs Act.

• Validation effect by giving retrospective effect to Sections 2, 3 and 5 of the Customs Act, 1962: Validation has been provided for any action taken or functions performed under specified chapters of the Customs Act, notifications issued thereunder, appointment of officer’s and assigning functions before commencement of the Finance Act, 2022.

RNM Comments: The said amendment has been proposed as an after-math of Canon India Private Limited (Civil Appeal No. 1827 of 2018) judgment wherein Supreme Court has held that officers of DRI are not proper officers under Customs Act.

• Valuation of Goods: Power to prescribe additional obligations, checks, circumstances and manner on such class of imported goods, upon the importer, where the Board has reason to believe that value of such goods may not be declared truthfully or accurately, having regard to the trend of declared value of such goods or any other relevant criteria.

RNM Comments: The said amendment has been proposed in order to check under-valuation and other clandestine removal of goods.

Advance Ruling

Advance Ruling to be valid for 3 years or till the time there is a change in law or change in facts (whichever is earlier). Further, for ARs which are as on the date on which the Finance Bill, 2022 receives the assent of the President, the said period of three years shall be reckoned from the date on which the said Finance Bill receives the assent of the President. Fee for advance ruling to be prescribed by way of notification.

RNM Comments: By amending validity of AR, there shall be increase in litigation and un-certainty of already ruled matters either by taxpayer / Revenue.

Penalty for publishing information

Insertion of Section 135AA for imposing penalty for publication (including re-production of information in printed or electronic form and making it available in public domain) of any data in relation to the value or classification or quantity of goods for exports from India, or imports into India, or the details of the exporter or importer of such goods, unless required under any law for the time being in force, to the extent of fine of Rs. 50,000/-, imprisonment for a term which may extend to six months or both. It further provides that the said penalty shall not be applicable to any publication made by or on behalf of the Central Government.

RNM Comments: This has been proposed for keeping confidentiality of data.

Transfer of documents along with report to jurisdictional offer

Where in pursuance of audit, searches, seizures and investigation under the Customs Act, the Proper Officer of Customs has reasons to believe that any duty has been short-levied, not levied, short-paid or not paid or any duty has been erroneously refunded or any drawback has been erroneously allowed or any interest has been short-levied, not levied, short-paid or not paid, or erroneously refunded, then such officer of customs shall, after inquiry, investigation, or audit, transfer the relevant documents, along with a report in writing to the proper officer having jurisdiction, in respect of assessment of such duty, or who allowed such refund or drawback, or to an officer to whom proper officer is subordinate. It further seeks to provide that in case of multiple jurisdictions, such transfer shall be made to an officer of customs to whom such matter is assigned by the Board under Section 5 of the Act.

RNM Comments: This shall reduce dual trails for an assessee.

Cognizance of Offence by Court

No court to take cognizance of any offence under the said section 135AA, except with the previous sanction of the Principal Commissioner of Customs or Commissioner of Customs.

OTHER AMENDMENTS

Replacement of SEZ Act with a new Act

• Special Economic Zones ‘SEZ’ Act shall be replaced with a new legislation that will enable the states to become partners in ‘Development of Enterprise and Service Hubs’.
• Reforms has been proposed in customs administration of SEZs which shall fully IT driven henceforth on the Customs National Portal with a focus on higher facilitation and with only risk-based checks, thereby enabling ease of doing business by SEZ units considerably. The said reforms shall be implemented by September 30, 2022.

RNM Comments: The new legislation to revamp provisions of SEZs in a more robust manner and shall be IT driven, thereby enabling ease of doing business

Retrospective Exemption

‘Service by way of grant of alcoholic liquor license, against consideration in the form of license fee or application fee’ has been declared as an activity or transaction which shall be treated neither as a supply of goods nor a supply of service vide Notification No. 25/2019 – Central Tax (Rate) dated 30.09.2019, Notification No. 24/2019- Integrated Tax (Rate) dated 30.09.2019 and Notification No. 25/2019- Union Territory Tax (Rate) dated 30.09.2019. The said notifications has been given retrospective effect from 01.07.2017. However, no refund shall be made of tax which has been collected, but which would not have been so collected, had the said notifications been in force at all material times.

Anti-dumping Duty

Anti-Dumping duty is being permanently revoked, on imports of the following goods:

a. Straight Length Bars and Rods of alloy-steel, originating in or exported     from People’s Republic of China;

b. High Speed Steel of Non-Cobalt Grade, originating in or exported from Brazil, People’s Republic of China and Germany;

c. Flat rolled product of steel, plated or coated with alloy of Aluminum or Zinc, originating in or exported from People’s Republic of China, Vietnam and Korea.

Countervailing duty

 

Countervailing duty is being permanently revoked on imports of Certain Hot Rolled and Cold Rolled Stainless Steel Flat Products, originating in or exported from People’s Republic of China.

RNM Comments: Anti-dumping duty and countervailing duty has been revoked in order to meet the demands of domestic manufacturing industries.

B.      Hon’ble Supreme Court have extended extension limitation period

• Background
• Hon’ble Supreme Court had suo-motu taken cognizance of the challenges faced by people of India on account of Covid-19 pandemic (first wave) and thus had issued an Order dated March 23, 2020 wherein limitation period was extended in all petitions, applications, suits, appeals and all other proceedings w.e.f. from March 15, 2020 till further orders. Further, the said order was retracted by Hon’ble Supreme Court vide Order dated March 8, 2021 and the period from March 15, 2020 to March 14, 2021 was excluded from the period of limitation. The balance period of limitation was to be reckoned from March 15, 2021.

• Subsequently, on account of surge in Covid-19 (second wave), the Apex Court had restored its Order dated March 23, 2020, granting relaxation in statutory limitation period from March 15, 2021 until further orders, which was retracted by Hon’ble Supreme Court vide its Order dated September 23, 2021 and inter alia laid down that the period from March 15, 2020 to October 2, 2021 shall be excluded from limitation. Thus, the balance period of limitation was to be reckoned from October 3, 2021.

• Order dated January 10, 2020

Hon’ble Supreme Court while recognizing drastic surge in Covid-19 cases (third wave) across the country on account of the new variant, has again restored its Order dated March 23, 2020 with following directions:

• Period of limitation shall stand extended upto February 28, 2022, i.e. period from March 15, 2020 to February 28, 2022 to be excluded for the purposes of limitation in respect of all judicial / quasi judicial proceedings. Further, the balance period of limitation from Oct 3, 2021 (if any) shall now become available from March 1, 2022;

• Where the limitation period expires during the period March 15, 2020 and February 28, 2022, notwithstanding the actual balance period of limitation remaining, all persons shall have an additional period of 90 days from March 1, 2022. In case where the balance period of limitation (reckoned from March 1, 2022) is greater than 90 days, the longer period of limitation shall apply.