Blog No. 56: Union Budget 2022 made effective from 01.10.2022 – Key Takeaways

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As the Government notifies 01.10.2022 as the effective date from when the Union Budget 2022 would be made effective, here are the key takeaways which should be taken note of. A bare look at these amendments gives a reflection that vendor has been made God for ensuring smoothness of compliances and claim of input tax credit by the recipient. Any non-compliance on part of vendor may have a cascading effect. Therefore, Government should operationalise the concept of “Vendor Compliance Rating” and we expect that restriction to avail ITC should be linked with compliance score instead of various circumstances provided in law.

 

Further, the most touted points are time limit for availing ITC, issuing credit notes and doing rectifications have been extended till 30th day of November following the end of financial year. As a welcome provision, the re-availment of ITC is not linked with 30th November or date of filing of Annual Return.

 

Read in detail about all amendments as well as Paksh take on certain technical issues below:

 

Input Tax Credit

  1. New condition to avail input tax credit has been inserted in section 16. Now, the registered person is entitled to the credit which is auto-populated in Form GSTR-2B and is shown as available (i.e., not shown as restricted).

Paksh Remarks:

1.1.       Existing Form GSTR-2B communicates the details in two parts, – A. ITC available summary (Table 3), and B. ITC not available summary (Table 4)

1.2.       As per instruction number 2(b) to Form GSTR-2B, presently GSTN portal communicates the credit as not available in following circumstances:

  1. Invoice or debit notes furnished by corresponding supplier in Form GSTR-1 after the due date specified under section 16(4).
  2. Invoice or debit notes where supplier’s GSTIN and place of supply are in the same state while recipient is in another State.

1.3.       Amended section 38(2) provides the list of circumstances where ITC would be communicated as restricted. The notification prescribing such circumstances is awaited as on date (i.e., on 30.09.2022). However, present list of circumstances as per section 38(2) does not find mention of any of above-mentioned circumstances.

1.4.       The circumstance “Invoice or debit notes furnished by corresponding supplier in Form GSTR-1 after the due date specified under section 16(4)” is notable for the reasons that supplier is bounded to furnish tax invoice for a particular financial year in his GSTR-1 on or before 30th November following the said financial year. This view is on account of section 16(2)(aa) read with section 16(4).

1.5.       Parliament has delegated vast range of powers to its sub-ordinate organ and it is expected that unreasonable restrictions, if any, prescribed would be made subject matter of challenge in this new era of ITC availment.

 

  1. ITC for a financial year can be taken upto 30th November following the end of financial year or furnishing of relevant annual return, whichever is earlier.

Paksh Remarks:

  1. Notably, the expression used is 30th November and it has invited attention of everyone by way of posing a question on its practical implications – “whether the return is to be filed on or before 30th November or ITC can be availed in books of accounts by 30th November?”
  2. Earlier the expression used was “due date of furnishing of the return under section 39 for the month of September”. Even then some schools of thought expressed the view that ITC is to be availed in the books of accounts by said date.
  3. It appears that mention of expression “thirtieth day of November” clears the air over the issue and now ITC can be availed in books of account by said date. Said ITC once self-assessed in the return furnished for the month of November would be credited to the electronic credit ledger.
  4. However, it is notable that the GST authorities have taken the view that ITC can be taken through return and hence, date of filing of return shall be on or before 30th November. Hence, there may be anomalies in manner of executing the compliance with this provision.

Cancellation of Registration

  1. Registration of composition dealers can be cancelled/suspended if the return for financial year is not filed upto 3 months from the due date of filing the same. This amendment has been made because the return of composition dealers was made annual instead of being a quarterly return without any corresponding amendment in section 29.
  2. Registration of monthly taxpayers can be cancelled/suspended if they do not furnish returns for a continuous period of 6 months.
  3. Registration of quarterly taxpayers can be cancelled/suspended if they do not furnish returns for a continuous period of 2 tax periods.

Credit Notes

  1. Clause 101 to the Finance Bill 2022 proposed amendment in this section with following object:

“Clause 101 seeks to amend sub-section (2) of section 34 of the Central Goods and Services Tax Act so as to provide for thirtieth day of November following the end of the financial year, or the date of furnishing of the relevant annual return, whichever is earlier, as the last date for issuance of credit notes in respect of any supply made in a financial year.”

  1. However, the statutory reading of this provision gives an indication to the contrary i.e., the credit note shall be declared in the return for the period during which such credit note has been issued but not later than 30th day of November. Therefore, there may be anomalies in ensuring compliance with this provision. Nevertheless, intention is to allow issuing of credit notes on or before 30th November.

Form GSTR-1

  1. GSTR-1 can be filed only if GSTR-1 and GSTR-3B for previous tax period(s) has been filed. Earlier said restriction was applicable if GSTR-3B for previous tax period was not filed.
  2. Rectification of Form GSTR-1 can be done on or before 30th day of November following the end of financial year to which such details pertain or furnishing of relevant annual return, whichever is earlier.

Form GSTR-2B

  1. Section 38 provides for Form GSTR-2B and the circumstances when ITC is to be shown as ”Not available” in Form GSTR-2B.
  2. There shall be no two-way communication between the supplier as well as recipient as provided in original scheme of GST law.

Return

  1. Filing of Form GSTR-1 has been made condition precedent for filing of Form GSTR-3B.
  2. The payment of tax by quarterly taxpayer as per self-assessment method or fixed payment method has been statutorily recognised. Therefore, fixed payment method need not to be notified as a special procedure of section 148.
  3. Due date for filing returns by non-resident taxable person in Form GSTR-5 has been changed from 20th to 13th.
  4. Rectification of Form GSTR-3B (or any other return) can be done on or before 30th day of November following the end of financial year to which such details pertain or furnishing of relevant annual return, whichever is earlier.

Reversal of ITC awaiting payment of tax by corresponding supplier

  1. In a situation where ITC appears in Form GSTR-2B but the tax in respect thereof has not been paid by the corresponding supplier, the recipient need to reverse the credit with interest. However, when the tax is paid by the taxpayer, recipient is entitled to avail the credit. The provision regarding re-availment of credit is a welcome provision.
  2. Section 42 earlier provided that supplier shall pay the tax within the time provided under section 39(9) of the Act. However, said restriction is not provided now.

No concept of matching

  1. Provisions of section 42, 43 and 43A along with corresponding rules have been omitted now.

Payment of tax

  1. Statutory backing given to the rule 86B vide section 49(12) of the CGST Act.

E-Commerce Operators

  1. Statement of TCS can be rectified on or before 30th day of November following the end of financial year to which such details pertain or furnishing of relevant annual return, whichever is earlier.

Refunds

  1. Refund of balance in electronic cash ledger is being filed in Form GST RFD-01 due to non-functioning in Form GSTR-3B. Since said functionality has been done away with, the enabling provision for applying refund through GSTR-3B has been removed.
  2. Specified persons u/s 55 can claim refund u/s 54(2). As per section 54(2), the application for refund is to be made within a period of 6 months from the end of quarter in which inward supplies are received. However, the government, as a special procedure notified under section 148, have extended this time limit to 18 months. Now, said time limit has been extended to 2 years.
  3. Now, the refund can be withheld even in cases where zero-rated supplies are made with payment of tax or in other cases as well. This is a corrective amendment.
  4. The relevant date for claiming refund in case of SEZ supplies has been provided now. Prior to amendment vide CGST (Amendment) Act, 2018, w.e.f. 01.02.2019, the end of financial year was considered as the relevant date. After aforesaid amendment, the reference to these supplies was left over to be explained.

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