Notifications to implement changes recommended by GST Council
Recommendations relating to GST procedures:
Amendments in GST Rules
All amendments to GST Rules will take effect from 05.07.2022, unless specifically mentioned otherwise in the notification.
1. Where GST registration of a taxpayer is suspended due to non-filing of returns, such suspension shall be deemed to be revoked upon furnishing of all pending returns.
2. Supply of Duty Credit Scrips is exempt from GST, leading to a view that proportionate Input Tax Credit (ITC) reversal is mandated on supply of such Duty Credit Scrips. To address this issue, rule 43 has been amended to exclude supply Duty Credit Scrips from ‘aggregate value of exempted supply’.
BDO Comments
Since the amendment is prospective, there is lack of clarity with respect to its applicability for the past periods.
3. The taxpayers having turnover above the threshold for issue of e-invoices, but not issuing e-invoices by virtue of exemption from e-invoicing mandate, are required to declare the following in the invoice raised by them:
“I/We hereby declare that though our aggregate turnover in any preceding financial year from 2017-18 onwards is more than the aggregate turnover notified under sub-rule (4) of rule 48, we are not required to prepare an invoice in terms of the provisions of the said sub-rule.”
BDO Comments
The above requirement would largely be applicable to SEZ units, Insurance companies, Banks and Financial institutions including Non-banking Finance Companies, Goods Transport Agencies, supplier of Passenger Transport Services (such as Airlines) and multiplexes.
4. Where taxpayer has received refund of ITC erroneously or refund of IGST paid on exports in violation of rule 96(10), upon repayment of such refunds along with interest and penalty through Form DRC 03 (payment challan), the erroneously refunded amount shall be recredited to the Electronic Credit Ledger of the taxpayer by the proper officer, by passing an order in Form PMT-03A.
5. United Payment Interface (UPI) and Immediate Payment service (IMPS) are added as mode by which amount can be deposited in the Electronic Cash Ledger of the taxpayer.
6. A specific provision has been inserted through rule 87(14) to permit transfer of balance lying in the Electronic Cash Ledger of one registration to the Electronic Cash Ledger of other registrations of the same taxpayers (the ‘distinct person’), by using form PMT 09, subject to conditions.
7. Specific provisions have been introduced for calculation of interest in case of delayed payment of tax with retrospective effect from 1.7.2017 as tabulated below:
|
S. No. |
Scenario |
Applicability of interest |
|
i |
Tax liability is declared in return and the return is filed with delay (except where the return is filed after issue of Show Cause Notice) |
@ 18% on the amount paid by debiting Electronic Cash Ledger, for the period of delay (In other words, no interest is payable on tax paid by debiting Electronic Credit Ledger). |
|
ii |
ITC wrongly availed and utilised |
@24% on amount of credit wrongly availed and utilized. ITC would be considered as utilised, if balance in Electronic Credit Ledger falls below the quantum of ITC wrongly availed. The date of utilization of ITC in such cases would be deemed to be:
|
|
iii |
All other cases |
@18% of the unpaid tax, from the due date of payment of tax till the date of payment of such tax. |
8. It is clarified that for the purpose of refunds pertaining to SEZ units/Developers, ‘Specified officer’ would mean the ‘Specified officer’ or ‘Authorised officer’, as defined in rule 2 of SEZ Rules, 2006.
9. Enabling provision has been made to allow refund of unutilized ITC on account of export of electricity.
10. It is clarified that for calculation of refund of accumulated ITC on export of goods, the export turnover would be taken as lower of the FOB value declared in the Shipping Bill or the value declared in the Tax invoice/Bill of supply.
11. Formula for calculation of refund of ITC due to inverted tax structure has been revised so as to factor the ITC availed on Services in the actual utilization of ITC for payment of tax. The amendment is explained by way of example as under:
Turnover of inverted rated supplies: Rs.1,000 (A)
Net ITC (i.e. ITC claimed on inputs): Rs.500 (B)
Total Turnover: Rs.10,000 (C)
Total ITC (i.e. ITC claimed on inputs and input services): Rs.750 (D)
Tax payable on inverted supplies: Rs.50 (E)
The refund as per the original formula = (A * B / C) - E
= (1,000 * 500 / 10,000) – 50
= nil
The refund as per the revised formula = (A * B / C) – (E * B / D)
= (1,000 * 500 / 10,000) – (50 * 500 / 750)
= Rs.17/-
BDO Comments
The new formula appears to favor taxpayers marginally. The amendment, presumably, has been made, taking into account the recommendation of the Supreme Court to revisit the formula so as to factor ITC of input service while reckoning the actual utilization of ITC for payment of tax in a given period.
12. Rule 95A of the CGST Rules deals with refund of taxes to the Duty free shops, has been omitted with retrospective effect from 01.07.2019. However, it appears that no alternate provisions have yet been introduced to replace the rescinded rule. Further clarity on this issue is awaited.
13. Other minor amendments with respect to refund procedures, with retrospective effect from 01.07.2017, are as under:
- In case of claim of refund of IGST paid on export of goods, where there is a mismatch between Shipping Bill and invoice details reported in GSTR 1, the application for refund of IGST would be deemed to be filed on the day on which the mismatch is rectified.
- The refund of IGST paid on export of goods claimed by an exporter who is identified as risky exporter would be granted after due verification, similar to refund claim of input tax credit.
14. Various return forms have been amended.
(Notification no:14/2022-Central Tax dated 05.07.2022)
Other amendments
15. Vide notification no:9/2022-Central Tax dated 05.07.2022, amendments to section 49(10) and 50(3) of the CGST Act, 2017 as approved by Finance Act, 2022 are made effective from 05.07.2022. Amended section 49(10) enables the taxpayers to transfer balance in Electronic Cash Ledger of one registration to Electronic Cash Ledger of another registration within the same entity. Amended section 50(3) provides clarity on levy of interest on ITC wrongly availed and utilized.
16. Vide notification no:10/2022-Central Tax dated 05.07.2022, the registered person with aggregate turnover up to INR 20 Mn in FY 2021-22 has been exempted from filing Annual returns for 2021-22.
17. Vide notification no:11/2022-Central Tax dated 05.07.2022, the due date for furnishing a statement in CMP-08 (for Composition taxpayers) for quarter ended 30.6.2022 has been extended to 28.07.2022.
18. Vide notification no:12/2022-Central Tax dated 05.07.2022, the due date for furnishing a statement in GSTR-4 (for Composition taxpayers) for FY 2021-22 has been extended to 31.07.2022.
19. Vide notification no:13/2022-Central Tax dated 05.07.2022, the Government has extended various due dates as under:
- Due date for issue of order adjudicating demand of tax or denial of credit for year 2017-18, not involving allegation of fraud, suppression, etc. has been extended to 30.09.2023 from 05.02.2023 /07.02.2023. Consequently, the due date for issue of notice demanding duty/denying credit for the same period also gets extended to 30.06.2023, as it is linked to the date of passing of order.
- Period between 01.03.2020 and 28.02.2022 is excluded for computing the due dates for issue of order for recovery of erroneous refund. Similarly, this period is also excluded for computing the due date for filing refund claims.
Circulars issued by CBIC as recommended by the GST Council
1. Disclosure of inter-State supplies and ineligible/blocked credit:
- Inter-State supplies made to unregistered persons, recipients under Composition scheme and UIN holders should be disclosed in table 3.2 of Form GSTR 3B and appropriate table in form GSTR 1. Further, amendments made to Form GSTR 1, if any, should be reflected in GSTR-3B too.
- The suppliers should capture the correct State name of their customers, location, ‘place of supply’ in invoice and returns.
- The disclosures for ITC claim must be made on the ‘gross’ basis and all the reversals are required to be separately disclosed.
(Circular no:170/02/2022-GST dated 06.07.2022)
2. Clarifications about demand/penalty under the CGST Act, 2017 in case of transactions involving fake invoices, are tabulated below:
|
S. No. |
Issue |
Clarification |
|
i |
Invoice issued by ‘A’ to ‘B’ without underlying supply. |
In absence of any supply by ‘A’ to ‘B’, no tax liability on ‘A’ and consequently, no demand or recovery on ‘A’. However, penalty under section 122(1)(ii), equal to amount of tax involved leviable. |
|
ii |
‘B’ claims credit and uses ITC for payment of tax on outward supplies. |
Demand of incorrectly availed and utilized credit on ‘B’, along with interest and penalty under section 74. No penalty under section 122 or other section applicable. |
|
iii |
‘B’ claims ITC and uses it for payment of tax on invoice issued by ‘B’ to ‘C’, without any underlying supply. |
No demand of tax (in absence of supply) or input tax credit for ‘B’. Penalty under section 122 (1)(ii) and 122 (1)(vii), both equal to amount of tax involved, to be levied. |
It is clarified that the above clarification is illustrative and actual facts would need to be assessed. Further, the person, who has retained the benefit of such transactions and the person, at whose instance, such transactions are conducted, will also be liable for penalty under section 122(1A). Depending on the facts, the arrest and prosecution provisions may also be invoked.
(Circular no:171/02/2022-GST dated 06.07.2022)
3. Clarifications on various issues pertaining to GST:
- Clarifications relating to refund claimed by recipient on supply regarded as deemed exports:
- ITC claimed by recipient of deemed export supply would not be subject to bar or restriction under section 17 of the CGST Act.
- ITC claimed on deemed export supply would not be includible in ‘net credit’ for computing eligible refund of accumulated ITC to exporters or in inverted tax structure.
- Clarification on restrictions on ITC under section 17(5) of the CGST Act
- Credit on goods or services, personally consumed by the employees will be allowed, if they are under a statutory obligation.
- Restriction on ITC on leasing applies only to leasing of Motor vehicles, Vessels or Aircrafts and other goods are eligible for credit.
- Taxability of perquisites given by employer to employee under contractual agreement
- Perquisites given by employer to employee in terms of contractual agreement between them, will not be subject to GST as they are in lieu of services provided by employee to the employer in relation to his employment.
- Utilisation of balance in Electronic Credit Ledger and Electronic Cash Ledger for payment of tax and other liabilities
- The balance in Electronic Credit Ledger can be used only for making payment of output tax liability, whether as per return or payable under any proceeding under GST laws, other than under reverse charge.
- The balance available in electronic cash ledger can be used making any payment under GST law.
(Circular no:172/02/2022-GST dated 06.07.2022)
4. Clarifications on refund under Inverted Tax Structure where goods are supplied under concessional rate:
- It is clarified that even if input and output goods are same and credit is accumulated due to application of lower rate of tax on output supply, the taxpayer can claim refund of accumulated credit by treating it as accumulation due to inversion of tax. Earlier, as per circular no:135/05/2020, refund under this route was not available, if the input and output goods were same.
(Circular no:173/02/2022-GST dated 6.7.2022)
5. Process for re-credit in Electronic Credit Ledger:
- When refund of any ITC is made incorrectly and taxpayer repays such amount in cash with interest and penalty, he can reclaim ITC in the Electronic Credit Ledger basis Form PMT-03A issued by the proper officer.
- The process for reclaim of such credit, broadly, is as follows:
- The taxpayer should make payment of such erroneously received refund in form DRC-03, along with applicable interest and penalty, specifically mentioning in the form the reason for payment as erroneous refund of ITC.
- After making payment, the taxpayer is required to make an application to the proper officer in the format prescribed in the circular to re-credit the amount.
- The proper officer, after due verification, will pass an order in form PMT-03A, preferably within 30 days, re-crediting the amount in electronic credit ledger of the taxpayer.
(Circular no:174/02/2022-GST dated 06.07.2022)
6. Process to claim refund of accumulated ITC for export of electricity:
- It is not possible to file Shipping Bill or Bill of Export for export of electricity due to which, exporters are unable to claim refund of ITC relating to such export, as refund was linked to Shipping Bill/Bill of Exports. To enable the electricity exporters to claim refund, a new procedure has been laid down as under:
- Exporters must submit application for refund under the category of “Any other” in form RFD 01 (giving relevant details in statement 3B) and mention in remarks that this claim is for ‘export of electricity-without payment of tax (accumulated ITC)’. The exporter is not required to debit the amount of refund claimed from Electronic Credit Ledger at this stage.
- The exporter must upload the Statement of scheduled energy for electricity exported by the Generation Plants (in format attached as Annexure-I) issued as part of Regional Energy Account by Regional Power Committee Secretariat, for the period for which refund is claimed and copy of relevant agreement, giving tariff per unit of electricity exported, along with calculation of refund amount in prescribed format. Lower of the quantum of export of electricity as per invoice and the statement issued by Regional Power Committee Secretariat, would be considered to compute export turnover.
- The due date for claiming refund would be computed on the basis of last day of month in which electricity is exported.
- The refund amount would be calculated on the same basis as on export of goods.
- The proper officer would verify the details and compute the admissible refund. If he is satisfied that any amount is refundable to the exporter, he would ask the exporter to debit the amount in their Electronic Credit Ledger and on receipt of proof of such debit, proceed to issue the refund order and payment order.
(Circular no:175/02/2022-GST dated 06.07.2022)
7. Circular no:106/25/2019-GST dated 29.6.2019, dealing with refund of taxes paid on inward supply of indigenous goods by duty free shops has been withdrawn, as the rule 95A, dealing with such refund has been withdrawn.
(Circular no. 176/02/2022-GST dated 06.07.2022)
BDO Comments
These amendments give effect to the recommendations of 47th GST Council meeting. It is important to note that the notifications are made effective immediately and the taxpayers have no window of time to review and implement changes, such as the declaration about non-applicability of e-invoicing provisions, in the billing system, which might require time. The other clarifications are welcome and largely on the expected lines.
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