Registration Related Changes
Rule 8
·Introduction of Biometric based Aadhaar authentication and taking of Photograph for the issue of new GST Registration
·Verification of original documents uploaded along with the registration application
Rule 9
Increase in time for grant of new Registration from 3 days to 7 days
Additional Grounds for Cancellation of Registration – Rule 21
Previously the Commissioner did not have a prescribed Rule for cancelling the registration incase of Sec 16 violation or when there was a major difference between outward tax liability as per GSTR 3B and outward tax liability as per GSTR 1.
Now with the insertion of clauses (e) & (f) in Rule 21, the Commissioner shall also have the prescribed powers to cancel GST Registration in case there is a non-compliance as per Sec 16. Most important is Sec 16(2)(c) wherein requires proof of payment of tax by the supplier. Hence in case the amount of GST paid by the recipient to the supplier is ultimately not paid to the Govt., the dept. may invoke Rule 21.
Furthermore, Rule 21A(2) provides that at least suspension of GST Registration may be done in case of violation of Rule 21. The suspension can now happen even without a hearing. The vires of Rule 21A(2) with Article 14 of The Constitution may be tested in time to come.
No Natural Justice for Suspension of Registration! Rule 21A(2)
Rule 21A(2) provides that suspension of GST Registration may be done in case there is reason to believe that there is a violation of Rule 21 or Section 29. The suspension can now happen even without a hearing.
Reason to believe should ordinarily be strong enough and one expects that the department shall be careful in implementing suspension as an invocation of this provision would result in a standstill of the business of the taxpayer whereby it would not be able of issue invoices or waybills till such suspension continues.
The vires of Rule 21A(2) with Article 14 of The Constitution may be tested in time to come.
SCN in case of differences as per SOME ANALYSIS – [New Rule 21A(2A)]
Again Rule 21A(2A) is a stringent Rule whereby in case of significant differences between GSTR 2A & GSTR 3B or between GSTR 1 & GSTR 3B, suspension of GST Registration can be invoked immediately and in future cancellation, pf GST Registration too can be invoked.
One expects here too, that the department shall be careful in implementing suspension as an invocation of this provision would result in a standstill of the business of the taxpayer whereby it would not be able of issue invoices or waybills till such suspension continues.
Addition of Rule 21A (3A)
“(3A) A registered person, whose registration has been suspended under sub-rule (2) or sub-rule (2A), shall not be granted any refund under section 54, during the period of suspension of his registration
Rule 138E: Waybills will also be suspended for such Taxpayers
Impact of amendment of Rule 21A(3A) & 138E
Rule 21A(3A) is in addition to earlier Rules whereby in case suspension of GST Registration refunds will be denied. Also under Rule 138E, waybills will be blocked.
Rule 36(4) – Excess ITC restricted to 5%
Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded or Furnished by the suppliers under sub-section (1) of section 37 in FORM GSTR-1 or using the invoice furnishing facility, shall not exceed 5% of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37.
Impact of amendment
The restriction of ITC to 105% of GSTR 2A figure would be a hardship. However, it seems that the intention of the revenue in the time to come is to just allow only the ITC of the GSTR 2A figure.
However, with the inception of GSTR 2B, there would be another reconciliation requirement of GSTR 2A vis-à-vis GSTR 2B wherein there would be the following points of difference-
♦ 26/26/2017 Effect
♦ Amendments made in the current period reflecting in 2A in the period of the invoice & 2B in the month of the amendment
♦ Timing differences
Rule 59 – No GSTR 1 in case Last Period’s GSTR 3B has not been filed!
Critical to note here that in the case last period’s GSTR 3B is not filed, the current GSTR 1 cannot be filed. Hence only after-tax payment of last period would the supplier be eligible to issue invoices.
In this case, it is important for recipients to ensure that the GSTR 3B of their suppliers is filed and the amount of GST is reflecting in their GSTR 2A before they may payment of the GST amount to the suppliers.
Rule 86B – Restriction of ITC to 99%
86B. Restrictions on use of amount available in electronic credit ledger.-
Notwithstanding anything contained in these rules, the registered person shall not use the amount available in electronic credit ledger to discharge his liability towards output tax in excess of 99% of such tax liability, in cases where the value of taxable supply other than exempt supply and zero-rated supply, in a month exceeds fifty lakh rupees
Provided that the said restriction shall not apply where –
(a) the said person or the proprietor or Karta or the managing director or any of its two partners, whole-time Directors, Members of Managing Committee of Associations or Board of Trustees, as the case may be, have paid more than one lakh rupees as an income tax under the Income-tax Act, 1961 (43 of 1961) in each of the last two financial years for which the time limit to file return of income under sub-section (1) of section 139 of the said Act has expired;
(b) the registered person has received a refund amount of more than one lakh rupees in the preceding financial year on account of unutilised input tax credit under clause (i) of the first proviso of sub-section (3) of section 54; or
(c) the registered person has received a refund amount of more than one lakh rupees in the preceding financial year on account of unutilised input tax credit under clause (ii) of first proviso of sub-section (3) of section 54;
(d) the registered person has discharged his liability towards output tax through the electronic cash ledger for an amount which is in excess of 1% of the total output tax liability, applied cumulatively, upto the said month in the current financial year; or
(e) the registered person is –
(i) Government Department; or
(ii) a Public Sector Undertaking; or
(iii) a local authority; or
(iv) a statutory body:
Provided further that the Commissioner or an officer authorised by him in this behalf may remove the said restriction after such verifications and such safeguards as he may deem fit.
Impact of amendment of Rule 86B
The said Rule has been invoked with the intention of dealing with unscrupulous and fly by night operators or circle traders who would now be required to pay some tax at least by cash. However, it remains to be seen how an increase in cost by 1% would be a deterrent to these parties.
For Honest Taxpayers, clause (d) is important to note. It gives the cumulation facility. However, at the beginning of the financial year, Rule 86B would be a hardship for even the Large and genuine Taxpayers. In this regard Section, 21(g) requires invocation of cancellation incase of non-compliance with Rule 86B and to monitor compliance would be a challenge for professionals.
However, this Rule would not bother Large Taxpayers who would certainly have paid more than Rs.1 Lakh in Income tax in the earlier Financial Years.
Rule 138(10) -Validity of e-way bill reduced
The validity of e-way bill reduced. E-way bill shall remain valid for 1 day for a distance up to 200 Kms and additional 1 day for every 200Kms or part thereof; _w.e.f 01.01.2021
Impact –
For Large Vehicles, it is difficult to cover 200 km in one day. Hence this amendment would create more request for extensions and more detentions possibly.
S 120. In section 16 of the Central Goods and Services Tax Act, in sub-section (4), the words “invoice relating to such” shall be omitted
Impact –
Section 16(4) of the CGST Act is amended to delink the date of issuance of debit note from the date of issuance of the underlying invoice for purposes of availing input tax credit. Hence input tax credit on debit notes will be available even if issued after 30th September of next Financial Year.
S 119. In section 10 of the Central Goods and Services Tax Act, in subsection (2), in clauses (b), (c) and (d), after the words “of goods”, the words “or services” shall be inserted.
Impact –
Section 10 of the CGST Act is being amended, so as to exclude from the ambit of the Composition scheme certain categories of taxable persons, engaged in making-
(i) supply of services not leviable to tax under the CGST Act, or
(ii) inter-State outward supply of services, or
(iii) outward supply of services through an eCommerce operator
121. In section 29 of the Central Goods and Services Tax Act, in subsection (1), for clause (c), the following clause shall be substituted, namely:-
“(c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to optout of the registration voluntarily made under sub-section (3) of section 25:”.
Impact –
Section 29(1)(c) of the CGST Act is being amended to provide for cancellation of registration which has been obtained voluntarily under Section 25(3).
122. In section 30 of the Central Goods and Services Tax Act, in sub-section (1), for the proviso, the following proviso shall be substituted, namely:-
“Provided that such period may, on sufficient cause being shown, and for reasons to be recorded in writing, be extended,-
(a) by the Additional Commissioner or the Joint Commissioner, as the case may be, for a period not exceeding thirty days;
(b) by the Commissioner, for a further period not exceeding thirty days, beyond the period specified in clause (a).”.
Impact –
A proviso to Section 30(1) of the CGST Act is being inserted to empower the jurisdictional tax authorities to extend the date for application of revocation of cancellation of registration in deserving cases.
123. In section 31 of the Central Goods and Services Tax Act, in sub-section (2), for the proviso, the following proviso shall be substituted, namely:-
“Provided that the Government may, on the recommendations of the Council, by notification,-
(a) specify the categories of services or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed;
(b) subject to the condition mentioned therein, specify the categories of services in respect of which-
(i) any other document issued in relation to the supply shall be deemed to be a tax invoice; or
(ii) tax invoice may not be issued.”.
Impact –
Section 31 of the CGST Act is being amended to provide enabling provision to prescribe that in certain cases in which tax invoice for services may not be issued or issued within a certain time period or some other document may be considered as tax invoice.
124. In section 51 of the Central Goods and Services Tax Act,-
for sub-section (3), the following sub-section shall be substituted, namely:-
“(3) A certificate of tax deduction at source shall be issued in such form and in such manner as may be prescribed.”;
sub-section (4) shall be omitted.
Impact –
Section 51 of the CGST Act is being amended to remove the requirement of issuance of TDS certificate by the deductor and to omit the corresponding provision of late fees for delay in issuance of TDS certificate.
126. In section 122 of the Central Goods and Services Tax Act, after sub-section (1), the following sub-section shall be inserted, namely:-
“(1A) Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.”.
Impact –
Section 122 of the CGST Act is being amended by inserting a new sub-section to make the beneficiary of the transactions of passing on or availing fraudulent Input Tax Credit liable for penalty similar to the penalty leviable on the person who commits such specified offences.
127. In section 132 of the Central Goods and Services Tax Act, in sub-section (1),-
(i) for the words “Whoever commits any of the following offences”, the words
“Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences” shall be substituted;
(ii) for clause (c), the following clause shall be substituted, namely:-
“(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;”;
(iii) in clause (e), the words “, fraudulently avails input tax credit” shall be omitted.
Impact –
Section 132 of the CGST Act is being amended to make the offence of fraudulent availing of input tax credit without an invoice or bill a cognizable and non-bailable offence, and to make any person who commits, or causes the commission, or retains the benefit of transactions arising out of specified offences liable for punishment.
131. In Schedule II to the Central Goods and Services Tax Act, in paragraph 4, the words “whether or not for a consideration,” at both the places where they occur, shall be omitted and shall be deemed to have been omitted with effect from the 1st day of July 2017.
Impact –
Entries at 4(a) & 4(b) in Schedule II of the CGST Act is being amended w.e.f. 01.07.2017 to make provision for the omission of supplies relating to the transfer of business assets made without any consideration from Schedule II of the said Act.
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