We have tried to cover major amendments brought in by Finance Act, 2022 in the GST Law.
Further, we have divided the same as summary part and detailed part so that reader can read as per his comfort.
Income tax version will follow soon.
- Insertion of Section 16(2)(ba) and substitution of a new Section 38:
Summary: Input tax credit with respect to a supply may be availed only when such credit has not been restricted as prescribed u/s 38.
There will be substitution of new Section 38 in place of current Section 38.
Section 16 deals with eligibility and conditions for claiming the input tax credit.
Section 16(2)(aa) was inserted vide Finance Act, 2021 (which was being notified w.e.f 1st January 2022) which allows to take credit of input tax in respect of an invoice or debit note related to supply of goods or services if the same has been furnished the supplier in his statement of outward supplies (commonly referred to as GSTR 1) and the such details have been communicated to the recipient.
In the current budget, a new provision has been inserted by Finance Act, 2022 by way of insertion of Section 16(2)(ba) which states that input tax credit with respect to a supply may be availed only when such credit has not been restricted in the details communicated to the registered person u/s 38.
Further, Section 38 is going to be substituted by new Section 38 wherein two sub sections will be there;
- Sub section (1) seeks to provide for prescribing such other supplies as well as the manner, time, conditions and restrictions for communication of details of inward supplies and input tax credit to the recipient by means of an auto-generated statement.
- Sub-section (2) seeks to provide for the details of inward supplies in respect of which input tax credit may be availed and the details of supplies on which input tax credit cannot be availed by the recipient.
- Section 16(4) & 34(2)
Summary: The last date as due date of September GSTR 3B has been replaced as 30th November.
First time Section 16(4) is turned to be blessings in disguise.
The erstwhile Section 16(4) of the prescribed the time limit to avail credit in respect of any invoice or debit note till the due date of furnishing of the return u/s 39 (commonly referred to as GSTR 3B) for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of annual return whichever is earlier.
So, in nutshell, the time limit for availing any ITC for the previous financial year will be earlier of the following:
- Due date of furnishing of GSTR 3B of September month after end of Financial year or
- Furnishing of annual return.
Finally, there is a blessing in disguise in Section 16(4) that Clause 99 of the Finance Act, 2021 seeks to amend the last date for claiming ITC with respect to any invoice or a debit is prescribed as 30th November after the end of the financial year or furnishing of an annual return whichever is earlier.
With the change in due date in Section 16(4), a corresponding change was required in Section 34(2) which prescribes the date of issuance and date of declaration of credit note.
Clause 101 of the Finance Act, 2022 seeks to amend the Section 34(2) to provide the date as 30th November following the end of the financial year instead 30th September.
- Section 29(2)
Summary: It seeks to amend Section 29(2)(b) to provide that the registration of a composition person is liable to be cancelled if the return for a financial year has not been furnished beyond 3 months from the due date of furnishing of the said return.
In Section 29(2)(c) it seeks to provide for prescribing continuous tax periods for which return has not been furnished.
Section 29(2) prescribes the situation when a registration of a person may be cancelled.
In the current Section 29(2)(b), it provides that for a composition dealer, his registration may get cancelled if he has not furnished returns for three consecutive tax periods.
In the proposed amendment, it has been provided that the registration may get cancelled if the return for a financial year has not been furnished beyond three months from its due date.
So, three consecutive tax periods has been replaced as non-furnishing of the return beyond three months.
- Section 37
Summary: Prescribing conditions and restrictions for filing GSTR 1, manner and time of communication to the recipient, omitting the two way communication process and the cutoff date to be amended as 30th November.
- Sub section 1 will prescribe conditions and restrictions for furnishing GSTR 1 along with the conditions and manner of communication of the details to the concerned recipients.
- First proviso to sub section 1 and sub section 2 will be omitted as there will be no two way communication.
- In sub section 3, ref. of Sec. 42 and 43 will be omitted i.e. the entire erstwhile system of matching and two way communications will be omitted.
- Further, with the amendment in Section 16(4), for rectification of errors or omission in respect of details of outward supplies, the last date will be 30th November following the end of the financial year instead of September month.
- New sub section 4 will be added to provide tax period-wise sequential filing of details of outward supplies.
- Section 39(5):
Summary: Return to be furnished within 13 days instead of 20 days.
The Non Resident taxable person is required to file return within 20 days after end of the calendar month which is now proposed to 13 days after end of the calendar month.
Further, it also seeks to amend proviso wherein the last date for rectification of ay omission or errors will be 30th November and reference of Section 37 and 38 will be removed.
Presently, under sub section 10, it is mentioned that a return cannot be furnished if any previous tax period return is pending. It is now proposed to provide that return u/s 39 cannot be furnished if return u/s 37 is pending (i.e. GSTR 1).
- Section 41:
Summary: Concept of provisional claim of credit will be removed.
Section 41 prescribes to take the ITC as self-assessed and such amount shall be credited as provisional basis.
It is proposed to take away the provisional claim concept and provide for self-assessed ITC only subject to such conditions and restriction.
The conditions and restrictions will be primarily based on Section 16.
- Section 42 and 43:
Due to inefficiency of the developer to provide GSTR 2, 3 utilities and schema, finally, it has been decided to omit Section 42 and 43 related to matching, reversal and reclaiming of ITC.
- Section 47(1) & 52
Provide for the levy of late fees for delayed filing of TCS returns.
Further, it also seeks to amend proviso to Section 52(6) wherein the last date for rectification of ay omission or errors will be 30th November
- Section 49
Transfer of cash ledger balance between distinct person and prescribing the maximum portion of output tax liability to be used.
Presently, in sub section 10, there is a provision to transfer any amount of tax, interest, penalty, cess or other to the other head of tax under CGST / SGST / IGST to any head of tax, interest, penalty, cess or other of CGST / IGST / SGST. However, it is to be done with same GSTIN.
It was decided in the GST Council meet that there will be facility to transfer balance in electronic cash ledger between distinct persons with same PAN and thereby now, balance in cash ledger of one unit can be transferred to another unit of the same taxpayer.
Further, a new sub section 12 will be introduced so as to provide for prescribing the maximum proportion of output tax liability which may be discharged through the electronic credit ledger.
- Section 50(3)
Amended retrospectively w.e.f 1st July, 2017 to provide levy of interest on ITC wrongly availed and utilized and interest rate @ 18%.
There may be instances where ITC is wrongly availed but it was not utilized and lying in electronic credit ledger only. The department has issued demand notice for levying interest on the same. However, the court of law has ruled that as it is not utilized so interest cannot be demanded.
And with the Finance Act, 2022, it provides to make an amendment and that to retrospectively to provide interest on ITC if it’s wrongly availed and utilized, a welcome amendment. Also the interest rate will be 18%