GST UPDATE No 112 ON CHANGES EFFECTIVE FROM 01.01.2022 IN CGST ACT, 2017

Since introduction of GST, there had been many twists and turns in the Act. The Government is taking all necessary steps to amend the provisions of law for better compliances. Recently, CBIC has notified the applicability of the provisions proposed in the Finance Act, 2021 as effective from 01.01.2022. The CBIC has issued Notification No. 39/2021-Central Tax dated 21.12.2021 for notifying the date of implementation of Sections 108, 109 and 113 to 122 of Finance Act, 2021 with effect from 1st January, 2022 which is the subject matter of discussion of our present update. The important amended provisions that are made applicable w.e.f. 01.01.2022 are discussed as follows: 1. Section 108 of Finance Act: A retrospective amendment is introduced in Section 7 of CGST Act, 2017 wherein entry no (aa) is proposed to be inserted which says that the activities or transactions provided by a person other than individual to its members for any valuable consideration shall be treated as supply. An explanation is added clarifying that members and the association shall be treated as different persons. Simultaneously, entry no 7 in Schedule II of CGST Act, 2017, is omitted retrospectively. The amendment is inserted on account of judicial pronouncements holding that no tax can be levied on the transactions undertaken between the club and its members owing to the principle of mutuality. This entry seeks to nullify the effect of the said decisions and confirms that activities provided by any person other than individual to its members for any valuable consideration will be considered as supply. 2. Section 109 of Finance Act: Section 16(2) of CGST Act, 2017 prescribes the conditions to be satisfied by an assessee for availing the input tax credit. Further, as per Rule 36(4) of CGST Rules, the assessee shall be eligible to take the provisional tax credit (without invoices being uploaded by the supplier in GSTR-1) in the GSTR-3B to the extent of 5% of eligible ITC reflected in the GSTR-2B. As of now, there was no legal statutory provision backing the provision restricting credit availment to the extent of 5% in the CGST Act, 2017. The government appears to have realised the lacunae in the law and has inserted section 16(2)(aa) of CGST Act, 2017 wherein it is stated that the assessee can claim credit only if the details of invoices or debit notes has been furnished by the supplier as outward supply and the details are communicated to the recipient in the manner as specified under Section 37 of CGST Act. This shall result in loss to the assessee because earlier assessee was able to avail 5% ITC on provisional basis but henceforth, ITC will be available only when invoice is furnished by supplier in GSTR-1. 3. Section 113 and 114 of Finance Act: As per section 74 of CGST Act, 2017, earlier, where proceedings against main person were concluded, proceedings against all other persons deemed to be concluded u/s 122, 125, 129 and 130 of CGST Act, 2017. However, the section 74 has been amended to deny the benefit of conclusion of proceedings to co-notice in cases where the provisions of Section 129 or 130 gets attracted. Furthermore, in Section 75 of CGST Act, 2017, an explanation has been inserted that the “self-assessed tax” shall include tax payable in respect of outward supplies furnished u/s 37 (GSTR-1) but not included in the return filed u/s 39 (GSTR-3B) of CGST Act, 2017. 4. Section 116 of Finance Act: Section 107 of CGST Act, 2017 deals with pre-deposit to be deposited with the Government in case the person is aggrieved by any decision or order passed under GST Act, 2017. In normal cases, the appellant is required to pre-deposit 10% of disputed tax liability in first appeal. However, amendment has been made to prescribe a mandatory predeposit of 25% of penalty in cases of detention and seizure of goods in transit. 5. Section 117 of Finance Act: Section 129 deals with detention, seizure and release of goods and conveyance in transit. There are numerous amendments in this Section. The provision contains sub clauses wherein penalty is segregated on the basis of who comes forward to release the goods detained. In clause (a) where the owner comes forward, in taxable goods, penalty equal to 200% of the tax payable and in exempted goods, penalty of 200% of value of goods or twentyfive thousand rupees, whichever is less shall be applicable. In clause (b), where owner does not come forward, penalty equal to 50% of the value of the goods or 200% of the tax payable on such goods, whichever is higher, while in case of exempted goods, 50% of the value of goods or twenty-five thousand rupees, whichever is less shall be applicable. Sub-section (3) has been substituted which says that the officer shall issue a notice within 7 days specifying the penalty and pass an order for payment of penalty within 7 days from date of service of notice. A proviso to sub-section (3) is clarified wherein the conveyance shall be released on payment of penalty as specified by the transporter or Rs. 1 lakh whichever is less. Certain other amendments are also notified which shall stand applicable from 01.01.2022. We have now completed 4 years after implementation of GST law but yet the process of refining the law is continued. The level of complexities is increasing with every passing day. It is hoped that the amendment made in section 16 of the CGST Act, 2017 requiring reflection of invoices by supplier in GSTR-1 for availment of credit by the recipient is re-visited as it leads to imposition of condition which is impossible to be complied by the recipient and tantamount to punishing recipient for the default of supplier.

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GST UPDATE No 112 ON CHANGES EFFECTIVE FROM 01.01.2022 IN CGST ACT, 2017

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