GST – A Roadmap Ahead

There were certain important amendments in the financial proposal of the Central Government for the financial year 2021-2022 regarding GST which emphasized collecting taxes, overruling all previous supreme court judgments or high courts judgments. An Act to give effect to such financial proposals received the assent of the President on the 28th of March 2021 but some of the important changes listed below commence on such date as the Central Government may, through a notification in the Official Gazette, appoint.

  1. Section 7 of the CGST Act

A new clause under the definition of supply. Transactions or Activities including the supply of goods or services by any person (other than an individual), to its constituents or members or vice-versa, for cash, other valuable consideration, or deferred payment falls undersupply and will be liable to tax. 

Writer’s Enlightenment: Such amendment in section 7 is aimed to treat the person (other than an individual) and its members or constituents as two distinct persons and hence, any transaction or activity betwixt them will be considered as supply between two separate persons.

Initially, this supply would have been marked as the only supply of goods under schedule II. 

But now, the scope is expanded for levy and collection of GST.

  • Section 16 of the CGST Act

Allow taxpayers to claim an input tax credit based on GSTR-2A and 2B. Subsequently, ITC on debit notes and invoices may be utilized only when the details of such debit notes or invoices have been grant by the supplier in the statement of outward supplies, aforesaid details have been communed to the recipient of such debit note or invoice

Writer’s enlightenment-A state of puzzlement has been experienced by the recipient of the Input tax credit as they were lacking clarity as to whether GSTR-2A is to be considered for claiming ITC or GSTR-2B and what percentage is to be applied for claiming the eligible input tax credit.

 Earlier, in accordance with Rule 36(4), the registered person could avail input tax credit towards tax invoices or debit notes which had not been furnished by the Supplier in GSTR-1 up to a prescribed percentage of eligible input tax credit keeping in mind that the mistake of one cannot be put on any other person. but, with the rise in issuance of the fake invoicing percentage of claiming ITC was subject to change from time to time. 

Now, at present, the amendment provides a crystal-clear approach that input tax credit on debit notes and invoices may be utilized only when the details have been grant by the supplier in the statement of outward supplies, aforesaid details have been communed to the recipient of such debit note or invoice. Thus, Rule 36(4) seems to lose its significance. 

  • Section 50 of the CGST Act: Interest liability

Section 50 of the CGST Act has been amended to present a backdated charge of interest on net cash liability, w.e.f. 1st July 2017.

Writer’s enlightenment Earlier, there was a lot of ambiguity whether interest would be payable on Gross Tax Liability or Net Tax Liability on late filing of GSTR-3B. Some Advance Rulings had specified that interest would be payable on Gross Tax Liability. The Govt. also issued notices in some states asking the registered persons to deposit interest on Gross Tax Liability. Several representations were sent to Govt. for clarifying the confusion within the trade & industry regarding payment of interest on Gross or Net Tax Liability.

Recently CBIC vide Notification No. 63/2020-Central Tax, dated 25th August 2020, has specified that Interest is to be levied on “Net Tax liability” w.e.f. 01/09/2020.

But this created further confusion in the minds of taxpayers as the amendment was made applicable prospectively w.e.f. 01/09/2020 hence, there was no clarity in respect of the period before 01/09/2020. CBIC has clarified vide a tweet that no notices shall be sent to the registered persons demanding tax on Gross Tax Liability for the period prior to 01/09/2020

The Govt. has put to rest all the confusions surrounding payment of interest on Net Cash Tax Liability w.e.f. 01/07/2017. This has sighed relief to all the persons in the trade & industry. 

Thus, it can be stated that a clear vision of the department has been received on the certain ambiguous provisions of GST. More of such provisions shall be discussed in the next connected blog.

This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by:

CA Tarun Kapoor

AKGVG & Associates

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