DEC 2020 (Week 4)


Various Sections of Finance Act, 2020 to be Applicable w.e.f. 1st January, 2021

CBIC vide Notification No. 92/2020 – Central Tax dated 22nd December, 2020 has appointed 1st January, 2021, as the date on which the provisions of sections 119, 120, 121, 122, 123, 124, 126, 127 and 131 of the Finance Act, 2020 shall come into force.


Waiver of Late Fees for Delayed Filing of GSTR-4 in UT of Ladakh for F.Y. 19-20

CBIC has waived late fees for delayed filing of GSTR-4 for F.Y. 19-20 from 1st November, 2020 to 31st December, 2020 for registered person whose principal place of business is in the Union Territory of Ladakh vide Notification No. 93/2020 – Central Tax dated 22nd December, 2020.


Various Amendments Notified in CGST Rules Vide CGST (Fourteenth Amendment) Rules, 2020

CBIC vide Notification No. 94/2020 – Central Tax dated 22nd December, 2020 has notified CGST (Fourteenth Amendment) Rules, 2020 to amend the CGST rules. A gist of the amendments carried out has been described below :

  • Biometric Based Aadhaar Authentication for GST Registration

    This provision is introduced by substituting sub-rule (4A) of Rule 8, but it shall be applicable with effect from a date to be notified. The GST registration process is envisaged as follows :

    Every application for new registration shall be followed by

    • biometric-based Aadhaar authentication and taking photograph of the applicant, if he has opted for authentication of Aadhaar number; or
    • taking biometric information, photograph and verification of such other KYC documents, as notified, if he has opted not to get Aadhaar authentication done,

    Above procedure is not required in case of persons exempted under Sec 25(6D).

    Verification of the original copy of the documents uploaded with the application in FORM GST REG-01 is also mandated. The application shall be deemed to be complete only after completion of the process laid down under this subrule.

  • Time Limit for Granting GST Registration Increased

    The time limit for granting registration by the department has been increased from 3 to 7 working days. Further, the proviso to Rule 9(1) has also been amended to include that physical verification of the place of business shall be mandatory where:

    a person, other than a person notified under sub-section (6D) of section 25, fails to undergo authentication of Aadhaar number or does not opt for authentication of Aadhaar number; or the proper officer, with the approval of an officer authorised by the Commissioner not below the rank of Assistant Commissioner, deems it fit to carry out physical verification of places of business.

    Furthermore, the registration shall be granted within 30 days of submission of application instead of the earlier period of 21 days in physical verification cases.

  • Suo-Moto Cancellation of Registration for Specified Violations

    Rule 21 has been amended to include the specified violations for Suo-moto cancellation of registration:

    • avails input tax credit in violation of the provisions of section 16 of the Act or the rules made thereunder; or
    • furnishes the details of outward supplies in FORM GSTR-1 under section 37 for one or more tax periods which is in excess of the outward supplies declared by him in his valid return under section 39 for the said tax periods; or
    • violates the provision of rule 86B (discussed in later part)
  • Suspension of Registration in case of Differences in GSTR-3B & GSTR-1

    Sub-rule (2A) has been inserted in Rule 21A, whereby if a comparison of returns furnished by a registered person under Sec 39 with

    • the details of outward supplies furnished in FORM GSTR-1 or
    • the details of inward supplies derived based on the details of outward supplies furnished by his suppliers in their FORM GSTR-1, or such other analysis carried out on the recommendations of the Council show thereafter there are significant differences or anomalies indicating contravention of the provisions of the Act or the rules, his registration shall be suspended and the said person shall be intimated in FORM GST REG-31, electronically.

    Furthermore, sub-rule (3A) to Rule 21A has also been inserted to provide that a registered person whose registration has been suspended shall not be granted any refund under Sec 54 during the period of suspension.

    Moreover, such person would also not be allowed to furnish information in PART A of E-way Bill.

  • Reduced ITC Entitlement Under Rule 36(4) From 10% to 5% w.e.f. 1st January, 2021

    With effect from 1st January, 2021, Rule 36(4) shall be substituted to further reduce the margin from 10% to 5% of the eligible credit available in respect of invoices or debit notes the details of which have been furnished by the suppliers in FORM GSTR-1 or using the Invoice Furnishing Facility (IFF).

  • Blocking of GSTR-1 for Non-Filing of GSTR-3B

    New sub-rule (5) to Rule 59 has been inserted to provide as follows:

    • a registered person shall not be allowed to furnish FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for preceding 2 months;
    • a registered person required to file GSTR-3B quarterly shall not be allowed to furnish details of outward supplies in FORM GSTR-1 or using IFF, if he has not furnished the return in FORM GSTR-3B for preceding tax period;
    • a registered person to whom restriction under Rule 86B applies, shall not be allowed to furnish details of outward supplies in FORM GSTR-1 or using IFF if he has not furnished the return in FORM GSTR-3B for preceding tax period.
  • Restrictions on Use of Amount Available in E-Credit Ledger

    With effect from 1st January, 2021, a new Rule 86B shall be effective to provide that the registered person shall not use the amount available in E-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 50 lakh rupees.

    Above restriction shall not apply in following cases :

    • the person has paid more than 1 lakh rupees as income tax in each of the last 2 F.Y. for which the time limit to file return of income under sub-section (1) of section 139 of the Income Tax Act has expired;
    • the registered person has received a refund amount of more than 1 lakh rupees in the preceding financial year on account of unutilised input tax credit under Sec 54(3) for zero-rated supplies or inverted duty structure;
    • 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, up-to the said month in the current financial year;
    • the registered person is Govt Department, PSU, local authority or a statutory body.
  • Validity of E-way bill Reduced

    Amendment has been carried out in Rule 138(10) w.e.f. 1st January, 2021, according to which the e-way bill will now be valid for 1 day for every 200 km of travel, as against 100 km earlier. Also, for every 200 km or part thereof thereafter, one additional day will be allowed.


CBIC Releases Informative Snapshots Titled “Myths v/s Facts”

CBIC has released informative snapshots to bust the myths being circulated in the trade & industry regarding CGST notifications issued dated 22nd December, 2020. Following myths have been cleared by CBIC :

Myth 1 : No opportunity of being heard will be given if proper officer believes that registration is liable to be cancelled.

Fact 1 : The GST laws passed by the Parliament and state legislatures provide that GST registration is liable to be cancelled for those who have not filed 6 or more returns. It is therefore wrong to say that the cancellation will be done without reasons. To protect the interest of revenue, this provision has been put in the law so that fraudsters do not run away with GST collected from their customers. It may be further noted that no cancellation of registration would be done without giving proper opportunity of hearing to the taxpayer. Immediate action for suspension is necessary in cases where unscrupulous operators seek to pass on huge fake credit by gaming the system. Such action will not affect genuine taxpayers and will provide them a level playing field. Moreover, suspension may be revoked by the officer based on the taxpayer’s representation.

Myth 2 : Even if there is a clerical error in filing returns, GSTIN will be cancelled. No option to correct your mistakes.

Fact 2 : This absolutely not true. Only in fraudulent cases where there are significant discrepancies based on data analytics and sound risk parameters, and not mere clerical errors, the action of suspension & cancellation will be taken up. An example of a fraudulent case and serious discrepancy is where one has passed on crores of rupees of ITC and not filed GSTR-3B returns, nor has he filed ITR or disclosed very little liability in ITR’s etc. The GST ecosystem is very carefully working towards curbing the fake invoice frauds in the interests of bonafide taxpayers. GST system applies sophisticated tools like BIFA, data analytics an AI & ML to pinpoint and segregate these fraudsters only.

Myth 3 : The proposed changes will impact ease of doing business.

Fact 3 : Not true. Fraudsters are misusing the system to the detriment of the interest of genuine taxpayers. Consequently, data driven targeting of the fraudsters is the need of the hour. The data is being collected from Income Tax, Banks, Customs and necessary matching is being done to identify fraudsters to take action of suspension & cancellation after following due process of law. Precise targeting of fraudsters is being done only in specific cases, after doing a comprehensive analysis, using advanced data analytics tools, etc. Further, multiple risk indicators are checked and only then few high risk entities are selected. Action against fraudsters will not impact the Ease of Doing Business which is achieved in GST through liberal registration, refund regime and self-compliance system with little or no manual checks.

Myth 4 : Large number of taxpayers would be affected by Rule 86B.

Fact 4 : Rule 86B provides for various exemptions like exporters, suppliers of goods of inverted duty structure, taxpayers having a footprint in the Income Tax database etc. It is expected that this rule would be applicable to less than 0.5% of the total taxpayer base of 1.2 crores. The rule clearly identifies where the risk to revenue is high & imposes deterrence to the fraudsters in a multiple-layered fraud of passing fake ITC. This rule would help to control such fraudsters, who issue fake invoices & show high turnovers, but they have no financial credibility and flee after misusing ITC without payment of any tax liability in cash.


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Knowledge Updates Team
AKGVG & Associates
(Chartered Accountants)

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