- Refund application time limit changed:
The refund claim of ITC on inward supplies can be made only within 2 years from the last day of the quarter in which supply was received. Earlier, it was 2 years from relevant date.
- Changes in Input Tax Credit provisions :
- No levy of interest on ITC claimed wrongly but not utilised under section 50 of the CGST Act. It will be implemented retrospectively from 1st July 2017.
- Provisional ITC is no longer a concept in the GST law: Currently, the new amendment in Section 41 of the CGST Act completely does away with the concept of provisional ITC. Section 43A is now omitted to corroborate with the amendment in Section 41 of removal of provisional ITC. These amendments put added pressure on businesses to accurately report ITC each month. Excess ITC could lead to demand notices and penalties, while suboptimal ITC could hit cash flows.
- Additional conditions to avail input tax credit: Section 38 is now titled ‘Communication of details of inward supplies and input tax credit’ and prescribes the manner, conditions and restrictions for availing input tax credit. It also governs the communication of details of inward supplies and input tax credit to the recipient via an auto-generated statement and does away with a two-way communication process in return filing. Previously, the seller’s details that were populated in the GSTR-1 had to be accepted by the buyer in the GSTR-2, and then the buyer could claim ITC in the GSTR-3B. Now, GSTR-2B is the legal document for determining ITC eligibility for a tax period. Section 16(2) has also been amended to introduce a new clause (ba) with an additional condition to avail input tax credit if the same is not restricted under Section 38, as per the details communicated to the buyer in Form GSTR-2B. Further, taxpayers can now claim input tax credit until 30th November of the following financial year, as against the previous deadline of 30th September.
- Extension of time limit to issue credit notes:
Time limit for issuance of credit notes is extended to 30th November following the end of the Financial year or date of filing the annual return, whichever is earlier. Earlier, this date of 30th September instead of 30th November.
- GSTIN cancellation rules modified for non-filers:
The Finance Bill 2022 amended Section 29 of the CGST Act for the cancellation of a GSTIN by an officer. In the case of a composition taxpayer, if they fail to file an annual return for three months beyond the 30th April deadline of the following year, their registration can get cancelled. For all other taxpayers, a six months consecutive default in return filing is now replaced with a single consecutive tax period default as may be prescribed.
- Return filing measures are made stricter
The Finance Bill 2022 has made GST return filing laws even stricter by amending both Section 37 and Section 39. Section 37 governs the details of outward supplies to be furnished, for example, the GSTR-1. Section 39 governs the summary of inward and outward supplies, input tax credit claimed, and taxes paid, for example, the GSTR-3B.
In Section 37, a new sub-section (4) added states that taxpayers will be not be allowed to furnish their details of outward supplies for a tax period if the same remains pending for any previous tax period. Similarly, Section 39 was amended with sub-section (10), now disallowing taxpayers from filing their return under Section 39 if their return under Section 37 for the said tax period remains pending. These amendments would ensure that all previously pending returns of a taxpayer are now filed.
- Amendments governing the electronic credit ledger
Section 49 of the CGST Act was amended to prescribe the restrictions for utilising the amount in the electronic credit ledger. The amendment also includes a provision to transfer amounts available in the electronic cash ledger of a registered person under the CGST Act to the electronic cash ledger under the CGST or IGST Act of a distinct person. A distinct person is a person with different GSTINs but under the same legal entity. This amendment helps taxpayers with multiple GSTINs to transfer excess cash balances from one state to another.
Further, the section now provides for prescribing the maximum proportion of output tax liability that can be discharged through the electronic credit ledger. Previously, Rule 86B governed these restrictions, and certain taxpayers were required to pay a minimum of 1% of their output tax liability in cash. This amendment corroborates the corresponding CGST rule.