Notification 18/2022, Notification 19/2022  and Notification 20/2022 dt. 28.09.2022

Summary of Notification 18/2022:

The Notification sets out that sections 100 to 114 of the Finance Act 2022 shall take effect from 1^st of October 2022 with the exception of Clause (c) of Section 110 and Section 111.

The Summary of the provisions which shall be effective from 01.10.2022 are as follows:

1. Section 100 of the Finance Act 2022 pertaining to Section 16 of the CGST Act [Eligibility and conditions for taking input tax credit.]

Sub section (4) of section 16 of the CGST Act has been amended to extend the time-limit for availment of ITC.

Presently, ITC on invoices/debit notes pertaining to a financial year needs to be availed on or before due date of September GSTR-3B of the succeeding financial year. Generally, this would be 20th October of the succeeding financial year. The change seeks to extend this date to 30th November of succeeding financial year.

While it is most welcome that the time limit for availing credit has been extended, the manner in which the time-limit is set out in the Finance Act does raise certain concerns. The present time-limit operates in a manner that the ITC of a financial year can be availed latest by the September GSTR-3B (assuming the 3B is filed on or before its due date).

It appears that by prescribing a fixed date, the ITC needs to be availed through filing GSTR-3B on or before 30th November. The return which appears to be more significant would be October GSTR-3B of the succeeding year. However, it may also be argued that since the ITC of November would only be reflected in GSTR-3B for the month filed in the succeeding month (20th December), ITC taken in November is merely being reflected at a later date.

By taking into account the changes made to time limit in other sections of GST Act, it appears that the intention for this change is to consider 30th November of succeeding financial year as the last day for disclosing any transaction, be it ITC, Invoice, Debit Note or Credit Note.

Considering that only the ITC that is being reflected in GSTR 2B is eligible for availment, the GSTR 2B of October, which shall be available in November, shall be latest 2B for availing credits pertaining to previous periods. The taxpayers would need to ensure that ITC of the FY is availed in GSTR-3Bs filed on or before 30th November of succeeding year.

2. Section 101 of the Finance Act 2022 pertaining to Section 29 of the CGST Act [Cancellation or suspension of registration.]

Section 29(2)(b) is amended to bring the provisions pertaining to cancellation and suspension of registration of Composition dealers in line with the change made to the frequency of filing GSTR-4 from quarterly to annually.

Presently the proper officer may cancel the registration of a composition dealer if he has not furnished the returns for three consecutive tax periods. This would be absurd where the tax period is a financial year.

As per the Finance Act, the proper officer can cancel the registration of a composition dealer if the return for a financial year is not filed within three months from the due date of furnishing the said return.

Section 29(2)(c) is being amended to provide the government to right to notify the number of continuous tax periods that would be considered appropriate for cancelling the registration of normal taxpayers. How much of Principles of natural justice will be followed in cancellation of registration is the moot point. Less than a week back, the GSTN portal-based posturing conveyed that anyone who has used more than 10% of ITC in terms of form GSTR 2B for setting off their liability in GSTR 3B would face cancellation of registration. It is very much required that we need to do business that adheres to utmost compliance but at the same time, a genuine business cannot be run under threat.

3. Section 103 of the Finance Act 2022 pertaining to Section 37 of the CGST Act [Furnishing details of outward supplies.]

The time-limit for making any rectification in GSTR-1 is presently allowed till the earlier of the following:

1. furnishing of the return under section 39 for the month of September following the end of the financial year to which such details pertain, or
2. furnishing of the relevant annual return

The Finance Act seeks to change the condition a mentioned above to 30th November following the end of the financial year to which such details pertain.

Like few of the other sections covered earlier, this change marks a clear change from a timeline based on return filing to a fixed date approach. The existing law effectively changes the timeline which generally falls somewhere in Mid to Late October. One thing that needs to be borne in mind is that the timeline used to fluctuate depending on the date in which the taxpayers choose to file their GSTR-3B for September. For those filing it before due date, the time-limit for disclosure in GSTR-1 would be shorter while for those who file the September GSTR-3B after due date, the opposite would hold true.

By fixing 30th November as a time-limit, the Govt appears to be removing the numerous permutations and combinations that arise due to different date of filing of GSTR-3Bs. Also, it is a comfort to all taxpayers who are filing returns within due date, that 30th November time-limit allows for disclosure of any missed-out items in GSTR-1 of October, provided they are filed by 30th November.

4. Section 104 of the Finance Act 2022 pertaining to Section 38 of the CGST Act [Communication of details of inward supplies and input tax credit]

Section 38 has been substituted to bring the same in line with Section 16(ba) which requires that ITC communicated under S.38 should not be restricted. If the same is restricted the ITC cannot be availed. S. 38(2) specifically mentions that the details of outward supplies communicated to the recipient vide auto-generated statement shall be classified into two

1. inward supplies on which ITC may be available, and
2. inward supplies on which ITC cannot be availed, whether wholly or partly.

It is likely that GSTR-2B would serve the purpose of auto-generated statement and the ITC shall be classified into those that can be availed and that cannot be.

5. Section 105 of the Finance Act 2022 pertaining to Section 39 of the CGST Act [Furnishing of returns.]

Presently the time-limit for filing GSTR-5 by Non-resident taxable persons is 20th of the succeeding month. In case of expiry of the GST Registration, GSTR-5 needs to be filed within 7 days.

The time-limit for filing the return in case of expiry of GSTR Registration continues to be 7 days, whereas the time-limit for filing returns in other cases have been reduced to 13 days. i.e., from 20th of succeeding month to 13th of succeeding month.

The time-limit for making any rectification in GSTR-3B is presently allowed till the earlier of the following:

1. due date of furnishing of the return for the month of September following the end of the financial year to which such details pertain, or
2. furnishing of the relevant annual return

The Finance Act seeks to change the condition (a) mentioned above to 30th November following the end of the financial year to which such details pertain.

Like few of the other sections covered earlier, this change marks a clear change from a timeline based on return filing/return due date (which have changed numerous times in GST) to a fixed date approach. As per the existing law the timeline would be 20th October (generally).

By fixing 30th November as a time-limit, the Govt appears to be removing the numerous permutations and combinations that arise due to due date extensions provided. One thing that needs to be borne in mind is that by incorporating the timeline in the GST Act itself, restricts the Govt. from conveniently providing extensions by issuing notifications. This amendment could be seen as the direction Govt is taking to show that the timelines need to be adhered to. The silver lining is that the timeline has been effectively extended till 30th November from 20th October.

6. Section 106 of the Finance Act 2022 pertaining to Section 41 of the CGST Act [Availment of input tax credit]

The self-assessed credit of eligible ITC as per amended s. 41 is no longer mentioned as provisional.

The section now requires the recipient to reverse ITC and pay interest in respect of, ITC availed but not paid by the suppliers. The ITC so reversed can be reclaimed once the payment is made by the supplier.

7. Section 107 of the Finance Act 2022 pertaining to Section 42, 43, 43A of the CGST Act

The following sections were related to GSTR 2 and its operations, considering that the GSTR 2 is not in operation and will not be brought in, the same is being omitted:

Section 42 – Matching, reversal and reclaim of input tax credit.

Section 43 – Matching, reversal and reclaim of reduction in output tax liability.

Section 43A – Procedure for furnishing return and availing input tax credit.

8. Section 108 of the Finance Act 2022 pertaining to Section 47 of the CGST Act [Levy of late fee]

Levy of Late fee is being made applicable on persons required to furnish details of outward supplies u/s 52 i.e., Collection of tax at source applicable on E-Commerce operators.

9. Section 112 of the Finance Act 2022 pertaining to Section 52 of the CGST Act [Collection of tax at source]

The time-limit for making any rectification in GSTR-8 is presently allowed till the earlier of the following:

1. due date of furnishing of the return for the month of September following the end of the financial year to which such details pertain, or
2. furnishing of the relevant annual return

The Finance Act seeks to change the condition (a) mentioned above to 30th November following the end of the financial year to which such details pertain.

Like few of the other sections covered earlier, this change marks a clear change from a timeline based on return filing/return due date (which have changed numerous times in GST) to a fixed date approach. As per the existing law the timeline would be 20th October (generally).

By fixing 30th November as a time-limit, the Govt appears to be removing the numerous permutations and combinations that arise due to due date extensions provided. One thing that needs to be borne in mind is that by incorporating the timeline in the GST Act itself, restricts the Govt. from conveniently providing extensions by issuing notifications. This amendment could be seen as the direction Govt is taking to show that the timelines need to be adhered to. The silver lining is that the timeline has been effectively extended till 30th November from 20th October.

10. Section 113 of the Finance Act 2022 pertaining to Section 54 of the CGST Act [Refund of tax]

Presently, the time-limit for applying for refund under S. 54(2) for specified specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries and any other person or class of persons, as notified under S.55 is six months from the last day of the quarter in which such supply was received.

As per the Finance Act, this time-limit is being extended to 2 years from the last day of the quarter in which such supply was received.

There was no specific date mentioned as “relevant date” in respect of supplies made to SEZ, with or without IGST. This has been remedied by Finance Act, where the due date for furnishing of return under Section 39, in respect of such supplies would be considered as relevant date for computing the time-limit of 2 years when applying for refund.

11. Section 109 and 114 of the Finance Act 2022 pertaining to Section 48 and 168 of the CGST Act

Since Section 38 has been substituted, wherever a reference was made to Section 38 (prior to the Substitution) has now been omitted. 

The notification excludes Clause (c) of Section 110 and Section 111 of the Finance Act 2022 to be brought into effect from 01.10.2022, since they have already been brought into effect as under:

Section 110 (c) of the Finance Act 2022 pertaining to Section 49 of the CGST Act [Payment of tax, interest, penalty and other amounts]

The provisions pertaining to the refund by way of transfer of amount available in electronic cash ledger has been brought into force w.e.f. 05-07-2022 vide Notification No. 9/2022-C. T, dated 05-07-2022.

Section 111 of the Finance Act 2022 pertaining to Section 50 of the CGST Act [Interest on delayed payment of tax]

The provisions setting out the rate of interest to be 24% for input tax credit has been wrongly availed and utilised has been brought into force w.e.f. 01-07-2017 (Retrospective amendment) vide Notification No. 9/2022-C. T, dated 05-07-2022.

Summary of Notification 19/2022:

As per the powers conferred by Section 164 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government on the recommendations of the council notifies the amendment to the Central Goods and Services Tax Rules, 2017. The Notification shall take effect from 1^st of October 2022.

The Summary of the rules which shall be effective from 01.10.2022 are as follows:

1. Rule 21 – Registration to be cancelled in certain cases

Inserted vide Rule 21 (h) –

“Being a registered person required to file return under subsection (1) of section 39 for each month or part thereof, has not furnished returns for a continuous period of six months;”

Not furnishing returns for a continuous period of 6 months will result in registration being cancelled.

Inserted vide Rule 21 (i) –

“Being a registered person required to file return under proviso to subsection (1) of section 39 for each quarter or part thereof, has not furnished returns for a continuous period of two tax periods.;”

For those who are required to be file quarterly returns, not furnishing returns for a period of 2 continuous quarters will result in registration being cancelled.

2. Rule 36 – Documentary requirements and conditions for claiming input tax credit

Previously Sub-rule (2) which specified that to avail ITC, the person was supposed to furnish such details in FORM GSTR-2 is now omitted.

Sub-rule (4) which specifies the conditions to be satisfied for availing ITC on invoice and debit notes furnished by the supplier in his return under Section 37(1). The condition in clause (b) has been amended to add “input tax credit in respect of”. The amended clause is as below:

“(b) the details of input tax credit in respect of such invoices or debit notes have been communicated to the registered person in FORM GSTR-2B under sub-rule (7) of rule 60.”

The amendment was to avoid ambiguity in respect of ITC to be availed on invoices reflecting in GSTR 2B.

3. Rule 37 – Reversal of input tax credit in the case of non-payment of consideration

The pervious sub-rule (1),(2),(3) read as follows:

“(1)A registered person, who has availed of input tax credit on any inward supply of goods or services or both, but fails to pay to the supplier thereof, the value of such supply along with the tax payable thereon, within the time limit specified in the second proviso to sub-section(2) of section 16, shall furnish the details of such supply, the amount of value not paid and the amount of input tax credit availed of proportionate to such amount not paid to the supplier in FORM GSTR-2 for the month immediately following the period of one hundred and eighty days from the date of the issue of the invoice:..”

“(2)The amount of input tax credit referred to in sub-rule (1) shall be added to the output tax liability of the registered person for the month in which the details are furnished.”

“(3) The registered person shall be liable to pay interest at the rate notified under sub-section (1) of section 50 for the period starting from the date of availing credit on such supplies till the date when the amount added to the output tax liability, as mentioned in sub-rule (2), is paid.”

As per the gazette notification, sub-rule(1) and sub-rule(2) have been amended and substituted whereas sub-rule 3 has been omitted.

The amended and substituted sub-rules (1) and (2) read as follows:

“(1) A registered person, who has availed of input tax credit on any inward supply of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, but fails to pay to the supplier thereof, the amount towards the value of such supply along with the tax payable thereon, within the time limit specified in the second proviso to sub-section(2) of section 16, shall pay an amount equal to the input tax credit availed in respect of such supply along with interest payable thereon under section 50, while furnishing the return in FORM GSTR-3B for the tax period immediately following the period of one hundred and eighty days from the date of the issue of the invoice:…”

(2) Where the said registered person subsequently makes the payment of the amount towards the value of such supply along with tax payable thereon to the supplier thereof, he shall be entitled to re-avail the input tax credit referred to in sub-rule (1).;”

Sub-rule 1 has been amended in line with notification 14/2022 read with circular no. 170/02/2022 where ITC shall be reversed when payment is not made within the specified time in FORM – GSTR – 3B along with interest payable under section 50.

Sub-rule 2 allows the registered person to re-avail the ITC post payment towards the value of the supply along with tax payable to the supplier.

4. Rule 38 – Claim of credit by a banking company or a financial institution

Omission of “FORM GSTR- 2” in clause (a) in sub-clause (ii).

Substitution in clause (c) of the words “and shall be furnished in FORM GSTR-2” with “and the balance amount of input tax credit shall be reversed in FORM GSTR-3B”.

Clause (d) was pertaining to Provisional availment of ITC and Matching, reversal and reclaim of Input Tax Credit and reduction in output tax liability as part of GSTR-2 operations. Since section 42 and 43 is being omitted, the reference to section in the rule is removed vide this notification.

5. Rule 42 – Manner of determination of input tax credit in respect of inputs or input services and reversal thereof

In sub-rule (1) clause (g), the words “at the invoice level in FORM GSTR-2 and” shall be omitted.

6. Rule 43 – Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases

In sub-rule (1), “FORM GSTR-2 and” shall be omitted.

7. Rule 60 – Form and manner of ascertaining details of inward supplies

In sub-rule (7), the words “auto-drafted” to be substituted with “auto-generated” meaning that once auto generated, the taxpayer is necessarily required to verify the details in the auto generated GSTR 2B as opposed in auto-drafted where the details were shared with the taxpayer.

8. Rules

69: Matching of claim of input tax credit

70: Final acceptance of input tax credit and communication thereof

71: Communication and rectification of discrepancy in claim of input tax credit and    reversal of claim of input tax credit

72: Claim of input tax credit on the same invoice more than once

73: Matching of claim of reduction in the output tax liability

74: Final acceptance of reduction in output tax liability and communication thereof

75: Communication and rectification of discrepancy in reduction in output tax liability and reversal of claim of reduction

76: Claim of reduction in output tax liability more than once

77: Refund of interest paid on reclaim of reversals

78: Matching of details furnished by the e-Commerce operator with the details furnished by the supplier

79: Communication and rectification of discrepancy in details furnished by the ecommerce operator and the supplier

Considering that GSTR 2 is not in effect, the rules pertaining to communication and filing have been omitted.

9. Rule 83: Provisions relating to a goods and services tax practitioner

In sub-rule (8) clause (a), Goods and services tax practitioner can undertake furnishing details of outward supplies only and not inward supplies on behalf of a registered person, if so, authorised by him to.

10. Rule 85: Electronic Liability Register

Sub-rule (2) clause (c), pertaining to tax and interest payable as a result of mismatch under Section 42 or 43 or 50 has now been omitted to bring it in line with omission of Section 42 and 43.

11. Rule 89: Application for refund of tax, interest, penalty, fees or any other amount

The first proviso had prescribed refund of balance of electronic cash ledger (ECL) in line with Section 49 (6) read with Section 54. The said proviso had given reference to GSTR 3/4/7, now the refund for balance in electronic cash ledger is set out in Rule 89 (1) directly. Considering the refund application to be filed for balance in ECL was RFD-01 and not the returns, the amendment to the rule could be considered as bringing the rule in line with the existing procedure. Especially in light of removal of Form GSTR 3.

12. Rule 96: Refund of integrated tax paid on goods [or services] exported out of India.

Earlier GSTR 3B and 3 were mentioned in the said rule considering that Form GSTR-3 is removed, the rule is amended accordingly.

13. FORM GSTR-1A, FORM GSTR-2 and FORM GSTR-3 of the said rules is being omitted.
14. In line with the amendment made in Rule 83 pertaining to Provisions relating to a goods and services tax practitioner, the FORM GST PCT-05 pertaining to Authorisation / withdrawal of authorisation for Goods and Services Tax Practitioner gives effect to the change.

Summary of Notification 20/2022:

The notification rescinds Notification No 20/2018 dt. 28.03.2018 which had relaxed the time limit for application for refund of tax paid for any specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries and any other person or class of persons as may be specified in this behalf; from 6 months to 18 months from the last date of the quarter in which such supply was received.

The above notification is being rescinded on the grounds that the time limit for application for the aforementioned refund has been amended vide section 113 of the Finance Act 2022 i.e., 2 years from the last day of the quarter in which such supply was received.