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IDT Developments and Associated Procedures

1. Important decision taken in 46th GST council meeting

The 46th Goods and Services Tax ("GST") council meeting was held on 31 December 2021 under the chairmanship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman.

The GST Council has recommended to defer the decision to change the GST rates on textiles which was recommended in the 45th GST Council meeting. Consequently, the existing GST rates on textile products would continue beyond 1 January 2022.

2. The Hon’ble Calcutta High Court remands the matter directing to the revenue that the Input Tax Credit cannot be denied where the transactions are supported by the valid documents: [TS-728-HC(CAL)-2021-GST]

The Hon’ble Calcutta HC remanded the matter to GST Authorities to considerImportant GST Notifications and Circulars issued during the quarter afresh the case of an assessee on the issue of their entitlement of benefit of ITC by considering the documents relied upon by assessee to support their claim of genuineness of the transactions.

The High Court has also directed the revenue to consider whether the payment for the purchases in question along with GST was actually paid to the suppliers, whether the transactions were made before or after cancellation of registration of suppliers and also consider the compliance of statutory obligations by the assessee.

Further, it stated that the revenue can penalize the assessee only if it finds out that the suppliers were fake and establishes with concrete materials that the transactions in question were an outcome of collusion between assessee and suppliers in question.

Important GST Notifications and Circulars issued during the quarter

1. Eligibility of Input Tax Credit

Vide Notification No.39/2021-Central Tax dated 21 December 2021, the Government has notified 1 January 2022 as the effective date for the amendment made vide Section 109 of the Finance Act, 2021 to insert the new clause ‘(aa)’ in Section 16(2) of the CGST Act, 2017 by which ITC on invoice or debit note can be availed only when details of such invoice/debit note have been furnished by the supplier in his outward supplies (GSTR-1) and such details have been communicated to the recipient of such invoice or debit note.

Further, vide Notification No. 40/2021-Central Tax dated 29 December 2021, Rule 36(4) of the CGST Rules, 2017 has been amended to provide an additional condition to claim ITC based on newly introduced Form GSTR-2B. Consequently, with effect from 1 January 2022, the amount of ITC which can be availed by the recipient of goods or services is restricted only to the extent of the amount which is reflecting in his Form GSTR-2B .

2. Recovery of Self Assessed Tax on the basis of difference between GST liability declared in GSTR-01 and GSTR-3B

Vide Notification No.39/2021-Central Tax dated 21 December 2021, the Government has notified 1 January 2022 as the effective date for the amendment made vide Section 114 of the Finance Act, 2021 to insert a new explanation to Section 75 of the CGST Act, 2017. By virtue of this, any GST payable in respect of details of outward supplies furnished in Form GSTR-01, but not included in Form GSTR-3B would be deemed to be self-assessed tax and recovery thereof can be made by the GST authorities. Prior to this amendment, self-assessed tax was to be determined on the basis of liabilities declared in Form GSTR-3B only.

3. Mandatory Aadhar Authentication for registered person for certain cases

Vide Notification No. 38/2021-Central Tax dated 21 December 2021, Rule 10B which was inserted in CGST Rules, 2017 has been made effective from 1 January 2022.

By virtue of this amendment, a person who is registered under the GST Regulations would be required to undergo mandatory Aadhar Authentication in case such registered person wishes to file an application for cancellation of GST Registration or intends to claim refund of GST under Rule 89 or 96 of the CGST Rules. In case of a Company, Aadhar of a Managing Director or Whole Time Director should be authenticated.

4. Taxability in the hands of E-Commerce Operators (‘ECO’)

Vide Notification No 17/2021-Central Tax (Rate) dated 18 November 2021, ECO are made liable to pay tax on services provided through them namely transport of passengers, by any type of motor vehicles (including omnibus, motor cycle, etc) as well as restaurant services (i.e. on charge for food and charge for proving the online platform) with effect from 1 January 2022.

Further, in order to provide more clarification regarding modalities for compliance to the GST laws in respect of supply of restaurant service through ECO, Circular No. 167/23/2021-GST dated 17 November 2021 has been issued. The circular provides clarification with respect to all the issues that could arise while complying with these changes such as registration requirement, meaning of restaurant services, responsibility to issue invoices, etc.

5. Updates in GST Rules

Vide Notification No. 40/2021-Central Tax dated 29 December 2021, following changes have been notified under the CGST Rules:

The due date for filing the Annual Return in Form GSTR 9 and self- certified reconciliation statement in Form GSTR 9C for the FY 2020-21 has been extended until 28 February 2022.
Rule 144A is inserted in CGST Rules which prescribes the procedure for auctioning of detained goods and recovery of penalty, etc.

6. Clarifications with respect to refund related issues

Vide Circular No. 166/22/2021-GST dated 17 November 2021, the CBIC has provided various clarifications, which are summarised as follows:

Provisions of Section 54(1) of the CGST Act regarding time period within which an application for refund can be filed and the requirement of furnishing of certification/ declaration under Rule 89(2)(l) or 89(2)(m) of the CGST Rules, 2017 relating to unjust enrichment is not required in cases of refund of excess balance in electronic cash ledger.
The registered person is at full liberty to discharge his GST liability in respect of the supplies made by him during a tax period, either through debit in electronic credit ledger or through debit in electronic cash ledger, as per his choice and availability of balance in the said ledgers and it is not mandatory for the registered person to utilize the TDS/TCS amount credited to his electronic cash ledger only for the purpose for discharging GST liability.
Further, the relevant date for purpose of filing refund claim on deemed exports by the recipient would be the date of filing of return, related to such supplies, by the supplier.

7. Dynamic QR Code related update

Vide Circular No. 165/21/2021-GST dated 17 November 2021, CBIC has clarified that an invoice may be issued without a Dynamic QR Code in cases where the invoice is issued to a recipient located outside India for supply of services, for which the place of supply is in India and the payment is received by the supplier in convertible foreign exchange or in Indian Rupees as permitted by the RBI.

8. Other GST Rate updates

Notification No. 14/2021-Central Tax (Rate) dated 18 November 2021

In order to resolve the issue of inverted duty structure, the CBIC has revised the GST Rate from 5 per cent to 12 per cent on fabrics, apparels and footwear. The same shall come into effect from 1 January 2022. However, as discussed above, the amendment in GST rates for the textile goods was deferred subsequently while the same was made effective on footwear.

Notification No. 15/2021-Central Tax (Rate) dated 18 November 2021

The CBIC has notified that services supplied by way of composite supply of works contract like construction of dams, canal, residential complex for self-use; civil structure other than for commerce and industry; involving earth work more than 75 per cent, which are provided to Governmental Authority or a Government Entity would be liable to GST at the rate of 18 per cent as against 12 per cent or 5 per cent at present. The same shall come into effect from 1 January 2022.

Notification No. 16/2021-Central Tax (Rate) dated 18 November 2021

The CBIC has notified that services provided as listed under Article 243G/W of the Indian Constitution, to any Governmental Authority or a Government Entity are excluded from the exemption entries and thus, would be liable to tax with effect from 1 January 2022.

Customs and Foreign trade policy related developments

1. Amendments to First Schedule of Customs Tariff Act, 1975 and introduction of HS-2022

The new (seventh) edition of the Harmonized System (‘HS’) nomenclature HS-2022, has come into effect from 1 January 2022. This edition has introduced some significant changes to the Harmonized System with a total of 351 amendments at the six-digit level, covering a wide range of goods moving across borders. In order to align the first schedule of Customs Tariff Act, 1975 with the HS 2022, necessary changes were brought in through the Fifth Schedule to the Finance Act, 2021, with effect from 1 January 2022.

For ease of transition to the HS 2022, an exercise to correlate the tariffs at the eight-digit level was undertaken and a guidance document on correlation between Customs Tariff 2021 and 2022 was issued.

While the above amendment has affected HSN classification under Customs Regulations, GST Regulations also adopts HS nomenclature as defined under Customs Tariff Act,1975. Accordingly, it is crucial to verify whether the HSNs adopted for the sale of goods under GST Regulations have been modified.

2. Extension of last date for submitting applications for Scrip based FTP Schemes

Vide Notification No. 48/2015-2020 dated 31 December 2021, the due date for submitting applications under MEIS, SEIS, ROSCTL, ROSL and 2 per cent ad hoc incentive under para 3.25 of FTP which was earlier notified to be 31 December 2021 has been extended till 31 January 2022.

3. Electronic filing of Registration Cum Membership Certificate (‘RCMC’)/ Registration Certificate (‘RC’) through common digital platform

Vide Trade Notice 27/2021-2022 dated 30 November 2021, it has been informed that a new online common digital platform has been made available at :- https://dgft.gov.in which would be a single point of access for all exporters/importers and Issuing Agencies for the issuance of RCMC/RC w.e.f. 6 December 2021.

During the transition period, the existing procedure of submitting applications directly through designated issuing agency would be continued till 28 February 2022.

4. Manual filing of EODC/Closure under Advance Authorization (‘AA’) Scheme

Vide Trade Notice 28/2021-2022 dated 31 December 2021, in view of difficulties expressed by AA holders, option has been given to file manual /physical EODC/closure applications for all such AAs issued prior to 1 December 2020.

Further, exporters are also requested to update EODC/closure status of earlier issued AA in the online system by 31 March 2022.

5. Deactivation of IECs not updated after 1 January 2014

Vide Trade Notice No. 25/2015-2020 dated 19 November 2021, the DGFT has stated that IECs which have not been updated after 1 January 2014 shall be de-activated with effect from 6 December 2021. Further, the concerned IEC holders would be provided a final opportunity to update their IEC in this interim period till 5 December 2021. Furthermore, any IEC so de-activated would be eligible for automatic re-activation without any manual intervention or any visits to the DGFT RA once the said IEC holder updates his IEC online.

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