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Changes In GST Law From 1 January 2021 – Summarised

The most prominent challenges the Central Government faced in the GST regime have been tax evasion and fake invoicing. The Central Government has notified various amendments to the CGST Act, 2017 and CGST Rules, 2017, in the past few months. In this article, we have summarised some of the key amendments applicable from 1 January 2021.:

Sl. No. Title Particulars Notification
1. Section 10 –  Composition Levy In the erstwhile provisions, only taxpayers supplying goods were eligible to opt-out of Composition Levy. This has now been updated to reflect the supply of services. This change helps bring parity between taxpayers engaging in the supply of goods and/or services.

 

Notification No.92/2020-Central Tax dated 22 December 2020

 

 

2. Section 16 – Eligibility and conditions for taking the Input Tax Credit (ITC) The existing provisions were vague, and the updated language now clearly states that an invoice or a debit note relating to a financial year received after 30 September (from the end of the financial year) or date of filing the annual return, whichever is earlier, is not valid for claiming ITC.

 

Notification No.92/2020-Central Tax dated 22 December 2020
3. Section 29 – Cancellation or suspension of GST registration Section 25(3) of the CGST Act, 2017 allowed voluntary GST registration for taxpayers for whom GST registration was not mandatory. However, such taxpayers were not eligible for cancellation of GST registration on their own accord. The language of the clause has been revised to bring clarity to such GST registrants.

 

Notification No.92/2020-Central Tax dated 22 December 2020
4. Section 30 – Revocation of cancellation of registration The existing proviso was outdated, and taxpayers did not have any provision to appeal to tax officers if 30 days had elapsed from the date of notice for cancellation. The amendment provides taxpayers with relief to extend the deadline by a maximum of 60 days provided sufficient cause is shown and recorded in writing.

 

Notification No.92/2020-Central Tax dated 22 December 2020
5. Section 31 – Tax Invoice The amendment to the provision provides the Central Government wider powers to notify any changes to the Tax Invoice. This is critical as the Government has introduced e-invoicing and other initiatives.

 

Notification No.92/2020-Central Tax dated 22 December 2020
6. Section 51 – Tax Deduction at Source The revision of sub-section 3 of section 51 of CGST Act, 2017 has given the Central Government powers to specify and revise the TDS certificate format. Sub-section 4 has been removed to reduce the burden of a deadline on taxpayers to furnish the TDS certificate within 5 days of crediting the amount to the Government and provides some flexibility to the taxpayers.

 

Notification No.92/2020-Central Tax dated 22 December 2020
7. Section 122 – Penalty for certain offences by a taxable person The Central Government has widened the net of the penalty by introducing sub-section 1A. Along with the taxable person, any person who stands to benefit from a transaction as specified in clauses (i), (ii), (vii) and (ix) of Section 122 (1) of the CGST Act, 2017, will be liable for a penalty of an amount equal to the tax evaded or input tax credit availed of or passed on to any other party.

 

Notification No.92/2020-Central Tax dated 22 December 2020
8. Section 132 – Punishment for certain offences Similar to the addition in Section 122 of the CGST Act, 2017, section 132 widens the net for taxpayers who are punishable. Instead of punishing only the person(s) who commits the offence, the amendment now includes whoever commits or causes to commit and retain the benefits arising out of the offences noted in section 132.

The amendments to clauses (c) and (e) to section 132(1) are in similar lines.

 

Notification No.92/2020-Central Tax dated 22 December 2020
9. Schedule II – Activities or transactions to be treated as a supply of goods or supply of services The Central Government has retrospectively amended Para 4 (a) and (b) of Schedule II of the CGST Act, 2017. The existing wording in the schedule was causing ambiguity for the taxpayers.

Example: A taxpayer being a sole proprietor is in the business of selling refrigerators. The proprietor uses the refrigerator temporarily for 2 weeks. After this retrospective amendment, the proprietor’s personal use of the refrigerator without consideration is not taxable.

 

Notification No.92/2020-Central Tax dated 22 December 2020
10. Rule 21 –

Registration to be cancelled in some instances

Additional grounds have been added to Rule 21 which can lead to Cancellation of Registration:

●     Availing of Input Tax Credit (ITC) in violation of provisions of Section 16 of the CGST Act, 2017 (Eligibility and conditions for taking ITC) or the rules made thereunder.

●     The amount of outward supplies furnished in Form GSTR-1 under Section 37 of the CGST Act, 2017 for one or more tax periods is more than the amount of outwards supplies furnished in their valid return under Section 39 of the CGST Act, 2017 for the said tax periods.

●     It has also been notified that if the provisions of Rule 86B of the CGST Rules 2017 (Restrictions on use of amount available in electronic credit ledger) are violated, it can lead to GST registration cancellation.

 

Notification No.94/2020-Central Tax dated 22 December 2020
11. Rule 21A – Suspension of registration As per the amendment, the officer can cancel a taxpayer’s registration without giving an opportunity to be heard.

 

An additional amendment has been introduced to restrict the refund of GST during the period of suspension of registration.

 

Notification No.94/2020-Central Tax dated 22 December 2020
12. Rule 36(4) –

Documentary requirements and conditions for claiming the input tax credit

In respect of invoices/debit notes not furnished, by the supplier in their GSTR-1 or by using the invoice furnishing facility, a GST registered person could avail 10% (ten per cent) of the ITC available in the said persons’ GSTR-2B. This has now been revised to 5% (five per cent) of the credit available in GSTR-2B.

 

Notification No.94/2020-Central Tax dated 22 December 2020
13. Rule 59(5) –

Form and manner of furnishing details of outward supplies

A new sub-rule (5) has been introduced to Rule 59.

A registered person will not be able to file GSTR-1 or use the invoice furnishing facility:

●     If they have not filed GSTR-3B for the past two months (in case of monthly filers) or the preceding tax period (in case of quarterly filers).

●     If they are restricted from using the electronic credit ledger to pay off the output tax liability above 99% (ninety-nine per cent) under Rule 86B (Restrictions on use of amount available in electronic credit ledger).

 

Notification No.94/2020-Central Tax dated 22 December 2020
14. Rule 86B –

Restrictions on use of amount available in the electronic credit ledger

A registered person is restricted from using the credit lying in the electronic credit ledger to discharge their tax liability above 99% (ninety-nine per cent) of such tax liability in cases where the value of taxable supply, other than exempt and zero-rated supply, in a month exceeds fifty lakh rupees.

 

However certain exceptions have been provided here – Rule 86B in Notification 94/ 2020 – Central Tax. The authorised officer may remove these restrictions after due verification.

 

Notification No.94/2020-Central Tax dated 22 December 2020
15. Rule 138(10) –

Information to be furnished prior to commencement of movement of goods and generation of E-way bill

With effect from 1 January 2021, the validity of an E-way bill has been increased from 100 km. per day to 200 km. per day.

 

For every 200 km. or part thereof after that, one additional day will be allowed.

Notification No.94/2020-Central Tax dated 22 December 2020
16. E-invoicing E-invoicing has been made mandatory w.e.f. 1 January 2021, for taxpayers whose aggregate turnover (based on PAN) in a financial year, exceeds INR 100 crores, subject to certain exempted entities like SEZ Units, Insurance Companies, Banks (including NBFCs), Goods Transport Agency (transporting goods by road in goods carriage), Passenger Transport Services, and Multiplex Cinema Admissions.

 

Notification No.88/2020-Central Tax dated 10 November 2020
17. Quarterly Return Monthly Payment (QRMP) Scheme To reduce the burden of filing monthly returns on taxpayers, the Central Board of Indirect Taxes and Customs (CBIC) has introduced the Quarterly Return Monthly Payment (QRMP) Scheme by issuing a circular.

 

A registered taxpayer who is required to file Form GSTR-3B monthly and has a turnover of INR 5 Crores or less, during the previous financial year, is eligible to apply for the QRMP scheme.

In case the turnover exceeds INR 5 Crores during any quarter of the financial year, the taxpayers will not be eligible for the scheme from the following quarter.

 

For more details on the scheme, refer to our article here.

Circular CBEC-20/01/08/2020-GST dated 10 November 2020.

E-Invoicing