Analysis on Recommendation from 45th GST Council Meeting

Recommendation from 45th GST council meeting held on 17th Sep 2021 with some sort of analysis in the bracket.

Measures for Trade facilitation:

In the spirit of earlier Council decision that interest is to be charged only in respect of net cash liability, section 50 (3) of the CGST Act to be amended retrospectively, w.e.f. 01.07.2017, to provide that interest is to be paid by a taxpayer on “ineligible ITC availed and utilized” and not on “ineligible ITC availed”. It has also been decided that interest in such cases should be charged on ineligible ITC availed and utilized at 18% w.e.f. 01.07.2017.”

(Important to note from this above wording, in whatever way the law is amended, the intention of the legislature to levy tax only if the tax liability is payable in cash. As this amendment is proposed w.e.f. 1st of July 2017, the assessee may explore the option of refund, if interest has been paid on account of ineligible ITC availed and reversed without utilizing the same. This change is welcome move, hopefully, the law would be amended in an unambiguous way)

“Taxpayers whose annual aggregate turnover in preceding financial year is above Rs. 5 crores shall furnish ITC-04 once in six months;

Taxpayers whose annual aggregate turnover in preceding financial year is upto Rs. 5 crores shall furnish ITC-04 annually.”

(It will help in ease of compliance)

“Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons (entities having same PAN but registered in different states), without going through the refund procedure, subject to certain safeguards.”

(Concept of Person being distinct is only for GST perspective, otherwise, it is one and same person only. Hence it will help the registered person to unlock its working capital and less administrative work for GST department)

“Issuance of the following circulars in order to remove ambiguity and legal disputes on various issues, thus benefiting taxpayers at large:

Clarification on scope of “intermediary services”

Clarification relating to interpretation of the term “merely establishment of distinct person” in condition (v) of the Section 2 (6) of the IGST Act 2017 for export of services. A person incorporated in India under the Companies Act, 2013 and a person incorporated under the laws of any other country are to be treated as separate legal entities and would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act 2017 for considering a supply of service as export of services.”

The division bench of Justices Ujjal Bhuyan and Abhay Ahuja could not come to a unanimous decision on the issue of GST on intermediary services. Therefore, a clarification will be provided on the definition of intermediary services and hopefully the clarification will keep the spirit of GST law alive i.e., consumption-based taxation.

The clarification on the mere establishment of a distinct person will surely remove the doubts of the taxpayers and create a fine line between mere establishment of distinct person and separate person)

Other clarification

“W.e.f. 01.01.2021, the date of issuance of debit note (and not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of CGST Act, 2017;” (So, the last date to take ITC on debit notes will be counted from the date of issue of debit note, not from the date of underlying invoice, but why is it effective from 1st Jan 2021, as debit notes should be assumed to be delinked with original invoices w.e.f. 1st July 2017 for the purpose of ITC)

“There is no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules, 2017;”

(No need to carry the hard copy of the invoice if the taxpayer has generated IRN)

“Only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) of CGST Act, 2017 from availment of refund of accumulated ITC.”

“Provision to be incorporated in in CGST Rules, 2017 for removing ambiguity regarding procedure and time limit for filing refund of tax wrongfully paid as specified in section 77(1) of the CGST/SGST Act and section 19(1) of the IGST Act.”

(Govt will prescribe procedure and rules to take a refund of taxes wrongly paid assuming a transaction as intrastate (CGST+SGST) and later it held to be interstate (IGST) and vice versa, so the assessee is required to pay the correct tax and to take the of taxes wrongly paid. It is humbly submitted that as this is revenue neutral exercise, so rather than paying taxes and taking refunds, a set-off functionality should be provided in the portal itself. Such functionality will reduce the administrative burden itself. And point to be noted here, as there is ambiguity in this situation as accepted by GST council, the taxpayer shouldn’t be harassed in respect of position taken by the taxpayer on its wisdom for past periods, rather should be sorted out amicably keeping in view of revenue neutrality)

Measures for streamlining compliances in GST

1. Aadhaar authentication of registration to be made mandatory for being eligible for filing refund claim and application for revocation of cancellation of registration.

2. Late fee for delayed filing of FORM GSTR-1 to be auto-populated and collected in next open return in FORM GSTR-3B.

3. Refund to be disbursed in the bank account, which is linked with same PAN on which registration has been obtained under GST.

4. Rule 59(6) of the CGST Rules to be amended with effect from 01.01.2022 to provide that a registered person shall not be allowed to furnish FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for the preceding month.

5. Rule 36(4) of CGST Rules, 2017 to be amended, once the proposed clause (aa) of section 16(2) of CGST Act, 2017 is notified, to restrict availment of ITC in respect of invoices/ debit notes, to the extent the details of such invoices/ debit notes are furnished by the supplier in FORM GSTR-1/ IFF and are communicated to the registered person in FORM GSTR-2B. (Point to be noted here that sub-clause (aa) of section 16(2) of CGST Act, 2017 is yet to be notified, meaning thereby still there is no requirement to match ITC with GSTR 2A/ GSTR 2B. Further, as there is no requirement to match ITC with GSTR 2A/ GSTR 2B, the condition of checking tax charged in respect of such supplies has been paid to the Government as envisaged clause (c) of section 16(2) of the CGST act 2017 is impossible to apply and flow the GSNT return system is not as envisaged as the inception of the GST law (i.e., GSTR 1, GSTR 2 and GSTR 3). So, it is humbly submitted that council should also provide the better clarification on mandate of comparison of ITC with GSTR 2A for past periods, as this is the basis of various notices from the GST department now a days)

There is other clarification related to rates on goods and services which can be referred from the press release of the posted-on 17 SEP 2021 9:16PM by PIB Delhi