Proposed changes in GST law in 2022 Budget

Prabhat Nigam

17 Mar, 2023

The Finance Minister presented the Union Budget of 2022 in the wake of highest recorded tax collections of 1.38 lakh crores through GST revenues. The Union Budget has proposed certain changes in GST law by making amendments in the GST laws to propel the lofty goals of ‘Aatmnirbhar Bharat’ and ‘Make in India’. Following is the list of changes in GST law that were presented through the Finance Bill, 2022.

Proposed changes in GST law  

The Finance Bill, 2022 has made following changes under indirect taxation:

• Extension of deadline for amendment, correction and uploading of missed sales invoice:  One of the proposed changes in GST law is the extension of the deadline from 30^th September to 30^th November for the purpose of amendment, correction or uploading of sales invoices or notes that were missed in order to claim Input tax Credit on the same.
• Cancellation of the GST Identification Number: The Finance Bill, 2022 amends Section 29 of the CGST Act for cancellation of the GST Identification Number by a GST Officer. The proposed changes in GST say that if a registered taxpayer under composition scheme fails to file annual returns for three continuous months beyond the prescribed deadline of 30^th April of the following year, then the GST Identification Number can be cancelled.

For those taxpayers who are not covered under the above mentioned composition scheme, the current period of six months consecutive default in filing of annual returns has been replaced with such consecutive tax period that shall be prescribed.

• Disallowing furnishing of details of outward supplies: The changes in GST law include amendments in section 37 where a new sub section has been introduced which disallows the taxpayers from furnishing details of outward supplies for a tax period which has been pending for any previous tax period. In the same vein amendments have also been made under section 39 which too disallows taxpayers from filing their returns if the returns have been pending under section 37 of the CGST Act.
• Amendments in furnishing of inward supplies: The new Finance Bill, 2022 brings amendments under section 38 of the CGST Act which governs furnishing of inward supplies..      
• Revision of dates for filing of GSTR-5: The changes in GST include revision of the date of filing GSTR-5 for the Non resident taxpayers from the 20^th of the succeeding month to 13^th of the succeeding month. Accordingly amendments have been made under sections 47, 48 and 169 of the CGST Act^[1].
• Amendments relating to matching and reversal of tax credits:  Removal of sections 42, 43 and 43A of the CGST Act which pertain to the matching and reversal of tax credits are also part of changes in GST law. The changes in GST law will come once the same have been notified by Central Board of Indirect Taxes (CBIC).
• Amendments in Customs Duties: Following changes in GST law have been introduced relating to the custom duties:

1. Establishment of Faceless Customs: The government has established the apparatus for faceless customs. The government has proposed to phase out gradually exemptions on 350 entries because sufficient domestic capacity for the production of these entries. The entries are related to sectors such as textiles, agriculture, medical devices, medicines etc.
2. Simplification of customs rate and tariff structure: The government proposed for simplification of customs rate and tariff structure for the sectors like textiles, chemical, metals to reduce number of disputes. The government intends to remove exemptions on the import of raw materials of for which domestic capacity has either been developed or can be developed. However, concessional duties will be given for the raw material which goes into manufacturing of intermediate products.
3. IT driven Customs Administration: The government announced that the Customs Administration of Special Economic Zones shall be fully IT driven from 30^th September, 2022 onwards and work from the Customs National Portal.

• Phasing out of concessional rates for Capital Goods and Project imports: The Budget has proposed the phasing out of concessional rates on capital goods and project imports applying a moderate tariff of 7.5% so that level playing field is offered to the domestic players. This move shall not affect the import of advanced machinery not manufactured in India and exemptions will continue to be applied on them.
• Provisional ITC can no longer be availed: The Budget has removed the concept of provisional ITC by making amendments in section 41 of the CGST Act. In response to this, section 43A has been amended to give effect to the amendment made in section 41 of the CGST Act. This has forced the businesses to accurately report ITC each month failing which penalties and demand notices will be directed towards the business from the GST department.  And if the ITC is filed less than the claimable ITC, then the business would suffer adversely due to reduced cash flows.
•  Amendments in Electronic credit ledger: The budget has made amendments in the electronic credit ledgers bringing in restrictions on utilising the amount in the electronic credit ledger. The amendment has also made a provision of transferring the amount present in the electronic cash ledger of a registered person under CGST Act to the electronic cash ledger under IGST or CGST Act of a distinct person. A distinct person is one having different GST Identification Numbers but registered under the same legal entity. This amendment has made it easier for the entities having multiple GSTINs to transfer excess cash balances from one state to another where it is required.

Conclusion

The Finance Minister announced the budget with buoyant tax collections and applauded the taxpayers for contributions made to the coffers. However, the changes in GST law reflect stricter compliances and attempts have been made that possible loopholes are plugged. Though facilitation has been provided to the taxpayers in deploying their funds, but at the same time it is ensured that taxpayers follow compliances strictly.   

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