RECOMMENDATIONS OF 43RD GST COUNCIL MEETING GIVEN EFFECT THROUGH NOTIFICATIONS

Appointment of section 112 of Finance Act 2021 w.r.t Section 50 of the CGST Act 2017- CGST Notification-16/2021 dt.01.06.2021

In Goods and Services Tax (GST) regime whenever there was a delay in furnishing returns under Section 39, interest (Section 50) was calculated on gross liability. In spite of the fact that the actual net liability to be discharged was comparatively less. This was causing immense hardship to the taxpayers. Adding to the pain were various judgements, which upheld this view. After various representation and deliberations, the amendment was announced in the Finance Act 2019. The same was given effect from 1.9.2020 vide CGST notification 63/2020 dt. 25.08.2020. As it was a prospective change, the taxpayers were not satisfied and continuous pressure was built to make it as a retrospective amendment. Because there were innumerable such instances, since inception of GST which were burdening the tax payers. Meanwhile many orders were passed by the authorities in the interest of revenue which were inconsistent with the said amendment. Finally, this most awaited change was announced in Section 112 of the Finance Act 2021 by introducing a proviso to section 50(1) of the CGST Act. The section states that the interest under Section 50 shall be levied on net cash basis (i.e., liability discharged by debiting electronic cash ledger) with retrospective effect from 1.7.2017 except for returns furnished after initiating of proceedings under Section 73 and 74 of the Act. Hence one of the long-standing grievance of taxpayers has been addressed at least to a limited extent. The said section has become operative vide CGST notification 16/2021 dt.01.06.2021.

The said amendment is exclusive to cases where the taxpayer voluntarily furnishes return under Section 39 in a delayed manner and discharges the tax liability and applicable interest on self-assessment basis. This is indeed a welcoming measure which would mitigate the problems of genuine taxpayers. On the other hand, it has passed a clear message to the Tax Authorities to not to initiate any proceedings wherein the taxpayer has acted in accordance with the said provisions.

In the absence of said amendment, number of tax disputes in this regard would have increased as proper officers would insist the interest to be charged on gross liability and taxpayers on net cash basis. Besides different views of various courts have created dilemma in the mind of taxpayers. Though a bit delayed, “Better late than never”, this decision has brought a sigh of relief among taxpayers.

Nevertheless, ramifications of this limited applicability are worth debate as the magnitude of its impact are material. On careful analysis of root cause for this anomaly, the prejudicial attitude of Revenue is evident. It seems as if every taxpayer subject to proceedings under Section 73 are treated on par with taxpayers undergoing proceedings under Section 74 as far as criteria of levying interest is concerned. The collection of interest from innocent tax payers under the shelter of provision of law though they have utilised their legitimate Input Tax Credit to discharge off the liability appears to be a camouflaged unjust enrichment by Revenue authorities.

More importantly the said amendment seems to be a deliberate act to exclude Section 73 and 74 of the Act, which deals with determination of tax liability in normal or fraudulent tax suppression cases through adjudication procedures. Usually in such cases as a pre-requisite, some material variances would have been figured out, which would be confirmed on conclusion of adjudication procedure. Ignoring the cases with zero impact (i.e., where no discrepancies are found), if non-reporting/ under reporting of sales or overstating of input tax credit is proved. The Revenue seems to have taken a very rigid stand be it normal cases under Section 73 or cases involving fraud, wilful misstatement under Section 74, that the said cases cannot be given beneficial treatment like genuine cases covered through the amendment. Hence the amendment has carefully carved out the cases where returns are furnished after initiating proceedings under Section 73 and 74.

Looking at various instances one cannot deny possibilities of tax payers resorting to understating of outward supplies or overstating of input tax credit due to non-availability of sufficient electronic credit ledger balance or with an intent to avoid payment through cash ledger. Subsequently if the taxpayers accumulate sufficient credit ledger balance, then on conclusion of proceedings, one would definitely opt to make payment by debiting electronic credit ledger to avoid interest implication.

On the contrary one cannot trivialise the effect it would have on genuine cases (i.e., without any fraudulent intentions) wherein taxpayers might have filed returns in a delayed manner after receiving notice under Section 73 but might be having sufficient electronic credit ledger balance to discharge their liability. In such cases it would be extremely unfair to charge interest on the gross liability.

No doubt loopholes in the provisions permitting taxpayers to take undue advantage needs to be plugged to protect the interest of revenue but at the same time, interest of genuine taxpayers needs to be safeguarded. So barring cases under Section 74, there is a strong need for the revenue to relook into extending the said provision of section 112 to cases covered under Section 73. It’s need of the hour that revenue puts genuine efforts to understand the pain points of taxpayers, identify the best solutions and implement them so as to make GST taxpayer friendly. Having said that it’s recommended for taxpayers to prioritize compliances in order to avoid tax disputes because ignorance of law is no excuse.

GST Amnesty Scheme CGST notification-19/2021 dt.01.06.2021

Capping of late fee has been introduced to reduce burden to the small taxpayers as below:

The maximum late fee that could be levied for late furnishing of GSTR-3B pertaining to tax period July 2017 to April 2021 are fixed as below provided such returns are furnished between 01.06.2021 to 31.08.2021

· If the tax payable determined in return is Nil-Rs.500/- per return (Rs.250 CGST and SGST each)

· In case of returns where tax liability is determined -Rs.1,000/- per return (Rs.500 CGST and SGST each)

Waiver of Late fee for specified tax period for limited duration 

Standardisation of late fee under Section 47 for delay in furnishing GSTR-3B with effect from tax period June 2021 or quarter ending June 2021

(Note-The below late fee structure is also applicable for delay in furnishing GSTR-1 vide notification 20/2021 dt. 01.06.2021)

The prescribed late fee structure applies to taxpayers under Regular scheme as below:

1. For taxpayers with Nil tax liability in GSTR-3B OR Nil Outward Supply (Sales)- Maximum late fee of Rs.500/- per return (Rs.250 each CGST and SGST)

2. Taxpayers other than above (Point 1) based on preceding year aggregate annual turnover^#

^#Aggregate annual turnover means sum of annual value of all taxable supplies, exempt supplies and exports of an entity on PAN India basis but excludes GST amounts and inward supplies/purchases attracting GST on Reverse charge(RCM) basis

Capping of Late fee for Composition taxpayers- CGST notification- 21/2021 dt.01.06.2021

From FY 2021-22 onwards, the maximum late fee which shall be imposed for delay in filing GSTR-4 is as below:

· If the tax payable determined in return is Nil- Maximum Rs.500/- (Rs.250 CGST and SGST each)

· In case of returns where tax liability is determined- Maximum Rs.2000/- (Rs.1000 each CGST+SGST)

Capping of Late fee for GSTR-7 - CGST notification 22/2021 dt 01.06.2021

Late fee for delay in furnishing GSTR-7, filed w.r.t deduction of tax is capped at Rs.50 for delay of each day, subject to a maximum of Rs.2000/- per return (Rs.1000 each CGST+SGST) from tax period June 2021 and onwards

Reduction in rate of interest- CGST notification-18/2021 dt.01.06.2021 w.e.f 18.05.2021

Note: ROI has been used as abbreviation of rate of interest in this context

^##QRMP-Quarterly Return Monthly Payment

* Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar Islands or Lakshadweep

** Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha, the Union territories of Jammu and Kashmir, Ladakh, Chandigarh and Delhi

Here it’s very important to note that in almost all the cases interest implication starts before the expiry of time period during which late fee is waived off. In case of large entities, the applicability of interest is almost immediate but the late fee starts after expiry 15 days from due date. In case small entities the interest implication starts on day 16 though late fee won’t be applicable up to delay of minimum 30 days from the due date. Therefore, the taxpayers must pay attention to all such aspects before deciding upon delay in return compliances.

Extensions of due dates of filing various returns

Other relaxations CGST Notification 27/2021 dt. 01.06.2021

· Cumulative application of rule 36(4) for tax periods April 2021, May 2021 and June 2021 in return for June 2021

· EVC verification permitted for companies for filing the return (Both GSTR-1 and GSTR-3B) till 31.08.2021

Extension of due date of compliances - CGST notification-24/2021 dt.01.06.2021

All compliances by either any person or by Authority/Commission/Tribunal falling between 15.04.2021 to 29.06.2021 shall stand extended to 30.06.2021. It including cases pertaining to issue of refund rejection order (for which notices are already issued) [Section 54(5) read with Section 54(7)]. Compliances covered are completion of any proceeding or passing of any order or issuance of any notice, intimation, notification, sanction or approval or such other action and so on. Similarly, compliances by persons like filing of an appeal, reply or application or furnishing of any report, document, return, statement or such other record, by whatever name called are covered under this relaxation.

There are no relaxations for the following provisions:

· Obligation to obtain registration under GST as regular tax payers or Casual taxable person (CTP) or Non-resident taxable person (NRTP). And provisions related advance tax deposition by CTP and NRTP (Section 25 & 27 of the CGST Act)

· Conversion of composition dealer to normal taxpayer owing to exceeding turnover threshold- (Section 10(3) of the CGST Act)

· Tax invoice related compliances- (Section 31 of the CGST Act)

· Various other extensions and reliefs granted related to GSTR-1 (Section 37) and other returns Section 39 except subsection (3)(4)(5) ^##, late fee (Section 47), interest (Section 50) etc which are already covered specifically in other notifications

· Penalty provisions for offences-(Section 122 of the CGST Act)

· Detection, search, seizure, release of goods/conveyance in transit- (Section 129 of the CGST Act)

· Provisions related to arrest- (Section 60 of the CGST Act)

· Liability of partners to discharge firm’s tax liability-(Section 90 of the CGST Act)

· Inspection of goods in movement so far as e-way bill is concerned-(Section 68 of the CGST Act)

^## The said subsections are related to TDS-GSTR-7, ISD-GSTR-6 and NRTP-GSTR-5. Hence the benefit of above relaxation is applicable to the mentioned returns as well.

Any compliances in process of verification and approval of GST registration falling between 01.05.2021 to 30.06.2021 shall be extended up to 31.07.2021. It includes process of authorities like verification of documents, physical verification, grant of registration, issue of notice in Form GST REG-03, passing of rejection order in Form GST REG-05 and process of applicant to furnish documents and provide clarification pertaining to notice of deficiency-Rule 9 of the Central Goods and Services Tax Rules, 2017.

All government departments and local authorities are exempted from complying e-invoicing- CGST notification-23/2021 dt 01.06.2021