The Finance Bill, 2022
Goods and services tax
- The matching concept by way of a two-way communication process has been done away with.
- Further restrictions on availing of ITC by way of amending section 16 read with section 38.
- Limitation period wherever linked with date of filing of return of September has been now amended to 30th November of the following year.
- Details of an outward supply in Form GSTR-1 and return in form GSTR3B for a particular month cannot be filed if any of the same has not been filed for the previous month.
- Interest rate in case of wrong availment and utilization of ITC has been reduced to 18% w.e.f 01.07.2017.
Applicability of proposed amendments
- Section 1(2)(b) of the Finance Bill 2022 provides that the changes made in GST (From Section 99 to Section 113) shall be made effective from the date as the Central Government may, by notification in the Official Gazette, appoint.
- These changes would come to light only once the same has been deliberated and approved by the GST council.
- Once the same has been approved by the GST council, the central government by way of notification shall appoint a date from which the provisions would become effective.
Section 16: Eligibility and Conditions for taking ITC
- Clause 2(ba) has been inserted in Section 16 of the CGST Act. The newly inserted sub-clause has been reproduced below:“(ba) the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted;”
- Section 16(4), CGST Act is being amended to extend the time limit for availment of input tax credit in respect of any invoice or debit note pertaining to a financial year up to 30th November of the following financial year.
- Reference to Section 43A in sub-Section 16(2)(c) has been deleted.
Section 16: Eligibility and Conditions for taking ITC
- Section 16(2ba) has now been inserted to provide that input tax credit with respect to a supply can be availed only if such credit has not been restricted in the details communicated to the taxpayer under section 38. Restriction, as prescribed in Section 38, has been elucidated in the ensuing slides.
- Earlier the limitation of taking ITC in respect of invoice or debit note pertaining to a financial year was earlier of the following;◦ Due date of furnishing return under Section 39 for September.
◦ Furnishing of Annual return for such financial year.The aforesaid limitation has been extended up to 30th November of the following financial year.
Section 29: Cancellation or suspension of Registration
|Section||Existing Provisions||Proposed Change|
|Section 29(2)(b)||a person paying tax under section 10 has not furnished returns for three consecutive tax periods;||a person paying tax under section 10 has not furnished the return for a financial year beyond three months from the due date of furnishing the said return; or|
|Section 29(2)(c)||(c) any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months;||(c) any registered person, other than a person specified in clause (b), has not furnished returns for such continuous tax period as may be prescribed|
Section 34 – Credit and Debit notes
- Limitation for issuance and declaration (in return) of credit note under sub-section (2) of Section 34 for a financial year has now been extended from a return period of September month to 30th November of the following year.
Section 37 – Furnishing details of outward supplies
|Section||Existing Provisions||Proposed Change|
|Section 37(1)||Every registered person, other than an Input||Every registered person, other than an Input|
|Service Distributor, a non-resident taxable person||Service Distributor, a non-resident taxable|
|and a person paying tax under the provisions of||person and a person paying tax under the|
|section 10 or section 51 or section 52, shall furnish,||provisions of section 10 or section 51 or|
|electronically, in such form and manner as may be||section 52, shall furnish, electronically|
|prescribed, the details of outward supplies of goods||subject to such conditions and restrictions|
|or services or both effected during a tax period on||and, in such form and manner as may be|
|or before the tenth day of the month succeeding the||prescribed, the details of outward supplies of|
|said tax period and such details shall be||goods or services or both affected during a tax|
|communicated to the recipient of the said supplies||period on or before the tenth day of the month|
|within such time and in such manner as may be||succeeding the said tax period and such|
|prescribed||details shall, subject to such conditions and|
|restrictions, within such time and in such|
|manner as may be prescribed, be|
|communicated to the recipient of the said|
|Section||Existing Provisions||Proposed Change|
|First Proviso to Section 37(1)||Provided that the registered person shall not be allowed to furnish the details of outward supplies during the period from the eleventh day to the fifteenth day of the month succeeding the tax period||Omitted|
|Section 37(2)||Every registered person who has been communicated the details under sub-section (3) of section 38 or the details pertaining to inward supplies of Input Service Distributor under sub-section (4) of section 38, shall either accept or reject the details so communicated, on or before the seventeenth day, but not before the fifteenth day, of the month succeeding the tax period and the details furnished by him under sub-section (1) shall stand amended accordingly||Omitted|
|First Proviso to Section 37(3)||Provided that no rectification of error or omission in respect of the details furnished under sub-section (1) shall be allowed after furnishing of the return under section 39 for the month of September following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier||Provided that no rectification of error or omission in respect of the details furnished under sub-section (1) shall be allowed after the thirtieth day of November following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier|
|Section||Existing Provisions||Proposed Change|
|Newly Inserted||NA||A registered person shall not be|
|Section 37(4)||allowed to furnish the details of|
|outward supplies under sub-section (1)|
|for a tax period, if the details of|
|outward supplies for any of the|
|previous tax periods has not been|
|furnished by him:|
|Provided that the Government may, on|
|the recommendations of the Council,|
|by notification, subject to such|
|conditions and restrictions as may be|
|specified therein, allow a registered|
|the person or a class of registered persons|
|to furnish the details of outward|
|supplies under sub-section (1), even if|
|he has not furnished the details of|
|outward supplies for one or more|
|previous tax periods|
- The government has amended the provision to empower the government to prescribe the conditions and restrictions for filing the details of an outward supply in Form GSTR-1.
- If the detail of the outward supply in Form GSTR-1 has not been furnished for any previous tax period, then the registered person is not allowed to furnish Form GSTR-1 for the subsequent tax period.
- Issue: If a registered person has not filed Form GSTR-1 for the month of May 2021 but has filed its GSTR-1 for all the subsequent periods, the question would arise whether the registered person would be restricted to file its subsequent GSTR-1 as and when the said provision come into force.
Section 38 – Furnishing details of inward supplies
Section 38 has been substituted (for substituted section 38 kindly refer to Annexure 1).
Section 38(1) provides that on the basis of outward supplies furnished by the supplier an auto-generated statement containing the details of ITC shall be made available to the recipient.
Section 38(2) provides for conditions and restrictions where a registered person is not allowed to avail input tax credit in respect of supplies made by a specified category of registered persons.
By virtue of section 38(2), the auto-generated statement shall consist of details of inward supplies in respect of which credit is available & the details of inward supplies in respect of which credit is not available.
Section 39 – Furnishing of returns
- A non-resident taxable person shall now furnish the monthly return by the 13th day of the following month (earlier to be filed by the 20th of the following month).
- An option has been allowed to the persons furnishing quarterly return wherein they could pay either the self-assessed tax or an amount that may be.
- The time period for rectification of errors in the return furnished under section 39 has been extended till 30th November of the following financial.
- GSTR-3B cannot be filed if GSTR-1 for the same month has not been Let Suppose, if GSTR-1 for April 2022 has not been filed, GSTR-3B cannot be filed for April 2022 (by virtue of Section 39(10)). Further, a registered person cannot file GSTR-1 for May 2022 as well (By virtue of Section 37(4)).
- In sum, filing of details of outward supplies in Form GSTR-1 and return in Form GSTR-3B for each tax period is made.
Section 41 – Availment of ITC
- Section 41 has been substituted. By virtue of such substitution the manner of availing credit on a provisional basis has been
- A draconian provision in form of Section 42 has been brought As per the said section if the supplier has not paid the tax to the govt, then the ITC availed by the registered person shall be reversed along with applicable interest. So, the recipient is penalized for misdeeds of the supplier.
- The recipient is allowed to avail of the credit once the tax has been paid by the
- Earlier as per Section 41(2) self-assessed credit shall be utilized only for the payment of self-assessed output tax. On the basis of said provisions, the courts were taking a stand that the pre-deposit cannot be paid using self-assessed However, the said section has been removed thus, it appears that now there is no restriction for payment of the amount of pre-deposit utilizing self- assessed ITC.
Section – 42, 43, 43A
- The following sections are omitted:Section 42 – Matching, reversal and reclaim of the input tax credit,
Section 43 – Matching, reversal and reclaim of reduction in output tax liability, and
Section 43A – Procedure For Furnishing Returns & Availing Input Tax Credit.
- The purpose of such omission is to do away with the two-way communication process in return filing.
Section 49 – Payment of tax, interest penalty, and other amounts
- The registered person is allowed to transfer any amount available in the electronic cash ledger to the electronic cash ledger of the distinct person as prescribed in sub-section (4) or sub-section (5) of section 25. Provided no such transfer shall be allowed if the transferor has unpaid liability in his electronic liability register.
- A new sub-section 12 has been inserted to provide for the maximum proportion of output tax liability which can be paid through an electronic credit ledger. This provision would support the restriction that has been brought by virtue of Rule 86B.
Section 50 – Interest on delayed payment of tax.
- Section 50(3) has been substituted so as to attract payment of interest in cases where the ITC has been wrongly availed and utilized. o Earlier as per the said sub-section the interest was payable:a. Where the taxable person makes an undue claim of ITC under section 42(10).
b. Where the taxable person makes an undue or excess reduction in output tax liability under section 43(10).
- The said substitution shall be substituted with effect from 01.07.2017.
- By virtue of amendment in Notification No. 13/2017, notified rate of interest in respect of violation covered under section 50(3) has been reduced to 18% from the earlier 24%. Such change has been made effective from 01.07.2017. a similar amendment has been made in IGST Act and UTGST Act.
Section 54 – Refund of tax
- Earlier for claiming the refund of balance in electronic cash ledger, the registered person was required to claim the same through return furnished under section 39. The same has been now amended and the refund can be claimed through a prescribed form.
- The limitation for claiming the refund for specified organizations as mentioned in section 54(2) has been extended from 6 months from the last day of the quarter to 2 years from the last day of the quarter.
- Amendment in section 54(10) has been made to extend the scope of withholding or recovery from the refund in respect of all types of refund applications filed by the assessee. Earlier the said restriction was only limited to the refund applications filed under section 54(3).
- The relevant date for filing of a refund claim under section 54 in respect of supplies made to SEZ units or developers has been now specifically provided.
- Notification No. 25/2019 Central Tax (Rate) dated 30.09.2019 has been made applicable on and from 01.07.2017. The said notification provides that – “service by way of grant of alcoholic liquor license against the consideration in form of license fee or application fee or by way of whatever name called” shall be neither considered as supply of goods nor supply of services by virtue of section 7(2) of the CGST Act.
- That no central tax shall be levied or collected on supply of unintended waste generated during the production of fish meal, except for fish oil during the period commencing from 01.01.2017 to 30.09.2019 (both days inclusive).
- Similar changes in notifications have been brought in the IGST Act, 2017.
- To overcome the ruling of the Hon’ble Supreme court in Canon India vs Union of India amendments have been brought in section 2(34), section 5(insertion of sub-section (1A) and (1B)), and section 3.
- Sub-section 4 of section 5 has been inserted specifying the criteria of assigning functions to the customs officer.
- Sub-section (5) to Section 5 is inserted to provide concurrent powers to the officers of customs for proper management of work.
- The changes in section 14 have been proposed to provide that by byway of rules, the board may be empowered to specify any additional obligation on the importer in respect of any class of imported goods and the checks to be exercised, where the board has reasons to believe the value of such goods may not be declared truthfully or accurately.
- Changes made in section 28E is in consequence of the amendments brought by the Finance Act, 2018 vide which clause (c) of the said section i.e. the meaning of “applicant” was substituted (omission of the meaning of Joint Venture, Non-resident, Indian company & Foreign company)
- Section 135AA has been inserted to penalize the person who publishes import or export data (value/ classification/ quantity/ detail of importer or exporter) unless required to do under any law for the time being in force.
- Section 110AA has been inserted with a view to affirm the principle that, wherever, an original function duly exercised by an officer of competent jurisdiction is the subject matter of a subsequent inquiry, investigation, audit, or any other specified purpose by any other officer of customs, then, notwithstanding, such inquiry, investigation, auditor any other purpose, the officer, who originally exercised such jurisdiction shall have the sole authority to exercise jurisdiction for further action like reassessment, adjudications, etc. consequent to the completion of such inquiry, investigation, audit or any other purpose.
Virtual Digital Asset
Due to “a phenomenal increase in transactions in virtual digital assets”, the following scheme has been proposed to vide Section 115BBH and 115BBI of the Income Tax Act for taxation of virtual digital assets –
- Income from the transfer of virtual digital assets shall be taxed at 30% with no deduction of expenses or allowance except the cost of acquisition.
- Virtual digital asset is defined in Section 2(47A) of the Act.
- Loss from the transfer of virtual digital asset cannot be set off against any other income.
- The gift of virtual digital assets is also proposed to be taxed in the hands of the recipient.
- In order to rescue the innocent taxpayers who have genuinely omitted to include certain items of income in the ITR or grappled with the complicated legal provisions from a lengthy process of adjudication, the budget has proposed a new provision permitting the taxpayers to file an updated return (seems to be different from revised return which is
already available in section 139(5) of the Act).
- Proposed to be inserted by way of sub-section (8A) to Section 139 of the Income Tax Act.
- As a result, the limitation for filing a return in case of an error or omission has been extended to twenty-four months from the end of the relevant assessment year.
No appeal on an identical question of law
- In order to reduce/avoid repetitive appeals by the department, the Finance Bill 2022 has proposed to provide that if a question of law in the case of an assessee is identical to a question of law that is pending in appeal before the jurisdictional High Court or the Supreme Court, in any case, the filing of further appeal in the case of this assessee by the department shall be deferred till such question of law is decided.
- The said measure is proposed vide insertion of a new Section namely Section 158AB in the Income Tax Act.
Rationalization of Surcharge
- In order to alleviate the suffering of Consortium/Association of Persons (AOPs), which are generally companies, from payment of graded surcharge which goes up to 37% [which is a lot more than the surcharge on individual companies], it is proposed to cap the surcharge of these AOPs at 15%.
- It has been proposed to cap the surcharge on long-term capital gains on the transfer of any type of asset at 15%.
- Reduction in Alternate Minimum Tax for co-op societies to 15%, surcharge to 7%.
- No set-off of any loss shall be allowed against undisclosed income detected during search and survey operations.
- Applicability of TDS in transactions where businesses pass on benefits (as a business promotional strategy) to agents.
- That Surcharge or cess on income and profits is not allowable as business expenditure.
- Tax incentives relating to start-ups has been extended by one more year in respect of start-ups established before 31.03.2022.
- The last date for commencement of manufacturing/production u/s 115BAB has been extended from 31.03.2023 to 31.03.2024.
Section 38 has been now substituted with the following ;
- The details of outward supplies furnished by the registered persons under sub-section (1) of section 37 and of such other supplies as may be prescribed, and an autogenerated statement containing the details of the input tax credit shall be made available electronically to the recipients of such supplies in such form and manner, within such time, and subject to such conditions and restrictions as may be prescribed.
- The auto-generated statement under sub-section (1) shall consist of–(a) details of inward supplies in respect of which credit of input tax may be available to the recipient; and(b) details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the recipient, on account of the details of the said supplies being furnished under sub-section (1) of section 37,-
i. by any registered person within such period of taking registration as may be prescribed; or
ii. a registered person, who has defaulted in payment of tax and where such default has continued for such period as may be prescribed; or
iii. by any registered person, the output tax payable by whom in accordance with the statement of outward supplies furnished by him under the said subsection during such period, as may be prescribed, exceeds the output tax paid by him during the said period by such limit as may be prescribed; or
iv. by any registered person who, during such period as may be prescribed, has availed credit of input tax of an amount that exceeds the credit that can be availed by him in accordance with clause (a), by such limit, as may be prescribed; or
v. by any registered person, who has defaulted in discharging his tax liability in accordance with the provisions of sub-section (12) of section 49 is subject to such conditions and restrictions as may be prescribed; or
vi. by such other class of persons as may be prescribed