The recent GST Council meeting has created anticipation for potential changes in GST rates on various products. Sources have revealed that the Council may refer the issue of GST rates on cigarettes and bidis to the Rate Rationalisation Committee. This move aims to potentially notify a maximum tax rate of 20% under CGST and 20% under SGST, compared to the current 28% rate.
Notably, state Finance Ministers are expected to propose changes to the indirect tax system for the upcoming Union Budget during the forthcoming meeting, reinstating the significance of this upcoming discussion.
Furthermore, there are expectations for significant adjustments in GST rates for multiple products. The Fitment Committee might propose reducing the GST rate from 18% to 5% for aircraft parts/components in aircraft maintenance. Additionally, the GST Council is anticipated to consider reducing the GST rate on carton boxes for packaging apples from 18% to 12%, as well as the GST on solar cookers from 18% to 5%.
Another potential adjustment includes the law committee’s suggestion to exempt the compensation cess of 12% on aerated beverages, indicating a potential shift in this aspect of the tax system.
Additionally, there is growing curiosity among consumers and industry experts about the future of the GST Compensation Cess, initially intended for the first five years of the GST regime starting in July 2017. Talks during the recent meeting, led by the Finance Minister, hinted at a future strategy to introduce an additional cess or surcharge post March 2026, following the expiration of the GST Compensation Cess.
These potential changes and discussions signify an important phase in the evolution of the GST system, reflecting the ongoing efforts to streamline and optimize the indirect tax structure for the benefit of all stakeholders.
Advisory for furnishing bank account details by registered taxpayers under Rule 10A of the Central Goods and Services Tax Rules, 2017.
Mandatory Bank Account Details Submission as per law: All Registered Taxpayers are required under the provisions of CGST Act, 2017 and the corresponding Rules framed thereunder to furnish details of their bank account/s within 30 days of the grant of registration or before the due date of filing GSTR-1/IFF, whichever is earlier.
Taxpayers are therefore advised to promptly furnish their bank account details, who have not provided it so far if 30 Days period is shortly going to expire to avoid disruption in business activities and the subsequent suspension of GSTIN.
1.Failure to furnish the bank account in the stipulated time: It would result into following:
a) Taxpayer Registration would get suspended after 30 days and intimation in FORM REG-31 will be issued to the Taxpayer.
b) Get the Taxpayer debarred from filing any further GSTR-1/IFF.
2.Revocation of Suspension: If the taxpayer updates their bank account details in response to the intimation in FORM REG-31, the suspension will be automatically revoked.
3.Cancellation of Registration: If the bank account details are not updated even after 30 days of issuance of FORM REG-31, the registration after suspension may also be taken up for cancellation process by the Officer.
Businesses can claim input tax credit on items, like gold coins and white goods, procured for distribution to dealers upon achieving pre-specified sales targets as part of promotional schemes, a GST advance ruling authority has ruled.
The Karnataka-bench of the AAR (Authority for Advance Ruling) ruled that ITC can be availed on taxes paid for procurement of white goods or gold coins for the purpose of incentive to dealer as it is a supply.
Orient Cement Ltd had approached the AAR seeking ruling in whether ITC can be claimed on distribution of gold coins and white goods to its dealers upon achieving a specified target fixed under the scheme. The company also offers various promotional schemes “Monthly/ Quarterly Quantity Discount Scheme”, etc.
The said salespromotion scheme helps the company in achieving their sales and collection targets.
The AAR noted that the applicant is issuing these gold coins and white goods so procured as incentives as per the agreement reached between himself and the recipients. It is only issued subject to the fulfilment of certain conditions and stipulations. “Gift is something which is given without any conditions and stipulations and hence the same cannot be covered under the scope of ‘gift’,” it said.
The applicant’s obligation to issue gold coins and white goods to the dealers/ customers upon achieving the stipulated lifting of the material/purchase target during the scheme period would not be regarded as “goods disposed of by way of gift” and input tax credit would not be restricted, the AAR said in its order dated August 24.
1. CHANGES IN HSN CODES AS PER HS-2022 w.e.f 01.01.2022:
The WCO has announced the New (Seventh) edition of HSN – HS-2022 w.e.f 01.01.2022. India being party to HS Convention will also align its First Schedule of Customs Tariff Act with HS-2022. The necessary changes required were already in placed in the Finance Act, 2021.
The new HS-2022 have around 351 amendments at 6 Digit level whereas India follows 8 digit classification.
In order to ease the transition for Exporter and Import and making the co-relation between HS2021 and HS2022 at 8-digit level, Customs have provided a correlation document(at 8 digit level).
2. New amendment in GST law & rules & procedure as under w.e.f 01.01.2022:
The definition of supply to make ‘Principle of Mutuality’ redundant w.e.f 01.07.2017 retrospectively.
An explanation has also been inserted in Section 7 to provide that the person and its members or constituents shall be deemed to be treated as two separate persons and the supply of activities or transactions inter-se shall be deemed to take place from one such person to another. The amendment provided that it would have an overriding effect over the other law, so now GST shall be payable on the supplies made by the club/association to their members w.e.f 01.07.2017.
Aadhaar Authentication:
The existing registered persons are required to do Aadhaar Authentication of their registration in the following cases:
Revocation of cancellation of registration;
IGST refund on export of goods under Rule 96 of CGST Rules; or
Refund under rule89 of CGST Rules
Now ITC can be availed if it has been reflected in GSTR-2A:
It has been provided that ITC on invoice or debit note can be availed only when thedetails of such invoices/debit notes have been furnished by the supplier in its FormGSTR 1 and the same is communicated to the recipient in the manner specified in Section37oftheCGSTAct
Changes in e way bill provision:
W.e.f. 01.01.2022 the proceedings initiated u/s 129 & 130 for E-way bill violations shall be independent proceedings and closure of parallel proceedings u/s73or74. Amendment in the provision of section 129 & 130 as under:
If any deficiency has been found in E way bill then penal clause as under:
Scenario
Nature ofGoods
Amendment made by theFinanceAct2021
If the owner
Taxable Goods
Penalty equal to 200% of
comes
tax payable on such goods
forward
Exempted
Penalty2%ofthe value of
Goods
goods or Rs. 25000,
which ever is lower
If the owner
Taxable Goods
Penalty equal to50% of the
doesn’tcome
value of such goods or
forward
200%of tax payable on
such goods whichever is
higher
Exempted
Penalty5% of the value of
Goods
goods or Rs. 25000,
which ever is lower
The option provided under clause (c) in terms of allowing furnishing of security equivalent to the aforementioned liabilities remainsun changed.
Presently Sec. 129(2) provides for applying the provisions related to seizure and release of the goods given u/s 67(6) in the context of detention and seizure u/s 129. Hence the same often results in officers seeking another payment of tax/penalty in addition to the amounts provided u/s129(1). The said anomaly has been corrected by way of omitting the said sub-section(2)w.e.f.01.01.2022.
Consequential amendments have been made u/s129(3)and129(4) to grant power to the officer to pass the order imposing the penalty mentioned in the above table and also grant a hearing to the concerned person be fore passing the order.
Now GST dealer has been liable for the payment tax as per details shown in GSTR-1, if short paid then gst officer will initiate recovery proceeding against such short tax paid dealer:
The self-assessed tax has been defined to include the tax payable in respect of outward supplies furnished in Form GSTR-1, but not included in Form GSTR-3B. There fore, if a person has furnished details of outward supplies in Form GSTR-1 but has not discharged the tax liability i.e., not furnished the details of outward supplies in the GSTR-3B, then the same would qualify as self-assessed tax and recovery proceedings under section 79 of the CGST Act may be initiated by the proper officer.
Widening the scope of provisional attachment of property including bank account:
Powers are expanded to permit provisional attachment on mereinitiati on of the proceedings and that too the proceedings covered under multiple Chapters (that includes assessment, inspection, search, seizure and arrest (that will include summons), demands and recovery). i.e Chapter XII: Assessment (Section59to64), Chapter XIV: Inspection, Search, Seizure & Arrest(Section 67to72), Chapter XV: Demands & Recovery (Section73to84).
Appeal pre-deposit has been increased to 25% of penalty in the case of appeal to be filed with Appellate Authority for thedetentionofGoods/Conveyance:
The Finance Act 2021 has provided that the appeal may be filed by a taxable person against the order of detention of goods or conveyance by a proper officer only if the person has deposited 25% of penalty amount as mentioned under an order issued inSection129(3) of the CGST Act
Department can now call for the information by the gst officer:
A general power to the Commissioner to issue an order and direct any person to furnish in formation relating to any matter connected with GST with in such time, in such form, and in such manner, as may be specified therein u/s.151.
Changes in GST rate w.e.f : 01.01.2021.
From January 2022, the GST rate on fabrics will be raised to 12 percent from 5 percent, and the GST rate on garments of any value has been raised to 12 percent, compared to the previous rate of 5 percent on items priced up to Rs 1,000.
Textiles (including woven fabrics, synthetic yarn, pile fabrics, blankets, tents, accessories such as tablecloths or serviettes, rugs and tapestries) have also seen their rates raised from 5% to 12%, while footwear of any value has seen its rate raised from 5% (up to Rs 1,000/pair) to 12%.
Composite supply of works contract to Govt. Entity or Govt. Authority will be taxable @18 percent
Job Work by way of Dyeing and Printing of Textile and Textile Products will be taxable @12 percent
Exemption removed for following services–
-Pure services and composite supply of goods and services where goods constitute not more than 25 percent value, provided to a Govt. Entity or Govt. Authority
-Non-AC contract Carriage or State Carriage or metered Cabs or Auto/e-rickshaws if supplied through e-commerce operators.
Disclaimer:
This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.
CBIC, on 2nd November 2021, has issued guidelines for disallowing use of Electronic Credit Ledger under Rule 86A of the CGST Rules 2017.
The board said, doubts have been raised by the field formations on various issues pertaining to disallowing debit of input tax credit from electronic credit ledger, under Rule 86A of the Rules. Further, Hon’ble High Courts in some cases have emphasized the need for laying down guidelines for the purpose of invoking rule 86A.
The board further said, the Commissioner. or an officer authorised by him, not below the rank of Assistant commissioner, must form an opinion for disallowing debit of an amount from electronic credit ledger in respect of a registered person. only after proper application of mind considering all the facts of the case, including the nature of prima facie fraudulently availed or ineligible input tax credit and whether the same is covered under the grounds mentioned in sub-rule (l) of rule 86A’ as discussed in para 3.1.2 above; the amount of input tax credit involved; and whether disallowing such debit of electronic credit ledger of a person is necessary for restricting him from utilizing/ passing on fraudulently availed or ineligible input tax credit to protect the interests of revenue.
Rule 86A of the CGST Rules, 2017 provides that in certain circumstances, Commissioner or an officer authorised by him, on the basis of reasonable belief that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible, may not allow debit of an amount equivalent to such credit in electronic credit ledger.
The Goods and Services Tax authorities have unearthed over Rs 31,000 crore of tax fraud committed by misuse of input tax credit (ITC) provision under the Goods and Services Tax (GST) regime during the financial year 2020-21 and booked more than 7,200 cases involving fake ITC. This was stated by Union Minister of State for Finance Shri Pankaj Chaudhary in a written reply to a question in Rajya Sabha today.
Giving details, the Minister stated Input Tax Credit (ITC) fraud detected by CGST formations under Central Board of Indirect Taxes & Customs (CBIC) as following:
The Minister stated that the Government has taken many steps to prevent such frauds, such as:
Introduction of AADHAR authentication for processing of new registration application;
Facility to verify cancelled / existing registrations of the applicants seeking new registrations;
Provisions to suspend / cancel registration of taxpayers found to the adverse notice of the department;
Bulk suspension of registration by GSTN based on business intelligence and further follow up of the same by the CBIC;
Additional grounds for cancellation of registration have been introduced where there is mismatch between FORM GSTR1 and FORM GSTR 3B (Rule 21) of CGST Act, 2017, etc.;
To prevent fake dealers and shell companies to pass on fake credit, without filing their GSTR3B returns and paying taxes, a provision has been made to block furnishing of outward supply statement in FORM GSTR-1 by a taxpayer, if 2 or more GSTR 3B returns are not filed by the said taxpayer.
E-invoices have been made mandatory for all B2B transaction with turnover above Rs. 50 crore.
Generation of E-way bill by those taxpayers who have not furnished return for consecutive period of two month has been restricted.
Blocking of ITC Credit under Rule 86A of CGST Act, 2017, was introduced if the proper officer has reason to believe that ITC has been availed fraudulently.
Clarification regarding rate of tax applicable on construction services provided to a Government Entity, in relation to construction such as of a Ropeway on turnkey basis
Applicability of GST on supply of food in Anganwadis and Schools.(Circular No. 149/05/2021-GST )
Key Points:-
The CBIC vide Circular No. 149/05/2021-GST dated June 17, 2021clarified that services provided TO an educational institution by way of serving of food ( catering including mid- day meals) is EXEMPT from levy of GST irrespective of its funding from government grants or corporate donations.
Educational institutions as defined in the notification include aganwadi
Hence, No GST on Supply of Food in Anganwadis and Schools.
2. Applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity).(Circular No. 150/06/2021-GST dated June 17, 2021)
Key Points:-
It clarified that Entry 23A of notification No. 12/2017-Central Tax does NOT exempt GST on the annuity (deferred payments) paid for construction of roads.
GST is exempt on service, falling under heading 9967 (service code), by way of access to a road or a bridge on payment of annuity [entry 23A of notification No. 12/2017-Central Tax]. Heading 9967 covers “supporting services in transport” under which code 996742 covers “operation services of National Highways, State Highways, Expressways, Roads & streets; bridges and tunnel operation services”. Entry 23 of said notification exempts “service by way of access to a road or a bridge on payment of toll”. Together the entries 23 and 23A exempt access to road or bridge, whether the consideration are in the form of toll or annuity [heading 9967].
Services by way of construction of road fall under heading 9954.
This heading inter alia covers general construction services of highways, streets, roads railways, airfield runways, bridges and tunnels. Consideration for construction of road service may be paid partially upfront and partially in deferred annual payments (and may be called annuities). Said entry 23A does not apply to services falling under heading 9954 (it specifically covers heading 9967 only). Therefore, plain reading of entry 23A makes it clear that it does not cover construction of road services (falling under heading 9954), even if deferred payment is made by way of instalments (annuities).
3. GST on supply of various services by Central and State Board (such as National Board of Examination – NBE). (Circular No. 151/07/2021-GST)
Key Points:-
GST is exempt on services provided by Central or State Boards ( including the boards such as NBE) by way of conduct of examination for the students, including conduct of entrance examination for admission to educational institution [under S. No. 66 (aa) of notif No. 12/2017-CT(R)]. Therefore, GST shall NOTapply to any fee or any amount charged by such Boards for conduct of such examinations including entrance examinations.
GST is exempt on input services relating to admission to, or conduct of examination, such as online testing service, result publication, printing of notification for examination, admit card and questions papers etc, when provided to such Boards [under S. No. 66 (b) (iv) of notif No. 12/2017- CT(R)].
GST at the rate of 18% applies to other services provided by such Boards, namely of providing accreditation to an institution or to a professional ( accreditation fee or registration fee such as fee for FMGE screening test ) so as to authorise them to provide their respective services.
4. GST rate on construction services provided to a Government Entity w.r.t construction of a Ropeway on turnkey basis. (Circular No. 152/08/2021-GST)
Key Points:-
Whether services supplied to a Government Entity by way of construction such as of “a ropeway” are eligible for concessional rate of 12% GST.
It clarified that works contract service provided by way of construction such as of rope way shall fall under entry at Sl. No. 3(xii) of notification 11/2017-(CTR) and attract GST at the rate of 18%.
5. GST on milling of wheat into flour or paddy into rice for distribution by State Governments under PDS.(Circular No. 153/09/2021-GST)
Key Points:-
IT clarified that Public Distribution specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution. Hence, said entry No. 3A would apply to composite supply of milling of wheat and fortification thereof by miller, or of paddy into rice, provided that value of goods supplied in such composite supply(goods used for fortification, packing material etc) does not exceed 25% of the value of composite supply. It is a matter of fact as to whether the value of goods in such composite supply is up to 25% and requires ascertainment on case-to-case basis.
In case the supply of service by way of milling of wheat into flour or of paddy into rice, is NOT eligible for exemption under Sl. No. 3 A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 for the reason that value of goods supply in such a composite supply exceeds 25%, then the applicable GST rate would be 5% if such composite supply is provided to a registered person, being a job work service (entry No. 26 of notification No. 11/2017- Central Tax (Rate) dated June 28, 2017). Combined reading of the definition of job-work [section 2(68), 2(94), 22, 24, 25 and section 51] makes it clear that a person registered only for the purpose of deduction of tax under section 51 of the CGST Act is also a registered person for the purposes of the said entry No. 26, and thus said supply to such person is also entitled for 5% rate.
6. GST on service supplied by State Govt. to their undertakings or PSUs by way of guaranteeing loans. (Circular No. 154/09/2021-GST)
Key Points:-
Itclarified that guaranteeing of loans by Central or State Government for their undertaking or PSU is specifically EXEMPT under Entry No. 34A of Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017.
What is Entry No. 34A of Notification no. 12/2017-Central Tax (Rate) dated June 28, 2017 exempts ?
“Services supplied by Central Government, State Government, Union territory to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the banking companies and financial institutions.”
7. GST rate on laterals/parts of Sprinklers or Drip Irrigation System.(Circular No. 155/09/2021-GST)
IT clarified the intention of notifying GST rate on laterals/parts of Sprinklers or Drip Irrigation System at 6% (each CGST and SGST).
S. No.
Chapter Heading/ Sub-heading/Tariff Item
Description of Goods
CGST rate
195B
8424
Sprinklers; drip irrigation systems including laterals; mechanical sprayer
6%
The GST rate on Sprinklers or Drip Irrigation System along with their laterals/parts aregoverned by S.No. ‘195B’ under Schedule II of notification No. 1/2017- Central Tax (Rate), dated June 28, 2017 which has been inserted vide notification No. 6/2018- Central Tax (Rate), dated January 25, 2018 and reads as below:
The intention of this entry has been to cover laterals (pipes to be used solely with with p irrigation system) and such parts that are suitable for use solely or principally with ‘sprinklers or drip irrigation system’, as classifiable under heading 8424 as per Note 2 (b) to Section XVI to the HSN. Hence, laterals/parts to be used solely or principally with sprinklers or drip irrigation systems, which are classifiable under heading 8424, would attract a GST of 12%, even if supplied separately. However, any part of general use, which gets classified in a heading other than 8424, in terms of Section Note and Chapter Notes to HSN, shall attract GST as applicable to the respective heading.
All Circulars 7 GST Circulars as mentioned below
Applicability of GST on supply of food in Anganwadis and Schools
BIO of Author:-CA JAYPRAKASH PANDEYThe author, CA Jayprakash Pandey is a practicing Chartered Accountant (Founder of Jayprakash P & Company) having Office at Mumbai, with more than 5 years of professional cum practical experience, Direct Tax, International Taxation, Indirect Tax & FEMA related advisory, litigation & compliance matters.
Disclaimer:
The purpose of this is to share knowledge and it is for education purpose only. This does NOT constitute NOR does this form part of neither it is to be construed as, A LEGAL OPINION. The analysis is solely based on the reading abilities of the Author. They may be correct/incorrect as per you. No representation or warranty, express or implied, is made or given in respect of any information provided. UNDER NO circumstances should any recipient rely on this communication as a basis for any legal decision. The views expressed are of personal to the author. They do not reflect the views of any organization he may be directly/indirectly associated with. Neither author nor any of its affiliates accepts any legal liability, or responsibility, for, or provides any assurance or guarantee of accuracy, authenticity, completeness, correctness, dependability, reliability, suitability or timeliness of, any part of this article. The contents of this article are based only on the understanding of the Law, Rules, Notifications, etc. of the author and THEY ARE NOT BASIS FOR ANY LEGAL OPINION.
1.) Man Arrested for Fraudulently Availing ITC of More Than Rs. 69 Crore :
The Directorate General of GST Intelligence (DGGI) Gurugram Zonal Unit (GZU), Haryana has arrested one Shri Surender Kumar Gupta resident of New Delhi on charges of availing and passing on fake input tax credit by way of receipt/issuance of invoices without any actual supply of goods or services.
It is apparent from the investigation conducted till date, that Shri Surender Kumar Gupta, Director of M/s. Mystic Exim Pvt. Ltd., M/s. Landmark Traders Pvt. Ltd. and Controller of M/s. JKM Impex forged documents to show receipt of goods in his above mentioned companies/firms from multiple fictitious/non-existent entities, which never existed at their given addresses. The entities of Shri Surender Kumar Gupta had further passed on the fake ITC to multiple exporter firms, who had further encashed such ITC through fraudulent IGST refunds.
The investigation spanned multiple locations in Delhi/Gurugram and based on documentary evidence and statement recorded, it was ascertained that Shri Surender Kumar Gupta is a key person in orchestrating this racket of availing fake ITC.
Accordingly, Shri Surender Kumar Gupta was arrested on 05/02/2021 and produced before Duty Magistrate, Tihar Complex, New Delhi, who ordered judicial custody. From the investigations conducted till date, it appears that the total value of goods involved in the subject transactions is more than Rs. 600 crore and the total fake ITC availed by entities of the accused is more than Rs. 69 crore.
Further investigations in the matter are under progress.
2.) DGGI Gurugram arrests man for fraudulently availing input tax credit of Rs 376 crore through 7 fake firms :
The Directorate General of GST Intelligence (DGGI) Gurugram Zonal Unit (GZU), Haryana, has arrested Shri Ritesh Aggarwal, resident of Bahadurgarh, Haryana on charges of passing and availment of fake ITC while operating dummy, fake and non existent firms and encashing this unduly availed input tax credit (ITC) through IGST refund mode by showing export of cigarettes.
It became apparent from the investigation that Shri Ritesh Aggarwal, the proprietor of M/s SR Impex was de facto controller of another firm — M/s SR International. In the supply chain of these firm were found to be six other dummy firms by the names of M/s Joles Trading Co, AS Traders, AR Traders, Om Traders, Capital India & S.M enterprises — all controlled by Shri Ritesh Agarwal. In all these firms, Shri Ritesh Aggarwal had availed and passed on ITC of Rs. 376 crore by means of billing without goods. Shri Ritesh Aggarwal was sanctioned refund of Rs. 37.13 crore from the department.
In addition, Shri Ritesh Aggarwal was found to be a habitual offender. In an earlier case also Show Cause Notice for demand of Rs 26.53 crore was issued to him for similar modus operandi of operating fake firm, M/s SS & Co. (GSTIN 06DJUPD5067G2ZW) and availing and passing on fake ITC.
Further, Shri Ritesh Aggarwal, who also adopts the alias of Ravi Gupta, was found to be accused in the Show Cause notice dated 01.03.2019 issued by the DGRI wherein fraudulent drawback was availed on imported areca nuts by forging the Certificate of Origins.
The investigation spanned multiple locations in Delhi and Haryana and based on documentary evidence and statement recorded of many suppliers of these firms, it was ascertained that Shri Ritesh Aggarwal is a key person in orchestrating this racket of making fake/non- existent/dummy firms and wrongly availment and passing on on ITC of Rs. 376 crore. Accordingly, Shri Ritesh Aggarwal was arrested on 09.02.2021 and produced before Duty MM, Patiala House Court Delhi, who ordered judicial custody.
Further investigations in the matter are under progress.
Analysis of Proposed Amendments in Union Budget 2021-22
The Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman presented the Union Budget 2021-22 in Parliament today, which is the first budget of this new decade and also a digital one in the backdrop of unprecedented COVID-19 crisis. Laying a vision for Aatma Nirbhar Bharat, she said this is an expression of 130 crore Indians who have full confidence in their capabilities and skills. She said that Budget proposals will further strengthen the Sankalp of Nation First, Doubling Farmer’s Income, Strong Infrastructure, Healthy India, Good Governance, Opportunities for youth, Education for All, Women Empowerment, and Inclusive Development among others.
Union Budget 2021-22 has also come with a lot of amendments in Income Tax Act, GST Act, Companies Act etc. to strengthen the taxation policy and to promote Ease of Compliance among taxpayers.
So here the analysis of proposed amendments in Union Budget 2021-22 by the GBC Group. To download the PDF file, Please Click Here
Budget 2021: Alarming Situation for Taxpayers Registered under GST
With the insertion of Clause(aa) in Section 16(2) of the CGST Act by the Finance Act, 2021, now it is clear that Input Tax Credit (ITC) claimed on the basis of invoices which are not uploaded by the supplier in his GSTR-1, is required to be reversed and tax/interest/penalty has to be paid under section 73(5) of the CGST Act.
However, this amendment is not as per the basic principle of law which is formed for seamless flow of credit; so section 16(2)(aa) of the CGST Act and its similar Rule 36(4) of the CGST Rules are in contravention of GST Act as well as the Indian Constitution, but we have to accept these provisions and have to pay tax/ interest/ penalty as per the amended provisions of law.
What We have to Do to Avoid Tax/ Interest/ Penalty
We all know that we can’t do anything except paying tax/ interest/ penalty or filing appeal to the appellate authority or recover tax amount from supplier, if we have availed ITC up-to F.Y. 2018-19 on the basis of invoices which are not uploaded by the supplier in his GSTR-1 (only if this section will be inserted retrospectively). But we can take actions on invoices which are related to F.Y. 2019-20 and up-to this month of F.Y. 2020-21.
To Avoid Extra Payment in F.Y. 2019-20 and 2020-21:
Reconcile ITC as claimed in GSTR-3B and as populated in GSTR-2A of relevant F.Y. and contact suppliers to upload invoices in their GSTR-1, so that you will be eligible to avail ITC as per Section 16(2)(aa),
If payment is already made to the l supplier for invoice which is not uploaded by him in his GSTR-1 and he is not ready to upload that invoice in GSTR-1 of upcoming months, deduct the amount of GST from payment to be made to him in future so that you can recover the amount of ITC from the supplier.
Thanks for Reading Write-up on “Budget 2021: Alarming Situation for Taxpayers Registered under GST”
Reconciliation Between Books and GST Portal and Adjustments in GSTR-9 Annual Return
As we know that Reconciliation is most important part of GST. Without Reconciliation between Books and Portal, we can not determine how much tax is required to be paid/ how much ITC is required to be claimed in next year’s returns. Reconciliation also enable us to make proper adjustments in relevant tables of GSTR-9.
To ease our Reconciliation process, I have prepared two examples which will guide us about how to reconcile books with GST Portal and also how to make relevant adjustments in GSTR-9. Examples can be downloaded by clicking below hyperlinks :
There is one more point in Example-1 which is mentioned below :
If you have applied for refund of overpaid output tax then write off only in the year in which refund rejected, otherwise this amount will be adjusted from refund received.
Thanks for Reading my write-up on “Reconciliation Between Books and GST Portal and Adjustments in GSTR-9 Annual Return”
Gujarat High Court Issues Notice to CBIC for Rule 86B of the CGST Rules
Rule 86B of the CGST Rules has been challenged in Gujarat High Court in the case of AAP and Co. v/s Union of India. This has been challenged by Advocate Mr. Avinash Poddar and notice has been issued to CBIC (respondent) returnable on 24th February, 2021.
This rule is applicable to registered persons having taxable value of supply (other than exempt supply and zero-rated supply) in a month which is more than Rs. 50 lakh. The limit has to be checked every month before filing each return. As per this rule, registered taxpayers cannot use ITC in excess of 99% of output tax liability (i.e. they have to pay 1% in cash).
GST : CA Arrested for Fraudulently Passing on Fake ITC of Rs. 14.30 Crore
In the ongoing campaign against fake/bogus invoices and resultant availment of inadmissible ITC, officers of Central Goods and Service Tax (CGST) Commissionerate, Delhi (East) have detected a case of issue of fake bills of Rs. 79.5 crore (approx). The syndicate was being operated by Sh. Nitin Jain, C.A by floating three firms i.e M/s Anshika Metals, M/s N.J Trading Co. and M/s A.J Enterprises using the identity of his family members, with the intent of passing of inadmissible ITC. Sh. Nitin Jain, C.A through these firms has passed on fake ITC of Rs. 14.30 crore. All the e-way bills generated to transport the goods were also found fictitious. Sh. Nitin Jain, C.A who was absconding since 16.12.2020 finally appeared before the investigating officers on 13.01.2021 and in his statement accepted that he has floated three fictitious firms using identity of his father Sh. Naresh Chand Jain and his wife Mrs. Diksha Jain for the purpose of availing and passing of fake ITC.
Significantly, in two earlier cases of fake billing detected by the Delhi East Commissionerate in which Sh. Sachin Mittal and Sh. Dinesh Jain were found involved in issue of bogus invoices and had passed fake ITC of Rs. 12 crore and Rs. 13.98 crore respectively through their firms had in their statements also revealed the name of Sh. Nitin Jain, C.A and stated that he had arranged/provided them fake bills/invoices of different firms on commission basis.
Sh. Nitin Jain by using fake entities on the identity of his family members has knowingly committed offences under Section 132(1)(b) and 132(1)(c) of the CGST Act,2017 as amended vide Section -127 of the Finance Act’2020, which are cognisable and non-bailable offences as per the provisions of Section 132(5) and punishable under clause (i) of the sub section (1) of Section 132 of the Act ibid.
Sh. Nitin Jain, C.A has been arrested under Section 69(1) of the CGST Act’2017 and produced before the Duty Magistrate. He has been remanded in judicial custody of 14 days upto 27.01.2021 by the Duty Magistrate. Further investigation in this case is under progress.
The consolidated amount of detection under fake invoices for the current year is Rs. 3684.46 crore and the total number of arrests for the Zone is 18.
On 29th Jan 2021, outside CGST Office in Each District/City of Whole India
To, Respected All Tax Consultant Associations, All Trade Bodies and Professional Associations All Consultants, Professionals – CA, CMA, CS, Advocates
In recent past, All professionals and Trade is suffering a lot, due to – Frequent Changes in Law, Complex Portal, Unstable GST and Forced to work on Sundays as well. Government is neither listening to representations submitted by various associations, nor listening to court direction in true spirit. In Covid 19 pandemic, all professionals and Trade, ignoring life and death risk, ensured that, India will stand again, paid taxes in lakh crores but it seems government doesn’t recognize us. Therefore, there is high time that, we all should come together, stand united and come onto street, to protest against:
Rigid Approach of Government against Professionals and Trade
Unstable GST, Denial of Input Tax Credit, No Revision of GST Return allowed, Mid night rain of notifications, Excessive power to authorities for cancellation of Registration and Blocking of ITC, causing big harassment
Failed GST Portal, having numerous issues
Income Tax Utilities not made available on time and changed frequently, Extention of CFSS
अभी नहीं तो कभी नही। हमें हमारे हक़ के लिए रास्तेपे उतरना होगा।
We request all association and Trade bodies to come forward and join this All India Protest call by WMTPA, against rigid approach of Government. You have to do protest outside your regional CGST Office on 29th Jan 2021, on eve of “महात्मा गाँधी पुण्य स्मृतिदिन”.
Tax Concept is Inviting Ideas/ Suggestions/ Proposals from professionals across the country, so that we can submit these suggestions etc. to the Ministry of Finance on behalf of the Professional Community for the Union Budget 2021-22. The last date for the same is 25th November, 2020 (11.00 PM).
To submit suggestions etc., please fill the form from the Links given below :
You can also submit your suggestions at Government’s website. To submit suggestions, Please Click Here
Your suggestions will be useful in correct implementation of the GST Act in coming years and in ease of doing business/ compliance for taxpayers and professionals.
GSTN has informed on 13th November 2020 that E-invoice details will be auto-populated in GSTR-1. The full text is as follows :
Certain notified taxpayers have to prepare and issue their invoices by obtaining Invoice Reference Number (IRN) from Invoice Registration Portal (IRP) (commonly referred as ‘e-invoices’).
Upon successful generation of IRN, details of such e-invoices will be auto-populated in respective tables of GSTR-1. The details of e-invoices available for auto-population along with status of auto-population can also be downloaded as excel file.
To effect this, certain tabs/labels are being added on GSTR-1 dashboard and screens. (Those taxpayers for whom e-invoicing is not applicable may ignore these changes.)
For the period of October, 2020, the e-invoice details would be processed incrementally from 13th November, 2020. The processing of details of e-invoices/IRNs generated till 31st October, 2020 is expected to take upto 10 days.
The processing of documents, dated in October, 2020, has no effect on filing of GSTR-1 for October. The taxpayers are advised not to wait for auto-population but file GSTR-1 for October, on their own (if not filed already). However, there is an option to download the details of October-dated documents through excel file:‘Download details from e-invoice (Excel)’ button (available at the bottom portion of GSTR-1 dashboard).
Taxpayers are requested to verify the documents present in the excel and may share feedback on GST Self Service Portal, on below aspects :
All documents reported to IRP are present in excel
Status of each e-invoice/IRN is correct
All the details of document are populated correctly
For the period of November, 2020, the e-invoices generated (i.e. the documents dated in the Month of November) will be auto-populated into GSTR-1 in incremental manner and the process for whole month will be completed by 2nd Dec, 20 (i.e. on T+2 basis).
The detailed advisory with methodology of auto-population etc. is made available on the GSTR-1 dashboard (‘e-invoice advisory’) and also e-mailed to relevant taxpayers.
GSTN has informed on 11th November 2020 that auto-populated GSTR-3B is now available on GSTN Portal from October 2020 onwards.
The full text is as follows :
GSTN has earlier introduced Form GSTR-2B, a static statement with details of ITC available for a tax period, for the benefit of taxpayers. GSTR-2B is an auto-drafted Input Tax Credit (ITC) statement generated for every recipient, on the basis of the information furnished by their suppliers, in their respective Form GSTR-1 & 5 and Form GSTR-6 filed by ISD. Click here for details.
GSTN has also introduced a facility to download pdf statement to taxpayers, who are filing monthly GSTR-1 statement, with system computed values of Table 3 of Form GSTR-3B. This PDF will be prepared on the basis of the values reported by them, in their GSTR-1 statement, for the said tax period. Click here for details.
In continuation of the return linkage project, GSTN has now introduced auto-populated Form GSTR-3B in PDF format, for benefit of the taxpayers. The auto-populated PDF of Form GSTR-3B will consist of :-
Liabilities in Table 3.1(a, b, c and e) and Table 3.2 from Form GSTR-1
Liability in Table 3.1(d) and Input Tax Credit (ITC) in Table 4 from auto-drafted ITC Statement from Form GSTR-2B.
This facility is made available in Form GSTR 3B dashboard from October 2020 tax period onwards.
This facility will become available for taxpayers who are registered as Normal taxpayer, SEZ Developer, SEZ unit and casual taxpayer.
The system generated PDF will be made available on GSTR-3B dashboard. Taxpayers will be able to access their Form GSTR-3B (PDF) through: Login to GST Portal > Returns Dashboard > Select Return period > GSTR-3B> System Generated 3B.
Two Persons Arrested for Availing and Passing Fake Input Tax Credit (ITC) Worth Rs. 520 Croresand 209 Crores
Main accused companies : M/s Sunil Hitech Engineering Ltd. and M/s Shree Oshiya Ferro Alloy Pvt. Ltd.
Mumbai Zonal Unit of the Directorate General of GST Intelligence, CBIC has arrested Mr. Sunil Ratnakar Gutte, Director of M/s. Sunil Hitech Engineering Ltd., on charges of having fraudulently availed, utilized, as well as passed on fictitious Input Tax Credit, today, 12th November 2020. The Input Tax Credit amounts to Rs. 520 Crores which has been raised on the strength of bogus invoices received and issued without any actual supply of goods or services.
As per DGGI – Mumbai Zonal Unit’s investigation it has been found that a large cartel of companies, have indulged & participated in this fraud. M/s. Sunil Hitech Engineers Ltd. had issued and received fake invoices valued at approximately Rs. 3,000 Crores, and involving ITC amounting to Rs. 520 Crores. Investigations conducted by the DGGI across the country have revealed that the beneficiaries of these bogus invoices are located in all parts of the country, including New Delhi, Hyderabad, Ludhiana, Gurugram, Meerut, Ahmedabad, Kolkata, etc. The investigations have revealed that M/s. Sunil Hitech Engineers Ltd. is one of the key operators involved in the fake ITC cartels throughout India.
In a parallel operation, the DGGI – Mumbai Zonal Unit also arrested Mr. Vijendra Vijayraj Ranka, Director of M/s. Shree Oshiya Ferro Alloy Pvt. Ltd. In pursuance of an on-going investigation, the DGGI – Mumbai Zonal Unit unearthed the bogus transactions being conducted by M/s. Shree Oshiya Ferro Alloy Pvt. Ltd. Subsequent enquiries revealed that M/s. Shree Oshiya Ferro Alloy Pvt. Ltd. had fraudulently issued as well as received bogus invoices without actual supply or receipt of any goods or service to the tune of Rs. 1371 Crores, involving ITC amounting to Rs. 209 Crores. It was also revealed that M/s. Shree Oshiya Ferro Alloy Pvt. Ltd. had made substantial supplies to M/s. Sunil Hitech Engineers Ltd.
These bogus transactions were used not just for generating bogus input tax credit, but also for artificially inflating their turnover so as to gain higher credit limit and bank loans, and also to siphon off funds.
As per Section 132 of the CGST Act 2017, issuance of an invoice or bill without supply of goods or services and wrongful availing or utilisation of Input Tax Credit on a bill/invoice without any supply of goods or services is a cognizable and non-bailable offence.
In light of the massive scale of the frauds committed by M/s. Sunil Hitech Engineers Ltd. and M/s. Shree Oshiya Ferro Alloy Pvt. Ltd., the Directors were arrested under the provisions of Section 69 (1) of the Central Goods and Services Act, 2017 for committing offences under Section 132 (1) (b) and Section 132 (1) (c) of the said Act, and were produced before the High Court. Both the accused have been remanded to judicial custody.
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GST Officials Can Not Resort to Physical Violence While Conducting Search, Interrogation or Investigation : Telangana High Court
In the case of M/s Agarwal Foundries Private Ltd. vs Union Of India [Writ Petition No. 28268 of 2019], the Telangana High Court has provided its judgement, some highlighted lines of which are quoted as under :
“74. No provision of any law is cited before us by the respondents to say that they are entitled to use physical violence against persons they suspect of being guilty of tax evasion while discharging their duties under the CGST Act, 2017.
75. Merely because the authorities under the CGST Act, 2017 are not to be treated as police officials, they cannot claim any immunity if they indulge in acts of physical violence against persons they suspect of being guilty of tax evasion.
76. After India adopted the Constitution of India, protection against torture by State actors has been recognized as part of right to life and liberty guaranteed by Art.21 of the Constitution of India.”
The court also said that the possibility of the use of violence by officials against the petitioners and the other employees cannot be entirely ruled out.
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GSTN Portal Started Showing Annual Aggregate Turnover for Previous Financial Year
Recently, GSTN has launched many new features on GSTN portal. One of its feature is that GSTN portal is now showing aggregate annual turnover for previous F.Y. after logging in to portal. The screenshot of which is attached here :
The methodology to calculate aggregate annual turnover is as under (as prescribed by GSTN Portal) :
1. Calculation of Number of GSTR- 3B eligible or liable to filed
a) Scenario- 1: As on date Active Taxpayer – and was not in composition in 2019-2020
i. All tax payers who got registered on or before 31st March 2020 are being considered.
ii. If Migrated tax payer or registered on or before 30th April 2020; number of GSTR- 3B eligible or liable to be filed is fixed as 12.
iii. If new tax payers registered after 30th April 2020 then number of GSTR- 3B eligible or liable to be filed is months between 31st March 2020 and date of registration.
b) Scenario- 2: As on date Cancelled Taxpayer – and was not in composition in 2019-2020.
i. All tax payers who got registered on or before 31st March 2020 are being considered.
ii. Derived the cancellation w.e.f. date and the tax payers who got cancelled after 01st April 2019 are considered.
iii. If cancellation w.e.f. date is beyond 31st March 2020 then cancellation w.e.f. date is considered as 31st March 2020 for calculation purpose.
iv. If cancellation w.e.f. date is 1st day of the month then cancellation w.e.f. date is fixed as last day of previous months for calculation purpose.
v. If migrated tax payers or registered before 01st April 2019 then number of GSTR- 3B eligible or liable to be filed is months between cancellation w.e.f. date and 01st April 2019.
vi. If new tax payer registered during 2019-2020 then number of GSTR- 3B eligible or liable to be filed is months between cancellation w.e.f. date and date of registration.
c) Scenario- 3: As on date Active Taxpayer and was in Composition scheme for some time in 2019-2020 and opted out (withdrew) from Composition Scheme during 2019-20.
i. All taxpayers who got registered on or before 31st March 2020 are being considered.
ii. Number of GSTR- 3B eligible or liable to be filed is months between 31st March 2020 and date of Opt-out/Withdrawal from Composition scheme.
d) Scenario- 4: As on date Cancelled Taxpayer and was in Composition scheme for some time in 2019-2020 and opted out (withdrew) from Composition Scheme during 2019-2020.
i. All taxpayers who got registered on or before 31st March 2020 are being considered.
ii. Derived the cancellation w.e.f. date and the tax payers who got cancelled after 01st April 2019 are considered.
iii. If cancellation w.e.f. date is beyond 31st March 2020 then cancellation w.e.f. date is considered as 31st March 2020 for calculation purpose.
iv. If cancellation w.e.f. date is 1st day of the month then cancellation w.e.f. date is fixed as last day of previous months for calculation purpose.
v. Number of GSTR- 3B eligible or liable to be filed is months between cancellation w.e.f date and Opt-out/Withdrawal date from Composition Scheme.
NOTE: If month between comes out to be in fraction, we consider next the highest integer. (For e.g. 2020-03-31 and 2019-09-28 comes to 6.09 we consider it as 7).
2. Calculation of Number of CMP-08 eligible or liable to be filed
a) Scenario- 1: As on date Active Taxpayer – and was in composition for full year 2019-2020
i. All taxpayers who got registered on or before 31st March 2020 are being considered.
ii. Number of CMP-08 eligible or liable to be filed is months between 31st March 2020 and composition start date.
b) Scenario- 2: As on date Cancelled Taxpayer – and was in composition for full year 2019-2020
i. All taxpayers who got registered on or before 31st March 2020 are being considered.
ii. Derived the cancellation w.e.f. date and the taxpayers who got cancelled after 01st April 2019 are considered.
iii. If cancellation w.e.f. date is beyond 31st March 2020 then cancellation w.e.f. date is considered as 31st March 2020 for calculation purpose.
iv. If cancellation w.e.f. date is 1st day of the months then cancellation w.e.f. date is fixed as last day of previous months for calculation purpose
iv. Number of CMP-08 eligible or liable to be filed is months between cancellation w.e.f date and composition start date.
c) Scenario- 3: As on date Active Taxpayer and was in Composition scheme for some time in 2019-2020 and opted out (withdrew) from Composition Scheme during 2019-20.
i. All taxpayers who got registered on or before 31st March 2020 are being considered.
ii. Number of CMP-08 eligible or liable to be filed is months between date of Opt-out/Withdrawal from Composition scheme and composition start date.
d) Scenario- 4: As on date Cancelled Taxpayer and was in Composition scheme for some time in 2019-2020 and opted out (withdrew) from Composition Scheme during 2019-20.
i. All tax payers who got registered on or before 31st March 2020 are being considered.
ii. Derived the cancellation w.e.f. date and the tax payers who got cancelled after 01st April 2019 are considered.
iii. If cancellation w.e.f. date is beyond 31st March 2020 then cancellation w.e.f. date is considered as 31st March 2020 for calculation purpose.
iv. If cancellation w.e.f. date is 1st day of the month then cancellation w.e.f. date is fixed as last day of previous months for calculation purpose.
v. If cancellation w.e.f. date is prior to Opt-out/Withdrawal date from Composition then number of CMP-08 eligible or liable to be filed is months between cancellation w.e.f. date and Composition Start date.
vi. If cancellation w.e.f. date is post Opt-out/Withdrawal date from Composition then number of CMP-08 eligible or liable to be filed is months between Opt-out/Withdrawal date and Composition start date.
NOTE: If month between comes out to be in fraction, we consider the next highest integer (For e.g. 2020-03-31 and 2019-09-28 comes to 6.09 we consider as 7). Further, CMP-08 being a quarterly return/statement, the output has been divided by 3.
3. Extracted GSTIN-wise Number of GSTR- 3B filed and Turnover declared in GSTR-3B
a) Number of GSTR-3B filed by the tax payer for the FY 2019-2020 and turnover declared in GSTR- 3B (Table 3.1. a, b, c, e) have been calculated.
4. Extracted GSTIN- wise Number of CMP-08 filed and Outward supply declared in CMP-08
a) Number of CMP-08 filed by the tax payer for the FY 2019-2020 and outward supply declared in CMP-08 (Table 3, Row- 1, Column- 3 of CMP-08) have been calculated.
5. Extrapolation of Turnover at GSTIN level (for those who have not filed all the returns as per their eligibility or liability)
a) GSTIN-wise GSTR-3B turnover for FY 2019-2020 has been extrapolated by the formula:
>> Total turnover declared as per all GSTR-3B filed / No. of GSTR-3B filed) X No. of GSTR-3B eligible or liable to be filed
b) GSTIN-wise CMP-08 outward supply has been extrapolated by the formula:
>> Total outward supply declared as per all CMP-08 filed / No. of CMP-08 filed) X No. of CMP- 08 eligible or liable to be filed
c) Added both the values of S. No. 5(a) and S. No. 5(b).
(Note: For those taxpayers who have filed all the returns as per their respective eligibilities, value of S. No. 5(c) will be the actual turnover)
6. Aggregation of extrapolated turnover at PAN level or Annual Aggregate Turnover
a) Resultant values as per S.No. 5(c) are aggregated or rolled up at PAN level to arrive at the Annual Aggregate Turnover.
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Based upon specific intelligence, the officers of the Anti Evasion branch of Central Goods and Service Tax (CGST), Commissionerate, Delhi (East) have busted a major racket for the generation of huge inadmissible input tax credit (ITC) through fake billing of Rs 1,278 crore (approx).
The well-established syndicate was being operated by floating seven different fake firms with the intent of passing of inadmissible credit to the tune of Rs 137 crores (approx). Searches were conducted over more than nine places spread over different locations in the state of Delhi and Haryana to identify the taxpayers, who were defrauding the Government of its legitimate taxes.
The modus operandi of the fraudulent taxpayers includes bogus invoices/ bills creation, without actual movement of goods. All the e-way bills generated to transport the goods were fake.
The mastermind of the entire racket Shri Ashish Aggarwal has been arrested under Section 132 of the CGST Act on 29.10.2020 and has been remanded to the transit judicial custody by the duty Metropolitan Magistrate till the hearing of regular judicial remand application by the CJM Patiala House Court. The accused kingpin of this fake billing racket has been absconding for more than 60 days and after intense coordinated efforts of the officers of the Anti Evasion branch, his presence was secured to record the statement, wherein he admitted his guilt and was arrested subsequently.
The primary beneficiary firm of this bogus billing network, was M/s Maya Impex, which has been registered in the name of Shri Ashish Aggarwal’s 66 years old mother through which fake ITC of Rs 77 crore has been passed on.
Shri Ashish Aggarwal knowingly committed offences under Section 132(1)(b) and 132(1)(c) of the CGST Act, 2017 which are cognizable and non-bailable offences as per the provisions of Section 132(5) and punishable under clause (i) of the sub section (1) of Section 132 of the Act ibid.
The fake billing operation was primarily engaged in generating and passing of fake ITC primarily to the milk products industry. Bogus invoices were raised against the fictitious sale of milk products such as ghee, milk powder, etc.
It is pertinent to mention here that apart from the other number of distinct companies, major brands like M/s Milk Food Ltd. was one of the major beneficiaries of this inadmissible credit. During the course of search operations, a huge quantum of incriminating documents pertaining to this racket was recovered.
So far the inadmissible input tax credit of more than Rs. 7 crores has been recovered and further investigations are underway to expose the other fictitious billing entities associated with this syndicate, who have defrauded the exchequer.
Source : Posted by PIB India on 29th October, 2020
Thanks for Reading Our Article on “Mastermind Arrested for Availing Fake Input Tax Credit (ITC) Worth Rs 1278 Crore”
Planning for Indirect Taxes is an effective way to reduce Cash Payouts for taxes, avoid outflow for Penalties and Interests and to Prevent Litigations and its related expenditure. Given below are few aspects to foster a robust Indirect Tax Planning and thereby benefiting the organization in terms of cost-saving and timely adherence to compliances.
The goods / service should be classified under the appropriate HSN code and accordingly the correct rate of tax to be applied and paid.
Example: Classification of Sanitizers under Chapter 87 or Chapter 63 attracting GST rate of 18% or 12% respectively.
(ii.) Erroneous calculation of tax amount:
A maker-checker policy would definitely prove useful to prevent such avoidable errors.
Example: Omitting to consider invoices for availment of input tax credit.
(iii.) Incorrect GSTIN:
Organizations having multiple GSTIN’s under one PAN can erroneously enter incorrect GSTIN while paying taxes.
(iv.) Timely reconciliation of Inward supply invoices:
(a) There may be invoices appearing in GSTR 2B uploaded by the supplier but the same are not booked in the accounts because of various reasons. A vendor-wise reconciliation would benefit to understand availment of pending credits.
(b) Delay in booking of invoices especially where credit is lost due to lapse of time limit to avail credit.
(2.) Penalties and Interests:
(i.) Late filing of GST Returns (GSTR-1 / GSTR-3B/GSTR-9/GSTR-9C):
Non – filing of return attracts a penalty of Rs. 200 (CGST+SGST) per day during which the failure continues, subject to a maximum of INR 5,000 (other than annual return) and maximum of quarter percent of the state level turnover (for annual return). Example: Inadvertent missing to file return of newly added state or delay in filing Annual return. Additionally, interest at the appropriate rate is payable on delayed filing of returns.
(ii.) E-way Bill Compliance:
Treating the e-way bill as merely a ‘procedural’ requirement can have perilous consequences. Non-filing of E-way Bill attracts a penalty of Rs.10, 000/- or tax sought to be evaded (whichever is greater). Example is the penalty (of ~Rs. 1.32 crore) levied for noncompliance in the case of Gati Kintetsu Express Private Ltd (Madhya Pradesh High Court).
(iii.) E-Invoicing:
If an invoice is not registered on the IRP (Invoice Reference Portal), then such an invoice would not be treated as a valid tax invoice for all GST related matters and would attract a penalty of ₹10,000 for each instance of non-compliance.
(3.) Prevent Litigations:
(i.) Obtaining Advance Ruling:
Attaining an Advance Ruling provides certainty in tax liability for an activity undertaken or proposed to be undertaken and hence avoids litigation as the same is binding on the assessee and the Government authorities.
(ii.) Being updated on Case Laws:
Staying updated on case laws will help confirm on the organizations tax position.
Thanks for Reading Article on “Indirect Tax Planning and Management”
Disclaimer : IN NO EVENT THE AUTHOR SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM OR ARISING OUT OF OR IN CONNECTION WITH THE USE OF THIS INFORMATION.
CA Final Student Creates 115 Fake Companies and Availed Fake ITC worth Rs 50 Crore
Prince Manish Khatri, a CA final student was arrested by CGST-II, Vadodara for claiming fake Input Tax Credit (ITC) of Rs. 50.24 Crore by creating 115 fake companies.
According to GST officials, Manish Khatri used identities of villagers to create fake companies and pass on fake ITC. He had promised villagers a monthly payment of cash.
Here, it is important to mention the provisions of Section 132(1) of the CGST Act, 2017 which provides that if anyone commits any of the following offences namely :
(a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;
(b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;
(c) “avails input tax credit using such invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;”
(d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;
(e) evades tax, or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d);
(f) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act;
(g) obstructs or prevents any officer in the discharge of his duties under this Act;
(h) acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder;
(i) receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder;
(j) tampers with or destroys any material evidence or documents;
(k) fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or
(l) attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section,
shall be punishable––
(i) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine;
(ii) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years and with fine;
(iii) in the case of any other offence where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds one hundred lakh rupees but does not exceed two hundred lakh rupees, with imprisonment for a term which may extend to one year and with fine;
(iv) in cases where he commits or abets the commission of an offence specified in clause (f) or clause (g) or clause (j), he shall be punishable with imprisonment for a term which may extend to six months or with fine or with both.
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Upcoming GSTR-1 Due Dates for Quarterly and Monthly Regular Taxpayers
Vide Notification No. 74/2020- Central Tax and 75/2020- Central Tax (Dated 15.10.2020), the CBIC has prescribed due dates for filing GSTR-1 by quarterly and monthly regular taxpayers under the GST Act.
GSTR-1 Due Dates for quarterly regular taxpayers :
Quarter
Due Date
October, 2020 – December, 2020
13th January, 2021
January, 2021 – March, 2021
13th April, 2021
GSTR-1 Due Dates for monthly regular taxpayers :
Month
Due Date
October, 2020
11th November, 2020
November, 2020
11th December, 2020
December, 2020
11th January, 2021
January, 2021
11th February, 2021
February, 2021
11th March, 2021
March, 2021
11th April, 2021
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Subject : To attract your kind attention on Serious Issues regarding GST
Hon’ble Sir,
GST was introduced in India to simplify the Indirect Tax Structure and to promote Ease of Doing Business. Indian business houses appreciated you for this step and had a lot of expectations from GST. GST was a new initiative of Indirect Tax Reforms.
Government said in 2017 that Indirect Tax structure is very complicated and this needs reforms. But today’s time of GST is saying that GST has made Indirect Tax structure more complicated due to several reasons.
We are here explaining those problems which businesses and professionals are facing due to wrong implementation of GST :
(1.) No opportunity to correct the mistakes committed in regular GST returns :
A lot of problems in GST are due to the reason that the government has not provided any opportunity to correct the mistakes which were committed by the businesses during filing of regular GST returns like GSTR-3B etc.
In previous Indirect Taxation system, there was opportunity to amend the returns filed and even Income Tax Department is also providing opportunity to correct the mistakes by amending filed returns. But why there is no option to amend filed returns in GST? You may note that without correcting GST returns, even annual return can not help tax authorities and all assessment will be done by issuing a lot of notices and this will be against the policy of Ease of Doing Business.
Some taxpayers paid GST tax under wrong head or some claimed GST under wrong head. However GST tax has been reached to government but either they have to reverse or to paid tax with interest because they have not any opportunity to amend the GST returns.
So your good self are kindly requested to provide an opportunity to amend the GST returns with retrospective effect.
(2.) Is GST for collecting Late Fees only?
GST was a new tax system for Indian business houses and professionals, so it is implied that they required some time to read and understand it. But in GST, late fees for late filing of GST returns is huge from starting, so businesses faced and facing huge GST late fees burden. Even late fees is more than tax liability in some cases.
Sometimes the delay in filing GST returns is due to that GSTN portal is not working effectively specially on last dates but the GSTN has not accepted the fact that the portal is committing mistakes and not working effectively. We are attaching screenshots of GSTN portal to let you know about some mistakes which GSTN has not corrected till date :
Due date for quarterly GSTR-1 is “the last day of month succeeding the month ending quarter” but for the quarter July- September, 2020, GST portal is showing due date as 11.10.2020 whereas actual due date of the same is 31.10.2020.
(3.) Notifying rules which are overriding GST Act and even Indian Constitution :
Vide Notification No. 49/2019- Central Tax (09.10.2019) CBIC has inserted new rule 36(4) under the CGST Rules, 2017 and capped the maximum ITC to 120% of invoices uploaded by supplier in his GSTR-1 which was reduced to 110% in 38thGST council meeting held on 18.12.2019.
If we refer the CGST Act, 2017, we can understand that the power to insert Rule 36(4) is coming from Section 43A of the CGST Act, 2017 and the said section is not notified till date. So if the section of any act is not notified then how the rule is notified and implemented? This is against the Article 265 of the Indian Constitution which says that “Rules and Circulars can not override Act”.
The question is that why our lawmakers are not following the law? Please look into this and direct them to notify rules etc. which have a legal validity.
Due to technical mistakes of taxpayers they have not claimed the ITC of previous years but Section 16(4) of the CGST Act, 2017 is restricting them to avail the said ITC whereas the seller who sold goods to them has paid the tax to government. So when the government has received the tax paid by buyer to seller then why the buyer is not allowed to take ITC of the same? This will result in double taxation.
Hon’ble sir, by mentioning these issues, our team has tried to attract your kind attention on some serious matters of GST.
So your good self are kindly requested to look into these matters and to provide solutions for the same.
Is Blocking of ITC on Non-Filing of GSTR-3B by Supplier Correct??
The government has inserted Rule 86A in the CGST Rules, 2017 vide Notification No. 75/2019- Central Tax dated 26.12.2019
This rule lays down the conditions for availment of Input Tax Credit (ITC) by a taxpayer. One of the condition prescribed in this rule states that “ITC will not be available on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government.”
It means if a supplier has not filed his GSTR-3B return then corresponding ITC will not be available to the buyer as per Rule 86A of the CGST Rules, 2017.
Now let’s try to find answer of these questions :
(1.) When the buyer has paid GST tax to the supplier then why he is restricted to avail the ITC?
(2.) Section 16(2) of the CGST Act, 2017 states that if the buyer is in possession of tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed, then he can claim ITC. But Rule 86A is restricting him to avail ITC if the said supplier has not paid tax in his GSTR-3B return.
So, here it is interesting to note that this is against Article 265 of the Constitution of India and the basic legal principle that “Rules and Circulars can not override Act”
(3.) On one side they made the law that if the invoice raised by the supplier is available in GSTR-2A of the buyer then the buyer can take ITC of that invoice but on another side, they are talking about GSTR-3B. Is it not controversial?
In support of above 2 questions, I am sharing the judgement provided by the Gujarat High Court in the case of M/s Kalpsutra Gujarat versus The Union of India. The extract of judgement is as under :
“We would like to understand from the respondents whether the omission on the part of the third party (Seller) in filing the GSTR-3B for the relevant period would be sufficient to block the Input Tax Credit of the writ applicant. We would also like to understand whether for such action, the Department has invoked Rule 86A of the Central Goods and Services Tax Rules, 2017.“
Conclusion : From the above discussion and HC judgement, we can understand that Rule 86A can not restrict a buyer from taking ITC even if the supplier has not paid tax in his GSTR-3B return, unless any action is mala-fide in nature.
Thanks for reading my thoughts on “Is Blocking of ITC on Non-Filing of GSTR-3B by Supplier Correct??”
The author is Dhanraj Sharma and he can be reached at dhanrajca66@gmail.com
In this article, i will discuss the decisions made by the government on Availment of ITC and will correlate with the financial position of taxpayers and Indian Constitution. So let’s start.
On 9th October, 2019, the government inserted Rule 36(4) in the CGST Rules, 2017 by Notification No. 49/2019- Central Tax which prescribes that : “(4) Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37, shall not exceed 20 per cent. of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37.”
From the above, we can understand that if we purchase goods in December, 2019 and paid CGST of Rs. 50,000 and SGST of Rs. 50,000 but corresponding suppliers uploaded invoices worth CGST Rs. 10,000 and SGST Rs. 10,000 in their GSTR-1.
Then in this case, the maximum ITC which we can claim in our GSTR-3B return is CGST Rs. 12,000 and SGST Rs. 12,000.
Amendment in Rule 36(4) : By issuing Notification No. 75/2019- Central Tax on 26th December, 2019, ITC availment ratio has been reduced from 20% to 10%.
If we take above example in amended case, then ITC available for the purchaser is CGST Rs. 11,000 and SGST Rs. 11,000.
Now let’s correlate it with the GST Act and Indian Constitution :
The validity of this rule will be questioned for the following reasons : (1.) If the power to make this rule comes from Section 43A of the CGST Act, 2017, then Rule 36(4) is invalid because Section 43A is non-operational. Also this is against Article 265 of the Constitution of India and the basic legal principle that “Rules and Circulars can not override Act”
Abhishek Rastogi, partner at Khaitan & Co., said the restriction on credits due to the fault of the vendors will have to cross the constitutional test.
It will be more in detail, if we understand it with the decreasing financial position of the taxpayers :
M S Mani, partner at consultants Deloitte India, said the restrictions on ITC increase the blockages of working capital.
Harpreet Singh, partner at consultancy KPMG says that it is imperative for businesses to ensure timely credit reconciliation, including follow-up with vendors, timely correction and maintaining of adequate date for the said compliance. Wherever proper reconciliations are not done, it may lead to cash flow issues,” he said.
Conclusion : When Rule 36(4) is against the Indian Constitution and even the GST Act itself, then :
(1.) Why government has introduced it?
(2.) Is it introduced by the government to increase its revenue under the guise of law?
If you have any suggestion, please let me know in comment section.
HC Accepts Writ Petition on Blocking of ITC due to Non Filing of GSTR-3B
Petitioner: M/s Kalpsutra Gujarat
Respondent: The Union of India
Issue Involved: Blocking of ITC due to non filing of GSTR-3B
Case Description:
By this writ application under Article 226 of the Constitution of India, the writ applicant, a partnership firm through one of its partners has prayed for the following prayers:
“(A) Your Lordships be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus, or any other appropriate writ, direction or order, striking down Rule 86A of Central Goods and Services Tax Rules, 2017, in so far as it gives power to block the Input Tax Credit at no fault of the registered recipient and declare it ultra vires of Section 16 of the CGST Act, 2017.
(B) Your Lordships be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus, or any other appropriate writ, direction or order, to the respondents to allow petitioner to utilize the Input Tax Credit until it is proved that the supplier did not pay the tax after following up the provision of CGST Rules, 2017;
(C) Pending hearing and final disposal of the present petition, Your Lordships may be pleased to direct or order to allow the Petitioner to utilize Input Tax Credit of Rs. 3,50,868/- and grant stay against the recovery of Input Tax Credit of Rs. 7,01,735/- vide letter dated 20.03.2020 (Annexure-J);
(D) An ex-parte ad-interim relief in terms of prayer “C” above may kindly be granted;
(E) Any other further relief as may be deemed fit in the facts and circumstances of the case please be granted;”
Having heard Mr. Dhawal Shah, the learned counsel appearing for the writ applicant and having gone through the material on record, for the present, we are inclined to issue notice to the respondents with respect to the reliefs prayed in the draft amendment and paras-8(B) and 8(C) of the main petition.
Let notice be issued to the respondents returnable on 14th September 2020. Mr. Dhawal Shah shall furnish one set of his entire paper book including the draft amendment to Mr. Devang Vyas, learned Additional Solicitor General of India. We would like to understand from the respondents whether the omission on the part of the third party (Seller) in filing the GSTR-3B for the relevant period would be sufficient to block the Input Tax Credit of the writ applicant. We would also like to understand whether for such action, the Department has invoked Rule 86A of the Central Goods and Services Tax Rules, 2017.
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