FINANCE BILL: AMENDMENTS IN ITC UNDER GST
Finance Bill 2022 has proposed many changes in CGST Act,2017. The Major changes pertain to provisions relating to Input Tax credit making it more restrictive. Let us discuss the change in provision in this article
I. Communication of Details of Inward Supplies and ITC (Clause 103 of Finance Bill, 2022)
Sub-section(1) seeks to empower the Central Government to make rules to specify other supplies as well as the manner, time, conditions, and restrictions for communication of details of inward supplies and input tax credit to the recipient by means of an auto-generated statement and to do away with two-way communication process in return filing.
Sub-section (2) seeks to provide details contained in auto-generated statement i.e.,
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.
This change is going to be harsh on taxpayers and may invite litigation.
This shall be effective from the notified date after the enactment of Finance Bill, 2022.
II. Additional Conditions for ITC u/s 16 of CGST Act, 2017
III. Change in provision related to GST Practitioners:
IV.Allowing cash balance to be transferred to Distinct Persons
a. Clause 109 proposes to amend section 49 of the CGST Act, 2017 which deals with payment of tax, interest, penalty and other amounts
b. The proposed amendments are as follows:
c. Central Government will be empowered to make rules for the maximum proportion of output tax liability which may be discharged through the electronic credit ledger.
d. The taxpayers can now transfer the balance of credit in the cash ledger to any other distinct person (i.e., any other GST registration under the same PAN) subject to the stipulation that there is no unpaid liability in the electronic liability ledger.
e. New sub-section 12 enables and makes valid the rule 86B for mandatory payment of 1 percent of tax liability by specified persons, despite there being a sufficient balance of ITC.
V. Amendment in Section 168 with reference to section 38 of CGST Act, 2017
VI: Retrospective relief in interest liability on the wrong ITC in GST: Finance Bill, 2022
a. According to section 50(3) of CGST Act, 2017, a taxable person who makes an undue or excess claim of input tax credit under section 42(10) or undue or excess reduction in output tax liability under section 43(10), shall pay interest on such undue or excess claim or on such undue or excess reduction.
b. Finance Bill, 2022 has proposed to substitute new sub-section 50(3) retrospectively, with effect from the 1st July, 2017, so as to provide for levy of interest on input tax credit wrongly availed and utilized, and to provide for prescribing manner of calculation of interest in such cases.
This amendment would result in the following :
VIII. Two-way communication in returns:
This amendment seeks to omit section 42 of the Central Goods and Services Tax Act relating to matching, reversal, and reclaiming of input tax credit so as to do away with the concept of “claim” of an eligible input tax credit on a “provisional” basis and subsequent matching, reversals and reclaim of such credit. It further seeks to omit section 43 relating to matching, reversal, and reclaim of reduction in output tax liability so as to do away with the two-way communication process in return filing. It also seeks to omit section 43 A.
Thus, with this amendment, two-way communication in return filing will be done away with as the matching mechanism has been prescribed in section 41 of CGST Act, 2017 now.
Copyright © 2013-2021 - All Right Reserved