Changes in GST Law From 1st January 2021

Last Updated On: Jan. 2, 2021, 10:16 p.m.



1. E-invoicing made mandatory for taxpayers having aggregate turnover exceeding Rs. 100 Crores, w.e.f 1st January, 2021

  • GST E-invoicing has been made applicable to Registered Person (other than SEZ unit, Insurance Company, banking company, financial institution including non-banking financial institution, GTA, supplier of passenger transportation service, supplier of services by way of admission to exhibition of cinematograph films in multiplex screens) whose aggregate turnover in any preceding financial year from 2017-18 onwards exceeds Rs. 100 crore in respect of supply of goods or services or both or for exports. 
  • It may be noted that GST e-invoicing was earlier made applicable to taxpayers having aggregate turnover exceeding Rs 500 crore from 1st October, 2020.


2. Important changes made to CGST Rules, 2017 vide CGST (Fourteenth Amendment) Rules, 2020 effective from 1st January, 2021

Restriction on claiming ITC in respect of invoices/debit notes not furnished by the suppliers has now been reduced from 10% to 5% of eligible credit available in GSTR-2B.
It may be noted that Rule 36(4) when introduced from 09-10-2019 had allowed a grace of 20% which was later reduced to 10% from 01-01-2020 and now further been reduced to 5% from 01-01-2021. 


3. Restricting use of ITC amount for discharging output tax liability in GST

  • It is applicable where value of taxable supply other than exempt supply and export, in a month exceeds INR 50 lakh.
  • Taxpayer is not allowed to use ITC in excess of 99% of output tax liability.
  • Certain exceptions provided to above restrictions are:
  • If the registered person has paid more than INR 1 lakh as income tax under the Income-tax Act, 1961 in each of the last two financial years.
  • If the registered person has received a refund amount of more than INR 1 lakh in the preceding financial year on account of export under LUT/Bond or inverted tax structure.
  • If the registered person has discharged his liability towards output tax through the electronic cash ledger for an amount which is in excess of 1% of the total output tax liability, applied cumulatively, upto the said month in the current financial year
  • If the registered person is the Government Department, Public Sector Undertaking, Local Authority or Statutory Body.
  • Validity of e-way bill narrowed by increasing distance from 100 km. to 200 km. per day
  • E-way bill will now be valid for 1 day for every 200 km of travel, as against 100 km earlier, in cases other than Over Dimensional Cargo or multimodal shipment in which at least one leg involves transport by ship.
  • For every 200 km. or part thereof thereafter, one additional day will be allowed.


4. Sections 119, 120, 121, 122, 123, 124, 126, 127 and 131 of Finance Act, 2020 have come into force from 1st January,2021


A. Section 10(2) (Composition levy)- 

Section 119 of the Finance Act, 2020 has inserted the words “or services”  after the words “of goods” in section 10(2) of the CGST Act,2017. 

Due to the amendment apart from above condition, a composition supplier cannot:

a) Supply services which are not leviable to tax under the CGST Act, 2017;

b) Engage into Inter-state Supply of services;

c) Supply services through an electronic commerce operator who is required to collect tax under Section 52 of the CGST Act, 2017.

Section 16(4) of the CGST Act, 2017 provided a time limit for availing Input Tax Credit with respect to an invoice or debit note. The time limit for availing Input Tax Credit against a debit note was linked with the date of invoice against which such debit note was issued.


B. Section 16(4) [Eligibility and conditions for taking Input Tax Credit (“ITC”)]- Now with the above amendment the time limit for availing of ITC in respect of a debit note has ben delinked from the date of invoice and time limit for availing of ITC shall be determined considering the date of the debit note. Thus, ITC on debit notes issued after 6 months from the end of the financial year to which invoice pertains can be availed post amendment.


C. Section 29(1)(c) (Cancellation or suspension of registration)-  The effect of the above amendment is that the person who has taken voluntary registration under Section 25(3) of the CGST Act, 2017, who was otherwise not required to get registered under Section 22 or Section 24 of the CGST Act, 2017, can now apply for cancellation of registration which was not permissible earlier. 


D. Proviso to Section 30(1) (Revocation of cancellation of registration)- Empowers jurisdictional Additional / Joint Commissioner and Commissioner to extend the period of 30 days / 60 days to file an application for revocation of cancellation of registration.


E.Proviso to Section 31(2) (Tax invoice)- The proviso to Section 31(2) of the CGST Act has been amended to widen the powers to the Central Government to notify the categories of services in respect of which a tax invoice shall be issued within such time and in such manner as may be prescribed.

Thus, the Central Government can now even prescribe a different time limit for issuance of tax invoices for such categories of services as may be notified.

Section 51(1) of the CGST Act, 2017 mandates certain class of person, specified therein and as notified by the Central Government, to deduct tax at source at the time of making payment to the supplier.

F. Section 51(3) (Tax deduction at source)- The above amendment provides that the form and manner of issuing certificate for deduction of tax at source shall be provided in the CGST Rules, 2017. Further, the provision imposing late fee for not issuing the certificate within the prescribed time limit has been omitted.



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