By Rajat Mohan
The Union Budget 2021-22 was presented on February 1, 2021, by the Union Finance Minister Nirmala Sitharaman. While all eyes are on the well-known sops anticipated beneath the revenue tax slabs and reliefs, one will have to also remain updated about the most important supply of income for the government, which is Goods and Services Tax (GST). Indirect Taxes Budget 2021 was critical mainly because of the collocation of two contrasting conditions in the existing financial situation, namely the government’s endeavor to make India a $5 trillion economy by 2025 and the financial slowdown of the worldwide COVID-19 pandemic.
The economy is witnessing a “V” shape trajectory in the GST income collections as from October 2020 the collections are consecutively above Rs. 1 lakh crore mainly because of the ease of the compliances and all the restrictions impacted by Covid -19. In light of this recovery, let us have an understanding of the effect of GST provision alterations in lucid language.
Scope of Supply extended.
A new clause has been added retrospectively with impact from July 01, 2017, due to which tax will be levied on transactions involving the provide of goods or services by any individual to its members for a beneficial consideration. Thereby, the persons and their members will be treated as two separate persons. Now retrospective amendment has been proposed to guarantee levy of tax on the amounts collected from the members towards the provide of goods/services.
Eligibility of ITC additional restricted
A new clause has been added which states that ITC on invoice or debit/ credit notes can be availed only when the facts of such invoice or debit/ credit notes have been furnished by the supplier in its GSTR-1.
From now on, the credit can be taken based on the invoice to invoice matching otherwise, ITC will be disallowed.
Mandatory audit by pros has been omitted
Section 35(5) of the CGST Act is proposed to be omitted to eliminate the mandatory requirement of having annual accounts audited and reconciliation statements submitted by specified pros. New Section 44 of the CGST Act now supplies for furnishing a reconciliation statement duly verified by the taxpayer himself, as a result shifting the onus back to him.
Businesses want to note that GSTR-9 and GSTR-9C nevertheless want to be filed relaxation is only on account of shifting the onus back on the taxpayers.
Tax Recovery proceedings enabled incase of mismatch in GSTR-3B and GSTR-1
An explanation to sub-section (12) of section 75 of the CGST Act is becoming inserted to clarify that “self-assessed tax” shall involve the tax payable in respect of outward supplies, the facts of which have been furnished in GSTR -1, but not integrated in the GSTR -3B.
This is a draconian provision providing the exclusive powers to the GST division to initiate tax recovery proceedings in case there is a brief liability reported in GSTR-3B than that appearing in GSTR-1. Section 75(12) overrules Section 73 and Section 74 and states that exactly where any self-assessed tax either wholly or party or any quantity of interest payable on such tax remains unpaid, the similar shall be recovered beneath the provisions of Section 79 that specifies the many modes of recovery.
We think that this amendment is unfair and has also overlooked earlier Circular No. 26/26/2017-GST dated December 29 2017 which stated that considering that GSTR-3B do not include the provisions for reporting of differential figures of previous month(s), the stated figures may possibly be reported on net basis along with values for existing month itself. Further, it also offered for generating adjustment in the next months for the unadjusted quantity due to the limitation of GSTR-3B of not accepting unfavorable values.
The stated amendment will lead to hardship to genuine taxpayers, and departmental harassment at reduce levels is anticipated. This will be a different location of litigation for the next handful of years.
Unrestricted energy to gather details
Section 151 of the CGST Act is becoming substituted to empower the jurisdictional commissioner to contact for details from any individual relating to any matter dealt with in connection with the Act.
Earlier, the powers beneath Section 151 had been restricted relating to matter in respect of which statistics is to be collected. Further, the stated energy could have been exercised by him by way of notification. However, with this amendment, the powers have been widened to contact for any details any time to any individual on any matters concerned with the Act. This will be a different hardship for the genuine taxpayers.
It appears that powers go beyond the “registered person”. Literally which means a tax officer can also serve notice on minor to seek any details associated to his distant relative’s company.
Zero-rated Supply
First modify in respect of zero-rated supplies is that provide of goods or services to a Special Economic Zone developer or a Special Economic Zone unit will be treated as zero-rated provide only when the stated provide is for authorized operations.
Second modify is in Section 16 which has been amended to restrict the zero-rated provide on payment of integrated tax only to a notified class of taxpayers or notified supplies of goods or services. Legally speaking, the selection of a refund in case of zero prices provide with payment of tax has been withdrawn from the GST law. Now, this advantage may possibly come back only for specified categories of taxpayer or a list of particular goods or services by way of a notification.
If this amendment is authorized then, numerous companies would be back old scheme for claiming a refund.
Budget 2021 has created a couple of crucial alterations in the GST laws, which will have far-reaching effect on companies. Higher duty is placed on the taxpayers for compliance of the GST laws, and the onus has been moved away from the pros in this respect. It is critical for the government to align its underlying policies, one of which says minimum government and maximum governance. The involvement of independent verification and assurance pros is want of the hour in GST law. Tax collections have jumped to an all-time higher of INR 1.20 Lakh crores on the back of unearthing extreme tax frauds, and the economy is now on the verge of stabilising. Removal of pros from the GST assurance services would additional worsen the compliance atmosphere. Let us now wait and watch for the next council meeting to give some remedial measures on the GST code to boost the general wellness of a taxpayer.
(Rajat Mohan is a Senior Partner at AMRG & Asscoiates. The views expressed are the author’s personal.)