New GST rule to be implemented from Jan 1, 2022: An Exhaustive Analysis

An Important amendments related to GST have been made vide the Finance Act, 2021 but the same were not notified at the time of receiving the presidential assent. Said amendments are contained from Sec. 108 to Sec. 123 of the said Act. In the said context Sec. 1(2)(b) of the said Act permits the Government to appoint a specified date by way of notification on which the said GST related amendments shall come into force. Few amendments have already been notified and are in force. Now vide Notification No. 39/2021 – CT dt. 21.12.2021 majority of the amendments are now brought into force with effect from 01.01.2022.

In the present write-up, we have undertaken an exhaustive analysis of the amendments have will come into force with effect from 01.01.2022. We have also discussed the amendments that have already come into force as well as the amendments that are yet to come into force. The said write-up, therefore, covers all the GST related amendments that were made vide the Finance Act, 2021 and brought into force at different dates or yet to be brought into force.

1. New GST Burden On E-Commerce Operators Zomato, Swiggy, Ola, Uber

On September 17, it was decided at the Goods and Services Tax Council meeting that e-commerce operators be made liable to pay tax on services provided through them namely transport of passengers, by any type of motor vehicles restaurant services or restaurant services provided, with some exceptions This will become effective January 1, 2022, said a statement issued by the Finance Ministry after the GST Council meeting.

2.Correction in Inverted Duty structure in Footwear and Textiles sector

The GST Council decided to introduce GST rate changes from January 2022 in order to correct the inverted duty structure in the Footwear and Textile Sector. All footwear, irrespective of prices will attract GST at 12 percent while barring cotton, all textile products including readymade garments will have GST at the rate of 12 percent.

3.Blocking of GSTR-1 for non filing of GSTR 3B

From 1st January 2022, the GSTR-1 return filing facility will be blocked if you have not submitted the return in FORM GSTR-3B for the previous two return periods. For example, if a taxpayer has not filed GSTR-3B for October 2021 and November 2021, the GSTR-1 filing facility will be blocked from the 1st January 2022.

4.Rules related to Mandatory Aadhaar authentication for GST Refund & Revocation application

The Central Board of Indirect Taxes and Customs (CBIC) has notified that Rules related to Mandatory Aadhaar authentication for GST Refund and Revocation application are to be effective from 1 January 2022.

5.GST Provision related to communication of Details of invoice or debit note to the recipient

Section 109 of the Finance Act, 2021 seeks to amend section 16 of the CGST Act wherein sub-section (2), after clause (a), the clause shall be inserted, namely “(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37.

6.Self-assessed tax shall include the tax payable in respect of details of outward supplies

• W.e.f. 01.01.2022 the term “self-assessed tax” under Explanation to Sec. 75 of the CGST Act, 2017 shall include the tax payable on supplies in respect of which the details have been furnished by the taxpayer in GSTR 1 but the same has not been included in the GSTR 3B and hence not paid.

• The aforesaid amendment shall allow the department to directly initiate the recovery action as regards the said self-assessed liability.

• Even before the aforementioned amendment, Hon’ble Madhya Pradesh High Court in the case of Kabeer Reality Pvt. Ltd. v. UOI 2020 (33) G.S.T.L. 27 (M.P.) has held that liability declared in GSTR 1 will be a self-assessed liability.

• Situations wherein errors have been committed in GSTR 1 (that can be rectified only at the time of filing the next GSTR 1) that results in undue reporting of excess liability are required to be excluded from the said definition as law duly permits rectification of GSTR 1.

7. Commissioner empowered to attach provisionally, any property, including bank account

• Provisional attachment u/s 83 of the CGST Act, 2017 can be undertaken by the department only during the pendency of the stipulated proceedings. In other words, provisional attachment cannot be undertaken if the stipulated proceedings are not pending.

• Hon’ble Bombay High Court in the case of Kaish Impex Private Limited v. UOI 2020 (34) G.S.T.L. 3 (Bom.) held that since proceedings in the nature of summons issued u/s 70 are not specified u/s 83, the provisional attachment of the bank account was illegal. Similar judgments have also been rendered by other High Courts (see 2020 (34) G.S.T.L. 592 (P & H) and 2019 (30) G.S.T.L. 15 (Guj.).

• Now w.e.f. 01.01.2022 Sec. 83(1) is substituted to the effect that the provisional attachment can be undertaken after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV if the Commissioner is of the opinion that the same is necessary to protect the revenue. Hence the sweep of the draconian powers is expanded to permit provisional attachment on mere initiation 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).

• The ratio of the Hon’ble Supreme Court decision in the case of Radha Krishan Industries vs. State of Himachal Pradesh 2021 (48) GSTL 113 (S.C.) shall still be relevant and the given powers cannot be abused.

8.No appeal to be filed against section 129(3) order, unless a sum equal to 25% of the penalty is paid

In the context of filing of the first appeals (Commissioner), presently Sec. 107(6) of the CGST Act, 2017 provides for making a pre-deposit of 10% of the disputed tax amount for filing the appeal and staying the recovery.

• Now an amendment has been made in the context of the orders passed levying penalty u/s 129(3) for E-way bill violations to provide that the quantum of the pre-deposit in such cases shall be equal to 25% of the penalty ordered to be paid.

• It may be noted there will be no further pre-deposit for filing the second appeals (Tribunal) in such cases (i.e. order u/s 129(3)) in view of no amendment u/s 112(8).

• It may also be noted that practically the conveyance, as well as goods, will not be released unless the payment ordered u/s 129(3) is paid. Hence the mechanism of getting a stay upon the filing of the appeal is only in theoretical remedy and not an efficacious one. It is suggested that the Government must look into making the given remedy practical by allowing the release of the conveyance/goods on an undertaking by the taxpayer of filing the appeal followed by the submission of the acknowledgement of the appeal filed. In absence of actual filing of the appeal, the department can always initiate recovery as per law.

9.Commissioner’s Power to call for information

• Presently Sec. 151 of the CGST Act, 2017 grants power to the Commissioner to issue a notification to collect statistics relating to any matter connected with GST. Further, it also grants power to call upon the concerned persons to furnish the requisite information/returns in respect of the statistics that are to be collected.

• Now w.e.f. 01.01.2022 the said provisions are completely recast to provide a general power to the Commissioner to issue an order and direct any person to furnish information relating to any matter connected with GST within such time, in such form, and in such manner, as may be specified therein.

10.Proper officer detaining or seizing goods or conveyance to issue notice within 7 days of such detention or seizure

The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty.

11.Levy of Tax

Presently paragraph 7 of Schedule II provides that the supply of goods by any unincorporated association or body of persons to a member for consideration shall be treated as supply of goods. In view of the retrospective amendment by way of inserting clause (aa) to Sec. 7(1) to deem every such transaction as supply, paragraph 7 (applying only in respect of unincorporated association or body of persons and not in respect of all associations/clubs) will have resulted in interpretational issues and hence omitted.

12.E-way Bill

W.e.f. 01.01.2022 Sec. 130 dealing with the confiscation of goods/ conveyance shall be completely de-linked from the provisions related to detention/seizure contained u/s 129. Hence confiscation can be made only if the ingredients specified u/s 130(1) are satisfied independent of Sec. 129(1).

• An amendment has been made u/s 130(2) to provide that the amount of fine payable by the person in lieu of confiscation shall be as the officer thinks fit but shall not be less than the penalty that is equal to the tax payable on the given goods. However such fine shall not exceed the market value of the goods less the tax chargeable thereon.

• Presently Sec. 130(3) provides that even if the fine is imposed u/s 130(2), still the owner of goods/conveyance shall in addition pay the tax, penalty and charges in respect of the given goods/conveyance. Said provisions are vague and onerous as it mandates further payment of tax/penalty/charges over and above of what has been paid as a fine. Hence w.e.f. 01.01.2022 the said provisions have been omitted.

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