RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

Ministry of Finance has released a ‘Status Note’ on GST compensation to states and UT’s on 28^th April, 2022 stating that Rs. 2.78 lakh crore of compensation has been released to states for the year 2020-21 and nothing is pending for this year. It has further released Rs. 7.35 lakh crore and compensation of Rs. 78704 crore pending only for the financial year 2021-22. It has clarified that normally, compensation for ten months of April-January of any financial year is released during that year and the compensation of February-March is released only in the next financial year. As explained earlier, compensation of eight out of ten months of 2021-22 has already been released to States. The pending amount will also be released as and when amount from cess accrues in the compensation fund.

According to RBI’s analysis of impact of Pandemic, output losses of past years could be @ Rs. 52 lakh crore. It expects about 12 years to overcome such losses, i.e. by 2034-35. Taking the actual growth rate of - 6.6% in financial year 2021, 8.9% in financial year 2022 and assuming a growth of 7.2 for financial year 2023 and 7.5% beyond that, India is expected to overcome Covid losses by the year 2035. The RBI’s report titled ‘scars of pandemic’ has a theme of ‘revive and reconstruct’ and suggests a blueprint of economic progress.

Karnataka High Court has recently held that there is no conflict between power of Municipal Corporation to levy a fee or tax on advertisement under the Karnataka Municipal Corporation Act and power to levy GST under the GST law. This being so, this is likely to open another Pandora box of confusions, overlapping tax policies and consequent litigation. GST Council should take note of this important development.

Recently there were media reports that feedback has been sought from States regarding a suggestion for raising Good & Services Tax (GST) rates on 143 items. It has since been clarified that no feedback from States has been sought on the GST rates for any specific items or specific proposals to restructure the rates and the reports regarding the same are purely speculative without any basis in fact.

GSTC appointed Group of Ministers who met on 2^nd May, 2022 to discuss, inter alia, GST on casinos, online gaming, race courses etc. has recommended a GST rate of 28%. GoM has suggested for 28% GST rate on online gaming, casinos and house races. However, it has not discussed the valuation part of it (gross or net value) on which GST @ 28% will be made applicable. These recommendations shall be further deliberated in next GST Council meeting.

GSTN has eased submission of GSTR-1 return on GST portal with introduction of new functionalities.

GST collections have been over rupees one lakh crore plus since last nine months. In whole of financial year 2022, GST collection stood at Rs. 14.83 lakh crore as against Rs. 11.37 lakh crore in financial year 2021, a straight growth of 30%. With robust collections favoring government, the much talked about GST rates rationalization in also under consideration and it is expected that this may be one of the major agenda in next GST Council meeting. A Group of Ministers is already seized of this matter who is to submit its recommendation in due course.

Gross GST collection in April 2022 is all time high, Rs 25,000 crore more than the next highest collection of Rs. 1,42,095 crore, last month in March, 2022. The gross GST revenue collected in the month of April, 2022 is Rs 1,67,540 crore of which CGST is Rs 33,159 crore, SGST is Rs 41,793 crore, IGST is Rs 81,939 crore (including Rs 36,705 crore collected on import of goods) and cess is Rs 10,649 crore (including Rs 857 crore collected on import of goods). The revenues for the month of April 2022 are 20% higher than the GST revenues in the same month last year. During the month, revenues from import of goods was 30% higher and the revenues from domestic transaction (including import of services) are 17% higher than the revenues from these sources during the same month last year.

The collections have improved due to technology driven compliances, economic recovery and further lifting of pandemic curbs. The gradual push to mandatory e-invoicing is also one of the factors by which unreported turnover is also coming down and businesses shifting to mainstream.

This shows clear improvement in the compliance behaviour, which has been a result of various measures taken by the tax administration to nudge taxpayers to file returns timely, to making compliance easier and smoother and strict enforcement action taken against errant taxpayers identified based on data analytics and artificial intelligence. Some people attribute the higher collection due to ongoing inflation also.

Government Clarification on GST Rates

• Recently there were media reports that feedback has been sought from States regarding a suggestion for raising Good & Services Tax (GST) rates on 143 items.
• It may be noted that the GST Council, in its 45th Meeting had formed a Group of Ministers (GoM) to look into the rationalization of rates. The deliberations of the Group are ongoing. The views of the States were sought generally on the Terms of References (To Rs) of the GoM soon after it was set up in September, 2021. A report of the Group is yet to be submitted to the Council for consideration.
• It has since been clarified that no feedback from States has been sought on the GST rates for any specific items or specific proposals to restructure the rates and the reports regarding the same are purely speculative without any basis in fact.

[Source: MOF Press Release ID No. 1819963 dated 25.04.2022]

‘Status Note’ on GST Compensation

• Ministry of Finance has released a ‘Status Note’ on GST compensation to states and UT’s on 28^th April, 2022 stating that Rs. 2.78 lakh crore of compensation has been released to states for the year 2020-21 and nothing is pending for this year. It has further released Rs. 7.35 lakh crore and compensation of Rs. 78704 crore pending only for the financial year 2021-22. 
• It has clarified that normally, compensation for ten months of April-January of any financial year is released during that year and the compensation of February-March is released only in the next financial year. As explained earlier, compensation of eight out of ten months of 2021-22 has already been released to States. The pending amount will also be released as and when amount from cess accrues in the compensation fund.

[Source: MOF Press Release ID No. 1820749  dated 27.04.2022]

Enhancements in GSTR-1/ IFF on GSTN Portal

• Form GSTR-1, a monthly Statement of outward supplies is to be furnished by all normal and casual registered taxpayers making outward supplies of goods and services or both and it contains details of outward supplies of goods and services.
• GSTN has made certain improvements / enhancements in GSTR-1 on the common portal.
• Quarterly GSTR-1 filers have also been provided with an optional Invoice Furnishing Facility (IFF) for reporting their outward supplies to registered persons (B2B supplies) in the first two months of the quarter.
• Improvements have been made in summary generation process, quicker response time, and enhanced user-experience for the taxpayers.
• The following changes are being done for GSTR-1/IFF enhancements :

• Removal of ‘Submit’ button before filing
• Consolidated Summary
• Recipient wise summary

• GSTR-1/IFF can be viewed as usual by navigating in the following manner :

Return Dashboard > Selection of Period > Details of outward supplies of goods or services GSTR-1 > Prepare Online.

(Source: GSTN dated 27.04.2022 (www.gst.gov.in)

Revised Guidelines for Risk Management in Customs & GST

• CBIC has issued revised guidelines for National Risk Management Committee (NRMC) for Customs and Goods and Services Tax (GST) for effective implementation of risk management system in Customs and GST which inter alia, covers:
• Setting up of a National Risk Management Committee with Directorate General of Analytics and Risk Management (DGARM) as its nodal agency.
• NRMC’s functions to include: Review the effectiveness of existing Risk Parameters employed in various modules namely Import, Export, Container Scanning, Express Cargo Clearance System (ECCS), Post Clearance Audit (PCA), Protection and enforcement of Intellectual Property Rights (IPR) etc. and Risks posed by changes in Modus Operandi, new exemption notifications and new CCR’s; Review existing parameters and suggest new parameters to address concerns on border and port security; Deliberate and advise on new and emerging risks and suggest ways to address systemic risks, having cross-cutting implications; Discuss new initiatives and projects for stepping up risk management strategy and associated processes, including the development of new modules and deployment of new technologies etc.
• A Local Risk Management Committee (LRMC) shall be constituted in each Custom Zone and CGST zone and it shall be headed by an officer not below the rank of Pr. Commissioner /Commissioner.
• LRMC Minutes/Periodic reports with the approval of the Pr/Commissioner will be sent to the ADG, DGARM, Delhi who will be the Member Secretary of the NRMC.

[Source: Instruction No. 3/2022-Customs dated 23.04.2022 issued by Customs – CBEC]

SOP for filing Annual Return of KFC

• Kerala Government has issued a Standard Operating Procedure (SOP)/User Manual for filing annual return of Kerala Flood Cess (KFC).
• The last date for filing return has since been extended till 30.04.2022 as the electronic system for filing KFC annual return was not in place.
• Now, data as per monthly returns filed by the assessee will automatically get populated in part 1 of return.
• Assessee will have to fill-up the value as per books and balance of Kerala Flood Cess (KFC) shall be shown under balance KFC payable (Col. K)
• The user manual will show menu, list of pending annual return, annual return filing page, payment and filing /payment history.

(Source: File No. CT/10077/2019-GSTINFO1 issued on 25.04.2022)

Extension of Validity of FTP 2015-20 upto 30.06.2022

• The foreign trade policy of 2015-20 has been amended for extension of validity in relation to exemption from Integrated Tax, Compensation Cess etc. on import under Advance Authorisation, EPCG and EOU scheme.

• Accordingly, following extensions / exemptions have been granted :

1. Exemption from Integrated Tax and compensation Cess under Advance Authorization under Para 4.14 of FTP 2015 -20 is extended upto 30.06.2022.
2. Exemption from Integrated Tax and Compensation Cess under EPCG scheme under Para 5.01 (a) of FTP 2015-20 extended upto 30.06.2022.
3. Exemption from Integrated Tax and Compensation Cess under EOU scheme under Para 6.01(d)(ii) of FTP 2015-20 extended upto 30.06.2022.

(Source: MCI (DC) Notification No. 66/2015-20, dated 01.04.2022)

Guidelines on Cross utilization of IGST/SGST and apportionment of IGST between Centre, States and within State for purpose of settlement of funds Centre to State or vice versa (Rajasthan)

• Many taxpayers have not disclosed ineligible  ITC in GSTR-3B on account of IGST paid on inward inter-state supply and import supplies which might have culminated in short transfer of IGST funds to the state, the Chief Commissioner, State Tax, Rajasthan, Jaipur has advised the taxpayers to declare the ITC correctly in the monthly return GSTR-3B and report reversal of lTC, other reversal, reversal of ineligible ITC or blocked credit in Table 4(B)(1), Table 4(B)(2), Table 4(0)(1) and Table 4(0)(2) of GSTR-3B, as the case  may be.

• Accordingly, the taxpayers, who have not furnished details of ineligible ITC or have furnished the details of ineligible ITC partially or have not reported the reversal of ITC fully or partially in the returns filed for the F.Y. 2021-22  are advised to ensure that they report it in the annual return to be filed in GSTR-9.

• For the F.Y. 2022-23 onwards, taxpayers should ensure that the details of ineligible ITC or partial details of ineligible ITC or reversal of ITC which has not been reported fully or partially should be reported in the subsequent GSTR-3B to be filed by giving net effect in that return and should file the subsequent periodic returns in GSTR-3B correctly.

(Source: Chief Commissioner, State Tax Rajasthan, Jaipur Circular No. 1/2022 dated 05.04.2022)

Guidelines for Personal Hearing in virtual mode – (Rajasthan)

• Commercial Taxes, Rajasthan has issued guidelines for conduct of personal hearing in virtual mode by all the appellate and adjudicating authorities under the present Covid limitations.
• This will ensure expeditious completion of ongoing work of appeals and adjudications and quick   delivery of justice through  quasi-judicial   proceedings and are based on Supreme Court judgment in Misc Civil Appeal No.5/2020.
• These guidelines shall apply to all proceedings pending under all the acts administered by the Department.
• Following are the major guidelines :

• The appellant/respondent, shall give his consent to avail facility of personal hearing before such authority, through Video conferencing at the time of filing his appeal or immediately after issuance of this instruction, in case of pending, appeals adjudication matter.
• The date and time of hearing along with link for the video conference shall be informed to the appellant/ respondent or their authorized representative and the concerned Appellate Authority or Adjudicating Authority, shall share the link through e-mail.
• Virtual hearing through video conference shall be held from the office of Appellate Authority/ Adjudicating Authority or any official video conference facility set up in the office.
• Appellants may participate in virtual hearing along with their Advocate/ Authorized representative or join the proceedings from their own office.
• If the assessee prefers to submit any document including additional submissions during the virtual hearing, he may do so by self-attesting such document and a scanned copy of the same may be e-mailed to the Appellate Authority/ Adjudicating Authority immediately after virtual hearing and in no case alter 3 days of virtual hearing.
• If the officer deems necessary and expedient to call the any person for inquiry in person, he may do so.

[Source: File No. F.5 Misc./Appeals/Legal/CCT/15-16 dated 18.04.2022 issued by Commercial Taxes Department, Government of Rajasthan (www.rajtax.gov.in)]

Clarification on Refunds (Uttar Pradesh)

• UP SGST Department has issued clarification on refunds of tax wrongly paid to the Government under section 77 of GST law / Section 19 of IGST law.
• The term ‘subsequently held’ in section 77 of UPSGST Act, 2017 or under section 19 of IGST Act, 2017 covers both the cases where the inter-state or intra-state supply made by a taxpayer, is either subsequently found by the taxpayer himself as intra-state or inter-state respectively or where the inter-state or intra-state supply made by a taxpayer is subsequently found / held as intra-state or inter-state respectively by the tax officer in any proceedings.
• Refund claim under such situations sections can be claimed by the taxpayer in both the above-mentioned situations, provided the taxpayer pays the required amount of tax in the correct head.
• Rule 89 of CGST Rules, 2017 clarify that the refund under section 77 of UPSGST Act/ Section 19 of IGST Act, 2017 can be claimed ‘before the expiry of two years, from the date of payment of tax under the correct head, i.e. integrated tax paid in respect of subsequently held inter State’ supply, or central and state tax in respect of Subsequently held intra-State supply, as the case may be.
• Refund under section 77 of the UPSGST Act / section: 19 of the IGST Act would not be available where the taxpayer has made tax adjustment through issuance of Credit note under section 34 of the UPSGST Act in respect of the said transaction’

[Source: Instruction No. GST/2021-22/36 Commercial Taxes dated 20.04.2022 issue by Commercial Taxes, UP]

GST clarification on E-invoices and ITC (Uttar Pradesh)

UP SGST Department has issued clarification on GST related to availment of input tax credits, refund and e-invoicing as under:

• On e-invoicing, there is no need to carry the physical copy of a tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the UPSGST Rules and production of the Quick Response (QR) code having an embedded Invoice. Reference Number (IRN) electronically, for verification by the proper officer, would suffice.
• On prohibition of refund of unutilized ITC in case of exports of goods which are having NIL rate of export duty, it has been clarified that only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) from availment of refund of accumulated ITC. Goods, which are not subject to any export duty and in respect of which either NIL rate is specified in Second Schedule to the Customs Tariff Act, 1975 or which are fully exempted from payment of export duty by virtue of any customs notification or which are not covered under Second Schedule to the Customs Tariff Act, 1975, would not be covered by the restriction imposed under the first proviso to section 54(3) of the UPSGST Act for the purpose of availment of refund of accumulated ITC.

[Source: Instruction No. GST/2021-22/35 Commercial Taxes dated 20.04.2022 issue by Commercial Taxes, UP]

GSTN functionality for Annual Aggregate Turnover

GSTN has released a new functionality on computation of Annual Aggregate Turnover (AATO) for the Financial Year 2021-2022:

• The taxpayers can view the exact Annual Aggregate Turnover (AATO) for the previous Financial Year (FY) as well as the Aggregate Turnover of the current FY based on the returns filed till date.
• The taxpayers will also have facility of turnover updation in case taxpayers feel that the system calculated turnover displayed on their dashboard varies from the turnover as per their records.
• This facility of turnover update is provided to all the GSTINs registered on a common PAN. All the changes by any of the GSTINs in their turnover shall be summed up for computation of Annual Aggregate Turnover for each of the GSTINs.
• The taxpayer can amend the turnover twice within the month of May, 2022.
• Thereafter, the figures will be sent for review of the Jurisdictional Tax Officer who can amend the values furnished by the taxpayer wherever required.

(Source: GSTN (//www.gst.gov.in) dated 02.05.2022)