47th GST meeting of the GST Council was held recently on 28-29 June, 2022 wherein many decisions on GST – taxability, rates, exemptions and procedure etc. were taken. These inter alia relate to:
- GST rate changes
- Rate rationalization to remove inverted duty structure
- Withdrawal of certain exceptions including concessional in relation to goods and services
- Clarifications in GST rates on goods and services
- Trade facilitation measures
- Streamlining of compliances and so on
Consequently, CBIC has issued six notifications, i.e., Notification No. 9 to 14/2022-CT, all dated 05.07.2022 to notify amendments. Further, CBIC has issued Circular Nos. 170 to 176, all dated 06.07.2022 to explain and clarify the changes.
This writes up explains and provide the gist of CBIC Circular issued on 06.07.2022 to implement decisions of GST council.
Clarification on mandatory furnishing of correct and proper information of inter-State supplies and amount of ineligible/blocked Input Tax Credit and reversal thereof in return in FORM GSTR-3B and statement in FORM GSTR-1
- Finding that there appears to be lack of clarity regarding reporting of information about reversal of Input Tax Credit (ITC) as well as ineligible ITC in Table 4 of FORM GSTR-3B, in order to ensure uniformity in return filing, various issues have clarified by CBIC in relation to:
- Furnishing of information regarding inter-State supplies made to unregistered persons, composition taxable persons and UIN holders.
- Furnishing of information regarding ITC availed, reversal thereof and ineligible ITC in Table 4 of GSTR-3B.
- Procedure to be followed by registered person for correct reporting of information in the returns has been provided i.e.,
- Total ITC (eligible as well as ineligible) is being auto-populated from statement in FORM GSTR-2B in different fields of Table 4A of FORM GSTR-3B (except for the ineligible ITC on account of limitation of time period as delineated in sub-section (4) of section 16 of the CGST Act or where the recipient of an intra-State supply is located in a different State / UT than that of place of supply).
- Registered person will report reversal of ITC, which are absolute in nature and are not reclaimable, such as on account of rule 38 (reversal of credit by a banking company or a financial institution), rule 42 (reversal on input and input services on account of supply of exempted goods or services), rule 43 (reversal on capital goods on account of supply of exempted goods or services) of the CGST Rules and for reporting ineligible ITC under section 17(5) of the CGST Act in Table 4 (B) (1).
- Registered person will report reversal of ITC, which are not permanent in nature and can be reclaimed in future subject to fulfilment of specific conditions, such as on account of rule 37 of CGST Rules (non-payment of consideration to supplier within 180 days), section 16(2)(b) and section 16(2)(c) of the CGST Act in Table 4 (B) (2). Such ITC may be reclaimed in Table 4(A)(5) on fulfilment of necessary conditions. Further, all such reclaimed ITC shall also be shown in Table 4(D)(1). Table 4 (B) (2) may also be used by registered person for reversal of any ITC availed in Table 4(A) in previous tax periods because of some inadvertent mistake.
- Therefore, the net ITC Available will be calculated in Table 4 (C) which is as per the formula (4A - [4B (1) + 4B (2)]) and same will be credited to the ECL of the registered person.
- As the details of ineligible ITC under section 17(5) are being provided in Table 4(B), no further details of such ineligible ITC will be required to be provided in Table 4(D)(1).
- ITC not available, on account of limitation of time period as delineated in sub-section (4) of section 16 of the CGST Act or where the recipient of an intra-State supply is located in a different State / UT than that of place of supply, may be reported by the registered person in Table 4D (2). Such details are available in Table 4 of FORM GSTR-2B.
(Source: CBIC Circular No. 170/02/2022-GST dated 06.07.2022 )
Clarification on provisions on demand and penalty in CGST law- Fake Invoices
- CBIC has issued clarification on various issues relating to applicability of demand and penalty provisions under the Central Goods and Services Tax Act, 2017 in respect of transactions involving fake invoices.
- The clarification is situation based, i.e.,
- tax invoice issued without any underlying supply: Action to be taken against person issuing fake invoice under section 122 (i) (ii) for issuing fake invoice
- Receipt of fake invoice, issuance of further fake invoice, utilization of ITC: Recovery of wrongly availed ITC, interest under section 50 and penal action under section 74 on such recipient person
- Receipt of tax invoice without underlying supply: Penal action against such recipient under section 122 (1) (ii) and 122(i)(vii)
- Issuing tax invoice without underlying supply leading to wrongful availment or utilization of input tax credit or refund of tax.
- Proceeding under section 122(1A) can be initiated against any person who has retained the benefit of the transactions specified therein or at whose instance such transactions are conducted.
- Provisions of section 132 may also be invokable in cases of:
- wrongful/fraudulent availment or utilization of input tax credit, or
- in cases of issuance of invoices without supply of goods or services or both.
- Section 132 would be invokable subject to the satisfactions of conditions specified therein and based on facts and circumstances of each case.
- Any person who has retained the benefit of transactions specified under section 122(1A) of CGST Act, and at whose instance such transactions are conducted, shall also be liable for penal action.
(Source: CBIC Circular No. 171/03/2022-GST dated 06.07.2022)
Clarification on taxability, refund, ITC etc under GST law
- CBIC has issued clarification on various issues pertaining to CGST , i.e.,
- refund claimed by the recipients of supplies regarded as deemed export;
- interpretation of section 17(5) of the CGST Act;
- perquisites provided by employer to the employees as per contractual agreement; and
- utilisation of the amounts available in the electronic credit ledger and the electronic cash ledger for payment of tax and other liabilities.
- Following is the gist of issues clarified :
- The ITC of tax paid on deemed export supplies, allowed to the recipients for claiming refund of such tax paid, is not ITC in terms of the provisions of Chapter V of the CGST Act, 2017. Therefore, the ITC so availed by the recipient of deemed export supplies would not be subjected to provisions of Section 17 of the CGST Act, 2017.
- ITC availed by the recipient of deemed export supply for claiming refund of tax paid on supplies regarded as deemed exports is not to be included in the “Net ITC” for computation of refund of unutilised ITC on account of zero-rated supplies under rule 89(4) or on account of inverted rated structure under rule 89(5) of the CGST Rules, 2017.
- The input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. This will apply to entire clause of section 17(5)(b).
- In section 17(5) (b)(i), leasing is of motor vehicles, vessels and aircrafts only and not to leasing of any other items. Accordingly, availment of ITC is not barred under sub-clause (i) of clause (b) of sub-section (5) of section 17 of the CGST Act in case of leasing, other than leasing of motor vehicles, vessels and aircrafts.
- Any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. It follows therefrom that perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee.
- Any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding instituted under the provisions of GST Laws, can be made by utilization of the amount available in the electronic credit ledger of a registered person.
- As output tax does not include tax payable under reverse charge mechanism, implying thereby that the electronic credit ledger cannot be used for making payment of any tax which is payable under reverse charge mechanism.
- As per section 49(4), the electronic credit ledger can be used for making payment of output tax only under the CGST Act or the IGST Act. It cannot be used for making payment of any interest, penalty, fees or any other amount payable under the said acts. Similarly, electronic credit ledger cannot be used for payment of erroneous refund sanctioned to the taxpayer, where such refund was sanctioned in cash.
- The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of the GST Laws.
(Source: CBIC Circular No. 172/04/2022-GST dated 06.07.2022)
Clarification on Refund under Inverted Duty Structure
- CBIC has issued a clarification on issue of claiming refund under inverted duty structure where the supplier is supplying goods under some concessional notification.
- Vide para 3.2 of Circular No. 135/05/2020-GST dated 31.03.2020, it was clarified that refund on account of inverted duty structure would not be admissible in cases where the input and output supply are same.
- Now, it has been clarified that the intent of para 3.2 of Circular No. 135/05/2020-GST dated 31.03.2020 was not to cover those cases where the supplier is making supply of goods under a concessional notification and the rate of tax of output supply is less than the rate of tax on input supply (of the same goods) at the same point of time due to supply of goods by the supplier under such concessional notification.
- Thus, in such cases, refund of accumulated input tax credit on account of inverted structure as per clause (ii) of sub-section (3) of section 54 of the CGST Act, 2017 would be allowed in cases where accumulation of input tax credit is on account of rate of tax on outward supply being less than the rate of tax on inputs (same goods) at the same point of time, as per some concessional notification issued by the Government providing for lower rate of tax for some specified supplies subject to fulfilment of other conditions.
(Source: CBIC Circular No. 173/05/2022-GST dated 06.07.2022)
Clarification on re-credit in Electronic Credit Ledger (Form GST PMT 03A)
- CBIC has prescribed the manner of re-credit in electronic credit ledger using Form GST PMT -03A
- As per rule 86(4B) of CGST Rules, 2017, following categories of refund sanctioned erroneously, re-credit of amount in the electronic credit ledger can be done through FORM GST PMT-03A, on deposit of such erroneous refund along with interest and penalty, wherever applicable, by the taxpayer:
- Refund of IGST obtained in contravention of sub-rule (10) of rule 96.
- Refund of unutilised ITC on account of export of goods/services without payment of tax.
- Refund of unutilised ITC on account of zero-rated supply of goods/services to SEZ developer/Unit without payment of tax.
- Refund of unutilised ITC due to inverted tax structure.
- Following has been prescribed:
- The taxpayer shall deposit the amount of erroneous refund along with applicable interest and penalty, wherever applicable, through FORM GST DRC-03 by debit of amount from electronic cash ledger.
- The taxpayer shall clearly mention the reason for making payment in the text box as the deposit of erroneous refund of unutilised ITC, or the deposit of erroneous refund of IGST obtained in contravention of sub-rule (10) of rule 96 of the CGST Rules.
- Till the time an automated functionality for handling such cases is developed on the portal, the taxpayer shall make a written request, in format as per “Annexure A” to the Circular to jurisdictional proper officer to re-credit the amount equivalent to the amount of refund thus paid back through FORM GST DRC-03, to electronic credit ledger.
- Proper officer shall re-credit an amount in electronic credit ledger, equivalent to the amount of erroneous refund so deposited by the registered person, by passing an order in FORM GST PMT-03A, preferably within a period of 30 days from the date of receipt of request for re-credit of erroneous refund amount so deposited or from the date of payment of full amount of erroneous refund along with applicable interest, and penalty, wherever applicable, whichever is later.
(Source: CBIC Circular No. 174/06/2022-GST dated 06.07.2022)
Refund of Unutilized ITC-Export of Electricity
- Filing of refund claim in Form GST RFD-01
- Relevant date for filing of refund claims
- Processing of refund claim by proper officer
- Rule 89(4) provides for the formula for calculation of refund of unutilised ITC on account of zero-rated supplies which is reproduced as under:
Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero rated supply of services) x Net ITC ÷Adjusted Total Turnover
- Export of electricity being zero-rated supply, refund of unutilised ITC on account of export of electricity would also be calculated using the same formula.
- Quantum of Scheduled Energy exported, as reflected in the Regional Energy Account (REA) issued by Regional Power Committee (RPC) Secretariat for a particular month, will be deemed to be the quantity of electricity exported during the said month and will be used for calculating the value of zero-rated supply in case of export of electricity.
(Source: CBIC Circular No. 175/07/2022-GST dated 06.07.2022)
Refund to International Tourists
- Rule 95A of CGST Rules deals with refund of taxes paid on inward supply of indigenous goods by retail outlets established at departure area of the international airport beyond immigration counters when supplied to outgoing international tourist against foreign exchange.
- Vide Notification No. 14/2022-CT dated 05.03.2022, Rule 95A has been omitted with retrospective effect, i.e., 01.07.2019 itself (date of insertion of Rule 95A)
- Accordingly, Circular No. 106/25/2019-GST dated 29.06.2019 which prescribed the manner of refund has also been withdrawn.
- This has been done based on few judicial pronouncements that refund shall be allowed for inputs as well as input services.
(Source: Circular No. 176/08/2022-GST dated 06.07.2022 read with Notification No. 14/2022-CT dated 05.07.2022)
These Circulars may be read along with relevant Notifications.
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