RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

According to CEBR, the world faces a recession in 2023. Higher borrowing costs aimed at tackling inflation cause a number of economies to contract. India is poised to become world’s third largest economy by 2032.

According to MoF in its monthly economic review, global economic developments remain complicated in November, and that fiscal and monetary policy makers need to remain vigilant. As we head into 2023, global economic developments are expected to complicate the outlook further, and therefore continued vigilance is a critical aspect in maintaining India’s external resilience. No country can afford to sit on its laurels, India included.

As  we  usher into  2023, GST brings in many changes or amends flowing from recent 48^th GST Council meeting held on 17^th December, 2022 in the form of Notification Nos. 26 & 27 dated 26.12.2022, rate notification Nos. 12 to 15 dated 30.12.2022 and Circular Nos. 183 to 188/2022-GST, all dated 27.12.2022. These are majorly applicable w.e.f. 1^st January, 203.  You will find the details inside.

Rs 1,49,507 crore GST revenue has been collected for December 2022 which is a record increase of 15% on Year-on-Year basis. The revenues for the month of December 2022 are 15% higher than the GST revenues in the same month last year. During the month, revenues from import of goods was 8% higher and the revenues from domestic transaction (including import of services) are 18% higher than the revenues from these sources during the same month last year. During the month of November, 2022, 7.9 crore e-way bills were generated, which was significantly higher than 7.6 crore e-way bills generated in October, 2022.

Amendment in CGST Rules, 2017

CBIC has issued Notification No. 26/2022- Central Tax to amend CGST Rules to implement decisions taken by the GST Council in 48^th Meeting held on 17.12.2022:

• The Notification inter alia, includes:

• Amendments in Rules 8, 9, 12, 37, 46, 46A, 59, 87, 89, 108, 138 and 161
• Amendments in Forms REG 01, REG 17, GSTR-01, APL-01, APL-03, DRC-01A, DRC-03 and DRC-25
• New Rules :

• 37A- Reversal of Input Tax Credit in case of non-payment of tax by supplier and re-availment on payment later
• 88C- manner of dealing with difference in liability reported in statement of outward supplies and that reported in return
• 109C- withdrawal of appeal

• Substitution of rule 109 on application to Appellate Tribunal
• Substitution of Form REG-19 – Order for cancellation of registration

• The important changes, inter alia, include:

• PAN-linked mobile number and e-mail address shall be captured in Forms REG 01 and OTP based verification will be conducted at the time of registration (Rule 8).
• One time passwords shall be sent to the mobile number and e-mail address linked to the permanent account number while registering in GST (Rule 8).
• For persons to whom registration is granted to deduct tax at source or to collect tax at source, the said officer may cancel the registration, based on a request made in writing by a person to whom such registration is granted [Rule 12(3)].
• Rule 37(1) of the CGST Rules has been amended w.e.f. 01-10-2022 to provide for the reversal of input tax credit only proportionate to the amount not paid to the supplier vis-a-vis the value of the supply, including tax payable.
• New Rule 37A has been inserted to provide for the mechanism and time limit of reversal of ITC by the recipient where tax is not paid by the supplier to the Government.
• Where a registered person is supplying taxable as well as exempted goods or services or both to an unregistered person, a single “invoice-cum-bill of supply” issued shall contain all the details which a regular tax invoice contains[Rule 46(A)].
• Mismatch between GSTR-1 and GSTR-3B : Rule 88C provides manner of dealing with difference in liability reported in statements of outward supplies and that reported in GSTR-3B. Tax authorizes will intimate the difference in amount in Part A of GST DRC-18 through GSTN portal / email directing the tax payer to pay the differential tax liability with interest. It also provides for procedure to be followed by the taxpayer after such intimation. Any unpaid tax liability shall be recoverable as per section 79 of the CGST Act, 2017.
• Procedure has been prescribed for filing application of refund by the unregistered buyers in cases where the contract/ agreement for supply of services, like construction of flat/house and long-term insurance policy, is cancelled.
• Prescribes procedure for filing refund application by unregistered byes (Rule 89). Form GST RFD-01 has also been amended.
• Rule 108 and Rule 109 of the CGST Rules have been amended to provide clarity on the requirement of submission of the certified copy of the order appealed against and the issuance of final acknowledgement by the appellate authority.
• New Rule 109C and new Form GST APL-01/03W have been inserted who provide the facility for withdrawal of an application of appeal up to a certain specified stage.
• E-way bill shall have to be generated for transportation of imitation jewellery( HSN-7117) (Rule 138).

(Source: Notification No. 26/2022- Central Tax dated 26.12.2022)

Non-Application of Aadhar Authentication

• Rule 8(4A) for verification for completion of GST registration through biometric based Aadhar authentication and photograph will not apply to all the States and Union Territories except Gujarat
• Rule 8(4A) shall only be applicable to the State of Gujarat w.e.f. 26.12.2022.
• For other states and Union Territories, it shall be notified later.

(Source: Notification No. 27/2022- Central Tax dated 26.12.2022)

Changes in Rates

CBIC has amended Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 to the following effect w.e.f. 01.01.2023:

1. 2.5% rate (Schedule-I) will be applicable to:

• Entry No. 102A: Ethyl alcohol supplied to Oil Marketing Companies or Petroleum refineries for blending with motor spirit (petrol).
• Entry No. 103A : Bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants [other than aquatic feed including shrimp feed and prawn feed, poultry feed and cattle feed, including grass, hay and straw, supplement and additives, husk of pulses including chilka, concentrates including chuni or churi, khanda, wheat bran, de-oiled cake].

2. 6% rate (Schedule-II) will be applicable to:

• Entry No. 48: Fruit pulp or fruit juice based drinks [other than Carbonated Beverages of Fruit Drink or Carbonated Beverages with Fruit Juice].
• Entry No. 180: Mathematical boxes, geometry boxes and colour boxes.

3. 9% rate (Schedule-III) will be applicbale to :

• Entry No. 25: Ethyl alcohol and other spirits, denatured, of any strength [other than ethyl alcohol supplied to Oil Marketing Companies or Petroleum refineries for blending with motor spirit (petrol)]

(Source: Notification No. 12/2022-Central Tax (Rate) dated 30.12.2022)

Changes in exemption to goods 

CBIC has amended Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017 providing exemption to intra state supplies as follows w.e.f. 01.01.2023:

• In entry No. 102, exemption will be available to aquatic feed including shrimp feed and prawn feed, poultry feed and cattle feed, including grass, hay and straw, supplement and additives, wheat bran and de-oiled cake [other than rice bran.
• New entry 102C has been added for husk of pulses including Chilka, Concentrates including chuni or churi, Khanda.

(Source: Notification No. 13/2022-Central Tax (Rate) dated 30.12.2022)

Changes in Reverse Charge

• CBIC has amended Notifiation No. 4/2017-Central Tax (Rate) dated 28.06.2017 to provide that payment of GST shall be under Reverse Charge Mechanism in case of supply of essential oils other than those of citrus fruits, i.e.,

(a)   Of peppermint (Mentha piperita).

(b)   Of other mints : Spearmint oil (ex-mentha spicata), Water mint-oil (ex-mentha aquatic), Horsemint oil (ex-mentha sylvestries), Bergament oil (ex-mentha citrate), Mentha arvensis.

• The supplier shall be any unregistered person and recipeint shall be any regisered person.
• This shall come into force w.e.f. 01.01.2023.

(Source: Notification No. 14/2022-Central Tax (Rate) dated 30.12.2022)

Amendments in exemption to services

CBIC has amended Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 has been amended to make following changes w.e.f. 01.01.2023.

• Exemption to renting of residential unit – the exemption shall be available of residential availing to a registered person under entry No. 12 to services by way of renting, subject to following conditions :

(i)    the registered person is proprietor of a proprietorship concern and rents the residential dwelling in his personal capacity for use as his own residence; and

(ii)   such renting is on his own account and not that of the proprietorship concern.

• Exemption under entry No. 23A has been omitted, i.e. to the sevices by way of access to a road or a bridge on payment of annuity.

(Source: Notification No. 15/2022-Central Tax (Rate) dated 30.12.2022)

CBIC Clarifications

CBIC has issued following Circulars to implement decisions taken by the GST Council in 48th Meeting held on 17.12.2022: CBIC has issued Circular Nos. 183 to 188/2022-GST dated 27.12.2022 as follows:

• 183/15/2022-GST - Clarification to deal with difference in Input Tax Credit (ITC) availed in Form GSTR-3B as compared to that detailed in Form GSTR-2A for FY 2017-18 and 2018-19.
• 184/16/2022-GST- Clarification on the entitlement of input tax credit where the place of supply is determined in terms of the proviso to sub-section (8) of section 12 of the Integrated Goods and Services Tax Act, 2017.
• 185/17/2022-GST -Clarification with regard to applicability of provisions of section 75(2) of Central Goods and Services Tax Act, 2017 and its effect on limitation.
• 186/18/2022-GST -Clarification on various issue pertaining to GST.
• 187/19/2022-GST - Clarification regarding the treatment of statutory dues under GST law in respect of the taxpayers for whom the proceedings have been finalised under Insolvency and Bankruptcy Code, 2016.
• 188/20/2022-GST-Prescribing manner of filing an application for refund by unregistered persons.

GST collection in December, 2022

• Monthly GST revenues are more than Rs 1.4 lakh crore for 10 straight months in a row in December, 2022.
• Rs 1,49,507 crore GST Revenue has been collected for December 2022 which is a  record increase of 15% Year-on-Year basis
• The gross GST revenue collected during December 2022 is Rs 1,49,507 crore, of which CGST is Rs 26,711 crore, SGST is Rs 33,357 crore, IGST is Rs 78,434 crore (including Rs 40,263 crore collected on import of goods) and Cess is Rs 11,005 crore (including Rs 850 crore collected on import of goods).

(Source: Press Release ID 1887876 dated 01.01.2023)