Last updated: December 29th, 2021 6:30 PM

Important Changes in GST Law Effective from 1st January 2022

The Central Board of Indirect Taxes and Customs (CBIC) has notified various changes in GST Law vide a Notification No. 39/2021–Central Tax Dated 21st December 2021 to give effect to Changes proposed in sections 108, 109, and 113 to 122 of Finance Act, 2021. The current article briefs the Important Changes in GST Law. Click here for Online GST registration

The Gist of CBIC Notification

The CBIC has decided to bring into effect a dozen amendments to the Central Goods and Services Tax (CGST) Act from 1st January 2022, tightening the indirect tax regime further.

• The changes are part of the Finance Act 2021 passed by Parliament earlier this year but their implementation date has been announced only now.
• The changes cover a host of issues including what constitutes a taxable supply, eligibility for tax credits, and norms for filing appeals in certain cases.

The official Notification of the Central Board of Indirect Taxes and Customs is attached here for reference:

Important Changes in GST Law

The GST regime will see a host of tax rates and procedural changes coming into effect from January 1st, 2022:

• One of the important changes in GST is the liability on e-commerce operators to pay tax on services provided through them by way of passenger transport or restaurant services.
• The correction in inverted duty structure in footwear and textile sectors would come into effect from Saturday wherein all footwear, irrespective of prices will attract GST at 12%.
• The passenger transport services provided by auto-rickshaw drivers through offline/ manual mode would continue to be exempt from GST
• The compliance of deposit and invoice raising has shifted to food delivery platforms.
• The other anti-evasion measures which would come into effect from January 2022 is the mandatory Aadhaar authentication for claiming GST refund, blocking of the facility of GSTR-1 filing in the case where the business fails to file GSTR-3B of proceeding two months.
• The GST Law has been amended to allow GST officers to visit premises to recover tax-dues without any prior show-cause notice.

Section 108 of Finance Act, 2021 - Scope of supply

Section 18 of Finance Act 2021 seeks to amend section 7 of the Central Goods and Services Tax Act, 2017 an insertion of new proviso sub-section 7 (1) (aa). Section 108 says that transactions, by a person, other than an individual, to its members or constituents for cash, deferred payment, or other valuable consideration will be treated as a taxable supply. Such transactions from the members to the entity too will be treated in the same way.

Section 109 of Finance Act, 2021 - Eligibility for taking ITC

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. This provision will tighten the norms governing the grant of credits for the taxes paid on raw materials and other services procured by businesses. If the seller of an item does not disclose the invoice details in his monthly sales return (in form GSTR-1), then the buyer will not be able to avail of credit for the taxes paid on that item.

Section 113 of Finance Act, 2021 - Determination of Tax Payment

Section 113 of the Finance Act, 2021 seeks to amend section 74 of the Goods and Services Tax Act, 2017. This provision will provide details for the Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized because of fraud or any willful misstatement or suppression of facts The proceedings-initiated u/s 129 & 130 for E-way bill violations, i.e. detention, seizure, and confiscation of goods or conveyances shall be independent proceedings, and closure of parallel proceedings u/s 73 or 74 (in respect of any person including the subject person) shall not result in the deemed closure of the proceedings initiated u/s 129 & 130.

Section 114 of Finance Act, 2021 - Self-Assessed Tax

Section 114 of the Finance Act, 2021 seeks to amend section 75 of the CGST Act, in sub-section (12), the Explanation shall be inserted, namely “For this subsection, the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.” So whatever is declared in the Statement of Outward supply i.e., GSTR-1 shall also be treated as a Self-Assessed liability. GSTR-1 is notified under Section 37 and GSTR-3B is notified under Section 39. Therefore, the self-assessed tax will include only detailed transactions furnished in GSTR-1 and therefore, it is important to file the correct return in GSTR-1. Otherwise, proceedings will be initiated even if tax might have been paid and reported in GSTR-3B for the transactions not reported in GSTR-1.

Section 115 of Finance Act, 2021 - Provisional attachment to protect revenue in certain cases

Section 115 of the Finance Act, 2021 seeks to amend section 83(1) of the CGST Act. Powers of provisional attachment have been extended to proceeding under Chapter XII (Assessment), XIV (Inspection, Search, Seizure, and Arrest), or XV (Demands and Recovery) for attachment of property including bank account belonging to the taxable person or person who has retained benefits of offenses under 122(1A). Due to this amendment, the Commissioner has been empowered to initiate provisional attachment proceedings even during the assessment, investigation, etc., if he feels that PA is necessary to protect the revenue. However, for the time being, the rule is that for initiating the PA proceedings, it is necessary to determine the liability and give reasonable time to discharge the obligation. This will be real harassment to the taxpayer considering flimsy proceedings or notices in Form ASMT-10 etc. or mismatch provision before 1st Jan 2022. Officers will be having powers for provisional attachment.

Section 116 of Finance Act, 2021 - Appeals to Appellate Authority

Under Section 107, sub-section (6), has been amended with insertion of the new proviso, namely “Provided that no appeal shall be filed against an order under sub-section (3) of section 129 unless a sum equal to twenty-five percent of the penalty has been paid by the appellant.” This will add a compliance burden in respect of penalties imposed in the Adjudicating Orders while filing appeals. As per this provision, `Pre-deposit includes 10% of the duty demand and 25% of the penalty; otherwise, the appeal will not get admitted.

Blocking of GSTR-1 for Non-Filing of GSTR 3B:-

GSTR-1 return filing facility will be blocked if a registered Taxpayer has 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. New GST Compliance obligation for providing restaurant Services on E-Commerce Operators All the E-Commerce Operators providing “Restaurant Services” will be liable to pay GST on such services instead of the hotel suppliers. The GST @ 5% will be paid by such e-Commerce Operators like Zomato, Swiggy, etc.

Correction in Inverted Duty structure in Footwear and Textiles sector

The GST Council decided to introduce GST rate changes from January 2022 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.

Mandatory Aadhaar authentication for GST Refund & Revocation application:

Aadhaar authentication with the GSTIN for claiming GST Refunds (all types of refunds and irrespective of the amount of claim involved) and Revocation application has been made Mandatory and are to be effective from 1 January 2022.