The Hon'ble Finance Minister Ms. Nirmala Sitharaman presented the Finance Bill, 2022 ("the Finance Bill") on February 1, 2022 in the Parliament. We are enumerating key policy initiatives and changes under the specified Indirect and Direct Tax Laws.


1. Amendment in Goods & Services Tax

1.1 The Central Goods and Services Tax Act, 2017 (CGST Act)

Changes in relation to input tax credit (ITC)
  • Auto generated inward statement to be referred for availing ITC under the CGST Act which will include details of available and restricted ITC basis the details furnished by the supplier.
  • ITC liable to be reversed wherein the supplier has not paid the tax. Such ITC can be re-availed on payment of tax by the supplier.
  • Interest@18% to be levied on ITC wrongly availed and utilized with effect from July 1, 2017.
  • Impact - This provision casts undue responsibility on the recipient to determine the compliance status of its vendors even to the extent of discharging tax liability correctly and correct claim of ITC.
  • Impact – More stringent proposal towards availment of ITC leading to working capital blockage and increase in compliance burden.
  • Impact – Litigation around levy of interest on ITC wrongly availed laid to rest. Similar changes have been proposed in the IGST Act and the UGST Act.
Key change in GST compliance:
  • Time limit for year-end compliances pertaining to previous financial year extended to November 30 of the following financial year for the following:
    • Availment of ITC
    • Issuance of Credit notes
    • Rectification in GST returns including TCS return
  • Any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger of a registered person can be transferred to its distinct person's electronic cash ledger as integrated or central tax.
  • Impact – More time to businesses to reconcile its GST returns and take corrective measures.
  • Impact – Free flow of blocked working capital and give synergy in business.
Other changes in GST compliance:
  • Two-way communication process in return filing removed. GSTR-1 cannot be filed without filing GSTR-1 of previous period, however subject to certain exceptions.
  • Due date for filing of GST return by non-resident person revised from 20th of the following month to 13th of the following month.
  • Late fee applicable on delayed filing of Tax Collection at Source (TCS) return.
  • Impact – Relaxation in some compliances along with measures to provide timely filing of returns leading to compliance driven business.
GST registration to be cancelled in the following cases:
  • For Composite taxpayers – After expiry of three months from due date of furnishing GST return / where the return has not been furnished for a financial year beyond three months from the due date of furnishing the said return; and
  • For taxpayers other than Composite taxpayers- After the expiry of such continuous period as may be notified later from due date of furnishing GST return / where the return has not been furnished for a financial year beyond such continuous period as may be notified later.
  • Impact – Measures introduced to deter noncompliance in filing of returns by the taxpayers.
Changes in refund provisions:
  • Scope of withholding of refund and recovery of tax from refund due extended to cover all types of GST refund application.
  • Relevant date for filing of refund application by SEZ developer or SEZ unit clarified to be the due date for furnishing the GST return.
  • Period of claiming refund by a specialised agency of the United Nations Organization or any Multilateral Financial Institution and Organization notified under United Nations (Privileges and Immunities) Act, 1947, extended from six months to two years from the last day of the quarter in which the inward supplies were received.
  • Impact – More powers to the tax department to recover tax dues from refund claims.
Sections inserted to validate Rule 86B of the Central Goods and Service Tax Rules, 2017 and QRMP Scheme:
  • Restriction on use of amount available in electronic credit ledger Quarterly return filers to have an option to either pay self-assessed tax or an amount that may be prescribed
  • Impact – To mitigate litigation around validity of these provisions.

(The above changes will come into effect from enactment of the Finance Bill)

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