A. Clarifications issued by the Board pursuant to the 48th GST Council Meeting:
Pursuant to the 48th GST Council Meeting held on December 17, 2022, the Central Board of Indirect Taxes & Customs (CBIC) has issued a series of Circulars to clarify various issues which were a bone of contention between the taxpayer and the Department.
- Clarification to deal with mismatch in ITC availed in Form GSTR 3B vis-à-vis reflected in Form GSTR 2A for FY 2017-18 and FY 2018-19:
Form GSTR 2A could not be made available to taxpayers on the common portal during the initial stages of GST implementation. Further, restriction regarding availment of ITC upto certain specified limit beyond the ITC reflected in Form GSTR 2A was brought in the statute book only with effect from October 9, 2019.
For FY 2017-18 and FY 2018-19, the Board has now prescribed a detailed procedure to be followed in the following specified scenarios which may have caused the mismatch:
– Where supplier has not filed Form GSTR 1 but filed Form
– Where supplier has filed Form GSTR 1 and Form GSTR 3B but has failed to disclose the particular supply.
– Where supplier has wrongly reported B2B supply as B2C supply in Form GSTR 1.
– Where wrong GSTIN of the recipient has been reflected in Form GSTR 1 [in this case, the jurisdictional tax authority of registered person whose GSTIN was mentioned wrongly would be intimated that ITC is to be disallowed]
It has been stipulated that –
Where the difference between ITC claimed in Form GSTR 3B and reflected in Form GSTR 2A in respect of a supplier exceeds INR 5 lacs: The registered person must produce a certificate for the concerned supplier from CA/ CMA certifying that (a) supplies have been actually made by the supplier to the registered person and (b) tax has been paid by the supplier in his return in Form GSTR 3B. Certificate issued by the CA / CMA shall contain UDIN which can be verified from the respective institute's website.
Where difference does not exceed INR 5 lacs: A certificate must be produced from the concerned supplier certifying that (a) supplies have been actually made by the supplier to the registered person and (b) tax has been paid by the supplier in his return in Form GSTR 3B. No CA / CMA certificate is required.
It has been clarified that these instructions will only apply to ongoing proceedings in scrutiny/ audit/ investigation etc. and not to completed proceedings. These instructions will also apply in those cases where adjudication or appeal proceedings are still pending.
|The Department has been issuing various notices denying input tax credit on account of mismatch. The aforesaid clarification is a welcome step. However, the Circular is silent on the course of action to be adopted in situations which are not specifically covered under the four scenarios mentioned therein. It may be interesting to see how courts would consider the denial of input tax credit on account of the default of the supplier post this clarification [Ref: D.Y. Beathel Enterprises v. State Tax Office [W.P. (MD) No. 2127 of 2021]]
- Clarification on ITC entitlement where place of supply of transportation services is outside India:
Where the transportation of goods is outside India and the supplier and recipient are in India, the place of supply is the destination of goods as per section 12(8) of the IGST Act – leviable to IGST. With respect to such transactions, it has been clarified that:
– ITC of IGST paid would be available to the
– The GST provisions do not restrict availment of ITC by the recipient located in India if the place of supply of the said input service is outside India.
– The supplier must report the place of supply by selecting State Code '96 – Foreign Country' in Form GSTR 1.
|The GST exemption on export freight was recently withdrawn (w.e.f. 1 October 2022). The Circular is beneficial to the trade as it clarifies that ITC will be available to the exporter (i.e. recipient of service) even if the place of supply is outside India.
- Clarification regarding treatment of statutory dues under GST in respect of taxpayers for whom proceedings have been finalized under IBC:
GST dues are considered 'operational debt' under GST and the claim is required to be filed before the Resolution Professional under IBC. It has been clarified that in cases where demand for recovery has been issued in Form GST DRC 07 / 07A and where proceedings have been finalized against the corporate debtor under IBC reducing the amount of statutory dues, the jurisdictional Commissioner will issue an intimation in Form GST DRC-25 reducing the amount of demand. No fresh notice of demand is required to be issued. Corresponding amendments are being made in the GST Rules.
|The Circular clarifies the procedure to be followed by the Department on completion of IBC proceedings. However, it has been observed that the Tax Department continues to raise / confirm demands even after the approval of the Resolution Plan, directly in teeth of the judgment of the Supreme Court in the case of Ghanshyam Mishra [2021 SCC Online SC 313]. It is expected that the Board may issue a Circular clarifying the stance of the Tax Department.
- Clarification with respect to applicability of provisions of section 75(2) of the CGST Act:
Section 75(2) of the CGST Act provides that where allegations of fraud, suppression are held by the Appellate Authority / Tribunal as not sustainable, then the officer must redetermine the duty in terms of section 73(1). In relation to such situations, it has been clarified that:
– The proper officer is required to issue an order for
re-determination of tax within 2 years from the date of
communication of the appellate authority's order. This
re-determination order will be passed under section 75(3).
– As the normal time limit for issuance of show cause notice under section 73 is 2 years and 9 months, re-determination would cover only those periods which are covered within the normal limitation period.
– The proceedings for the period not covered within the aforesaid time limit would be dropped.
|The Circular clarifies that the Tax Department may continue a proceeding under section 73 even if the proceedings under section 74 were set aside by the appellate authority. However, the proceedings would continue only for the period covered by the normal limitation period (i.e. 2 years 9 months). The proceedings beyond the normal limitation period would be dropped.
- Clarification with respect to filing of refund application by unregistered persons:
Unregistered customers have been provided a facility for claiming GST refund under section 54 in case of cancellation of contracts where the time limit for issuance of credit note has expired. This may be applicable in cases where a flat owner cancels the agreement due to non-completion of construction activity etc. or where a long-term insurance policy is terminated. The mechanism for claiming refund has been provided and the corresponding amendments are being made under the GST Rules.
|The Circular clarifies the procedure to be followed for claiming refund by unregistered persons. The possibility of claiming refund in other cases where a taxpayer is not registered in a particular state may be examined keeping in view the reasoning/intent behind this clarification.
- Other issues:
– No-claim bonus (NCB): As a practice, insurance companies deduct (NCB) when no claim is made by the insurance person during the period of insurance. It has been clarified that:
- There is no supply provided by the insured to the insurance company in not lodging an insurance claim. NCB cannot be treated as consideration for supply provided by the insured to the insurance company.
- NCB amount is pre-disclosed in the policy document and therefore fulfils the conditions of section 15(3) of the CGST Act. It is, therefore, clarified that NCB is an admissible deduction under section 15(3) for the purpose of deduction from the value of insurance services.
– It has been clarified that exemption from e-invoices is applicable for the whole entity and not restricted to the nature of supply.
|The clarification on NCB would be welcomed by the insurance industry. While the Circular is applicable only for NCB, the reasoning drawn may also have bearing on other B2C industries (like e-commerce, retail online gaming etc.) which give cashbacks and loyalty points.
B. Key amendments in GST Rules:
ITC related amendments:
- A series of amendments have been made in the GST Rules, which are briefly summarized below:
– Rule 37 has been amended to provide that recipient needs
to reverse ITC proportionate to the amount not paid to the
– Rule 37A has been inserted to provide for reversal of ITC by the recipient by November, 30 of the following year if Form GSTR 3B has not been furnished by the supplier by September, 30 of the following year. If ITC is not reversed by November, 30 the amount will be payable along with interest. When the supplier subsequently furnishes Form GSTR 3B, credit may be re-availed.
– Rule 88C has been inserted to specify procedure for recovery of tax in case of difference in Form GSTR 1 and Form GSTR 3B, by such amount and such percentage as may be recommended by the GST Council. A person to whom an intimation is issued under Rule 88C would be barred from filing Form GSTR 1 for subsequent periods, if he has not furnished a reply explaining reasons for difference or depositing the unpaid tax.
– Rule 89 has been amended to specify the procedure for unregistered persons to claim GST refund.
– Rule 108 has been amended to exclude the requirement of furnishing a certified copy of the order in case of filing of appeal when the order is uploaded in the GST portal. In case the order is not uploaded on the GST portal, a self-certified copy of the order may be furnished within a period of seven days of filing the appeal.
– Rule 109C has been inserted to permit withdrawal of appeals at any time before issuance of show cause notice by appellate authority or before issuance of order, whichever is earlier.
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