The dissection of GST provisions in the Budget should be done in two parts — the speech of the Finance Minister and the proposed amendments to GST laws.
The difference between the two is quite stark — the Budget speech waxes eloquent on how GST has been a success while the amendments continue to impose further restrictions on availing input tax credit and filing of returns. In a rare occurrence, the Finance Minister deviated from the written script and announced extempore that GST returns for January 2022 have come in at ₹140,000 crore — an all-time record.
The figure does look high if one takes into account the fact that a good population of taxpayers were either down with Omicron or were recovering from it in January 2022. It is clear that artificial restrictions on input tax credit (mandating taxpayers to avail credit only on their input invoices that show up in GSTR 2B) and aggressive tax collections by the Department (pay now, rest later) have contributed to the record revenue collections.
These numbers have probably prompted the Finance Minister to estimate an almost 16 per cent increase in GST to ₹660,000 crore in the Budget Estimates for 2022-23. The Budget estimates for 2022-23 should be met with a stronger dose of the same medicine — restrictions and aggressive assessments. The Budget speech also highlighted the fact that GST laws have now become progressive and fully IT-driven — a fact that many taxpayers and their advisers who visit the Department daily would not agree with.
The Amendments
The proposed amendments to GST laws are a mixed bag of beneficial and not-so-beneficial proposals. Taxpayers could risk losing their registration if they do not file their returns for a period of three months (Section 29).
One of the beneficial clauses is an extension of the time limit for issuing credit notes from September to November of the financial year. While welcoming this provision, the only question from taxpayers would have been “Why not December?”. Similarly, the due dates to rectify errors in furnishing of returns has also been extended till November.
The “matching concept” that was proposed when GST was introduced never really took off. Budget 2023 nips this in the bud by amending the sections that mandated a two-way communication process. In short, taxpayers can only avail input tax credit on the invoices that are both in their books of account as well as auto-populated in GSTR 2B. It has almost become a habit for Budgets to introduce some provisions with retrospective effect.
The Tax Department has been showing and attempting to explain to taxpayers across the country Section 50(3) of the CGST Act which prescribes an interest of 24 per cent for undue or excess claim of input tax credit. The Section has also brought in some decent revenues. Dreaming of a fortune, the Budget makes the Section applicable from July 1, 2017. They also made sure that similar amendments are made in the SGST and UTGST Acts. Late fees are going to be levied for delays in filing returns.
Annual Budgets are not expected to make major announcements as far as GST amendments are concerned — that is the job of the GST Council. With Council meetings becoming a rarity, annual budgets can be used to bring in amendments that cannot wait.
Budget 2023 has missed a trick in not taking a cue from the Direct Taxes provisions in the same Budget as far as reducing litigation is concerned and extending the same to GST. In GST, different jurisdictional Authorities for Advance Rulings (AAR’s) have given contrary opinions on the same query. Budget 2023 could have brought in a structure to plug this issue. Take more, give less could well become a theme for Annual Budgets.
The writer is a chartered accountant