In the build-up to the 48th meeting of the GST Council, the grapevine was that the Council would fix two major matters that needed resolution — the GST rate on online gaming services and the procedure to get the GST Tribunals up and running.
After the meeting, the Ministry of Finance summarised the proceedings. Apart from the two aforementioned matters, many other matters were recommended by the Council. But taxpayers were disappointed since they were still left with no proper means of appealing against orders passed by trigger-happy officers.
Input tax non-credit
The provisions regarding Input tax credit in GST laws today are an extremely diluted version of the “seamless credit across-the-board” that were conceptualised in 2017. Restrictions abound and the tax compliance behaviour of the issuer of the invoice are critical to avail credit.
At their latest meeting, the GST Council further tightened these provisions. The Council has recommended to amend sub-rule (1) of rule 37 of CGST Rules, 2017 retrospectively with effect from October 1, 2022to provide for reversal of input tax credit, in terms of second proviso to Section 16 of CGST Act, only proportionate to the amount not paid to the supplier vis-a-vis the value of the supply, including tax payable.
In addition, the Council recommended to insert Rule 37A in CGST Rules, 2017 to prescribe the mechanism for reversal of input tax credit by a registered person in the event of non-payment of tax by the supplier by a specified date and mechanism for availing credit again if the supplier pays tax subsequently. This would ease the process for complying with the condition for availing input tax credit under Section 16(2)(c) of CGST Act, 2017. The Council also recommended that a circular be issued to detail a procedure for verification of input tax credit in cases involving difference in input tax credit availed in GSTR-3B vis-a-vis that available as per GSTR-2A during FY 2017-18 and 2018-19, a move that should help taxpayers who are at the receiving end of notices demanding tax for prior periods though the provisions were introduced in later periods. The Council has recommended that no GST is payable where the residential dwelling is rented to a registered person if it is rented it in his/her personal capacity for use as his/her own residence and on his own account and not on account of his business.
The Council has recommended to raise the minimum threshold of tax amount for launching prosecution under GST to ₹2 crore from ₹1 crore except for the offence of issuance of invoices without supply of goods or services or both. The compounding amount is also being reduced from 50-150 per cent to 150 per cent of tax amount to the 25-100 per cent range. The Council also recommended the decriminalisation of offences of obstruction or preventing any officer in discharge of his duties, deliberate tempering of material evidence and failure to supply information.
Rules and forms are being amended for intimation to the taxpayer about the difference between liability reported by the taxpayer in GSTR-1 and in GSTR-3B for a tax period, where such difference exceeds a specified amount and/ or percentage, for enabling the taxpayer to either pay the differential liability or explain the difference. Another proposal is to restrict furnishing of GSTR-1 for a subsequent tax period if the taxpayer has neither deposited the amount specified in the intimation nor has furnished an explanation for the unpaid amount. The Council feels that these provisions would facilitate taxpayers to pay/explain the reason for the difference in such liabilities reported by them, without intervention of the tax officers. Soon some taxpayers will move a High Court over the restrictions and compliances placed on them without recourse to appeal to the Tribunal.
The writer is a chartered accountant