Introduction to Budget 2021 – 22

The Goods and Services Tax (GST) has completed around 3 years of its implementation. GST has been recently known for increasing the compliance burden on taxpayers in view of simplifying tax systems and making it online.

Further, GST was introduced with a motive to remove cascading effect by introducing a system of seamless flow of credit, however, the word “seamless” has been done away with due to the insertion of various restrictions in form of Rule 86B, 36(4), 2A reconciliation and such others.

The Union Budget 2021 – 22 has finally announced on 1st February 2021. From a taxpayer to a tax expert, everyone had some expectations from the Finance Minister, Smt. Nirmala Sitharaman.

Trade & Industry in view of hardships faced during these 3 years, expected department to be the taxpayer-friendly system with an introduction of various measures in order to make it Truly “Good & Simple Tax”. The proposals made by Finance Minister are elaborated and analysed in detail in below paras.

(1) GSTR 1 be filed & Communication of Details – to avail Input Tax Credit [Clause 100]

A new clause (aa) to sub-section (2) of the section 16 of the CGST Act is proposed to be inserted to provide that input tax credit on invoice or debit note may be availed only when the details ofsuch invoice or debit note have been furnished by the supplierin the statement of outward supplies and; such details have beencommunicated to the recipient of such invoice or debit note.

Analysis: – Before insertion of clause (aa), the recipient was supposed to file return u/s 39 of CGST Act, and the supplier shall pay taxes so as to avail input tax credit. With the insertion of clause (aa), the supplier is supposed to show the details of such invoice or debit note in GSTR – 1, the ITC would be eligible to the recipient. The communication clause was already mentioned in section 37(1) of the CGST Act, however, now it has become the condition to avail ITC.

Such details will be communicated to the recipient of supply, which can be seen in user services > Communication between taxpayers. Recipient is required to accept the same. In case of discrepancy, a taxpayer can communicate with the recipient for issues like payment related issues or any other issue. In order to communicate with the suppliers, a taxpayer need to click on “Compose” tab.

(2) No requirement of GST Audit by CA / CMA u/s 35(5) [Clause 101 & 102]

As per section 35(5) of CGST Act, GST Audit is performed by CA / CMA if aggregate turnover exceeds a specific limit (Rs. 5 crores for FY 2019-20). However, the said section is being proposed to be deleted, meaning thereby there would be no requirement of GST Audit to be done by CA/CMA.

A consequent amendment has been made in section 44 of CGST Act, so as to remove the mandatory requirement of furnishing reconciliation statement (GSTR 9C) duly audited by specified professional and to provide for filing of the annual return on a self-certification basis.

It provides for the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return.

(3) Interest to be charged u/s 50 (1) on Net Cash Liability [Clause 103]

CBIC has clarified that the amendment in Section 50 was made prospectively in view of technical limitations. Also, it had clarified that no recoveries will be made for the past period to provide retrospective relief as decided by the GST Council.

Vide Finance Bill, 2021; the government has finally proposed to give legal validity to charge interest on net cash liability retrospectively w.e.f 1st July, 2017.

Section 50 of the CGST Act is being amended, retrospectively, to substitute the proviso to sub-section (1) so as to charge interest on net cash liability with effect from the 1st July 2017.

(4) Recovery in case of seizure & confiscation of goods & conveyance in case of Fraud shall be proceeded separately [Clause 104]: –

Section 74 of the CGST Act, provides for the assessment of the person in case of fraud, wilful misstatement, etc. For instance, as per section 64 of CGST Act, where the taxable person to whom the liability pertains is not ascertainable and such liability pertains to supply of goods, the person in charge of such goods shall be deemed to be the taxable person liable to be assessed and liable to pay tax and any other amount due under this section.

Thus, notice can be issued to person in charge of goods. Accordingly, the main person & person in charge of goods are separate.

As per explanation 1 to section 74, where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded.

(5) Insertion of meaning of Self Assessed Tax [Clause 105]

Section 75 (12) of CGST Act, provides that where any amount of self-assessed tax in accordance with a return furnished under section 39 (GSTR – 3B) remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79.

CBIC has proposed to clarify the meaning of self assessed tax by insering an explanation to Section 75(12), which states that, “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section37 (GSTR – 1), but not included in the return furnished under section 39 (GSTR 3B).

Thus, due care shall be exercised while filing GSTR – 1, because the details filled in GSTR – 1 but short paid in GSTR 3B, would amount to self-assessed tax not paid in GSTR 3B.

It is pertinent to note that if a person has self-assessed its tax liability then he is required to pay the same within 30 days for becoming due, otherwise, a penalty will be levied even if paid before issuance of show cause notice (SCN) or paid within 30 days of issuance of SCN. [S. 73(11)]

(6) Enlarging the Scope of Provisional Attachment [Clause 106]

As per section 83(1) of the CGST Act, there were only a few cases where the provisional attachment can be done i.e. where during the pendency of any proceedings under section 62 (Assessment of Non-filers) or section 63 (Assessment of unregistered persons) or section 64(Summary assessment) or section 67 (Inspection, search & seizure) or section 73 or section 74.

However, vide Finance Bill, 2021 it has been proposed that, where, after the initiation of any proceeding under chapter XII(Assessment), Chapter XIV (Inspection, Search, Seizure, and Arrest), or Chapter XV(Demands and Recovery), the Commissioners of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in Section 122(1A) of CGST Act(person who retains the benefit of the transaction), in such manner as may be prescribed.

With this, the government has enlarged the scope of provisional attachment which was limited to assessment pending section 62, 63, 64, 67, 73 & 74 to various chapters as enumerated above.

(7) Pre – Deposit for Appeal against detention, seizure, and release of goods and conveyances in transit – 25% of Penalty[Clause 107]

A person appearing before appellate authority shall pay the amount of Tax, interest, fine, fee & penalty, as is admitted, in full; and pre-deposit of the sum equal to 10% of the remaining amount of tax in dispute (not interest & penalty) (subj. to max Rs. CGST 25crores, SGST 25 crores) before appeal. [S. 107(6)].

Vide, Finance Bill, 2021, a person appealing before appellate authority against the order of detention, seizure & release of goods shall pay the amount of 25% of penalty as pre-deposit.

(8) Plethora of Amendments in Section 129 of CGST Act[Clause 108]

If a person who has transport goods while in transit in contravention of provisions, such goods & conveyance in which goods were transported shall be liable for detention or seizure & shall be released on payment of below penalty or security: –

Notice to Pay Penalty be passed within 7 days of Detention or Seizure, Order to be passed within 7 days from service of such order [Section 129(3)]: –

The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty.

Disposal of Seized Goods or Conveyance to recover penalty [Section 129(6)]: –

Where the person transporting any goods or theowner of such goods fails to pay the amount of penalty within 15 days from the date of receiptof the copy of the penalty order, the goods or conveyance so detained or seized shall be liable tobe sold or disposed of otherwise, in such manner and withinsuch time as may be prescribed, to recover the penalty payable.

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