Union Budget 2022 was recently announced by the finance minister Smt. Nirmala Sitharaman wherein some crucial decisions were made in different areas of development. The finance bill 2022 was also announced the same day that listed key changes in GST that can significantly impact taxpayers and business owners across all spheres. In this article, we discuss the key areas that have seen multiple changes in GST laws and rules after the Union Budget 2022…

1. Changes and additions with respect to Input Tax Credit

• ITC has been a topic of discussion for taxpayers since the beginning of the GST tax regime. Changes in this section affect businesses significantly as it directly affects the additional cash flow. The latest changes suggested in finance bill 2022 with respect to Input Tax Credit in Budget 2022 are as follows:
• The complete text for Section 38 of the CGST Act has been substituted to ‘Communication of details of Inward Supplies and Input Tax Credit’. It seems GSTR-2B is now the document for determining ITC eligibility and ineligibility.
• No Levy of interest on ITC wrongly availed but not utilized under Section 50 of the CGST Act retrospectively from July 01, 2017.
• Section 16(2) now has a new clause (ba) with an additional condition to avail ITC.
• ITC can be claimed by November of next financial year instead of September of next financial year.

Since the rules of ITC have changed distinctively, read 10 factors to consider for defining your ITC strategy for 2022.

Explaining Section 38 Changes in detail:

In finance bill 2022, section 38 has been completely substituted and inserted some more conditions to avail GST ITC. In section 38, they have divided the auto-generated statement (GSTR 2B) into two parts.

Part A:
Details of inward supplies in respect of which credit input tax may be available to the recipient.
It seems from the above part that in Part A, there may be some credit where ITC would not be allowed, like ITC pertaining to non-business purposes, block credit etc. as they have used the words “may” for the availability of ITC.

Part B:
Details of supplies in respect of which such credit cannot be availed, whether fully or partly, by the recipient. In part B, whatever credit is available, is either ineligible or partly eligible. Now the credit of the recipient depends on the supplier.

Below are the new restrictions that are defined in the finance bill – Budget 2022 where the recipient is not allowed to take ITC for default of supplier.

1. If the person is a newly registered taxpayer under GST, the recipient of such a person cannot take credit for such a period as may be prescribed.
2. Any registered person who has defaulted in payment in taxes for such a period, recipient of such a person cannot take credit.
3. Any registered person, the liability payable by whom in GSTR 3B is less in comparison to GSTR 1, recipient of such person cannot take credit.
4. Any registered person who takes more ITC in comparison to GSTR 2A and that exceeds the credit that can be availed, recipient of such person cannot take credit related to such person.
5. Any registered person who has defaulted to discharge tax liability in cash in accordance with the provision of subsection 12 of section 49, recipient of such person cannot take credit related to such person.
6. Any other class of persons as may be prescribed.

2. Removal of Provisional ITC

The finance bill 2022 (a part of the union budget 2022) completely amended Section 41 of the CGST Act. It has been substituted to remove the concept of claiming eligible ITC on a “provisional” basis. Also, availing the self-assessed ITC is subject to such conditions and restrictions that are mentioned in the ITC changes section of this article.

You can read the latest provisional ITC changes and how it impacts you!

3. Changes in GSTIN Cancellation Rules

In the finance bill 2022 (a part of the union budget 2022), there are a few new changes related to the GSTIN Cancellation Rules as well. Clause (b) and (c) of sub-section (2) of Section 29 of the CGST Act are being amended.
Let us look at them in detail:

For Composite Taxpayers: If a taxpayer under the composition scheme has not filed their yearly return even after the 3 months from the due date, their GSTIN cancellation proceedings may get initiated.

For Normal/Regular Taxpayers: The time limit of a continuous period of 6 months has been removed. So, cancellation proceedings may be started even before 6 months if failed to file regularly.

Now that non-filing can lead to GSTIN Cancellations, here’s what you can do: Reasons Why Your GSTIN Can Get Cancelled And How To Avoid GSTIN Cancellation

4. Changes in Return Filing

With regards to changing GST Return filing norms, amendments have been made to both Section 37 and Section 39. Here are the changes:

• • As per the new sub-section (4) in Section 37, taxpayers are not allowed to furnish their details of outward supplies for a tax period if the filing is pending for any previous tax period subject to such conditions and restrictions may be specified.
  • In the case of Section 39, sub-section (10) has been amended. So, taxpayers are not allowed to file their returns if their returns under Section 37 are pending. Thus making it mandatory for taxpayers to file all the previous pending returns.
  • Section 42, 43 and 43A of the CGST Act are omitted to do away with two-way communication in the filing of GST Returns. Impact: GSTR 2 and GSTR3 is now finally buried.
  • A non-resident taxable person needs to furnish the return (GSTR 5) for a month by the 13th day of the following month.

5. Amendments with respect to Electronic Cash Ledger

There are a few changes in ECL as per Section 49 of the CGST Act. The changes include:

• In order to help taxpayers with multiple GSTINs to transfer excess cash balances from one state to another, a new amendment has been made that allows a taxpayer to transfer ECL balance to another taxpayer’s ECL. However, the person who is receiving the transferred amount must be from the same legal entity (can have a different GSTIN).

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