Usually in India, we will get significant amendments at the commencement of a new financial year due to the applicability of Finance Act related changes, but this time around, a good number of amendments are applicable at the start of a new calendar year thanks to various notifications which are giving effect to statutory provisions coming into force with effect from 1st January 2022.
Happy New Year 2022 to the business fraternity and wish everyone a smooth transition owing to these changes. Spare us 5 minutes to have quick insights into these recent GST amendments.
1. Cannot exceed Input credit in GSTR 3B in excess of credit available in GSTR 2B
[ Section 109 of Finance Act 2021 comes to force from 01.Jan.2022 vide Not.No. 39/2021– Central Taxes dt. 21.12.2021 – Inserting 16(2)(aa) of CGST Act ]
Change(s) – Input Tax Credit (ITC) can now be claimed only in relation to invoices furnished by supplier in GSTR-1 effective from January 1, 2022. There will be no more provisional claim of 5% given cushion under the current rule 36(4).
Impact – We are bound to expect more follow-ups and reconciliations between the Supplier and the Buyer in the B2B world. If your supplier is filing quarterly GSTR-1, then it would result in more funds getting locked up in your GST input electronic credit ledger at-least for a minimum period of 3 months.
2. Haven’t submitted GSTR-3B for the previous month, GSTR-1 filing will be blocked
[ Rule 59(6) of CGST Rules made applicable from 01.01.2022 vide Not.No.35/2021– Central Taxes dt. 24.09.2021 ]
Change(s) – From 1st January 2022, GST portal will block you from filing GSTR-1 return, if you have not submitted the GSTR-3B return for the preceding month. This functionality will be implemented on the GST Portal, wherein the system will check the filing of preceding GSTR-3B before permitting to file GSTR-1 for the subsequent month.
Say for example, if you have not filed the monthly GSTR-3B for November 2021 and you are trying to file GSTR-1 for December 2021 by 11th January 2022. Then, you will not be permitted by the GST portal to file GSTR-1 for December 2021 unless you have filed the GSTR-3B for November 2021.
Impact – If you don’t file GSTR-1 on time, then your customers will not get ITC in GSTR-2B as stated above, which will lead to loss of reputation, customers & revenue.
3. Restaurant services GST compliance obligation shifted to e-commerce operators
[ Not.No. 17/2021 (Rate) – Central Taxes dt. 18.11.2021 amending earlier Not.No. 17/2017 CT(R) ]
Change(s) – E-commerce operators are the ones who have to collect & remit the GST on restaurant services from 1st Jan 2022 instead of the hotels/restaurants. One exception to this new law is if the restaurants/eating joints are located at specified premises whose declared tariff is above INR 7,500/day, where the restaurants will continue to pay like in the 2021 scenario. Also, this new rule is applicable for restaurant services only and not on the goods sold by them, again continuing the current 2021 status quo on such cases.
Impact – From the restaurant perspective, for the dine-in/take-away services directly provided by them, they will be liable for GST obligations, whereas for the online orders through e-commerce operators like Swiggy/Zomato etc then it will be exempt in the hands of restaurants in respect of services only but goods (bought & sold) will be continued to be taxable at 5% or 12% as the case may be.
4. All items across the textile sector brought under a uniform rate structure of 12%
[ Not.No. 14 & 15/2021 (Rate) – Central Taxes dt. 18.11.2021 ]
Change(s) – GST rate has been increased/reduced at 12% to make it uniform across the textile sector. Apparels, Footwear have been increased to 12% GST category regardless of their value from January 1, 2022. Earlier, we had slab-based GST rates like 5% on goods up-to INR 1000 & 12% on goods above INR 1000. GST rates on certain synthetic fibers and yarn have been decreased from 18% to 12%. But the rates on Job Work by way of Dyeing-Printing of Textile Products increased from 5% to 12%.
Impact – Retailers in Textile sector is bound to increase their MRP/Sale price thus making them costlier for the end-consumers. Without such increase, retailers gross margin is affected on items sold after 1st January 2022, whose purchases were made at 5% GST before 31st Dec 2021 , especially when GST calculation is done on MRP inclusive method.
Note – However the 46th meeting of the GST council held on 31st December 2021, unanimously decided to defer the above GST rate hike on textiles from 5% to 12%, due to various representations received from the state governments and the business fraternity. We need to wait for the next council meeting to understand the future course of the above GST rate hike in the textile sector. Till such time, the current rates prevail.
5. Mandatory AADHAR authentication for GST Refund & Revocation applications
[ Rule 2(2), 2(3), 2(6)(i), 2(7) of CGST Rules made applicable from 01.01.2022 vide Not.No. 38/2021– Central Taxes dt. 21.12.2021 ]
Change(s) – AADHAR authentication is now mandatory from 1st January 2022 for GST applications like filing a refund (Form RFD-01) , revocation of cancellation of GST registration (Form GST REG-21), claiming IGST refund on exports (under Rule 96). The rules specify whose AADHAR is to be authenticated for various categories of persons like proprietor, partner, trustee or a managing director as the case may be. Alternative identification proof will be required if AADHAR is yet to be allotted, and such applications must be validated with AADHAR within 30 days of AADHAR allotment.
Impact – In continuation of AADHAR unique identification linking process across various Govt. departments like PAN/Mobile numbers/DBT schemes/Electoral card, there is no sparing GST department also. Once all such departments are synchronized, Govt. will have a holistic & centralized control over all its wings through AADHAR.
6. Your goods or vehicle are detained or seized, spend more to get them released
[ Sections 116-118 of Finance Act 2021 comes to force from 01.01.2022 vide Not.No. 39/2021– Central Taxes dt. 21.12.2021 – Amending 107,129,130 of CGST Act ]
Change(s) – If your goods or vehicle in transit is detained or seized by GST officials due to contravention of any GST provisions, then you may land up paying a penalty of 2X the tax liability or 50% of the value of the goods so detained, whichever is higher. Also, the penalty needs to be paid only by cash without availing any security bond or bank guarantee. If the penalty is not paid within 15 days of notice, then the goods or vehicle can be sold or disposed of to recover the taxes/penalties due. If you have to file an appeal against the detention order, you have to pay 25% of the penalty as deposit amount.
Impact – All these recent GST changes in vehicle transport from 1st Jan 2022 would result in huge cash outflows, if you are stuck in such detentions or seizures. The cost of litigation also has a significant impact in such scenarios.
7. Taxability scope of some transport services availed through e-commerce operators widened
[ Not.No. 16/2021 (Rate) – Central Taxes dt. 18.11.2021 amending earlier Not.No. 12/2017 CT (R) ]
Change(s) – Passenger transport services by Non-AC contract carriage or state carriage or metered cabs or auto/e-rickshaws or omnibus or any other motor vehicle will now be subject to GST from 1st January 2022, if such services are availed through e-commerce operators. For example, as an end consumer, your Ola/Uber auto fares will become costlier due to GST impact, but you are not subject to pay GST if you avail them directly without these e-commerce apps.
Impact – The Govt. is bringing more transportation services under the GST purview, if they are routed through e-commerce operators which would otherwise be exempted.
PS: One more amendment for 1st Jan 2022 (Non-GST related) impacting businesses in the Food industry
FSSAI Number mandatory to be disclosed in Invoices & other documents of Food Business Aggregators
[ FSSAI ORDER dt. 30.09.2021 ]
Change(s) – Effective 1st Jan 2022, it is mandatory for food business operators (FBOs) to mention their 14-digit FSSAI license registration number on receipts, invoices or bills on sale of products. When any operator issues 2 transaction documents such as in the case of transporters issuing transport challan, Bill etc. and an invoice, the FSSAI number needs to be mentioned on both documents. Exemptions will be system generated GST e-way bill and such other govt documents
Impact – Businesses will become more transparent to their customers for Food Safety Standards compliance.
GOFRUGAL THE SAVIOR
Gofrugal POS/ERP has always pioneered in addressing the challenges caused by GST changes with timely product updates for compliance requirements like GSTR 2B auto-reconciliation, E-commerce integration, etc. As always, please follow our product release notes to understand the recent enhancements made in our respective products to comply with Govt. norms and adapt to the best business practices.