Key GST Changes in India Applicable from January 1, 2022

Posted by Written by Naina Bhardwaj Reading Time: 6 minutes

We list key GST changes in India, which impact the scope of Supplies and enforcement mechanisms, withdraws concessions, introduces input credit restrictions, etc.

Starting January 1, 2022, several key amendments in the goods and services tax (GST) regime will be implemented. While some of these amendments were introduced in the Central Goods and Services Tax (CGST) Act, 2017 via the Finance Act, 2021, other changes have been made based on the recommendation of the GST Council in its 45th meeting.

The scope of these amendments cover several areas, including shifting the tax burden to e-commerce websites, input credit restriction, enforcement provisions, mandatory Aadhaar authentication for GST revocation and refund application, blocking of GSTR-1 for non-filing of GSTR 3B, empowering the GST Commissioner, etc.

To prevent confusion regarding key GST compliances and reporting, businesses are welcome to reach out to our tax advisors at india@dezshira.com.

Below is a list of all the key amendments made in the GST regime:

GST changes that impact e-commerce operators

The notification dated November 18, 2021 has amended a previous notification dated June 28, 2017 wherein:

  • A proviso in entry 15 to item (b) and (c) has been added whereby passenger transportation services mediated by an e-commerce platform in a non-air conditioned contract carriage or a stage carriage has been brought under the GST net.
  • Proviso to entry 17 has been added whereby facilitating passenger transportation services by an e-commerce platform through auto rickshaws have also been made taxable (auto-rickshaw services were hitherto completely exempt).

This implies that the food aggregators / e-commerce platforms using transportation service like Zomato, Swiggy etc. are liable to pay tax on restaurant services effective January 1, 2022. The liability to pay taxes on the non-restaurant services as per this directive still lies with the restaurants themselves.

Restaurant service means supply a) by way of or as part of any service; b) of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint – including mess, canteen – whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.

As per the latest notification, Zomato, Swiggy, etc. shall be responsible for charging, collecting, and paying GST at the rate of five percent on supply of “restaurant services” made by such restaurant through the e-commerce platform.

GST Categories

Tax Charged by Restaurants (%)

Old Tax Treatment

New Tax Treatment (w.e.f. January 1, 2022)

Registered under GST

 

 

 

 

E-commerce operator collects and pays GST

Restaurant pays the GST

E-commerce operator collects and pays GST

Restaurant pays the GST

Restaurant

5%

1%

4%

5%

 

Non-restaurant

5% / 12% / 18% / 28%

1%

Balance amount

1% TCS

 

Hybrid

5% / 12% / 18% / 28%

1 %

Balance amount

5% on restaurant services

Nil

1% TCS on non-restaurant services

Balance amount

Unregistered
(not registered under GST regime)

 

Restaurant

No tax

No tax

 

 

Non-Restaurant

No tax

No tax

 

 

Hybrid

No tax

No tax

 

 

Recovery of self-assessment tax without opportunity of difference between GSTR-1 and GSTR-3B

Earlier, self-assessed tax was to be determined on the basis of liabilities declared in Section 39. The new amendment aims to curb the practice of fake billing whereby sellers show higher sales in GSTR-1 to enable a purchaser to claim an input tax credit (ITC) but report suppressed sales in GSTR-3B to lower GST liability.

The amended section 75 (12) of the CGST Act states: “Notwithstanding anything contained in section 73 or section 74, where any amount of self-assessed tax in accordance with a return furnished under section 39 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.”

Businesses worried that this amendment would lead to hostile recovery actions from the tax department even for relatively frivolous/minor cases of mismatch for otherwise compliant players. Therefore, on January 7, 2022, the Central Board of Indirect Taxes and Customs (CBIC) issued guidelines on recovery proceedings and clarified that taxmen would give a “reasonable time” to businesses to explain the reasons for such mismatch.

Expansion of the GST Commissioners’ powers

This amendment has been made to empower officers to provisionally attach property of taxable person or any other person who is the beneficiary of the transaction, after initiation of the proceedings.

This amendment has been introduced vide Section 115 of the Finance Act, 2021, which seeks to amend section 83 (1) of the CGST Act, which shall be substituted as follows:

  • Where, after the initiation of any proceeding under Chapter XII, Chapter XIV, or Chapter XV, the Commissioner is 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 sub-section (1A) of section 122, in such manner as may be prescribed.

Various stakeholders have expressed concern regarding the potential for abuse of this draconian power to coerce taxpayers into depositing tax demands without following the due process of law. It is expected that this amendment will be challenged in court on grounds of constitutional validity.

Amendments in sections 129 and 130 of CGST Act, 2017

These amendments further empower tax authorities relating to detention of goods during movement and confiscation.

An amendment to section 129 to delink it with section 130 (confiscation) makes it a complete code in itself. The amount of penalty payable has also been increased to 200 percent and the option of getting the detained goods provisionally released has been deleted. Furthermore, time limits have been prescribed for issuance of notice and the order adjudicating the said notice.

Additionally, changes have been made in section 130 as well, along with changes to rationalize the penalties that can be imposed in case of confiscation of goods.

The amended section 129 reads as follows:

  • Section 129(1): 200 percent penalty is required to be paid to release the goods that are seized for violation of E-Way Bill provisions.
  • Section 129(2) has been deleted.
  • Section 129(3): Specified period of issuance of notice (seven days) and passing of order(seven days) under Section 129(3) of the CGST Act, 2017.
  • Section 129(6): Specified time limit for selling/ disposing seized goods or conveyance.
  • Section 129(4): No penalty shall be determined without giving opportunity of hearing.

Further, section 107(6) has been amended vide Section 116 of the Finance Act, 2021. This amendment states that “no appeal shall be filed against an order under sub-section (3) of section 129 of the CGST Act, unless a sum equal to 25 percent of the penalty has been paid by the appellant.”

Amendment related to input credit

Amendment has been made vide Section 109 of the Finance Act, 2021 to insert the new clause ‘(aa)’ in Section 16(2) of the CGST Act, 2017. This new clause introduces a new condition to avail input GST credit. It states that the credit of input GST on an input side invoice or debit note can be availed only when details of such invoice/debit note have been furnished by the supplier in their outward supplies (GSTR-1) and such details have been communicated to the recipient of such invoice or debit note.

This implies that the supplier’s declaration/return in GSTR-1 must match with GSTR-2A/2B at the recipient’s end in order for the recipient to avail credit of GST charged from it by the supplier.

Consequently, the five percent limit mentioned in Rule 36(4) has been rendered irrelevant as the recipient would not be able to take any ITC if the same is not reflected in the recipient’s GSTR-2A and/or 2B.

Mandatory Aadhaar authentication for GST revocation and refund application

With effect from January 1, 2022, it is now mandatory for the registered person to undergo Aadhaar authentication for the following purposes:

  • Filing of application for revocation or cancellation of registration in FORM GST REG-21 under Rule 23 of CGST Rules, 2017.
  • Filing of refund application in FORM RFD-01 under Rule 89 of CGST Rules, 2017.
  • Refund of the IGST paid on goods exported out of India under Rule 96 of CGST Rules, 2017.

Aadhaar authentication or e-KYC verification before filing of refund may be done by accessing the “Dashboard > My Profile > Aadhaar Authentication Status” on the GST portal.

Amendment to definition of ‘supply’ under GST

Section 7(1)(aa) of the CGST Act has been inserted with retrospective effect from July 1, 2017 to broaden the definition of ‘supply’ by including the supply of goods or services or both between any ‘person’ (other than an individual) to its members or constituents or vice versa for consideration.

In other words, this amendment seeks to classify the activity of a club or an association in supplying goods or services to its members as a ‘supply’ and therefore subject to GST.

Withdrawal of GST exemption/concession for specified infrastructure/EPC projects

The notification dated November 18, 2021 has amended entries 3 and 3A of the previous notification dated June 28, 2017 to omit the words “Governmental Authority or a Government Entity”.

The Entry 3 and 3A provided GST exemptions for pure services and supply of composite services provided to a ‘governmental authority’ or a ‘government entity’ where the value of goods did not exceed 25 percent. The said exemption has been withdrawn. The various statutory authorities which had qualified as a ‘governmental authority’ or a ‘government entity’ include:

  • Smart City project agencies
  • City development authorities
  • Government controlled universities
  • State-owned power utilities
  • State-owned industrial development
  • Public sector undertakings (PSUs)
  • Authorities like NHAI, etc.

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for more support on doing business in in India.

We also maintain offices or have alliance partners assisting foreign investors in Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Italy, Germany, and the United States, in addition to practices in Bangladesh and Russia.

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