CGST (Fourteenth Amendment) Rule, 2020

Time limit for system-based GST Registration increased

The time for system-based registration has been enhanced from 3 days to 7 days. That means, now department shall be required to review and grant registration within 7 days against 3 days as provided earlier from the date of filing of the registration application. Where the applicant does not do Aadhaar authentication or where the department feels fit to carry out physical verification the time limit for grant of registration shall be 30 days instead of 7 days. 

More Powers to GST department in cancellation of GSTIN

Now the officer can proceed for cancellation of GSTIN where a taxpayer avails Input Tax Credit (ITC) exceeding than that permissible in Section 16. Clause (e) has been inserted in Rule 21 of CGST Rules 2017.

Now where the liability declared in GSTR 3B is less than that declared in GSTR 1 in a particular month, the department may now proceed with the cancellation of GSTIN. There might be some practical difficulties in implementing such a provision as there are a number of corrections that are made in GSTR 3B which may result in lower tax liability as compared with GSTR 1. The clause (f) newly inserted talks about details of outward supply to which we understand that Taxable value and tax both should be in synchronization between GSTR 1 and GSTR 3B.

Now, no opportunity of being heard shall be given to a taxpayer for suspension of GSTIN, where the proper officer (PO) has reasons to believe that the registration of the person is liable to be canceled. The words “opportunity of being heard has been omitted from clause (2) of Rule 21A. 

Where there are significant deviation/anomalies between details of outward supply between GSTR 3B and GSTR1 or inward supplies (ITC) between GSTR 3B and GSTR 2B which indicate contravention of Act, the department shall now serve a notice in FORM GST REG 31 to call explanation as to why GSTIN should not be canceled. The taxpayer shall be required to submit his reply within 30 days of such notice being served to him. 

Where a GSTIN is suspended no refund u/s 54 of CGST Act 2017 can be availed by the taxpayer. This means that first GSTIN Suspension proceedings have to be closed before applying for a refund. 

GSTR 1 to be blocked in case of non-filing of GSTR 3B

Where a taxpayer fails to file GSTR 3B for two subsequent months, his GSTR 1 shall now be blocked. Earlier non-filing of GSTR 3B used to result in blocking of E-way Bill facility but from now on it shall also result in blocking of GSTR 1 of the taxpayer. Similarly, for quarterly return filers, the taxpayer who fails to file GSTR 3B for the preceding quarter shall not be permitted to file GSTR 1 of the subsequent quarter.   

Restriction on the claim of ITC as per Rule 36(4)

The claim of ITC in respect of invoices not furnished by the corresponding vendors has now been restricted to 5% of the credit available in GSTR 2B. This limit earlier was 10% of ITC available. This would be mean that a taxpayer’s ITC claim shall now be restricted to 105% of the Credit reflected in his GSTR 2B. Any claim exceeding the specified limit shall result in the violation of the CGST Act read with rules which may result in the suspension of GSTIN as described above. The provision shall come into effect from 1st January 2021.

Restriction on Utilization of Input Tax Credit – Rule 86B

New Rule 86B shall be affected from 1st January 2021 wherein restriction has been placed on setting off more than 99% of tax liability from Input tax credit where the value of taxable supplies other than exempt supply and zero rated supply exceeds Rs. 50 lakhs in a month.

Though few exceptions have been provided to this rule which are as follows:

• Where the taxpayer has paid Income Tax exceeding Rs. 1 lakh in two preceding financial year.
• Where the taxpayer has received a refund exceeding Rs. 1 lakhs u/s 54 of CGST Act 2017. (i.e. Refund under LUT or inverted duty refund )
• Where the taxpayer has used electronic cash ledger to pay off liability on outward supplies which cumulatively makes 1% of the total liability up to the said month
• Where a person is a Government Department, Public Sector Undertaking (PSU), local authority or a statutory body.
• A taxpayer who is restricted to avail ITC as per rule 86B shall also not be permitted to file GSTR 1 where he has not filed GSTR 3b for the preceding tax period.

Narrowing the validity of E-way bill

Earlier one day was permitted for a distance up to 100 km under e way bill provision. Now the same has been increased to 200 km. This means that only one-day validity shall be granted to cover a distance up to 200 km which was earlier 100 km.