Critical Changes in GST Compliances from 1st Jan 2021

94/2020 – 14th Amendment Rules 2020

Rule 21: Additional Grounds for Cancellation of Registration

(a) does not conduct any business from the declared place of business;

(b) issues invoice or bill without supply of goods or services in violation of the provisions of the Act, or the rules made thereunder; or

(c) violates the provisions of section 171 of the Act or the rules made thereunder.

(d) violates the provision of rule 10A.

(e) avails input tax credit in violation of the provisions of section 16 of the Act or the rules made thereunder; or

(f) furnishes the details of outward supplies in FORM GSTR-1 under section 37 for one or more tax periods which is in excess of the outward supplies declared by him in his valid return under section 39 for the said tax periods; or

(g) violates the provision of rule 86B

Impact of amendment of Rule 21

Previously the Commissioner did not have a prescribed Rule for canceling the registration incase of Sec 16 violation or when there was a major difference between outward tax liability as per GSTR 3B and outward tax liability as per GSTR 1.

Now with the insertion of clauses (e) & (f) in Rule 21, the Commissioner shall also have the prescribed powers to cancel GST Registration in case there is a non-compliance as per Sec16. Most important is Sec 16(2)(c) wherein requires proof of payment of tax by the supplier. Hence in case the amount of GST paid by the recipient to the supplier is ultimately not paid to the Govt., the dept. may invoke Rule 21.

Furthermore, Rule 21A(2) provides that at least suspension of GST Registration may be done in case of violation of Rule 21. The suspension can now happen even without a hearing. The vires of Rule 21A(2) with Article 14 of The Constitution may be tested in time to come.

No Natural Justice for Suspension of Registration!

Suspension of registration

21A(2) Where the proper officer has reasons to believe that the registration of a person is liable to be canceled under section 29 or under rule 21, he may suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under rule 22.

Impact of amendment of Rule 21A(2)

Rule 21A(2) provides that suspension of GST Registration may be done in case there is reason to believe that there is a violation of Rule 21 or Section 29. The suspension can now happen even without a hearing.

Reason to believe should ordinarily be strong enough and one expects that the department shall be careful in implementing suspension as an invocation of this provision would result in a standstill of the business of the taxpayer whereby it would not be able to issue invoices or waybills till such suspension continues.

The vires of Rule 21A(2) with Article 14 of The Constitution may be tested in time to come

SCN in case of differences as per SOME ANALYSIS

Rule 21A (2A) Where, a comparison of the returns furnished by a registered person under section 39 with –

(a) the details of outward supplies furnished in FORM GSTR-1; or

(b) the details of inward supplies derived based on the details of outward supplies furnished by his suppliers in their FORM GSTR-1, or such other analysis, as may be carried out on the recommendations of the Council, show that there are significant differences or anomalies indicating contravention of the provisions of the Act or the rules made thereunder, leading to the cancellation of registration of the said person, his registration shall be suspended and the said person shall be intimated in FORM GST REG-31, electronically, on the common portal, or by sending a communication to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said differences and anomalies and asking him to explain, within a period of thirty days, as to why his registration shall not be canceled

Impact of amendment of Rule 21A(2A)

Again Rule 21A(2A) is a stringent Rule whereby in case of significant differences between GSTR 2A & GSTR 3B or between GSTR 1 & GSTR 3B, suspension of GST Registration can be invoked immediately and in future cancellation, pf GST Registration too can be invoked.

One expects here too, that the department shall be careful in implementing suspension as an invocation of this provision would result in a standstill of the business of the taxpayer whereby it would not be able to issue invoices or waybills till such suspension continues.

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