Key Changes in GST w.e.f from 1st January 2021- TaxHelpdesk

Key Changes in GST Effective from Jan 1, 2021

Central Board of Indirect Taxes and Customs vide Notification No. 94/2020-Central Tax dated 22.12.2020 has issued Central Goods and Services Tax Rules (Fourteenth Amendment), 2020, inter alia, amending Rule 36(4) of the Central Goods and Services Tax Rules, 2017 (CGST Rules), w.e.f. January 1, 2021 in following manner:

1. Rule 36(4) amended to reduce ITC entitlement for invoices not furnished by supplier from 10% to 5% 
Rules 36(4) as amended by CBIC which will be effective from January 1, 2021, will be read as follows
“(4) Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been furnished by the suppliers under sub-section (1) of section 37 in FORM GSTR-1 or using the invoice furnishing facility, shall not exceed 5 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been furnished by the suppliers under sub-section (1) of section 37 in FORM GSTR-1 or using the invoice furnishing facility

Provided that the said condition shall apply cumulatively for the period February, March, April, May, June, July and August, 2020 and the return in FORM GSTR-3B for the tax period September, 2020 shall be furnished with the cumulative adjustment of input tax credit for the said months in accordance with the condition above.”

Therefore, restriction on claim of Input Tax Credit wrt invoices/debit notes not furnished by the suppliers has now been reduced from 10% to 5% of the credit available in GSTR-2B.

2. Mandatory payment of 1% from cash ledger where taxable supply other than exempt supply and zero rate supply, in a month exceeds ₹50 lacs.
In order to curb tax evasion through fake invoicing, CBIC has inserted Rule 86B in GST Rules which is related to the cash ledger. Businesses having  monthly turnover of upto ₹50 lacs will have to mandatorily pay at least 1% of their GST liability in cash.
However, this rule shall not be applicable:
(i) Where the taxpayer (managing director or partner of the company) has paid Income Tax exceeding ₹1 lakh in two preceding financial year.
(ii) Where taxpayer has received refund exceeding ₹1 lakhs under Section 54 of CGST Act, 2017.
(iii) Where taxpayer has used electronic cash ledger to pay of liability on outward supplies which cumulatively makes 1% of the total liability up to the said month
(iv) Where a person is a Government Department, Public Sector Undertaking (PSU), local authority or a statutory body.

3. If the liability declared in GSTR-3B is less than the liability declared in GSTR-1 in a particular month, then department may now proceed with cancellation of GSTIN.
Through the newly inserted clause(f) to Rule 21 of CGST Rules, 2017, the department now has the option to proceed with the cancellation of GSTIN of the registered taxpayer, if his liability in GSTR-3B is less than the liability declared in GSTR-1.

4. If the registered GST taxpayer fails to file his GSTR-3B for two consecutive months, then his GSTR-1 shall be blocked.
Earlier, in case of non-filing of GSTR-3B, it used to result in blocking of e-way but now through this notification, if the taxpayers fails to file his GSTR-3B for two consecutive months, then his GSTR-1 will also be blocked.

5. No opportunity of being heard in case of suspension of GSTIN.
Through this notification, Rule 21(2) has been amended to omit the words “opportunity of being heard”. If the proper office has reasons to believe that the registration of person is liable to be cancelled, then no opportunity of being heard shall be given to the taxpayer.

6. GSTIN suspension to be applied before applying for refund
In order to claim the refund, the registered taxpayer will now have to first apply for suspension under Section 54 of the CGST Act, 2017 and then, apply for refund. Therefore, first suspension proceedings have to be closed and then the refund is to be applied for.

7. Notice from department if there is huge deviation in details of outward or inward supplies
Significant deviation/anomalies between details of outward supply between GSTR 3B and GSTR1 or inward supplies (ITC) between GSTR 3B and GSTR 2B indicates the contravention of Act. The department shall now serve a notice in FORM GST REG 31 to call explanation as to why GSTIN of the registered taxpayer should not be cancelled for such contravention. The taxpayer shall be required to submit his reply within 30 days of such notice being served to him.

8. e-way bills will be valid for one day to transport 200 km from 1 January, instead of the existing 100 km.
Through this notification, CBIC has notified that now only one day validity shall be granted to cover a distance up to 200 kms which was earlier 100 km, under e-way bill provision

9. Cancellation of GSTIN, if ITC exceeds the limit prescribed in Section 16
CBIC by inserting clause (e) to Rule 21 of CGST Rules, 2017 has stated that in this notification that the officer now can proceed for cancellation of GSTIN where a taxpayer avails Input Tax Credit (ITC) exceeding than that permissible in Section 16.

10. The time for system based registration has been enhanced from 3 days to 7 days.
The time limit for system-based registration now will be enhanced from 3 days to 7 days. This means that now department shall be required to review and grant registration within 7 days instead of 3 days, as provided earlier from the date of filing of the registration application. It is also further notified that 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.

11. Quarterly filing of GSTR-1 and GSTR-3B
Taxpayers having turnover of ₹5 crores will now have an option to file their GSTR-1 and GSTR-3B quarterly.

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