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CBIC notifies 10 significant changes in CGST Rules 2020

The Central Board of Indirect Taxes and Customs (CBIC) notified 10 Changes in CGST Rules which is called the CGST (Fourteenth Amendment) Rules 2020, which are as follows : 

1. The notification has empowered the officer to proceed with the cancellation of GSTIN where a taxpayer avails Input Tax Credit (ITC) exceeding that permissible in Section 16. Clause (e) has been inserted in Rule 21 of CGST Rules 2017.

2. The CBIC has notified the increase in the Time limit for GST Registration from 3 days to 7 days, which means that now the department shall be required to review and grant registration within 7 days from the date of filing of the registration application.

It is further notified that if 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.

3. The notification amended Rule 36(4) in respect of Restriction on claim of ITC wherein it has revised the limit to 5% instead of earlier 10%. Mandatory payment of 1% from cash ledger if taxable supply exceeds ₹50 lakhs.

4. The notification inserted Rule 59(5) which says that a registered person shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 if he has not furnished the return in FORM GSTR-3B for preceding two months.

5. If 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.

6. The words “opportunity of being heard” has been omitted from clause (2) of Rule 21A, which means now the taxpayer’s registration can be cancelled without the opportunity of being heard, where the proper officer (PO) has reasons to believe that the registration of the person is liable to be cancelled.

7. Significant deviation 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. Taxpayers shall now be required to submit their reply within 30 days of such notice being served to him.

8. CBIC notified Rule 86B in respect of restrictions on use of amounts available in electronic credit ledger. Rule 86B is applicable on the registered person whose value of taxable supply other than exempt supply and export, in a month exceeds ₹50 lakhs limit to be checked for each month As per said Rule, taxpayers cannot use Input Tax Credit in excess of 99% of output tax liability.

However, Rule 86B shall not be applicable on a registered person who deposited more than Rs 1 lakh rupees as income tax under the Income-tax Act, 1961 in each of the last two financial years; the registered person has received a refund of more than Rs 1 lakh rupees in the preceding financial year on account of export under LuT or inverted tax structure; cumulatively upto the said month in the current financial year registered person has discharged his output tax liability in cash which is in excess of 1% of the total output tax liability and this rule not applicable on govt department, PSU, local authority.

The taxpayer has to track each month that cumulative discharge of output tax liability in cash in the current Financial Year is more than 1% upto filing of return.

9. Where a GSTIN is suspended no refund under section 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.

10. 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.

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