Central Goods and Services Tax (Second Amendment) Rules, 2022

Central Board of Indirect Taxes and Customs introduced the Central Goods and Services Tax (Second Amendment) Rules, 2022, vide notification no. 19/2022- Central Tax dated 28

th September 2022. Notably, the said amendment rules are effective from 1st October 2022. Important amendments/ omissions as notified vide the Central Goods and Services Tax (Second Amendment) Rules, 2022 are taken up and explained in the current article.

Additional grounds for cancellation of GST registration –

Rule 21 of the Central Goods and Services Tax Rules, 2017 covers grounds based on which registration of the person gets liable to be canceled. There are pre-existing 7 grounds [sub-rule (a) to sub-rule (g) of rule 21]. Now, the amendment rules have introduced the following two grounds [by adding sub-rule (h) and sub-rule (i) to rule 21] based on which registration of the person gets liable to be canceled under GST –

The registered person liable to furnish the return in Form GSTR-3B on monthly basis fails to furnish the same for a continuous period of 6 months; or
The registered person liable to furnish the return in Form GSTR-3B every quarter fails to furnish the same for a continuous two tax periods.

Amendment in provisions relating to reversal of input tax credit in case of non-payment of the consideration (rule 37) –

The provisions of rule 37 of the Central Goods and Services Tax Rules, 2017 are almost completely changed. The amended provisions state as under –

The registered person, who has availed input tax credit on inward supply of goods/ services, is required to reverse the input tax credit if payment towards the value of such supply of goods/ services is not done within 180 days to the supplier.
Here, the registered person needs to –
- Reverse an amount equal to input tax credit availed on such supply of goods/ services; and
- Pay interest as per provisions of section 50.
Such reversal is to be done while filing the return in Form GSTR-3B for the period immediately following the period of completion of 180 days from the date of issue of the invoice.
The registered person has entitled to re-avail the input tax credit after making payment of the value of such supply.

Amendment in the application of refund (rule 89) –

Now, the applicant needs to file an application in Form GST RFD-01 for claiming a refund of the balance lying in the electronic cash ledger as per provisions of section 49(6) of the Central Goods and Services Tax Act, 2017. Notably, the earlier such refund was available via furnishing return for the relevant tax period in Form GSTR-3 or

GSTR-4 or GSTR-7.

Various omissions due to the elimination of the two-way communication –

Vide the Finance Act, 2022, the two-way communication process in GST return filing was scrapped. Giving effect to the same many sections were omitted/ amended. Correspondingly, various omissions/ amendments are also carried out vide the Central Goods and Services Tax (Second Amendment) Rules, 2022. The same are highlighted hereunder –

Rule 36(2) covering availability of input tax credit only if relevant information is furnished in Form GSTR-2 is now stands omitted.
Amendment/ omission under rule 38 relating to claim of credit by a banking company/ a financial institution –

As per sub-rule (c), 50% of the remaining amount of input tax shall be input tax credit which is admissible to the banking company/ financial institution and the other remaining balance of 50% amount of input tax credit should be reversed in Form GSTR-3B;
Sub-rule (d) to rule 38 is completely omitted.

Rule 42(1)(g) and rule 43(1) the reference to Form GSTR-2 is omitted.
Form GSTR-1A, Form GSTR-2, and Form GSTR-3 are omitted.
All the following rules stand omitted –

Rule 69 – Matching of claim of the input tax credit;
Rule 70 – Final acceptance of input tax credit and communication thereof;
Rule 71 – Communication and rectification of discrepancy in the claim of input tax credit and reversal of the claim of the input tax credit;
Rule 72 – Claim of the input tax credit on the same invoice more than once;
Rule 73 – Matching of the claim of reduction in the output tax liability;
Rule 74 – Final acceptance of reduction in output tax liability and its communication thereof;
Rule 75 – Communication and rectification of discrepancy in a reduction in the output tax liability and reversal of claim of reduction;
Rule 76 – Claim of reduction in the output tax liability more than once;
Rule 77 – Refund of interest paid on reclaim of the reversals;
Rule 79 – Communication and rectification of discrepancy in the details furnished by e-commerce operator and supplier.

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Frequently Asked Questions

Common questions about CGST Second Amendment Rules.

The amendment rules have introduced two new grounds based on which a person's GST registration can be canceled: (i) If the registered person liable to furnish the return in Form GSTR-3B on a monthly basis fails to do so for a continuous period of 6 months, or (ii) If the registered person liable to furnish the return in Form GSTR-3B quarterly fails to do so for a continuous two tax periods.

The amended provisions state that if a registered person does not make payment towards the value of inward supply of goods/services within 180 days to the supplier, they must reverse the input tax credit availed on such supply and pay interest as per section 50. This reversal needs to be done while filing the return in Form GSTR-3B for the period immediately following the completion of 180 days from the date of invoice issuance.

As per the amendment, the applicant now needs to file an application in Form GST RFD-01 for claiming a refund of the balance lying in the electronic cash ledger as per provisions of section 49(6) of the Central Goods and Services Tax Act, 2017. Earlier, such refund was available by furnishing the return for the relevant tax period in Form GSTR-3, GSTR-4, or GSTR-7.

Due to the elimination of the two-way communication process in GST return filing, various rules and forms have been omitted or amended. These include the omission of Rule 36(2) related to the availability of input tax credit, amendments to Rule 38 relating to the claim of credit by banking companies/financial institutions, and the omission of various rules and forms like GSTR-1A, GSTR-2, GSTR-3, and others.

The reversal of input tax credit if payment is not made within 180 days is important to prevent the misuse of the input tax credit facility. It ensures that the registered person does not continue to avail the input tax credit indefinitely without making payment to the supplier. This provision aims to maintain the integrity of the GST system and prevent potential revenue leakages.

The cancellation of GST registration for non-filing of returns can have significant implications for businesses. It may lead to the suspension of business operations, the inability to issue tax invoices, and potential penalties or legal consequences. Therefore, it is crucial for registered persons to ensure timely filing of returns to avoid such consequences and maintain compliance with GST regulations.

The introduction of additional grounds for the cancellation of GST registration is aimed at ensuring better compliance with GST regulations and preventing potential misuse or fraud. By canceling the registration of non-compliant taxpayers, the GST authorities can maintain the integrity of the system and encourage voluntary compliance from registered persons.

The amended provisions allow a registered person to re-avail the input tax credit after making payment of the value of such supply to the supplier. This provision ensures that the registered person can claim the rightful input tax credit once the payment is made, while also ensuring compliance with the time limit for availing the credit.

The omission of various rules and forms related to the two-way communication process is a consequence of the elimination of this process in GST return filing. These changes aim to simplify the return filing process and reduce the administrative burden on taxpayers and GST authorities. However, it may also impact the verification and matching process for input tax credit claims.

The amendment to the refund application process, which now requires filing Form GST RFD-01, may impact businesses seeking refunds. While it aims to streamline the process, businesses will need to familiarize themselves with the new procedure and ensure compliance with the prescribed form and documentation requirements. This change may initially cause some transitional challenges, but it is expected to provide greater clarity and transparency in the refund process.