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Explained: New GST provisions to come into effect from Jan 1; concerns around them

🔴 So far, show cause notices were issued first and then the recovery process initiated in cases of mismatch in GSTR-1 and GSTR-3B.

Written by Aanchal Magazine , Edited by Explained Desk | New Delhi |
Updated: December 24, 2021 7:40:46 am
The provision, which was introduced as part of the Finance Act passed by Parliament earlier this year, has now been notified to be implemented from January 1, 2022. (File)

Goods and Services Tax (GST) authorities are now empowered to initiate recovery proceedings directly for mismatch in sales return GSTR-1 and the monthly summary return GSTR-3B.

The provision, which was introduced as part of the Finance Act passed by Parliament earlier this year, has now been notified to be implemented from January 1, 2022, and gives tax authorities way more powers to tackle alleged instances of mismatches in filings, amid concerns regarding the potential for misuse.

What does it imply for GST payers?

The Central Board of Indirect Taxes and Customs (CBIC), on December 21, notified January 1, 2022 as the date on which these provisions under the GST law would come into effect, allowing recovery to be made directly and without the issuance of a notice. So far, show cause notices were issued first and then the recovery process initiated in cases of mismatch in GSTR-1 and GSTR-3B.

Through the Finance Act, an explanation to sub-section (12) of section 75 of the CGST Act is being inserted to clarify that “self-assessed tax” shall include the tax payable in respect of outward supplies, the details of which have been furnished under section 37 but not included in the return furnished under section 39.

Section 75 of GST Act states where there is any self-assessed tax, it can be recovered without issuing show cause notice and the recovery proceedings under section 79 can be directly invoked.

For businesses now, it will be crucial that GSTR -3B and GSTR-1 should match with each other, and no differences will be allowed irrespective of the reasons.

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What does it mean for tax authorities?

The move is aimed at curbing the practice of fake billing, where sellers show higher sales in GSTR-1 to enable purchasers to claim input tax credit (ITC) and then report lower sales in GSTR-3B to reduce their GST liability. But tax experts said this also gives exclusive discretionary powers to the tax department.

AMRG & Associates Senior Partner Rajat Mohan said, “This is a draconian provision giving exclusive powers to the GST department to initiate tax recovery proceedings…this new change may arrest one significant part of fake billers, but the misuse of such wide provisions by field officers could not be ruled out.”

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