Budget 2021 was announced by Finance Minister Nirmala Sitharaman on February 1. Several amendments were made in this year’s budget concerning goods and service tax. Most of these changes were made to support small and medium businesses during the pandemic. This includes the relaxations in audit requirements and computation of interest payable against outstanding liabilities.
While the government has tried to address most of them in Budget 2021, decisions concerning Section 16(4), late fee or amnesty is still pending. These issues have been a pain point for most GST consultants and taxpayers for the past few years. However, there have been no amendments to these critical areas.
Amendments announced in Budget 2021 under GST
Input tax credit and 2A/2B
There have been significant changes in Section 16 of the GST Act. This section mainly talks about the input tax credit, according to the latest amendment. Supplier invoices or debit notes uploaded in GSTR 1 should be communicated to the recipient, as specified under Section 37. The purchaser cannot claim the input tax credit until the invoices/debit notes are reflected in GSTR 2A/2B.
Relaxation in audit requirements
Amendments concerning audit requirements will broadly impact GST consultants. Section 35 (5) mandated GST audits for businesses with turnover exceeding Rs 5 crore. This clause has now been omitted. However, taxpayers must keep in mind that this will not impact the audit for the fiscal year 2019-20.
Annual return and reconciliation
As per Section 44(1), registered taxpayers with a turnover exceeding Rs 2 crore have to file their annual return in GSTR 9. Its sub-section (2) stated that those eligible for GST audit under 35(5) have to provide audited financial statements and reconsideration statements along with 44(2).
However, the deletion of Section 35(5) led to the obsoletion of Section 44(2). This prompted the revision of Section 44 in Budget 2021.
According to the new Section 44, GSTR 9 and GSTR 9C have been merged. The only relaxation provided here is that CA certification is no longer required; the documents’ self-certification is acceptable. However, reconciliation of figures is still needed, wherein the taxpayers are advised to seek help from professionals.
Interests and penalties
Amendments in Section 50 provide that here on interest has to be paid only on the amount debited from the electronic cash ledger. This will be effective from July 1, 2017.
Amendment in Section 75 (12), clause 105 inserts an explanation to clarify the term ‘self-assessed tax’. The expression self-assessed tax shall here on include the “tax payable in respect of the details of the outward supplies furnished under section 37 but not included in the return furnished under section 39”.
To simplify, invoices uploaded in GSTR 1 not shown while computing the GSTR 3B liability will be included in the self-assessed tax. The government can recover such tax without issuing a show-cause notice. If the turnover depicted in GSTR 1 is more than that described in GSTR 3B, the provisions of Section 79 can be directly invoked without prior intimation.
The entire process of calculating and filing GST can consume a lot of time. A better approach would be to hire a reliable GST consultant like Dewan P.N. Chopra & Co., S. N. Dhawan & Co LLP, Desai Haribhakti & Co., etc., for tax calculation and invoicing.
The goods and service tax has been criticised since its inception. The government has been making small changes every year to make it more acceptable. However, the amendments made in Budget 2021 have been unsettling for GST consultants and taxpayers. The amendment in Section 16, in particular, has generated a lot of heat amongst the taxpayers. Also, the relaxations in audit requirements and CA certification have raised concerns amongst GST consultants and experts.