GST Rates and Compliance Updates: Key CBIC Notifications and Circulars from July-August 2022
The Central Board of Indirect Taxes and Customs (CBIC) issued a series of significant notifications and circulars between July and August 2022, introducing changes across multiple areas of GST compliance from Input Tax Credit (ITC) interest computation and filing timelines to GST rate revisions and amendments to key return forms. Businesses managing their GST and indirect tax compliance obligations should review these changes carefully, as several carry retrospective effect or revised procedural requirements that directly affect return filing, ITC claims, and sectoral tax positions.
ITC Interest, Computation Rules, and Electronic Ledger Updates
Levy of Interest on ITC Wrongly Availed and Utilized Retrospective Effect
CBIC vide Notification No. 9/2022-Central Tax dated 5th July 2022 has notified that interest is applicable only where ITC has been wrongly availed and utilized not in cases where the ITC has been reversed before utilization. This change is retrospectively effective from the appointed date of GST, providing relief to taxpayers who had reversed wrongly availed credits before using them. Businesses uncertain about their ITC exposure should consider a structured GST advisory and compliance review to assess the impact of this retrospective amendment on past periods.
Procedure for Calculation of Interest Under Rule 88B
CBIC vide Notification No. 14/2022-Central Tax dated 5th July 2022 has notified the procedure for interest calculation under Rule 88B across three scenarios:
(a) Interest on delayed payment under self-assessment (excluding Section 73 or 74 cases) shall be calculated on the Net Cash Liability debited from the electronic cash ledger, for the period of delay in filing beyond the due date.
(b) In all other cases (other than self-assessed liability), interest shall be calculated on the amount of tax remaining unpaid from the date it was due until the date of payment, without netting off ITC.
(c) Where interest is payable on ITC wrongly availed and utilized, it shall be calculated on such ITC for the period from the date of utilization until the date of actual reversal or payment of such credit.
Note: An Explanation has been added to Rule 88B clarifying that ITC availed shall be construed to have been utilized when the balance in the electronic credit ledger falls below the amount of ITC wrongly availed.
Transfer of Balance in the Electronic Cash Ledger
CBIC vide Notification Nos. 09/2022 and 14/2022-Central Tax dated 5th July 2022 has notified Form GST-PMT-09, allowing the transfer of balance available in the electronic cash ledger (under any head) from one head to another within the same registration, or between distinct persons.
Re-Credit of Electronic Credit Ledger Against Erroneous Refunds
CBIC vide Notification No. 14/2022-Central Tax dated 5th July 2022 has notified that where a registered person deposits back the amount of an erroneous refund along with applicable interest and penalty via DRC-03, the proper officer shall re-credit the electronic credit ledger through an order made in Form GST PMT-03A.
Clarification on Utilization of Balance in the Electronic Credit Ledger
CBIC vide Circular No. 173/02/2022-GST dated 6th July 2022 has clarified that the balance in the electronic credit ledger can only be used to pay output tax on taxable supplies whether on self-assessment or otherwise. It cannot be utilized for payments under RCM, or for interest, penalty, fees, or any other such amounts.
Extension of Timelines and Filing Relaxations
Extension of Timelines for GST Authorities and Taxpayers
CBIC vide Notification No. 13/2022-Central Tax dated 5th July 2022 has extended the following timelines:
(a) The time limit for issuance of orders under Section 73(10) of the CGST Act, 2017 for recovery of tax not paid, short paid, or ITC wrongly availed for reasons other than fraud, willful misstatement, or suppression of facts for FY 2017-18 extended up to 30th September 2023.
(b) The period from 1st March 2020 to 28th February 2022 is excluded for computation of limitation for recovery of erroneous refunds under Section 73(10) of the CGST Act, 2017.
(c) The period from 1st March 2020 to 28th February 2022 is excluded for computation of limitation for filing GST refund claims under Section 54 or 55 of the CGST Act, 2017.
Exemption from Filing Annual Return for FY 2021-22
CBIC vide Notification No. 10/2022-Central Tax dated 5th July 2022 has exempted registered persons with an aggregate turnover of up to Rs. 2 Crore for FY 2021-22 from the requirement to file the annual return.
Extension of Due Date for Filing FORM GST CMP-08
Notification No. 11/2022-Central Tax dated 5th July 2022 extends the due date for filing FORM GST CMP-08 (payment details for composition taxpayers) for the quarter ending 30th June 2022 to 31st July 2022.
Waiver of Late Fee for Filing GSTR-4
Notification No. 12/2022-Central Tax dated 5th July 2022 waives the late fee for filing GSTR-4 (annual return for composition taxpayers) for FY 2021-22, provided the return is filed on or before 28th July 2022.
Revocation of Registration Under Suspension
CBIC vide Notification No. 14/2022-Central Tax dated 5th July 2022 has added a proviso to Rule 21A(4) of the CGST Rules, 2017 providing that a suspended registration (on account of non-filing of returns) that has not been cancelled shall be deemed revoked i.e., the registration shall be automatically activated upon furnishing of all pending returns.
Amendments to Return Forms: GSTR-3B and GSTR-9
Key Changes in Form GSTR-3B
CBIC vide Notification No. 14/2022-Central Tax dated 5th July 2022 has introduced the following changes in FORM GSTR-3B. Businesses should review their return filing processes against these amendments as part of their ongoing GST compliance review:
(a) A separate field (paragraph 3.1.1) has been inserted to report supplies notified under Section 9(5) of the CGST Act, 2017 i.e., supplies on which tax is payable by the electronic commerce operator. A corresponding change has been made in paragraph 3.2.
(b) ITC reversed and reported at paragraph 4(B)(1) which previously covered ITC reversed as per Rules 42 and 43 shall now also cover ITC reversed under Rule 38 (restricted ITC for banking companies or financial institutions) and Section 17(5) (blocked ITC).
(c) Paragraph 4(D), previously titled ‘Ineligible ITC’, has been renamed ‘Other Details’ and shall now cover under sub-item (1) “ITC reclaimed which was reversed under Table 4(B)(2) in earlier tax periods” and under sub-item (2) “Ineligible ITC under Section 16(4) and ITC restricted due to POS provisions.”
Key Changes in Form GSTR-9 for FY 2021-22
Notification No. 14/2022-Central Tax dated 5th July 2022 introduces the following changes in FORM GSTR-9:
(a) Registered persons must separately report Non-GST Supply (Table 5F) and have the option to report Nil-rated and exempted supplies separately or combined under the ‘exempted’ row.
(b) From FY 2021-22 onwards, reporting of 6-digit HSN codes is mandatory for taxpayers with annual turnover exceeding ₹5 Crore in the preceding year. For taxpayers with turnover up to ₹5 Crore, 4-digit HSN code reporting is required for all B2B supplies.
Mandatory Accuracy in GST Returns CBIC Circular
CBIC vide Circular No. 170/02/2022-GST dated 6th July 2022 mandates that taxpayers furnish correct and complete information regarding inter-State supplies and ineligible or blocked ITC and its reversal in both FORM GSTR-3B and statement FORM GSTR-1.
ITC-Related Clarifications and Adjustments
No Reversal of ITC on Supply of Duty Credit Scrips
CBIC vide Notification No. 14/2022-Central Tax dated 5th July 2022 has notified that the aggregate value of exempt supplies for determination of restricted ITC shall exclude the value of Duty Credit Scrips. Accordingly, common ITC shall not be restricted on account of such exempt supplies.
Clarification on ITC Availability on Obligatory Employer Services
CBIC vide Circular No. 173/02/2022-GST dated 6th July 2022 has clarified that the proviso after clause (iii) of Section 17(5)(b) of the CGST Act applies to the entire Section 17(5)(b). Where it is obligatory for an employer under any law to provide food and beverages, health services, cosmetic and plastic surgery, motor vehicle hire, club memberships, insurance, travel benefits, or similar services to employees, ITC will be eligible to the employer for such expenditure.
GST Rate Changes: Sectors Affected from 18th July 2022
GST on Renting of Residential Dwelling to Registered Persons
CBIC vide Notification No. 05/2022-Central Tax (Rate) dated 13th July 2022 has notified that services by way of renting a residential dwelling to a GST-registered person for either residential or commercial use shall attract GST with effect from 18th July 2022. The tax is to be discharged under the Reverse Charge Mechanism (RCM) by the registered recipient. It is irrelevant whether the supplier of rental services is registered under GST or not.
Forward Charge Mechanism Under GTA
CBIC vide Notification No. 03/2022-Central Tax (Rate) dated 13th July 2022 has notified that a Goods Transport Agency (GTA) now has the option to charge GST at 5% without ITC or 12% with ITC under the Forward Charge Mechanism, effective 18th July 2022. Previously, forward charge was only applicable at 12% with ITC. The RCM at 5% continues for supplies to specified recipients as per Notification No. 13/2017-Central Tax (Rate). GTAs opting for forward charge must make a specified declaration on their invoices. Businesses engaged in GTA-related transactions who need guidance on the applicable mechanism should consult an indirect tax litigation support specialist if disputes arise on the treatment applied.
GST Rate Increase for Government Works Contracts
As per Notification No. 03/2022-Central Tax (Rate) dated 13th July 2022, works contracts involving construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of archaeological sites, canals, dams, pipelines, water or sewerage treatment systems, residential complexes, roads, bridges, tunnels, terminals, railways (including monorail and metro), etc. executed for Central/State Government, local authorities, or others — have been moved from 12% to 18% GST. Works involving predominantly earthwork and sub-contracts thereof, previously taxed at 5%, are now taxed at 12%.
GST at 5% on Hospital Room Charges Exceeding Rs. 5,000 per Day
Vide Notification No. 03/2022-Central Tax (Rate) dated 13th July 2022, a new entry (Sl. No. 31A) has been inserted in Notification No. 11/2017-Central Tax to levy GST at 5% on services provided by a clinical establishment by way of providing room accommodation other than ICU/CCU/ICCU/NICU where room charges exceed Rs. 5,000 per day to a person receiving healthcare services.
Levy of GST on Pre-Packaged and Labelled Goods
As per Notification No. 07/2022-Central Tax (Rate) dated 13th July 2022, GST is now applicable on the supply of pre-packaged and labelled goods on which a declaration is required under the Legal Metrology Act, 2009. The earlier distinction between branded and unbranded goods has been done away with.
Other Noteworthy Amendments
Particulars on Tax Invoice in Specified Cases
CBIC vide Notification No. 14/2022-Central Tax dated 5th July 2022 has notified a declaration requirement for tax invoices where a taxpayer such as an insurer, banking company, or GTA has not issued the invoice as per the manner specified under Section 48(4) (i.e., e-invoice), even though the taxpayer’s aggregate turnover from FY 2017-18 onwards exceeds the notified limit. Such taxpayers must include a declaration to this effect on the tax invoice.
Endorsement of Invoices for SEZ Units by Authorized Officers
CBIC vide Notification No. 14/2022-Central Tax dated 5th July 2022 has notified that an Authorized Officer as defined under Section 2(c) of the SEZ Rules, 2006 including Inspectors, Preventive Officers, Appraisers, or Superintendents of Customs posted in the SEZ may endorse invoices to SEZ units or developers confirming receipt of supply for authorized operations.
FOB Value for Determination of Eligible Refund Under Rule 89
CBIC vide Notification No. 14/2022-Central Tax dated 5th July 2022 has inserted an explanation providing that for zero-rated supplies exported without payment of tax, the value of goods exported shall be taken as the Free on Board (FOB) value or the value declared in the tax invoice or bill of supply, whichever is less for the purpose of determining the eligible refund amount under the formula in Rule 89(4) of the CGST Rules, 2017.
E-Invoicing Threshold Reduced to INR 10 Crore from 1st October 2022
As per CBIC Notification No. 17/2022-Central Tax dated 1st August 2022, e-invoicing is mandatory with effect from 1st October 2022 for every registered taxable person whose aggregate annual turnover exceeds Rs. 10 Crore in any of the financial years from 2017-18 onwards. The earlier limit was Rs. 20 Crore. For further details refer to: CBIC Notification on E-Invoicing Threshold.
Additional Resources
For further reading on related GST compliance, ITC, and return filing topics, the following MBG insights may be useful: