CBIC amends rules to disallow transitional credit claims retrospectively

CBIC amends rules to disallow transitional credit claims retrospectively CBIC vide Notification No. 43/ 2020-Central Tax notified retrospective amendments to section 140 of the CGST Act, granting it the power to prescribe a time limit for availing transitional credit which was allowed as an input tax credit (ITC) from July 1, 2017. The notification has an effect of reversing the benefit granted by the Delhi High Court to all assessees of availing pending ITC till June 30, 2020, through an order passed on May 5, where it was ruled that time limit for transitional credit was only ‘directory’ and not ‘mandatory’ and thereby allowed a 3-year time limit to claim ITC. CBIC has appointed 18^th May 2020 as the effective date for enforcing the provisions of Section 128 of the Finance Act, 2020 in order to bring the aforesaid amendment in Section 140 of the CGST Act 2017. CBIC issued circular to clarify on various measures CBIC vide Circular No. 138/08/2020-GST has clarified the following issues raised in respect of announcements made to provide relief to the taxpayers in view of the spread of COVID-19.

1. Issue: As per notification no. 40/2017-CT (Rate) dated 23.10.2017, a registered supplier is allowed to supply goods to a registered merchant exporter at 0.1% when such goods are exported within a period of ninety days from the date of issue of a tax invoice. The request has been made to clarify the provision in the context of the exemption provided vide notification no. 35/2020-Central Tax dated 03.04.2020 due to the COVID-19 scenario. Clarification: Vide notification No. 35/2020-CT dated 03.04.2020, the time limit for compliance falling during the period from 20.03.2020 to 29.06.2020 has been extended up to 30.06.2020. Accordingly, it is clarified that the said requirement of exporting the goods by the Merchant exporter within 90 days from the date of issue of tax invoice gets extended to 30th June 2020, provided the completion of such 90 days period falls within 20.03.2020 to 29.06.2020.
2. Issue: Rule 45(3) of CGST Rules requires furnishing of FORM GST ITC-04 in respect of job work carried during a quarter by the 25th of the month succeeding that quarter. Accordingly, the due date of filing of FORM GST ITC-04 for the quarter ending March 2020 falls on 25.04.2020. Clarification has been sought in respect of its extension. Clarification: Vide notification No. 35/2020-CT dated 03.04.2020, the time limit for compliance falling during the period from 20.03.2020 to 29.06.2020 has been extended up to 30.06.2020. Accordingly, it is clarified that the due date of furnishing of FORM GST ITC-04 for Qtr-4 stands extended up to 30.06.2020.

Change in SOP’s for verification of IGST refunds to exporters  CBIC vide Circular No. 131/1/2020 dated 23rd January 2020 had introduced Standard Operating Procedure (SOP) to be followed by exporters in order to avoid fraudulent GST refunds. Such SOP included 100 % examination of consignments of few exporters at the customs port which are selected through tools of Artificial Intelligence and Data Analytics. The concerned exporter’s, on being informed or his own volition, shall furnish certain information in the Format as per prescribed Annexure-A to the aforesaid circular. Further, time periodicity and grievance redressal mechanism was duly incorporated in the circular. However, many representations have been received by the board against delay in the release of IGST refunds even beyond a 6-month delay. Considering such delays, CBIC vide circular dated May 20, 2020, has accordingly been re-examined SOP’s issued earlier with a view to curtailing delay in finalization of reports. It has been advised to Zonal Pr. Chief Commissioners / Chief Commissioners to review the positions and ensure all pending refund verification reports should be forwarded to Directorate General of Analytics and Risk Management (DGARM) by 05.06.2020 and fixed the time of 3 weeks for future verification reports. Further, in order to cut down the time taken in a grant of NOC, the following partial changes in the SOP are prescribed with immediate effect to streamline the process:

• • DGARM without waiting for the report from the field shall share the risky suppliers with Jurisdictional authorities;
  • Verification reports of the identified suppliers should be sent to DGARM. DGRAM can accordingly decide to grant NOC to eligible exporter;
  • Final NOC’s from DGRAM shall be updated in the system to remove such alerts for such suppliers;
  • In the case of inadmissible credit by suppliers, appropriate recovery proceedings shall be initiated by jurisdictional authorities.

Last Updated: 8^th June 2020 This article is contributed by:  Vaibhav Matta Senior Manager, Legal  

Tag: GST Updates