Budget 2021: Key changes in GST to help small and medium- sized businesses

Key changes announced by Finance Minister Nirmala Sitharaman in budget 2021 are

1.Relaxation in the mandatory audit requirement for registered businesses

2. determination of interest payable against outstanding tax liability

3. specifying condition under which input tax credit can be utilised.

Mandatory Audit Requirement Relaxed

Finance minister has now announced that the businesses having turnover above 5 crore won't be required to get their accounts audited by a chartered accountant.

Similarly, the earlier need for an external certification of annual reconciliation statement has been abolished. Now, businesses can rely on self-certification for this purpose.

Interest Payable Only On Net Liability

The GST law requires a registered person to deposit tax collected by it before the deadline prescribed by the government. Businesses generally set off thr unutilised input tax credit available in the electronic ledger before paying the tax to the government.

In case of a delay in depositing text, businesses need to shell out interest up to the rate of 18%.

Taxpayers are faced with a question in such a situation- whether they must pay interest on their gross or net tax liability.

Gross tax liability means the entire outstanding amount of tax without any deduction of unutilised credit. This anomaly even lead to multiple rounds of litigation.

To clarify on this issue the government has now moved an amendment to the CGST Act which specifies that interest will only apply on the net tax liability. This Amendment will apply retrospectively from July 1 , 2017_ the date from which GST was enfocred.

Credit Available Only If Specified Conditions Fulfilled

The Central Goods and Service Tax Act says registered person can avail input tax credit against valid invoices if they comply with the prescribed requirements.
While the act prescribed no further conditions, the government amended the CGST rules to specify that tax credit can only be availed if supplier gives a valid invoice and furnishes it's details in his statement of outward supplies.

Taxpayers questioned the legal validity of the changes and the power of government to impose such restrictions through the rules.

Budget 2021 now introduces an amendment in section 16 of CGST Act to incorporate such restrictions.

The amendment to Section 16 seems rightly placed, said Dr Ajay Kummar Pandey, Advocate, 4C Supreme Law International. Section 16 never had a condition to say that input tax credit shall be only available if the supplier reflected his invoice in GSTR.

The only conditions were, filing of return, payment of tax, receipt of of goods and prossessing the tax invoice, he added.

The moot point that arises is whether credit can be denied due to the procedural lapse on the part of the supplier especially when the receiver has paid the consideration and tax Pandey questioned.

The restriction of credits in such circumstances may require a judicial review, he said.

Other important changes

The government has also proposed amendments which specify that a tax appeal can be filed in certain instances only after 25% deposit of the contested amount with the department allowing the GST commissioner to call for information from any person in connection with any matter under the CSGT Act.

Dr Ajay Kummar Pandey
Advocate & Consultant
4C Supreme Law International
editor.kumar@gmail.com, advocate@ajaykr.com
+91 98183 20572
www.drajaypandey.com
www.4csupremelawint.com