New GST provisions will take effect on January 1; there are some reservations about them.

New GST regulations will take effect on January 1; concerned Goods and Services Tax (GST) authorities will now be able to commence recovery actions straight for sales return GSTR-1 and monthly summary return GSTR-3B mismatches.

The measure, which was included in the Finance Act enacted by Parliament earlier this year, has now been announced to take effect on January 1, 2022, and offers tax authorities far more ability to deal with alleged filing mismatches, prompting worries about potential misusens surrounding them 

What does this mean for taxpayers who pay GST?

On December 21, the Central Board of Indirect Taxes and Customs (CBIC) announced that certain aspects of the GST law would take effect on January 1, 2022, allowing for direct recovery without the need for a notification. In cases of mismatch in GSTR-1 and GSTR-3B, show cause notices have been sent initially, followed by the recovery process.

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An explanation to sub-section (12) of section 75 of the CGST Act is being inserted through the Finance Act to clarify that “self-assessed tax” includes the tax payable on outward supplies for which details have been furnished under section 37 but not included in the return furnished under section 39.

Section 75 of the GST Act says that any self-assessed tax can be recovered without the need for a show cause notice, and recovery proceedings under section 79 can be initiated immediately.

Why is it necessary for taxpayers to break down dividend income by quarter?

For enterprises, it is critical that GSTR -3B and GSTR-1 are identical, and no discrepancies will be tolerated, regardless of the reason.

What does this signify for tax administration?

The move is intended to stop sellers from reporting larger sales in GSTR-1 to allow buyers to claim input tax credit (ITC) and subsequently reporting lower sales in GSTR-3B to minimise their GST payment. However, tax experts claim that this also grants the IRS exclusive discretionary rights.

“This is a harsh clause granting the GST department exclusive rights to commence tax recovery actions,” AMRG & Associates Senior Partner Rajat Mohan remarked.

This new adjustment may deter a portion of bogus billers, but the possibility of field police abusing such broad rules cannot be ruled out.”