Key GST Reforms Initiated by CBIC during the year 2023
In a ground-breaking year for GST reforms, 2023 witnessed the Central Board of Indirect Taxes and Customs (CBIC) achieving unprecedented success, marking six years of seamless GST implementation. The latest data reveals a historic milestone in tax revenue collection, with April 2023 seeing an impressive Rs 1.87 lakh crore in collections.
Utilizing cutting-edge technology, CBIC has fortified the GST registration process with the introduction of a risk rating system. This innovative approach ensures meticulous verification, thwarting fraudulent entries and elevating the integrity of the system. Geo-tagging of business locations, automated suspension of registrations for non-filers, and a risk-centric approach to refund processing are few of the major GST reforms exemplifying CBIC’s commitment to eradicating malpractices.
In a bid to streamline filing procedures, CBIC has mandated the sequential filing of GSTR-1 and GSTR-3B. This strategic move promotes punctual returns and ensures the seamless availability of input tax credit. CBIC has initiated special campaigns against fake registrations, introduced system-based mechanisms for detecting mismatches, and unveiled a new functionality enabling unregistered entities to apply for temporary registration, are some of the GST reforms geared towards fostering compliance.
Furthermore, in the process of GST reforms addressing ease of doing business, the CBIC has implemented measures such as electronic cash ledger balance transfers, exemptions tailored for small taxpayers, and facilitation of intra-state supply through e-commerce operators. These initiatives underscore CBIC’s dedication to supporting businesses and enhancing cash flows. Noteworthy is the extension of GST exemptions for satellite launch services and the simplification of late fee structures, marking a significant stride in promoting ease of doing business.
Let us now delve into the details of the major GST reforms introduced by CBIC in the year 2023.
1. Use of Data Analytics & AI for risk rating of Registration applications:
As a most important GST reforms of the year, use of data analytics & AI was introduced in the GST system. To prevent the fraudulent persons entering into GST system, registration process has been strengthened by use of data analytics and artificial intelligence to identify risky applicants, so that their detailed verification, including physical verification can be done by the field officers before accepting the application for registration.
2. Facility of Geo Tagging of Place of business:
The facility of Geo Tagging of the place of business of the applicant for the registration as well as existing registered persons provided on the portal is one of the crucial GST reforms of the year.
3. System Based Suspension of Registration:
System based suspension of registration introduced in cases where returns are not filed for continuous period of 6 months was one of the biggest GST reforms initiated towards ensuring compliance.
4. Use of Data Analytics & Risk Parameters for risk rating of Refund applications:
GST refund applications are being assigned risk rating based on data analytics and risk parameters, so that detailed verification can be conducted by the tax officers while processing such risky refund applications, so as to ensure that undue/ineligible refunds are not sanctioned to the fraudulent taxpayers.
5. Sequential filing of GSTR-1 and GSTR-3B:
Filing of GSTR-1 has been made mandatory before filing of GSTR-3B for tax periods starting from 01.10.2022. Also, sequential filing of GSTR-1 has been mandated w.e.f. 01.10.2022. Thus, GSTR-1 as well as GSTR-3B have been made totally sequential tax period wise. This would ensure timely furnishing of returns and will smoothen the availability of the input tax credit to the recipient.
6. Special All India Drive against Fake Registrations:
A special all India drive was conducted jointly by Central and State tax authorities from 16.05.2023 to 15.07.2023 against fake registrations. Detailed guidelines were issued for the implementation of the said drive vide Instruction no. 01/2023-GST dated 04.05.2023.
7. Mechanism for Intimation of Mismatch between GSTR-1&3B or GSTR-3B&2B:
Under the process of GST reforms, a System based mechanism of intimation of mismatches in liability between GSTR-1 and GSTR-3B above a certain threshold (Rs 25 Lakh and 20% at present) has been introduced by CBIC for enabling taxpayers to either pay the differential liability or explain the difference. Similarly, a System based mechanism has been introduced for excess availment of ITC in FORM GSTR-3B vis-a-vis that available in FORM GSTR-2B above a certain threshold (Rs 25 Lakh and 20% at present).
8. New Functionality for Refund claim by Un-Registered persons:
A new functionality was made available on the common portal which allows unregistered persons to take a temporary registration to apply for refund (if any). Also, the manner and procedure for filing of refund applications by unregistered persons in certain circumstances has been prescribed vide Circular No. 188/20/2022-GST dated 27.12.2022.
9. Initiative for Improving Cash Flow of Taxpayers:
Provision has been made to provide for transfer of balance in electronic cash ledger of a registered person to electronic cash ledger of a distinct person. This provision would help taxpayer in easily transferring unutilized balance in cash ledger between the registered persons having same PAN, without need for filing refund claim with tax officers. This was one of the GST reforms targeted towards improving liquidity and cash flows of such taxpayers.
10. Permitting Small Taxpayers to make Intra-state supply of goods through ECOs:
Among the GST reforms benefiting small businesses, the GST council in its 47th meeting recommended for allowing unregistered suppliers and composition taxpayers to make intra-state supply of goods through E-Commerce Operators (ECOs), subject to certain conditions. The requisite amendments in the GST Act have been made by Finance Act, 2023 and then it has been notified w.e.f. 01.10.2023 vide Notification No. 34/2023-CT dated 31.07.2023 as per the recommendation made by the GST Council.
11. Extended Time for Rectification of Returns/Issuance of Cr Note/Availment of ITC:
Vide Notification No. 18/2022-CT dated 28.09.2022, w.e.f. 01.10.2022, amendments have been brought in the CGST Act to extend the time period for Rectification of returns/ Issuance of credit notes and for availment of ITC up-to 30th November following the end of the FY to which such details pertain. Earlier it was allowed up to the due date for furnishing of return for the month of September.
12. Late Fees for Delayed filing of GSTR-9/GSTR-9C rationalized:
Late fees for delayed filing of FORM GSTR-9/ GSTR-9C by registered persons having turnover up-to Rs. 20 crores have been rationalised by linking it to the taxpayers’ aggregate turnover in the relevant Financial Year.
13. Threshold Limit for e-Invoicing reduced to 5 Crore:
E-Invoicing system was introduced in India with effect from O1.10.2020 for B2B transactions as well as exports, for taxpayers with annual aggregate turnover of Rs. 500 crore and above. This threshold was further reduced to Rs 10 crores from 01.10.2022. This threshold limit has been further reduced to Rs 5 crore with effect from 01.08.2023 vide notification no. 10/2023-Central Tax dated 10.05.2023.
14. Relief from Late Fees for Delayed filing of GSTR-9/9C/10 of FY 2017-18 to 2021-22:
Vide Notification No. 07/23-CT dated 31.03.2023, late fee payable for delayed filing of FORM GSTR-9 / GSTR-9C for FY 2017-18 to FY 2021-22 was capped to maximum of Rs. 20,000/- (Rs. 10,000/- + Rs. 10,000/-) if filed between 01.04.23 to 30.06.23 and the due date was further extended till 31.08.2023 vide Notification No. 25/2023-CT dated 17.07.2023.
Vide Notification No. 08/23-CT dated 31.03.2023, late fee payable for delayed furnishing of final return in FORM GSTR-10 was capped to maximum of Rs. 1,000/- (Rs. 500/- + Rs. 500/-) if filed between 01.04.23 to 30.06.23 and the due date was further extended till 31.08.2023 vide Notification No. 26/2023-CT dated 17.07.2023.
15. Amnesty Scheme for Withdrawal of Orders u/s.62 issued up-to 28.02.23:
Vide Notification No. 6/2023-CT dated 31.03.2023, a conditional amnesty scheme was provided for deemed withdrawal of best judgement assessment orders issued under Section 62, in the cases where a valid return was not furnished within 30 days from the date of service of such assessment order issued up-to 28.02.23, if the pending return is filed by 30.06.23. Further, such date for filing of pending return was extended till 31.08.2023 vide Notification No. 24/2023-CT dated 17.07.2023.
16. Amnesty for Registrations Cancelled up-to 31.12.22:
Vide Notification No. 03/2023-CT dated 31.03.23, for such registrations which were cancelled up-to 31.12.22 for non-filing of returns and application for revocation not filed or appeal rejected or appeal pending within the specified time, the time limit for filing of application for revocation of cancellation of registration, was extended till 30.06.23. Further, vide Notification No. 23/2023-CT dated 17.07.23, the time limit for filing of application for revocation was extended till 31.08.23.
17. Taxpayers with ATO up-to 2 Cr in FY 2022-23 exempted from filing Annual Return:
Vide Notification No. 32/2023-CT dated 31.07.2023 the registered person, whose aggregate turnover in the financial year 2022-23 is up to two crore rupees, has been exempted from filing annual return for the said financial year.
18. Information sharing by Common portal to ‘Account Aggregator’:
Vide Notification No. 33/2023-CT dated 31.07.2023, ‘Account Aggregator’ has been notified as the systems with which information may be shared by the common portal based on consent provided by the registered person. This will help MSMEs in getting credit/business loan based on their GST registration.
19. Amendments in CGST Act to simplify & Decriminalise certain provisions:
In order to simplify and decriminalise certain provisions of the GST Act, based on the recommendation of GST Council, amendments have been made in provisions of CGST Act, 2017.
20. Constitution of GST Appellate Tribunal:
The requisite amendment in CGST Act, 2017, as recommended by the GST Council, for constitution of GST Appellate Tribunal has been made. Further action for functioning of the Tribunal is being taken.
21. GTAs permitted to pay GST under Forward Charge Mechanism:
With a view to further enhance ease of doing business, GTAs who pay duty on RCM basis have been given an option to pay GST under forward charge mechanism. GTAs are not required to file declaration for paying GST under forward charge every year. If they have exercised this option for a particular financial year, they shall be deemed to have exercised it for the next and future financial years unless they file a declaration that they want to revert to reverse charge mechanism (RCM).
22. GST exemption on Satellite Launch Services extended to Private Sector entities:
GST exemption on Satellite Launch Services supplied by ISRO, Antrix Corporation Limited and New Space India Limited (NSIL) has been extended to such services supplied by organisations in private sector also was one of the GST reforms to encourage Start-Ups.
23. Finalising Long-pending issues of GST on Online gaming:
The issue of GST on online gaming decided by the GST Council in its 51st GST Council meeting giving finality to long pending issue.
24. Exemption of water supply, health, sanitation, SWM, etc Services provided to Govt:
The 52nd GST council recommended to exempt services of water supply, public health, sanitation conservancy, solid waste management and slum improvement and upgradation supplied to Governmental Authorities.
25. Launching of Mera Bill Mera Adhikaar Scheme:
Mera Bill Mera Adhikaar Scheme was launched as a pilot project in select States/ UTs providing for rewards to the persons uploading B2C invoices on the Mera Bill Mera Adhikaar Application. This was one of the welcome GST reforms to encourage consumers to demand GST invoices for their purchases, fostering transparency and accountability in commercial transactions.
26. Clarity on Applicability of ISD Mechanism:
Vide Circular No. 199/11/2023-GST dated 17.07.2023, it has been clarified that Input Services Distributor (ISD) mechanism is not mandatory for distribution of input tax credit of common input services procured from third parties to the distinct persons as per the present provisions of GST law, and also to clarify issues regarding taxability of internally generated services provided by one distinct person to another distinct person.
27. Amendment in Rule-9 & Rule-25:
Amendment has been made in Rule-9 and Rule 25 of CGST Rules, 2017 to do away with the requirement of the presence of the applicant for the physical verification of business premises and also to provide for physical verification in high-risk cases even where Aadhaar has been authenticated.
28. Registration made mandatory for Overseas Online Money Gaming Entities:
Towards expansion of Tax base, some GST reforms initiated through certain amendments made in the Act w.e.f 01.10.23 to provide clarity on the taxation of supplies in casinos, horse racing and online gaming. These amendments provide level playing field to the suppliers of online money gaming based in India vs overseas suppliers providing online money gaming to the recipients in India. Registration has been made mandatory for such overseas suppliers of online money gaming and provisions made for punitive action including blocking of their websites, in case of contravention of provisions.
29. Amnesty Scheme to Appeal against demand orders issued up-to 31.03.23:
The Council has recommended providing an amnesty scheme for taxable persons, who could not file appeal u/s.107 of the CGST Act, 2017 against demand orders passed up-to 31.03.23 or whose appeal was rejected solely on the grounds of not filing within the time specified u/s.107(1). In all such cases, filing of appeal will be allowed up-to 31.01.24, subject to payment of pre-deposit of 12.5% of the tax under dispute, out of which at least 2.5% should be debited from Electronic Cash Ledger.
30. Automatic Restoration of Provisionally Attached Property after 1 year:
The Council recommended amendments in Rule 159(2) and FORM GST DRC-22 to provide that the order of provisional attachment in FORM GST DRC-22 shall not be valid after expiry of one year from the date of the said order. These GST reforms were initiated to facilitate release of provisionally attached properties after expiry of period of one year, without need for separate specific written order from the Commissioner.
In summary, the CBIC’s trailblazing GST reforms in 2023 have not only propelled revenue to record highs but have also fortified the system’s integrity and efficiency. These transformative measures in form of GST reforms backed by advanced technology, signify a commitment to compliance, transparency, and the continued success of the GST system in India.
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