New GST rules effective from 1 January 2022

The Central Government has notified several amendments in the GST laws, effective from 1 January 2022. The recent amendments are made to curb the problem of fake bills and prevent tax evasions.

1. Increase in GST rate (from 5% to 12%) on textiles and footwear

There is an increase of GST from 5 to 12 per cent. It will be applicable on all finished goods, including apparel, footwear, and textiles (synthetic yarn, fabrics, and other man-made items) except cotton. 

The purpose of such amendments is to reduce the blockage of working capital. These sectors were covered under the inverted duty structure, where the unused input tax credits accumulated at various stages. Now, with an increase in GST rates, the taxpayers can utilize such blocked ITC.

2. E-commerce operators are liable to pay GST on services 

Currently, the restaurants collect GST from the consumer and deposit the same to the government. But now, E-commerce companies such as Swiggy, Zomato, Uber, Ola, and other E-commerce operators have to collect GST from consumers (instead of from the restaurants) and deposit GST @ 5% on services provided by them. 

Such services include passenger transport services and restaurant services. Further, they also need to issue invoices related to such restaurant services. 

As per the government survey, nearly INR 2,000 crore GST revenue was lost in the last 2 years.

3. Mandatory Aadhar authentication  For GST refund  & For revocation application

Aadhar authentication and Goods and Services Tax Identification Number will be necessary for claiming any type of refunds irrespective of the amount of claim. 

4. Blocking of GSTR -1 if last month GSTR-3B is not submitted        

If a registered taxpayer fails to file GSTR-3B for the preceding 2 months, he would not be allowed to provide the details of outward supplies of goods or services or both in GSTR-1.  

Therefore, from 1 January 2022, the facility of filing GSTR-1 will not be available if the taxes and GSTR-3B for the previous month have not been submitted. 

5. GST officers can visit premises without prior show cause notice

If the GST officer finds that the businesses have claimed higher sales in GSTR-1 than GSTR-3B, they can directly visit the business premises that have made such false claims of ITC. Officers are not required to issue any show-cause notice. 

The purpose of such provision is to keep track on the fake bills where the businesses showed higher sales in GSTR-1 to claim fraudulent Input Tax Credit (ITC) on purchases and lower sales in GSTR-3B to decrease their GST liability. Now, both the forms should match each other. 

6. Time limits for issuance of notice in case of detention or seizure of goods or conveyance 

In case of detention or seizure of goods or conveyance, the proper officer shall issue a notice (specifying the penalty payable) within seven days of such detention or seizure. Further, they shall pass an order within seven days from the date of service of such notice for payment of penalty.