Central Board of Indirect Taxes and Customs (CBIC) has issued Notification No. 94/2020 dated 22nd December, 2020 to further amend the Central Goods and Services Tax (CGST) Rules, 2017.

Key Points of the Amendment are:

1. After Rule 86A, of the CGST Rules, 2017 with effect from the 1st day of January, 2021, new rule shall be inserted relating to “Restrictions on use of amount available in electronic credit ledger”, to provide that, the registered person shall not use the amount available in electronic credit ledger to discharge his liability towards output tax in excess of ninety-nine per cent. of such tax liability, in cases where the value of taxable supply other than exempt supply and zero-rated supply, in a month exceeds fifty lakh rupees. Further it has been provided that the said restriction shall not apply where –

a. the said person or the proprietor or Karta or the managing director or any of its two partners, whole-time Directors, Members of Managing Committee of Associations or Board of Trustees, have paid more than one lakh rupees as income tax under the Income Tax Act, 1961 in each of the last two financial years for which the time limit to file return of income under subsection (1) of section 139 of the said Act has expired; or

b. the registered person has received a refund amount of more than one lakh rupees in the preceding financial year on account of unutilized input tax credit with respect to zero rated supplies made without payment of tax; or

c. the registered person has received a refund amount of more than one lakh rupees in the preceding financial year on account of unutilized input tax credit with respect to credit that has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies; or

d. the registered person has discharged his liability towards output tax through the electronic cash ledger for an amount which is in excess of 1% of the total output tax liability, applied cumulatively, up to the said month in the current financial year; or

e. the registered person is a Government Department; or a Public Sector Undertaking; or a local authority; or a statutory body.

2. Sub Rule 4 of Rule 36 relating to Documentary requirements and conditions for claiming input tax credit has been substituted with effect from 1st day of January, 2021 in order to provide that Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been furnished by the suppliers under FORM GSTR-1 or using the invoice furnishing facility, shall not exceed 5% of the eligible credit available in respect of invoices or debit notes the details of which have been furnished by the supplier. Before this substitution, the eligible limit was upto 10%.

3. After Sub-Rule 4 of Rule 59 relating to “Form and manner of furnishing details of outward supplies”, a new sub rule 5 has been inserted to provide the following –

a. A registered person shall not be allowed to furnish the details of outward supplies of goods or services or both in FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for preceding two months.

b. A registered person who required to furnish GSTR-3B return for every quarter shall not be allowed to furnish the details of outward supplies of goods or services or both in FORM GSTR-1 or using the invoice furnishing facility, if he has not furnished the return in FORM GSTR-3B for preceding tax period

c. A registered person, who is restricted from using the amount available in electronic credit ledger to discharge his liability towards tax in excess of 99% of such tax liability under newly Rule 86B, shall not be allowed to furnish the details of outward supplies of goods or services or both in FORM GSTR-1 or using the invoice furnishing facility, if he has not furnished the return in FORM GSTR-3B for preceding tax period.

4. Rule 21 relating to “Registration to be cancelled in certain cases” has been amended and also new insertions has been made to provide that the registration granted to a person is liable to be cancelled, if-

a. The said person issues invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder.

b. Avails input tax credit in violation of the provisions of section 16 relating to Eligibility and conditions for taking input tax credit of the Act or the rules made thereunder

c. furnishes the details of outward supplies in FORM GSTR-1 for one or more tax periods which is in excess of the outward supplies declared by him in his GSTR-3B returns for the said tax periods;

d. violates the provision of newly introduced rule 86B, which has imposed 99% restricted on ITC (Input Tax Credit) available in electronic credit ledger of Registered Person. This means 1% of Output liability to be paid in cash. This limitation is applicable where the value of taxable supply other than exempt supply and zero-rated supply, in a month exceeds fifty lakh rupees.

5. Sub Rule 4A of Rule 8 relating to “Application for registration” shall be substituted with effect from a date to be notified to provide that every application for obtaining registration which has been made by a person other than the individual (in case of company Managing Director, whole time Director) shall be completed by the following procedure along with the verification of the original copy of the documents uploaded with the application in FORM GST REG-01 at one of the Facilitation Centers notified by the Commissioner –

a. biometric-based Aadhaar authentication and taking photograph (unless government has exempted such person or class of persons or any State or Union territory or part thereof), if he has opted for authentication of Aadhaar number; or

b. taking biometric information, photograph and verification of such other KYC documents, as notified, if he has opted not to get Aadhaar authentication done

6. Changes has been made under Rule 21A relating to “Suspension of registration” as follows –

a. Sub Rule 2 of Rule 21A has been amended to provide that no reasonable opportunity of being heard shall be provided ,where the proper officer has reasons to believe that the registration of a person is liable to be cancelled.

b. A new Sub Rule 2A has been inserted after Sub Rule 2 to provide that where, a comparison of the returns furnished by a registered person under GSTR-3B with (a) the details of outward supplies furnished in FORM GSTR-1; or (b) the details of inward supplies derived based on the details of outward supplies furnished by his suppliers in their FORM GSTR-1 or such other analysis, as may be carried out on the recommendations of the Council, show that there are significant differences or anomalies indicating contravention of the provisions of the Act or the rules made thereunder, leading to cancellation of registration of the said person, his registration shall be suspended and the said person shall be intimated in FORM GST REG-31, electronically, on the common portal, or by sending a communication to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said differences and anomalies and asking him to explain, within a period of thirty days, as to why his registration shall not be cancelled

c. A registered person, whose registration has been suspended because of violations of the new sub-rule 2 or newly inserted sub-rule 2A above shall also not be allowed to make any taxable supply during the period of suspension and shall not be required to furnish GSTR-3B return.

d. A new sub rule 3A has been inserted to provide that A registered person, whose registration has been suspended under sub-rule (2) or newly inserted sub-rule (2A), shall not be granted any refund, during the period of suspension of his registration.

e. As per subrule 4, the suspension of registration under sub-rule (1) or sub-rule (2) or newly inserted sub-rule (2A), shall be deemed to be revoked upon completion of the proceedings by the proper officer.

7. The validity period for the e-way bill has been substituted, with effect from the 1st day of January, 2021, as mentioned the below table-

8. In clause (b) of sub rule 1 of Rule 138E relating to “Restriction on furnishing of information in PART A of FORM GST EWB-01”, has been amended with effect from 1st day of January, 2021, so as to provide that any person other the person who have opted for composition scheme shall be restricted from furnishing the information in PART A of FORM GST EWB-01 if the return for two consecutive tax periods has not been furnished.

9. Form GST REG- 31, for “Intimation for suspension and notice for cancellation of registration” has been inserted.

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