11 July 2022

EY Tax Alert
CBIC issues Notifications and
Circulars pursuant to 47th GST
Council Meeting

Tax Alerts cover significant Executive summary

tax news, developments and This Tax Alert summarizes recent Notifications1 and Circulars2 issued by Central Board of
changes in legislation that Indirect Tax and Customs (CBIC) pursuant to recommendations made by the Goods and
Services Tax (GST) Council in their 47th Meeting.
affect Indian businesses. They
The key changes are:
act as technical summaries to
keep you on top of the latest ► Declaration is to be provided on invoice where taxpayers are exempted from
issuing e-invoice.
tax issues. For more
► Manner of calculating interest on delayed payment of tax and reversal of wrongly
information, please contact availed and utilized input tax credit (ITC) under various scenarios have been
your EY advisor. prescribed.

► Manner of disclosure of ITC in GSTR-3B have been clarified. Further, the

consequential changes have been made in the said return.

► Clarification provided with respect to demand and penal provisions for

transactions involving fake invoices.

► It is clarified that refund in case of inverted tax structure will be eligible for
supplies under concessional rate notification.

► Clarification provided on applicability of GST on employee perquisites. Procedure

for re-credit of ITC on account of repayment of erroneous refund has also been
prescribed.

► Supplies by Duty Free shops (DFS) to be treated on par with exports and
accordingly, earlier rules and consequential circular have been withdrawn.

1
Notification No. 9 to 14/2022- Central Tax all dated 5 July 2022
2
Circular No. 170 to 176 – GST all dated 6 July 2022
Background ► In case of input tax credit (ITC) wrongly availed and
utilized, interest shall be calculated from the date of
utilization of such wrongly availed ITC till the date of
► Goods and Services Tax (GST) Council had held its 47 th
reversal or payment of such amount.
meeting on 28 and 29 June 2022 at Chandigarh.
► Further, ITC wrongly availed shall be construed to
► In the said meeting, the Council had made have been utilized, when balance in the electronic
recommendations relating to changes in GST rates on
credit ledger (ECRL) falls below the amount of ITC
supply of goods and services and law and procedures.
wrongly availed.
Reference is invited to our tax alert dated 30 June
20223.
► The extent of such utilization of ITC = Amount of ITC
wrongly availed – the balance in ECRL.
► Central Board of Indirect Taxes and Customs (CBIC) has
now issued Notifications4 and Circulars5, giving effect
to such recommendations.
► The date of utilization of such ITC shall be taken to be:

► On account of payment of tax whilst filing of

Key Changes return – due date of return or actual date of filing
of return, whichever is earlier.
Declaration for non-issuance of e-invoice
► In all other cases, date of debit in ECRL.
► Rule 48(4) of the Central Goods and Services Tax Rules,
2017 (CGST Rules) requires notified class of persons to Valuation of goods exported
prepare e-invoice if the aggregate turnover in any
financial year from 2017-18 exceeds the prescribed ► Rule 89(4) prescribes the formula for calculating the
limit. Further, certain registered persons are exempted refund in case of zero-rated supplies without payment of
from such compliance even if their turnover exceeds the tax.
above limit.
► An explanation has been inserted in the above Rule to
► Rule 46 of the CGST Rules specifies the content to be prescribe that the value of goods exported out of
included while issuing a tax invoice. The said rule has India shall be taken as lower of free-on-board (FOB)
been amended w.e.f. 5 July 2022 requiring the above value as declared in shipping bill/ bill of export and
class of exempted persons to include the following value as per invoice/ bill of supply.
declaration in the invoices issued by them:
Mismatch in respect of shipping bill
"I/We hereby declare that though our aggregate
turnover in any preceding financial year from 2017-18 ► Rule 96(1)(b) has been amended to provide that in case
onwards is more than the aggregate turnover notified of export of goods with payment of tax, if there is any
under sub-rule (4) of rule 48, we are not required to mismatch between the data in the shipping bill and
prepare an invoice in terms of the provisions of the said GSTR-1, the application for refund of tax shall be
sub-rule.” deemed to have been filed on such date when such
mismatch is rectified by the exporter.
Manner of calculating interest
Furnishing of correct and proper information in
► Rule 88B has been inserted in the CGST Rules with GSTR-3B & GSTR-1
retrospective effect from 1 July 2017 for prescribing
manner of calculating interest on delayed payment of ► It has been clarified that it is mandatory to furnish
tax. correct and proper information of inter-state supplies
and amount of ineligible or blocked ITC and reversal
► As per the said rule, in case of delay in filing of return, thereof in GSTR-3B and GSTR-1.
interest will be levied only on the net tax liability, which
is paid by debiting the electronic cash ledger (ECL), ► Details of inter-state supplies made to unregistered
unless such return is furnished after commencement persons, composition taxable persons and UIN holders
of any proceedings under Section 73 or 74 of the are required to be furnished place of supply-wise in
Central Goods and Services Tax Act, 2017 (CGST Act) Table 3.2 of GSTR-3B, even though the same have been
in respect of the said period. furnished in Table 3.1.

► In all other cases, where interest is payable under ► Changes have been made in respect of furnishing
Section 50(1), it will be levied on gross tax liability and information regarding ITC availed, reversal thereof and
calculated from the due date of payment till the actual ineligible ITC in Table 4 of GSTR-3B, which are as follows:
date of payment.
► In table 4(A), total ITC (eligible as well as ineligible)
will be auto-populated from GSTR-2B in different

3 4
IDT Alert - GST Council recommends rate rationalization and Notification No. 9 to 14/2022 - Central Tax all dated 5 July
changes in GST law and procedure 2022
5
Circular No. 170 to 176 – GST all dated 6 July 2022

EY Tax Alert 2
 fields, except for the ineligible ITC on account of time invoice along with underlying supply of goods or
period limitation in Section 16(4) or where the services to “C” and utilizes the above ITC for
recipient of an intra-state supply is located in a payment of tax liability.
different State/ Union Territory (UT) than that of
place of supply. ► Since B has availed and utilized ITC without receiving
the goods or services, the same is in contravention
► In Table 4(B)(1), registered person shall report of the provisions of Section 16(2)(b).
reversal of ITC, which are permanent and not
reclaimable, such as, on account of Rule 38, 42 or ► Therefore, B shall be liable for demand and recovery
43 and ineligible ITC under Section 17(5). of the said ITC under Section 74 along with interest
and penalty.
► In Table 4(B)(2), registered person shall report
reversal of ITC, which are not permanent in nature ► Further, as per provisions of Section 75(13), if penal
and can be reclaimed in future subject to fulfilment action is taken under Section 74, no penalty for the
of specific conditions, such as, on account of Rule same act can be imposed under any other provisions
37, Section 16(2)(b) and Section 16(2)(c). of CGST Act, including under Section 122.

► The net ITC available in Table 4(C) is as per the Case 3

formula 4A - [4B(1) + 4B(2)] and same will be
credited to the ECRL of the registered person. ► “A” has issued tax invoice to “B” without any
underlying supply of goods or services.
► Reclaimed ITC shall be shown under table 4(D)(1) for
disclosure purpose. It has been clarified that ► B avails ITC on the said tax invoice and further passes
reversal of ITC under Section 17(5) is being provided on the same to “C” by issuing invoice without
in Table 4(B), and hence the same need not be underlying supply of goods or services.
reported in Table 4(D)(1).
► ITC availed by B on tax invoice issued by A, is without
actual receipt of goods or services, and is ineligible
► In Table 4(D)(2), registered person may report ITC
not available, on account time period limitation in in terms of Section 16(2)(b).
Section 16(4) or where the recipient of an intra-state
supply is located in a different State/ UT than that of ► There was no supply of goods or services by B to C
place of supply. and no tax liability arose in respect of the said
transaction.
► For the aforementioned purpose, changes have been
made in Form GSTR-3B. ► Therefore, no demand and recovery of either ITC or
tax liability is required to be made from B under
Section 73 or 74 of CGST Act.
► Further, separate columns have been prescribed for
reporting of turnover in case of supplies made
through e-commerce operator. ► However, B shall be liable for penal action under
Section 122(1)(ii) and Section 122(1)(vii), both, for
issuing invoices without any actual supply of goods
Applicability of demand and penalty in respect
or services and for taking/ utilizing ITC without
of fake invoicing actual receipt of goods or services.

► Various issues have been clarified regarding ► It has also been clarified that actual action to be taken
applicability of demand and penalty in respect of fake against a person will depend upon the specific facts and
invoicing with the help of illustrations. The same is circumstances of the case and provisions relating to
summarized below: arrest may also be invoked if the situation arises.

Case 1
Clarification on various issues pertaining to GST
► “A” issued tax invoice to “B” without any underlying
supply of goods or services. ► CBIC has provided clarification on certain issues, which
are as follows:
► Since there is no supply as per Section 7, no tax
liability arises against A and accordingly, no demand ► Refund claim by the recipient of deemed export
and recovery/ penal action is required under Section supplies
73 or 74 in respect of the same.
▪ Claim of refund of tax paid on deemed export
► However, A will be liable for penal action under supplies by the recipient is not availment of ITC
Section 122(1)(ii) for issuing tax invoices without and hence, not subjected to provisions of Section
actual supply of goods or services. 17.

Case 2 ▪ Also, the aforementioned amount is not to be

included in the “Net ITC” for computation of
► “A” has issued tax invoice to “B” without any refund of unutilized ITC on account of zero-rated
underlying supply of goods or services. supplies/ inverted tax structure.

► B avails ITC on the said tax invoice. He further issues

EY Tax Alert P a g e |3
 ► Clarification on various issues of Section 17(5) Particulars Scenario 1 Scenario 2
Accumulated ITC 100 100
▪ Section 17(5)(b) was amended to allow ITC in Date of inward supply 1 July 22 1 July 22
respect of notified goods or services which are Rate of Tax 18% 18%
obligatory for an employer to provide to its
Date of outward 1 August 1 August
employees, under any law for the time being in
supply 2022 2022
force which was otherwise not available as ITC.
Rate of Tax applicable
5% 18%
on outward supply
▪ It has been clarified that this amendment to allow
Rate of tax due to
ITC is applicable to all goods and services
concessional rate - 5%
covered under clause (i), (ii), and (iii) of Section
notification
17(5)(b).
Whether refund
No Yes
available
▪ Further, the term “leasing” referred in Section
17(5)(b) covers leasing of motor vehicles,
vessels, and aircrafts only and not leasing of any Prescribing manner of re-credit in ECRL on
other items. Hence, ITC w.r.t leasing of only repayment of erroneous refund
motor vehicles, vessels and aircrafts is blocked
as per Section 17(5). ► A new functionality of GST PMT-03A has been
developed which allows proper officer to re-credit the
► Perquisites provided by employer to the employees amount in ECRL of the taxpayer on repayment of
as per contractual agreement erroneous refund.

▪ Perquisites provided by the employer to the ► It has been clarified that in respect of the following
employee in terms of contractual employment categories of erroneous refund, re-credit of amount in
agreement, will not be subjected to GST as it is in the ECRL can be done through PMT-03A:
lieu of the services provided in relation to
employment. ► Refund of IGST obtained in contravention of Rule
96(10).
► Utilization of amount available in the ECRL and ECL
for payment of tax and other liabilities ► Refund of unutilized ITC on account of:
▪ Any payment towards tax liability (other than tax ▪ Export of goods or services without payment of
payable under reverse charge mechanism, tax.
erroneous refund in cash) whether self-assessed ▪ Supply of goods or services to SEZ developer/
in the return or payable as a consequence of any Unit without payment of tax.
proceeding instituted under the provisions of ▪ Inverted tax structure.
GST laws, can be made by utilization of the
amount available in ECRL. ► Also, the procedure have been prescribed for re-credit
of the said amount in ECRL.
▪ Further, the credit lying in ECRL cannot be used
for making payment of any interest, penalty,
fees, or any other amount payable under the law.
Manner of filing refund of unutilized ITC on
account of export of electricity
▪ Also, ECL may be used for making any payment
towards tax, interest, penalty, fees, or any other ► Difficulties were faced by exporters of electricity in filing
amount payable under the provisions of GST. refund application for unutilized ITC due to non-
availability of shipping bill.
Clarification on issue of claiming refund under
► Accordingly, CBIC has now prescribed separate
inverted tax structure procedure for filing and processing of refund of
unutilized ITC on account of export of electricity.
► Refund of accumulated ITC on account of inverted tax
structure would be allowed in cases where accumulation
of credit is due to rate of tax on outward supply being
Supplies from Duty Free Shops to be treated as
less than the rate of tax on inputs (same goods) at the export
same point of time, due to some concessional rate
notification. ► As per the recent press release issued by the Ministry of
Finance in respect of 47th GST Council meeting, supplies
► Further, the refund will not be available if the input and from Duty Free Shops (DFS) at international terminal to
output supplies attract different tax rates at different outgoing international passengers are to be treated as
points in time. exports by DFS.

► The same is illustrated in the following table: ► Consequently, Rule 95A of CGST Rules along with
Circular No. 106/25/2019-GST dated 29 June 2019
have been rescinded with effect from 1 July 2019.

EY Tax Alert P a g e |4
Comments
a. Compliance by way of declaration
regarding non-issuance of e-invoice made
effective from 5 July 2022 is likely to put
taxpayers to inconvenience as it would
require necessary changes in their IT
system/ business processes.

Further, the applicability of declaration in

few scenarios, for instance, in case of
debit/ credit notes and B2C invoices,
requires more clarity.

b. Considering the requirement of disclosing

in GSTR-3B, the ineligible ITC pertaining
to intra-state supply where place of
supply is different from that of location of
recipient, taxpayers may have to evaluate
the eligibility of credit in respect of inter-
state supplies in similar situation.

c. Re-credit mechanism prescribed for

erroneous refund under various situations
is a welcome move.

However, clarification is required on the

re-credit mechanism in case of repayment
of refunds owing to non-receipt of foreign
exchange within prescribed timelines in
terms of Rule 96B.

d. Section 54(3) does not prohibit claiming

refund of unutilized ITC in case of
inverted tax structure where the rate of
tax on inputs and outward supplies are
different at different points in time. This
view has been endorsed earlier by
Calcutta High Court. However, the
Circular appears to restrict such refunds.

e. Clarification on taxability of perquisites

provided by employer to employee
appears to be supporting the
Government’s viewpoint provided in press
release in July 2017. Taxpayers may have
to evaluate the tax position adopted for
such transactions pursuant to this
clarification.

EY Tax Alert P a g e |5
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