Tax on Go


Key Highlights of the 45 th GST Council Meeting
By CA Raghav Rathi
Sep 21, 2021

" Extracts analyzed from the Textile Industry point of view"

Various amendment have been proposed in the 45th meeting held of the GST Council, the glimpse of which is as follows:

1. GST rate changes in order to correct inverted duty structure (IDS), in footwear and textiles sector, as was discussed in earlier GST Council Meeting and was deferred for an appropriate time, will be implemented with effect from 01.01.2022.

Our Comments : Government has noticed that there were various anomalies in the inverted duty structure refund designed to remove the cascading effect specifically in the footwear and textile industry. In both of these industries the inputs bears a rate higher than the rate chargeable on output, creating a gap in the ITC available and the outward liability to be discharged. Even after refund proposed it was noticed across the nation that the plant didn't bear the fruits the seeds sown for. The same was also evident from the famous judgement passed by Justice Dr. D.Y. Chandrachud in the case of Union of India V/s VKC Footsteps India Private Limited, wherein the Supreme Court reversed the judgement passed by Gujarat High Court holding that formulae laid under rule 89(5) is very well within the delegated power of the government. There being no case of abuse of delegated power. GST Council also taking into cognizance the ruling provided by the SC and the hardship faced by the business houses, have confirmed to rationalize the rate of taxes specifically in the inverted duty structure scheme to make the refund more streamline. The implementation of the same have been affirmed latest from 01.01.2022 and in our opinion it very much probable that rates would be finalized in such a manner that the refund under IDS structure would finally be done away with.

2. Relaxation in the requirement of filing FORM GST ITC-04 under rule 45 (3) of the CGST Rules:

Aggregate Turnover

Time Period

- Greater than Rs. 5 Crore in previous financial year

Once in a six Month

- Less than Rs. 5 Crore in previous financial year


Our Comments : Industry has been from long asking for relief in filing Form ITC-04 required to be filed in case of job work related activities. Council took in cognizance the glitches in the tool available for filing ITC-04 and for the ease of compliances, relaxation has been provided by amending the period of filing of such return.

3. In the spirit of earlier Council decision that interest is to be charged only in respect of net cash liability, section 50 (3) of the CGST Act to be amended retrospectively, w.e.f. 01.07.2017, to provide that interest is to be paid by a taxpayer on "ineligible ITC availed and utilized" and not on "ineligible ITC availed". It has also been decided that interest in such cases should be charged on ineligible ITC availed and utilized at 18% w.e.f. 01.07.2017.

Our Comments: It is highly welcomed proposal. Patna High Court in the case of M/s COMMERCIAL STEEL ENGINEERING CORPORATION Versus STATE OF BIHAR reported at - TOG-478-HC-PTN-GST-2019 has held that " a reflection in the electronic credit ledger cannot be treated as an ‘availment'." Council understanding the potential litigations standing before on account of such judgements and its notified amendment under section 50(1), that interest is liable to be paid on liability discharged through electronic cash ledger, have proposed that in case of ITC reversal also under section 50(3), retrospectively from 01.07.2017, interest would be demanded on such part of reversal which is been availed and utilized i.e. interest on such part of where for reversal the payment has been done from electronic cash ledger. Making the sky clear and a way easy for the industries.

4. Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons (entities having same PAN but registered in different states), without going through the refund procedure, subject to certain safeguards.

Our Comments: Earlier the council have decided to allow inter head transfer of balance lying in electronic cash ledger (i.e. balance lying in interest head may be transferred under penalty head or liability head, vice-versa). Taking that a way forward, the council have decided to consider the different registration of a single unit under a single umbrella of PAN and consequent to which have allowed the transfer of balance lying in electronic cash ledger of one registration to any other registration (having similar PAN but registered in different state).

5. W.e.f. 01.01.2021, the date of issuance of debit note (and not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of CGST Act, 2017.

Our Comments: It is just a clarification regarding the amendment already brought into force w.e.f. 01.01.2021, in which the financial year in which debit note was raised were to be considered for time limit specified under section 16(4) of the act. In other words,

Pre Amendment

Post Amendment

Invoice Date: 15.03.2020
Debit Note Date: 14.04.2020
Time Limit for ITC for both invoice and debit note would have been the 30.09.2020

Invoice Date: 15.03.2020
Debit Note Date: 14.04.2020
Time Limit for ITC for invoice would be the 30.09.2020.
Time Limit for ITC for debit note would be 30.09.2021.

Post this clarification it is hoped that department would not raise query in regards to availment of credit for debit note raised in financial year being different from invoice financial year.

6. There is no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules, 2017.

Our Comments: A clarification would be followed in this regards, laying the conditions to be fulfilled for not carrying the physical copy of tax invoice in the cases where the E-Invoices have been generated.

7. Provision to be incorporated in in CGST Rules, 2017 for removing ambiguity regarding procedure and time limit for filing refund of tax wrongfully paid as specified in section 77(1) of the CGST/SGST Act and section 19(1) of the IGST Act.

Our Comments: There have been various case reported where the liability have been discharged inter head i.e. liability of SGST have been discharged under IGST and vice versa. As of present no appropriate refund module has been placed for the same and positions in regards to such taxes paid is still blur. Although Kerala High Court in the case of M/s ADITHYA AND AMBADI TRADERS and M/s RANJITH ROADLINES V/s THE COMMISSIONER, STATE GST DEPARTMENT, TAX TOWER, THIRUVANANTHAPURAM [WP(C). No. 35868 of 2018] - TOG-465-HC-KRL-GST-2018 have held that inter head tax liability may be adjusted, a proper rule, mechanism and procedure for such instances will be highly appreciable.

Measures for streamlining compliances:

1. Aadhaar authentication of registration to be made mandatory for being eligible for filing refund claim.

2. Late fee for delayed filing of FORM GSTR-1 to be auto-populated and collected in next open return in FORM GSTR-3B.

3. Refund to be disbursed in the bank account, which is linked with same PAN on which registration has been obtained under GST.

4. A registered person shall not be allowed to furnish FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for the preceding month.

5. Rule 36(4) is still in force till the proposed amendment of insertion of clause (aa) of section 16(2) of act is notified.

A thinking needs to be given to the outcomes of meeting whether it leads direction towards good governance or emergence of red tape bureaucracy.

[The views expressed are strictly personal.]