pwc.

in

Tax Insights

9 July 2022
CBIC issues notifications and circulars pursuant to recommendations made during
the GST Council’s 47th meeting

In brief

1
The Central Board of Indirect Taxes and Customs (CBIC) has issued notifications making key amendments to
the Central Goods and Services Tax Rules, 2017 (CGST Rules), and the statutory forms therein in furtherance
of announcements made at the 47th GST Council meeting.

The CBIC has also issued circulars on a few key issues, i.e. re-credit in the electronic credit ledger (ECL),
refund under the inverted duty structure, refund of unutilised input tax credit (ITC) on account of export of
electricity, other issues on ITC eligibility, utilisation of ITC from ECL, etc. under the Central Goods and Services
Tax Act, 2017 (CGST Act).

The specific clarifications and guiding principles provided in the circulars and key amendments made through
notifications are discussed below.

In detail

2
1. Key amendments to the CGST Rules
3
The CGST Rules have been amended vide the Central Goods and Services Tax (Amendment) Rules, 2022,
and the major amendments are summarised below.

Refund Scenario Amendment

Refund claim on account of export of Explanation is inserted in rule 89(4) of the CGST Rules to
goods without payment of tax provide the value of export of goods to be considered for refund
purposes. It states that the lower of the free-on-board (FOB)
value as per the shipping bill, bill of export, tax invoice or bill of
supply is to be considered.

1
You may refer to our Tax Insights dated 30 June 2022 summarising the Press Release on the GST Council meeting.
2
Notification No. 14/ 2022-Central Tax dated 5 July 2022
3
To come into force on the date of their publication in the Official Gazette.

1 PwC
Tax Insights

Refund Scenario Amendment

Accordingly, the accompanying Statement-3 to upload the

information in the portal is amended to include a column for the
FOB value.

Refund claim on account of inverted duty A revised formula (given below) is prescribed by way of a
structure substitution in rule 89(5) of the CGST Rules to factor
proportionate ITC on input services utilised for payment of
output tax payable on inverted rated supply. This is in the wake
4
of a Supreme Court judgement , whereby refund is not allowed
for ITC pertaining to input services.

Maximum refund amount = {(turnover of inverted rated supply of

goods and services) x net ITC ÷ adjusted total turnover} - {tax
payable on such inverted rated supply of goods and services x
(net ITC ÷ ITC availed on inputs and input services)}.

Special economic zone refund An explanation is inserted to provide the meaning of a Specified
Officer and Authorised Officer.

Refund for export of electricity Statement-3B for the export of electricity without payment of tax
has been introduced.

Form PMT-03A to re-credit the amount of Sub-rule 4B has been inserted into rule 86 of the CGST Rules to
erroneous refund paid by the taxpayer provide for re-credit of the amount of erroneous refund
sanctioned and subsequently deposited by the taxpayer in cash,
along with interest and penalty, wherever applicable, by filing
Form DRC-03.

Payment of erroneous refunds can be on the taxpayer’s own

account or pointed out by the authorities.

Form PMT-03A is prescribed to provide re-credit to the

taxpayer.

Period of limitation for refund claims and The time period from 1 March 2020 to 28 February 2022 is to be
demand of erroneous refunds received excluded –

(i) from calculation of the limitation period for filing a refund

claim under sections 54 and 55 of the CGST Act; and

(ii) in computation of the limitation period for issuance of an

order in respect of erroneous refunds under section 73 of the
CGST Act.

Refund claim on account of export of In case of refund of integrated GST (IGST) paid on the export of
goods with payment of tax goods or services, if there is any mismatch between the data
furnished in the shipping bill and Form GSTR-1, such refund
application of IGST paid on the export of goods will be deemed
to have been filed on the date when such mismatch is rectified.

4 You may refer to our Tax Insights dated 14 September 2021.

2 PwC
Tax Insights

Refund Scenario Amendment

Refund on account of the IGST paid on export of goods or

services may be withheld for risky exporters.

The procedure and manner of withholding and subsequent

release has been notified.

Interest provisions

• The CBIC has notified 5 July 2022 to be the effective date to implement the amendment made in section
5
50(3) of the CGST Act through the Finance Act, 2022. In terms of the amendment in section 50(3) of the
6
CGST Act, interest would be applicable only in cases where the ITC has been wrongly availed and utilised.
For this purpose, the CBIC has inserted a new rule 88B to the CGST Rules w.e.f. 1 July 2017 to provide the
manner of calculating interest to maintain uniformity.

In case of Method of calculation

Belated filing of return Interest is applicable only on the portion of tax that is paid by
debiting the electronic cash ledger. It is calculated for the period
of delay in filing the return beyond the due date.

Cases other than belated filing of return Interest is payable on the amount of tax that remains unpaid and
should be calculated from the date on which such tax was due
to be paid till the date of payment.

• Interest on ITC wrongly availed and utilised is calculated from the date of utilisation until the date of
reversal. This has been further clarified as follows for the purpose of calculation of interest:

- ITC wrongly availed is construed as utilised when balance in the ECL falls below the amount of ITC
wrongly availed. The amount of utilisation is equal to the amount by which balance in the ECL falls
below the amount of ITC wrongly availed.

- The date of utilisation of ITC is also prescribed.

Provisions for payment of tax

• The common portal now provides the additional methods of the Unified Payment Interface and Immediate
Payment Service from any bank to deposit the amount in the electronic cash ledger (PMT-06).

• The CBIC has notified 5 July 2022 to be the effective date to implement the amendment made in section 49
of the CGST Act by the Finance Act, 2022, whereby a registered person may transfer any amount of tax,
interest, penalty, fee or any other amount available in the electronic cash ledger, to the electronic cash
ledger for:

- integrated tax, central tax, state tax, union territory tax or cess (applicable to transfer of the amount
from one head to another in the same GST Network [GSTN] such as late fees to the tax head); or

- integrated tax or central tax of a distinct person as specified in sub-section (4) or, as the case may be,
sub-section (5) of section 25 of the CGST Act (applicable to transfer within the GSTN of the same
permanent account number [PAN], except for the state GST portion).

• However, no transfer is allowed in cases of pending liability in the electronic liability ledger.

5
Notification No. 09/ 2022-Central Tax New Delhi, dated 5 July 2022
6
This amendment is applicable retrospectively with effect from 1 July 2017.

3 PwC
Tax Insights

Tax invoices

Taxpayer whose aggregate turnover in the preceding financial year (FY) from 2017–18 onwards is more than
INR200m is required to declare it on the tax invoice but is not required to generate an invoice reference number
or QR code.

Reversal of ITC

Rule 43 of the CGST Rules providing for the reversal of ITC is amended to provide that the value of exempt
supply is to exclude the value of duty credit scrips.

Demand and recovery of taxes

The period of limitation for issuance of an order under section 73(9) of the CGST Act for recovery of tax not
paid, tax short paid, or ITC wrongly availed or utilised, as pertaining to FY 2017–18, is extended from 31
January 2023 to 30 September 2023.

2. Key amendments to GST forms

Forms Amendments

GSTR-3B • Paragraph 3.1.1 has been inserted, which contains details of supplies notified under
section 9(5) of the CGST Act (i.e. e-commerce operators) and corresponding provisions.

• The form has been amended to provide details such as ITC reclaimed, which was
reversed under Table 4(B)(2) in the earlier tax period, ineligible ITC under section 16(4)
of the CGST Act and ITC restricted due to place-of-supply (POS) provisions.

GSTR-9/ 9C • An option has been provided to the taxpayer wherein either non-GST supply is to be
reported separately as exempted and nil-rated supply, or consolidated information is to
be reported only under the ‘exempted’ row.

• Details of the amendment to supplies are to be declared in the annual return for FY
2021–22, where such details were declared in the previous FY’s returns and furnished in
Form GSTR-1 for April 2022 to September 2022.

• Aggregate value of the reversal of ITC is to be declared in the annual return for FY
2021–22, where such amount was availed in previous FY’s returns and has been
reversed in returns filed for April 2022 to September 2022.

• Details of ITC received in the previous FY, which was availed during April 2022 to
September 2022, is to be declared in the annual return for FY 2021–22. However, ITC
reclaimed in FY 2022–23 is to be declared only in the annual return for FY 2022–23.

• From FY 2021–22 onwards, it is mandatory to report the six-digit Harmonised System of

Nomenclature (HSN) code for taxpayers having annual turnover above INR50m in the
preceding year and the four-digit HSN code for all business-to-business supplies for
taxpayers having annual turnover up to INR50m in the preceding year.

• Amendment is made in the Form to the extent to include ‘or FY 2021–22’ wherever ‘FY
2019–20’ or ‘FY 2020–21’ is mentioned.

• The registered person is provided an option not to fill the HSN-wise summary for inward
supplies for FY 2021–22.

GST RFD-01 • In Statement 3, under the heading shipping bill or bill of export, ‘column 9A – FOB value’
is inserted.

• Statement 3B is inserted containing details of the invoice, Regional Energy Account,

tariff rate per unit, number of units exported and value of electricity exported.

4 PwC
Tax Insights

Forms Amendments

GST PMT-09 • In the table, serial no 4A containing the entry for ‘GSTIN of transferee on the same PAN’
is inserted.

• Instructions are added to provide for the transfer of amount available in the cash ledger
under the CGST or IGST head to another taxpayer registered on the same PAN,
provided no unpaid liability exists in the liability register of the transferor.

GST PMT- • It is prescribed to provide re-credit to the taxpayer.

03A

7
3. Other amendments

• Registered persons whose aggregate turnover in FY 2021–22 is up to INR20m are exempted from filing
annual return for the same FY.
8
4. Circular to clarify various issues pertaining to GST

Issue Clarification

Refunds the recipients claimed for deemed export

ITC the recipient has availed on deemed export Refund of deemed exports is the refund of tax paid on
supply to claim refund of tax paid to be such supplies. Such tax was available as ITC vide
subjected to provisions of section 17 of the Circular No. 147/ 03/ 2021 only to enable claim of refund,
CGST Act. and it is not ITC under Chapter V of the CGST Act. Thus,
it is not subjected to the provisions of section 17 of the
CGST Act.

Such ITC the recipient has availed on deemed Such ITC the recipient has availed on deemed exports is
export supply to claim refund of tax paid on not to be included in the net ITC on account of zero-rated
such supplies to be regarded as net ITC to supplies under rule 89(4) or on account of the inverted
compute the refund of unutilised ITC under rules rated structure under rule 89(5) of the CGST Rules.
89(4) and 89(5) of the CGST Rules.

Blocked ITC under section 17(5) of the CGST Act

Applicability of the proviso to section 17(5)(b) of This is applicable to the whole clause (b) and all goods
the CGST Act, which provides that ITC will be and services mentioned therein and not only to sub-
available in respect of goods or services that an clause (iii) of clause (b) of section 17(5) of the CGST Act.
employer is obligated to provide to its
employees.

Bar on availment of ITC on input services being Availment of ITC is not barred in case of leasing other
limited to ‘leasing of motor vehicles, vessels or than leasing of motor vehicles, vessels and aircraft.
aircraft’ or ITC on input services by way of any
type of leasing.

7
Notification No. 10/ 2022-Central Tax, dated 5 July 2022
8
Circular No. 172/ 04/ 2022-GST, dated 6 July 2022

5 PwC
Tax Insights

Issue Clarification

Perquisites the employer has provided to the employees

Taxability of perquisites provided by the Any perquisites the employer has provided to the
employer to its employees in terms of the employee are in the course of the contractual agreement
contractual agreement entered into between the between the employer and employee. They are in lieu of
employer and employee. the services the employee has provided to the employer
in relation to the employee’s employment and not
subjected to GST.

ECL and electronic cash ledger

Amount available in the ECL to be used for Amount available in the ECL can be used for any
making payment of any tax under the GST. payment of output tax, whether self-assessed or
otherwise; this does not include tax payable under the
reverse charge mechanism.

Amount available in the ECL not to be used for ECL can be used for making payment of output tax only
making payment of any liability other than and not of interest, penalty, fees or erroneous cash
output tax. refund sanctioned.

Amount available in the electronic cash ledger The electronic cash ledger can be used for making any
to be used for making payment of any liability. payment of tax, interest, fees or any amount payable.

9
5. Circular clarifying the manner of re-credit in ECL

• Categories of refunds where re-credit can be done using Form GST PMT-03A:

- Sub-rule 4B has been inserted into rule 89 of the CGST Rules to provide for re-credit of such amount to
the credit ledger, which is equivalent to the amount of erroneous refund deposited by the taxpayer
10
along with interest and penalty. This can be done through Form PMT-03A.

Categories where refund is Refund of IGST obtained in contravention of rule 96(10) of the CGST
sanctioned erroneously Rules

Refund of unutilised ITC on account of export of goods or services

without payment of tax

Refund of unutilised ITC on account of zero-rated supply of goods or

services

Refund of ITC due to the inverted duty structure

9
Circular No. 174/ 06/ 2022-GST, dated 6 July 2022
10
Notification No. 14/ 2022-Central Tax, dated 5 July 2022

6 PwC
Tax Insights

Procedure for re-credit of the amount in the ECL

Deposit of erronous refund along with interest and penalty is made through Form DRC-03 by mentioning
properly the reasons for making such payment.

Until an automated functionality is developed, the written request is to be made in the format prescribed to
the jurisdictional proper officer to re-credit the amount of refund.

On satisfaction that the full amount of erroneous refund along with the applicable interest and penalty has
been paid, the amount in the ECL equivalent to the amount of erronous refund is re-credited by passing an
order in Form GSTPMT-03A, preferably within 30 days from the date of receipt of request for re-credit of the
erroneous refund.

11
6. Applicability of demand and penalty provisions in transactions involving fake invoices

The applicability of demand and penalty provisions for transactions involving fake invoices has been clarified by
way of the following scenarios:

Scenarios Clarification

Issuance of tax invoice without No demand, recovery or penal action can be initiated to a person who
any underlying supply of goods or has issued such tax invoice under sections 73 and 74 of the CGST Act.
services with or without availment
of ITC by the recipient Penal action under section 122(1)(ii) of the CGST Act to issue tax
invoices without actual supply of goods can be initiated.

The recipient, upon availment, is liable for demand and recovery of the
ITC, along with interest and penalty.

Availment and passing of ITC on Recovery of ITC from the customer can be made under sections 73 and
to the customer by the above 74 of the CGST Act.
recipient, based on such tax
invoice issued without any Penal action under section 122(1)(ii) of the CGST Act to issue tax
underlying supply of goods or invoices without actual supply of goods can be initiated.
services

12
7. Procedure for filing refund of unutilised ITC on account of export of electricity

• The CBIC has clarified various issues, including filing of refund claim and processing of refund claim by the
proper officer. It has also prescribed the procedure to be followed for filing and processing of refund of
unutilised ITC on account of export of electricity under section 54(1) of the CGST Act.

11
Circular No. 171/ 03/ 2022-GST, dated 6 July 2022
12
Circular No. 175/ 07/ 2022-GST, dated 6 July 2022

7 PwC
Tax Insights

8. Clarification on correct or proper reporting of information on inter-state supplies, ineligible or

13
blocked ITC, and reversals

• Clarification is provided on various issues such as simplification of the return filing process, ITC reversal,
reporting of ineligible ITC in Table 4 of Form GSTR-3B, as well as on infirmities in information the registered
person has furnished in relation to inter-state supplies to unregistered persons (unregistered dealers
[URDs]), composition taxable persons and Unique Identification Number holders.

• Correct reporting of information in Forms GSTR-3B and GSTR-1 for correct accounting and accurate
settlement of funds between the Centre and State Governments is clarified.

• Clarification is provided on the issue of incorrect capturing of the URD’s address by the supplier, which
leads to wrong declaration of POS in both invoices issued under section 31 of the CGST Act and in Table
3.2 of Form GSTR-3B. It is instructed that information on inter-state supplies and POS is to be furnished
despite the details of supplies already being part of the supplies in Table 3.1 of Form GSTR-3B.

• Advise is provided on details of inter-state supplies also being reportable in Tables 7B, 5 or 9/ 10 of Form
GSTR-1 as well as Tables 4A, 4C or 9 of Form GSTR-1. There is a requirement to update the customer
database properly so that tax reaches the consumption state as per the principles of the destination-based
taxation system.

• To aid the return filer, Table 3.2 of Form GSTR-3B is to be auto-populated on the portal based on the
details furnished in Form GSTR-1.

• In terms of furnishing information regarding ITC availed and reversal thereof, ineligible ITC in Table 4 of
GSTR-3B states that any reversal of ITC or any ITC that is ineligible under any provision of the CGST Act
should not be part of net ITC available in Table 4(C) and should not be credited into the ECL of the
registered person.

• Details of the ITC on account of import of goods that are auto-populated in Table 4 of the return in Form
GSTR-3B are editable by the return filer. It is clarified that ‘the entire set of data that is available in Form
GSTR-2B is carried to the Table 4 in Form GSTR-3B, except for the details regarding ITC that is not
available to the registered person either on account of limitation of time period as delineated in sub-section
(4) of section 16 of the CGST Act or where the recipient of an intra-state supply is located in a different
state/UT than that of place of supply’.

• The procedure to be followed is clarified to correctly report information in the return and identify ineligible
ITC as well as reversal of ITC to arrive at the net ITC available, which is to be credited to the ECL.

• The reversal of ITC of ineligible credit under section 17(5) or any other provisions of the CGST Act and
CGST Rules is required to be made under Table 4(B) and not under Table 4(D) of Form GSTR-3B. Also
illustrates the manner of reversals in the Annexure to the circular.

9. Refund not deniable under inverted duty structure on the same input-output, where goods are
14
supplied under concessional notification

• It is clarified that cases where the rate of tax of output supply is less than the rate of tax on inputs at the
same point of time due to supply of goods by the supplier under a concessional notification are admissible
for refund. This is so except in cases where output supply is either nil rated or fully exempted, and provided
that supply of such goods or services is not notified by the government for exclusion from refund of the
accumulated ITC.

10. Rollback of circular relating to tax refund to retail outlets located in departure areas of international
15
airports

• There is withdrawal of Circular No. 106/ 25/ 2019-GST dated 29 June 2019 relating to clarifications given in
relation to rule 95A of the CGST Rules. This circular deals with refund of taxes paid on inward supply of
indigenous goods by retail outlets established at the departure areas of international airports beyond the

13
Circular No. 170/ 02/ 2022-GST, dated 6 July 2022
14
Circular No. 173/ 05/ 2022-GST, dated 6 July 2022
15
Circular No. 176/ 05/ 2022-GST, dated 6 July 2022

8 PwC
Tax Insights

immigration counters, when the supply is to outgoing international tourists against foreign exchange. The
withdrawal is issued considering that rule 95A of the CGST Rules has itself been omitted retrospectively
16
from 7 June 2019.

The takeaways

The trade facilitation measures on refunds, computation of interest and transfer of cash ledger balances are
welcome steps that were much awaited by the industry. The circular on taxability of employee perquisites and
the scope of ITC eligibility comes as a relief to the trade and industry, and it is likely to set to rest some of the
issues previously mired in controversy. Clarification on the applicability of demand and penalty in case of fake
invoices also gives more clarity to taxpayers and field formations. Extension of timelines for the recovery of
unpaid taxes for FY 2017–18, recovery of erroneous refund, and filing of refund applications is also noteworthy.
Matching of the shipping bill and Form GSTR-1 as the date of filing the refund is a serious concern for
exporters.

16
vide Notification No. 14/ 2022-Central Tax, dated 5 July 2022

9 PwC
Tax Insights

About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 156
countries with over 295,000 people who are committed to delivering quality in assurance, advisory and tax
services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal
entity. Please see www.pwc.com/structure for further details.

© 2022 PwC. All rights reserved.

Follow us on

Facebook, LinkedIn, Twitter and YouTube.

pwc.in
In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India having Corporate Identity
Number or CIN : U74140WB1983PTC036093), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each
member firm of which is a separate legal entity.
©2022 PricewaterhouseCoopers Private Limited. All rights reserved.