Wednesday, 07 December 2022

Harder GST Rules to take effect from 1st January

Harder GST Rules to take effect from 1st January

These changes are part of the Finance Act 2021 passed by the Parliament earlier this year, but their execution date has been announced only now. The changes cover many issues, including what constitutes a taxable supply, eligibility for tax credits, and norms for filing appeals in some instances.

One of the modifications says that transactions by a person, other than individuals, to its members or constituents for cash, deferred payment, or further valuable consideration will be treated as a taxable supply. Such transactions from members to the entity will be treated the same way. Experts said these would mean all associations and clubs would be subject to GST on their transactions with members.

Read More: Diesel and petrol can't be brought under GST in pandemic: Govt

Other provisions coming into effect from January will tighten the norms governing the grant of credits for taxes paid on raw materials and other services businesses obtain. If the seller of an item doesn't disclose the invoice details in his monthly sales return (in form GSTR-1), the buyer will not get credit for the taxes paid on that item.

The central and state officials have hardened the tax credits rules to check tax shunning. While indirect tax shunning by errant firms using fake invoices has been a significant headache for the governments, the hardened tax credit rules warrant businesses to make sure that their suppliers promptly disclose the transactions' details in their monthly sales returns. The idea is to effectively use the describing requirements and technology for improving tax consent. This will also encourage businesses to materials and services from credible and law-abiding suppliers.

Also, businesses will have to pay 25 percent of the penalty for appealing against officials' orders in cases where goods are captured for alleged transportation or storage in violation of the rules. This provision also comes into force from 1st January.

This move comes when both central and state governments discover GST system will improve. Ajit Pawar, Maharashtra Deputy chief minister, is working on GST system reforms.

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