GST Second Amendment Rules, 2023

Introduction:

The Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs, issued Notification No. 38/2023-Central Tax on August 4, 2023. This notification introduced the Central Goods and Services Tax (Second Amendment) Rules, 2023, which consist of a series of amendments to the existing Central Goods and Services Tax (CGST) Rules, 2017. These amendments aim to streamline and strengthen India`s GST law by making necessary modifications to the CGST Rules.

1. Amendment in Rule 9

Under this amendment, the phrase “in the presence of the said person” has been eliminated from Rule 9 of the CGST Rules. This change affects the procedure for verification of the registration of Taxable persons under the Act, making the registration process more efficient and less reliant on physical presence.

Physical verification of premises is required in the following cases-

“a person, other than a person notified under sub-section (6D) of section 25, fails to undergo authentication of Aadhaar number as specified in sub-rule (4A) of rule 8 or does not opt for authentication of Aadhaar number; or

(aa) a person, who has undergone authentication of Aadhaar number as specified in sub-rule (4A) of rule 8, is identified on the common portal, based on data analysis and risk parameters, for carrying out physical verification of places of business; or

(b) the proper officer, with the approval of an officer authorised by the Commissioner not below the rank of Assistant Commissioner, deems it fit to carry out physical verification of places of business,”

Now prior to amendment tax payer was necessarily required to be present at the place of registration but through this amendment the requirement for physical presence of the person has been removed.

2. Changes to Rule 10A

Rule 10A now prescribes a new deadline for submitting information related to bank account details. As per the amendment, this information must be furnished “within a period of thirty days from the date of grant of registration, or before furnishing the details of outward supplies of goods or services or both u/s section 37 in Form GSTR-1.

Earlier the time limit for submitting bank account details was 45 days from the date of Grant of registration.

3. Significant Changes in Rule 21A

Rule 21A underwent substantial modifications primarily designed to deal with violations of the Act or the rules. Such contraventions can lead to the potential cancellation or suspension of the registration of the concerned person. The earlier Sub-Rule 2A has now been substituted by new Sub-Rule 2A which is reproduced as under-

“(2A) Where,-

(a) a comparison of the returns furnished by a Registered person under section 39 with the details of outward supplies furnished in FORM GSTR-1 or 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, or

(b) there is a contravention of the provisions of rule 10A by the Registered person,

the registration of such person 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, anomalies or non-compliances and asking him to explain, within a period of thirty days, as to why his registration shall not be cancelled.”;

Amendment also brought in the undermentioned, providing much needed relief to taxpayers in case their registration gets suspended on account non furnishing of bank account details within the prescribed time limit which now is 30 days.

(ii) in sub-rule (4), after second proviso, the following proviso shall be inserted, namely: –

“Provided also that where the registration has been suspended under sub-rule (2A) for contravention of provisions of rule 10A and the registration has not already been cancelled by the Proper officer under rule 22, the suspension of registration shall be deemed to be revoked upon compliance with the provisions of rule 10A.”.

4. Extension in Rule 23

The CGST (Second Amendment) Rules, 2023, extends the period permitted for filing an application for the revocation of the cancellation of registration under Rule 23. This change provides taxpayers with more flexibility and time to rectify any issues leading to cancellation of registration.

The amendment extends the time limit for applying for revocation of cancelation of registration from 30 days to 90 days.

Amendment further provides flexibility to the taxpayers by allowing another 90 days. Commissioners or any other officer authorized by him can extend the period of initial 90 days by a further period of 90 days. Relevant extracts are reproduced as under-

“Provided that such period may, on sufficient cause being shown, and for reasons to be recorded in writing, be extended by the Commissioner or an officer authorised by him in this behalf, not below the rank of Additional Commissioner or Joint Commissioner, as the case may be, for a further period not exceeding one hundred and eighty days:”

5. Substitution of Old Rule 25 by a new one

The Amendment introduces a new Rule 25, which clearly defines the procedures and timelines for the physical verification of business premises in specific scenarios.

Relevant extracts of the newly substituted Rule 25 is reproduced as under-

“(1) Where the Proper officer is satisfied that the physical verification of the place of business of a person is required after the grant of registration, he may get such verification of the Place of business done and the verification report along with the other documents, including photographs, shall be uploaded in FORM GST REG-30 on the Common portal within a period of fifteen working days following the date of such verification.

(2) Where the physical verification of the Place of business of a person is required before the grant of registration in the circumstances specified in the proviso to sub-rule (1) of rule 9, the Proper officer shall get such verification of the Place of business done and the verification report along with the other documents, including photographs, shall be uploaded in FORM GST REG-30 on the Common portal at least five working days prior to the completion of the time period specified in the said proviso.”

6. Modification in Rule 43

Following has been inserted vide this amendment Rule-

“(a) in Explanation 1, clause (c) shall be omitted;

(b) after Explanation 2, with effect from the 1st day of October, 2023, the following Explanation shall be inserted, namely: -

“Explanation 3:- For the purpose of rule 42 and this rule, the value of activities or transactions mentioned in sub-paragraph (a) of paragraph 8 of Schedule III of the Act which is required to be included in the value of exempt supplies under clause (b) of the Explanation to sub-section (3) of section 17 of the Act shall be the value of supply of goods from Duty Free Shops at arrival terminal in international airports to the incoming passengers.”.

7. Simplification in Rule 46

Rule 46 has been simplified. The changes concern the information that is regarded as “the Address on record of the recipient”. The amended rule is illustrated as under-

“Provided that where any taxable service is supplied by or through an electronic commerce operator or by a supplier of online information and database access or retrieval services to a recipient who is un-registered, irrespective of the value of such supply, a tax invoice issued by the Registered person shall contain the name of the state of the recipient and the same shall be deemed to be the Address on record of the recipient”

8. New Clauses in Rule 59

Rule 59 now contains two new clauses related to restrictions on providing the details of outward supplies under certain situations. This amendment ensures that businesses follow appropriate procedures when declaring outward supplies, thereby preventing misuse of the tax system. Irrelevant extracts of the newly inserted clauses are reproduced as under-

“(e) a Registered person, to whom an intimation has been issued on the Common portal under the provisions of sub-rule (1) of rule 88D in respect of a Tax period or periods, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 or using the invoice furnishing facility for a subsequent Tax period, unless he has either paid the amount equal to the excess Input tax credit as specified in the said intimation or has furnished a reply explaining the reasons in respect of the amount of excess Input tax credit that still remains to be paid, as required under the provisions of sub-rule (2) of rule 88D;

(f) a Registered person shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 or using the invoice furnishing facility, if he has not furnished the details of the bank account as per the provisions of rule 10A.”.

9. Inclusion in Rule 64

A significant inclusion to Rule 64 is the term “Non-taxable online recipient” as referred to in the Integrated Goods and Services Tax (IGST) Act, 2017. This change expands the scope of Rule 64 to cover more categories of recipients, thereby promoting greater tax compliance. The amended rule 64 is reproduced as under-

“Every Registered person providing online information and data base access or retrieval services from a place outside India to a ¹[non-taxable online recipient referred to in section 14 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017) or to] a Registered person shall file return in FORM GSTR-5A on or before the twentieth day of the month succeeding the calendar month or part thereof.

¹Subs. by CGST (Second Amendment) Rules, 2023 dated 04.08.2023 w.e.f. 01.10.2023 for "person in India other than"

10. Modification of Rule 67

Rule 67 has been changed to modify the method in which tax collected at source (TCS) details are furnished by the operator. This amendment helps simplify the tax collection process, making it easier for operators to comply with tax laws.

“ In the said rules, in rule 67, in sub-rule (2), with effect from the 1st day of October, 2023, for the portion beginning with the words “The details” and ending with the words “suppliers”, the words “The details of tax collected at source under sub-section (1) of section 52 furnished by the operator under sub-rule (1) shall be made available electronically to each of the registered suppliers” shall be substituted.”

11. Introduction of New Rule 88D

A new rule 88D, has been introduced to deal with the difference in Input tax credit as per the auto-generated statement and that availed in the return. This rule helps streamline the process of availing Input tax credit, reducing discrepancies and promoting accurate reporting. An separate article on rule 88D shall shortly be published on TaxLok website.

Many other rules have undergone changes and modifications as part of the Central Goods and Services Tax (Second Amendment) Rules, 2023, including Rules 108, 109, 138F, 142B, 162, and 163. Additionally, new forms have been introduced, like FORM GST DRC-01C and FORM GST DRC-01D. Several existing forms, such as FORM GSTR-3A, GSTR-5A, GSTR-8, GSTR-9, GSTR-9C, and GST RFD-01, have also seen notable changes.

These changes signify an ongoing commitment to evolve India’s tax system, making it more accessible, accurate, and transparent. By regularly reviewing and updating the tax laws, the government is ensuring that the country’s tax system keeps pace with the changing economic landscape.

The Central Goods and Services Tax (Second Amendment) Rules, 2023, is an essential step towards streamlining tax compliance, providing clarity on specific tax-related matters, and ensuring a robust, efficient, and fair tax system in India. Businesses, professionals, and tax practitioners should take note of these changes and their impact on their tax compliance and planning.