Amendment to CGST Act and CGST Rules, w.e.f. 01.01.2021

Article Dated 12th January, 2021

Amendment to CGST Act and CGST Rules, w.e.f. 01.01.2021

Notification No 92/2020-Central Tax dated 22nd December 2020 and Notification No. 94/2020 CT dated 22nd December 2020


Section/ Rule



Section 10- Composition Scheme

In section 10(2) of the CGST Act, in clauses (b), (c) and (d), after the words “of goods”, the words “or services” shall be inserted

Thus, the conditions for eligibility to pay tax under composition are harmonised and certain categories of taxable persons, engaged in making- supply of services not leviable to tax under the CGST Act, or inter-State outward supply of services, or outward supply of services through an e-Commerce operator. Are excluded from the ambit of the Composition scheme.


Section 16(4)- Time limit for taking credit of debit note

In section 16(4) of the CGST Act, the words “invoice relating to such” is omitted.

Thus, the date of issuance of debit note is delinked from the date of issuance of the underlying invoice for purposes of availing input tax credit.


Section 29- Cancellation of voluntary registration

Section 29(1) of the CGST Act, for clause (c), the following clause shall be substituted, namely:––

 “(c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to opt out of the registration voluntarily made under sub-section (3) of section 25:”

Thus, now it also provides for cancellation of registration which has been obtained voluntarily under section 25(3)


Section 30(1)- Time limit for revocation of cancellation of registration

Section 30(1) of the CGST Act (Revocation of cancellation of registration) Time limit of 30 days to apply for revocation of cancellation of registration, Made extendable by the Additional Commissioner or the Joint Commissioner, as the case may be, for a period not exceeding thirty days and by the Commissioner, for a further period not exceeding thirty days


Section 3- Invoice

Section 31(2) of the CGST Act, for the proviso, the following proviso shall be substituted, namely:––

“Provided that the Government may, on the recommendations of the Council, by notification,–– (a) specify the categories of services or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed; (b) subject to the condition mentioned therein, specify the categories of services in respect of which–– (i) any other document issued in relation to the supply shall be deemed to be a tax invoice; or (ii) tax invoice may not be issued.”.


Section 51- TDS-

Section 51 of the CGST Act,–– (a) for sub-section (3), the following sub-section shall be substituted, namely:–

“(3) A certificate of tax deduction at source shall be issued in such form and in such manner as may be prescribed.

Earlier sub-sections (3) and (4) which provided for requirement of issuing TDS certificate on deductor and provision for late fees for not issuing such certificate within five days are deleted


Amendment of section 122

In section 122 of the CGST, after sub-section (1), the following sub-section shall be inserted, namely:––

“(1A) Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.

Thus, it makes the beneficiary of the transactions of passing on or availing fraudulent Input Tax Credit liable for penalty similar to the penalty leviable on the person who commits such specified offences.


Amendment of section 132

Section 132 of the CGST Act, in sub-section (1),––

(i) for the words “Whoever commits any of the following offences”, the words “Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences’’ shall be substituted;

(ii) for clause (c), the following clause shall be substituted, namely:–– “(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;”;

(iii) in sub-clause (e), the words “, fraudulently avails input tax credit” shall be omitted.


Amendment to Schedule II

In Schedule II to the CGST Act, in paragraph 4, the words “whether or not for a consideration,” at both the places where they occur, shall be omitted and shall be deemed to have been omitted with effect from the 1st day of July 2017.

Schedule II cannot include a transaction, without consideration, because then it would not be a supply at all in the first place. Schedule II, issued under section 7(1)(d) is meant only for the purpose of classification of a transaction either as a supply of goods or as a supply of services

Thus, para 4 is being corrected retrospectively from 1st July 2017


Rule 9 - Time limit for system-based GST Registration increased

The time for system-based registration has been enhanced from 3 days to 7 days.

That means, now department shall be required to review and grant registration within 7 days against 3 days as provided earlier from the date of filing of registration application.

Where the applicant does not do adhaar authentication or where department feels fit to carry out physical verification the time limit for grant of registration shall be 30 days instead of 21 days.


Rule 21 - Cancellation of GSTIN

Clause (e) in Rule 21 of CGST Rules 2017.

Now the officer can proceed for cancellation of GSTIN where a taxpayer avails Input Tax Credit (ITC) exceeding than that permissible in Section 16.

Clause (f) inserted in Rule 21 of CGST Rules, 2017

Liability in GSTR-3B < GSTR-1, cancellation may be initiated Where the liability declared in GSTR 3B is less than that declared in GSTR 1 in a particular month, department may now proceed with cancellation of GSTIN.


Rule 21A - Suspension of GSTIN

Now, no opportunity of being heard shall be given to a taxpayer for suspension of GSTIN, where the proper officer (PO) has reasons to believe that the registration of person is liable to be cancelled.

The words “opportunity of being heard” omitted from clause (2) of Rule 21A


Rule 21A - Cancellation Notice in GST REG-31

Where there are significant deviation / anomalies between details of outward supply between GSTR 3B and GSTR1 or inward supplies (ITC) between GSTR 3B and GSTR 2B which indicate contravention of Act, department shall now serve a notice in FORM GST REG 31 to call explanation as to why GSTIN should not be cancelled.

Taxpayer shall be required to submit his reply within 30 days of such notice being served to him.


Rule 21A - No refund during suspension of GSTIN

Where a GSTIN is suspended, no refund under Section 54 of CGST Act 2017 can be availed by the taxpayer.

This means that first GSTIN Suspension proceedings have to be closed before applying for refund.


Rule 36 - Restriction on claim of ITC

The claim of ITC in respect of invoices not furnished by the corresponding vendors has now been restricted to 5% of the credit available in GSTR 2B. This limit earlier was 10% of ITC available.

This would mean that a taxpayer’s ITC claim shall now be restricted to 105% of the Credit reflected in his GSTR 2B.

Any claim exceeding the specified limit shall result in violation of CGST Act read with rules which may result into suspension of GSTIN as described above.


Rule 59— Blocking of GSTR-01 in case of non filing of GSTR-3B

Where a taxpayer fails to file GSTR-3B for two subsequent months, his GSTR-1 shall now be blocked.

Earlier non filing of GSTR-3B used to result in blocking of Eway Bill facility but from now on it shall also result in blocking of GSTR-1 of the taxpayer.

Similarly, for quarterly return filers, the taxpayer failing to file GSTR-3B for the preceding quarter shall not be permitted to file GSTR-1 of subsequent quarter.


Rule 86B - Restriction on utilization of ITC

New Rule 86B shall be affected from 1 st January 2021 wherein restriction has been placed on setting off more than 99% of tax liability from Input tax credit where the value of taxable supplies other than exempt supply and zero rated supply exceeds Rs. 50 lakhs in a month. Few exceptions have been provided to this rule which are as follows:

Where the taxpayer has paid Income Tax exceeding Rs. 1 lakh in two preceding financial year.

Where taxpayer has received refund exceeding Rs. 1 lakhs u/s 54 of CGST Act 2017.

Where taxpayer has used electronic cash ledger to pay off liability on outward supplies which cumulatively makes 1% of the total liability up to the said month.

Where a person is a Government Department, Public Sector Undertaking (PSU), local authority or a statutory body.


Rule 138 - Validity of E-way Bill

Earlier one day was permitted for distance up to 100 km under E-Way Bill provision. Now the same has been increased to 200 km.

This means that only one day validity shall be granted to cover a distance up to 200 km which was earlier 100 km.

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