GST-IMS related changes in 55th GST Council Meeting!

The 55th GST Council Meeting brought significant amendments to the CGST Act, 2017, and CGST Rules, 2017. One major change concerns the Invoice Management System (IMS). 

Let’s understand the changes!

Amendment in CGST Act, 2017 and CGST Rules, 2017 in respect of functionality of Invoice Management System (IMS)

The GST Council recommended inter-alia-

1. To amend section 38 of CGST Act, 2017, and rule 60 of CGST Rules, 2017 to provide a legal framework for the generation of FORM GSTR-2B based on the action taken by the taxpayers on the Invoice Management System (IMS).
2. To amend section 34(2) of CGST Act, 2017, to specifically provide for the requirement of reversal of input tax credit as is attributable to a credit note, by the recipient, to enable the reduction of output tax liability of the supplier.
3. To insert a new rule 67B in CGST Rules, 2017, to prescribe how the output tax liability of the supplier shall be adjusted against the credit note issued by him.
4. To amend section 39 (1) of CGST Act, 2017 and rule 61 of CGST Rules, 2017 to provide that FORM GSTR-3B of a tax period shall be allowed to be filed only after FORM GSTR-2B of the said tax period is made available on the portal.

Key Highlights

1. Legal Framework for FORM GSTR-2B Generation:
   • Section 38 of the CGST Act, 2017 deals with the Communication of details of inward supplies and input tax credits. Rule 60 of the CGST Rules, 2017 deals with the Form and manner of ascertaining details of inward supplies. Both these provisions specify Form GSTR 2B. These provisions are proposed to be amended to give effect to the IMS response by the taxpayer.
2. Reversal of Input Tax Credit on Credit Notes:
   • Section 34 of the CGST Act, 2017 deals with Credit and debit notes. It’s sub-section 2 states that any registered person who issues a credit note about a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued. It is proposed to be amended to mandate the reversal of input tax credit related to credit notes by the recipient, allowing for a reduction in the supplier's output tax liability.
3. Adjustment of Output Tax Liability through Credit Notes:
   • Introduction of Rule 67B in the CGST Rules to prescribe the method of adjusting the supplier’s output tax liability against the credit note issued by the supplier.
4. Filing of FORM GSTR-3B Linked to FORM GSTR-2B Availability:
   • Amendments to Section 39(1) of the CGST Act and Rule 61 ensure that FORM GSTR-3B for a given tax period can only be filed after FORM GSTR-2B for that period has been made available on the GST portal.

Conclusion

The amendments to the CGST Act, 2017, and CGST Rules, 2017, introduced by the 55th GST Council Meeting, bring significant improvements to the functionality of the Invoice Management System (IMS) and streamline the GST compliance process. These updates aim to provide greater clarity and structure for taxpayers, ensuring better handling of tax credits, credit notes, and output tax liabilities. The amendments regarding the generation of FORM GSTR-2B, the reversal of input tax credit, and the adjustment of supplier output tax liability offer businesses a more transparent and efficient system to follow. Furthermore, the change that ties the filing of FORM GSTR-3B to the availability of FORM GSTR-2B will help improve the accuracy and timeliness of GST returns.

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