Celebrate this Diwali with GST Fireworks!

Arjuna: Krishna Many people celebrate Diwali by setting off fireworks. GST is live after completion of income tax audit. So how can we link GST and fireworks?

Krishna: Arjuna, Diwali is the festival of joy and happiness. Dhanateras, Lakshmipujan etc. are highly respected. We celebrate Diwali by bursting crackers. Similarly, the government bursts some new types of crackers every year. This year too, the government has set off fireworks by issuing various notifications, circulars, provisions and recommendations on GST before Diwali. Let’s discuss some important GST fireworks that will help taxpayers comply better with GST laws.

Arjuna: Krishna, tell me about this “Rocket”, fireworks that fly high and light up the sky in seconds. Is there anything like a rocket in GST?

Krishna: Arjuna, just like a rocket flies fast and lights up the sky, the new Section 128A Amnesty Program provides a fast and effective way for taxpayers to settle their FY 2017-18, 2018-19, 2019-20 back claim notices/orders. Effective November 1, 2024, this plan allows taxpayers to pay their dues by waiving penalties and interest if they pay their tax obligations by March 31, 2025 of that period. This is like launching a rocket; It illuminates the sky for a moment before disappearing. This amnesty helps taxpayers clear their past debts instantly, leaving them with a clean income without the burden of penalties or interest.

Arjuna: Krishna, what about “Jameen chakkar”, The earth spinner that dazzles as it spins? Is there something similar in GST that revolves around different phases?

Krishna: Yes Arjuna! The new Invoice Management System (IMS) is similar to the Jameen chakkar of GST and revolves around key actions that involve taxpayers at every step. Just like Jameen chakkar turns and lights up the place, IMS revolves around Accept, Reject or Leave Pending options for invoices uploaded by suppliers in their GSTR-1/1A/IFFs. This structured rotation provides visibility and control over Input Tax Credit (ITC), reducing errors and ensuring compliance. IMS makes GST compliance smoother and more transparent by ensuring taxpayers have a foundation in accurate record keeping. This system is valid as of October 15, 2024.

Arjuna: Krishna, what about “Full Jadi”, Fireworks that sparkle quietly and bring a smile to everyone’s face? Is there a provision in the GST with similar effect?

Krishna: Definitely Arjuna! The new provisions under Section 16(5) and 16(6) are similar to Full Jadi, the firework that sparkles silently and brings joy to all who watch. These provisions provide quiet but significantly strong relief to taxpayers facing delayed ITC claim issues due to the Section 16(4) timeline for the period 2017-18 to 2020-21. Effective November 1, 2024, this new provision allows taxpayers who mistakenly claimed ITC outside the Section 16(4) timeline to now be considered a valid claim if they meet the criteria of the new provisions. ITC for the specified period can be claimed in any return filed up to November 2021. Like Full Jadi, which quietly but effectively lights up the scene, this provision allows taxpayers to clearly resolve past mistakes and move forward with confidence.

Arjuna: What about “Wreath Crackers”, Where does one cracker start the next? Is there a similar chain reaction in GST?

Krishna: Definitely Arjuna! From January 2025, the GST portal will apply hard locking of GSTR-3B for all liabilities auto-populated from GSTR-1, GSTR-1A or IFF. If taxpayers need to adjust their tax liability, they have to do it through GSTR-1A as there will be no option to change it in GSTR-3B. This new measure provides consistency and accuracy, like a series of breakers exploding in perfect order.

Arjuna: Krishna, what about “Atomic bomb”, Fireworks that explode with a huge bang and fill the sky with intense light? Have there been any recent GST decisions with similar impact?

Krishna: Indeed Arjuna! The Safari Retreats decision is like an Atomic Bomb, shaking up the real estate industry with a strong impact on ITC’s claims regarding construction activities. In this landmark judgment, the court held that Input Tax Credit (ITC) can be allowed for inputs used to construct immovable property, provided that the property is ultimately used for renting or letting. Purpose will determine classification as “Facility” or “Building”. ITC is allowed if it is a plant. This decision was a game-changer, especially for the real estate sectors. Just like an Atomic Bomb burns up with a powerful explosion, this decision has brought relief to many businesses in the real estate sector by shedding light on a previously unclear area of ​​the GST law.

Arjuna: Krishna, what about “Lasun Bomb or Chitput”Fireworks known for their sharp and rapid explosions that attract everyone’s attention? Are there any GST changes that have a similar impact?

Krishna: Yes Arjuna! Recent notifications introducing Reverse Charge Mechanism (RCM) for both property rental and metal scrap supply are acting like a Lasun Bomb, shaking up compliance requirements across sectors. Effective October 10, 2024, registered buyers renting non-residential property from unregistered suppliers must now bear GST liability under the RCM. Similarly, the RCM for the metal scrap sector where registered buyers are required to self-assess and pay GST on purchases from unregistered suppliers. This step aimed to prevent tax evasion.

Arjuna: Krishna, what lesson should taxpayers learn from this?

Krishna: Arjuna, Diwali is a festival of light and joy, a time to celebrate with brightness and hope. Law abiding by every Indian taxpayer would enlighten the entire nation and promote prosperity and growth. In other words, it is a real Diwali when we follow the rules; but when we do not follow the rules, we face the risk of Diwale (bankruptcy).