Recent Changes to Goods and Services Tax in Budget 2021

Recent Changes to Goods and Services Tax in Budget 2021


To help businesses tide over the disruptions caused due to the pandemic, the Finance Minister announced many changes to the GST rules during her Budget 2021 speech. This post highlights some of the key changes.

There are only a few business sectors in India that were not significantly disrupted in 2020 due to the pandemic.

Helping businesses, especially MSMEs, was one of the primary goals of Budget 2021. In her speech, Finance Minister Nirmala Sitharaman announced several changes to the GST framework to help businesses tide over the disruptions.

Here is a list of some of the critical changes to GST in 2021-

1. Mandatory Audit Relaxation

In the past, businesses with a turnover of above INR 5 crores were required to mandatorily get their accounts audited every year by a registered Chartered Accountant (CA). As the pandemic has caused significant losses to most businesses, this mandatory audit requirement has been relaxed.

Businesses can now self-certify their financial accounts and don’t mandatorily need to hire an accountant. This move is aimed at making compliance more affordable, easier, and faster for businesses.

2. Pay Interest Only on Net Liability

As per the GST laws, businesses should deposit the tax they collect before the deadline. The businesses set off the unutilised input tax credit before depositing the tax money. If any registered business fails to deposit tax before the deadline, then interest at the rate of 18% is applicable to the outstanding amount.

However, it was never clear whether a business should pay this interest on the net liability or gross liability. Net liability is the tax amount after adjusting the unutilised input tax credit. On the other hand, gross liability is the entire tax liability without setting it off with the tax credit. But in Budget 2021, it was made clear that such interest penalties should only be paid on net tax liability.

3. Avail Input Tax Credit Only Against Valid Invoices

In the past, the Goods and Services Tax council introduced an amendment to the CGST laws to make it mandatory for taxpayers to furnish valid invoices if they want to avail input tax credit. However, the legality of this amendment was questioned by the taxpayers as there were no such rules in the CGST Act for validating this change.

But Budget 2021 has added a new amendment in Section 16 of the CGST Act to make it possible for the government to introduce such changes as and when required. This recent amendment has provided legal backing to the previous move by the GST council mandating valid invoices and other necessary details for availing input tax credit.

GST Advisory Support to Ensure Compliance

While the government and the GST council have constantly made changes to the GST framework to make compliance easier, most businesses are unable to take advantage of such amendments. Registered businesses can work along with professional GST advisors to ensure compliance and take advantage of all the provisions in a time-efficient and legal manner.

From assisting in tax preparations, reviewing GST returns, assessments to legal representations, tax advisors can help businesses at every step, providing enhanced convenience and even reducing tax liabilities whenever possible in a lawful manner.