Latest Income Tax Updates for FY 2022-23.

Latest Income Tax Updates for FY 2022-23.

As we know, the latest income tax updates for FY 2022-23 have been proposed in the finance budget presented on 1st Feb 2022. The changes for the Financial year 2022-23 are mentioned below:

  • ⦁ Provision for filing ‘Updated Income Tax returns’ within 2 years from the end of relevant AY.
  • ⦁ Reduced AMT rates for Co-operatives from 18.5% to 15%.
  • ⦁ Reduced surcharge for Co-operatives with a total income of 1cr to 10Cr.
  • ⦁ Tax relief for persons with disability: Allow annuity payment to differently-abled dependents when parents attain the age of 60 years.
  • ⦁ Deduction for National Pension Scheme for State Government employees u.s 80CCC made at par with Central Govt.
  • ⦁ Start-ups established before 31.03.2023 (earlier–31.03.2022; now extended by 1 year) will be provided tax breaks.
  • ⦁ Last date for commencement of manufacturing for claiming lower tax regime under Section 115BAB to be 31.03.2024 (earlier 31.03.2023; now extended by 1 year).
  • ⦁ Virtual digital assets (Cryptocurrency): Income from transfer of virtual digital assets to be taxed at 30%; No deduction for expenses other than the cost of acquisition; No set-off of losses.
  • ⦁ TDS @ 1% on consideration above a specific threshold.
  • ⦁ The gift to be taxed under section 56(2)(x).
  • ⦁ No repetitive appeals for a common question of laws.
  • ⦁ Off-shore banking units/ IFSC income to be provided exemptions.
  • ⦁ A surcharge of certain AOPs to be capped at 15%.
  • ⦁ Surcharge on Long Term Capital Gains on any assets to be capped at 15%.
  • ⦁ Health and education cess not allowable as business expenditure u/s 37.
  • ⦁ No set-off of losses against undisclosed income detected during the search.

Restrictions on availment of ITC as per GSTR-2A/2B from 1st, January 2022.

Availment of ITC as per GSTR-2A/2B

The taxpayer had been allowed to claim ITC based on the 4 conditions mentioned in section 16.
However, in section 16 of the Central Goods and Services Tax Act, in sub-section (2), after clause (a), CBIC has inserted 5th condition via clause (aa) namely, “the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37”.
Now, this provision will apply from 1st Jan 2022, and 100 percent invoice matching with GSTR 2A will come into place.

On which basis taxpayer used to claim ITC till date?

Till date, taxpayers used to claim ITC based on either of the following two methods –

  • ⦁ Method 1: Claim ITC in return for that period to the extent of appearing
    in GSTR 2A.
  • ⦁ Method 2: Claim Full ITC based on amount appearing in the purchase
    invoice booked.

Now taxpayers will be allowed to take ITC only to the extent of the amount appearing in GSTR 2A.

What are the reasons due to which ITC of the genuine taxpayer can be disallowed because of insertion of the above new clause?

Following are the reasons due to which ITC of the genuine taxpayer can be disallowed:

  • ⦁ Your supplier has not filed GSTR 1 within the due date.
  • ⦁ Your supplier has filed GSTR 1 but mentioned the wrong GST number.
  • ⦁ Your supplier has filed GSTR 1 but mentioned the transaction as B2C instead of B2B.
  • ⦁ Many more reasons which are not in control of taxpayer.

What action department can take if any taxpayer claims ITC in excess of appearing in GSTR 2A?

⦁ The GST department has already started issuing a notice in the Form of ASMT 10 for FY 2017-18 and FY 2018-19 against the dealer who has claimed excess ITC than that appearing in GSTR 2A / Table 8 of GSTR 9. Such notices have been sent to all dealers by mail and are also available on the GST portal. The notice needs to be replied to, otherwise, the GST department can recover the tax along with interest and penalty.

What care should be taken by the taxpayer?

⦁ Now it is the responsibility of every taxpayer to check whether the supplier is filling GSTR 1 accurately and in a timely manner and after the auto-population of GSTR 2A of the following month the taxpayer shall reconcile ITC on purchases accounted in books with ITC reflected in GSTR 2A. If the same is not reflected in GSTR-2A, then a follow-up must be taken by the taxpayer with the supplier so that the same can be availed by the taxpayer.

Our previous article on the same issue –