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  • Writer's pictureAccounString Management Private Limited

Attention!! Changes in GST with effect from 1st January 2021!!

In light of the GST investigation wing recently unearthing several cases of fake invoices and bogus firms, which also resulted in the arrest of some individuals CBIC has issued a couple of notifications amending the CGST Act, 2017 and the CGST Rules, 2017 which are applicable w.e.f. 1st January 2021.


1. Restriction on ITC claim [Rule 36(4)]


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 be 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. The provision shall come into effect from 1st January 2021.


2. Restriction on use of ITC for paying GST [Rule 86B]


As per GST Notification number, 94/2020-Central Tax dated 22nd Dec 2020, GST rule 86B has been introduced. This rule has imposed a 99% restriction on ITC (Input Tax Credit) available in the electronic credit ledger of the Registered Person. This means 1% of Output liability to be paid in cash. This limitation is applicable where the value of taxable supply other than exempt supply and zero-rated supply, in a month, exceeds fifty lakh rupees.


3. QRMP Scheme [Quarterly Return Monthly Payment] for Small Taxpayers with turnover upto Rs.5 Crores


This scheme has been introduced with effect from 1st January 2021. As per this scheme, Small Taxpayers with turnover upto Rs.5 Crores are required to file only 4 Quarterly Return GSTR-3B instead of 12 monthly GSTR-3B. This means now small taxpayers have to file only 8 GST Returns in a year [ 4 GSTR-3B & 4 GSTR-1]. The payment of taxes, however, would be still required to be done on monthly basis.


4. GSTR 1 to be blocked in case of non-filing of two 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 E-way 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.


5. Taxable value and tax both should be in synchronization between GSTR 1 and GSTR 3B


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. There might be some practical difficulties in implementing such a provision as there are number of corrections which are made in GSTR 3B which may result in lower tax liability as compared with GSTR 1. The clause (f) newly inserted talks about details of outward supply to which we understand that Taxable value and tax both should be in synchronization between GSTR 1 and GSTR 3B.


6. Validity of E-way bill to 200 Kms in a day


Earlier one day was permitted for distance up to 100 kms under e way bill provision. Now the same has been increased to 200 kms. This means that only one day validity shall be granted to cover a distance up to 200 kms which was earlier 100 km.


7. No Natural Justice for Suspension of Registration!


Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29 or under rule 21, he may, after affording the said person a reasonable opportunity of being heard, suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under rule 22.


9. E-invoicing


It is applicable for registered persons having aggregate turnover over Rs.100 crores in any of the financial year starting with FY 2017-18. From 1st January, 2021, all Tax Invoices, Credit Notes & Debit Notes will be required to be registered with Invoice Registration Portal (IRP) and IRN number along with QR code shall be mentioned on the above documents.




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