In exercise of the powers conferred by section 164 of the Central Goods and Services Tax Act,

## Policy Analysis Report: Central Goods and Services Tax Amendment Rules, 2021 **1. Executive Summary:** This report analyzes the Central Goods and Services Tax Amendment Rules, 2021, as detailed in Notification No. 01/2021-Central Tax. This amendment, issued by the Ministry of Finance, Department of Revenue, aims to modify the Central Goods and Services Tax Rules, 2017, specifically concerning the furnishing of outward supply details (GSTR-1) under section 37. The core purpose of the amendment is to restrict the filing of GSTR-1 for registered persons who have not filed their GSTR-3B returns for preceding tax periods or those restricted from using the electronic credit ledger under rule 86B. The key finding is that this amendment intends to improve compliance with GSTR-3B filing and addresses concerns related to the utilization of the electronic credit ledger. **2. Introduction:** The purpose of this report is to provide an informative analysis of the Central Goods and Services Tax Amendment Rules, 2021, based solely on the text of Notification No. 01/2021-Central Tax, published on January 1, 2021. This report will detail the amendment's objective, key changes, affected stakeholders, and potential impacts. **3. Policy Overview:** * **Amendment:** This notification amends the Central Goods and Services Tax Rules, 2017. * **Core Objective(s):** The inferred objective, based on the text, is to improve tax compliance by restricting the filing of GSTR-1 for registered persons who have not furnished GSTR-3B returns and those restricted under rule 86B from fully utilizing their electronic credit ledger. **4. Background and Rationale:** * **Amendment:** The rationale for this amendment appears to stem from the government's desire to ensure timely filing of GSTR-3B returns and to address concerns regarding the potential misuse of the electronic credit ledger. The amendment links the ability to furnish outward supply details (GSTR-1) to the filing of GSTR-3B and compliance with Rule 86B, implying a strategy to enforce better tax discipline and prevent irregularities in credit utilization. **5. Key Provisions / Changes:** This amendment introduces changes specifically to Rule 59 of the Central Goods and Services Tax Rules, 2017, by inserting a new sub-rule (6). The key changes are as follows: * **Specific Part of Original Policy Changed:** Rule 59 of the Central Goods and Services Tax Rules, 2017. * **New Rule/Provision:** The new sub-rule (6) imposes the following restrictions on furnishing details of outward supplies in FORM GSTR-1 under section 37: * **(a)** A registered person is *not allowed* to furnish GSTR-1 if they haven't furnished the GSTR-3B return for the *preceding two months*. * **(b)** A registered person required to furnish returns quarterly under section 39(1) is *not allowed* to furnish GSTR-1 (or use the invoice furnishing facility) if they haven't furnished the GSTR-3B return for the *preceding tax period* (quarter). * **(c)** A registered person restricted under rule 86B from using the electronic credit ledger to discharge more than 99% of their tax liability is *not allowed* to furnish GSTR-1 (or use the invoice furnishing facility) if they haven't furnished the GSTR-3B return for the *preceding tax period*. * **Difference/Effect of the Change:** Previously, Rule 59 likely did not explicitly link the ability to file GSTR-1 with the prior filing of GSTR-3B or adherence to Rule 86B restrictions. This amendment now *directly* links these obligations. The effect is that businesses failing to file GSTR-3B or those with 86B restrictions will be *prevented* from filing their GSTR-1, potentially impacting their customers' ability to claim input tax credit. **6. Target Audience and Stakeholders:** Based on the text, the target audience and directly affected stakeholders are: * Registered persons under the Central Goods and Services Tax Act, 2017. * Specifically, those registered persons who: * Frequently delay or fail to file their GSTR-3B returns. * Are required to furnish returns quarterly. * Are subject to restrictions on using the electronic credit ledger under Rule 86B. * Indirectly, businesses that rely on timely GSTR-1 filings from their suppliers to claim input tax credit will also be affected. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Central Board of Indirect Taxes and Customs (CBIC), under the Department of Revenue, Ministry of Finance, is responsible for implementing and overseeing these rules. * **Timelines or Procedures:** The rules came into force on January 1, 2021, the date of their publication in the Official Gazette. The amendment introduces a procedural change, requiring the GST portal to block GSTR-1 filing if the GSTR-3B filing requirement is not met. **8. Expected Outcomes / Impact of Changes:** * **Expected Outcome of the Changes:** The primary intended outcome of these amendments is to improve compliance with GSTR-3B filing deadlines and prevent potential misuse of input tax credit. By preventing non-compliant businesses from filing GSTR-1, the government likely intends to incentivize timely GSTR-3B filing and adherence to Rule 86B restrictions. This aims to ensure better tax collection and reduce the potential for fraudulent activities related to input tax credit claims. This may create challenges for buyers as well since the suppliers GSTR-1 filing is blocked, thus creating input tax credit issues. **9. Conclusion:** The Central Goods and Services Tax Amendment Rules, 2021, represent a significant step towards enforcing stricter compliance with GST regulations. By linking the ability to file GSTR-1 to the prior filing of GSTR-3B and adherence to Rule 86B restrictions, the amendment aims to improve tax collection, reduce the potential for fraudulent activities, and improve the overall integrity of the GST system. These changes will directly impact registered persons and indirectly affect businesses that rely on timely GSTR-1 filings for input tax credit claims.

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