Does amendment/s to Rule 37 is prospective or retrospective? And its implications?

[Amit Agrawal]

As you are aware, vide Notification No. 19/2022–Central Tax dated the 28th September, 2022, sub-rule (1) & (2) of rule 37 of the CGST Act, 2017 were substituted while sub-rule (3) thereof was omitted.

As per Clause 1 (2) of above said notification reads as follows: Save as otherwise provided in these rules, they shall come into force with effect from the 1st day of October, 2022.

Does these amendment/s to Rule 37 is prospective or retrospective? Please share your views with supporting legal reasoning.

And to make this discussion more meaningful and lively, I request you to also explain what will be implications if you feel that these amendments are prospective in nature (i.e. what happens to contraventions under second proviso to sub-section (2) of section 16 for past period & its recovery procedure as per law etc.?).

Similarly, I request you to also explain what will be implications if you feel that these amendments are retrospective in nature (i.e. how any tax-paper is supposed to follow these substituted rule for past period, effect of changes made in sub-rule (1) about quantum of ITC reversal etc?).

Thank you!

AI Summary

Retrospective effect of GST rule amendments remains limited unless Parliament enacts retrospective law, and administrative recommendations propose reversal mechanisms.
Absent express retrospective enactment by Parliament, the Notification amending Rule 37 operates prospectively; retrospective effect altering past liabilities requires an express retrospective provision in Finance legislation. The 48th Council recommended treating certain reversals as retrospective to provide proportionate input tax credit reversal and proposed Rule 37A to prescribe reversal and re availment mechanics, but implementation awaits notifications and legislative wording.