Introduction:
In the wake of this Union Budget 2023, it will be apt and pertinent to note here about a saying as follows, i.e., ‘A budget proposes about where your money is about to go rather than making us to contemplate about where it went’. Clinically, Budgeting is nothing but a financial planning towards balancing our estimated income in concomitance with the possible expenditures.
Having said all this, I have endeavoured through this article, to delineate in detail about the proposed amendments in Central Goods and Services Act, 2017. The Clause wise amendments that have been proposed and their impact are being enlisted as here under.
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CGST Act, 2017: |
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| Section | 10 (2) & 10(2A) – Composition Levy |
| Change | It has been proposed in the Finance Bill to omit the words “goods or” from Section 10(2) & 10(2A).
(2) The registered person shall be eligible to opt under sub-section (1), if:— …. (d) he is not engaged in making any supply of goods or services through an electronic commerce operator who is required to collect tax at source under section 52. (2A)(c) (c) engaged in making any supply of goods or services through an electronic commerce operator who is required to collect tax at source under section 52 |
| Impact | As per the existing provisions, the taxpayers who make supply of goods or services through e-commerce operator are not eligible to opt for Composition Scheme. Now the enabling mechanism has been brought in the Act so as to allow the taxpayers to opt for Composition levy – even if they make supply of goods through e-commerce operator. This will definitely encourage the small players, who are under Composition Scheme, to sell their goods through online commerce portals. |
| Section | 16(2) – Conditions for availing ITC |
| Change | (i) It has been proposed to substitute the words “added to his output tax liability, along with interest thereon” with the words “paid by him along with interest payable under section 50” in second proviso to Section 16(2)
Provided further that where a recipient fails to pay to the supplier of goods or services or both, ……, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty……, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon paid by him along with interest payable under section 50. (ii) in the third proviso, after the words “made by him”, the words “to the supplier” shall be inserted. Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him [to the supplier] of the amount towards the value of supply of goods or services or both along with tax payable thereon. |
| Impact | (i) Second proviso to Section 16(2) provides that the recipient taxpayer has to pay the amount along with the tax to the supplier within 180 days failing which an amount equal to ITC availed has to be added to his (recipient’s) output tax liability. Initially it was proposed to introduce three returns (GSTR-1,2 & 3). The present legal and practical aspects of reversal on account of the above proviso are not matching inasmuch as GSTR-2 got suspended for ever. Hence, the legal aspect gets suitably amended now to accommodate the practical aspect.
(ii) In order to remove ambiguity, the proposed amendment makes it clear that the value of supply and tax to be paid to the supplier (and not to anyone on behalf of him) |
| Section | 17(3) – Reversal of ITC attributable to exempt supply |
| Change | The explanation clause to Section 17(3) has been proposed to amend so as to include the value of transactions of sale of warehoused goods before home clearance (Schedule – III neither supply of goods nor supply of services) in exempt supply for the purpose of reversal of ITC under Rule 42/43.
Explanation.—For the purposes of this sub-section, the expression ‘‘value of exempt supply’’ shall not include the value of activities or transactions specified in Schedule III, except,- except those specified in paragraph 5 of the said Schedule (i) the value of activities or transactions specified in paragraph 5 of the said Schedule; and (ii) the value of such activities or transactions as may be prescribed in respect of clause (a) of paragraph 8 of the said Schedule”; |
| Impact | So far, the turn over of sale of warehoused (custom bonded) goods is not included in exempt supply under Rule 42 and thereby ITC is not required to be revered. With this amendment, ITC attributable to said sale- even though, it is not a supply under GST Law, has to be reversed.
However, now only the enabling mechanism has been amended. The relevant rule (42) has to be amended by way of notification. |
| Section | 17(5) – Blocked Credit |
| Change | A new clause has been inserted in Section 17(5).
“(fa) goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013; |
| Impact | It is a very important amendment. There has been, so far, a confusion prevailing among the stakeholders about the eligibility of ITC which are used for CSR activities by a Company. Even the different Authorities for Advance Ruling, in different states, have taken contradictory stands. For e.g.
(a) UP AAR, in the case of M/s Dwarikesh Sugar Industries Limited’, ruled that CSR expenses qualify as being incurred in the course of business and thus eligible for Input Tax Credit. (b) But the Gujarat AAR, in the case of ‘Adama India Pvt Ltd’, observed that the CSR activities undertaken by the company shall exclude activities undertaken in pursuance of its normal course of business and it does not include activities undertaken in pursuance of normal course of business of the company, and thus not eligible for ITC. In order to remove ambiguity, a separate entry has been inserted in Section 17(5) which makes clear that ITC is not available if goods / services are used for CSR activities by the Company- even though it is an obligatory under the Companies Act, 2013. |
| Section | 23 – Persons not liable for registration |
| Change | Non obstinate clause has been inserted in Section 23,
“23. Notwithstanding anything to the contrary contained in sub-section (1) of section 22 or section 24,–– (a) the following persons shall not be liable to registration, namely:–– … …. |
| Impact | This is an appreciable amendment. Section 22 deals with registration in case of taxpayer crosses the threshold limit of Rs.20 laks or 10 lakhs as the case may be. However, Section 24 deals with compulsory registration which has overriding effect to Section 22. Hence, so far, even if a taxpayer makes exclusively exempt supply but falls under situations mentioned in Section 24 has to take compulsory registration. Now, with the amendment, Section 23 will over ride Section 24, and thereby will give relief to the taxpayers who makes exclusively exempt supply. |
| Section | 37 – GSTR-1 |
| Change | A new sub-section has been inserted in Section 37 to provide maximum time limit for filing GSTR-1 return.
“(5) A registered person shall not be allowed to furnish the details of outward supplies under sub-section (1) for a tax period after the expiry of a period of three years from the due date of furnishing the said details: |
| Impact | Presently there is no legal restriction with regard to fixing maximum time limit for filing GSTR-1 return. With this amendment the taxpayers will not be allowed to file GSTR-1 returns after expiry of three years from the due date. Of course, there is an enabling proviso too inserted to extend the said period. |
| Section | 39 – GSTR-3B |
| Change | A new sub-section has been inserted in Section 39 to provide maximum time limit for filing GSTR-3B return.
“(11) A registered person shall not be allowed to furnish a return for a tax period after the expiry of a period of three years from the due date of furnishing the said return: |
| Impact | Presently there is no legal restriction with regard to fixing maximum time limit for filing GSTR-3B return. With this amendment the taxpayers will not be allowed to file GSTR-3B returns after expiry of three years from the due date. Of course, there is an enabling proviso too inserted to extend the said period. |
| Section | 44- Annual Return |
| Change | A new sub-section has been inserted in Section 44 to provide maximum time limit for filing GSTR-9 return.
“(2) A registered person shall not be allowed to furnish an annual return under sub-section (1) for a financial year after the expiry of a period of three years from the due date of furnishing the said annual return: |
| Impact | Presently there is no legal restriction with regard to fixing maximum time limit for filing GSTR-9 return. With this amendment the taxpayers will not be allowed to file GSTR-9 return after expiry of three years from the due date. Of course, there is an enabling proviso too inserted to extend the said period. |
| Section | 52- Tax Collection at Source |
| Change | A new sub-section has been inserted in Section 52 to provide maximum time limit for filing GSTR-8 return.
“(15) The operator shall not be allowed to furnish a statement under sub-section (4) after the expiry of a period of three years from the due date of furnishing the said statement: |
| Change | E-Commerce operators are required to file a return/statement in Form GSTR-8 every month. Presently there is no restriction in fixing maximum time limit for filing GSTR-8. With this time limit, E-Commerce operators will not be allowed to file return after expiry of three years from the due date. However, the Govt. may extend the period by way of notification. |
| Section | 54- Refund |
| Change | In section 54 of the Central Goods and Services Tax Act, in sub-section (6), the words “excluding the amount of input tax credit provisionally accepted,” shall be omitted |
| Impact | Section 54(6) provides refund of ITC, on account of zero-rated supply, may sanction 90 % of refund claim provisionally. However, for calculating 90 %, ITC availed on provisional basis shall not be taken into account. As there is no concept of provisional ITC existing now, Section 54(6) is suitably amended. Earlier section 41 which stood prior to 01.10.2022 contained the words “ITC on provisional basis”. |
| Section | 56- Interest on delayed Refunds |
| Change | In section 56 of the Central Goods and Services Tax Act, for the words “from the date immediately after the expiry of sixty days from the date of receipt of application under the said subsection till the date of refund of such tax”, the words “for the period of delay beyond sixty days from the date of receipt of such application till the date of refund of such tax, to be computed in such manner and subject to such conditions and restrictions as may be prescribed” shall be substituted |
| Impact | Section 56 provides interest in case of refund is sanctioned beyond 60 days. Presently interest is calculated from 61st day from the date of receipt of refund. However, as per the recent amendment in Rule 96(5A) which has retrospective effect, IGST refund claims which are withheld (generally risky exporters) will be transferred electronically to the jurisdictional officers (from Customs Systems) with system generated RFD-01 for disposal. In such cases, generation of RFD-01 (system generation) will be considered as date of receipt refund application. Hence, interest will be calculated accordingly and date of filing Shipping Bill will not be taken into account in such cases. |
| Section | 122-Penalty for certain offences |
| Change | In section 122 of the Central Goods and Services Tax Act, after sub-section (1A), the following sub-section shall be inserted, namely:––
“(1B) Any electronic commerce operator who–– (i) allows a supply of goods or services or both through it by an unregistered person other than a person exempted from registration by a notification issued under this Act to make such supply; (ii) allows an inter-State supply of goods or services or both through it by a person who is not eligible to make such inter-State supply; or (iii) fails to furnish the correct details in the statement to be furnished under sub-section (4) of section 52 of any outward supply of goods effected through it by a person exempted from obtaining registration under this Act, shall be liable to pay a penalty of ten thousand rupees, or an amount equivalent to the amount of tax involved had such supply been made by a registered person other than a person paying tax under section 10, whichever is higher.”. |
| Impact | With the insertion of new sub-section, the onus is shifted to E-Commerce operators in case of any contravention by unregistered person / composition tax payers who makes supply through their online portal. Hereafter, E-Commerce operator has to strictly ensure proper compliance by taxpayers who makes supply through them. |
| Section | 132- Punishment for certain offences |
| Change | In section 132 of the Central Goods and Services Tax Act,
in sub-section (1),–– (a) clauses (g), (j) and (k) shall be omitted; (b) in clause (l), for the words, brackets and letters “clauses (a) to (k)”, the words, brackets and letters “clauses (a) to (f) and clauses (h) and (i)” shall be substituted; (c) in clause (iii), for the words “any other offence”, the words, brackets and letter “an offence specified in clause (b),” shall be substituted; (d) in clause (iv), the words, brackets and letters “or clause (g) or clause (j)” shall be omitted. |
| Impact | The proposed amendment de-criminalizes certain offences such as “obstruct /prevent any officer, fails to supply information” etc. Further monetary limit for prosecution, for other than fake invoice cases, has been increased from 1 Cr to 2 Cr |
| Section | 158 A- Sharing of information |
| Change | A new section 158 A has been inserted.
“158A. (1) Notwithstanding anything contained in sections 133, 152 and 158, the following details furnished by a registered person may, subject to the provisions of subsection (2), and on the recommendations of the Council, be shared by the common portal with such other systems as may be notified by the Government, in such manner and subject to such conditions as may be prescribed, namely:–– (a) particulars furnished in the application for registration under section 25 or in the return filed under section 39 or under section 44; (b) the particulars uploaded on the common portal for preparation of invoice, the details of outward supplies 92 furnished under section 37 and the particulars uploaded on the common portal for generation of documents under section 68; (c) such other details as may be prescribed. (2) For the purposes of sharing details under sub-section (1), the consent shall be obtained, of –– (a) the supplier, in respect of details furnished under clauses (a), (b) and (c) of sub-section (1); and (b) the recipient, in respect of details furnished under clause (b) of sub-section (1), and under clause (c) of sub-section (1) only where such details include identity information of the recipient, in such form and manner as may be prescribed. (3) Notwithstanding anything contained in any law for the time being in force, no action shall lie against the Government or the common portal with respect to any liability arising consequent to information shared under this section and there shall be no impact on the liability to pay tax on the relevant supply or as per the relevant return.” |
| Impact | With the consent of the taxpayers the information such as “Application of registration, information in his statement of outward supply (GSTR-1), details of e-invoice / E-way bill etc. may be shared with other systems as may be notified by the Govt. |
| Schedule | Schedule – III : Neither Supply of goods , nor Supply of services |
| Change | Retrospective Effect is given to Paras 7 and 8 of Schedule – III which was earlier inserted vide Finance Act,2018.
[7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. 8. (a) Supply of warehoused goods to any person before clearance for home consumption; (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.] Explanation 2.––For the purposes of paragraph 8, the expression “warehoused goods” shall have the same meaning as assigned to it in the Customs Act, 1962. |
| Impact | From 01.02.2019 onwards, High Sea Sales and sale of warehoused (custom bonded) goods are treated as NO SUPPLY. However, there are some litigations on the above issue for the period prior to 01.02.2019. In order to remove ambiguity, the Govt. has given retrospective effect i.e. from 01.07.2017 to the above amendments. |
| IGST ACT,2017 | |
| Section | 12- Place of Supply of services where supplier and recipient are in India |
| Change | In section 12 of the Integrated Goods and Services Tax Act, in sub-section (8), the proviso shall be omitted |
| Impact | There was a confusion prevailing among the taxpayers whether IGST or CGST & SGST has to be charged on ocean freight (outbound) when Supplier and Recipient are in the same state. Going by the logic, any one can jump to a conclusion that CGST & SGST has to be collected as it is intra-state supply. However, the crucial factor which determines a supply as intra-state or inter-state is something called “Place of Supply”. As per the proviso to Section 12(8) of IGST Act, 2017, place of supply in case of transportation of goods to a place outside India will be the place of destination. With this amendment, hereafter such transaction will fall under intra-state supply and therefore, CGST & SGST will be payable. |
Conclusion:
All the above amendments are at the proposal stage only. The same has to be approved by the Parliament, later to be approved by the Hon’ble President of India. Let’s wait for the proposed provisions to be notified.
Happy Learning!!!
(DISCLAIMER: (i) The views expressed in this article are strictly confined to the author’s personal views, only. (ii) The author disclaims all liability in respect of any action taken or not taken based on this article)
| Name of the Author | A. SIVA |
| Post | Superintendent of Customs.
Tuticorin |
| Photo |
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