Siddharth Surana, Director, RSM India
Budget 2024-25: Major Proposals on Indirect Taxes
With a focus on inclusive growth and enhancing tax transparency and simplification, Budget 2024-25 includes significant proposals concerning indirect taxes. The Budget Estimates project a double-digit growth in Goods and Services Tax (GST) collections for FY 2024-25, and the Budget aims to achieve this by streamlining compliances and assessment procedures, enhancing digitalization, and focusing on dispute resolution. Here are the key Goods and Services Tax amendments proposed in the Finance Bill:
Clarification on Time of Supply for GST on Reverse Charge Basis
The Finance Bill provides much-needed clarity on the levy of GST on a reverse charge basis, particularly, in those situations, where the recipient needs to issue the invoice. Most commonly, this situation usually applies to the import of services. These amendments clearly delineate situations based on the obligation to issue invoices. Under GST, reverse charge typically applies to specified services like legal services, e-commerce rent-a-cab, and Goods Transport Agency services, where the service provider issues the invoice, determining the time of supply. The recipient pays tax on reverse charge basis, either at time of making payment or on receipt of invoice by supplier.
In cases where the recipient issues the invoice and where supplier is not obligated to issue an invoice, such as with the import of certain services, the amendments specify that the time of supply shall be reckoned based on the recipient’s invoice date. This distinction is crucial since GST liability is determined by the time of supply and this clarification will help resolve disputes with tax authorities over self-invoicing interpretations.
The GST Council’s 53rd meeting also clarified the applicability of interest and availability of input tax credit in cases of non-issuance of self-invoices for import of services.
Streamlining of Certain Assessment Procedures and Time Limit for Issuance of Notices
The Finance Bill introduces Section 74A to the CGST Act, effective from FY 2024-25, superseding Sections 73 and 74. This amendment changes the time limit for issuing assessment notices to 42 months from the due date of the annual return for the financial year, and the same shall apply uniformly across all types of taxpayers. For example, FY 2024-25, with the annual return due on 31st December 2025, the deadline for issuing notices will be 30th June 2029.
Previously, Sections 73 and 74 allowed time limits of three and five years, respectively, depending on whether the assessment involved a taxpayer alleged to have committed fraud, willful misstatement, or suppression of facts. It is important to note that Sections 73 and 74 will remain applicable for all financial years up to and including FY 2023-24.
Further even from FY 2024 – 25 onwards, the taxpayers found liable for fraud, misstatements, or willful suppression of facts will still face a higher penalty, equivalent to the tax due, in addition to tax and interest. The Finance Bill has imposed different penalty norms for taxpayers alleged to have committed fraud, willful misstatement, or suppression of facts.
Time Limit for Issuing Orders in respect of Notices Under New Section 74A
The GST Council, in its 53rd meeting, recommended a common time limit for issuing assessment orders under Sections 73 and 74 from FY 2024-25 onwards. The time limit for taxpayers to avail the benefit of reduced penalties has been increased from 30 days to 60 days. The Finance Bill specifies a 12-month time limit from the notice issuance date for completing assessments and issuing orders. For instance, a notice issued on 1st April 2026 for FY 2024-25 requires an order by 31st March 2027, giving tax authorities more time for thorough assessments. This time limit earlier was significantly shorter and was only 3 months from date of issuance of notice.
Conditional Waiver of Interest and Penalty for FY 2017-18 to 2019-20
Recognizing initial GST implementation challenges, the Finance Bill introduces Section 128A, which provides a waiver of interest and penalties for non-fraudulent taxpayers being assessed under Section 73 for the periods FY 2017-18, 2018-19, and 2019-20. The waiver of interest and penalty is conditional and is subject to payment of tax amount under dispute by 31 March 2025. Further, this waiver excludes cases of erroneously sanctioned refunds and applies only to open cases, which are still in appeal or under dispute, and do not appear to extend to cases where the taxpayer has already paid interest and penalty.
Reduction in Pre-Deposit Amounts for GST Appeals
To ease cash flow constraints, the Finance Bill proposes reducing the pre-deposit amounts for GST appeals. The maximum amount for appeals before the Appellate Authority i.e. Commissioner (Appeals) has been reduced from Rs. 25 crores to Rs. 20 crores each under CGST and SGST. For appeals before the yet to be formed GST Appellate Tribunal, the pre-deposit amount is reduced from 20% to 10% of the disputed tax amount, with a maximum ceiling of Rs. 20 crores each under CGST and SGST and Rs 40 crores under IGST.
Timelines for GST Appellate Tribunal Appeals
The GST Council’s 53rd meeting recommended a three-month period for filing appeals before the GST Appellate Tribunal, to be counted from a yet-to-be-notified date. The Finance Bill adopts this recommendation, providing taxpayers ample time to approach the Tribunal for dispute resolution. The formation and operational details of the GST Appellate Tribunal will be notified subsequently and has not yet been addressed in the Budget.
Relaxation in Timelines for Availing Input Tax Credit for the initial years of GST implementation
The Finance Bill clarifies that the time limit for availing input tax credit (ITC) for FY 2017-18, 2018-19, 2019-20, and 2020-21 is deemed as 30 November 2021, provided ITC is availed in GST returns (FORM GSTR 3B) filed up to that date. Retrospective amendments to Section 16(4) of the CGST Act have been introduced accordingly.
These amendments aim to streamline the assessment process, enhance clarity and certainty for taxpayers, and address various practical challenges faced during GST implementation.
Views expressed are personal.
