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Pre-Budget Memorandum 2018

Suggested Amendments in respect of Indirect Taxes for Finance Bill, 2018



Suggestions under GS Law

Sr. No. Existing provision under the CGST Act, 2017, SGST Act, 2017, IGST Act, 2017 and CGST Rules (“GST Law”) Difficulties / Obstacles / Hurdles faced
1. Proviso to Section 140(3) provides for the deemed transitional credit of CGST and SGST in case of where the registered person other than a manufacturer or a supplier of services is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs. The said deemed credit will be available in the prescribed manner.

Rule 117 (4)(a)(iii) prescribes that the said credit will be available six months period only from the appointed date.

There can be various reasons due to which the pre-GST stock lying with the registered persons is not sold within a period of six months from the appointed date. However, the said pre-GST stock has suffered excise duty or other taxes, the transitional credit of which would have been available to the registered persons had the stock been sold within the six months. If no credit is given after six months are complete, the price of the said pre-GST goods will be higher as compared to the post-GST goods and the registered person will either have to bear loss to make the prices competitive.


It is suggested that the six months cap be removed so that the deemed credit can be availed on all pre-GST goods lying in stock

Justifications for the suggestions:

If the cap is removed, the pre-GST stock will be competitive to sell on pricing terms and can be sold as early as possible. If no credit is given of the excise duty and other taxes suffered by the goods earlier, the registered person may have to suffer losses merely due to change in law.

2. Section 140(9) of the CGST Act, 2017 provides that where any CENVAT credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such credit can be reclaimed subject to the condition that the registered person has made the payment of the consideration for that supply of services within a period of three months from the appointed day There are many reasons due to which the registered person had not paid the consideration to the service provide under the Service Tax regime and had reverse the CENVAT Credit. One of the reasons can be the genuine dispute between the parties. Under the CENVAT credit rules, the said credit was then available anytime when the payment is made in future. However, under the transitional provision, the credit was available only if payment is made within 3 months i.e. upto 30.09.2017. If full payment is not made by 30.09.2017, then the said credit shall not be available to the registered person.


A mechanism should be brought in place to allow the credit on consideration paid for services received under the erstwhile service tax regime without any time limit. The time limit of 3 months in Section 140(9)should be removed.

Justifications for the suggestions:

Many registered persons have genuine disputes regarding the services and hence have not paid the consideration. Some disputed might even date back to more than years. Sometimes even stay may have been obtained from payment under any court or arbitration order. Any dispute on account of all this factors may not be possible to be solved within 3 months. Further the amount of credit involved may be huge. It is also not possible to avail such credit by revising Service Tax returns for the past so as to claim the refunds. Thus, it is necessary to grant unlimited time to avail the said transitional credit.

3. Section 10 of the IGST Act, 2017 provides for the place of supply for goods in various situations.


The existing provision under Section 10 especially Section 10(1)(b) are difficult to apply in certain situations.


It is suggested that place of supply for all B2B transactions may be made as registered place of business of the recipient. Specific rule may be amended for B2C transaction. In any case, the concept of “third person” may be explained in the legislature itself by way of an example to bring in uniformity in interpretation of Section 10(1)(b)

Justifications for the suggestions:

it is important to bring parity in place of supply rules between services and goods. Different treatments leads to confusions among the trade and also may increase the chance of litigation.

4. Place of supply for goods sold outside Non-Taxable territory There is no clarity on tax treatment on supplies made outside the Non-Taxable territory by a registered person from India.


Clarity needs to be brought in treatment of supplies made by a registered person for goods situated outside India.

Justifications for the suggestions: 

Specific provision should be inserted to bring in clarity on supplies made in nontaxable territory by registered person in India.

5. Existing invoice wise return system of 3 returns per months needs to be modified. Filing of invoice wise three returns per month is time consuming and tedious for small as well as big businesses. The compliance of the said provisions is difficult and cannot be done by the consultants too.


It is suggested that new return system may be introduced based on the existing return system under the erstwhile VAT laws in various States. The self-assessed return along with Annexure of sales and purchase invoices for matching of invoices would reduce the compliance and is easy to follow.

Justifications for the suggestions:

It is necessary to revamp the return filing system in order to make the compliance easier and simple. This will also increase the revenue collection for the Government.

6. Delinking of payment of dues with filing of return. Under the existing return system, a registered person cannot file the return unless all the dues as per the return are paid. This system will lead to noncompliance as well as make other provisions of law such as installment payments redundant.


It is suggested that returns should be allowed to be filed even without payment. The late payment of tax as per the return is anyways liable to interest.

Justifications for the suggestions:

A registered person who is in financial difficulty may not be able to file the return even though he wants to comply the returns and apply for installment for payment of taxes as per the return.

7. Dispute regarding classification of imported goods. The IGST on imported goods is collected by the Customs Department. Even if the classification adopted by the Customs Department is disputed by the importer, the imported is liable to pay IGST.


Appropriate forum needs to be set up for challenging the classification of imported goods either with the Customs Department or under the GST Department.

Justifications for the suggestions:

This is necessary to ensure the timely decision on classification for goods. If the importer is made to pay IGST even on nil rated goods, it may lead to blockage of working capital on imported goods.

8. No GST on advances received for works contract service. Under the GST law, works contract has been deemed to be a supply of service. In case of supply of service, GST is payable on receipt of advances from the customer. Thus, even before actually suppling any service, the registered person is made liable to pay GST on advances such as mobilization advances, etc.


it is suggested that the GST on advances received for works contract service needs to be removed. GST on advances leads to working capital blockage and the credit of such GST will be available to the recipient only after the services have been actually received.

Justifications for the suggestions:

Many a times, the works contract like construction of a building come to a standstill after initial payment of advances. If GST is paid on such advances, the same will lead to blockage of working capital. Hence, for the sake of ease of doing business, it is necessary to remove the GST on advances for works contract service.


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May 2024