The Finance Act 2021 has been passed by both the houses of parliament and the President has given assent on 29.3.2021.
The Finance Act 2021 has amended the CGST Act and IGST Act as also Central Sales Tax Act 1956.
Key Features are narrated herein after in short:
1. Section 7 is amended to insert clause (aa) in sub-section (1) so to provide that the activities or transactions, by a person, other than an individual, to its members or constituents or vice versa, for cash, deferred payment or other valuable consideration shall be included in the scope of supply. It has inserted an Explanation that for the purposes of this clause, it is clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another. Thus argument of mutuality is now not available at all.
2. In section 16, in sub-section (2), after clause (a), clause (aa) has been inserted to effect that the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37. This is an additional condition for claiming ITC.
3. Provision for audit of annual accounts has been omitted. Hence now onwards taxable person shall not be required to get his books of accounts by a chartered accountant or a cost accountant irrespective of turnover.
4. The annual return u/s 44 is not now required to filed with audited accounts in view of provision for audit being omitted. Self Certification of Reconciliation statement has to be done by the taxable person only. As earlier, this provision is not applicable to an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person.
5. Section 50, proviso is substituted to give effect to liability of interest on the amount paid in cash and the whole of tax.
6. The Explanation (1) (ii) of Section 74 provided for conclusion of all proceedings for penalties u/s122,125,129 and 130 on conclusion of proceedings u/s 73 or74.By amendment proceedings u/s 125 and 129 have been excluded from being deemed to have been concluded .Thus proceedings u/s 125 and 129 will continue.
7. In section 75 Explanation has been inserted that the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39. Earlier only when tax as per Return u/s 39 was considered for recovery. Now even outward supply included in statement u/s 37 but omitted in Return u/s 39 shall be considered as self assessed tax.
8. The section 83 has been amendment to give wider scope for provisional attachment cover all proceedings under Chapter XII, Chapter XIV or Chapter XV. It provided that the Commissioner may if he is of the opinion that for the purpose of protecting the interest of the Government revenue attach provisionally, any property, including bank account . Earlier only some sections in those chapter were provided for provisional attachment.
9. The Amendment of section 107 provides that no appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to twenty-five per cent of the penalty has been paid by the appellant. Earlier the payment of tax and penalty was ten percent and now tax pre deposit is retained at 10% but penalty pre deposit is enhanced to 25%.
10. The amendment in section 129 and 130 have been designed to ensure strict compliance of E way Bill.
(i)Now , instead of tax and 100 % penalty now straight penalty of 200 % of tax is provided and the same shall not be appropriated towards tax as used to happen in past. This is where the owner of goods comes forward for payment of penalty .
(ii) In case if the owner does not come forward for payment of penalty , it will be equal to 50 % of value of goods or two hundred per cent. of the tax payable on such goods, whichever is higher .
(iii)Sub-section (2) has been omitted since the provisions of section 129(1)(c) were overlapping.
(iv)The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of . The action of issuing notice has been made to be within seven days and order to be passed has been provided to be passed within seven days.
(v)In section 129(4) for levying tax , interest and penalty , hearing of the person concerned .Now no hearing is required for levying tax and interest and hearing on only penalty is provided.
(vi) Sub-section (6), has been substituted providing that where the person transporting any goods or the owner of such goods fails to pay the amount of penalty within fifteen days from the date of receipt of the copy of the order passed , the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise , to recover the penalty payable .
(vii) It now provides that the conveyance shall be released on payment by the transporter of penalty or one lakh rupees, whichever is less. Only conveyance sought to be released not goods. Earlier the failure to pay tax and penalty resulted in proceedings to be initiated u/s 130.
(viii) Under section 130(2) provided the limit of fine and penalty to be not exceeding market value of goods but gave rebate of penalty u/s 129(1) which has been increased to 200% Therefore now rebate shall be restricted to only 100% of tax.
(ix) Section 130(3) has been omitted there by meaning that the person shall not be liable for payment of tax , penalty and charges payable in respect of such goods once he has paid any fine in lieu of confiscation.
11. The Amendment to Schedule II by omitting item 7 is consequent upon amendment of section 7.
12. In the Integrated Goods and Services Tax Act, 2017, in section 16, the authorised operations is SEZ Unit or to developers is also provided for eligibility of zero rated supply.
13. In the Integrated Goods and Services Tax Act, 2017, facility to clear the goods on payment of IGST and thereafter claim of refund of IGST payment has been withdrawn and only notified persons or goods shall be eligible. Now all exports have to follow clearance under Bond or LUT.
14. The Central Sales Tax Act 1956 has been amended by amending Section 8(3)(b) to permit purchase of goods at concessional rate for goods covered by definition of goods u/s 2(d). This has done away with the goods used for generation or distribution of electricity or mining or telecommunication out of the purview of purchase at concessional rate on C Form. This amendment not nullifies High Court judgments and Supreme Court judgment (Commissioner of Commercial Taxes & Anr. Vs Ramco Cements Ltd.Etc. the Supreme Court of India In Appeal Number Special Leave to Appeal (C) No(s). 15785-15788/2020 held by an Order dt 24/03/2021) holding that the concessional rate is also applicable for purchase of other goods that what is described in section 2(d). approving the decision of Madras High Court that the Respondent herein and Petitioner there in are entitled to obtain C form for the purchase of goods other than those mentioned in S 2(d) of CST Act and dismissed SLP. Now controversy has been set at rest and even the generation or distribution of power or telecommunication or mining will not get benefit of the purchase of natural gas
This is summary of amendments and requires critical analysis from legal point of view.