Comparative insight into the amended CGST and IGST Acts applicable w.e.f. 01.02.2019

The GST Council in its 32nd meeting held on January 10, 2019, gave approval that the changes made by CGST (Amendment) Act, 2018, IGST (Amendment) Act, 2018, UTGST (Amendment) Act, 2018 and GST (Compensation to States) Amendment Act, 2018 along with the corresponding changes in SGST Acts would be notified w.e.f. February 01, 2019.

Earlier, the Hon’ble President on August 29, 2018 has given its assent to these four crucial amendment bills of GST law, which got published in the official Gazette of India on August 30, 2018.

Now, since the various Amendment Acts are going to be effective from first day of February, 2019, it is highly advisable to plunge into the changes and understand their implications on our business.

For the ease of understanding, we are summarising herewith section-wise tabular presentation of amended CGST Act, 2017 (“CGST Act”) and IGST Act, 2017 (“IGST Act”) in comparison with the pre-amendment Acts. This tabular also discusses the effect of these amendments along with suggestions as to further simplification of the GST Laws.

Trust you will find the same useful.

Synopsis of the CGST Amendment Act, 2018

 

Provisions as per pre-amendment CGST Act Provisions of amended CGST Act w.e.f. 01.02.2019 Effect of amendment along with analysis as to comparison
Section 2(4) – Definition of ‘Adjudicating Authority’
“adjudicating authority” means any authority, appointed or authorised to pass any order or decision under this Act, but does not include the Central Board of Excise and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate Authority and the Appellate Tribunal. “adjudicating authority” means any authority, appointed or authorised to pass any order or decision under this Act, but does not include the Central Board of Excise Indirect Taxes and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate Authority, and the Appellate Tribunal and the Authority referred to in subsection (2) of section 171.  

Changes are made in pursuance of the change in name of CBEC to CBIC.

 

Further, the National Anti-Profiteering Authority constituted under Section 171 of the CGST Act is also excluded from the definition of ‘adjudicating authority’.

Section 2(17)(h) – Definition of ‘Business’
“business” includes––

(h) services provided by a race club by way of totalisator or a licence to book maker in such club; and

“business” includes––

(h) services provided by activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and

 

This change ensures that all activities related to a race club are included in definition of business.

Section 2(35) – Definition of ‘Cost Accountant’
“cost accountant” means a cost accountant as defined in clause (c) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959; “cost accountant” means a cost accountant as defined in clause (c) (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959;  

 

Corrects typographical error

Section 2(69) – Definition of ‘Local Authority’
“local authority” means––

(f) a Development Board constituted under article 371 of the Constitution; or

“local authority” means––

(f) a Development Board constituted under article 371 and article 371J of the Constitution; or

Development board constituted Article 371J of the Constitution will now be considered as local authority.

Note: Article 371J grants special status to 6 backward districts of Karnataka-Hyderabad region by empowering the President to establish a separate Board to ensure equitable distribution of funds in the State’s budget to meet the developmental needs of the region.

Section 2(102) – Definition of ‘Service’
“services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;

Explanation. –– For the removal of doubts, it is hereby clarified that the expression “services” includes facilitating or arranging transactions in securities;’.

 

This explanation provides clarity that although ‘securities’ [s. 2(h) of Securities Contract Regulations Act, 1956] are excluded from the definition of ‘goods’ and ‘services’ in the CGST Act, but if some service charges or service fees or documentation fees or broking charges or such like fees or charges are charged in relation to transactions in securities, the same would be a consideration for provision of service and chargeable to GST.

What additionally could have been done:

Definition of services could have further been amended to treat ‘intangible goods’ as services.

Section 7 – Definition of ‘Supply’
(1) For the purposes of this Act, the expression “supply” includes–

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

(b) import of services for a consideration whether or not in the course or furtherance of business;

(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and

(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.

(2) Notwithstanding anything contained in sub-section (1), ––

(a) activities or transactions specified in Schedule III; or

(b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services.

(3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as—

(a) a supply of goods and not as a supply of services; or

(b) a supply of services and not as a supply of goods.

(1) For the purposes of this Act, the expression “supply” includes–

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

(b) import of services for a consideration whether or not in the course or furtherance of business; and

(c) the activities specified in Schedule I made or agreed to be made without a consideration, and

(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.

(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.

(2) …………

(3) Subject to the provisions of sub-sections (1), (1A) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as–

(a) a supply of goods and not as a supply of services; or

(b) a supply of services and not as a supply of goods.

Retrospective application w.e.f. 01.07.2017

Term ‘supply’ is amended to exclude activities/ transactions listed in Schedule II to ensure that the activities/ transactions as per Schedule II is to determine only whether the same is supply of goods or services. Hence, activities/ transactions listed in Schedule II (as supply of service or supply of goods) shall be taxed only when they constitute ‘supply’ in accordance with provisions of Section 7(1)(a), (b) and (c) of the CGST Act.

Amendments in definition of ‘supply’ are made retrospectively applicable. Thus, there shall not be any past litigation on account of any transaction merely covered under Schedule II, but otherwise not a ‘supply’.

What additionally could have been done:

  • Inclusive definition of supply must be made concrete with no subjectivity;
  • Clarity must be provided on concept of composite and mixed supply as to manner of determining principal supply and dominant intention;
  • Activities relating to repairs, maintenance, installation etc. of movable goods must be included as supply of services in Schedule II.
Section 9(4) – Reverse charge in case of procurement from unregistered persons
The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both”.

Earlier Section 9(4) of the CGST Act has been omitted and instead, an enabling power is granted for the Govt. to notify a class of registered persons who would be liable to pay tax on reverse charge basis in case of receipt of specified categories of goods or services or both (as against taxable goods or services or both) from an unregistered supplier.

The details of such specified persons and specified goods/ services are to be notified in future.

What additionally could have been done:

Operation of Section 9(4) in its present form, is not conducive as the registered recipient requires to raise self-invoice, capturing individual HSN/ SAC codes for procurement of such specified goods or services, which is operationally not easing business and should be done away completely.

Section 10 – Composition Scheme
(1) Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not exceeding, ––

(a) one per cent. of the turnover in State or turnover in Union territory in case of a manufacturer,

(b) two and a half per cent. of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and

(c) half per cent. of the turnover in State or turnover in Union territory in case of other suppliers, subject to such conditions and restrictions as may be prescribed:

Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding one crore rupees, as may be recommended by the Council.

(2) The registered person shall be eligible to opt under sub-section (1), if: —

(a) he is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II;

(b) he is not engaged in making any supply of goods which are not leviable to tax under this Act;

(c) he is not engaged in making any inter-State outward supplies of goods;

(d) he is not engaged in making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52; and (e) he is not a manufacturer of such goods as may be notified by the Government on the recommendations of the Council:

Provided that where more than one registered persons are having the same Permanent Account Number (issued under the Income-tax Act, 1961), the registered person shall not be eligible to opt for the scheme under sub-section (1) unless all such registered persons opt to pay tax under that sub-section.

(3) The option availed of by a registered person under sub-section (1) shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the limit specified under sub-section (1).

(4) A taxable person to whom the provisions of sub-section (1) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

(5) If the proper officer has reasons to believe that a taxable person has paid tax under sub-section (1) despite not being eligible, such person shall, in addition to any tax that may be payable by him under any other provisions of this Act, be liable to a penalty and the provisions of section 73 or section 74 shall, mutatis mutandis, apply for determination of tax and penalty.

(1) Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate as may be prescribed, but not exceeding,––

(a) one per cent of the turnover in State or turnover in Union territory in case of a manufacturer,

(b) two and a half per cent. of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and

(c) half per cent. of the turnover in State or turnover in Union territory in case of other suppliers, subject to such conditions and restrictions as may be prescribed:

Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding one crore and fifty lakh crore rupees, as may be recommended by the Council.

Provided further that a person who opts to pay tax under clause (a) or clause (b) or clause (c) may supply services (other than those referred to in clause (b) of paragraph 6 of Schedule II), of value not exceeding ten per cent. of turnover in a State or Union territory in the preceding financial year or five lakh rupees, whichever is higher.”;

(2) The registered person shall be eligible to opt under sub-section (1), if—

(a) save as provided in sub-section (1), he is not engaged in the supply of services, other than supplies referred to in clause (b) of paragraph (6) of Schedule II save as provided in sub-section (1);

(b) …………….

This amendment gives effect to the earlier decision of the GST Council to increase threshold limit for the composition suppliers from INR 1 crore to 1.5 crores and further to enable registered manufacturers and traders to opt for composition scheme u/s 10(1) of the CGST Act even if they supply services of value not exceeding 10% of the turnover in a State/Union territory in the preceding FY or INR 5 lakhs, whichever is higher [Presently, registered persons engaged in the supply of services (other than restaurant services) are not eligible for the composition scheme]

The amendment also allows supply of services to the extent of above specified limits, apart from services referred in Para 6(b) of Schedule II i.e. restaurant services. This change seems to be inserted in view of clause (b) of Section 10. Clause (b) mentions about composite rate of tax on restaurant service providers. It clarifies that for clause (b), this limit shall apply for services supplied other than restaurant services.

What additionally could have been done:

  • It should be clarified that this amount of 10% of turnover in preceding financial year or INR 5 Lakhs, whichever is higher, should only be the taxable value of services – Order No. 01/2017 dated 13.10.2017 already clarifies that person supplying exempt services along with goods or restaurant services are not ineligible for composition levy;
  • Clarification is required on nature of supply of services – Whether inter-state supply of services will be allowed;
  • Clarification is required as to what could be the rate of tax on such supply of services- composition rate or actual rate of tax;
  • If normal rate of tax is applicable, then whether composition supplier would be entitled to claim ITC for such services under composition scheme?
  • It is suggested that certain percentage of turnover may be allowed for inter-state supply of goods for the benefit of SME/MSME sector in true sense.
  • It is also required that certain service sector may also be included in the composition scheme, which may be chargeable at higher rate tax as against 1% so as to provide ease of business to SME/ MSME Service providers.
Section 12 – Time of supply of goods
12 (2) The time of supply of goods shall be the earlier of the following dates, namely: —

(a) the date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply; or

12 (2) The time of supply of goods shall be the earlier of the following dates, namely: —

(a) date of issue of invoice by the supplier or the last date on which he is required under sub-section (1) of section 31 to issue the invoice with respect to the supply; or

 

This amendment seeks to correct a drafting error and thus includes issuance of invoice/other documents contained in other sub-sections of Section 31 like continuous supply of goods, etc.

What additionally could have been done:

  • Clarity may also be provided in respect of determining time of supply of debit notes issued for increase in taxable value and/or tax amount of supply of goods as the same is issued under Section 34 of the CGST Act.

 

 

Section 13 – Time of supply of services
(2) The time of supply of services shall be the earliest of the following dates, namely: —

(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or

(b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or

13 (2) The time of supply of services shall be the earliest of the following dates, namely: —

(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or

(b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or

 

This amendment seeks to correct a drafting error and thus includes issuance of invoice/other documents contained in other sub-sections of Section 31 like continuous supply of services etc.

What additionally could have been done:

  • Clarity may also be provided in respect of determining time of supply of debit notes issued for increase in taxable value and/or tax amount of supply of services as the same is issued under Section 34 of the CGST Act.

 

Section 16(2)(b) – Conditions for availing Input Tax Credit
16(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, ––

(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

(b) he has received the goods or services or both.

Explanation. — For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

16(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, ––

(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

(b) he has received the goods or services or both.

“Explanation. — For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services––

(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.”;

 

To satisfy the requirement of receiving services for availing ITC, it is stated that where the services are provided by the supplier to any person on the direction of and on account of registered person it shall be deemed that such registered person has received the services.

Presently this deeming fiction is applicable only in case of “bill-to-ship-to” supply of goods. The same has been extended to services as well.

Section 16(2)(c) – Conditions for availing Input Tax Credit
16(2) …………

(c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and

16(2) ………

(c) Subject to the provisions of section 41 or section 43A, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and

 

 

This amendment seeks to include the provisions relating to the new return format as specified in the proposed new Section 43A, for availment of ITC.

Section 17(3) – Apportionment of credit
(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. 17(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

‘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 those specified in paragraph 5 of the said Schedule.

 

It is clarified by way of explanation that no reversal of common ITC shall be required on activities or transactions specified in Schedule III (other than sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building) by excluding it from the ambit of ‘exempt supply’ for the purpose of reversal.

 

 

Section 17(5)(a) – Blocked credit on motor vehicles
(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: —

 

(a) motor vehicles and other conveyances except when they are used––

(i) for making the following taxable supplies, namely: —

(A) further supply of such vehicles or conveyances; or

(B) transportation of passengers; or

(C) imparting training on driving, flying, navigating such vehicles or conveyances;

(ii) for transportation of goods;

(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely: —

(a) motor vehicles and other conveyances for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely: —

(A) further supply of such motor vehicles or

(B) transportation of passengers; or

(C) imparting training on driving, such motor vehicle;

(aa) vessels and aircraft except when they are used ––

(i) for making the following taxable supplies, namely: —

(A) further supply of such vessels or aircraft; or

(B) transportation of passengers; or

(C) imparting training on navigating such vessels; or

(D) imparting training on flying such aircraft;

(ii) for transportation of goods;

(ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa):

Provided that the input tax credit in respect of such services shall be available —

(i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;

(ii) where received by a taxable person engaged—

(I) in the manufacture of such motor vehicles, vessels or aircraft; or

(II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;

 

  • Now, ITC is restricted only to the extent of motor vehicles for transportation of persons having approved capacity of not more than 13 persons (including the driver) unless used for specified purposes;
  • Reference of ‘other conveyances’ while disallowing credit on motor vehicles has been omitted. This amendment makes it clear that ITC would now be available in respect of dumpers, work-trucks, fork-lift trucks and other special purpose motor vehicles;
  • Separate entry is created for vessel and aircrafts in clause (aa) – No credit shall be available on vessels and aircrafts except when used for specified purposes under clause (aa);
  • It is clarified that no ITC shall be available for services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels and aircraft for which the credit is not available;
  • But, ITC on services of general insurance, servicing, repair and maintenance on motor vehicles, vessels or aircraft is allowed to manufacturer of such motor vehicles, vessels or aircraft and to those engaged in supply of general insurance services in respect of such motor vehicles, vessels or aircraft.
Section 17(5)(b) – Other blocked credits
(b) the following supply of goods or services or both—

(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

 

 

 

 

 

 

 

 

(ii) membership of a club, health and fitness centre;

(iii) rent-a-cab, life insurance and health insurance except where––

(A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or

(B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and

(iv) travel benefits extended to employees on vacation such as leave or home travel concession;

(b) the following supply of goods or services or both—

(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:

Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

(ii) membership of a club, health and fitness centre; and

(iii) rent-a-cab, life insurance and health insurance except where––

(iii) travel benefits extended to employees on vacation such as leave or home travel concession:

Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.

 

ITC in respect of food and beverages, health services, renting or hiring of motor vehicles, vessels and aircraft, travel benefits to employees etc., can be availed where the provision of such goods or services is obligatory for an employer to provide to its employees under any law for time being in force.

Further ITC on renting or hiring of motor vehicles, vessels or aircraft is allowed when they are used for purposes specified in clause (a) or (aa).

What additionally could have been done:

Section 17(5) of the CGST Act must be pruned down further.

  • ITC in respect of construction of factory, offices must be allowed as the same are foundation of any business for making outward supply of goods or services and always required in the course or furtherance of business;
  • Word ‘free samples’ must be deleted from clause (h) of Section 17(5) as distributing free samples is an inevitable practice of the trade to induce clients to judge quality and buy the product of the company;
  • It may be clarified that supply of promotional items along with supply of goods as a combo supply (undertaken as a part of business promotional activity), shall not be covered under the ambit of ‘gift’ for reversal of ITC;
  • Allow ITC on ‘gifts’ when tax is paid on outward supply;
  • No denial of ITC on goods confiscated or detained.
Section 20(c) – Manner of distribution of credit by ISD
(c) the term ‘‘turnover’’, in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule. (c) the term ‘‘turnover’’, in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied under entry entries 84 and 92A of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule. This amendment excludes the amount of tax levied under entry 92A of List I from the value of turnover for the purposes of distribution of credit by ISD. The same was inadvertently left out from clause (c) of Explanation to Section 20.

Entry 92A of List I covers taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce.

Section 22(1) second proviso – Persons liable for registration
22 (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:

Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.

22 (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:

Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.

Provided further that the Government may, at the request of a special category State and on the recommendations of the Council, enhance the aggregate turnover referred to in the first proviso from ten lakh rupees to such amount, not exceeding twenty lakh rupees and subject to such conditions and limitations, as may be so notified.

 

Proviso is inserted under Section 22(1) so as to enable government to enhance the threshold limit of registration in special category states from ten lakh rupees to maximum twenty lakh rupees

Section 22 Explanation (iii) – Persons liable for registration
Explanation (iii) to section 22 the expression “special category States” shall mean the States as specified in sub-clause (g) of clause (4) of article 279A of the Constitution except the State of Jammu and Kashmir. Explanation (iii) to section 22 the expression “special category States” shall mean the States as specified in sub-clause (g) of clause (4) of article 279A of the Constitution except the State of Jammu and Kashmir and States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand.  

The threshold turnover for registration in special category States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand is increased from ten lakh rupees to twenty lakh rupees.

 

Section 24 – Compulsory registration in certain cases
(x) every electronic commerce operator. (x) every electronic commerce operator who is required to collect tax at source under section 52. Now, only those e-commerce operators who are required to collect tax at source under Section 52 would be required to take compulsory registration.

Other small e-commerce operators would now be eligible for availing the threshold exemption limit benefit for registration purposes.

Section 25(1) – Procedure for registration
25 (1) Every person who is liable to be registered under section 22 or section 24 shall apply for registration in every such State or Union territory in which he is so liable within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed:

 

Provided that a casual taxable person or a non-resident taxable person shall apply for registration at least five days prior to the commencement of business.

Explanation. — Every person who makes a supply from the territorial waters of India shall obtain registration in the coastal State or Union territory where the nearest point of the appropriate baseline is located.

25 (1) Every person who is liable to be registered under section 22 or section 24 shall apply for registration in every such State or Union territory in which he is so liable within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed:

Provided that a casual taxable person or a non-resident taxable person shall apply for registration at least five days prior to the commencement of business.

Provided further that a person having a unit, as defined in the Special Economic Zones Act, 2005, in a Special Economic Zone or being a Special Economic Zone developer shall have to apply for a separate registration, as distinct from his place of business located outside the Special Economic Zone in the same State or Union territory.

Explanation. — Every person who makes a supply from the territorial waters of India shall obtain registration in the coastal State or Union territory where the nearest point of the appropriate baseline is located.

 

Provision inserted for separate registration of a person having a unit(s) in a SEZ or being a SEZ developer as a business vertical distinct from his other units located outside the SEZ. This provision is already contained in Rule 8 of the CGST Rules.

Section 25(2) – Procedure for registration
25 (2) A person seeking registration under this Act shall be granted a single registration in a State or Union territory:

Provided that a person having multiple business verticals in a State or Union territory may be granted a separate registration for each business vertical, subject to such conditions as may be prescribed.

25 (2) A person seeking registration under this Act shall be granted a single registration in a State or Union territory:

Provided that a person having multiple business vertical places of business in a State or Union territory may be granted a separate registration for each such business vertical place of business, subject to such conditions as may be prescribed.

 

Proviso is substituted to allow persons having multiple places of business in a State or Union territory to obtain separate registrations for each such place of business, if they wish so. Thus, the requirement of having multiple business vertical for obtaining separate registration is dispensed with.

Section 29(1) – Cancellation or Suspension of Registration
29 (1) The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where, ––

(a) ..

(b) ..

(c) the taxable person, other than the person registered under sub-section (3) of section 25, is no longer liable to be registered under section 22 or section 24.

 

 

 

29 (1) The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where-

(a) ..

(b) ..

(c) the taxable person, other than the person registered under subsection (3) of section 25, is no longer liable to be registered under section 22 or section 24.

Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.

 

This amendment provides for suspension of registration during pendency of proceedings relating to cancellation of registration. This would relieve the taxpayer of continued compliance burden under the law till such time as the process of allowing cancellation of registration is completed.

 

 

Similar changes are also made in sub-section (2) after the proviso of Section 29(2)
Section 34 – Debit and Credit Notes
34 (1) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed.

(2) …

(3) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note containing such particulars as may be prescribed.

 

34(1) Where a tax invoice has one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.

 

(2) …

(3) Where a tax invoice has one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note one or more debit notes for supplies made in a financial year containing such particulars as may be prescribed.

 

The amendment seeks to permit a registered person to issue consolidated credit / debit notes as prescribed under Section 34 of the CGST Act in respect of multiple invoices issued in a Financial Year without linking the same to individual invoices.

 

However corresponding changes in Rule 53 of the CGST Rules shall also be required which prescribes corresponding invoice number and date of invoice as one of the mandatory particulars on debit and credit notes. Further, suitable amendments in return format is also required.

Section 35(5) – Accounts and other records
35 (5) Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed.

 

 

35 (5) Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed:

Provided that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.

 

This amendment provides that any department of the Central or State Government/local authority which is subject to audit by CAG need not get their books of account audited by any CA or CMA.

Section 39 (1)- Furnishing of returns
39 (1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars as may be prescribed, on or before the twentieth day of the month succeeding such calendar month or part thereof. 39 (1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed in such form, manner and within such time as may be prescribed, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars as may be prescribed, on or before the twentieth day of the month succeeding such calendar month or part thereof.

Provided that the Government may, on the recommendations of the Council, notify certain classes of registered persons who shall furnish return for every quarter or part thereof, subject to such conditions and safeguards as may be specified therein.

 

It seeks to amend Section 39(1) of the CGST Act relating to ‘furnishing of returns’, so as to provide for prescribing the procedure for quarterly filing of returns for specified class of registered persons.

Section 39 (7)- Furnishing of returns
39 (7) Every registered person, who is required to furnish a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (5), shall pay to the Government the tax due as per such return not later than the last date on which he is required to furnish such return. 39 (7) Every registered person, who is required to furnish a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (5), shall pay to the Government the tax due as per such return not later than the last date on which he is required to furnish such return.

Provided that the Government may, on the recommendations of the Council, notify certain classes of registered persons who shall pay to the Government the tax due or part thereof as per the return on or before the last date on which he is required to furnish such return, subject to such conditions and safeguards as may be specified therein.

 

It seeks to amend Section 39(7) of the CGST Act relating to ‘furnishing of returns’, so as to provide for prescribing the procedure for monthly payment of taxes even for quarterly filing of returns.

Section 39(9)- Furnishing of returns
39 (9) Subject to the provisions of sections 37 and 38, if any registered person after furnishing a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the return to be furnished for the month or quarter during which such omission or incorrect particulars are noticed, subject to payment of interest under this Act:

Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of return for the month of September or second quarter following the end of the financial year, or the actual date of furnishing of relevant annual return, whichever is earlier.

39 (9) Subject to the provisions of sections 37 and 38, if any registered person after furnishing a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the return to be furnished for the month or quarter during which such omission or incorrect particulars are noticed in such form and manner as may be prescribed, subject to payment of interest under this Act:

Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of return for the month of September or second quarter following the end of the financial year the end of the financial year to which such details pertain, or the actual date of furnishing of relevant annual return, whichever is earlier.

 

Rectification of errors in returns is made subject to the form & manner to be prescribed.

Section 43A – Procedure for furnishing return and availing input tax credit
——– 43 A: Procedure for furnishing return and availing input tax credit

(1) Notwithstanding anything contained in sub-section (2) of section 16, section 37 or section 38, every registered person shall in the returns furnished under sub-section (1) of section 39 verify, validate, modify or delete the details of supplies furnished by the suppliers.

(2) Notwithstanding anything contained in section 41, section 42 or section 43, the procedure for availing of input tax credit by the recipient and verification thereof shall be such as may be prescribed.

(3) The procedure for furnishing the details of outward supplies by the supplier on the common portal, for the purposes of availing input tax credit by the recipient shall be such as may be prescribed.

(4) The procedure for availing input tax credit in respect of outward supplies not furnished under sub-section (3) shall be such as may be prescribed, and such procedure may include the maximum amount of the input tax credit which can be so availed, not exceeding twenty per cent. of the input tax credit available, on the basis of details furnished by the suppliers under the said sub-section.

(5) The amount of tax specified in the outward supplies for which the details have been furnished by the supplier under sub-section (3) shall be deemed to be the tax payable by him under the provisions of the Act.

(6) The supplier and the recipient of a supply shall be jointly and severally liable to pay tax or to pay the input tax credit availed, as the case may be, in relation to outward supplies for which the details have been furnished under sub-section (3) or sub-section (4) but return thereof has not been furnished.

(7) For the purposes of sub-section (6), the recovery shall be made in such manner as may be prescribed and such procedure may provide for non-recovery of an amount of tax or input tax credit wrongly availed not exceeding one thousand rupees.

(8) The procedure, safeguards and threshold of the tax amount in relation to outward supplies, the details of which can be furnished under sub-section (3) by a registered person, —

(i) within six months of taking registration;

(ii) who has defaulted in payment of tax and where such default has continued for more than two months from the due date of payment of such defaulted amount shall be such as may be prescribed.”.

 

This new Section 43A provides for prescribing the procedure for furnishing return and availing ITC.

As per new provisions, the tax on details of outward supplies declared by the supplier will be deemed to be payable by the supplier.

However, the supplier and recipient have been made jointly and severally liable to pay tax for details furnished/ not furnished by the supplier in respect of which the return has not been furnished.

 

 

Section 48(2) – GST Practitioner
48 (2) A registered person may authorise an approved goods and services tax practitioner to furnish the details of outward supplies under section 37, the details of inward supplies under section 38 and the return under section 39 or section 44 or section 45 in such manner as may be prescribed. 48 (2) A registered person may authorise an approved goods and services tax practitioner to furnish the details of outward supplies under section 37, the details of inward supplies under section 38 and the return under section 39 or section 44 or section 45, and to perform such other functions in such manner as may be prescribed.

 

 

This amendment allows the GST practitioner to perform other functions such as, filing refund claim, filing application for cancellation of registration etc., apart from furnishing the details of outward and inward supplies and various returns on behalf of a registered person.

Sec 49 (2) – Payment of Tax
49 (2) The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with section 41, to be maintained in

such manner as may be prescribed.

49 (2) The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with section 41 section 41 or section 43A, to be maintained in such manner as may be prescribed.
Sec 49 (5)(c) & (d) – Payment of Tax
49 (5) The amount of input tax credit available in the electronic credit ledger of the registered person on account of––

(a)….

(b)….

(c) the State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax;

(d) the Union territory tax shall first be utilised towards payment of Union territory tax and the amount remaining, if any, may be utilised towards payment of integrated tax.

49 (5) The amount of input tax credit available in the electronic credit ledger of the registered person on account of ––

(a)….

(b)….

(c) the State tax shall first be utilized towards payment of State tax and the amount remaining, if any, may be utilized towards payment of integrated tax;

Provided that the input tax credit on account of State tax shall be utilised towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax;”;

(d) the Union territory tax shall first be utilized towards payment of Union territory tax and the amount remaining, if any, may be utilized towards payment of integrated tax;

Provided that the input tax credit on account of Union territory tax shall be utilised towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax.

 

Clauses (c) and (d) to Section 49(5) are amended to provide that the credit of SGST/ UTGST can be utilized for payment of IGST only when the balance of the input tax credit on account of CGST is not available for payment of IGST.

 

 

Section 49A – Utilisation of input tax credit subject to certain conditions
—— 49A – Notwithstanding anything contained in section 49, the input tax credit on account of central tax, State tax or Union territory tax shall be utilised towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilised fully towards such payment. A taxpayer would be able to utilise credit on account of CGST, SGST/UTGST, only after exhausting all the credit on account of IGST available to him. This is being done to minimise fund settlement on account of IGST.

Therefore, the manner of utilisation of GST credits is as follows:

Credit of IGST to be utilised first for liability of: IGST – CGST – SGST

Then,

– Credit of CGST to be utilised for liability of: CGST/ IGST (If any)

– Credit of SGST to be utilised for liability of: SGST/ IGST (if any)

Section 49B – Order of utilisation of input tax credit
——- 49B. Notwithstanding anything contained in this Chapter and subject to the provisions of clause (e) and clause (f) of sub-section (5) of section 49, the Government may, on the recommendations of the Council, prescribe the order and manner of utilisation of the input tax credit on account of integrated tax, central tax, State tax or Union territory tax, as the case may be, towards payment of any such tax.  

This Section provides an enabling power for the Government to prescribe any specific order of utilization of ITC for payment of taxes.

This provision is subject to clause (e) and (f) of Section 49(5) i.e. CGST and SGST/UTGST cannot be cross utilized.

Section 52(9) – Collection of tax at source
52 (9) Where the details of outward supplies furnished by the operator under sub-section (4) do not match with the corresponding details furnished by the supplier under section 37, the discrepancy shall be communicated to both persons in such manner and within such time as may be prescribed. (9) Where the details of outward supplies furnished by the operator under sub-section (4) do not match with the corresponding details furnished by the supplier under section 37 section 37 or section 39, the discrepancy shall be communicated to both persons in such manner and within such time as may be prescribed.  

Amendment is made to include reference of returns filed under Section 39 by the supplier.

Section 54(8) – Refunds
54 (8) Notwithstanding anything contained in sub-section (5), the refundable amount shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to—

(a) refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies;

(b) ………..

54 (8) Notwithstanding anything contained in sub-section (5), the refundable amount shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to—

(a) refund of tax paid on zero-rated supplies export and exports of goods or services or both or on inputs or input services used in making such zero-rated supplies exports;

(b) ………..

 

This seeks to amend Section 54 relating to “Refund of tax”, to provide that the principle of unjust enrichment will apply in case of a refund claim arising out of supplies of goods or services or both made to a SEZ developer or unit.

Section 54 Explanation (2)(c) – Relevant date for filing refunds in case of export of services
(c) in the case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of––

(i) receipt of payment in convertible foreign exchange, where the supply of services had been completed prior to the receipt of such payment; or

(ii) ………….

(c) in the case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of––

(i) receipt of payment in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India, where the supply of services had been completed prior to the receipt of such payment; or

(ii) ………….

 

This amendment allows receipt of payment in Indian rupees, where permitted, by the RBI in case of export of services.

 

In this respect, the provisions of Section 2(6)(iv) of the IGST Act are also being amended to provide that services shall qualify as exports even if the payment for the services supplied is received in Indian rupees as per RBI regulations.

Section 54 Explanation (2)(e) – Relevant date for filing refunds in case of unutilized ITC
Explanation. -For the purposes of this section, –

(2) “relevant date” means-

…………….

(e) in the case of refund of unutilised input tax credit under sub-section (3), the end of the financial year in which such claim for refund arises.

Explanation. -For the purposes of this section, –

(2) “relevant date” means-

…………….

(e) in the case of refund of unutilised input tax credit under clause (ii) of first proviso to sub-section (3), the end of the financial year due date for furnishing of return under section 39 for the period in which such claim for refund arises.

 

This seeks to prescribe that the relevant date in the case of refund of unutilised ITC arising out of inverted duty structure, shall be the due date for furnishing of return under section 39 for the period in which such claim for refund arises.

For all other cases of unutilized ITC, relevant date shall be the end of any tax period as mentioned in Section 54(3) of the CGST Act.

Section 79(4)– Recovery of tax
79 (4) Where the amount recovered under sub-section (3) is less than the amount due to the Central Government and State Government, the amount to be credited to the account of the respective Governments shall be in proportion to the amount due to each such Government. 79 (4) Where the amount recovered under sub-section (3) is less than the amount due to the Central Government and State Government, the amount to be credited to the account of the respective Governments shall be in proportion to the amount due to each such Government.

Explanation. –– For the purposes of this section, the word person shall include “distinct persons” as referred to in sub-section (4) or, as the case may be, sub-section (5) of section 25.

 

This amendment provides that recovery may be made from distinct persons present in different States / UTs in order to ensure speedy recovery from other establishments of the registered person.

This amendment is anti-industry and will be retrograde in nature. Operation of units in other states should not be affected if there are disputes in one state and a consequent recovery. This should have been dropped in the interest of industry.

Section 107(6) & 112(8) – Appeal to Appellate Authority and Appellate Tribunal
107 (6) No appeal shall be filed under sub-section (1), unless the appellant has paid—

(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, in relation to which the appeal has been filed.

107 (6) No appeal shall be filed under sub-section (1), unless the appellant has paid—

(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order subject to a maximum of twenty-five crore rupees, in relation to which the appeal has been filed.

 

This amendment put a ceiling on the limit of the amount to be deposited before filing an appeal to the appellate authority u/s 107 (6) which is 10% of the disputed tax amount subject to maximum limit of INR 25 crores. Further, the maximum amount to be deposited to file appeal from the appellate authority [u/s 112(8)] to appellate tribunal is 20% of the disputed tax amount along with the amount deposited u/s 107(6) subject to maximum of INR 50 crores

What additionally could have been done:

Keeping such high pre-deposit amount of 10%/20% with maximum ceiling as high as INR 50 crores/ 100 crores [CGST + SGST/UTGST] will cause undue hardship on innocent assesses having genuine case and not easing business for SME/ MSME Sectors.

Pre-deposit amount under GST also should be 7.5% at first level of appeal and 2.5% at second level, totalling together 10% of disputed tax amount subject to maximum of INR 10 Crores, as was in Service tax and Excise era.

112 (8) No appeal shall be filed under sub-section (1), unless the appellant has paid––

(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him, and

(b) a sum equal to twenty per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order, in relation to which the appeal has been filed.

112 (8) No appeal shall be filed under sub-section (1), unless the appellant has paid––

(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him, and

(b) a sum equal to twenty per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order subject to a maximum of twenty-five crore rupees, in relation to which the appeal has been filed.

Section 129(6) – Detention, seizure and release of goods and conveyances in transit
129 (6) Where the person transporting any goods, or the owner of the goods fails to pay

the amount of tax and penalty as provided in sub-section (1) within seven days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130:

Provided that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of seven days may be reduced by the proper officer.

129 (6) Where the person transporting any goods, or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within seven days fourteen days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130:

Provided that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of seven days fourteen days may be reduced by the proper officer.

 

It seeks to increase the time limit before which proceedings under Section 130 can be initiated from seven to fourteen days.

What additionally could have been done:

  • Section 129 must be amended to restrict levying of penalties only in cases where there is intent to evade taxes;
  • Further, suitable provision must be incorporated which allows releasing of goods without levying penalty once the proof of payment of appropriate tax is shown or a mere technical breach is shown;
  • E-Way Bill compliance must be made little easy for small taxpayers upto specified turnover by prescribing simple form with lesser details.
  • Alternatively, threshold of consignment value exceeding INR 50,000/- requiring generating of E-Way Bill may be increased to INR 2 Lakh per consignment basis for small taxpayers.
Section 140(1) – Transitional arrangement of Input Tax Credit
(1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed….”

 

“……Explanation 1.— For the purposes of sub-sections (3), (4) and (6), the expression “eligible duties” means––

(i)…….

(ii)……

(iii)….

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978.

“…. Explanation 2.—For the purposes of sub-section (5), the expression “eligible duties and taxes” means––

(i)……

(ii)….

(iii)….

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978.

(v)….”

(1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit of eligible duties carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed……”

“…. Explanation 1.—For the purposes of sub-sections (1), (3), (4) and (6), the expression “eligible duties” means––

(i)…

(ii) …

(iii)…

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978;”

(v)…”

“…. Explanation 2.—For the purposes of sub-sections (1) and (5), the expression “eligible duties and taxes” means––

(i)…

(ii) …

(iii)…

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978;”

(v) … ”

Explanation 3.—For removal of doubts, it is hereby clarified that the expression “eligible duties and taxes” excludes any cess which has not been specified in Explanation 1 or Explanation 2 and any cess which is collected as additional duty of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975.

Retrospective application w.e.f. 01.07.2017

This clarifies that only transitional credit of eligible duties can be carried forward in the return and not all credits. Further, eligible duties do not include the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978.

Furthermore, explanation is inserted to clarify that the expression “eligible duties and taxes” excludes any cess which has not been specified in Explanation 1 or Explanation 2 above and any cess which is collected as additional duty of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975.

What additionally could have been done:

Companies which have availed credit of the cesses (as law was not clear) should be allowed time to reverse the credit within 30 days from the date of the enactment without interest or penalty implication.

Section 143(1)(b) – Job work procedure
143 (1) A registered person (hereafter in this section referred to as the “principal”) may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker and likewise, and shall, ––

(a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out, to any of his place of business, without payment of tax;

(b) supply such inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out from the place of business of a job worker on payment of tax within India, or with or without payment of tax for export, as the case may be:

Provided that the principal shall not supply the goods from the place of business of a job worker in accordance with the provisions of this clause unless the said principal declares the place of business of the job worker as his additional place of business except in a case—

(i) where the job worker is registered under section 25; or

(ii) where the principal is engaged in the supply of such goods as may be notified by the Commissioner.

143 (1) A registered person (hereafter in this section referred to as the “principal”) may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker and likewise, and shall, ––

(a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out, to any of his place of business, without payment of tax;

(b) supply such inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out from the place of business of a job worker on payment of tax within India, or with or without payment of tax for export, as the case may be:

Provided that the principal shall not supply the goods from the place of business of a job worker in accordance with the provisions of this clause unless the said principal declares the place of business of the job worker as his additional place of business except in a case—

(i) where the job worker is registered under section 25; or

(ii) where the principal is engaged in the supply of such goods as may be notified by the Commissioner.

Provided further that the period of one year and three years may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively.

 

In terms of Section 143 of the CGST Act, a registered person (principal) is allowed to send inputs or capital goods to a job worker for job work without payment of tax subject to the conditions inter-alia, that the inputs and capital goods are brought back within a period of one year and three years respectively.

Now, a proviso is inserted in Section 143 to provide that the period of one year or three years may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively.

Schedule I – Supply made without consideration
4. Import of services by a taxable person from a related person or from any of his other

establishments outside India, in the course or furtherance of business

4. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business. Import of services by entities which are not registered under GST (say, they are only making exempted supplies) but are otherwise engaged in business activities shall be liable to tax when received from a related person or from any of their establishments outside India.
Schedule II – Activities or Transactions to be treated as supply of goods or supply of services
——- Change in heading Change in heading retrospectively w.e.f. 01.07.2017
Schedule III – Activities or transactions which shall be treated neither as supply of goods nor supply of services
6. Actionable claims, other than lottery, betting and gambling.

Explanation. — For the purposes of paragraph 2, the term “court” includes District Court, High Court and Supreme Court.

6. Actionable claims, other than lottery, betting and gambling.

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. 1 — For the purposes of paragraph 2, the term “court” includes District Court, High Court and Supreme Court.

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.

 

 

 

The scope of Schedule III is expanded to include merchant trading, supply of goods in the course of High Seas Sale and Sale of imported warehoused goods. Thus, these transactions shall nether be treated a supply of goods nor supply of services.

Further, there shall be no reversal of common credit on account of these supplies.

What additionally could have been done:

  • Amendments in Schedule III should have been made effective retrospectively from 01.07.2017;
  • Relief in the form of possible refunds should be granted for the tax already paid earlier on sale of goods from custom bonded warehouse;
  • Inter-Company supply of services provided by Head office to branch office/ representative office of the same legal entity having a common PAN located in the taxable territory or vice versa should be included in Schedule III so that the same does not qualify as supply of services liable to GST, like centralized functions of accounting, legal, HR etc., carried out by HO;
  • Duty credit scrips viz. MEIS/ SEIS, issued on export of goods/ services are presently treated as exempted goods and therefore are subject to reversal of credit provisions. As an encouragement to exporters, these Duty credit scrips should be included here as neither supply of goods nor services.

Synopsis of the IGST Amendment Act, 2018

Provisions as per pre-amendment IGST Act Provisions of amended IGST Act w.e.f. 01.02.2019 Effect of amendment along with analysis as to comparison
Section 2(6) – Definition of ‘Export of services’
2 (6) “export of services” means the supply of any service when, ––

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8.

(6) “export of services” means the supply of any service when, ––

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian Rupees wherever permitted by the Reserve Bank of India; and

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8.

 

This amendment allows receipt of payment in Indian rupees in case of export of services wherever permitted by the RBI. This is a taxpayer-friendly measure.

 

 

Explanation to Section 2(16) – Meaning of ‘governmental authority’
2 (16) “non-taxable online recipient” means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.

Explanation. –– For the purposes of this clause, the expression “governmental authority” means an authority or a board or any other body, ––

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government, with ninety per cent. or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution;.

2 (16) “non-taxable online recipient” means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.

Explanation. –– For the purposes of this clause, the expression ‘governmental authority’ means “an authority or a board or any other body, –

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government, with ninety per cent. or more participation by way of equity or control, to carry out any function entrusted to a Panchayat under article 243G or municipality under article 243W of the Constitution.

 

The reference to Panchayat under Article 243G is sought to be added in the definition of Governmental authority.

Section 5(4) – Reverse charge on procurements made from unregistered suppliers
(4) The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

(4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.

 

This omits Section 5(4) of the IGST Act and instead, grant an enabling power for the Govt. to notify a class of registered persons who would be liable to pay tax on reverse charge basis in case of receipt of specified categories of goods or services or both from an unregistered supplier.

The details of such specified persons and specified goods/services are to be notified in future.

What additionally could have been done:

Operation of Section 5(4) in its present form, is not conducive as the registered recipient requires to raise self-invoice, capturing individual HSN/ SAC codes for procurement of specified goods or services, which is operationally not easing business and should be done away completely.

Explanation to Section 8 – Establishments of distinct persons
Explanation 1. –– For the purposes of this Act, where a person has, ––

(i) an establishment in India and any other establishment outside India;

(ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or

(iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons.

Explanation 1. –– For the purposes of this Act, where a person has, ––

(i) an establishment in India and any other establishment outside India;

(ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or

(iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons.

 

Amendment is made to align with the CGST Amendment Act, 2018 which allows more than registration in a state or union territory by removing the requirement of having multiple business verticals.

Section 12(8) – Place of supply of domestic services of transportation of goods
12 (8) The place of supply of services by way of transportation of goods, including by mail or courier to, ––

(a) a registered person shall be the location of such person;

(b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation.

12 (8) The place of supply of services by way of transportation of goods, including by mail or courier to, –

(a) a registered person shall be the location of such person;

(b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation:

Provided that where the transportation of goods is to a place outside India, the place of supply shall be the place of destination of such goods.

 

In order to provide a level playing field to the domestic transportation companies and promote export of goods, this proviso provides that transportation of goods from a place in India to a place outside India by a transporter located in India would not be chargeable to GST, as place of supply will be outside India.

Section 13(3) – Place of supply of performance-based services
13 (3) The place of supply of the following services shall be the location where the services are actually performed, namely: —

(a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services:

Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services:

Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs without being put to any other use in India, than that which is required for such repairs;

13 (3) The place of supply of the following services shall be the location where the services are actually performed, namely: —

(a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services:

Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services:

Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs or for any other treatment or process and are exported after such repairs or treatment or process without being put to any other use in India, other than that which is required for such repairs or treatment or process.

 

Amendment is made to not tax job work of any treatment or process done on goods temporarily imported into India (e.g., gold, diamonds) which are then exported. This is a taxpayer-friendly amendment which would encourage skill development in our country.

Section 17 (2A) – Apportionment of tax and settlement of funds
—– (2A). The amount not apportioned under sub-section (1) and sub-section (2) may, for the time being, on the recommendations of the Council, be apportioned at the rate of fifty per cent. to the Central Government and fifty per cent. to the State Governments or the Union territories, as the case may be, on ad hoc basis and shall be adjusted against the amount apportioned under the said sub-sections.  

This amendment provides that the amount of IGST which does not get apportioned under clauses (a) to (f) for the time being shall be apportioned to the Central Government and State Government/Union Territories @ 50% each on the recommendations of the Council and shall be adjusted against the amounts apportioned under clauses (a) to (f).

 

New proviso in Section 20 – Application of provisions of the CGST Act
—— Provided also that where the appeal is to be filed before the Appellate Authority or the Appellate Tribunal, the maximum amount payable shall be fifty crore rupees and one hundred crore rupees respectively. This amendment prescribes the maximum ceiling of INR 50 crores/ 100 crores as pre-deposit for filing appeal to Appellate Authority/ Appellate Tribunal respectively.

The amendment is made in line with amendments proposed in Section 107(6) and 112(8) of the CGST Act, 2017.

Hope the information will assist you in your Professional endeavours. In case of any query/ information, please do not hesitate to write back to us.

Thanks & Best Regards,

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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3 Comments

  1. amit agarwal says:

    YOUR ARTICLE SAY Order No.
    01/2017 dated
    13.10.2017 already
    clarifies that person
    supplying exempt
    services along with
    goods or restaurant
    services are not
    ineligible for
    composition levy;(BY READING OF THIS IT COMES OUT THAT person
    supplying exempt
    services along with
    goods can opt composition scheme and exempted service will not be considered in total turnover limit)but order01/2017 say only for clause (b) of paragraph 6 of Schedule II(mean only reasturant).accordingly 01/2017 is only for reastaurant and not for other. whereas in your article 01/2017 includes other than clause (b) of paragraph 6 of Schedule II assessee.pl clarify

  2. jmlaxmidhar says:

    WHEN PURCHASE MADE FROM REGISTERD PERSON WE PAY GST AND CLAIMED AS ITC. FROM THIS ITC WE HAVE REVERSED ITC, DEDUCT ILELIGIBLE ITC OR BLOCK ITC U/S 17.
    NOW WHEN WE PURCHASE GOODS FROM UNREGISTED PERSON AND PAYS GST U/S 9(3) UNDER RCM. WHETHER SECTION 17 IS APPLICABLE ? UNDER WHAT SECTION ? NO ARTICLE ON THIS TOPIC, PLEASE EXPLAIN. THANK YOU, I REMAIN. – jmlaxmidhar@Gmail.com

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