Analysis of Proposed Amendments in GST law along with Suggestions/feedback /Comments

In GST Law 46 Amendments are proposed and The public is invited to give their valuable suggestions on these proposed amendments till July 15. By these Proposed 46 Amendments in GST law Amendments are proposed in Definitions, Provisions related to Supply, Levy and Collection of Taxes under GST, Composition Scheme under GST, Time and Value of Supply under GST, Input Tax Credit, Registration, Tax Invoice, Credit and Debit Notes, Returns, GST Practitioner, Payment of Tax, Refunds, Recovery of Tax, Appeals to Appellate Authority and Appellate Tribunal and in Transitional Provisions.

Also Read-Gist of key 21 amendments proposed in GST Law

In this article Author has discussed all these 46 amendments and has given his Suggestions/feedback /Comments as below:-

Amendment No. Description
1 CBIT and NAPA excluded from Adjudicating Authority [S.2(4)]

a) CBEC was earlier excluded from adjudicating authorities. After change of name of CBEC to CBIT, CBIT instead proposed to be excluded

b) National Anti profiteering Authority referred in section 171(2) also being proposed to be excluded from adjudicating authorities

2 Business to include all activities of race club[S.2(17(h)]

a) Actvities of Race club fall with in ambit of actionable claim, which specifically is included in goods. But the definition of service defined it as service. Hence in the context of “race club” the term “service” has been replaced by “activities”.

b) Further the activities of licensed book maker were earlier not included in definition of Business. Only the activities of race club were included. Hence the definition of business under S. 2(17(h) has been expanded to include following activities:

a) Activities of race club

i) By way of totalisator

ii) License to book Maker

b) Activities of Book Maker

This also brings home that activities of race club should hence forth be classified in Entry 453 of Schedule III @ 18%

3 Cost Accountant [S. 2(35)]

In GST law the term cost accountant meant cost accountant as defined in section 2(1)(c) of the Cost and Works Accountants Act. However the term is defined in section 2(1)(b) of the Cost and Works Accountants Act Instead. Hence typographical error is sought to be corrected.

4 Local Authority to include Development Board under Article 371J [S. 2(69)]

In article 371J, development board of 6 backward districts of Karnatka has been empowered to be envisaged by President to ensure equitable distribution of state funds for the welfare of these backward districts.

The state of Kartnatka requested to include development board in the definition of local authority so that this development board may enjoy similar privileges as the other local authorities.

Hence the development board constituted under Article 371J has been specifically included in the definition of Local Authority.

5 Services to include facilitating or arranging transactions in securities[S.2(102)]

Official Comments

Although ‘securities’ has been excluded from the definition of ‘goods’ and ‘services’ in the CGST Act, facilitating or arranging transactions in securities is liable to GST. This has been clarified recently through a detailed FAQ on Banking and Insurance wherein it has been clarified that 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. It is proposed to insert an Explanation in order to remove any doubts.

6 Schedule II for classification excluded from Supply [Section 7]

Official Comments:

Classification of certain specified activities or transactions (which qualify as a supply under the CGST Act) either as supply of goods or supply of services is supposed to be done in Schedule II. However, it is observed that clause (d) being part of the subsection defining the term ‘supply’ leads to a situation where an activity listed in Schedule II would be deemed to be a supply even if it does not constitute a supply as per clauses (a), (b) and (c) of sub-section (1). Hence, it is proposed to insert a new sub-section (1A) in section 7 and omit clause (d) of sub-section (1).

Author’s Comments:

In Schedule I, Permanent transfer/ disposal of business assets without consideration where ITC has been taken is considered supply. But in Schedule II in following situations also ambit of supply was extendable:

Para 4(a): where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, not for a consideration, such transfer or disposal is a supply of goods by the person;

Parting of goods to unrelated and non-distinct persons, both capital goods as well as inputs, shall no longer be taxable, provided no ITC has been availed. In following no ITC is taken:

a) Motor Vehicles for transportation of passengers having seating capacity up to 13 persons

b) Assets transitioning from pre GST era, for which no ITC is availaed u/s 140

c) Disposal/ Transfer of Pre registration assets for which no ITC is availed u/s 18(1)

d) Inputs and Capital Goods being used exclusively for exempt purpose.

e) Inputs and Capital goods for which tax invoice is not held but are duly accounted for in the books of accounts.

The inputs and capital goods of business may be transferred without consideration to unrelated non distinct person in following situations:

1. CSR activity of the business (Now if CSR activity is related to business, ITC shall not be reversed and if it is not related to business, ITC shall be reversed, but not to be treated as supply, because ITC is not availed.)

2. Promotional Material

Computation of Tax where ITC is taken

However section 18(6) only covers the capital goods or plant and machinery, where ITC has been taken. There are no similar computation provisions for inputs except u/s 29(5), which deals with situation of cancellation of registration and deals with inputs as well as capital goods.

Hence disposal of inputs to unrelated person without consideration even where ITC is taken in situations other than cancellation of registration is devoid of computational provisions and may not get taxed.

Suggestion:

Hence section 18(6) needs amendment to provide for such situation.

Para 4(b): where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, not for a consideration, the usage or making available of such goods is a supply of services

Putting business assets for private or non business use without consideration for unrelated or non distinct person shall also be outside tax net, where ITC is not taken

E.g. Use of Motor Car

Para 4© where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless—

(i) the business is transferred as a going concern to another person; or

(ii) the business is carried on by a personal representative who is deemed to be a taxable person.

Say if firm is dissolved and business is not taken over by some other person/firm, then tax need need be paid on assets on which ITC is not taken.

 

 

 

7 Import of Service by non taxable person also taxable [Sch I (4)]

Official Remarks

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, without consideration is taxable. The word taxable person is being omitted. This amendment is to ensure that 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 is taxed when received from a related person or from any of their establishments outside India.

8 Supply of goods from one non taxable territory to another:Schedule III

Following insertion is proposed in Schedule III

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 the taxable territory.

Official Comments

It is sought to exclude from the tax net such transactions which involve movement of goods, caused by a registered person, from one non-taxable territory to another non-taxable territory.

Author’s Comments:

It is sought to keep international trading of goods from one country to another country outside the gst purview. Hence if a person sitting in India wishes to buy goods from China and sell it to USA, it shall neither be treated as supply of goods nor as supply of services.

Suggestion

However procurement of service outside India and also its further supply to some person in territory outside India has not been excluded. Hence amendment should provide for supply of services from one non taxable territory to another also. If this amendment is not done, while the subscription of service may be treated as imports but for provision of service in intermediary capacity, the place of supply shall be in India u/s 13(8)(b) and the transaction shall get taxed.

The instances where place of supply is outside India, it shall be inter state supply u/s 7(5) and also zero rated supply u/s 16, being export of service, resulting cash flow issues arising from refunds, if such amendment regarding services is not given effect to.

Issue : Whether supply under Schedule III shall form part of adjusted turnover for calculation of refund under Rule 89(4) and 89(5)

9 Supply of goods in course of import (Warehouse, High Sea Sale) included in Schedule III]

Following insertion is proposed in Schedule III

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.- For the purposes of this clause, the expression “warehoused goods” shall have the meaning as assigned to it in the Customs Act, 1962 (52 of 1962)

Official Comments:

It is sought to ensure that there is no double taxation of transactions where supply of goods occurs in the course of high sea sales and sale of warehoused goods, before clearance for home consumption. It was observed that in case of supply of goods as high seas sales and sale of warehoused goods, before being cleared for home consumption, IGST was being levied twice, once under the Customs Tariff Act, 1975 (read with the IGST Act) and then for a second time, on clearance for home consumption under the IGST Act. Since double taxation needs to be avoided, Circulars were issued to state that IGST would be payable only once at the time of clearance of goods for home consumption. However, it is imperative that such situations are squarely mentioned as ‘no supply’ in Schedule III.

Author’s Comments:

Article 286 bars to tax supply in course of import. Already Customs Circulars 33/2017-Cus dated 01-08-2017 and Circular 3/1/2018-IGST dated 25-05-2018 also exhorted that no tax under GST shall be charged till the clearance for home consumption. At the point of clearance entire value addition shall get taxed.

Suggestion:

The situations where consignee stands in shoes of supplier and further endorses the document of title to goods, should also be covered.

Issue :

Whether supply under Schedule III shall form part of adjusted turnover for calculation of refund under Rule 89(4) and 89(5)

10 Reverse Charge on inward supplies from unregistered persons to be taxed for specified class of registered persons[S. 9(4)]

Old section 9(4) which has been deferred till 30-09-2018 has been repealed and substituted by new section 9(4) as under :

The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of taxable goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such 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 the supply of such goods or services or both.

Official Comments:

Section 9 (4), which mandates that all registered persons shall pay the tax on reverse charge basis on purchases made from unregistered persons, is presently under suspension. This subsection is being omitted for trade facilitation.

Instead, it is proposed to take an enabling power for the Government to notify a class of registered persons who would be liable to pay tax on reverse charge basis in case of receipt of goods from an unregistered supplier.

Author’s Comments:

a) The term unregistered supplier is not defined under the law. The words used in present law are “supplier, who is not registered”.

b) RCM is sought to be applied only to “class of registered persons” and not all the registered persons. The class of registered persons may be

a) persons receiving goods or services falling under specific headings

b) persons engaged in specified outward supplies

c) Persons having inward supplies more than specified percentage

Suggestion:

On inward supplies from unregistered persons law should be amended to authorize government to notify uniform rate.

11 Composition Scheme with extended limit and scope of services[Section 10(1)]

Amendment is proposed to clarify that composition tax shall be paid in lieu of tax payable u/s 9(1). In present law, reference to section 9(1) is missing. Even nomenclature of amount paid under composition scheme is not “tax”. The proposed amendment aims to provide for these misses.

Further inspite of GST Council recommending the limit of 1.5 crores in its meeting dated 10-11-2017, there was no corresponding amendment in law which provided for maximum limit at 1 crore only. The law is being amended to enhance the composition limit to 1.5crore

Suggestion:

In the press release it was mentioned that maximum limit shall be increased to 2 crore and actual limit for composition scheme shall be enhanced to 1.5 crores.

Following 2nd proviso to section 10(1) is proposed to be incorporated:

Provided further that a person who opts to pay tax under clause (a), clause (b) or clause (c) may supply services of value not exceeding ten percent of turnover in the preceding financial year in a State or Union territory or five lakh rupees, whichever is higher

Official Comments

At present, registered persons engaged in the supply of services (other than restaurant services) are not eligible for composition scheme. As a result, manufacturers and traders supplying services are unable to opt for the scheme even if its percentage is very small as compared to the supplies of goods. With a view to enable these taxpayers to avail of the

benefit of composition scheme, a new proviso is being added in order to allow them to be eligible for the scheme even if they supply services of value not exceeding 10% of the turnover in the preceding financial year in a State/Union territory or Rs. 5 lakhs, whichever is higher.

Author’s Comments

In 23rd Council meeting dtd 10-11-17 press release number 116, interest on deposit was sought to be totally excluded for the purpose of composition scheme, hence 10% and Rs. 5 lakhs cap in such cases is not in sync with Council decision.

Section 10(2)(a) is being amended to provide that 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 save as provided in sub-section (1)

Official Comments:

This is a consequential amendment, as a new proviso is being added to section 10 (1) which allows the registered person to opt for the scheme even if they supply services of value not exceeding 10% of the turnover in the preceding financial year in a State/Union territory or Rs. 5 lakhs, whichever is higher

12 & 13 Time of Supply for goods and services under Forward Charge [S.12(2)/13(2)]

In present law, invoice is required to be issued for the goods before the last day for issuance of invoice u/s 31(1)/31(2). Since issuance of invoice u/s 31 is required in many other cases, the law is being amended to provide that invoice is required to be issued on or before the last date for issuance of invoice u/s 31.

Impact

a) Issuance of Revised Invoice with in 1 month from the date of issuance of registration certificate for the period beginning with the effective date of registration till the date of issuance of certificate of registration [u/s 31(3)(a)shall not hit time of supply;

b) In case of continuous supply of goods, issuance of invoice at the time issuance of statement or receipt of payment u/s 31(4) shall meet the test of time of supply also.

c) In case of continuous supply of service, issuance of invoice at the time of due date of payment or date of receipt of payment or completion of payment u/s 31(5) shall meet the test of time of supply also.

d) In case of cessation of supply of service before completion u/s 31(6), the time of cessation of supply shall be the time of supply.

e) In case of goods sent for approval u/s 31(7), the date of removal shall not be the time of supply but the 6 months from the date of removal or the date of issuance of invoice, whichever is earlier.

Suggestions:

Time of supply u/s 31(3)(f) is also not in synchronization with time of supply under reverse charge mentioned in section 12(3) and 13(3).

As per section 31(3)(f), invoice for reverse charge u/s 9(3) and 9(4) to be issued by recipient on the date of receipt of goods or services but:

As per 12(3), time of supply for goods under reverse charge is :

Earliest of the following dates, namely:—

(a) the date of the receipt of goods; or

(b) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

(c) the date immediately following thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply.

As per section 13(3), time of supply for services under reverse charge is

(a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

(b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the time of supply shall be the date of entry in the books of account of the recipient of supply:

Provided further that in case of supply by associated enterprises, where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier.

Hence 31(3)(f) is not in sync with 12(3) and 13(3)

14 Supply provided on the direction of registered person to cover services also [Expl to section 16(2)(b)]

U/s 16(2)(b), receipt of goods or services is a pre condition for availing ITC. For goods, there is already explanation inserted below S. 16(2)(b) that supply provided to recipient or any other person on the direction of registered person shall be deemed to be received by registered person.

For services, explanation is being expanded to provide that it shall be deemed that registered person has received services where the services are provided by the supplier to any person on the direction of and on account of such registered person;

Impact:

If catering is done by supplier on the direction of some person who takes orders for getting done catering, the ITC shall be available to the person who takes order and not the customer who places order.

However, if services provided by the supplier are not on account of the registered person, the ITC shall not be available. Hence the invoice raised by the supplier should mention that though services are being provided to some other person but are being provided on account of registered person.

Suggestion :

Amendment should be provided to provide that supply on direction or on account of registered person shall be deemed to have been received by registered person.

15 Interest not to be paid for Reversal of ITC for non payment in 180 days [2nd Proviso to Section 16(2)]

For non payment with in 180 days, ITC is required to be reversed along with interest from the date of availment of ITC. Later on after payment ITC is restored but not the interest.

Now the proposed amendment seeks to take away interest liability and reverse only ITC.

Suggestion:

Rule 37(3) also needs to be omitted which provides for interest.

16 Reversal of ITC for exempt supplies to exclude Sch III supplies [S. 17(2)]

Reversal of ITC is required u/s 17(2) read with section 17(3) for exempt supplies which cover Schedule III supplies, being non taxable supply.

Now section 17(2) is being amended to provide that no reversal of ITC is required for Schedule III supplies except sale of land and building.

Hence no ITC reversal shall be required for :

1. Services by an employee to the employer in the course of or in relation to his employment.

2. Services by any court or Tribunal established under any law for the time being in force.

3. (a) the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities;

(b) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or

(c) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause.

4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

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 the taxable territory.

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.

Say e.g. some Indian office is managing High Sea Sale transactions or International trading of goods, ITC is not required to be reversed for expenses of Indian office

Issue: Whether Schedule III activities or transactions, though not part of exempt supply shall form part of turnover for computing proportion of ITC not eligible to claimed under Rule 42 and Rule 43.

17 Changes in Prohibitive List of ITC [Section 17(5)]

ITC prohibitions removed

a) ITC on Motor Vehicle for transportation of persons having approved seating capacity of more than 13 passengers. However ITC on vessel and aircraft shall not be available unless used for transportation of goods or further supply or imparting training or transportation of money for banking company or financial institution.

In earlier clause ITC was denied on motor Vehicle excluding motor vehicle for transportation of passengers. However not ITC is being denied only for motor vehicles for transportation of persons, Hence ITC on motor vehicles for transportation of goods shall be allowed even if there is no specific exclusion for transportation of goods. Hence now exclusion for transportation of goods is only clarificatory in nature.

b) ITC on vessel or aircraft for further supply of vessel or aircraft or used for transportation of goods or imparting training or transportation of money for banking company or financial institution. As per Official Comments ITC on vessel and aircraft shall be denied only when used for personal purposes. But the intention is not manifest.

Suggestion:

Drafting of availability of ITC on vessel and aircraft needs to be amended to give effect to the intent or else the comments may not have any bearing on the interpretation of law.

c) Motor Vehicle not used for transportation of persons. Hence ITC shall be available for dumpers, work trucks, fork lift trucks and other special purpose motor vehicles.

d) Irrespective of the prohibitions placed u/s 17(5), ITC shall be available for provision of goods or services (i.e. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, renting or hiring of motor vehicles, vessels and aircraft referred to in S.17(5) (a), life insurance and health insurance, membership of club, health and fitness centre, travel benefits extended to employees on vacation such as leave or home travel concession), where it is obligatory for employer to provide to its employees goods or services under any law for the time being in force.

Instances of provisions of facilities to Employees under law

As per section 18 of Factories Act, a factory where there are more than 250 workers provisions for cooling drinking water during hot temperature should be made.

As per section 46, canteen facility is mandatory where number of workers is more than 250.

As per section 48 of Factories Act, any factory employing more than 30 women workers should provide for crèche facility.

ITC prohibition imposed [S. 17(5)(aa)]

Services of

a) general insurance,

b) servicing,

c) repair and maintenance

in so far as they relate to motor vehicles, vessels and aircraft for which the credit is not available in accordance with provisions u/s 17(5)(a)

Suggestion: This clause should be removed

Hence ITC for general insurance, servicing and repair shall not be available for

a) Motor Vehicle for transportation of person up to 13 persons

b) Vessel

c) Aircraft

ITC shall however be available for general insurance, servicing and repair for

a) Motor Vehicle for transportation of person up to 13 persons

b) Vessel

c) Aircraft

Used for

– Transportation of goods

– Further supply of motor vehicle, vessel, aircraft

– Imparting training

– Transportation of money for banking company or financial institution

ITC shall also be available for general insurance, servicing and repair for

a) Motor Vehicles not for transportation of persons

b) Motor Vehicles for transportation of more than 13 persons

Amendments made to section 17(5) regarding renting of motor vehicle, life insurance and health insurance to avoid repetition:

Section 17(5)(b)(iii) is proposed to be deleted and merged with 17(5)(b)(i) to deny ITC on :

1. Renting or hiring of Motor Vehicle, Vessel and Aircraft referred to in S. 17(5)(a) [Hence ITC shall be allowed on renting of motor vehicle for transportation of more than 13 passengers or for transportation of goods]

2. Life Insurance

3. Health Insurance

18 Turnover Calculation for distribution of ITC [Expl (c) to S.20]

Inadvertent omission to exclude CST under Entry 92A of Union list for calculation of turnover for the appropriation of ITC by Input service distributor is sought to be set right.

Similar amendment may be required in Explanation below R. 42(1)(i) also where aggregate value of exempt supplies and total turnover is defined

19 Registration limit for Assam[S.22]

State of Assam being one of special category states is covered by registration limit of 10 lacs. The limit for Assam is proposed to be increased to 10 lacs along with state of J&K.

20 Registration Requirement for Small E Commerce Operators relaxed [24(x)]

E-Commerce operators not required to collect tax u/s 52 henceforth are sought to be kept out of registration unless they meet the registration limit. At present every E Commerce operator whether covered by 9(5) or S. 52 is required to collect tax.

21 Separate registration for SEZ and Multiple places of business [S. 25(2)]

Under present law single registration is allowed for state. Multiple registration with in state is allowed only for different business verticals. As per Comments along Proposals, Certain PSUs have requested for separate registration for their individual units in a State, a facility which was available prior to 1st July 2017.

Hence 2nd proviso is proposed to be inserted in section 25(2) as under:

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

Hence grant of multiple registrations is subject to prescribed conditions.

Author’s Comments

While this amendment shall increase the self imposed compliance burden, but it shall not increase the tax revenue of the government. Some small units might resort to splitting to avoid onerous provisions like audit etc. Transfer between these separate registrations shall also constitute supply

Compulsory Separate registration for SEZ Units

Single SEZ Unit

Provided also that a person having a unit, as defined in the Special Economic Zones Act, 2005 (28 of 2005), in a Special Economic Zone or being a Special Economic Zone Developer shall be granted a separate registration as distinct from his units located outside the Special Economic Zone in the same State or Union territory:

Multiple SEZ Units

Provided also that a person having more than one unit, as defined in the Special Economic Zones Act, 2005 (28 of 2005), in a Special Economic Zone shall be granted a separate registration for each such unit, subject to such conditions as may be prescribed.

As per proviso to Rule 8, a person having a unit(s) in a Special Economic Zone or being a Special Economic Zone developer shall make a separate application for registration as a business vertical distinct from his other units located outside the Special Economic Zone:

Suggestions/Comments

Proviso to Rule 8 does not compulsorily require separate registration for each unit of SEZ in case of Multiple Units of SEZ, while proviso to section 25(2) is so proposed to require mandatorily.

22& 23 Suspension of Registration pending cancellation

Once a registered person has applied for cancellation of registration, the proper officer may temporarily suspend its registration till the procedural formalities for cancellation are completed. This measure would relieve the taxpayer of continued compliance burden under the law till such time as the process of allowing cancellation of registration is completed.

Hence it is proposed to provide that :

Provided that pending cancellation of registration, the proper officer may suspend the registration of the person subject to such conditions and limitations as may be prescribed.

Author’s Comments

Filing of registration cancellation application under REG-16 [Rule 20] is required to be followed by cancellation order in REG-19 [Rule 22(3)] with in 30 days from application.With in 3 months from REG-19, final return u/s 45 GSTR-10 is required to be filed.

There is no provision for deemed cancellation after 30 days unlike deemed registration u/s 25(12). Hence pending the issue of REG-19, it is being proposed to provide for suspension of registration so that compliance burden gets axed.

24 Consolidated Credit/Debit Notes [S. 34(1) & 34(3)]

Under present provisions of GST law, one credit/debit note is required to be issued against every invoice. Now section 34(1) and 34(3) is being proposed to be amended to provide for issuance of one or more credit or debit notes against one or more tax invoices.

The purpose is to permit consolidated credit/debit notes for financial year

25 Government department to be kept out of GST Audit

As per section 35(5), audit is required where turnover of registered person exceeds Rs. 2 crores. Ministry of Defence has represented that the annual accounts of Canteen Stores Department (CSD) are internally audited by the Controller of Defence Accounts (CDA) and therefore, should not be subject to audit by a Chartered Accountant or a Cost Accountant. Thus, it is proposed to provide 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 Chartered Accountant or Cost Accountant.

Hence proviso has been added to section 35(5)as under:

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 accounts 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.

Author’s Comments

The above amendment shall result in obviating the requirement for reconciliation statement u/s 44(2) as well furnishing prescribed statement of particulars. While government departments may be otherwise kept out of purview of audit should not be obviated from providing reconciliation statement and statement of prescribed particulars.

26 Amendment Return [S. 39(9)]

Section 39(9) allows rectification of any omission or furnishing of incorrect particulars in subsequent return not beyond 20th October of next financial year.

There is no provision for amending the same return .

Section 39(9) is being amended to take care of amendment return in prescribed form just like pre GST regime to enable correction of inadvertent mistakes

Comments:

The provision for amendment return is applicable only to GSTR-3/3B, GSTR-4, 5, 6, 7 and not GSTR-1 and GSTR-2

27 New Return filing Procedure

43A. Procedure for furnishing return and availing input tax credit. –

(1) Notwithstanding anything contained in section 37 or section 38, the procedure for furnishing the details of outward supplies by a 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 (hereafter in this section referred to as the ‘supplier’), and for verifying, validating, modifying or deleting such supplies by the corresponding registered person (hereafter in this section referred to as the ‘recipient’) in connection with the furnishing of return under section 39 shall be such as may be prescribed..

(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 specified under sub-section (1) and sub-section (2) may include the following:-

(i) the procedure for furnishing the details of a tax invoice by the supplier on the common portal for the purposes of availing input tax credit by the recipient in terms of clause (a) of sub-section (2) of section 16;

(ii) the amount of tax specified in an invoice for which the details have been furnished by the supplier under clause (i) but the return in respect thereof has not been furnished and tax has not been paid shall be deemed to be tax payable by him under the provisions of this Act;

(iii) the procedure and threshold, not exceeding one thousand rupees, for recovery of the amount of tax payable under clause (ii);

(iv) the procedure and circumstances where the recovery of input tax credit can be made, instead of from the supplier, from the recipient who has availed credit on an invoice for which details have been furnished by the supplier under clause (i) but tax has not been paid by the said supplier;

(v) for the purposes of clause (ii) and (iii), the supplier and the recipient shall be jointly and severally liable to pay tax or to reverse the input tax credit availed against such tax, as the case may be;

(vi) the procedure and threshold for availing input tax credit by the recipient on the basis of invoice for which details have not been furnished by the supplier under clause (i) and recovery thereof; and

(vii) the procedure, safeguards and threshold of tax amounts in the invoices, the details of which can be furnished under clause (i) by a newly registered person or by a registered person who has defaulted in payment of tax liability, exceeding the amount of tax or the period of time specified in the rules.

Author’s Comments:

The new return procedure has been divided into following limbs:

1. Availment of ITC on the basis invoice uploading instead of filing of return and tax payment by the supplier

2. Fixing the liability of supplier for tax payment for invoices uploaded by him

3. Circumstances where tax to be collected from recipient who has availed credit instead of collection from supplier uploading invoices

4. Joint and several liability of supplier for tax payable on invoices and reversal of ITC against tax not paid

5. Procedure for claiming ITC on the basis of invoices not uploaded by supplier.

6. Safeguards for new registrants and defaulters regarding credit on the basis of invoice uploading.

No procedure has been prescribed for recovery of amount exceedings Rs. 1000/- because 43A(3)(iii) deals with procedure for recovery of amounts not exceeding Rs. 1000/-. Alternately the word “not exceeding” needs to be substituted with word “exceeding” in section 43A(3)(iii)

28 Scope of functions of GST Practitioners expanded [S. 48]

Apart from filing of returns GST practitioners shall be authorized to perform other functions also such as filing refund claims, filing applications for cancellation of registrations etc.s

29 Change in Logic of payment of taxes [S. 49(5)]

In accordance with portal

Under present law, SGST/UTGST credit is utilized first towards payment of SGST/UTGST. Balance credit is utilized for payment of IGST. However the law is being amended to provide that SGST/UTGST credit shall be utilized for payment of IGST only if the credit balance of central tax is not available for payment of IGST. This amendment is required since the GST common portal has placed this restriction in the utilization of input tax credit of State tax/Union territory tax towards payment of integrated tax.

This is done to defy Delhi High Court Judgment in A&M Design dated 08-09-2017 which said that portal can not override the law.

To Minimize fund settlement on account of IGST

Proviso to section 49(5) is proposed to be inserted to provide that credit on account of central tax, State tax or Union territory tax shall be utilised towards payment of integrated tax only after the input tax credit available on account of integrated tax has been first utilised fully towards such payment. This is being done to minimize fund settlement on account of IGST.

30 Government being empowered to decide order of utilization of ITC [S. 49(5A)]

New subsection proposed to be inserted as under:

Ø Notwithstanding anything contained in this section,

Ø The Government may, on the recommendations of the Council,

Ø prescribe the order of utilization of input tax credit

Ø of integrated tax, central tax, State tax or Union territory tax, as the case may be,

Ø towards payment of any such tax

The purpose of this sub section is provide enabling power for the Government to prescribe any specific order of utilization of input tax credit of any of the taxes

31 Relevant date in case of refunds for Inverted Duty Rate Structure [S. 54 Expl (2)(e)]

In case of inverted duty rate refunds, maximum period of 2 years to be counted from due date of furnishing of return u/s 39 for the period in which such claim for refund arises and not from the end of financial year in which such claim for refund arises. This amendment has been brought because as per section 54(3) refund is required to be applied for tax period and not for financial year. Since the relevant date was not in synchronization with section 54(3), the amendment has been brought.

32 Principal of Unjust Enrichment in case of refund of IGST paid supply to SEZ Units recognized [S. 54(8)(a)

As per section 54(8)(a), in present form, refund for zero rated supply (including supply to SEZ units ) is required to be paid to applicant and not to be transferred to Consumer welfare fund. But in case of supply to SEZ Units after charging IGST , it is being proposed to allow ITC in the hands of SEZ Unit. (No such proposal in the 46 amendments notified, though section 16 provides for credit to all registered persons)

Hence 54(8)(a) which provided for refund of tax on zero rated supplies is being amended to be restricted to provide only for refund of tax on export of goods or services or both.

Similar amendment has been made for unutilized ITC for zero rated supplies and refund for unutilized ITC to applicant shall be confined to export and not for supplies to SEZ Units. However, in case of supplies to SEZ Units where refund of unutilized ITC is claimed, no tax is charged and hence there can be no unjust enrichment. Hence this part of proposal needs to be reconsidered.

33 & 39 Export of services [S. 2(6)(iv)] and Relevant date for Export of service [S. 54 Explanation 2 (c) (i)]

Receipt of payment in convertible foreign exchange is a pre condition for export of service but not for export of goods. Export of service against payment in Indian rupees under present law does not qualify as zero rated supply. Normally against export of services, payment in Indian rupees is received from Nepal and Bhutan. Now it is being proposed to amend the definition of export of service to provide that even if payment is received in Indian rupees, where permitted by RBI, it shall be treated as export of service and can enjoy the refund.

It may be pertinent to mention that Service to Nepal and Bhutan are exempt but ITC on such services is not denied under Rule 42.

With this proposal services to Nepal and Bhutan in Indian Rupees, subject to permission by RBI, shall rank with exports against convertible foreign exchange.

Consequential Amendment has been made in definition of relevant date when defined with reference to export of services.

34 Recovery of Tax [S.79]

Official Remarks

It is proposed to provide 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.

Hence explanation below section 79 is being amended to provide that 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.

Author’s Comments

This will enable government to recover tax from all the registrations under same PAN. So, an entity shall be liable not only for its own dues but also all other establishments covered by the same PAN.

35& 36 Payment of Tax in Dispute to Appellate Authorities

At the time of Ist Appeal against the order of adjudicating authority, 10% of tax is dispute is required to be deposited u/s 107(6). Now against this 10% of tax in dispute, Maximum cap of Rs. 25 crore is proposed to be placed.

Against 2nd appeal, in addition to amount paid u/s 107(6), 20% of remaining amount of tax in dispute is required to be deposited u/s 112(8). Now a maximum cap of 50 crores is being placed.

Hence at the stage of 2nd appeal 30% of the remaining amount of tax in dispute gets paid.

37 Transitional Provisions [S. 140]

Amendment is being brought to deny credit of Education cess and Senior & High Secondary Education cess. Since TRAN-1 have already been filed, this proposal shall result in genuine hardship to the tax payers and should not be done.

Even if it is done, it can be challenged, because of amputation of already vested rights. Rather proposal itself manifests that tax payers are other wise entitled to these credits.

38 Job Work

Non return of inputs by Job worker with in 1 year and non return of capital goods by Job Worker in 3 years is taxable by treated as supply.

The amendment is being proposed that the period of one year or three years, as the case may be, may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively

39 Already dealt with 33
40 Governmental Authority [S.2(16)]

Panchayat also included in definition of governmental authority

41 Place of supply in case of transportation of goods [S. 12(8)]

As per section 12(8)(b), The place of supply of services by way of transportation of goods, including by mail or courier to a person other than a registered person, shall be the location at which such goods are handed over for their transportation

Hence ocean freight on export of goods becomes taxable because foreign importer is not a registered person. But ocean freight was exempted by separate Notification dated 25-01-2018 till 30-09-2018. Now amendment proposes not to tax ocean fright by bringing change in law.

42 Place of Supply of Job Work for goods imported into India shall be outside India [Proviso to S. 13(3)(a)]

Official remarks

It is proposed 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

43,44 and 45 Regarding settlement of taxes by government under IGST and Compensation Cess
46 The integrated goods and services tax apportioned to that State, as certified by the Principal Chief Controller of Accounts of the Central Board of Excise Indirect Taxes and Customs;

Official Remarks

This is in pursuance of the change in name of the Central Board of Excise and Customs to the Central Board of Indirect Taxes and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963

GST  Explained with example

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