Refund of GST on Zero Rated Supplies- Without Payment

Pursuant to Para 114 of Finance Bill 2021

Section 16(3) of IGST Act, 2017 After Amendment

“(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed

Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 for receipt of foreign exchange remittances, in such manner as may be prescribed.”

Prior to Amendment

(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:––

(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or,

Comment:

The person eligible to claim the refund of unutilized credit of input tax shall be liable to realize the sale proceeds within the time limit prescribed under FEMA Act, 1999, failing which he shall be liable to deposit the tax along with interest.

Earlier Rule 96B was inserted vide Notification No- 16/2020 Central Tax dated 23.03.2020 creating obligation to realize the sale proceeds within the time limit prescribed under FEMA Act, 1999.

Refund of tax on Zero Rated Supplies- With Payment

Insertion of sub-section 4 to Section 16 of IGST Act, 2017

(4) The Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification, specify–– 

(i) a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid;

(ii) a class of goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim the refund of tax so paid.”.

Section 16(3)(b)- Prior to amendment as follows

(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:-

 (b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied,

Comment:

1. Government by notification shall specify class of person eligible to claim the refund on payment of integrated tax

2. Government by notification shall specify the class of goods or services eligible to claim refund on payment of integrated tax

Amendment to Definition of Supply

Pursuant to Clause 99 of Finance Bill 2021, Section 7of the CGST Act, 2017 has been amended by insertion of “aa” in sub-section 1 after clause “a”.

the activities or transactions, by a person, other than an individual, to its members or constituents or vice- versa, for cash, deferred payment or other valuable consideration.

Explanation.––For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained  in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;”.

Pursuant to Clause 113 of Finance Bill 2021, Para 7 of the Schedule read as follows shall be omitted

The following shall be treated as supply of goods, namely:-

Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. 

Comments: Association of Person, Trust and their members shall be treated as two distinct person for the purpose of the supply between the above persons. This was earlier part of Schedule II and now part of inclusive scope of supply of section 7

Additional Conditions for taking Credit of Input Tax

Pursuant to Clause 110 of Finance Bill 2021, in sub-section (2), after clause (a), the following clause shall be inserted, namely:––

“(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have  been communicated to the recipient of such invoice or debit note  in the manner specified under section 37;”

Comments: One additional condition has been imposed for claiming the credit of the input tax. Credit of the Input Tax shall be subject to furnishing of GSTR 1 by the supplier. By virtue of Rule 36(4) of the CGST Rules, 2017 registered person was allowed to claim the credit of the input tax to the extent of 5% of the tax reported in GSTR 1 for the tax amount involved in invoices not furnished in GSTR 1 and full amount of the tax amount for the invoices furnished in GSTR 1 

Filing of Annual Reconciliation Statement- GSTR 9C

Pursuant to Clause 101 of Finance Bill 2021, Section sub-section 5 of Section 35 of the CGST Act, 2017 has been omitted.

Section 35(5) of CGST Act, 2017 read as follows

(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.

Pursuant to Clause 102 of Finance Bill 2021, Section 44 of the CGST Act, 2017 has been amendment. Sub-section 2 of Section 44 of the CGST Act, 2017 has been omitted and hence there will be no requirement to file GSTR 9C.

The above amendment is subject to the Notification issued by appropriate authority.

Section 44 after Amendments

44. (1) Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return which may include a self- certified reconciliation statement reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statement for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.

4[Provided that the Commissioner may, on the recommendations of the Council exempt any class of registered persons from filing annual return under  this section:and for reasons to be recorded in writing, by notification, extend the time limit for furnishing the annual return for such class of registered persons as may be specified therein:

Provided further that nothing contained in this 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.”.

Provided further that any extension of time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.]

(2) Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 shall furnish, electronically, the annual return under sub-section (1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed.

6[Explanation.- For the purposes of this section, it is hereby declared that the annual return for the period from the 1st July, 2017 to the 31st March, 2018 shall be furnished on or before the 7[31st January, 2020] and the annual return for the period from the 1st April, 2018 to the 31st March, 2019 shall be furnished on or before the 31st March, 2020.]

Comments: Registered Person shall not be required to file GSTR 9C. However whether such amendment will be applicable for FY 2019-20 shall be subject to issue of Notification

Retrospective amendment for Interest

Pursuant to Clause 103 of Finance Bill 2021, effective date of the proviso to amendment was inserted by Finance Bill 2020.

Comments: The amendment was in relation to the payment of interest on tax only on the amount paid through Electronic Cash Ledger.

The said amendment shall be effective from 01.07.2017.

Proceedings under section 74

Pursuant to Para 104 of Finance Bill 2021, amendment has been done to Section 74 of the CGST Act, 2017 in Explanation 1, in clause (ii),

 (ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded.

Comments: Proceedings u/s 129 and 130 shall not be deemed to be concluded even if the proceedings has been concluded against the main person.

Extended meaning of Self Assessed Tax u/s 75 of CGST act, 2017

Pursuant to Para 105 of the Finance Bill 2021, meaning of the self- assessed tax has been extended by insertion of Explanation to Section 75(12) of CGST Act, 2017 read as follows

For the purposes of this sub-section, the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.

Section 75(12) Notwithstanding anything contained in section 73 or section 74, where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79.

Comments: Meaning of the Self- Assessed tax has been extended to include the amount of tax payable not reported in GSTR 3B

Extended Power to Provisional Attachment

Pursuant to Para 106 of the Finance Bill 2021, powers u/s 83 of the CGST Act, 2017 to make the provisional attachment of the property has been extended.

After Amended Section 83 read as follows:

 “(1) Where, during the pendency of any proceedings after the initiation of any proceeding under section 62 or section 63 or section 64 or section 67 or section 73 or section 74 under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed.

 Before amendment read as follows

(1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed. 

Comments: Powers u/s 83 of Provisional Attachment has been proposed to increase many fold times.

1. Attachment of Property was limited to the taxable person. However after the amendment, provisional attachment can also be made to the person specified/s 1A of Section 122 of CGST Act, 2017

Section 1A of Section 122 CGST Act, 2017 refers to those person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of section 122(1) of CGST Act, 2017 and at whose instance such transaction is conducted

2. Provisional Attachment of the Bank Account can be done upon initiation of the proceedings. Even if the proceedings have been completed after initiating the proceedings, attachment of the property of the Property shall continue

3. Provisional Attachment earlier can be done for the proceedings pending u/s 62, 63, 67, 67, 73, 74. However pursuant to above amendments, provisional attachment of bank account can be done for the proceedings as follows:

Section 59 Self-assessment.
Section 60 Provisional assessment.
Section 61 Scrutiny of returns.
Section 62 Assessment of non-filers of returns.
Section 63 Assessment of unregistered persons.
Section 64 Summary assessment in certain special cases.
Section 67 Power of inspection, search and seizure.
Section 68 Inspection of goods in movement.
Section 69 Power to arrest.
Section 70 Power to summon persons to give evidence and produce documents.
Section 71 Access to business premises.
Section 72 Officers to assist proper officers.
Section 73 Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful-misstatement or suppression of facts.
Section 74 Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilfull-misstatement or suppression of facts.
Section 75 General provisions relating to determination of tax.
Section 76 Tax collected but not paid to Government.
Section 77 Tax wrongfully collected and paid to Central Government or State Government.
Section 78 Initiation of recovery proceedings.
Section 79 Recovery of tax.
Section 80 Payment of tax and other amount in instalments.
Section 81 Transfer of property to be void in certain cases.
Section 82 Tax to be first charge on property.
Section 83 Provisional attachment to protect revenue in certain cases.
Section 84 Continuation and validation of certain recovery proceedings.

Pre-Deposit of Penalty before Filing Appeal

Pursuant to Para 107 of Finance Bill 2021, amendment to Section 107(6) of CGST Act, 2017 as follows

“Provided that no appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to twenty-five per cent. of the penalty has been paid by the appellant.”

Comments: Any person proposes to file appeal before the Appellate Authority against the order of the detention u/s 129(3) of the CGST Act, 2017 has to make the payment of a sum equal to 25% of the penalty

 Increased Penalty on Release of the goods once detained

Pursuant to Para 108 of the Finance Bill 2021, Amended clause (i) and (ii) of Section 129(1) of the CGST Act, 2017 is read as follows:

(a) on payment of the applicable tax and penalty equal to one hundred per cent.  two hundred percent of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty;

(b) on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods or two hundred percent of the tax payable on such goods whichever is higher  reduced by the tax amount paid thereon and, and in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty;

Comments:

√ Upon release of the goods detained, the assessee is required to pay the penalty and not the tax.

√Penalty amount has been increased from 100% to 200% of the tax payable on the goods detained.

√ Even if the owner of the goods does not come forward for the payment of the penalty, the transporter shall be liable to penalty equal to 50% value of goods or 200% penalty of the tax payable whichever is higher

Release of the Goods detained during Transit

Pursuant to Para 108 of Finance Bill 2021, provision of Section 67(2) has been omitted.

As per Section 129(2), provision sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.

Comments: As per section 67(6), goods seized pursuant to search u/s 67(2) can be released upon furnishing the Bank Guarantee with the Bond. However upon omission facility to furnish Bank Guarantee for the release of the goods detained during the transit is no more available

Time Limit for issue of Notice and Passing Order for Goods detained during Transit

After Amendment to Section 67(3) CGST Act, 2017 as follows:

“(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).”

The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).

Comment:

√ Earlier there was no time limit to issue the notice once the goods were detained. However now the adjudicating authority is required to issue the notice within 7 days of detention

√ Earlier there was not time limit to pass order after the detention. However now the adjudicating authority is required to pass the order within 7 days from the date of issue of detention notice 

Show Cause Notice being passing Order for Penalty u/s 129

Amended Section 129(4) as follows

(4) No tax, interest or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.

Comment: As per amended Section 129(1), there will be no levy of tax for the goods detained. The above amendments are consequential in nature. 

Consequences on failure to pay the amount upon Detention of Goods Vehicle

Amended Section 129(6) as follows

Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3)

Prior to amendments Section 129(6) as follows

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 1[fourteen days] of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130:

Comments:

√ Penalty amount has to be paid within 15 days from the receipt of the order giving rise to the detention of the goods for the release of the goods.

√ If there is failure to pay the penalty as determined by the adjudicating authority, goods or conveyance so detained or seized shall be liable to be sold or disposed of

√ Earlier where the owner of the goods fails to pay the tax along with the penalty, further proceedings were initiated in accordance with Section 130.

√ Provisions of Section 130 shall not be initiated if the owner of the goods fails to pay the penalty u/s 129 of CGST Act, 2017.

Omission of Non-Obstante Clause of Section 130 of CGST Act, 2017

Section 130(1) shall be read as “where any person” instead of “Notwithstanding anything contained in this Act, if any person”

Comments: Non obstante clause has been omitted. Overriding effect of the provisions of the act over the other provisions has been removed.

Section 130(3) has been omitted read as follows: Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in sub-section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance.

Comments: Provision of Section 129 is independent of Section 130 of CGST Act, 2017. If the goods detained pursuant to Section 129 shall not be confiscated u/s 130 of CGST Act, 2017 and hence the provision related to the payment of fine in lieu of confiscation of goods or confiscation does not arise.

 Power to Collect Statistics

Section 151 after amendment read as follows:

“151. The Commissioner or an officer authorised by him may, by an order, direct any person to furnish information relating to any matter dealt with in connection with this Act, within such time, in such form, and in such manner, as may be specified therein.”

Prior to Amendment

151. (1) The Commissioner may, if he considers that it is necessary so to do, by notification, direct that statistics may be collected relating to any matter dealt with by or in connection with this Act.

(2) Upon such notification being issued, the Commissioner, or any person authorised by him in this behalf, may call upon the concerned persons to furnish such information or returns, in such form and manner as may be prescribed, relating to any matter in respect of which statistics is to be collected.

Note: All Above Amendments as per Finance Bill are subject to issue of Notification. Further above analysis is based on the personal understanding of the author and views on above may differ from person to person

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