Introduction:

Gone are the days when manufacturers/ service providers kept their fingers crossed on the Budget day expecting change in rate of duty/tax for their products/services in Central Excise / Service Tax regime. After rolling out of GST- a new indirect taxation which replaced the earlier laws- Budget has lost it’s importance with respect to change in rate of tax for Goods and Services, as the same is being decided in GST Council which became the supreme body as far as GST is concerned. However, the Finance Bill 2021 has proposed some amendments in CGST & IGST Act,2017. In this article, I would like to discuss these proposed amendments and it’s impact on day to day business/ procedure.

Proposed Amendments:

CGST Act, 2017:

Section 7: It has been proposed to insert the following new clause (aa), after clause (a), in sub-section 1 of section 7.

“(aa) 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.”

Impact: With insertion of the above clause, scope of supply has further been widened so as to include the activities / transaction between a person (other than an individual) to it’s members for consideration. It is pertinent to mention here that this amendment has been proposed with retrospective effect i.e w.e.f 01.07.2017.

Section 16: It has been proposed to insert the following new clause (aa), after clause (a), in sub-section 2 of section 16.

“(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;”.

Impact: Section 16(2) deals with certain conditions to avail ITC. Now one more condition has been inserted which provides that taxpayers are entitled to avail ITC on purchase invoice only if supplier has uploaded the same on GST portal. It is understood that this amendment has been brought in to avoid the unnecessary litigation as many writ petitions are being filed to challenge the validity of rule 36(4) of CGST Rules, 2017 which prescribes the same condition with some ceiling limit. It is pertinent to note that this clause does not have retrospective amendment in the bill.

Section 35: It has been proposed to omit sub-section 5 of section 35. Earlier Section 35(5) reads as;

“(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

Impact: With omission of the above sub-section, now there will be no requirement for the taxpayers to get his books of accounts audited by a CA or CMA (GSTR-9C).

Section 44: Section 44 has been proposed to substitute with the following new section.

44. 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, within such time and in such form and in such manner as may be prescribed:

Provided that the Commissioner may, on the recommendations of the Council, by notification, exempt any class of registered persons from filing annual return under this section.

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.

Impact: (i) Section 44 deals with filing of Annual return. Earlier, the due date for filing Annual Return has been prescribed in the Act itself (i.e. 31st day of December of the following year). Now the words “within such time ….. as may be prescribed” make it clear that due date for filing of Annual Return will be prescribed by way of notifying rules.

(ii) Earlier, the taxpayers are required to upload a copy of audited annual accounts reconciliation statement certified by CA or CMA (GSTR-9C). Now, a self-certified reconciliation statement along with audited annual financial statement shall be uploaded.

Section 50: The proviso to sub-section 1 of section 50 has been proposed to be substituted with the following proviso.

―Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger

Impact: Don’t you find any difference between the earlier proviso (inserted vide Finance Act 2019) and the new proposed proviso? Yes of course, there is no major change in this. The words “ shall be levied” are substituted with the words “ shall be payable”. It is pertinent to mention here that this amendment has been proposed with retrospective effect i.e. w.e.f 01.07.2017.

Section 74: In section 74, in Explanation 1, in clause (ii), for the words and figures “sections 122, 125, 129 and 130”, the words and figures “sections 122 and 125” shall be substituted.

Impact: Section 74 deals with non-payment of tax on account of fraud, suppression facts etc. Earlier, the relevant portion reads as “(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. After this amendment, proceedings under section 129 & 130 (detention of goods/conveyance, confiscation of goods and conveyance) shall still continue, even if the proceedings against the main person is concluded.

Section 75: The following explanation has been proposed to be inserted in sub-section 12 of section 75.

“Explanation.––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.”

Impact: Earlier, there was a confusion as to whether SCN needs to be issued to recover the tax, if the taxpayer declares his tax liability in GSTR-1 but failed to pay in GSTR-3B. With this insertion of explanation, it has now become crystal clear that such tax liability can straightaway be recovered under section 79 (recovery of arrears).

Section 83: The following sub-section has been proposed to be substituted with sub-section (1) of section 83.

“(1) Where, after the initiation of any proceeding 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”

Impact: Section 83 deals with provisional attachment of property up to one year. Earlier, provisional attachment of property could be made while during the proceedings under sections 62, 63, 64 , 67 , 73 & 74 only. Now, the scope for provisional attachment of property has been widened so as to include many other proceedings.

Section 107: The following proviso has been proposed to be inserted in sub-section (6) of Section 107;

“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.”.

Impact: While detaining or seizing goods or conveyances, the proper officer will pass an order for payment of tax and penalty. In such cases, if the taxpayer is filing appeal, he has to pay a sum of 25 % of the penalty imposed in the order.

Section 129 & 130: Many clauses / sub-sections have been proposed to be amended in section 129.

Impact: Since, the extracts of the proposed amendment is larger, I choose to skip from re-producing the same. The procedure for detention, seizure and release of goods and conveyance and levy of penalty thereto has further been streamlined.

Section 151: The following section has been proposed to be substituted in section 151.

“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”

Impact: It gives power to the Commissioner or any officer authorized by him to call for any information related to any matter in connection with GST Act.

Section 152: The following amendments have been proposed in section 152.

(a) in sub-section (1),––

(i) the words “of any individual return or part thereof” shall be omitted;

(ii) after the words “any proceedings under this Act”, the words “without giving an opportunity of being heard to the person concerned” shall be inserted;

(b) sub-section (2) shall be omitted.

Impact: The commissioner or any officer authorized by him shall not use the information of any person for the purposes of any proceedings under GST Act without giving an opportunity of being heard to such person.

Schedule II: It has been proposed to omit paragraph 7 in Schedule II which reads as;

7. Supply of Goods

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 forcash, deferred payment or other valuable consideration.

Impact: The above paragraph has been proposed to be omitted with retrospective amendment i.e. w.e.f 01.07.2017. Schedule II treats certain activities or transaction either as supply of goods or as supply of service. The above transaction has been omitted from Schedule II and thereby the same will be decided under normal provisions (not as per Sch II).

IGST Act 2017:

Section 16 of IGST Act: Many amendments have been proposed to give the following effect.

1. Supply of goods or services to SEZ Unit or Developer can be termed as “Zero-rated supply” only when such supply is used for Authorized Operations

2. Recovery of refund claimed on account of zero-rated supplies, in case of non-realization of sale proceeds within the stipulated time prescribed under FEMA 1999.

3. Government may restricts zero-rated supply on payment of IGST and claim refund of IGST so paid only to ,-

  • Specified class of persons;
  • Class of goods or services.

Conclusion:

All the above amendments are at proposal stage only. The same has to be approved by parliament and further requires the consent of the President of India. The picture will be more clear when this Finance Bill 2021 becomes the Finance Act,2021.

Happy Learning!!!

(DISCLAIMER: (i) The views expressed in this article are strictly of author’s personal views only. (ii) The author disclaims all liability in respect of any action taken or not taken based on this article)

Name of the Author A.Siva
Post Superintendent of Central Taxes, Tuticorin

Author Bio

Name: A SIVA
Qualification: Other
Company: Central Board of Indirect Taxes and Customs
Location: TUTICORIN, Tamil Nadu, IN
Member Since: 07 Jul 2017 | Total Posts: 2

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