Proposed amendments to CGST Act, 2017 Budget 2021

1. GST on supply by clubs, associations etc to its members

-Section 7(1)(aa) and an explanation clause proposed to be inserted in the CGST Act, retrospectively with effect from the 1st July 2017,To ensure levy of tax on activities or transactions involving supply of goods or services by any person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.

-The person (Other than an individual) 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.

-Further, paragraph 7 in Schedule II has been proposed to be omitted w.e.f 1st July 2017. It 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 for cash, deferred payment or other valuable consideration

2. Conditions for claiming ITC

  • Section 16(2)(aa) inserted in CGST Act, 2017
  • Condition for claiming ITC
  • The details of the invoice or debit note referred to in clause 16(2)(a) has been furnished by the supplier in the statement of outward supplies (GSTR-1) and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37.
  • Thus, ITC to be taken only for those invoices whose details are reflected in GSTR-2A/ 2B i.e the respective suppliers (vendors) have filed their GSTR-1

3. Audit under GST

  • Section 35(5) proposed to be omitted
  • No requirement for the taxpayers to get books of accounts audited by a CA or CMA
  • A registered person will have to self comply
  • Section 44 proposed to be substituted
  • Responsibility of reconciliation shifts to the taxpayer; the taxpayer liable for filling annual return required to self-certify the reconciliation statement.
  • Due date for filing of Annual Return will be prescribed by way of notifying rules ( Earlier provided in the Act itself)

4. Interest

  • Proviso to section 50(1) substituted
  • Interest will be on net cash liability and not on gross tax liability
  • This amendment has been proposed with retrospective effect i.e., w.e.f 01.07.2017.
  • Explanation clause to section 74(1)(ii) substituted-
  • (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.
  • Thus, conclusion of proceedings will lead to conclusion of proceedings u/s. 73 or 74 and the proceedings u/s. 122 and 125 but not the proceedings u/s. 129 and 130.
  • This makes seizure and confiscation of goods and conveyances in transit a separate proceeding from the recovery of tax

5. Self assessed tax

  • Explanation clause to section 75(12) inserted-
  • 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.
  • Thus, recovery can straight away be initiated by the officer for the outward supply liability shown in the statement filled u/s 37, if not reflecting in the GSTR-3B

6. Provisional Attachment under section 83

  • Section 83(1) substituted
  • Where after the initiation during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74 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 subsection (1A) of section 122, in such manner as may be prescribed

7. Appeal in case of detention and seizure of goods and conveyance

  • Section 107(6) inserted
  • 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.
  • The pre-deposit prior to this amendment was only to the extent of 10% of Tax Liability in case of dispute which is now proposed to be 25% of the penalty amount in case of detention and seizure of goods and conveyance during transit

8. Changes in section 129

  • Section 129(1)(a) & (b) substituted as-

(a) on payment of applicable tax and penalty equal to one two hundred per cent. 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 penalty

(b) on payment of applicable tax and penalty equal to fifty per cent of the value of the goods reduced by the tax amount paid thereon and or two hundred per cent. of the tax payable on such goods, whichever is higher, 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 penalty”

  • Section 129 (2) deleted; Section 129(3) & (4) substituted as-
  • (2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.
  • (3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the tax and 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).”
  • (4) No tax, interest or penalty shall be determined under sub section (3) without giving the person concerned an opportunity of being heard.
  • Section 129(6) substituted as under:
  • Where the person transporting any goods or the owner of such goods fails to pay the amount of tax and penalty under subsection (1) within fourteen of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130 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 undersub-section (3)
  • 1st Proviso to Section 129 inserted as-
  • Provided that the conveyance shall be released on payment by the transporter of penalty under subsection (3) or one lakh rupees, whichever is less
  • 2nd proviso to section 129 substituted as –
  • Provided further 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 fourteen fifteen days may be reduced by the proper officer.
  • Instead of 100% tax and 100% penalty, now penalty of 200% of tax payable is applicable
  • To file appeal, 25% of penalty i.e 50% of tax amount
  • Transporter can get the conveyance released on payment of penalty or Rs. 1 lakh w/ever is less
  • The proceedings under section 129 relating to detention, seizure and release of goods and conveyances in transit, delinked from the proceedings under section 130 relating to confiscation of goods or conveyances and levy of penalty.

9. Changes in section 130

  • The proceedings under section 130 relating to confiscation of goods or conveyances and levy of penalty delinked from the proceedings under section 129 relating to detention, seizure and release of goods and conveyances in transit.
  • Penalty of 100% of tax payable is applicable ( Section 130 (2) amended)
  • Section 151 of the CGST Act 2017 amended so as to empower the jurisdictional commissioner to call for information from any person relating to any matters dealt with in connection with the Act
  • Section 168 of the CGST Act, 2017 amended so as to enable the jurisdictional commissioner to exercise powers under section 151 to call for information
  • Section 152(1) of the CGST Act, 2017 amended so as to provide that no information obtained under sections 150 and 151 shall be used for the purposes of any proceedings under the Act without giving an opportunity of being heard to the person concerned

Proposed amendments to IGST Act, 2017 Budget 2021

10. Zero rating : Section 16(1)(b)

  • Section 16(1)(b) substituted
  • (b) supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit
  • Thus, benefit of zero rating will be available only to the supplies of SEZ developer or SEZ Unit which are for authorised operations and not for any other supplies

11. Refunds on exports: Section 16(3)

  • Section 16(3) substituted
  • Only notified class of taxpayer/notified class of goods/services shall be eligible for claiming refund in case the supplies are made with payment of tax. ( IGST Refund)
  • 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
  • Government may restrict 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

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