The Budget-2023 has nothing very important for GST though the expectations were there for an amnesty scheme plus some measures for Simplification of GST. Anyways what is proposed by the Hon. FM in the budget we have to study the same so let us try to understand what is there in the Budget-2023 with respect to GST. There are 17 amendments proposed by the Hon. Finance Minister and let us have a look at the proposed major amendments as proposed in the Budget-2023.
The total amendments made in the Finance Bill are as under:-
| ACT | NUMBER OF AMENDMENTS |
| CGST | 15 |
| IGST | 02 |
1. DEALERS SUPPLYING GOODS THROUGH ELECTRONIC COMMERCE OERATOR CAN OPT FOR COMPOSITION SCHEME
Amendment in Section 10
Now the composition dealers can sale goods through E-Commerce operator intra-State after enactment of this amendment.
There is a restriction in the existing law and according to it the dealers who are supplying the goods through electronic commerce operators cannot go for composition scheme and now through this amendment it is proposed to remove this restriction.
Let us see the existing restriction as provided in the current GST Law:-
Section 10(2):- The registered person shall be eligible to opt under sub-section (1) , if – ……
(d). he is not engaged in making any supply of goods or services through an electronic commerce operator who is required to collect tax at source under section 52.
Here through this amendment “goods or” words are proposed to be removed hence now the restrictions as mentioned in Section 10(2) (d) regarding Goods will be removed.
The same amendment is also proposed in the section 10(2A)(c) .
Now the dealers making supply through electronic commerce operator can go for composition scheme for Goods.
This will be a good relief for the small goods dealer who wants to sell goods through Electronic Operators and wants to go for Composition.
Here one should note that the Composition dealers can not make interstate sales hence this relief will only be for intra-state sale since in the basic scheme of GST Composition Interstate supply by the composition dealer is not possible. Anyways it will be great relief for the small dealers who wants to sale good in the same city or in the same state through Electronic Commerce operators and wants to take the benefit of Composition.
E- Commerce operators like Amazon and Flipkart are now becoming part of the life of citizens of our country. Lot of E-commerce operators are working at local levels and now small dealers can use them to make the local sale through these operators with the benefit of Composition also.
The GST council in it’s 48th Meeting has agreed in principle to allow composition dealers and unregistered dealers to sale the goods through E-commerce operators and through this amendment Composition dealers has got the facility and it is expected the Unregistered dealers will get the facility sooner or later. The GST council has fixed the probable date 1st. Oct. 2023 . Let us hope that URD will also get this facility up to that date.
2. LATE PAYEMENT BY THE PURCHASER- 180 days
Amendment in section 16(2)
If the dealer has not made payment to his vendor within 180 days then instead of adding the proportionate ITC with output tax liability, he will have to reversed it with interest.
See there is a proviso 2 in section 16(2) and according to it if the purchaser has not made payment to the vendor within 180 days from the date of invoice …… an amount equal to the input credit availed by the recipient shall be added to his output tax liability , along with interest thereon , in such manner as may be prescribed.
“Added to his output tax liability , along with interest thereon ,”
is to be substituted by the following :-
“Paid by him along with interest payable under section 50”
Now the amount of such non payment by the purchaser to the seller within prescribed time then instead of adding it to the output tax it must be reversed with interest . It is commensurate with the return filing system presently going on.
There is one more amendment in Section 16(2) and it is in the third proviso . Let us have a look at third proviso in section 16(2):-
PROVIDED ALSO that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with the tax payable by him with the tax payable thereon.
Here after made by him following shall be added :-
“To the supplier”
This amendment is not very crucial and what is the purpose of these two amendments can only be searched from the memorandum and let us see what is given in the memorandum :-
“Second and third proviso to subsection 16(2) of the section 16 of the CGST Act are being amendment to align the said subsection with the return filing system provided in the said Act.”
It seems this amendment is of technical reason but amendment in third proviso seems to be having no meaning when “payment is made” to “payment is made to the supplier” what they want to say is better known to the lawmakers and it should be clarified further why this amendment is made ? How this provision of making the payment to the supplier is related to the return filing system as mentioned in the memorandum ?
3. FURTHER RESTRICTION ON ITC
Amendment in section 17(3) and 17(5)
ITC seems to be a big problem not only for the dealers but also for lawmakers so they want to change their stance whenever they got every possible chance to further restrict the ITC. Let us see what they have done here :-
In section 17(3) they have made one more restriction through addition to the explanation attached with the section :-
(ii). The value of such activities or transactions as may be prescribed in the respect of clause (a) of the paragraph 8 of the third schedule.
What is Clause (a) of paragraph 8 of third schedule :-
(a). Supply of warehoused goods any person before clearance for home consumption.
These supplies shall be treated as Exempt supply hence the ITC shall be restricted hence the ITC involved in it shall be revered as per the provisions of section 17(2) by adding the same to the Exempt supply.
See if ITC is related wholly for this supply, then it will be reversed and if there is common ITC then it will be added to the exempt supply to calculate the proportionate eligible supply.
Let us try to understand the impact of the amendment and for this purpose we have to go through Section 17(2) of the CGST Act, 2017:-
Where the Goods or services or both are used by the registered person partly for effecting the taxable supplies including the zero-rated supplies under this Act or under the Integrated Goods and Service Tax Act and partly for effecting exempt supplies under the said Acts , the amount of input tax credit shall be restricted to so much of input tax as is attributable to the said taxable supplies including the zero-rated supplies.
Now see the existing Section section 17(3)
The value of Exempt supply under subsection (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 , transaction in securities , sale of Land and , subject to clause (B) of paragraph 5 of Schedule II , sale of Building .
Explanation :- For the purpose of this sub section the expression “ value of exempt supply” shall not include value activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said schedule.
Now it is proposed in the above mentioned Explanation “except those specified in paragraph 5 of the said schedule” the following is proposed to be substituted :-
Except- (i) the value of activities or transactions specified in Paragraph 5 of the said Schedule ; and
(ii) the value of such activities or transactions as may be prescribed in respect of clause (a) of the paragraph 8 of the said Schedule.
What is Clause (a) of paragraph 8 of third schedule :-
(a). Supply of warehoused goods any person before clearance for home consumption.
Now while calculating and restricting the ITC the above supply shall also be include in Exempt supply so it will be one more restriction on availability on amount of ITC.
CSR ACTIVITIES- NO ITC
Now one more restriction and this related to the restricted ITC as mentioned in Section 17(5) and one more addition is made to this section which is as under:-
(fa):- goods or services or both received by a taxable person , which are used or intended to be used for activities relating to his obligation under corporate social responsibility referred to in section 135 of the companies Act, 2013.
So, the supplies received for CSR activities shall not be eligible for ITC … Why ? It was disputed question till now but through this proposed amendment it has been made clear that ITC on supplies used for CSR activities will not be allowed as ITC.
Please don’t go for Logic behind this amendment because still you are searching why they have restricted the ITC for Scooters , Motor cycles , Passenger Cars etc. so it is one more addition to your List to search the reasons of the same.
This is GST and it is going in the same way since its inception!!!!!
4. NO REGISTRATION FOR EXEMPT DEALERS
Section 23
There is section 23 in the CGST Act, 2017 and it has given immunity from registration and main beneficiaries are dealers who are exclusively dealing in exempt or Non-taxable Goods. Section 23 is already there but there were section 22 (Persons Liable for Registration) and Section 24 (compulsory Registration) and in certain cases immunity given in Section 23 was disputable and not free from controversies.
Now the Section 23 is proposed to be substituted by a new Section 23 and the initial words of new section 23 has made it clear that section 23 is applicable “Notwithstanding anything to the contrary contained in sub-section (1) of 22 or section 24.
Now section 23 has overring effect over section 22(1) and Section 24 hence the dealers covered under section 23 will get an absolute exemption from registration.
A non-obstante clause is added to a Section 23 in order to uphold its enforceability over other provisions mentioned in Section 22(1) and Section 24 which are contradictory to it.
If a person is exempt from getting the Registration under section 23 including the persons dealing in Exempt or non-taxable goods will not be required registration even if they are covered under section 22(1) and section 24.
This amendment is retrospective and it is effective from 1st. July 2017. It is a big relief for person dealing in Exempted Goods and Non-taxable Goods and since it is effective from 1st. July 2017 hence it will resolve the problems connected with these dealers due to interpretation problems specially the RCM and compulsory registration provisions.
5. TIME LIMIT FOR SUBMISSION OF CERTAIN RETURN
The Time limit , after which certain returns can not be filed is introduced first time through this amendment.
If a dealer has not filed certain returns, then he can file it with late fees but these returns can be filed at any time after due dates but there was no time up to which return can be filed or in other words after which time the dealer can not file the returns even after paying the late fees. Now some amendments are proposed to restrict the time limit after which these returns cannot be filed . Following returns can not be filed after 3 years from the due date of filling of such returns:-
| NAME OF FORM |
| GSTR-3B |
| GSTR-1 |
| GSTR-8 |
| GSTR-9/9C |
Further the power is given to the Government to extend this time limit for filing of these returns on the recommendation of the GST council.
The time limit may create a problem with respect to the dealers who failed to pay tax and Government has retained the power to mitigate this situation to save the revenue.
Now the window for filling of these return will be closed and dealer will not be able to file these returns which at present they can file within unlimited.
6. PENAL PROVISIONS FOR ELECTRONIC COMMERCE OPERATOR
Section 122 (IB)
If E-commerce operator allow Unregistered dealer to make sale through it’s Platform and further allow Composition dealer to make sale interstate through it’s platform then penal actions are being introduced.
New penal provisions are proposed to be introduced on ECO for the following contraventions :-
(1). Any Interstate supplies made by the Composition Dealers.
(2). Any Supply made by the un-registered dealer where such unregistered dealer is not exempt from registration specifically by a Notification .
(3). Fails to furnish the correct details in the statement to be furnished under sub-section (4) of section 52 of any outward supply of goods effected through it by a person exempted from obtaining registration under this Act.
Now amount of Penalty is Rs. 10000.00 or amount of tax which is required to be paid if such supply is made by a regular registered dealer, whichever is higher.
Composition dealer can make their sale through E-commerce operators after amendments in Section 10 which we have explained above but this facility is only for intra-state sale of goods and not for Interstate Supply of Goods and further the Unregistered dealers are also not allowed.
7. PROSECUTION AND IT’S MONETROY LIMITS
SEC. 132
Some of the offences have been removed from the prosecution List and further the overall limit for all the offences has been has been raised from 1crore to 2 Crores except fake invoices.
The budget -2023 has given one more relief against the so-called harassment of the dealers by removing some of the offences from the prosecution List under section 132 (1). It is proposed to decriminalise 3 offences which were mentioned in section 132(1). These offences are mentioned in (g), (j) and (k) of section 132(1). Let us see these offences:-
|
Sections |
Nature of offence |
| 132(1)(g) | Obstruct and prevents any officer in discharge of his duties under this Act. |
| 132(1)(j) | Tempers with or destroys any material evidence of documents. |
| 132(1)(k) | Fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief , the burden of proving which shall be upon him , that the information supplied by him is true) supplies false information. |
The three offences will no longer be punishable under section 132(1) of the CGST Act, 2017 hence no prosecution can be launched for these offenses .
Further there is change in Minimum threshold limit for launching prosecution is now increased from Rs.1 Crores to Rs. 2 Crores except in case of issuance of Fake invoice where the limit is proposed to be maintained at Rs. 1 crore only.
What is Fake Invoice :-
“Issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder leading to wrongful availment or utilisation of input credit or refund of tax.”
8. COMPOUNDING OF OFFECNES
SEC. 138
What is compounding of offence ? Is it a compromise to get the immunity from further Legal Action ? – Yeas
Let us See section 138(1) and 138(3) to understand what is compounding of an offence ?
Section 138(1)
Any offence under this Act may , either before or after the institution of prosecution , be compounded by the commissioner on payment , by the person accused of the offence , to the central Government or the state Government , as the case may be, of such compounding amount in such manner , as may be prescribed.
Section 138(3)
On Payment of such compounding amount as may be determined by the commissioner , no further proceedings shall be initiated under the Act against the accused person in respect of same offence and any criminal proceedings , if already initiated in respect of the said offence , shall be abated.
These two provisions are enough to explain what is compounding of offence. So, we can assume it as compromise with payment of certain amount so prevent from further negative effects or punishment. See every offence is no eligible for compounding so for clear understanding one has to go for section 138 of the CGST Act, 2017. Here we are just discussing what changes are proposed to be made in this section of compounding by the Budget-2023.
Every offence , the compounding should not be allowed and offences and compounding should not be allowed every time the offices is committed . So, considering these two principles amendments are made in section 138.
In case of Compounding of offence following amendments are proposed:-
|
S.NO. |
DESCRIPTION |
| 1. | Now there will be no compounding of offence in case related to issuance of Fake invoice- “Issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder leading to wrongful availment or utilisation of input credit or refund of tax.” |
| 2. | Other offences under section 132 can be compounded only once. |
| 3. | The amount of compounding is also proposed to be amended and the new rates of compounding is as under:-
(i). Minimum 25% of the Tax involved and the (ii). Maximum amount not being more than 100% of the tax involved. At present the amount of Compounding is as under which is proposed to be reduced as mentioned above:- (i). Minimum Rs. 10000.00 or 50% of the Tax involved whichever is Higher. (ii). Maximum amount Rs. 30000.00 or 150% of the tax involved whichever is higher. Amount of compounding is proposed to be reduced considerably. |
9. SHARING THE INFORMATION
SEC. 158A
This is a new provision proposed to be made to share the information of the dealer with the other system as may be notified by the Government . The following information now after this amendment , can be shared with the subject to certain conditions :-
|
S.NO. |
Description of the information |
| 1. | Registration form in REG-01. |
| 2. | Information furnished in Return GSTR-3B and GSTR-1 |
| 3. | GST Annual Return GSTR-9 and 9C |
| 4. | E-Invoice |
| 5. | E-way Bill |
| 6. | Any other details as may be provided by rules on common portal. |
Requirement of Consent of related parties while sharing the Information
|
S.NO. |
Description of the information | Consent Required |
| 1. | Registration form in REG-01. | Supplier |
| 2. | Information furnished in Return GSTR-1 | Suppliers and also the recipient if the identity of the recipient. |
| 3. | Information furnished in Return GSTR-3B | Supplier and also the recipient if the identity of the recipient. |
| 4. | GST Annual Return GSTR-9 | Supplier |
| 5. | E-Invoice | Supplier and also the recipient if the identity of the recipient. |
| 6. | E-way Bill | Supplier and also the recipient if the identity of the recipient. |
| 6. | Any other details as may be provided by rules on common portal. | Supplier and also the recipient if the identity of the recipient. |
Further a new sub-section 3 is also proposed in Section 158A to provide the following:-
|
S.NO. |
Description |
| 1. | No action shall lie against the Government / common portal with respect to any liability due to sharing of such information. |
| 2. | There shall be no impact on liability to pay tax on the relevant supply or as per the relevant return. |
Why this provision is being introduced ?
We have very clear Memorandum in case of Direct Taxes but in case of Indirect taxes specially the in case of GST we can not say that memorandum is very clear hence it is still a mystery that why this provision is being introduced in the GST provisions.
The Portal is already sharing the details with the IT portal hence for this purpose this provision was not needed. Since information under this proposed provision can only be shared with the consent of the dealers on other authorities and systems hence, we can presume that this will help the dealers where they are required to present their authentic data to other authorities.
Anyways the intention of Law makers to introduce this provision is not clear.
10.SCHEDUEL III – RETROSPECTIVELY EXEMPTION FOR CERTAIN ACTIVITIES w.e.f. 1st. JULY 2017
The following clauses were added to the schedule III by the Finance Act, 2018 but through this amendment they are made applicable retrospectively w.e.f. 1st. July 2017:-
|
Clause No. of Schedule III |
Description |
| 7 | Supply of Goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering India. |
| 8(a) | Supply of Goods to any person before clearance of the home consumption. |
| 8(b) | Supply of Goods by consignee to any other person , by endorsement of documents of the title of the Goods , after the goods have been dispatched from the port of origin located outside India but before clearance for Home Consumption. |
These activities will be treated as neither supply of Goods or services and it is applicable since 1st. July 2017 as per schedule III of the Goods and Service Tax Act, 2017.
It is also clarified the if tax has been paid between 1st. July 2017 to 31st. January 2019 on these transactions then no refund will be given.
This is very strange provision there will no refund shall be made of all the tax which would have been so collected , had the sub-section (1) been in force at all material times. How it will be possible to withheld the refund in those situations where it was not possible to collect any tax from the recipient but the same was paid to the Government. It will be a discriminatory provision and will again become the cause litigation.
Why these type of half hearted reliefs are introduced ? If the lawmakers want to give relief from a unwarranted and disputed taxability then relief should be given to the persons also who have already paid the tax . A restriction on their refund is not good Law.
11. INTEGRATED GOODS AND SERVICE TAX – AMENDMENTS
1. Definition of ‘Non-Taxable online recipient’ under Section 2(16) have been substituted as follows :-
“non-taxable online recipient” means any unregistered person receiving online information and 93 database access or retrieval services located in taxable territory”
Explanation- For the purposes of this clause, the expression “unregistered person” includes a person registered solely in terms of clause (vi) of section 24 of CGST ACT, 2017.
The purpose of above change is to rationalise the above definition which earlier included Unregistered person as well as Govt., Local authorities, panchayats etc.
Now the same has been rationalized to include unregistered persons and person registered solely for purpose of deduction of tax at source (TDS), shall also be considered as unregistered person by way of explanation, thereby practically including all the earlier mentioned persons such as Govt., Local Authorities, panchayats.
2. Definition of ‘online information and database access or retrieval services’ under Sec 2(17) have been amended to omit the words “essentially automated and involving minimal human intervention and”
Removal of the above-mentioned rider would widen the definition of OIDAR services and now all the services whose nature is such that it cannot be supplied in absence of information technology would be covered by the definition of OIDAR.
Just to give a background OIDAR services includes services such as advertising on internet, cloud services, provision of e-books, music, movies on internet (Netflix, Amazon prime etc.),digital content, data storage, online gaming etc. Now when these OIDAR services are being provided from non-taxable territory to registered person then Registered person has to pay tax under RCM. BUT when OIDAR services are being provided from non-taxable territory then liability to pay tax on such supplies lies on supplier of OIDAR services via section 14 of IGST – Special provision for payment of tax by a supplier of OIDAR services. So since the definition of such services have been widened which will increase the revenue for the govt.
3. Proviso to sub-section (8) of section 12 of the IGST Act is being omitted.
Existing Sec 12(8) reads as under:-
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.”
As per the existing provisions if goods are destined for a place outside India, then POS shall be place of destination i.e. outside India. GST Council recommended the removal of abovementioned proviso in 48th meeting and same was mentioned in the Press release of that meeting. Post that Circular 184/16/2022 dated 27th Dec 2022 was issued clarifying the procedural aspect in existing scenario of transaction hit by the said proviso of sec 12(8) and that IGST charged in this transaction shall be available as ITC to the recipient of the services.
Now after the removal of said proviso, POS will not be dependent on the destination of goods but will rather depend upon the location of recipient (in case of registered recipient) or location of goods handed over (in case service is being provided to unregistered recipient) which is in line with other provision related to Place of supply and also the concept of GST i.e. based on destination of consumption of services.
Post this amendment State will directly get the share of revenue i.e. CGST and SGST will be applied if Supplier and recipient of service are in same state even when the destination of goods is outside India. Earlier even when the supplier and recipient were in same state IGST was being charged on such transaction.
12. WHAT IS NOW UNDER GST
We have seen lot of changes in GST since its inception . The dealers and professionals have stopped counting the number of such Amendments, Clarification , Circulars and Press releases. Every year we have seen lot of changes but till the Lawmakers has not made any provision in the law for purchasers to show from whom or from which dealer they have purchased goods, there will be no simplification of GST and Solution of ITC Problems.
This was there in the original GST and until this is practically introduced there will be no use of introducing the new amendments in GST Laws. How the Government will know that persons are selling goods and not showing the same in their return and not paying tax for want of this long-awaited provision. Let us wait for such amendment to make the GST Procedures purposeful and effective.
Some amendments are proposed in Budget -2023 which we have seen above in our detailed discussion. Is this the end for GST Amendments ? No since inception Goods and Service Tax is being run on “Trial and Error” basis so we will certainly see lot of Changes in Coming years.
GST is getting stability on the front of collection of Revenue but no “law and procedural front” it will take time to stable and now it seems that Simplification of GST is a very distant dream.
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