1. Transactions between an Organisation and Members deemed to be a supply.

Proposal

Any activity with respect to goods and services for cash between an organization like Club and its members is constituted as a supply. Also, an Explanation has been inserted to hold that the ‘Organisation’ and its members are two distinct persons under GST.

Comments

This amendment is in contradiction to the Principle laid down in the recent landmark judgment by the Hon’ble Calcutta High Court in the case of Calcutta Club Ltd. [Civil Appeal No. 4184/2009] wherein the Hon’ble Court held that as per the Doctrine of Mutuality, a club cannot charge service tax on the services rendered to its own members. The rationale behind this ruling was that if there are no members, there is no club and vice-versa. However, the newly proposed insertion contradicts the very established principle.

2. Responsibility on the Supplier to file GSTR-01 u/s 37 of the CGST Act to avail ITC by recipient

Proposal

If a recipient has to avail the ITC on the tax paid on supply of goods and services, then the supplier of the said goods/services has an obligation to file his GSTR-01 and the same has to be mandatorily reflected in his GSTR-2A.

Comments

Earlier, as per Section 16(2) of the CGST Act, returns under Section 39(GSTR-3B) were alone a condition precedent for availing ITC. Currently, both GSTR-01 and GSTR-3B are to be filed by the supplier for the recipient to avail the credit. This very aspect of entrusting the responsibility on the supplier for the benefit accruing to the recipient could open the gates for numerous litigations.

3. Audit Return under GST scrapped

Proposal

Section 35(5) of the CGST Act, which mandates the registered person to file GSTR-9C after Certification from a Chartered Account, if their turnover is above the specified limit, has been omitted.

Comments

The government has intended to remove the mandatory requirement of getting the accounts audited under GST and reconciling the same through a qualified professional. However, removing this provision would not mean that the activity of reconciling the statements would be done away with.

4. Annual Return under GST to include the Reconciliation statement

Proposal

Section 44 of the CSGT Act has been substituted and  the new provision states that the registered person shall file an annual return which includes a Reconciliation statement that reconciles the value of supplies declared in the returns with the values specified in the Audited Financial statement.

Comments

The new provision has expanded the scope of Annual Returns. Earlier, a registered person was under an obligation to file GSTR-9 which was a summary of the GSTR-3B returns filed during the year and GSTR-9C was a Reconciliation statement wherein the Qualified professional was required to reconcile the income/Turnover reported under Income Tax Act with the Income/Turnover reported under the GST. This provision enables the registered person to file such a reconciliation as a part of the Annual returns and makes the entire filing under self-certification basis thereby removing the mandate of certification by a Chartered Accountant. The intention with which this amendment was made is to remove the exercise by the professional. It further empowers the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return. This would only increase the scope of audit by the officers and would lead to unnecessary litigation.

5. Interest on delayed payment of tax to be calculated on Amount debited from cash ledger

Proposal

In case of delayed payment of tax, as per proposed Section 50, the Interest for such delayed payment shall be calculated on the amount that is debited from the cash ledger and not on the entire amount that is paid belatedly.

Comments

This amendment is deemed to be introduced with effect from 1st July 2017. Being a retrospective amendment, this should clear the air with regard to numerous recovery made by the officers claiming the interest on the entire delayed payment. However, unless specifically clarified by the Board, the answer to the recoveries made by the Department earlier claiming the interest on the entire amount is unclear.

6. Proceedings for Seizure and Confiscation to continue even if the case of the main accused u/s 73 and 74 is concluded.

Proposal

If a notice is issued u/73 or 74 to the main accused and the same is concluded, the proceedings initiated against the other persons under section 129 and 130 in terms of seizure and confiscation continues.

Comments

The government intends to make the recovery of tax and the confiscation proceedings independent of each other. This might keep the confiscation proceedings prolonged even though the basic recovery is made. The purpose of the proceedings, even if closed will not necessarily close the confiscation cases.

7. Recovery can be initiated if no tax is paid corresponding to the supplies declared under GSTR-01.

Proposal

If the tax assessed as per GSTR-01 is not paid through GSTR-3B, then the officer is empowered to recover the same under Section 79 of the CGST Act.

Comments

The word “Self-assessed” tax under Section 75 has been amended to 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. A mandatory reconciliation of GSTR-3B and GSTR-01 is required to be done to ensure that the officers do not issue recovery notices merely due to any clerical errors.

8. Pre-deposit of 25% of the Penalty is mandatory for filing appeal against Seizure Order

Proposal

If an appeal against a Seizure Order is to be made, then the appellant is required to pay 25% of the Penalty as a pre-requisite.

Comments

In addition to the payment of disputed tax, the appellant is now required to pay Penalty equivalent to 25%. This provision was not so, under the erstwhile indirect taxes. If an order demanding tax and penalty was issued, then the pre-deposit was mandated only on the tax amount.

9. Detention and Seizure- No way out

Proposal

  • The payment of tax on the goods to be detained has been done away with. Instead penalty equal to two hundred percentage of the tax amount is required to be paid and in case of exempted goods, payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, has to be made by the owner of the goods if he comes forward to pay the penalty.
  • The payment of tax on the goods to be detained has been done away with. Instead penalty equal to fifty percentage of the value of goods or two hundred percentage of the tax amount whichever is higher, is required to be paid and in case of exempted goods, payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, has to be made by the owner of the goods if he does not come forward to pay the penalty.
  • The earlier provision of providing Bond/Bank Guarantee equivalent to the tax, interest, penalty is done away with.
  • The proper officer has to issue a notice for detention/seizure within 7 days from the date of detention/seizure for penalty and thereafter within a period of 7 days pass order for payment of such penalty.
  • The officer can entertain a personal hearing only for the penalty amount so specified in the notice and not for the tax or interest amount calculated thereunder.
  • If the person transporting the goods/owner of the goods fails to pay the penalty, within 15 days from the date of receipt of the order, then such goods will be sold/disposed off to recover the same.
  • The conveyance can be released on payment of Rs.1 lakh or as per the order whichever is less.
  • In case of hazardous items, the time of disposal/sale can be reduced by the officer.

Comments

1. The owner of the goods has no option but negotiate in terms of payment to get the consignment released. The option of providing a Bank Guarantee is no more in existence.

2. The opportunity of personal hearing shall not be provided for the liability assessed by the officer in terms of tax and interest. This is very much against the principle of “Audi Alteram Partem”.

3. Earlier, if there is a delay in payment of penalty or tax, the officer had to proceed with the confiscation. But as per the proposed amendment, the goods are subjected to sales/disposal. This rigid timing can be very detrimental to the business fraternity if the communication by the transporter is delayed due to reasons beyond the control of the owner of the goods.

10. Confiscation provision no more has overriding effect

Proposal

The confiscation proceedings are independent of the penalty proceedings u/s 129 of the CGST Act. The words “Nothing contained in this Act” has been replaced conveying that this provision is no more an overriding provision. Further, the penalty payable is equivalent to 100 percent of tax payable on the goods.

No fine in lieu of confiscation can be made.

Comments

This paves way for multiple proceedings under the Act. The owner of the goods is mandated to pay an amount equivalent to tax as a penalty which will monetarily create a block in the funds. Paying an amount in lieu of confiscation is now not an option. The owner has no option but to litigate and prove his stand. This will push the flow of business behind and make the job of answering queries to the Department a primary one.

11. Power of the officer to collect any information required under the Act

Proposal

The earlier provision empowering the officer to collect information for statistical purpose has been removed. Instead, the officer is currently empowered to collect any information from any person for the purpose of this Act.

Comments

This will mean that the registered person will be deemed to provide any random information about any supplier merely because he is connected with the issue.

12. Attention to Personal hearing

Proposal

If the information about the registered person is obtained under Section 150 and 151, then such information should not be used to initiate the proceedings under the Act without the consent of the concerned person and such proceedings cannot be initiated without giving an opportunity of personal hearing.

Comments

Even the Authorised representative can appear and explain the stand if required.

13. Amending the section in line with newly proposed section 44, 151.

Proposal

Since section 44 and 151 has no subsections, the words “sub-section of 44 and 151” are removed. This also enables the jurisdictional commissioner to exercise powers under section 151 to call for information.

Comments

The section is amended to bring the new provisions in alignment with the amended ones.

14. Supply of goods by unincorporated body to its members excluded

Proposal

The supply of goods by unincorporated body to its members was treated as a supply of goods. This has been proposed to be omitted wef July 1, 2017 as the definition of supply has been amended to include all the activities between the body and members to be a supply.

Comments

The scope of unincorporated bodies and the applicability of Doctrine of Mutuality is now a question.

15. Changes to Zero rated sales and payment of IGST thereof

Proposal

  • Limits the supply of goods or services to SEZ. Not all supplies to SEZ will be zero rated. It is proposed to include only authorized operations i.e either specified class of taxpayers or specified supplies of goods or services.
  • 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 and only then he will be eligible for refund of unutilized input tax credit.
  • The Government may specify a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid; and 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.

Comments

The concept of Zero rated supply is henceforth very restrictive in nature.

The Author is a practising Indirect Tax Advocate. The comments expressed above are the views of the author, only to be used for educational purposes. For any queries related to the content above, please reach out via mail to [email protected]

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Qualification: LL.B / Advocate
Company: N/A
Location: Chennai, Tamil Nadu, IN
Member Since: 22 Jan 2021 | Total Posts: 2

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