Effects and implications of Union budget 2024-25 with respect to CGST provisions

• Extra Neutral Alcohol used in manufacture of alcoholic liquor for human consumption out of purview of central tax. Thus, no gst payable if Extra Neutral Alcohol used in manufacture of alcoholic liquor for human consumption.

• S. 74A is newly proposed provision for providing common time limit for issuance of demand notices and orders irrespective of whether there is fraud, suppression or willful statements or not, from FY 2024-25 onwards as per recommendation of 53^rd council meeting.
• Said proposed provision is added in section 10(5)

S. 11A (newly inserted)

(a) a practice was, or is, generally prevalent regarding levy of central tax (including non-levy thereof) on any supply of goods or services or both; and

(b) such supplies were, or are, liable to, –

(i) central tax, in cases where according to the said practice, central tax was not, or is not being, levied, or

(ii) a higher amount of central tax than what was, or is being, levied, in accordance with the said practice, the Government may, on the recommendation of the Council, by notification in the Official Gazette, direct that the whole of the central tax payable on such supplies, or, as the case may be, the central tax in excess of that payable on such supplies, but for the said practice, shall not be required to be paid in respect of the supplies on which the central tax was not, or is not being levied, or was, or is being, short-levied, in accordance with the said practice.”.

• Empowers the government to regularize non-levy or short levy of central tax due to any general practice prevalent in trade, which seems to be a welcome provisions for certain classes of trade.

S. 13(3)(b) & (c)

(ii) after clause (b), the following clause shall be inserted, namely:––

“(c) the date of issue of invoice by the recipient, in cases where invoice is to be issued by the recipient:”;

(iii) in the first proviso, after the words, brackets and letter “or clause (b)”, the words, brackets and letter “or clause(c)” shall be inserted.

• Section 13(3) deals with Time of supply(TOS) provisions for supplies of services liable to be taxed under RCM.
• Under old provision of section 13(3)(b) TOS would be the date immediately following 60 days from the date of issue of the invoice or any other document by the supplier.
•  As per proposed provisions clause (b) by the supplier, in cases where invoice is required to be issued by the supplier will be inserted.
•  13(3)(c) the date of issue of invoice by the recipient, in cases where invoice is to be issued by the recipient
• First Proviso will also contain reference to clause 13(3)(c) as above.
• Thus TOS for services under RCM would be:
• a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier.
•  b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier, in cases where invoice is required to be issued by the supplier
• c) the date of issue of invoice by the recipient, in cases where invoice is to be issued by the recipient.

New insertion of sub-section (5) & (6) to section 16

(6) Where registration of a registered person is cancelled under section 29 and subsequently the cancellation of registration is revoked by any order, either under section 30 or pursuant to any order made by the Appellate Authority or the Appellate Tribunal or court and where availment of input tax credit in respect of an invoice or debit note was not restricted under sub-section (4) on the date of order of cancellation of registration, the said person shall be entitled to take the input tax credit in respect of such invoice or debit note for supply of goods or services or both, in a return under section 39,––

(i) filed upto thirtieth day of November following the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier; or

(ii) for the period from the date of cancellation of registration or the effective date of cancellation of registration, as the case may be, till the date of order of revocation of cancellation of registration, where such return is filed within thirty days from the date of order of revocation of cancellation of registration, whichever is later.”

• Insertion of 16(5) shall allow the registered tax payer to claim ITC in any returns filed u/s 39, filed before 30-11-2021.
• Insertion of 16(6) shall allow registered person to claim ITC in respect of an invoice or debit note in a return filed for the period from the date of cancellation of registration or the effective date of cancellation of registration, as the case may be, till the date of order of revocation of cancellation of registration, filed within thirty days of the date of order of revocation of cancellation of registration, subject to the condition that the time-limit for availment of credit in respect of the said invoice or debit note should not have already expired under sub-section (4) of the said section on the date of order of cancellation of registration.
•  If any ITC which is unclaimed and not restricted u/s 16(4) i.e. the period of claiming till 30^th of November from the end of relevant FY is not lapsed on date of order of cancellation of GSTIN then such ITC can be claimed in any returns filed u/s 39 for the period from date of cancellation to date of revocation of cancellation, if filed within 30 days from revocation.

S. 17(5)(i)

• Restrict the non-availability of input tax credit in respect of tax paid under section 74 of the said Act only for demands upto Financial Year 2023-24.

S. 21

• Provides for manner of recovery of credit distributed in excess.
• Excess credit distributed shall be recovered with interest and provisions of section 73 & 74 shall apply.
• Now reference is also made to S. 74A. for recovery of excess credit.

S. 30

2^nd proviso to be added as:

“Provided further that such revocation of cancellation of

registration shall be subject to such conditions and restrictions, as may be prescribed

• enabling clause to prescribe conditions and restrictions for revocation of cancellation of registration.

S. 31

• in sub-section (3), in clause (f), after the words and figure “of section 9 shall”, the words “, within the period as may be prescribed,” shall be inserted.
• After clause (g), the following Explanation shall be inserted, namely:––

‘Explanation.––For the purposes of clause (f), the expression “supplier who is not registered” shall include the supplier who is registered solely for the purpose of deduction of tax under section 51

• Section 31(3)(f) provides for self-invoicing if goods received from unregistered supplier incldg supplier registered for tds.
• Now said invoices must be issued to self within period prescribed.

S. 35(6)

• Inserting newly inserted section 74A.

Substitution of S. 39(3)

Provided that the said registered person shall furnish a return for every calendar month whether or not any deductions have been made during the said month

• Nil returns also should be filed compulsorily for every month.

S. 70(1A)

• enable an authorised representative to appear on behalf of the summoned person before the proper officer in compliance of summons issued by the said officer

S. 74A

• Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason pertaining to Financial Year 2024-25 onwards.

Applicability

(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder:

Provided that no notice shall be issued, if the tax which has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised in a financial year is less than one thousand rupees.

• Newly inserted section 74A deals with Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason pertaining to Financial Year 2024-25 onwards. Thus, whether there is fraud, suppression or willful misstatement or not, it doesn’t makes any difference, provided the tax amount is not less than Rs. 1000/-.

Time limit to issue notice

The proper officer shall issue the notice under subsection

(1) within forty-two months from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within forty-two months from the date of erroneous refund.

• 73(2) provided atleast 3 months prior to completion of 3 years from the due date of furnishing annual returns of relevant FY.
• 74(2) provided atleast 6 months prior to completion of 5 years from the due date of furnishing annual returns of relevant FY.
• 74A(2) provides for 42 months from the due date of furnishing of annual return for the relevant financial year.
• For eg: due date for AR of FY 2024-25 is 31/12/2025 thus notice u/s 74A(1) shall be issued on or before 30-06-2029.

Service of Statement

• Same as prevailing in section 73 or 74.

• Same as prevailing in section 73 or 74.

Penalty:

(i) for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, shall be equivalent to ten per cent. of tax due from such person or ten thousand rupees, whichever is higher;

(ii) for the reason of fraud or any wilful-misstatement or suppression of facts to evade tax shall be equivalent to the tax due from such person

• For any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, shall be equivalent to ten per cent. of tax due from such person or ten thousand rupees, whichever is higher;
• for the reason of fraud or any wilful-misstatement or suppression of facts to evade tax shall be equivalent to the tax due from such person.

Issuance of order

Time limit to pass order:

Provided that where the proper officer is not able to issue the order within the specified period, the Commissioner, or an officer authorised by the Commissioner senior in rank to the proper officer but not below the rank of Joint Commissioner of Central Tax, may, having regard to the reasons for delay in issuance of the order under sub-section (6), to be recorded in writing, before the expiry of the specified period, extend the said period further by a maximum of six months.

• Section 73 provided to pass order before 3 years from the end of the due date of furnishing annual returns of relevant FY.
• Section 74 provided to pass order before 5 years from the end of the due date of furnishing annual returns of relevant FY.
• 74A(7) provides for issuance of order within 12 months from the date of issuance of notice, which can be further extended for 6 months.

Suomoto Payment of tax for reason other than fraud etc:

(i) before service of notice under sub-section (1), pay the amount of tax along with interest payable under section 50 of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment, and the proper officer, on receipt of such information shall not serve any notice under sub-section

(1) or the statement under sub-section (3), as the case may be, in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder;

(ii) pay the said tax along with interest payable under section 50 within sixty days of issue of show cause notice, and on doing so, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.

• Under 73(8) no penalty was levied if paid within 30 days from issuance of notice.
•  Said period of 30 days is extended to 60 days u/s 74A(8).

Payment of tax for reason other than fraud etc

(i) before service of notice under sub-section (1), pay the amount of tax along with interest payable undersection 50 and a penalty equivalent to fifteen per cent of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment, and the proper officer, on receipt of such information, shall not serve any notice under sub-section (1), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder;

(ii) pay the said tax along with interest payable under section 50 and a penalty equivalent to twenty-five per cent of such tax within sixty days of issue of the notice, and on doing so, all proceedings in respect of the said notice shall be deemed to be concluded;

(iii) pay the tax along with interest payable thereon under section 50 and a penalty equivalent to fifty per cent of such tax within sixty days of communication of the order, and on doing so, all proceedings in respect of the said notice shall be deemed to be concluded.

• Under 74(8) penalty @ 25% of tax was levied if paid within 30 days from issuance of notice.
• u/s 74A(9), under cases of fraud etc:

before service of notice pay tax with interest and penalty @ 15% of tax on own or Pay Tax with interest and penalty @ 25% of tax was levied if paid within 60 days from issuance of notice or  Pay tax, interest and 50% of tax as penalty if paid within 60 days from date of communication of order

Short payment under subsection 8 or 9 above

• If the amount paid suo moto or on own ascertainment falls short, then proper officer shall issue notice u/s 74A(1)

Penalty for self assessed tax if paid beyond 30 days from due date of such payment

• Though there is no fraud, suppression or willful misstatement, penalty of 10% of tax shall be applicable if any self-assessed tax or any amount collected as tax has not been paid within a period of 30 days from the due date of such payment.

Applicability of FY

• Applicable for transactions or supplies for tax period from FY 2024-25.
• Section 73 & 74 would be applicable till FY 2024.

Suppression defined:

(i) the expression “all proceedings in respect of the said notice” shall not include proceedings under section 132;

(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 this section, the proceedings against all the persons liable to pay penalty under sections 122 and 125 are deemed to be concluded.

Explanation 2.––For the purposes of this Act, the expression “suppression” shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer.

• Applicability of proceedings u/s 132 shall apply irrespective of initiation or not of proceedings under section 74A.
• If there are parallel proceedings initiated under this section against main person and other persons too, further if such proceeding is concluded against the main person then proceedings against other person shall also be deemed to be concluded.
• Suppression being defined under section 74A itself stating to as non declaration of facts or information which a taxable person is required to provide or declare in returns etc or failure to provide the same to proper officer when asked for.

Insertion of para 9 & 10:

Activities or transactions which shall be treated neither as a supply of goods nor a supply of services

10. Services by insurer to the reinsurer for which ceding commission or the reinsurance commission is deducted from reinsurance premium paid by the insurer to the reinsurer, subject to the condition that the central tax, the State tax, the Union territory tax and the integrated tax is paid by the reinsurer on the gross reinsurance premium payable by the insurer to the reinsurer, inclusive of the said ceding commission or the reinsurance commission.”.

• Schedule III deals with activities or transactions which shall be treated neither as a supply of goods nor a supply of services.
• Activity of apportionment of co-insurance premium between lead insurer and coinsurer will not be supply if lead insurer pays tax on premium charged from the insured.
• Service of insurer by reinsurer representing consideration in the form of ceding or reinsurance commission, will not be supply if tax on premium charged includes said reinsurance or ceding commission.