Finance Bill- 2023 Changes In GST Laws

Finance Bill, 2023 as presented in Parliament on 1^st February, 2023 has proposed many changes in CGST / IGST laws via clause 128 to 144 of the Finance Bill, 2023

Here is a brief overview of such proposed changes:

MAJOR BUDGET (FINANCE BILL, 2023) PROPOSALS IN RELATION TO GOODS AND SERVICES TAX

 Composition Scheme for E-commerce

• Finance Bill, 2023 has proposed to amend section 10(2)(d) and 10(2A) (c) of CGST Act, 2023.
• This amendment seeks to remove reference to ‘goods’ from these clauses.
• These amendments have been proposed so as to remove the restriction imposed on registered persons engaged in supplying goods through electronic commerce operators from opting to pay tax under the Composition Levy.
• Now, traders engaged in supply of goods through E-commerce platform can also opt for composition scheme under GST.

 (Source: Clause 128 of Finance Bill 2023)

 Change in Input Tax Credit conditions 

• Section 16 of CGST Act, 2017 deals with eligibility and conditions for taking input tax credit
• Finance Bill, 2023 has proposed changes in provisos (2) and (3) of section 16 (2).
• Accordingly, conditions for input tax credit post amendment will be as follows:
• Where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be paid by him along with interest payable u/s 50 in such manner as may be prescribed.
• The recipient shall be entitled to avail of the credit of input tax on payment made by him to the supplier of the amount towards the value of supply of goods or services or both along with tax payable thereon.
• The above amendments align these provision with return filing system.

(Source: Clause 129 of Finance Bill, 2023)

Restriction on ITC in case of exempt supplies

• Section 17 of CGST Act, 2017 provides for certain restrictions on availment of input tax credit (ITC).
• Section 17(3) restricts ITC on value of except supplies which presently does not include value of activities or transaction as per Schedule III of the Act except ‘sale of land and sale of building’.
• Clause 130 of Finance Bill, 2023 proposes to add one more exception, i.e. value of such activities or transactions as may be prescribed in respect of supply of warehoused goods to any person before clearance for home consumption.
• Now, ITC on such transactions shall also be restricted treating such transaction as exempt supply.

 (Source: Clause 130 of Finance Bill, 2023)

 No ITC on CSR Spends

• The Finance Bill, 2023 has proposed to amend section 17(5) of the CGST Act, 2017 to restrict input tax credit on Corporate Social Responsibility (CSR) expenditure.
• CSR obligation are prescribed under section 135 of the Companies Act, 2013 for companies.
• The amendment provides that input tax credit shall not be available in respect of goods or services or both received by a taxable person, which are used or are intended to be used for activities relating to obligations under the Corporate Social Responsibility as per Section 135 of the Companies Act, 2013.
• The proposed amendment appears to be the outcome of contrary rulings pronounced by the Authority for Advance Ruling.

 (Source: Clause 130 of the Finance Bill, 2023)

 Non-requirement of Registration under GST

• Section 23 of CGST Act, 2017 provides for persons not liable for registration under GST and empowers Government to notify exemptions in this regard.
• Section 22 deals with persons liable for registration while section 24 provides for compulsory registration in specified cases.
• Finance Bill, 2023 has proposed to amend section 22 so as to provide for an overriding effect of section 23 over section 22(1) and 24.
• Such overriding effect shall come into force from retrospective effect w.r.e.f. 01.07.2017.

(Source: Clause 131 of Finance Bill, 2023)

 New Time lines for GST Returns

• Time limit upto which GSTR-1/GSTR-3B/Annual return (GSTR 9) /GSTR-8 for a tax period can be furnished by a registered person is three years from the due date. Further, it also seeks to provide an enabling provision for extension of the said time limit, subject to certain conditions and restrictions, for a registered person or a class of registered persons.
• In future, taxpayers will not be permitted to furnish or file the above GST returns after the expiry of 3 years from due date of filing such respective returns, i.e.,
  • GSTR 1 under section 37(5)
  • GSTR 3B under section 39(11)
  • GSTR 9 under section 44(2)
  • GSTR 8 under section 52 (15)

 (Source: Clause 132, 133, 134, 135 of Finance Bill, 2023)

 Refund of tax under section 56 of CGST

• Finance Bill, 2023 has proposed an amendment in section 56(6) of CGST Act, 2017.
• In sub-section (6), it is proposed to remove reference to the provisionally accepted input tax credit so as to align the same with the present scheme of availment of self-assessed input tax credit as per section 41(1) of the CGST Act, 2017.
• Section 41 provides that every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to avail the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited to his electronic credit ledger.

 (Source: Clause 136 of Finance Bill, 2023)

Calculation of Interest on Delayed Refund

• Section 56 of the CGST Act, 2017 provides for interest on delayed refunds, if refund is not made within 60 days from the date of receipt of application for refund under section 54(1) of the Act.
• Clause 137 of the Finance Bill, 2023 has proposes an amendment to section 56 so as to provide for an enabling provisions to prescribe manner of computation of delayed period for the purpose of calculation of interest on delayed refunds.
• The manner of computation shall be prescribed by way of rules / notifications after enactment.

                (Source: Clause 137 of Finance Bill, 2023)

 Penal Provisions for E-com Operators

• Finance Bill, 2023 has proposed to inserted sub-section (1B) in section 122 of CGST Act, 2017.
• It provides for penal provisions applicable to Electronic Commerce Operators in case of contravention of provisions relating to supplies of goods made through them by unregistered persons or composition taxpayers.
• Any electronic commerce operator shall be liable to penalty of Rs. 10,000 or amount equivalent to tax amount had such supply been made by registered person other than under section 10 whichever is higher, where e-com operator:
• allows a supply of goods or services or both through it by an unregistered person other than a person
• xempted from registration by a notification issued under this Act to make such supply;
• allows an inter-State supply of goods or services or both through it by a person who is not eligible to make such inter-State supply; or
• 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 the Act.

 (Source: Clause 138 of Finance Bill 2023)

 Changes in Prosecution Law and Decriminalization under GST

Finance Bill, 2023 has proposed the following amendments:

• The minimum threshold for prosecution under GST is proposed to be raised from Rs. 1 crore to Rs. 2 crore, except for the offense of issuance of invoices without supply of goods, or services, or both.
• The compounding amount range is proposed to be reduced as follows:
• Minimum from 50 percent to 25 percent
• Maximum from 150 percent to 100 percent
• Following offences are proposed to be  decriminalized:
• Obstruction or preventing any officer from discharging his duties
• Tampering with or destruction of material evidence or documents
• Failure to supply information required under law or supplying false information

 (Source: Clause 138, 139 and 140 of Finance Bill, 2023)

 Consent based sharing of Information

• Finance Bill, 2023 proposes to insert new section 158A which provides for consent based sharing of information furnished by taxable persons.
• It provides for prescribing manner and conditions for sharing of the information furnished by the registered person in his return or in his application of registration or in his statement of outward supplies, or the details uploaded by him for generation of electronic invoice or E-way bill or any other details, as may be prescribed, on the common portal with such other systems, as may be notified.
• Conditions include :
• particulars furnished in the application for registration under section 25 or in the return filed under section 39 or under section 44.
• the particulars uploaded on the common portal for preparation of invoice, the details of outward supplies furnished under section 37 and the particulars uploaded on the common portal for generation of documents under section 68.
• such other details as may be prescribed.
• Such sharing shall be subject to consent to be obtained.
• No action shall arise against the Government or common portal for any liability arising consequent upon such sharing.

(Source: Clause 141 of Finance Bill, 2023)

Retrospective amendments to schedule III of CGST Act, 2017

• Finance Bill, 2023 proposes to amend retrospectively para (7) and (8) and Explanation (2).
• Schedule III deals with activities or transactions which shall be treated neither as a supply of goods nor supply of services.
• Para (7) and (8) provides as under:

“7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.

(a) Supply of warehoused goods to any person before clearance for home consumption;

(b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.”

• Explanation (2) defines warehoused goods to mean as per Customs Act, 1962.
• Accordingly, these paras and explanation shall have retrospective effect w.e.f. 01.07.2017.
• However, no refund shall be made of the tax which has been collected.

(Source: Clause 142 of Finance Bill, 2023)

 New definition of “Non-taxable Online Recipient” 

• Finance Bill, 2023 has amended section 2(16) of IGST Act, 2017 to amend the definition of Non-taxable Online Recipient.
• Accordingly, “non-taxable online recipient” means any unregistered person receiving online information and database access or retrieval services located in taxable territory.
• In this, “unregistered person” includes a person registered solely in terms of section 24 (vi) of the Central Goods and Services Tax Act, 2017.
• Thus, the condition of receipt of online information and database access or retrieval services (OIDAR) for purposes other than commerce, industry or any other business or profession so as to provide for taxability of OIDAR service provided by any person located in non-taxable territory to an unregistered person receiving the said services and located in the taxable territory has been removed.

(Source: Clause 143 of Finance Bill, 2023)

The aforementioned amendments shall come into force after the enactment of Finance Act, 2023 and being notified.