First Time Amendments in CGST and IGST Act, 2017

COMPREHENSIVE ANALYSIS UPDATED WITH THE AMENDMENTS IN THE RULES

Vide CGST (Amendment) Act, 2018 as well as IGST (Amendment) Act, 2018; CGST Act, 2017 as well as IGST Act, 2017 have been amended respectively for the first time since the implementation of GST in our Country. Present write-up is an attempt to analyze the said amendments clause-by-clause in an exhaustive manner.

Date from which the amendments shall be made applicable

Sec. 1(2) of the CGST (Amendment) Act, 2018 as well as IGST (Amendment) Act, 2018 provides as under:

“Save as otherwise provided, the provisions of this Act shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.”

Reading of the above provision will entail that the amendments shall come into force from such date which shall be notified. Further, Government has power to notify separate dates for different provisions from which the respective provision shall come into force. All the amendments discussed hereinafter shall be made applicable from 01.02.2019 (vide Notification No. 02/2019 – Central Tax dt. 29.01.2019 & Notification No. 01/2019 – Integrated Tax dt. 29.01.2019) except following two categories of amendments viz. retrospective amendments & amendments not yet notified.

Retrospective amendments

Following amendments made in the CGST Act, 2017 have been made applicable retrospectively and hence the same apply from 01.07.2017:

a. Sec. 7 of the CGST Act, 2017 which deals with the scope of supply

b. Sec. 140(1) of the CGST Act, 2017 which deals with the carry forward of balance lying in the last return before the implementation of GST.

c. Title of Schedule II of the CGST Act, 2017.

Amendments not yet notified

Following amendments (reference to the sections of the CGST (Amendment) Act, 2018) are yet to be notified:

1. Sec. 8(b) – Amendment in Sec. 16(2)(c) to provide for reference to Sec. 43A (dealing with the new return system)

2. Sec. 17 – Amendment to Sec. 39 (dealing with the new return system)

3. Sec. 18 – Insertion of Sec. 43A (dealing with the new return system)

4. Sec. 20(a) – Amendment to Sec. 49(2) (dealing with the new return system)

5. Sec. 28(b)(i) & 28(c)(i) – Explanation 1 & Explanation 2 to Sec. 140 (dealing with carry forward of cess balance) – Not to be notified ever.

As seen from the above list, amendments dealing with the new return filing system have not yet been notified. This shall be notified as and when the new system is made operational.

Readers may also note that certain Explanations have also been added. Hence depending on the context, certain Explanations will apply retrospectively (which are clarificatory in nature) whereas certain Explanations (which expand the scope) will apply only prospectively from the date they are notified (i.e. 01.02.2019). Readers must keep the above discussion in mind while appreciating the below contents.

Important proposed amendment has been dropped

Readers may note that the proposed amendment seeking the removal of interest obligation on reversal of Input Tax credit on failure to make payment within 180 days from the date of invoice has not been incorporated in the Amendment Bill which has been passed. This is really unfortunate to note that despite the approval from the Council to all the draft amendments, this important amendment has been consciously left out from the Bill.

Consequent to the amendments in the Act, several notifications have also been issued on 29.01.2019 (referred at appropriate places) to align the Rules and certain existing notifications with the amendments in the Act. Now we shall discuss the amendments.

CGST AMENDMENTS

Readers may also note that the amended portion in a particular provision reproduced below has been highlighted in bold text with an underline and the original text which has been deleted by the amendment has been stricken off. We shall now discuss the provisions clause-by-clause.

1. Definition of adjudicating authority amended

 Amended provision

Sec. 2(4): “adjudicating authority” means any authority, appointed or authorized to pass any order or decision under this Act, but does not include the Central Board of Excise Indirect Taxes and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate Authority and the Appellate Tribunal and the Authority referred to in subsection (2) of section 171

Implications

The said amendment has been made in respect of the change in the name of the Central Board of Excise and Customs to the Central Board of Indirect taxes and Customs. Further, the National Anti-profiteering Authority constituted by the Central Government under section 171 of the CGST Act, 2017 has also been excluded from the definition of Adjudicating Authority. It may be noted that appeal u/s 107 of the CGST Act, 2017 can be filed only against the decision or order passed by the Adjudicating Authority. Hence the order of Anti-profiteering Authority cannot be challenged in an Appeal. Remedy available under the Constitution of India can be taken recourse to.

2. Amendment in the definition of “business”

 Amended Provision

Sec. 2(17)(h): services provided by a race club by way of totalisator or a licence to book maker in such club

Sec. 2(17)(h): activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and

Implications

Before the amendment only “services” provided by a race club was included in the definition of “business”. As per the scope of supply contained u/s 7(1)(a) of the CGST Act, 2017 only supplies made for a consideration in the course or furtherance of “business” are taxable. Actionable claim has been defined u/s 2(1) of the CGST Act, 2017 to have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882. The Transfer of Property Act defines actionable claim to mean “a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent “. Illustrations of actionable claims would be right to recovery insurance money, arrears of rent, benefits of a contract, account receivables, lottery, betting etc. Being a “claim”, it is an incorporeal right. Hence race club betting ticket is an “actionable claim”. Further “actionable claim” is regarded as “goods” u/s 2(52) of the CGST Act, 2017. Since the same is regarded as “goods”, it will be excluded from the definition of “service” u/s 2(102) of the CGST Act, 2017 as “service” means anything other than “goods”. Due to said ambiguity, the supply in connection with the “goods” pertaining to race club was clearly not coming within the tax net as it only included “services”. Hence an amendment has been made to provide that instead of “services”, all the “activities” shall be subjected to tax.

3. Modification in the definition of Cost Accountant

Amended Provision

Sec. 2(35): “cost accountant” means a cost accountant as defined in clause (c) (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959

Implications

Said amendment has been made to correct an inadvertent typographical error where a wrong reference was made to the provision of the Cost and Works Accountants Act, 1959.

4. Addition of Article 371J in the definition of local authority

Amended Provision

Sec. 2(69): “a local authority “means –

(f) “a Development Board constituted under article 371 and article 371J of the Constitution; or

Implications

Article 371J of the Constitution of India grants special status to six backward districts of Karnataka-Hyderabad region. Under the said Article the President is empowered to establish a separate Board to ensure equitable distribution of funds in the States’ budget so as to meet the developmental needs of the region. Such board shall be considered as a local authority as per the above amendment.

5. Multiple registrations possible within the same State

 Amended Provision

Sec. 2(18): “business vertical” means a distinguishable component of an enterprise that is engaged in the supply of individual goods or services or a group of related goods or services which is subject to risks and returns that are different from those of the other business verticals.

Explanation––For the purposes of this clause, factors that should be considered in determining whether goods or services are related include––

(a) the nature of the goods or services;

(b) the nature of the production processes;

(c) the type or class of customers for the goods or services;

(d) the methods used to distribute the goods or supply of services; and

(e) The nature of regulatory environment (wherever applicable), including banking, insurance, or public utilities;

Implications

Definition of “business vertical” has been deleted. This is so because before the amendment only a person, having multiple business verticals in a particular State or Union Territory, had an option to seek separate registration for each such business vertical. Now an amendment has been made u/s 25(2) of the CGST Act, 2017 to provide that in cases where a person is having multiple places of business within the same State or Union Territory, he can also apply for a separate registration for each such place of business subject to certain conditions. Hence it will now be possible to seek different registration for each place of business, even within the same State, even if each such location carry out the same nature of business. One must however keep in mind the consequences of taking separate registration (e.g. any supply of goods or services between such separate registrations shall be treated as “supply”) before taking any action.

Rule 11 of the CGST Rules, 2017 has been substituted vide Notification No. 03/2019 – Central Tax dt 29.01.2019 to provide for the mechanism for obtaining such separate registration. Same is reproduced below for ready reference:

“Rule 11 Separate registration for multiple places of business within a State or a Union territory.-

 (1) Any person having multiple places of business within a State or a Union territory, requiring a separate registration for any such place of business under sub-section (2) of section 25 shall be granted separate registration in respect of each such place of business subject to the following conditions, namely:-

(a) such person has more than one place of business as defined in clause (85) of section 2;

(b) such person shall not pay tax under section 10 for any of his places of business if he is paying tax under section 9 for any other place of business; (c) all separately registered places of business of such person shall pay tax under the Act on supply of goods or services or both made to another registered place of business of such person and issue a tax invoice or a bill of supply, as the case may be, for such supply.

Explanation. – For the purposes of clause (b), it is hereby clarified that where any place of business of a registered person that has been granted a separate registration becomes ineligible to pay tax under section 10, all other registered places of business of the said person shall become ineligible to pay tax under the said section. (2) A registered person opting to obtain separate registration for a place of business shall submit a separate application in FORM GST REG-01 in respect of such place of business. (3) The provisions of rule 9 and rule 10 relating to the verification and the grant of registration shall, mutatis mutandis, apply to an application submitted under this rule”

Attention must be paid to Sec. 11(1)(c) above wherein it has been clearly provided that supply (of goods as well as services) between separately registered persons within the same State shall require payment of tax. Hence before obtaining separate registration, lot of thought must be put into the implications of the same.

Rule 41A has also been inserted vide Notification No. 03/2019 – Central Tax dt. 29.01.2019 providing for the transfer of credit on obtaining separate registration for multiple places of business within a State or Union territory. Same reads as under:

“Rule 41A. Transfer of credit on obtaining separate registration for multiple places of business within a State or Union territory.-

(1) A registered person who has obtained separate registration for multiple places of business in accordance with the provisions of rule 11 and who intends to transfer, either wholly or partly, the unutilised input tax credit lying in his electronic credit ledger to any or all of the newly registered place of business, shall furnish within a period of thirty days from obtaining such separate registrations, the details in FORM GST ITC-02A electronically on the common portal, either directly or through a Facilitation Centre notified in this behalf by the Commissioner:

Provided that the input tax credit shall be transferred to the newly registered entities in the ratio of the value of assets held by them at the time of registration. Explanation.- For the purposes of this sub-rule, it is hereby clarified that the ‘value of assets’ means the value of the entire assets of the business whether or not input tax credit has been availed thereon.

(2) The newly registered person (transferee) shall, on the common portal, accept the details so furnished by the registered person (transferor) and, upon such acceptance, the unutilised input tax credit specified in FORM GST ITC-02A shall be credited to his electronic credit ledger.”

Above rule thus enables transfer of unutilized credit after obtaining separate registration in the same State in the manner prescribed.

6. Definition of services now cover facilitation or arranging transactions in securities

Amended Provision

Sec. 2(102): “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;

Explanation-For the removal of doubts, it is hereby clarified that the expression “services” includes facilitating or arranging transactions in securities.

Implications

Definition of “goods” as well as “services” excludes securities. Hence confusion was prevailing as to whether the services of arranging or facilitating transactions in securities shall also be excluded from the said definitions and consequentially will not be liable to tax. The amendment has been made to add an Explanation to clarify that the expression services shall include facilitating or arranging transactions in securities. Since clarificatory Explanation has been added, we are of the view that it shall apply retrospectively.

7. Retrospective amendment in the definition of supply in context of Schedule II

Amended Provision

Sec. 7 (1): For the purposes of this Act, the expression “supply” includes––

 (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II

(1A) Where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), shall be treated either as supply of goods or supply of services as referred to in Schedule II.

(3) Subject to the provisions of sub-sections (1), (1A) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as–

Implications

This is a retrospective amendment which is made applicable from 01.07.2017. Since clause (d) of Section 7(1) of the CGST Act, 2017 was part of the scope of supply, a confusion was created as to whether the activities referred under Schedule II would tantamount to “supply” even if the same is made without consideration. The amendment seeks to delete the said clause and insert the same by way of another sub-section (1A). Hence a clear view emerges that the activities referred under Schedule II are only for the purpose of classification as to whether the said activities shall be regarded as supply of goods or as supply of services. Merely because an activity has been prescribed under the said Schedule II shall not tantamount to a “supply”.

8. Unregistered entities made liable to pay tax on import of services under reverse charge

Amended Provision

Schedule I

4. Import of services by a taxableperson from a related person or from any of his other establishments outside India, in the course or furtherance of business.

Implications

Entry No. 4 of Schedule I has been amended to provide that the import of services by any person from related person or from any of his other establishment outside India in the course or furtherance of business shall be considered as a supply chargeable to tax even if the same is made without consideration. It may be noted that import of services is under reverse charge under section 5(3) of the IGST Act, 2017.  Hence it is the recipient who is liable to make the payment of tax. The objective behind this amendment is to ensure that import of services by entities which are not registered under GST since they are only making exempted supplies but are otherwise engaged in the business activities will be liable to tax for services received from related person or from any of his other establishments outside India.  It may however be noted that section 23 of the CGST Act, 2017 grants exemption from obtaining registration to a person who is only making exempted supplies. Without consequential amendment to the said provision, the amendment in the above referred Entry of Schedule I may still not serve the desired objective since such person will be able to avoid the registration requirement and hence payment of tax under the said Sec. 23.

9. High sea sales , supply of warehoused goods before clearance for home consumptions and merchant trade transactions not to be treated as supplies

Amended Provision

Entries mentioned below have been inserted in Schedule III:

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.

8 (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.––For the purposes of this paragraph, the expression “warehoused goods” shall have the same meaning as assigned to it in the Customs Act, 1962.

Implications

Entry No. 7 is the new insertion to Schedule III. It provides that the supply of goods from place in the non-taxable territory to another person in the non-taxable territory, without such goods entering into the taxable territory, shall not be considered as supply of goods or supply of services. As an example a person registered in India procuring goods from Spain and sending the same directly to the customer in Canada shall not be liable to pay tax on the said supply in view of the above inserted entry. Even before the said insertion we are of the view that such transaction shall not be subjected to tax. This is because as per section 1(2) of the IGST Act, 2017, the levy of GST extends only to the whole of India. Careful analysis of the scope of supply as contained u/s 7(1)(b) of the CGST Act, 2017 would lead to an inescapable conclusion that only import of services have been specifically included. Had the intention been to cover all the transactions of a person registered under GST, then the said specific inclusion was not required since all forms of supply for consideration is already covered u/s 7(1)(a). Hence even before the amendment, the transactions originating outside India and concluding outside India (except import of services) should not be subjected to tax. Import of goods on the other hand is subjected to tax under the Customs Act, 1962.

Another entry (No. 8) which has been inserted in Schedule III deals with a scenario where the supplier (i.e. original importer) of warehoused goods supplies such goods to any person (i.e. consignee) before the clearance for home consumption. It also covers supply of goods by the consignee (i.e. the buyer of goods from the original importer) 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. Hence both such transactions shall not be regarded as either supply of goods or supply of services.

Let us take an example to understand the issue. Let us say that the original importer contracted to import the goods worth $100. Said importer files “into bond bill of entry” for warehousing and deposits the goods at the warehouse at an Indian port. Subsequently before removing the same, the original importer sells the said goods to another customer located in India for $110. Hence the said customer shall file “ex-bond bill of entry” and pay custom duties along with the IGST under the Customs Law. However before the amendment to Sec. 3 of the Customs Tariff Act, 1975 vide Finance Act, 2018 (which is made effective from 31.03.2018), the custom duties as well as IGST under the Customs Law was payable by the buyer on $100 and not on $110 (since as per the earlier provision, by filing “in to bond bill of entry” only the payment of duties already quantified at the time of filing (i.e. on $100) was deferred). Amendment u/s 3 of the Customs Tariff Act, 1962 vide Finance Act, 2018 referred above provided that w.e.f. 31.03.2018, the duties of customs as well as IGST shall be payable on the higher of the two values (i.e. in our case $110).

To plug the revenue on the gap of $10 before the said amendment, Circular No. 46/2017-Cus dated 24.11.2017 was issued to provide that such sale of warehoused goods will be liable to IGST under the IGST Act, 2017. Hence the original importer shall charge IGST on $110 (by converting into INR) under the IGST Act, 2017. Thus the buyer who will file “ex-bond bill of entry” shall pay IGST on $110% to original importer and shall again pay IGST along with the custom duties under the Customs Law on filing ex-bond bill of entry. Hence double payment of IGST was to be made. Said Circular was further referred in Circular No. 3/1/2018-IGST, dated 25-5-2018 to provide that in view of amendment in the Customs Tariff Act, 1975, such sale of warehoused goods shall not be liable to integrated tax w.e.f. 01.04.2018.

It is interesting to observe that the first proviso to Sec. 5(1) of the IGST Act, 2017 clearly provides that the IGST on goods imported into India shall be levied and collected in accordance with the Customs Tariff Act, 1975. Said provision has not undergone any amendment. With such background, how can a circular (No. 46/2017-Cus. dated 24.11.2017) impose a liability which is not fastened by the Act? In our view, even before 01.04.2018, IGST under the IGST Act, 2017 cannot be imposed in view of the express provisions of the Act referred above.

One more issue connected with the above point is that whether such sale of our warehoused goods can be considered as an “exempt supply” so as to trigger input tax credit reversal under section 17(2) of the CGST Act, 2017. It must be noted that the IGST on such sale is indeed collected at the point when duties of Customs are levied and collected i.e. the point at which ex-bond bill of entry for home consumption is filed. Hence such sale cannot be regarded as an “exempt supply” since the tax on such sale is indeed payable not by the first importer but by the buyer when he files bill of entry for home consumption. Hence in our opinion there shall not be any requirement to reverse the input tax credit on account of such transaction.

It may also be noted that an amendment has also been made under section 17(3) of the CGST Act, 2017 to the effect that the transactions specified in Schedule III (which includes the newly inserted entries) except sale of land and sale of building post completion shall not be included for the purpose of input tax credit reversal. Hence once said provisions are notified there shall not be any dispute on the referred issues at least prospectively.

10. Restriction on applicability of Section 9 (4) 

Provision before Amendment

Provision after Amendment

Sec. 9(4): The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

Sec. 9(4): The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of taxable goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

 Implications

Section 9(4) which mandates that all registered persons shall pay the tax under reverse charge basis on purchases made from unregistered persons is currently suspended till 30.09.2019. An amendment has been made to replace the said provision to the effect that the Government on the recommendation of the Council shall specify a class of registered persons who shall be covered under the said reverse charge. Hence a power has been granted to only apply the said provision on a certain class of registered persons and not in general.

Accordingly Notification No. 01/2019 – Central Tax (Rate) & Notification No. 01/2019 – Integrated Tax (Rate) have been issued rescinding Notification No. 8/2017-Central Tax (Rate) & No. 32/2017-Integrated Tax (Rate) respectively which granted exemption from payment of tax under general reverse charge.

It must be noted that the above cancellation of exemption notification shall not revive the charge. In view of amendments in Sec. 9(4) of the CGST Act, 2017 & Sec. 5(4) of the IGST Act, 2017 only notified persons shall be made liable for payment of tax under general reverse charge on or after 01.02.2019. Hence in absence of any notification, the exemption granted earlier through the notifications shall now flow from the Act itself.

11. Increase in threshold limit as well as allowance of provision of services for composition suppliers

Amended Provision

Sec. 10(1): Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him under sub-section (1) of Section 9, an amount of tax calculated at such rate as may be prescribed, but not exceeding, ––

(a) one per cent of the turnover in State or turnover in Union territory in case of a manufacturer,

(b) two and a half per cent of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and

(c) half per cent of the turnover in State or turnover in Union territory in case of other suppliers, subject to such conditions and restrictions as may be prescribed:

Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding one hundred and fifty lakhs crore rupees, as may be recommended by the Council. 

Provided further that a person who opts to pay tax under clause (a), clause (b) or clause (c) may supply services (other than those

referred to in clause (b) of paragraph 6 of Schedule II) of value not exceeding ten percent of turnover in a State or Union territory in  the preceding financial year or five lakh rupees, whichever is higher.

Sec. 10(2): The registered person shall be eligible to opt under sub-section (1), if: —

(a) he is not engaged in the supply of services, other than supplies referred to in  clause (b) of paragraph 6 of Schedule II; save as provided in sub-section (1);

Implications

Section 10(1) of the CGST Act, 2017 before the amendment provided that the person opting for payment of tax under composition scheme shall pay in lieu of tax payable by him and amount of tax is to be calculated at the prescribed rate on his turnover. Hence plain reading of the said provision lead to a conclusion that the composition supplier is not liable to pay the tax under reverse charge covered under section 9(3) or section 9(4) since the tax payable under the composition scheme is in lieu of the tax payable under entire Sec. 9 which includes tax payable under reverse charge. The present amendment seeks to cure this defect by providing that the tax payable under the composition scheme shall be only in lieu of Sec. 9(1) and hence the tax under specific reverse charge presently shall be payable by such composition supplier.

A proviso has also been added to section 10(1) to provide that a composition supplier may supply services of value not exceeding 10% of the turnover in the preceding financial year in a State or Union Territory or five lakh rupees whichever is higher. Readers will note that before the above amendment the composition supplier was prohibited from making any supply of services. Hence a supplier having only minuscule income from supply of services could not have opted for the composition scheme. A business friendly measure has thus been provided to the effect that such composition supplier can supply services of value not exceeding 10% of turnover in the preceding financial year in a State or Union Territory or five lakh rupees, whichever is higher, and can still opt for composition scheme. As an example, let us say the turnover of a composition supplier during FY 2018-19 is INR 90 lakhs. Hence for FY 2019-20 said composition supplier can make a supply of services upto INR 9 lakhs (since 10% of turnover is higher than INR 5 lakhs) without violating the composition scheme.

It may be noted that a composition supplier is prohibited from making inter-state supply of goods. However the above proviso permits supply of services. Hence even inter-state supply of services upto the limits allowed shall be permitted.

An amendment has been made against serial number (3) in column (3) (which covers suppliers other than manufacturer & those who are engaged in making supplies under paragraph 6(b) of Schedule II (food or beverages as part of service)) in the table contained under Rule 7 vide Notification No. 03/2019 – Central Tax dt. 29.01.2019 to provide that the composition tax shall be counted as 0.5% of the taxable turnover of goods and services as opposed to only taxable turnover of goods. Consequent amendment has also been made in the Notification No.8/2017 – Central Tax dt. 27.06.2017 vide Notification No. 05/2019 – Central Tax dt 29.01.2019 wherein now the reference for calculation of the composition tax has been made to Rule 7 (as amended above). Hence if a composition supplier makes supply of taxable services (within the permissible limits), he shall have to pay the composition tax even on the value of said taxable services.

It must also be noted that even after the above amendments, composition tax is payable only on the taxable goods or services and not on all goods or services which have been supplied. This is because the amendment (supra) in table 7 has not deleted the word “taxable”.

The limit of turnover up to which a registered person can opt for the composition scheme, subject to fulfillment of all other conditions, has been increased from INR1 crore to INR 1.5 crores. It may be noted that the GST Council in the decision had recommended that the said limit be raised to INR 2 crores. But the said recommendation has not been accepted by the Government since such limit has been raised to only INR 1.5 crores. It must also be noted that the said revised limit shall not come into effect from 01.02.2019 (as only power is granted vide the above amendment) unless a notification is issued in this regard.

Accordingly format of FORM GSTR-4 has been amended vide Notification No. 03/2019 – Central Tax dt. 29.01.2019.

 12. Amendments in the time of supply provisions for goods and services

Amended Provision

Sec. 12(2): The time of supply of goods shall be the earlier of the following dates, namely:—

(a) the date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply; or

Sec. 13(2): The time of supply of services shall be the earliest of the following dates, namely:—

(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment,  whichever is earlier; or

(b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier;

Implications

Before the above amendment, time of supply of goods u/s 12(2)(a) of the CGST Act, 2017 was linked with the date of issuance of invoice as required under section 31(1). Hence the invoice issued under other provisions of section 31 (for example section 31(4) in respect of continuous supply of goods) was not covered. An amendment has been made to provide that the all kinds of invoices issued under entire section 31 shall be considered for the determination of time of supply of goods. Similar amendment has also been made in section 13(2) with respect to time of supply of services.

13. ITC on services provided to any person on direction of / on account of another person

Amended Provision

Sec. 16(2): Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, ––

(b) he has received the goods or services or both.

Explanation— for the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services

(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person

Implications

One of the conditions for availing tax credit is that the person must receive the goods or services. Now in respect of services it is possible that such services are received by someone else whereas the payment for the same has been made by the registered recipient. Hence the claim of input tax credit of such recipient could have been disputed on the ground that he has not received the stated services. The amendment has been thus made to the effect that the Explanation now provides that when such services are received by someone else on behalf of the registered person, it shall be deemed that such registered person has received the services. Hence such person is duly entitled to claim the input tax credit. Since an Explanation has been amended to clarify the issue, we are of the opinion the same shall apply retrospectively.

14. Availment of ITC subject to the new return filing procedure

Amended Provisions

Sec. 16(2)(c): Subject to the provisions of section 41 or 43A, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and 

Implications

Before the above amendment one of the condition stipulated under clause (c) to Sec. 16(2) provided that input tax credit can be claimed only if the tax charged in respect of supply has been actually paid by the concerned vendor to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply. Said condition was subject to provision of Sec. 41. Sec. 41 permits the input tax credit on provisional basis which is subject to the confirmation through the original return filing system of GSTR 1, 2 & 3. Said system has been discarded. Instead a new return filing system shall be implemented as per newly inserted Sec. 43A. Hence a consequential amendment has been made u/s 16(2)(c) to provide that the claim of input tax credit shall be subject to the new system of return filing which will be stipulated u/s 43A which shall seek confirmation of actual payment of tax by the vendor.

15. Restriction of ITC on certain Schedule III items

Amended Provision

Sec. 17(3):  Explanation: For the purposes of this sub-section, the expression‘‘ value of exempt supply’’ shall not include the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said Schedule.’;

Implications

Section 17(2) of the CGST Act, 2017 provides that the input tax credit attributable to exempt supplies shall not be permitted. Section 17(3) further provides that the value of exempt supply shall include certain transactions by way of a deeming fiction. Section 17(3) before the amendment was silent on whether the transactions specified in the schedule III are to be considered as an exempt supply. The view was that since schedule III contains transactions which are to be treated as neither supply of goods nor supply of services, the same shall not be treated as an exempt supply except transactions of sale of land and sale of building post completion since the same is categorically mentioned in the said provision. An amendment has been made to section 17(3) on the same lines to say that only transactions of sale of land and sale of building post completion out of the transactions specified in schedule III shall be treated as exempt supply for the purpose of restricting the input tax credit attributable thereto.

16. Expanding the scope of ITC available on motor vehicles

Provision before amendment

Provision after amendment

Sec. 17(5): Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: — (a) motor vehicles and other conveyances except when they are used–– (i) for making the following taxable supplies, namely: — (A) further supply of such vehicles or conveyances; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (ii) for transportation of goods;

Sec. 17(5): Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: — (a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver) except when they are used for making the following taxable supplies, namely: — (A) further supply of such vehicles or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles; (aa) vessels and aircraft except when they are used–– (i) for making the following taxable supplies, namely:— (A) further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on flying such aircraft;  (ii) for transportation of goods; (ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels and aircraft for which the credit is not available in accordance with the provisions of clause (a) or clause (aa); Provided that the input tax credit in respect of such services shall be available—  (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;  (ii) where received by a taxable person engaged—  (I) in the manufacture of such motor vehicles, vessels or aircraft; or  (II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;

Implications

Section 17(5)(a) has been completely re-casted. We shall discuss the implications subject-wise below:

Motor vehicles: Section 17(5) prior to the amendment provided that input tax credit in respect of motor vehicles and other conveyance shall not be available except in certain exceptional circumstances. The said exceptions included the cases where the concerned registered supplier who intends to avail such credit is engaged in the business of a) further supply of such vehicles and conveyance or b) transportation of passengers or c) using the same in imparting training skills. Input tax credit in respect of motor vehicles was also available to registered supplier who is using such vehicle or conveyances for transportation of goods. The amendment now provides that the said restriction shall only apply to such kind of motor vehicles (specified vehicles) which are for the transportation of persons not having approved seating capacity exceeding 13 persons (including driver). The restriction shall also apply to aircraft and vessels. Hence input tax credit shall not be restricted in case of any other motor vehicle (e.g. goods transportation vehicle or vehicle having seating capacity exceeds 13 (bus)).

Even in respect of specified vehicles, input tax credit shall be available if the concerned registered supplier who intends to avail such credit is engaged in the business of a) further supply of such vehicles or b) transportation of passengers or c) using the same in imparting training skills.

It may also be noted that exception of claiming input tax credit if the motor vehicle or the aircraft or the vessel is used for transportation of goods is only retained for the aircraft or the vessel and not for the motor vehicle. This is because the restriction as per the amendment shall apply only in case of motor vehicle which are for transportation of persons. Hence motor vehicle for transportation of goods is not at all covered by the restriction so that it requires an exclusion through an exception.

Expenses related to motor vehicle: Before the above referred amendment, clause (a) of Section 17(5) of the CGST Act, 2017 did not expressly restrict the input tax credit in respect of expenses related to motor vehicle. Section 17(5)(a) only stated that credit shall not be available “in respect of” motor vehicles. The phrase “in respect of” has been interpreted as “on” by the Supreme Court and hence a view can be taken that the restrictions contained under section 17(5)(a) only covered purchase of motor vehicles and not expenses related to such motor vehicles. An amendment has been made, to specifically provide that the input tax credit in respect of general insurance, servicing, repair and maintenance of the motor vehicle which is not entitled for input tax credit shall also not be allowed. Hence one has to now see whether the input tax credit is available or not in respect of the motor vehicle for which such expenses have been incurred. If such motor-vehicle is eligible for input tax credit, then expenses pertaining to such motor vehicle shall also be eligible for input tax credit.

It may also be noted that as per the above amendment, input tax credit shall also be available in respect of services of general insurance, servicing, repair and maintenance where the registered receiver is engaged in the manufacture of such motor vehicles, vessels or aircraft; or is in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him.

17. Expanding the scope of ITC for Section 17(5)(b) 

Provision before amendment

Provision after amendment

Sec. 17(5)(b): the following supply of goods or services or both— (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; (iii) rent-a-cab, life insurance and health insurance except where–– (A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or (B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and (iv) travel benefits extended to employees on vacation such as leave or home travel concession;

Sec. 17(5)(b): the following supply of goods or services or both—  (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:  Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;  (ii) membership of a club, health and fitness centre; and  (iii) travel benefits extended to employees on vacation such as leave or home travel concession;  Provided that the input tax credit in respect of such goods or services or both shall be available, where the provision of such goods or services or both is obligatory for an employer to provide to its employees under any law for the time being in force.

 Implications

Food & beverages and outdoor catering as well as health services: Before the amendment, input tax credit in respect of food and beverages and outdoor catering was not permitted unless such inward supply is used by a registered person for making an outward taxable supply of the same category of goods or services or as an element of taxable composite or mixed supply. Now an amendment has been made which provides that credit in respect of food and beverages as well outdoor catering shall be available if provision of such goods or services is obligatory for an employer to provide to its employees under any law for the time being in force. Hence, in case of a factory covered under the Factories Act (having more than 250 workers) it is obligatory for a factory to provide the canteen facility to its workers and hence input tax credit in respect of the tax charged by the canteen contractor shall be admissible. Similarly even in case of health services, life insurance and health insurance; input tax credit shall be admissible after the amendment if the same is obligatory on the employer to provide to its employees under any law for the time being in force. It may however be noted that there is difference between health insurance and an accidental policy. Accidental policy is expressly not restricted under any provisions of Section 17(5). Hence input tax credit in respect of such accidental policy shall be available even before the amendment as well as after the amendment, even if the same is not obligatory under any law for the time being in force.

Rent-a-cab: Before the above amendment input tax credit only in case of rent-a-cab service was specified in the negative list. Since the word “cab” is not defined in the Act, normal meaning has to be resorted to which will only include such vehicle for transportation of persons where the sitting capacity is of less than six people (excluding the driver). This is because the definition of “motor cab” under the Motor Vehicle Act, 1988 only covers such vehicle. Now an amendment has been made to provide that the input tax credit in respect of leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) shall be available only if they are used for the purposes specified in the exception to said clauses. In other words, input tax credit shall be available of tax paid on leasing, renting or hiring in following circumstances:

a. Motor vehicles not referred under clause (a) (i.e. vehicles other than those used for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver).

b. Motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) but used for making following taxable supplies:

i. further supply of such vehicles or

ii. Transportation of passengers or

iii. Using the same in imparting training skills.

c. Vessels or aircraft used for transportation of goods.

18. Insertion of Entry 92A in the exclusions from turnover for distribution of credit as well as calculation of restricted ITC

Amended Provision

Sec. 20(C): the term ‘turnover’, in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied under entries 84 and 92A of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule.

Implications

Clause (c) of Explanation to Section 20 has been amended to provide that even the tax or duty levied under entry 92A of List I of the Seventh Schedule to the Constitution shall be excluded while computing the turnover for the purpose of distribution of credit by an input service distributor. Entry 92A covers the central sales tax which was inadvertently not included earlier where only Entry 84 (VAT) was included. Said error has been corrected.

Similar corrections have been made in Rule 42 & 43 of the CGST Rules, 2017 vide Notification No. 03/2019 – Central Tax dt. 29.01.2019. Said rules provide for calculation of ITC which is to be restricted when one makes taxable as well as exempt supplies or uses goods/services for personal consumption.

19. Threshold exemption limit for registration increased for certain States

Amended provision

Sec. 22: Provided further that the Government may, at the request of a special category State and on the recommendations of the Council, enhance the aggregate turnover referred to in the first proviso from ten lakh rupees to such amount, not exceeding twenty lakh rupees and subject to such conditions and limitations, as may be so notified

Explanation (iii) to section 22 the expression “special category States” shall mean the States as specified in sub-clause (g) of clause (4) of article 279A of the Constitution except the State of Jammu and Kashmir and States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand.

Implications

The State of Assam has requested that the threshold exemption in that State should be raised from INR 10 lakhs to INR 20 lakhs and hence said amendment has been made.

Consequentially Notification No. 06/2019 – Central Tax dt. 29.01.2019 has been issued to amend Notification No. 65/2017-Central Tax (which provides for exemption from registration for suppliers making supply of services) to make it in line with the above amendment in the Act (which shall enable special category States to prescribe threshold exceeding INR 10 lakhs but less than INR 20 lakhs).

20. Mandatory registration for e-commerce operator who is required to collect TCS

Amended provision

Sec. 24(x): every electronic commerce operator who is required to collect tax at source under section 52;

Implications

Section 24 of the CGST Act, 2017 contains a list of suppliers who shall be mandatorily required to get registered. Clause (x) of the said provision provides that every electronic commerce operator should be mandatorily registered irrespective of his turnover. The said clause is being amended to provide that only those electronic commerce operator who are required to collect tax at source under section 52 shall be mandatorily registered. Hence following e-commerce operators shall not require compulsory registration if the aggregate turnover does not exceed INR 20 lakhs:

a. services by way of transportation of passengers by a radio-taxi, motor cab, taxi cab and motor cycle

b. services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act

c. services by way of house-keeping, such as plumbing, carpentering etc., except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act.

21. Multiple registrations for each place of business and separate registration for SEZ

Amended Provision

Sec. 25(1)(a): Every person who is liable to be registered under section 22 or section 24 shall apply for registration in every such State or Union territory in which he is so liable within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed:

Provided that a casual taxable person or a non-resident taxable person shall apply for registration at least five days prior to the commencement of business

Provided further that a person having a unit, as defined in the Special Economic Zones Act, 2005, in a Special Economic Zone or being a Special Economic Zone developer shall have to apply for a separate registration, as distinct from his place of business located outside the Special Economic Zone in the same State or Union territory.”;

Sec. 25(2)(b) A person seeking registration under this Act shall be granted a single registration in a State or Union territory:

Provided that a person having multiple business verticals in a State or Union territory may be granted a separate registration for each business vertical, subject to such conditions as may be prescribed:

Provided  that a person having multiple places of business in a State or Union territory may be granted a separate registration for each such place of business, subject to such conditions as may be prescribed:

 Implications

Before the above amendment only cases where a person is having multiple business verticals in a particular State or Union territory had an option to seek a separate registration for each such business vertical. Now an amendment has been made to provide that in cases where a person is having multiple place of business in the same State or Union territory can also apply for a separate registration for each such place of business subject to certain conditions. Hence it will now be possible to seek registration for every place of business even within the same State even though all such places within a particular State carry out the same nature of business.

Another amendment has been made to provide that a person having a unit in a Special Economic Zone or a Special Economic Zone developer shall obtain a separate registration as distinct from his units located outside the Special Economic Zone in the same State or Union territory. This provision was already there in Rule 8 of the CGST Rules, 2017 and the same has now been provided in the Act. In view of the insertion of the same in the Act, first proviso to Rule 8 which provided for separate registration has been omitted vide Notification No. 03/2019 – Central Tax dt. 29.01.2019.

One more amendment has been made to provide that a person having more than one unit in a Special Economic Zone shall be granted a separate registration for each such unit. Hence even within the same SEZ, if a person is having multiple units then each such place of business shall be separately registered.

22. Allowing for suspension upon filing application for the cancellation of registration

Amended Provision

 Sec. 29: The heading Section 29 has been now amended to “Cancellation or Suspension of registration.”

Sec 29(1) …

Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.

Sec 29(2) …

Provided further that during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.

Implications

When a person applies for the cancellation of the registration unless the cancellation application is accepted the person may also be held liable for the filing of the returns even in absence of any tax liability. An amendment has been made to provide that the officer has been given the power to suspend the registration of the person who is applying for cancellation while the cancellation request is still pending. Hence when the registration is suspended, such person will now be no longer under an obligation to file the returns.

Vide Notification No. 03/2019 – Central Tax dt. 29.01.2019 Rule 21A has been inserted to provide for such suspension. Same reads as under:

“Rule 21A. Suspension of registration.-

(1) Where a registered person has applied for cancellation of registration under rule 20, the registration shall be deemed to be suspended from the date of submission of the application or the date from which the cancellation is sought, whichever is later, pending the completion of proceedings for cancellation of registration under rule 22.

(2) Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29 or under rule 21, he may, after affording the said person a reasonable opportunity of being heard, suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under rule 22.

(3) A registered person, whose registration has been suspended under sub-rule (1) or sub-rule (2), shall not make any taxable supply during the period of suspension and shall not be required to furnish any return under section 39.

(4) The suspension of registration under sub-rule (1) or sub-rule (2) shall be deemed to be revoked upon completion of the proceedings by the proper officer under rule 22 and such revocation shall be effective from the date on which the suspension had come into effect.”

 Above referred sub-rule (3) clearly provides that the registered person cannot make any taxable supply during the period of suspension and shall also not be liable for filing any return u/s 39. This is obvious because one shall apply for cancellation only if he is not going to make any taxable supplies.

23. Issuance of consolidated credit note

Amended Provision

Sec. 34(1): Where a tax invoice has one or more tax invoice have been issued for supply of any goods or services or both and the taxable value or tax charged in that invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.

Implications

Before the above amendment separate credit note had to be issued against every tax invoice. Hence if a registered supplier has issued 100 invoices and post-supply discount is given against all the invoices, he was obliged to issue 100 credit notes for each specific invoice for giving the tax effect. Practically companies who give year-end discounts find it very difficult to link issue multiple credit note’s against multiple tax invoices. Hence, as a business friendly measure, an amendment has been made to provide that a single consolidated credit note can be issued against one or more tax invoices. It must be noted that even before the amendment, consolidated accounting credit note (not giving the tax effect) can be issued at the option of the registered supplier in cases of post-supply discounts.

Consequent amendments have been made in Rule 53 of the CGST Rules, 2017 by insertion of Rule (1A) vide Notification No. 03/2019 – Central Tax dt. 29.01.2019 to facilitate issuance of the consolidated credit notes.

24. Issuance of consolidated debit note

Amended Provisions

Sec 34(3): Where a tax invoice has one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note one or more debit note for supplies made in a financial year containing such particulars as may be prescribed

Implications

Similar to amendment in respect of credit notes, even a consolidated debit note can be issued against multiple invoices.

Consequent amendments have been made in Rule 53 of the CGST Rules, 2017 by insertion of Rule (1A) vide Notification No. 03/2019 – Central Tax dt. 29.01.2019 to facilitate issuance of the consolidated debit notes.

25. Auditing of Accountsfor specified class of registered person

Amended Provision

Sec. 35(5): Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed.

Provided that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority, whose books of accounts are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.

Implications

The provisions of filing the annual return and a reconciliation statement shall not apply to any department of the Central Government or the State Government or Local Authority whose books are subject to audit by the Comptroller and Auditor General of India or an Auditor appointed for auditing the accounts of Local Authorities under any law for the time being in force. Hence as an example, annual accounts of Canteen stores Department which are internally audited by the Controller of Defense shall not be subjected to audit by a Chartered Accountant or a Cost Accountant.

Consequent amendment has been made in Rule 80(3) vide Notification No. 03/2019 – Central Tax dt. 29.01.2019 to exclude such entities from purview of audit.

26. Amendment in time limit and periodicity for filing of return through rules

Amended Provision

Sec. 39(1): Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, in such form, manner and within such time as may be prescribed, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars as may be prescribed on or before the twentieth day of the month succeeding such calendar month or part thereof.

Provided that the Government may, on the recommendations of the Council, notify certain classes of registered persons who shall furnish return for every quarter or part thereof, subject to such conditions and safeguards as may be specified therein.”;

Implications

Currently the time limit (by 20^th of succeeding month) for filing of return is stipulated in the Act itself. An amendment has been made to remove such time limit from the Act and enable the Government to prescribe such time limit.

27. Payment of tax on monthly basis for quarterly taxpayers

Amended Provisions

Sec. 39(7): Provided that the Government may, on the recommendations of the Council, notify certain classes of registered persons who shall pay to the government the tax due or part thereof as per the return on or before the last date on which he is required to furnish such return, subject to such conditions and safeguards as may be specified therein.

Implications

Sec. 39(7) of the CGST Act, 2017 provides that every registered person shall pay the tax due not later than the last day on which he is required to furnish the return. However as per the new return design, Government may seek early payment of tax (staggered filing) for certain class of registered persons. Hence an amendment has been made to enable issuance of such Notification.

28. Correction of mistake through an alternate mechanism including amendment return

Amended Provision

Sec 39(9): Subject to the provisions of sections 37 and 38, if any registered person after furnishing a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the return to be furnished for the month or quarter during which such omission or incorrect particulars are noticed, in such form and manner as may be prescribed subject to payment of interest under this Act:

Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of return for the month of September or second quarter following the end of the financial year, the end of the financial year to which such details pertain, or the actual date of furnishing of relevant annual return, whichever is earlier.

Implications

As per the current system of GSTR-3B, no corrections are possible once the return is filed. Any correction to be made has to be made in the succeeding month’s GSTR-3B. However the new return design provides for the corrections in the return and hence the above amendment has been made.

29. New return filing mechanism for furnishing of details in returns and availing ITC

Amended Provision:

Sec. 43A: (1) Notwithstanding anything contained in sub-section (2) of section 16, section 37 or section 38, every registered person shall in the returns furnished under sub-section (1) of section 39 verify, validate, modify or delete the details of supplies furnished by the suppliers.

(2) Notwithstanding anything contained in section 41, section 42 or section 43, the procedure for availing of input tax credit by the recipient and verification thereof shall be such as may be prescribed.

(3) The procedure for furnishing the details of outward supplies by the supplier on the common portal, for the purposes of availing input tax credit by the recipient shall be such as may be prescribed.

(4) The procedure for availing input tax credit in respect of outward supplies not furnished under sub-section (3) shall be such as may be prescribed and such procedure may include the maximum amount of the input tax credit which can be so availed, not exceeding twenty per cent of the input tax credit available, on the basis of details furnished by the suppliers under the said sub-section.

(5) The amount of tax specified in the outward supplies for which the details have been furnished by the supplier under sub-section (3) shall be deemed to be the tax payable by him under the provisions of the Act.

(6) The supplier and the recipient of a supply shall be jointly and severally liable to pay tax or to pay the input tax credit availed, as the case may be, in relation to outward supplies for which the details have been furnished under sub-section (3) or sub-section (4) but return thereof has not been furnished.

(7) For the purposes of sub-section (6), the recovery shall be made in such manner as may be prescribed and such procedure may provide for non-recovery of an amount of tax or input tax credit wrongly availed not exceeding one thousand rupees.

(8) The procedure, safeguards and threshold of the tax amount in relation to outward supplies, the details of which can be furnished under sub-section (3) by a registered person,—

(i) within six months of taking registration;

(ii) who has defaulted in payment of tax and where such default has continued for more than two months from the due date of payment of such defaulted amount, shall be such as may be prescribed.”

Implications

Above referred section has been inserted to enable the Government to prescribe the new return filing mechanism, which will be introduced in the future.

Procedure for furnishing details of outward supplies by the suppliers shall be as may be prescribed. Also, the amount of tax on the outward supplies as declared by the supplier shall be deemed to be the tax payable by the supplier. On the other hand, procedure for availing input tax credit by the recipient and its verification thereof shall be as may be prescribed. Procedure for availing input tax credit, on the supplies which are not declared by the supplier as outward supplies, shall be as may be prescribed. However, the said provisional credit cannot exceed 20% of the ITC available.

Suppliers and recipients have been made jointly and severally liable for the payment of tax or for the payment of input tax credit availed, as the case may be, in respect of which details have been furnished but the returns have not been filed. Hence in cases where the returns have been filed, only supplier shall be liable for depositing the tax.

Procedure for the recovery of the same shall be as may be prescribed. Procedure may provide for non-recovery of an amount of tax or input tax credit wrongly availed not exceeding INR 1000.

The procedure, safeguards and threshold of the tax amount in relation to outward supplies for the supplier shall be as may be prescribed for a registered person:

a. Within six months of taking registration

b. Who has defaulted in payment of tax and the same continues for more than 2 months from the due date of payment of such defaulted amount

30. Expanding the working area of GST Practitioner

Amended Provision

 Sec. 48(2): A registered person may authorize an approved goods and services tax practitioner to furnish the details of outward supplies under section 37, the details of inward supplies under section 38 and the return under section 39 or section 44 or section 45, and to perform such other functions and in such manner as may be prescribed.

Implications

The role of GST Practitioner has been expanded by allowing them to perform other functions such as filing of reports, filing of application for cancellation of registration etc.

Consequent amendments have been made in Rule 83 vide Notification No. 03/2019 – Central Tax dt. 29.01.2019. Now GST Practitioner can undertake following activities:

(a) furnish the details of outward and inward supplies;

(b) furnish monthly, quarterly, annual or final return;

(c) make deposit for credit into the electronic cash ledger;

(d) file a claim for refund;

(e) file an application for amendment or cancellation of registration;

(f) furnish information for generation of e-way bill;

(g) furnish details of challan in FORM GST ITC-04;

(h) file an application for amendment or cancellation of enrolment under rule 58; and

(i) file an intimation to pay tax under the composition scheme or withdraw from the said scheme:

Provided that where any application relating to a claim for refund or an application for amendment or cancellation of registration or where an intimation to pay tax under composition scheme or to withdraw from such scheme has been submitted by the goods and services tax practitioner authorised by the registered person, a confirmation shall be sought from the registered person and the application submitted by the said practitioner shall be made available to the registered person on the common portal and such application shall not be further proceeded with until the registered person gives his consent to the same.

Also the requirement to pass the exam for enrolment as GST Practitioner should be fulfilled within a period of thirty months from the appointed day (i.e. by December, 2019) for persons enrolled as a sales tax practitioner or tax return preparer under the earlier law for a period of not less than five year.

31. IGST to be utilized first

Provision before Amendments

Provision after Amendments

Sec. 49 (5): The amount of input tax credit available in the electronic credit ledger of the registered person on account of –– (a) integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order; (b) the central tax shall first be utilised towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax; (c) the State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax (d) the Union territory tax shall first be utilised towards payment of Union territory tax and the amount remaining, if any, may be utilised towards payment of integrated tax (e) the central tax shall not be utilised towards payment of State tax or Union territory tax; and (f) The State tax or Union territory tax shall not be utilised towards payment of central tax.

Sec. 49 (5): The amount of input tax credit available in the electronic credit ledger of the registered person on account of –– (a) integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order; (b) the central tax shall first be utilised towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax; (c) the State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax  Provided that the input tax credit on account of state tax shall be utilized towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax; (d) the Union territory tax shall first be utilised towards payment of Union territory tax and the amount remaining, if any, may be utilised towards payment of integrated tax Provided that the input tax credit on account of Union territory tax shall be utilized towards payment of integrated tax only when the balance of the input tax credit on account of central tax is not available for payment of integrated tax; (e) the central tax shall not be utilised towards payment of State tax or Union territory tax; and (f) The State tax or Union territory tax shall not be utilised towards payment of central tax. Sec. 49A: Notwithstanding anything contained in section 49, the input tax credit on account of central tax, State tax or Union territory tax shall be utilised towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilised fully towards such payment.  Sec.49B:  Notwithstanding anything contained in this Chapter and subject to the provisions of clause (e) and clause (f) of sub-section (5) of section 49, the Government may, on the recommendations of the Council, prescribe the order and manner of utilisation of the input tax credit on account of integrated tax, central tax, State tax or Union territory tax, as the case may be, towards payment of any such tax.”.

 Implications ​

​The manner of utilization of credit has been amended. As per the said amendment credit available on account of Integrated tax has to be first utilized fully for the payment of Integrated tax, Central tax or State tax in that order. Only thereafter the credit of Central tax or the State tax can be utilized for the payment of Integrated tax. This has been done to minimize the fund settlement on account of IGST. Also, an enabling power has been provided to the Government to prescribe any specific order of utilization of input tax credit for the payment of the taxes.

Consequent amendment has been made in Rule 85 & 86 of the CGST Rules, 2017 vide Notification No. 03/2019 – Central Tax dt. 29.01.2019 to provide for the utilization of credit balance in the given order.

32. Matching concept for E-Commerce transactions

Amended Provision

Sec. 52(9): Where the details of outward supplies furnished by the operator under sub-section (4) do not match with the corresponding details furnished by the supplier under section 37 or section 39, the discrepancy shall be communicated to both persons in such manner and within such time as may be prescribed.

Implications

Transactions reported in  the return filed by E-commerce operator in FORM GSTR 8 shall be matched with the data reported by the concerned supplier. Discrepancy (where the value of outward supply furnished by the E-commerce operator is more than the value furnished by the concerned supplier) shall be communicated for rectifications. If such rectifications are not carried out, the differential tax will be added to the liability of the concerned supplier.

33. Amendmentin the meaning of relevant date in case of refund of unutilized credit

Amended Provision

Sec. 54: Explanation.-For the purposes of this section,-

(2) “relevant date” means-

(e) in the case of refund of unutilized input tax credit under sub-section (3), the end of the financial year under clause (ii) of sub-section (3), the due date for furnishing of return under section 39 for the period in which such claim for refund arises;

Implications

As per section 54 of the CGST Act, 2017 the application has to be made within a period of two years from the relevant date. An amendment has been made to provide that the relevant date in case of refund of unutilized input tax credit on account of inverted supply structure shall be the due date for furnishing of return under section 39 for the period in which such claim for refund arises.

34. Applicability of unjust enrichment principlein case of refund on supplies to SEZ developer/unit

Amended Provision

Sec. 54(8)(a): Refund of tax paid on zero rated supplies export of goods or services or both or on inputs or input services used in making such zero-rated supplies exports exports;     

Implications

Section 54(8) of the CGST Act, 2017 provides a list of situations wherein the principle of unjust enrichment does not apply for the purposes of refund. One such situation mentioned is zero-rated supplies of goods or services. Zero-rated supplies includes exports as well as supplies to SEZ units/developer. The provision is now amended to provide that the principle of unjust enrichment shall not apply only in case of export of goods or services. In other words the supply of goods or services to SEZ units or to a developer shall be covered by the said principle. In other words the person applying the refund on account of zero-rated supplies to SEZ units or developer shall prove that he has borne the burden of tax and has not collected the same from such SEZ units or developer. Said amendment has been made since the SEZ unit or the developer is also entitled to claim input tax credit of the tax charged by the domestic supplier. Hence in such a situation where the tax charged has been claimed as credit the refund of the same shall not be available to the supplier on account of the principle of unjust enrichment.

Consequent amendment has been made in Rule 89(2)(f) of the CGST Rules, 2017 vide Notification No. 03/2019 – Central Tax dt. 29.01.2019 to provide for a declaration to the effect that tax has not been collected from SEZ unit/developer in case where refund is claimed by the unit in the DTA.

35. Export of services even if payment is received in INR

Amended provision

Sec. 54: Explanation.-For the purposes of this section,-

(2) “relevant date” means-

(i) receipt of payment in convertible foreign exchange or in Indian Rupees where permitted by the Reserve Bank of India, where the supply of services had been completed prior to the receipt of such payment;

Implications

One of the conditions for claiming the supply as export of service is that the supplier should receive the payment against the said supply in foreign currency. Hence in cases where even if RBI permits the receipt in Indian currency (e.g. Nepal or Bhutan) the benefit of export of service was not available since the payment is not in foreign currency. Now an amendment has been made under Sec. 2(6)(iv) vide the IGST Amendment Act, 2018 to provide that in cases where the receipt from the foreign customer is permitted in the Indian rupees by the RBI, it shall be sufficient to claim the transaction as export of services. Hence a consequential amendment has been made in section 54 with regard to the refund to say that even if the receipt of payment is in Indian rupees where it is permitted by the RBI, refund shall be eligible.

Consequentially clause (a) in the Explanation to Rule 43(2) has been omitted vide Notification No. 03/2019 – Central Tax dt. 29.01.2019. Said explanation provided that services to Nepal & Bhutan shall not be considered as exempt services for the purpose of calculation of the ITC which is to be restricted. Since now the same shall enjoy the benefit of zero-rating, said clause is not required.

An amendment has also been made in Rule 96A(1)(b) of the CGST Rules, 2017 which deals with refund of accumulated ITC in case of exports made under LUT/bond to consider such transactions where RBI permits remittance in Indian rupees as exports.

36. Person to include distinct person for recovery of dues

Amended Provision

Sec. 79 (1):

Explanation: For the purposes of this section, the word person shall include “distinct persons” as referred to in sub-section (4) or, as the case may be, sub-section (5) of section 25.

Implications

Before the amendment, the recovery of any dues against distinct person can be made only from such person. Hence recovery of dues of a branch located in Gujarat (distinct person) cannot be made from a branch located in Maharashtra (another distinct person under same PAN). Hence, an Explanation has been added to provide that recovery can be made from distinct person located in other States/ UTs in order to ensure speedy recovery from the other establishments of the registered person.

37. Ceiling limit for pre-deposit for filing appeal before Appellate Authority

Amended Provision

Sec. 107(6): No appeal shall be filed under sub-section (1), unless the appellant has paid—    

(b) a sum equal to ten per cent of the remaining amount of tax in dispute arising from the said order, subject to a maximum of twenty-five crore rupees, in relation to which the appeal has been filed.

Implications

Readers are aware that pre-deposit equal to 10% of the amount of tax disputed is required to be made with the filing of the appeal before the first Appellate Authority. Hence before the amendment, if the disputed tax demand is of INR 700 crores (i.e. INR 350 crores under CGST & INR 350 crores under SGST) then INR 35 crores (i.e. 10%) is required to be deposited under each head (CGST as well as SGST). Hence total INR 70 crores is required to be deposited. An amendment has been made to cap the maximum amount of such pre-deposit to INR 25 crores under CGST. A similar amendment will also be made in the State GST Act’s. Hence in our example the pre-deposit amount to be paid shall be restricted to INR 25 crores each (i.e. total INR 50 crores) and not INR 70 crores.

38. Amendment in ceiling of pre-deposit for filing appeal  before Appellate Tribunal

Amended Provision

Sec. 112(8): No appeal shall be filed under sub-section (1), unless the appellant has paid––

(b) a sum equal to twenty per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order, subject to a maximum of fifty crore rupees, in relation to which the appeal has been filed.

Implications

In case of Second Appeal an amendment has been made to provide a maximum cap of INR 50 crores as pre-deposit amount under the CGST Act, 2017. Hence the total cap shall be INR 100 crores (CGST as well as SGST). It may be noted that in case of Second Appeal an amount equal to 20% of the disputed tax is required to be deposited which is in addition to the 10% already paid at the first appeal stage.

39. Time limit for payment of tax or penalty for goods detained or seized has been increased

Amended Provision

Sec. 129(6): Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within seven days fourteen days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130:

Provided 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 seven days fourteen days may be reduced by the proper officer.

Implications

The time limit for payment of tax and penalty in case of detention of goods during transportation is now extended to 14 days from 7 days. Non-payment within such time limit will invite confiscation of goods u/s 130.

40. Retrospectiveamendment for debarring carry forward of cess balances

Amended Provision

Sec. 140(1): A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit eligible duties carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed:

Explanation 1: For the purposes of sub-sections (1), (3), (4) and (6), the expression “eligible duties” means ––

(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);

(ii) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);

(iii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978);

(v) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);

(vi) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); and

(vii) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001 (14 of 2001),

in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day.

Explanation 2: For the purposes of sub-section (1) and (5), the expression “eligible duties and taxes” means ––

(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);

(ii) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);

(iii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978);

(v) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);

(vi) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);

(vii) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001 (14 of 2001); and

(viii) the service tax leviable under section 66B of the Finance Act, 1994 (32 of 1994),

in respect of inputs and input services received on or after the appointed day.

Explanation 3 – For removal of doubts, it is hereby clarified that the expression “eligible duties and taxes” excludes any cess which has not been specified in Explanation 1 or Explanation 2 and any cess which is collected as additional duty of customs under sub- section (1) of section 3 of the Customs Tariff Act, 1975.

Implications

Above referred amendment has been made applicable retrospectively from 01.07.2017. Section 140(1) of the CGST Act, 2017 before the amendment provided that a registered person, other than the person opting for composition scheme, shall be entitled to take in his electronic credit ledger the CENVAT Credit carried forward in the return filed for the period ending with the day immediately preceding the day of GST implementation. The words “CENVAT Credit” has been defined in the Explanation to say that it shall have the same meaning as attributed in the CENVAT Credit Rules 2004. Rule 3 of the CENVAT Credit Rules, 2004 provides that Education Cess, Secondary and Higher Education Cess as well as Krishi Kalyan Cess shall be regarded as “CENVAT Credit”. Hence before the amendment the balance of such Cesses lying in the last return filed by the registered person was entitled to be carried forwarded. Retrospective amendment has now been made in the said provision to provide that only “eligible duties” lying in the last return can be carry forwarded. Explanation further provides that the “eligible duties” shall not include the balance of any cess. Following observations must be noted in this regard:

Amendments in Explanation 1 & 2 referred above which were to be retrospectively made applicable to Sec. 140(1) clearly provided that the word “eligible duties” defined therein is in respect of “inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day” (Explanation 1) or “inputs and input services received on or after the appointed day” (Explanation 2).  It may be noted that the carry forward of the balance lying in the last return is not in respect of any inputs or finished goods. Hence notifying the said amendments would have resulted into an ambiguity and also the carry forward of service tax balance could have been doubted since the said Explanation 1 does not include service tax. Accordingly Circular No. 87/06/2019-GST has been issued to provide that the amendments to Explanation 1 & 2 shall not be notified to avoid the conflict. Said Circular further provides that the expression “eligible duties and taxes” adopted in the newly inserted Explanation 3 shall be read into the expression “eligible duties” used u/s 140(1). It may be noted that Sec. 140(5) uses the expression “eligible duties and taxes” as opposed to “eligible duties” used u/s 140(1).

It may also be noted that Sec. 140(4) permits carry forward of “CENVAT Credit” (which includes cess) as per last return in cases where a registered person was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 (1 of 1944) or provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994 (32 of 1994), but which are liable to tax under GST. Said provision has not been amended.

41. Extension in the time limit for receipt of goods sent on job-work basis

Amended Provision

Sec. 143(1): Provided that the period of one year or three years, as the case may be, may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively

Implications

Readers are aware that the time limit of one year in case of inputs or three years in case of capital goods has been provided in the law for a registered person to receive back the respective goods when they were sent for job work. The law further provides that if the said goods are not received within the stipulated time limit then it shall be presumed that the supply has taken place and hence tax along with interest is payable. An amendment has been made to provide that the said time limit of one year or three years can be extended by the Commissioner for the further period of one year or two years respectively on sufficient cause been shown. It may be noted that this time limit is not applicable to moulds and dies, jigs and fixtures or tools and hence such goods can be returned even after the stipulated time limit without any consequence.

42. Retrospective additionof the term ‘Transactions’ in the heading of Schedule II

Amended Provision

 Schedule II  

Activities or transactions to be treated as supply of goods or supply of services

Implications

A retrospective amendment, applicable from 01.07.2017, has been made to change the title of Schedule II to include not only activities but even “transactions” listed therein. This ensures complete coverage of the items specified in Schedule II since some items are in the form of transactions rather than activities.

IGST AMENDMENTS

43. Amendment in definition of export of services to allow benefit even if consideration is received in INR

Amended Provision

Sec. (2)(6):“Export of services” means the supply of any service when, ––

(iv)The payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian Rupees where permitted by the Reserve Bank of India; and

Implications

The definition of the “export of services” is being amended to provide that where the payment for the export of services is received in Indian rupees and such receipt is permitted by the Reserve Bank of India then the same shall be sufficient to satisfy the criteria of the receipt of payment in convertible foreign exchange and hence even if such Indian rupees are received, the benefit of export of services shall be available.

44. Amendment in the definition of Governmental Authority

Amended Provision

Sec. 2(16): ‘Governmental authority’ means “an authority or a board or any other body, –

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government, with ninety percent or more participation by way of equity or control, to carry out any function entrusted to a Panchayat under article 243G orto a municipality under article 243W of the Constitution”.

Implications

The definition of governmental authority is being amended to include Panchayat under article 243G which was inadvertently left out earlier.

45. Restriction in the applicationof Section 5(4) 

Provision before Amendments

Provision after Amendments

Sec. 5(4): The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

Sec. 5(4): The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.

Implications

Section 5(4) of IGST Act, 2017 is now under suspension. It has been proposed that the Government will notify certain class of registered person who shall be liable to pay tax on reverse charge basis in case of receipt of goods from an unregistered person. Hence as and when the said provision is made applicable only a notified class of registered taxpayers are purported to be covered by this substituted section now.

46. Omission of term business vertical in the deeming fiction for distinct persons

Amended Provision

Sec. 8(2): Explanation 1(iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory,

Implications

Multiple registrations were allowed earlier only in case of separate business verticals. The law now allows a separate registration for each place of business in respect of persons having multiple places of business in a State. So, the definition of business verticals is not required anymore under the GST law. Hence, the said definition is deleted.

47. Place of supply for goods transported outside India where the supplier and recipient are in India

Amended Provision

Sec. 12(8): 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.

Implications

In order to provide a level playing field to the domestic transportation companies and to promote export of goods, an amendment has been made to provide that the transportation of goods from a place in India to a place outside India by a transporter located in India would not be chargeable to GST as the place of supply will be outside India.

48. Place of supply outside India where goods temporarily imported into India & then exported after any treatment or process carried out on it without being put to use

Amended Provision

Sec. 13(3): The place of supply of the following services shall be the location where the services are actually performed, namely:—

(a) Services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services:

Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services:

Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs or for any other treatment or process and are exported after repairs or such treatment or process without being put to any use in India, other than that which is required for such repairs or process;

Implications

The above amendment has been made to not tax repairing as well as any other treatment or process done on goods which are temporarily imported into India (e.g. gold & diamonds) which are then subsequently exported. It may be noted that before the amendment only repairing of the goods imported into India and subsequently exported was not suffering any tax. Enlarging the scope to include any kind of treatment or process is a tax friendly measure.

49. IGST apportionment

Amended Provision

Sec. 17(2A): The amount not apportioned under sub-section (1) and sub-section (2) may, for the time being, on the recommendations of the Council, be apportioned at the rate of fifty per cent to the Central Government and fifty per cent to the State Governments or the Union territories, as the case may be, on ad hoc basis and shall be adjusted against the amount apportioned under the said sub-sections.

Implications

Amendment has been made for the purpose of apportionment of the IGST which does not get apportioned as per the sub-section (1) and sub-section (2).

50. Ceilinglimit introduced for filing appeal before Appellate Authority and Appellate Tribunal

 Amended Provision

Sec. 20 Provided also that where the appeal is to be filed before the Appellate Authority or the Appellate Tribunal, the maximum amount payable shall be fifty crore rupees and one hundred crore rupees respectively.

Implications

The ceiling limit for the pre-deposit while filing an appeal under IGST Act, 2017 has been kept at INR 50 crores and INR 100 crores in respect of the first Appellate Authority and Appellate Tribunal respectively. It is similar to the corresponding amendments in the CGST Act, 2017.

(Views are strictly personal)