Interim Budget 2024 had a very few changes in GST laws. Among the noteworthy amendments are the changes concerning the Input Service Distributor (ISD) registration and the introduction of stringent penalties for tobacco manufacturers failing to register their machines. These modifications aim to streamline GST compliance, reduce disputes, and ensure greater transparency within the GST ecosystem. Let’s delve into the specifics of these changes and their implications for businesses. We are here discussing the changes regarding Input Service Distributor and penalty for non-registration of machines by tobacco manufacturer.
(A) Input Service Distributor (ISD): As per the existing provisions, a input service distributor is the office which receives tax invoices for input services and distributes GST credit to its branches, and issue prescribed document. This definition had lot of controversy and needed clarity. The registration of the distributor was not mandatory. To bring about efficiency of GST system and reducing disputes, Interim Budget has made following changes:
- Section 2(61) of CGST Act concerning ISD has been amended.
- Now, registration as Input Service Distributor is made mandatory.
- An office (may be HO) needs to register either for providing service to its branches and taking input tax credit or for taking common service from third party and distributing across branches.
- Third party services may be banking, advertising and security.
- There will be no need to issuing any prescribed documents.
- ISD mechanism is meant only for distributing credit on common invoices for input services, and not on the goods.
- The changes will be prospective and will cover the cross charges going into disputes.
- Tax Payment Clarification: For distributing ITC on services liable to Reverse Charge Mechanism (RCM), tax payment must be made through normal registration in the state of the ISD.
- The changes in ISD mechanism will entail adequate preparation for technology process changes, communication with vendors, tracking of usages of expenses, deciding of billing locations etc.
(B)Penalties non-registration of machines:
- Manufacturers of tobacco, pan masala and similar products now need to register their machines and submit monthly returns.
- They need to provide details on existing, new, and removed machines in Form GST SRM-I.
- All details need to get certified by a Chartered Engineer using Form GST SRM-III.
- This provision imposes a penalty of INR 100,000 for each machine not registered by the manufacturers covered under the special procedures.
- The penalty is imposed to make sure that manufacturers follow the rules for registering their machines and encourages them to stick to the special procedures.
Conclusion: The Interim Budget 2024’s alterations to GST laws, specifically regarding ISD registration and penalties for non-registration of machines by tobacco manufacturers, signify a progressive step towards refining GST administration and compliance. By making ISD registration obligatory and penalizing non-compliance in machine registration, the government is pushing for a more transparent, efficient, and dispute-free GST regime. Businesses, especially in the manufacturing sector, must stay abreast of these changes to align with the new regulatory requirements and avoid penalties.
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In case you have any concern and queries or need any support in GST compliances, you may like to contact us.
Abhinarayan Mishra, FCA, FCS, Certified GST Expert; Managing Partner, KPAM & Associates, Chartered Accountants, Dwarka, New Delhi; +9910744992, ca.abhimishra@gmail.com
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