The Indian government has introduced a series of significant changes to the Goods and Services Tax (GST) through the Finance Act, 2023, which are set to take effect from October 1, 2023. These changes encompass various sections of the CGST (Central Goods and Services Tax) Act and IGST (Integrated Goods and Services Tax) Act. In this article, we will provide a detailed analysis of these GST changes, their implications, and the actions businesses need to take to ensure compliance and minimize costs.
Page Contents
- 1. Composition Levy Extended for Ecommerce Goods Suppliers (Section 10 CGST Act, 2013):
- 2. Clarificatory Amendment Concerning Payment to Supplier within 180 Days (Section 16 of CGST Act, 2017):
- 3. Inclusion of Sale of Warehoused Goods in Value of Exempt Supply (Section 17(3) of CGST):
- 4. ITC Blocked on CSR Activities (Section 17(5)(fa) of CGST):
- 5. Retrospective Overriding Effect of Section 23(2) on Sections 22 and 24:
- 6. Time Limit for Application for Revocation of Cancelled Registration (Section 30 & Rule 23):
- 8. Refunds and Interest on Delayed Refunds (Section 54 & 56 of CGST and Rule 94):
- 9. Assessment of Unregistered Persons (Section 62 of CGST):
- 10. Inclusion of ‘Non-taxable Online Recipient’ (Rule 64 of CGST Rules):
- 11. Penalty for Certain Offences (Section 122(1B) of CGST):
- 12. Punishment for Certain Offences (Section 132 of CGST):
- 13. Compounding of Offences (Section 138 of CGST and Rule 162):
- 14. Consent-Based Sharing of Information (Section 158A of CGST Rule 162):
- 15. Retrospective Applicability of Schedule III (Schedule III of CGST and Rule 43):
- 16.Scope of OIDAR Services Widened (Section 2(17) of IGST Act):
- 17. Place of Supply for Transportation of Goods (Section 12(8) and 13(9) of IGST):
- 18. Zero-rated Supplies to SEZ for Authorized Operations (Section 16(1)(b) of IGST Act):
- 19. IGST Zero-rated Supplies Not Permitted with Payment of IGST Until Notified (Section 16(3) & (4) of IGST Act):
- 20. Deletion of Liability on Import Ocean Freight in CIF Imports (Notification 11, 12 & 13/2023-IGST Rate):
1. Composition Levy Extended for Ecommerce Goods Suppliers (Section 10 CGST Act, 2013):
The composition scheme, previously unavailable to registered persons supplying goods through ecommerce operators, is now extended to them. This change brings a sigh of relief to many small suppliers who operate in the ecommerce sector. However, it’s crucial to note that registered persons engaged in the supply of services through ecommerce operators are still restricted from availing this benefit. This amendment, as per [Notification No. 36/2023-Central Tax dated 04.08.2023], is set to level the playing field for businesses in the ecommerce space.
2. Clarificatory Amendment Concerning Payment to Supplier within 180 Days (Section 16 of CGST Act, 2017):
To align the language of law with the return filing system, it is provided that where a recipient fails to pay to the supplier the amount towards the value of supply along with tax, within a period of 180 days from the date of issue of invoice, an amount equal to the ITC availed by the recipient, shall be paid by the recipient along with interest payable u/s 50 of the CGST Act. The pre-amendment provision provides for payment of ITC as addition to output tax liability whereas, post-amendment it would be payment/reversal of ITC.
Consequently, the liability of interest on such reversal shall be determined in accordance with Section 50(3) instead of 50(1) of the CGST Act.
3. Inclusion of Sale of Warehoused Goods in Value of Exempt Supply (Section 17(3) of CGST):
A notable change pertains to the sale of warehoused goods before filing the Bill of Entry. According to the [Notification No. 36/2023 – Central Tax dated 04.08.2023], the value of such transactions will now be included in the value of exempt supply for the purpose of reversing common input tax credit under Section 17(2)(3) read with Rule 42/43.
4. ITC Blocked on CSR Activities (Section 17(5)(fa) of CGST):
An essential amendment introduced in Section 17(5)(fa) of the CGST Act pertains to Corporate Social Responsibility (CSR) activities. As per the change, Input Tax Credit (ITC) will no longer be available on goods or services received by a taxable person, which are used or intended to be used for activities related to fulfilling obligations under CSR activities.
5. Retrospective Overriding Effect of Section 23(2) on Sections 22 and 24:
An intriguing change is the retrospective amendment introduced from July 1, 2017. This amendment stipulates that persons exempted from obtaining GST registration by virtue of a notification issued under Section 23(2) of the CGST Act need not obtain registration regardless of the provisions under Section 22 (threshold limit cases) or Section 24 (mandatory cases). It’s noteworthy that persons exempted from registration under Section 23(1) do not benefit from this amendment.
6. Time Limit for Application for Revocation of Cancelled Registration (Section 30 & Rule 23):
A significant alteration relates to the time limit for applying for the revocation of a cancelled GST registration. As per [Notification No. 38/2023- Central Tax dated 4th Aug 23], the previous time limit of 30 days prescribed under Section 30 has been omitted. Instead, the time period is now prescribed under Rule 23 and has been extended to 90 days from the date of the order of cancellation. Additionally, the Commissioner has the authority to allow further extensions, not exceeding 180 days.
7. Limitation on Filing Returns (Section 37, 39, 44, 52 of CGST):
An essential amendment concerns the limitation on filing various GST returns. As per the [Notification No. 38/2023 – Central Tax dated 4th Aug 23], registered persons will not be allowed to furnish returns in GSTR-1, GSTR-3B, GSTR-9, GSTR-9C, and GSTR-8 after a period of three years from the due date of furnishing the relevant return.
8. Refunds and Interest on Delayed Refunds (Section 54 & 56 of CGST and Rule 94):
Noteworthy amendments have been made in Sections 54 and 56 of the CGST Act concerning refunds and interest on delayed refunds. According to the amendments, Section 54 has undergone technical changes to align with the current scheme of ITC availment on a self-assessment basis. Section 56 specifies that interest on delayed refunds will be granted subject to certain conditions and restrictions. The manner in which interest will be prescribed is also mentioned.
[Notification No. 38/2023- Central Tax dated 4th Aug 23]
9. Assessment of Unregistered Persons (Section 62 of CGST):
An important change pertains to the period within which a taxable person must furnish Form GSTR 3B or Form GSTR 10 (Final Return) in cases of Best Judgment Assessment. The period has been increased from 30 days to 60 days under the Best Judgment Assessment for effecting the deemed withdrawal of the best judgment order. Beyond 60 days, an additional period of 60 days (61 to 120 days) has been extended, subject to the payment of an additional late fee over and above the standard late fee.
10. Inclusion of ‘Non-taxable Online Recipient’ (Rule 64 of CGST Rules):
A significant inclusion to Rule 64 is the term “non-taxable online recipient” as referred to in the Integrated Goods and Services Tax (IGST) Act, 2017. This change expands the scope of Rule 64 to cover more categories of recipients, thereby promoting greater tax compliance.
[Notification No. 38/2023- Central Tax dated 4th Aug 23]
11. Penalty for Certain Offences (Section 122(1B) of CGST):
To provide penal provisions applicable to e-commerce operators (ECOs), a significant amendment has been introduced in Section 122(1B) of the CGST Act. These provisions apply in cases of contravention of provisions relating to supplies of goods made through ECOs by unregistered persons or composition taxpayers.
[Notification No. 37/2023 – Central Tax dated 04.08.2023]
12. Punishment for Certain Offences (Section 132 of CGST):
Section 132 of the CGST Act, which deals with the punishment for certain offences, has undergone several amendments:
a) Decriminalization of Certain Offences: Some offences specified under clause (g), (j), and (k) from Section 132(1) of the CGST Act, 2017, have been decriminalized. This change reduces the severity of penalties for these specific offences.
b) Monetary Limit for Prosecution: There is an amendment in the monetary threshold for initiating prosecution proceedings. The threshold has been amended from Rs. 1 Crore to Rs. 2 Crore for launching prosecution, except for cases involving fake/bogus invoices. In cases of offences other than fake invoices, imprisonment can be initiated if the value exceeds Rs. 2 crores, while prosecutions for fake invoices will continue for the threshold amount of Rs. 1 Crore.
13. Compounding of Offences (Section 138 of CGST and Rule 162):
The amendment concerning the compounding of offences brings two significant changes:
a) No Compounding of Offences: Fake/bogus invoice cases are excluded from the option of compounding of offences.
b) Reduction in Compounding Fees: The amendment reduces the amount for compounding various offences, except for the offence of fake invoices. Under the new provisions, the minimum compounding amount is 25% of the tax involved, and the maximum is 100% of the tax involved. This is a notable change from the previous minimum of higher of Rs. 10,000 or 50% of tax involved and a maximum of higher of Rs. 30,000 or 150% of tax involved.
Table on reduction in Compounding Fees
| Earlier | Now | |
| Minimum | Higher of Rs. 10,000 or 50% of tax involved | 25% of tax involved |
| Maximum | Higher of Rs. 30,000 or 150% of tax involved | 100% of tax involved |
[Notification No. 38/2023- Central Tax dated 4th Aug 23]
14. Consent-Based Sharing of Information (Section 158A of CGST Rule 162):
An insertion of Section 158A allows for the sharing of information or details furnished by a taxable person on the GST common portal with other systems as may be notified by the government.
[Notification No. 38/2023- Central Tax dated 4th Aug 23]
15. Retrospective Applicability of Schedule III (Schedule III of CGST and Rule 43):
Several retrospective changes have been made to Schedule III of the CGST Act. These changes concern the activities of supply of goods from a place outside the taxable territory to another place outside the taxable territory, high sea sales, and the supply of warehoused goods before their clearance for home consumption. These supplies are proposed to be made non-taxable with retrospective effect from July 1, 2017, to resolve ongoing and prospective litigations. However, no refund of such tax paid shall be available in cases where any tax has already been paid in respect of such transactions/activities during the period from July 1, 2017, to January 31, 2019.
[Notification No. 38/2023- Central Tax dated 4th Aug 23]
16.Scope of OIDAR Services Widened (Section 2(17) of IGST Act):
The definition of Online Information Database Access and Retrieval (OIDAR) services has been amended to widen the scope of services. The condition of “essentially automated” and “involving minimal human intervention” has been removed, making the definition more inclusive.
17. Place of Supply for Transportation of Goods (Section 12(8) and 13(9) of IGST):
Amendments have been made to Section 12(8) and Section 13(9) of the IGST Act regarding the place of supply for transportation of goods. These amendments have significant implications for tax accrual:
a) Place of supply of transportation of goods, including by mail or courier (Section 12(8) of IGST Act): The proviso to Section 12(8) has been omitted. As a result, the place of supply, irrespective of the destination of the goods, will be determined based on the location of the recipient of the service. If the recipient is a registered person, half of the tax shall accrue to the State where the recipient is registered, as opposed to the previous practice of the full tax accruing to the Union in case of goods destined outside India.
b) Place of supply of transportation of goods, other than by mail or courier (Section 13 of IGST Act): Section 13(9) of the IGST Act, 2017, has been omitted. Consequently, the place of supply of services in the case of transportation of goods, other than by way of mail or courier, would be covered under the default provision of Section 13(2) of the IGST Act. It will be determined based on the location of the recipient of services, in cases where either the supplier of services or recipient of services is located outside India. This change has significant implications for international trade, as services to recipients outside India will qualify as exports, and services from suppliers outside India will qualify as imports of service, regardless of the destination of goods.
[Notification 13/2023 – Integrated Tax (Rate) dated 26th Sept 23]
[Notification 11/2023 – Integrated Tax (Rate) dated 26th Sept 23]
18. Zero-rated Supplies to SEZ for Authorized Operations (Section 16(1)(b) of IGST Act):
An important change to Section 16(1)(b) has added the words “for authorized operations.” This amendment clarifies that only supplies made for authorized operations to Special Economic Zone (SEZ) units or developers shall qualify as zero-rated supplies. This amendment streamlines the process and removes the need for an endorsement from a designated SEZ officer regarding authorized operations, as required by Rule 89.
[Notification No. 27/2023–Central Tax Dated: 31st July, 2023]
19. IGST Zero-rated Supplies Not Permitted with Payment of IGST Until Notified (Section 16(3) & (4) of IGST Act):
The default option is now supplying under LUT without tax payment and claiming refund of accumulated ITC, with the government authorized to notify categories permitted for IGST payment and refund route.
The latest notification, No.01/2023-IGST, permits tax payment for all exports of goods and services, barring specific goods like cigarettes, pan-masala, and other tobacco related products. Currently, no notification has been issued permitting supplies to SEZ units/developers with payment of IGST. Hence, default route of LUT without payment of IGST would only be available.
[Notification No. 1/2023–IGST Dated: 31st July, 2023]
20. Deletion of Liability on Import Ocean Freight in CIF Imports (Notification 11, 12 & 13/2023-IGST Rate):
Notifications deleting the entries casting liability on importers on import ocean freight in CIF imports under RCM to align with the Supreme Court Judgement in UOI vs Mohit Minerals
The three Notifications have made amendment in the Rate, Exemption, and RCM principal notifications of IGST to terminate the liability casted on the importers on the services supplied by a person located in non- taxable territory (foreign shipping line) to a person located in non-taxable territory (foreign supplier) by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India (in lieu of import ocean freight) in case of CIF imports under reverse charge. The amendments come after more than a year of Supreme Court’s judgement in UNION OF INDIA & VERSUS M/S MOHIT MINERALS PVT. LTD. wherein Supreme Court had held the reverse charge levy on importer as import of service violative of Section 8 of the CGST Act, 2017, and decided in favour of the Indian importers.
[Notification 11/2023 – Integrated Tax (Rate) dated 26th Sept 23]
Conclusion
The GST changes set to take effect from October 1, 2023, are extensive and diverse. Businesses operating in India need to be well-informed about these changes and take proactive measures to ensure compliance and minimize any financial impact. The amendments cover a wide range of topics, from composition levy and payment deadlines to penalties and place of supply rules. Staying abreast of these changes and adapting to them is essential for a smooth transition and continued success in the Indian market. Moreover, seeking expert advice and conducting a comprehensive review of current GST practices is recommended to navigate these changes effectively. By doing so, businesses can optimize their GST operations and avoid potential pitfalls in the evolving tax landscape.
Author Bio
Could you please clarify on the situation mentioned below.
We have a customer in the U.S who is buying from India and we are providing them the logistics service.We bill the FOB charges to the Supplier in India and the Air Freight/ Ocean Freight to the Customer in U.S.
Could you please clarify whether we need to bill GST on Air Freight / Ocean Freight to the Customer in U.S.
Thanking you in anticipation
Martin George