Shreya Khuntet, Final year student, B.A. L.L.B (Hons.)
Recently on 10th July 2018 GST Council has released “proposed amendments to GST law”, seeking comments from stakeholders by 15 July 2018. The Proposal comprises 38 amendments to the CGST Act, 6 amendments to IGST Act and 2 amendments to GST (Compensation to States) Act.
The analysis of the key proposed amendments has been discussed here.
Page Contents
- Amendment in CGST ACT, 2017
- 1. Amendment in the definition of ‘Adjudicating Authority’
- 2. Amendment in definition of ‘services’
- 3. Amendment in definition of ‘supply’
- 4. Amendment in Schedule I
- 5. Amendment in Schedule III
- 6. Amendment in reverse charge mechanism
- 7. Changes with regard to composition scheme
- 8. Non- payment of interest by recipient on failure to pay tax to supplier
- 9. Scope of exempt supply for the purposes of input tax credit reversal
- 10. Amendments in Section 17(5) of CGST Act, 2017
- 11. Changes related to E-commerce operator
- 12. Allowing for separate registration for different places of business in a state
- 13. Cancellation of registration
- 14. Issue of credit/debit note against invoice
- 15. Auditing of books of accounts
- 16. Returns
- 17. Insertion of Section 43A: Procedure for furnishing return and availing input tax credit
- 18. Functions of GST Practitioners
- 19. Utilization of input tax credit
- 20. Relevant date in case of refund of unutilized ITC
- 21. Refund in case of Zero rated supply of goods or services
- 22. Claim of refund in case receipt of payment in Indian Rupees
- 23. Capping on the amount of pre-deposit
- 24. Amendment in transitional credit provisions
- 25. Extension of time period in case of Job work
- Amendments proposed in IGST Act, 2017
- 26. Place of supply of services by way of transportation of goods
- 27. Apportionment of IGST
- Amendments in GST (Compensation to States) Act, 2017
- 28. Distribution of unutilized cess
Amendment in CGST ACT, 2017
1. Amendment in the definition of ‘Adjudicating Authority’
Section 2(4) of CGST Act, 2017 defines ‘adjudicating authority’ as
“any authority, appointed or authorised to pass any order or decision under this Act, but does not include the Central Board of Excise and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate Authority and the Appellate Tribunal”.
It has been proposed to further exclude National Anti-Profiteering Authority (NPAA) from the ambit of ‘adjudicating authority’.
This would mean that any orders passed by (NPAA) will not be appealable to appellate authority as only the decision or order passed by the adjudicating authority is appealable to the Appellate Authority under Section 107(1) of CGST Act, 2017.
2. Amendment in definition of ‘services’
Section 2(102) of CGST Act, 2017 provides for the definition of ‘services’ according to which
““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.”
An explanation to the said definition has been proposed to be inserted, according to which, ‘services includes facilitating or arranging transactions in securities.’
3. Amendment in definition of ‘supply’
Section 7 of the CGST Act, 2017 provides for the Scope of Supply.
Section 7(d) of CGST Act, 2017 provides supply includes “the activities to be treated as supply of goods or supply of services as referred to in Schedule II”.
It has been proposed to remove the deemed inclusion of activities mentioned in Schedule II from the definition of supply, i.e., to delete Section 7(d) of CGST Act, 2017.
In place of this a new sub section (1A) has been proposed to be inserted which states
“Certain activities or transactions, when constituting 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.”
4. Amendment in Schedule I
Schedule I, Entry 4
“Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.”
The word ‘taxable’ has been proposed to be omitted. This means that import of services even by a non-taxable person from a related person or any establishment outside India, in the course of his business without consideration, will attract GST.
5. Amendment in Schedule III
New entries have been proposed to be inserted:
7. Supply of goods from a place in non-taxable territory to another place in non-taxable territory without entry in taxable territory.
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 from home consumption.
Explanation.- For the purposes of this clause, the expression “warehoused goods” shall have the meaning as assigned to it in the Customs Act, 1962 (52 of 1962)
The said amendment has been made to ensure that there is no double taxation in case of supply goods occurs in the course of high sea sales and sale of warehoused goods before clearance for home consumption. It had already been clarified by the issue of Circular that IGST would be levied only once at the time of clearance of goods for home consumption. Thus for removal of doubts these activities have been incorporated as ‘no supply’.
6. Amendment in reverse charge mechanism
Section 9(4) of CGST Act, 2017 has been proposed to be changed.
Present:
“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.”
Proposed:
“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.”
Presently, all the registered persons receiving goods or services from an unregistered person are liable to pay GST on reverse charge basis. However as per the proposed amendments, instead of all the registered persons, Government will specify a class of registered persons who will be liable to pay GST on reverse charge basis in case of supply from an unregistered person.
7. Changes with regard to composition scheme
Under Section 10 of CGST Act, 2017, the upper limit of turnover for being eligible for composition scheme has been increased to 1.5 crore from 1 crore.
Further a proviso has also been proposed to be added which is stated as
“Provided further that a person who opts to pay tax under clause (a), clause (b) or clause (c) may supply services of value not exceeding ten percent of turnover in the preceding financial year in a State or Union territory or five lakh rupees, whichever is higher.”
Presently, a person engaged in supply of services alongwith the supply of goods is not eligible to opt for composition scheme.
However, insertion of proviso will make sure that a person will be eligible under composition scheme even if he supply services provided that the value of supply of services should not exceed 10% of the turnover in the preceding financial year or 5 lakh rupees whichever is higher.
This has increased the ambit of composition scheme as it will cover more small businesses now.
8. Non- payment of interest by recipient on failure to pay tax to supplier
Proviso to Section 16(2) of CGST Act, 2017 states:
“Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed.”
Presently, if the recipient fails to pay to the supplier of goods or services, the amount of tax payable, within 180 days from the date of issue of invoice by the supplier, then the recipient is liable to pay interest equal to the amount of Input tax credit availed.
However, this requirement of payment of interest by the recipient has been proposed to be removed, considering it to be too onerous.
9. Scope of exempt supply for the purposes of input tax credit reversal
Section 17(3) of CGST Act, 2017 states:
“The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.”
This is proposed to be amended by further excluding the activities/transactions (other than sale of land and sale of building) mentioned in Schedule III from the value of exempt supply. This means that the assessees can claim ITC on these transactions which do not amount to supply by virtue of Schedule III.
10. Amendments in Section 17(5) of CGST Act, 2017
Section 17(5) of CGST Act, 2017:
“Notwithstanding……
(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;…”
It is proposed to expand the scope of ITC availability in case of motor vehicles.
Proposed amendment: “(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), vessels and aircraft”
Thus the proposed amendment made it clear that input tax credit would be denied only in respect of motor vehicles for transport of persons having approved seating capacity of not more than 13 persons (including driver), vessels and aircraft when they are used for supply other than those as specified. This shows that vehicles such as dumpers, trucks, fork lifts etc. won’t be covered under this clause and thus ITC can be claimed in respect of the same.
Further there is also new insertion of sub section 5(a)(iii) and 5(a)(iii)(aa)
(iii) for transportation of money for or by a banking company or a financial institution.
(aa) 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)
The amendment has been proposed that ITC will not be denied in respect of motor vehicles if they are used for transportation of money for or by a banking company or a financial institution. Further it is to clarify that ITC will be available in respect of services of general insurance, servicing, repair and maintenance in respect of those motor vehicles, vessels and aircraft on which ITC is not available under clause (a)
Also, presently in accordance with the provisions of Section 17(5)(b), ITC is not available in respect of food and beverages, health services, travel benefits to employees etc. This sub-section is proposed to be amended to allow ITC in respect of such goods or services or both 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.
Presently, there is a mandatory registration requirement for every e-commerce operator under Section 24(x) of CGST Act, 2017.
However, by the proposed amendment this is restricted to only such e-commerce operators who are required to collect tax at source under Section 52.
12. Allowing for separate registration for different places of business in a state
New provisos to Sub-section 25(2) have been proposed to be inserted.
“Provided further 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.
Provided also that a person having a unit, as defined in the Special Economic Zones Act, 2005 (28 of 2005), in a Special Economic Zone or being a Special Economic Zone Developer shall be granted a separate registration as distinct from his units located outside the Special Economic Zone in the same State or Union territory.
Provided also that a person having more than one unit, as defined in the Special Economic Zones Act, 2005 (28 of 2005), in a Special Economic Zone shall be granted a separate registration for each such unit, subject to such conditions as may be prescribed”.
Thus an option is proposed to be given to every person to obtain separate registration for each place of business in a State, instead of a single registration for all places in a State. Further the provisions for separate registration for a SEZ unit in a State distinct from other units located outside the SEZ have also been proposed.
13. Cancellation of registration
It has been proposed by inserting a proviso to Section 29(2) of CGST Act, 2017 that once a registered person has applied for cancellation of registration, the proper officer may temporarily suspend its registration till the procedural formalities for cancellation are completed.
14. Issue of credit/debit note against invoice
Present scenario:
A credit/ debit note is issued by a registered person for each invoice separately
Proposed amendment:
A consolidated credit/debit note can be issued in respect of multiple invoices.
15. Auditing of books of accounts
Section 35 (5) of CGST Act, 2017 states:
“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.”
A proviso to Section 35(5) has been proposed to be inserted. It has excluded any department of Central/State Government/ local authority which is subject to audit by CAG, to get their books of accounts audited by any Chartered Accountant or Cost Accountant.
16. Returns
Change has been proposed under Section 39(9) of the CGST Act, 2017 which allows the taxpayer to amend the returns.
17. Insertion of Section 43A: Procedure for furnishing return and availing input tax credit
The new section, Section 43A is proposed to be introduced to enable new return filing procedure.
Proposed Section 43A states as:
“(1) Notwithstanding anything contained in section 37 or section 38, the procedure for furnishing the details of outward supplies by a 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 (hereafter in this section referred to as the ‘supplier’), and for verifying, validating, modifying or deleting such supplies by the corresponding registered person (hereafter in this section referred to as the ‘recipient’) in connection with the furnishing of return under section 39 shall be such as may be prescribed.
(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 specified under sub-section (1) and sub-section (2) may include the following:-
(i) the procedure for furnishing the details of a tax invoice by the supplier on the common portal for the purposes of availing input tax credit by the recipient in terms of clause (a) of sub-section (2) of section 16;
(ii) the amount of tax specified in an invoice for which the details have been furnished by the supplier under clause (i) but the return in respect thereof has not been furnished and tax has not been paid shall be deemed to be tax payable by him under the provisions of this Act;
(iii) the procedure and threshold, not exceeding one thousand rupees, for recovery of the amount of tax payable under clause (ii);
(iv) the procedure and circumstances where the recovery of input tax credit can be made, instead of from the supplier, from the recipient who has availed credit on an invoice for which details have been furnished by the supplier under clause (i) but tax has not been paid by the said supplier;
(v) for the purposes of clause (ii) and (iii), the supplier and the recipient shall be jointly and severally liable to pay tax or to reverse the input tax credit availed against such tax, as the case may be;
(vi) the procedure and threshold for availing input tax credit by the recipient on the basis of invoice for which details have not been furnished by the supplier under clause (i) and recovery thereof; and
(vii) the procedure, safeguards and threshold of tax amounts in the invoices, the details of which can be furnished under clause (i) by a newly registered person or by a registered person who has defaulted in payment of tax liability, exceeding the amount of tax or the period of time specified in the rules.”
18. Functions of GST Practitioners
Presently GST practitioners are authorized under Section 48 to furnish details of outward and inward supplies and various returns on behalf of registered persons.
It has been proposed to allow GST practitioner to perform other functions such as filing refund claim, filing application for cancellation of registration etc.
19. Utilization of input tax credit
Presently under Section 49(5)(c), the amount if ITC available in the credit ledger of the registered person on account of the State tax shall first be utilized towards payment of State tax and the amount remaining, if any, may be utilized towards payment of integrated tax.
Now, it has been proposed to amend clause (c) and (d) to provide that the credit of SGST/UTGST can be utilized for the payment of IGST only when the balance of the input tax credit on account of CGST is not available for payment of IGST.
Further a new proviso to sub section 5 has been proposed to be inserted in order to specify that a taxpayer would be able to utilize credit on account of CGST, SGST/UTGST, only after exhausting all the credit of IGST available to him for payment of IGST.
Also new sub section 5A in section 49 has been proposed which enables Government to prescribe any specific order of utilization of input tax credit.
20. Relevant date in case of refund of unutilized ITC
Correction has been proposed to Section 54, Explanation (2)(e), which provides for ‘relevant date’.
Presently, the relevant date means the end of the financial year in which such claim for refund arises while section 54(3) states that a registered person may claim refund of any unutilized ITC at the end of any tax period. Thus there is an inherent contradiction exists in this.
It is proposed that the relevant date in the case of refund of unutilised input tax credit under Section 54(3)(ii)shall be the due date for furnishing of return under section 39 for the period in which such claim for refund arises.
21. Refund in case of Zero rated supply of goods or services
Presently, under section 16 (3) of the IGST Act, only the supplier making supplies of goods or services to an SEZ unit/SEZ developer can claim refund and it will be subjected to principle of unjust enrichment.
It has been proposed to allow ITC to the SEZ developer or SEZ unit. Thus, the provisions for refund claim made by the supplier to the SEZ unit are proposed to be amended to prescribe test for unjust enrichment in such cases.
22. Claim of refund in case receipt of payment in Indian Rupees
Amendment to Section 54, Explanation (2)(c)(i) has been proposed to be made. It has been proposed that for the purposes of claiming refund of tax paid in respect of services exported out of India relevant date could be the date on which the payment is received in Indian rupees in case of export of services where permitted by the Reserve Bank of India since particularly in the case of exports to Nepal and Bhutan, the payment is received in Indian Rupees.
23. Capping on the amount of pre-deposit
As per Section 107(6) of CGST Act, 2017:
“No appeal shall be filed under sub-section (1), unless the appellant has paid
(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and
(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, in relation to which the appeal has been filed.”
It has been proposed that the amount of pre-deposit for filing an appeal before the Appellate Authority to be capped at Rs. 25 crore.
As per section 112(8) of CGST Act, 2017:
“No appeal shall be filed under sub-section (1), unless the appellant has paid––
(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him, and
(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, in relation to which the appeal has been filed.”
It is now proposed that the amount of pre-deposit for filing an appeal before the Appellate Tribunal to be capped at Rs. 50 crore.
24. Amendment in transitional credit provisions
It has been proposed that only transitional credit of eligible duties can be carried forward in the return and not all credits under Section 140. The eligible duties do not include the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978.
25. Extension of time period in case of Job work
A new proviso has been proposed to be inserted in Section 143(1), wherein the Commissioner has been given powers to extend the time limit for bringing back or supply the inputs/ capital goods sent to the job worker for another period of one year and two years for inputs and capital goods respectively.
Amendments proposed in IGST Act, 2017
26. Place of supply of services by way of transportation of goods
Proviso to Section 12(8) has been proposed to be inserted.
It has been proposed that if the transportation of goods is from a place in India to a place outside India by a transporter located in India, then the place of supply will be the place of destination of goods. This means that it would not be chargeable to GST as the place of supply will be outside India.
27. Apportionment of IGST
New provisos has been proposed to be inserted to Section 17(1) and Section 17(2) which provides that fifty percent of the amount of IGST which does not get apportioned under clauses (a) to (f) for the time being shall be apportioned to the Central/State Government on the recommendations of the Council and shall be adjusted against the amounts apportioned under clauses (a) to (f).
Amendments in GST (Compensation to States) Act, 2017
28. Distribution of unutilized cess
New Section 10(3A) has been proposed to be inserted which provides for distribution of cess remaining unutilized in the Fund among Centre and States on the recommendations of the Council.
Proposed Section 10(3A):
“(a) Notwithstanding anything contained in sub-section (3), the Central Government may, at any point of time in a financial year, on the recommendations of the Council, distribute the amount remaining unutilized in the Fund amongst the Centre and the States in the manner provided for in sub section (3).
(b) In case of shortfall in the amount collected in the Fund against the requirement of compensation to be released under section 7 for any two month period, the same shall be adjusted from the amount released from the Fund under clause (a).”
FOLLOWING ARE OBSERVATIONS ON GST EVEN AFTER ONE YEAR OF IMPLEMENTATION:-
01. GST LAW CAN BE EXECUTED ONLY IN WORKS CONTRACT SERVICES ONLY IF THE BOOKS OF ACCOUNT ARE KEPT ON CASH BASIS INSTEAD OF ACCRUAL BASIS SINCE PROCESS FOR REVENUE REALIZATION IN LONG AND DEPENDS ON MILESTONES AND NOT CALENDAR MONTH ENDS.
02. THE EXEMPTION TO PUBLIC UTLITY WORKS CONTRACT SERVICES FOR
03. HSD PETROL ETC HIGH QUANTUM USAGE IN CONSTRUCTION/INFRASTRUCTURE INDUSTRY ON WHICH EXEISE DUTY AND VAT ARE ALREADY PAID @45-52% OF COST OF FUEL APPROX. CANNOT GET CLAIMED AS INPUT SINCE GST PORTAL DOES NOT HAVE ANY SLOT FOR REDUCING SAME FROM GST TAX LIABILITY.
04. TRANSPORTATION -GTA AND ADVOCATE FEE ONLY CONTINUATION UNDER RCM ARE NOT ACCEPTABLE AND WHOLE ISSUE BE DONE AWAY WITH.
05. SYSTEM OF RECOVERY OF GST BY GOVT. DEPARTMENTS OF R&B/NHAI/NHAIDCL/MORTH ETC FROM CERTIFIED BILLS UNDER GST AND ISSUING CERTIFICATES FOR SET OFF OF LIABILITY BE RESTORED INSTEAD OF ADDING GST VALUE IN CONTRACTOR BILL , PAYMENT OF SAME AND REMITTANCE OF GST BY CONTRACTOR ARE CUMBERSOME PROCESS HENCE NOT BEING FOLLOWED IN ANY OF THE GOVERNMENT CONTRACTS EVEN AFTER ANNUAL CELEBRATION OF GST
06. GST PORTAL AUDIT BY CISA/DISA/ AND OTHER SOFT WARE EXPERTS FOR CAPTURING THE COMPLEXITY OF ERSTWHILE EXCISE, VAT, CUSTOMS AND EXEMPTIONS TO PUBLIC UTILITY WORKS ETC BE TAKEN UP TO ENSURE SURVIVAL OF BUSINESS. NOW ENTIRE FOCUS AND ENERGY OF BUSINESS MEN IS EXHAUSTING IN GST COMPLIANCE THAN DOING BUSINESS AND REVENUE GROWTH OF RURAL AND NATIONAL ECONOMY, NOW GST ONLY BENEFITING DEFINED TRADING BUSINESS AND PORTAL DEVELOPERS AND NOT BUSINESS COMMUNITY.
07. COMPUTATION FORMAT AND FORMULE OF GST BE REVISITED EACH BUSINESS WISE AND GSTIN PORTAL TO ALLOW DEDUCTION OF NON GS, EXEMPT, BELOW THRESHOLD UNREGISTED DEALER PURCHASES, LABOUR, EARTH WORK-SOIL AND SAND PURCHASES ON WHICH ROYALTY ALREADY PAID ETC TO REDUCE THE HIGH COST OF HIGH RISK INFRASTRUCTURE AND CONSTRUCTION WORK
THERE IS NO SCOPE FOR REDUCTION OF TAXES ACTUAL./NOTIONAL FOR NON GST & EXEMPT PURCHASES FROM THE BELOW THRESHOLD LIMIT RS.20LACS TURNOVER SUPPLIERS OF GOODS AND SERVICES PARTICULARLY IN RURAL AREAS/REMOTE AREAS OF ROAD/CANAL PROJECT WORKS.
08.GST UNIMPLEMENTABLE DUE TO INHERENT LIMITATIONS IN GSTIN PORTAL AND FRAMING OF GST LAWS FOR WORK CONTRACT SERVICES INVOLVING HUGE VALUES OF GST LIABILITY DUE TO ABSENCE OF TAXABLE LIABILITY COMPUTATION SYSTEM UNDER GSTIN PORTAL BE OUTSIDE THE PRUVIEW PENALTITIES, INTEREST AND PUNISHMENTS AND CANNOT BE TREATED AS OFFENCES. THE OFFENCES UNDER GST MAY BE ENFORCED ON LOPSIDED GSTIN PORTAL CREATORS.
09. GST CAN BE IMPLEMENTED BY THE CONTRACTOR ONLY IF THEIR EMPLOYER/ULTIMATE IMPLOYER IN BOT PROJECTS ALSO IMPLEMENTS THE SAME. ELSE NOT POSSIBLE TO FOLLOW GST.