Major Changes in CGST rules with effect from 1st February, 2019

CBIC notified the applicability of  CGST (Amendment) Act, 2018 with effect from 1st day of February, 2019 vide  Notification No. 02/2019.

The major changes with effect from 1st February, 2019 are enumerated here below:

1. Section – 2, Amendment of Definitions

• The definition of the term “adjudicating authority” has been amended by replacing the words, ‘Central Board of Excise and Customs’ with ‘Central Board of Indirect Taxes and Customs’ and adding ‘The National Anti-profiteering Authority’ in the exclusion part of the definition. [Section 2(4)].
• Definition of business vertical omitted.[Section 2(8)].

Now the taxpayer has the option to take separate registration for each place of business within a State / Union Territory.

• Definition of local authority amended to include a development board constituted under Article 371J of Constitution of India.

2. Section -7, Changes in meaning of Supply

• A new sub-section (1A) has been inserted in Section 7 which contains that where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II and clause (d) of Section 7(1) has been deleted which provided that supply includes the activities to be treated as supply of goods or supply of services as referred to in Schedule II, omitted.  

3. Section – 9(4), procurement from unregistered persons

• As per section 9(4) of the Principal Act, in case of procurement of goods and services from unregistered persons, taxpayers were liable to pay tax under reverse charge. Though this provision has been kept in abeyance till date. Now this subsection has been amended to provide that tax shall be liable to be paid under reverse charge by specified class of persons on supply of specified categories of goods or services received from unregistered persons.
• The specified class of persons and specified class of goods not notified. Therefore this provision shall be effective only after Government notify the above two.

4. Section -10, Composition levy / scheme

• The threshold limit for composition taxpayer has been increased from Rs. 1 Crore to Rs. 1.5 Crore as per GST Council’s recommendation.
• Composition taxpayers shall be allowed to supply services upto a value of 10% of turnover or Rs. 5 lakhs, whichever is higher.

5. Section -12 & 13, Time of supply of goods and services

• Section 12 and Section 13 of the principal Act, deals with the time of supply of goods and services respectively. As per Section 12, in case of supply of goods invoice is required to be raised as per Section 31(1). As per Section 13 invoice is required to be issued as per provisions of Section 31(2). After amendment, both Sections 12 and 13 refer to entire Section 31.

6. Section -13, Changes in rules of Input tax credit

• To remove the ambiguity of availability of ITC in case of bill to ship of services, section 16 of CGST Act amended to provide for deemed receipt of services by registered person where the services are provided by the supplier to any person on the direction and on account of such registered person.  

7. Section -20, Definition of Turnover for the purpose of ISD Distribution

• Definition of turnover for the purpose of distribution of ITC by an input service distributor not to include CST paid on non-GST supplies.

8. Section -22, Persons liable for registration

• Threshold limit for registration can be increased to Rs. 20 lakhs from Rs. 10 lakhs on request by special category State and based on recommendations of GST Council.
• Special Category States – meaning amended to exclude Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand.

9. Section -17, Amendment in Blocked Credit Rules

• The total value of exempt supply (for proportionate reversal) will not include activities specified in Schedule III, except sale of land & sale of building in respect of which construction has been completed prior to sale.

• ITC will be not be available in case of purchase, leasing, renting or hiring of motor vehicles, vessels or aircrafts having seating capacity upto 13 persons ( including driver ).
• For motor vehicles having approved seating capacity upto 13 persons, ITC will be available only when such vehicles are used for:
  • Further supply of such motor vehicles
  • Transportation of passengers
  • Imparting training on driving such motor vehicles
• ITC in respect of purchase,leasing, hiring of vessel and aircraft will not be available except when they are used:
  • for making the following taxable supplies:
    • further supply of such vessels or aircraft
    • transportation of passengers
    • imparting training on navigating such vessels
    • imparting training on flying such aircraft
    • for transportation of goods
• ITC in respect of general insurance, servicing, repair and maintenance relating to motor vehicles, vessels and aircraft will not be available if credit of motor vehicles is restricted.
• ITC, however, will be available if the recipient is engaged in the:
  • manufacture of such motor vehicles, vessels or aircraft; or
  • supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;

10. Section – 24, Registration of Electronic Commerce Operator

• The registration of electronic commerce operator shall be mandatorily if he is required to collect tax at source under GST law.

11. Section -25, Multiple registration in a state

• SEZ developer or SEZ unit shall be required to obtain separate registration distinct from its registration for place of business located outside SEZ.
• A person having multiple places of business in a State/UT shall be allowed to obtain a separate registration for each such place of business subject to prescribed conditions.

12. Section -29, Suspension of registration

• Once the taxpayer apply for cancellation of registration, the same registration shall in in suspension till the cancellation proceedings are pending.

13. Section 34, Issuance of single Debit/Credit Notes in respect of multiple invoices

• Taxpayer shall be able to issue single debit note or credit note for the multiple invoices issued for supplies made during a financial year.

14. Section 49 & 49A, Priority in credit utilisation.

For payment of IGST liability, following priority to be followed :

• Utilise ITC balance of IGST fully
• Utilise ITC balance of CGST fully
• Utilise ITC balance of SGST/UTGST

15. Section 143, – Extension of retention period in case of (Job work)

• Commissioner has been empowered to extend the time period one year in case of inputs and two more year in case of capital goods for which goods/capital goods can be retained by job-worker.  

16. Amendment in Schedule I

• Entry 4 of Schedule I amended to provide that import of services by any person from a related person or from any of his other establishments outside India, in the course or furtherance of business shall be deemed to be supply even if made without consideration. [‘Taxable person’ substituted with ‘person’]

17. Amendment in Schedule III (Neither supply of goods nor services)

Following new entries inserted in Schedule III:

• Supply of goods from a place in non-taxable territory to another place in non-taxable territory without such goods entering into India.
• Supply of warehoused goods to any person before clearance for home  consumption.
• Supply of goods by 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.