Article discusses Proposed Amendment in GST (CGST & IGST) vide Union Budget 2021.

CGST Act, 2017

1. Insertion of clause (aa) to Section 7(1):

Sec. 7(1)(aa) is sought to be inserted so as to ensure levy of tax on activities or transactions involving the supply of goods or services by any person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.

  • “principle of mutuality” will not work
  • Hon’ble Supreme Court in the case of Calcutta Club)
  • This amendment is Retrospective

2. Insertion of clause (aa) to Section 16(2):

Section 16(2)(aa) is sought to be inserted to provide that input tax credit on invoice or debit note may be availed only when the details of such invoice or debit note have been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note.

  • ITC cannot be availed beyond GSTR-2A/2B
  • No concept of Provisional Credit
  • If GSTR-1 filled beyond cutoff date then ITC will be lost.

3. Omitted of Subsection (5) of Section 35:

Sub-section (5) of section 35 of the CGST Act is proposed to be omitted so as to remove the mandatory requirement of getting annual accounts audited and reconciliation statement submitted by specified professional.

  • Now GSTR-9C required self-certification of taxpayer.
  • Maximum chances of mistakes
  • Special Audit by the Department
  • Huge liability on taxpayers
  • Cost of auditor will be less as compare to liability arises at the time of Special Audit

4. Amendment in Section 50:

Section 50 of the CGST Act is sought to be amended, retrospectively, to substitute the proviso to sub-section (1) so as to charge interest on net cash liability with effect from the 1st July, 2017.

“Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger.”.

  • Interest will be calculated on the basis of Net cash Liability
  • If cash balance available in cash ledger then also interest is applicable
  • If liability of previous months paid in next period the interest is applicable on such amount irrespective of availability of credit ledger.

For Example: April month liability paid in the month of July whereas balance in credit ledger is available and liability paid in the month of July by debiting the electronic credit ledger, in that case interest u/s. 50 is applicable on such liability.

5. Amendment to Section 74:

Section 129 (Detention, seizure and release of goods and conveyances in transit) & Section 130 (confiscation of goods or conveyance and levy of tax, penalty and fine) these two section has been removed from the Section 74.

  • Meaning thereby separate proceeding will be initiated in case of seizure and confiscation of goods.

6. Explanation added to Section 75:

An explanation to sub-section (12) of section 75 of the CGST Act is sought to be inserted

For the purposes of this sub-section, the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.

  • If Liability declared in GSTR-1 but not paid in GSTR-3B then it should be considered as “self-assessed tax”.

7. Widened the Scope of Section 83 (Provisional Attachment):

“(1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed.”.

  • Provisional attachment of property is now permitting in case of proceedings in the nature of assessment (Chapter XII), inspection, search, seizure and arrest (Chapter XIV) and demands & recovery (Chapter XV).
  • Any type of notice is to be taken seriously otherwise officer have power to attached the property.

8. Amendment to Section 107:

In section 107 of the Central Goods and Services Tax Act, in sub-section (6), the following proviso shall be inserted, namely:–

“Provided that no appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to twenty-five per cent. of the penalty has been paid by the appellant.”.

  • Appeal to first appellant authority in case the of detention and seizure of goods & Conveyance during transit, taxpayer has to deposit 25% amount of penalty.

9. Amendment to Section 129:

(i) in sub-section (1), for clauses (a) and (b), the following clauses shall be substituted, namely:––

“(a) on payment of penalty equal to two hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods

comes forward for payment of such penalty;

  • Quantum of penalty u/s 129 has been doubled to 200% of the tax payable where the owner of the goods comes forward for payment of such penalty.

(Earlier Tax was 100% and penalty is 100% of Tax amount, hence this attracted a lot of litigation. Now no tax only penalty is 200%)

  • Proceedings under Section 129 and 130 delinked from each other.
  • Substitution of new section for section 151

The Commissioner or an officer authorised by him may, by an order, direct any person to furnish information relating to any matter dealt with in connection with this Act, within such time, in such form, and in such manner, as may be specified therein.”.

  • Now Commissioner has power to call record from Bank, Telecommunication Company.

IGST Act, 2017

Section 16:

  • Refund of capital goods are not available.
  • Automatic route of Refund in case of export with payment is not available.
  • Export can be made under LUT bond without payment of IGST except in few cases as prescribed by the Proper officer.

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July 2022