Changes Proposed In GST – Union Budget-2021-22

Changes Proposed In Goods And Services Tax – Union Budget-2021-22

The Finance Bill 2021, have proposed certain changes in CGST Act, 2017 & IGST Act, 2017 in order to curb input credit frauds and safeguard Government revenues. The amendments carried out in the Finance Bill, 2021 will come into effect from the date when the same will be notified, as far as possible, concurrently with the corresponding amendments to the similar Acts passed by the States and Union territories with Legislature.

The gists of proposed changes from Clause 99 to Clause 114 are summarized as under:

1. The coverage of the expression supply has been further enhanced – Section 7 of the CGST Act : (Clause 99 of the Finance Bill)

A new clause (aa) in sub-section (1) of Section 7 of the CGST Act is being inserted, retrospectively with effect from the 1’st July, 2017, so as to ensure levy of tax on activities or transactions involving supply of goods or services by any person, other than an individual, to its members or constitutes or vice-versa, for cash, deferred payment or other valuable consideration. 

Comments: This amendment is brought in view of the Hon’ble Supreme Court judgment in the case of State of West Bengal & Ors. v Calcutta Club Limited [2019(29) G.S.T.L 545 (S.C.)] for erstwhile Service tax regime wherein it was held that there cannot be sale of gods or provision of services between the unincorporated private club / associations and its members owing to the principle of mutuality which treats such clubs / associations and its members as the same person. This ratio should be applicable to GST.

The Government proposed a retrospective amendment by way of insertion of this sub-clause (aa) to ensure the levy of on the amounts collected from the members for cash, deferred payment or other valuable consideration by considering supply of goods or services by clubs or associations.

2. Additional eligibility condition to avail ITC – Section 16 of the CGST Act: ( Clause 100 of the Finance Bill)

A new clause (aa) to sub-section (2) of the section 16 of the CGST Act is being 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. 

Comments: By this amendment one more additional condition added for determining the eligibility of ITC. ITC would not be available to the recipient or buyer if the detail of such invoice or debit note has been not furnished by the supplier in GSTR-1 or using IFF / GSTR-2B. Hence, this amendment gives the statutory backing to much disputed and deliberated upon Rule 36(4) of the CGST Rules, 2017.

3. Audit under GST has been scrapped – Section 35 of the CGST Act: ( Clause 101 of the Finance Bill)

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

Comments: By this amendment seeks to omit Section 35(5) of the CGST Act so as to scrap the mandatory requirement of getting annual accounts audited by a Chartered accountant or a Cost accountant under GST.

4. Filing of Annual return on self certification basis – Section 44 of the CGST Act: ( Clause 102 of the Finance Bill)

Section 44 of the CGST Act is being substituted so as to remove the mandatory requirement of furnishing a reconciliation statement duly audited by specified professional and to provide for filing of the annual return on self-certification basis. It further provides for the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return. 

Comments: By this amendment substitute Section 44 of the CGST Act so as to remove the mandatory requirement filing of reconciliation of financial statement in GSTR-9C duly certified by Chartered or Cost accountant in place self-certification of such reconciliation statement for Annual return.

5. Interest on Net Cash Liability – Section 50 of the CGST Act : ( Clause 103 of the Finance Bill)

Section 50 of the CGST Act is being 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. 

Comments: Section 50(1) of the CGST Act has been amended retrospectively from 1’st July ,2017  so as to charge interest on delayed payment of GST on net cash liability. This is in line with recommendation of 39’th GST Council meeting. With this amendment the issue of payment of tax on gross tax liability will now finally settle.

6. Separate recovery of tax proceeding in Transit checking – Section 74 of the CGST Act: ( Clause 104 of the Finance Bill)

Section 74 of the CGST Act is being amended so as make seizure and confiscation of goods and conveyances in transit a separate proceeding from recovery of tax. 

Comments: Conclusion of proceedings under Section 73 or 74 amended to remove Section 129 or Section 130 and recovery of tax under Section 73 or 74 during movement of goods, the person liable to pay penalty under section 122 or section 125

7. “Self-assessed Tax” clarified – Section 75 of the CGST Act: ( Clause 105 of the Finance Bill)

An explanation to sub-section (12) of section 75 of the CGST Act is being inserted to clarify that “self-assessed tax” shall include the tax payable in respect of outward supplies, the details of which have been furnished under section 37, but not included in the return furnished under section 39. 

Comments: By this self assessment of tax widen scope and include the tax payable in respect of outward supplies furnished in GSTR-1 u/s 37 but tax on such invoices not included in the return furnished in GSTR-3B u/s 39.

8. Validity period of attachment one year – Section 83 of the CGST Act: (Clause 106 of the Finance Bill)

 Section 83 of the CGST Act is being amended so as to provide that provisional attachment shall remain valid for the entire period starting from the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV till the expiry of a period of one year from the date of order made thereunder. 

Comments: By this provide that provisional attachment made any property, including bank account, belonging to a taxable person specified u/s 122(1A) , shall remain valid for one year from the date of passing order u/s 83(1) of the CGST Act.

9. Pre-deposit of 25% of penalty for filing Appeal – Section 129 of the CGST Act: (Clause 107 of the Finance Bill)

A proviso to sub-section (6) of section 107 of the CGST Act is being inserted to provide that no appeal shall be filed against an order made under sub-section (3) of section 129, unless a sum equal to twenty-five per cent. of penalty has been paid by the appellant.

Comments: By this amendment provide order passed in Section 129(3) of the CGST Act, in FORM MOV-09 and appeal against this order can be filed after deposit of 25% of pre-deposit of disputed amount including penalty in case of detention and seizure of conveyance and goods during transit.

10. Delink the proceedings in transit for detention – Section 129 of the CGST Act: ( Clause 108 of the Finance Bill)

Section 129 of the CGST Act is being amended to delink the proceedings under that section relating to detention, seizure and release of goods and conveyances in transit, from the proceedings under section 130 relating to confiscation of goods or conveyances and levy of penalty.

Comments: By this amendment section 129(1) (a) seeks to enhance penalty from 100% to 200% for releasing of detained or seized goods and conveyance and previously only tax / penalty.

The penalty has to be paid in cash. 129(1)(b) Where owner does not come forward, penalty equal to 50% of value of goods or 200% of tax payable on such goods whichever is higher.

The Goods seized shall not be released on provisional basis upon execution of a bond and furnishing security in such manner. This means the penalty have to be paid in cash by the taxpayer u/s 129(2).

The penalty should be payable for issuance of MOV-07 and for passing order in MOV-09 within a period of 7 days u/s 129(3)

No penalty shall be determined without opportunity of hearing where penalty is payable on detention or seizure of goods or conveyance u/s 129(4)

Section 129(6) amended to delink proceedings under the section u/s 130, if person does not pay tax and penalty within 15 days, goods liable to be sold or disposed off in the manner prescribed.

11. Delink the proceedings in transit for confiscation – Section 130 of the CGST Act: ( Clause 109 of the Finance Bill)

Section 130 of the CGST Act is being amended to delink the proceedings under that section relating to confiscation of goods or conveyances and levy of penalty from the proceedings under section 129 relating to detention, seizure and release of goods and conveyances in transit.

Comments: Section 130 of the CGST Act not having any overriding impact and delink to Section 129 of the CGST Act relating to detention, seizure and release of goods and conveyance in transit.

12. Jurisdictional Commissioner empowered to collect information- Clause 110 of the Finance Bill

Section 151 of the CGST Act is being substituted to empower the jurisdictional commissioner to call for information from any person relating to any matter dealt with in connection with the Act.

Comments: This amendment intends to enhance wider powers to the jurisdictional Commissioner to call for any information on any matters relating to the act.

13. Opportunity of hearing made mandatory for the purposes of proceeding- Section 152 of the CGST Act: Clause 111 of the Finance Bill)

 Section 152 of the CGST Act is being amended so as to provide that no information obtained under sections 150 and 151 shall be used for the purposes of any proceedings under the Act without giving an opportunity of being heard to the person concerned.

Comments: By this amendment information shall be used for the purposes of any proceedings under the Act but giving an opportunity of being heard to the person concerned.

14. Jurisdictional Commissioner empowered to collect information- Section 168 of the CGST Act: Clause 112 of the Finance Bill

Section 168 of the CGST Act is being amended to enable the jurisdictional commissioner to exercise powers under section 151 to call for information.

Comments: Seeks to enable the jurisdictional commissioner to exercise power to collect information on annual return.

15. Schedule II to the CGST Act omitted – Section 7 of the CGST Act: (Clause 113 of the Finance Bill)

Consequent to the amendment in section 7 of the CGST Act paragraph 7 of Schedule II to the CGST Act is being omitted retrospectively, with effect from the 1st July, 2017.

Comments: Consequent to the insertion of sub-clause (aa) in Section 7(1) of the CGST Act paragraph 7 of Schedule II to the CGST Act is being omitted.

16. SEZ provisions amended – Section 16 of the IGST Act: ( Clause 114 of the Finance Bill)

Section 16 of the IGST Act is being amended so as to:

(i) zero rate the supply of goods or services to a Special Economic Zone developer or a Special Economic Zone unit only when the said supply is for authorised operations;

(ii) restrict the zero-rated supply on payment of integrated tax only to a notified class of taxpayers or notified supplies of goods or services; and

(iii) link the foreign exchange remittance in case of export of goods with refund.

Comments: Only supplies to SEZ or developer of SEZ qualify as zero-rated, which are used for the authorised operations and restricted the zero-rated supply on payment of IGST only to a notified class of taxpayers or notified supplies of goods or services and link non realisation of export sales proceeds of goods exported liable for refund so received along with interest after expiry of prescribed time under Foreign Exchange Management Act, 1999.

Now notified class of taxpayer of goods/services eligible to export on payment of IGST and claiming refund unlike all persons u/r 96(10) and other option left to claim refund of the accumulated ITC u/s 54 of the CGST Act and Rules.