Article explains Proposed GST Amendments under Finance Bill 2021. These amendments include GST on The activities or transactions, by a person, other than an individual, to its members or constituents or vice versa, for cash, deferred payment or other valuable consideration, New section 16(2)(aa), Omission of Requirement of GST Audit,  Amendment of Section  44 of the CGST Act related to GSTR-9C GST Reconciliation Statement, Amendment in Provision related to Interest on Gross Liabilities Under Section 50(1) etc.

S. No. Section Provisions to be Proposed- Present Provisions
1. 7(1)(aa) of the CGST Act The activities or transactions, by a person, other than an individual, to its members or constituents or vice versa, for cash, deferred payment or other valuable consideration.

Explanation.––For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another.

New Section
According to this proposed section activities or transactions made by any association or club etc. to its members shall be treated as supply of goods or services. This section shall create plethora of litigations if it is implemented with effect from 01-07-2017 as proposed in Finance Bill.
2. 16(2)(aa) of the CGST Act “(aa) the details of the invoice or debit note referred to in clause (a) has 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 in the manner specified under section 37;”. New Section
Rule 36(4) as inserted on 09-10-2019 that the Registered Person can avail input tax credit towards tax invoices or debit notes which had not been furnished by the Supplier in GSTR-1up to prescribed percentage of eligible input tax credit. At present such percentage is five percent. But there were no such corresponding provisions under the Act.

Therefore, the Government has proposed to insert this provision under the Act.

3. 35(5) of the CGST Act Omitted 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 form58 and manner as may be prescribed.
According to this proposed section GST Reconciliation Statement in Form GSTR-9C (GST Audit) shall be done away prospectively. The GST Department tweets that GST Audit shall be applicable for 2019-20 and 2020-21. Last date to furnish GSTR-9C is 28-02-2021.
4. 44 of the CGST Act Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person shall furnish an annual return which may include a self certified reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statement for every financial year electronically, within such time and in such form and in such manner as may be prescribed:

Provided that the Commissioner may, on the recommendations of the Council, by notification, exempt any class of registered persons from filing annual return under this section:

Provided further that nothing contained in this section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.

Present provisions covered both in regard of GSTR-9 Annual Return and GSTR-9C GST Reconciliation Statement
In place of GSTR-9C (Reconciliation Statement furnished by CA or Cost Accountant etc.) the Government has proposed to furnish self certified reconciliation statement along with GSTR-9 Annual Return.

My observation is that any lacuna and discrepancies in books of account in regard of GST shall be pointed by the Auditor through tax audit report done under the Income Tax Law, therefore, double audit on same books of account should not be required.

5. Proviso to section 50(1) of the CGST Act “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.

Present proviso asks to pay interest on tax payable i.e. gross tax payable.
The Government has already clarified on this point to make payment of interest on net tax liability with effect from 01-07-2017. To make the law such proviso has been proposed to insert under the Act.
6. Amend in explanation 1 clause ii of section 74 of the CGST Act In section 74 of the Central Goods and Services Tax Act, in Explanation 1, in clause (ii), for the words and figures “sections 122, 125, 129 and 130”, the words and figures “sections 122 and 125” shall be substituted. (ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded.
According to proposed amendments in section 74 that proceedings in regard to e-way bills matters shall be dealt separately, not be covered under section 74.
7. Explanation to section 75(12) of the CGST Act ‘Explanation.––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. Notwithstanding anything contained in section 73 or section 74, where any amount of self- assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79.
This proposed explanation shall enhance the area of “self-assessed tax”. Now tax liability according to outward supply furnished through GSTR-1 as per section 37 shall be treated as self-assessed tax. The Government may recover the tax which shall be liable as per GSTR-1.
8. 83(1) of the CGST Act 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. (1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, 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 in such manner as may be prescribed.
At present the attachment of property including bank account shall be done belonging to the taxable person. But under proposed section such attachment may be done belonging to any person including taxable person. Any person means as per section 122(1A) who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted,…

(i)  supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

(ii)  issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder;

(vii) takes or utilizes input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;

(ix)  takes or distributes input tax credit in contravention of section 20, or the rules made thereunder;

9. Proviso to Section 107(6) of the CGST Act 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 New Proviso
In general appeal shall be filed subject to payment of ten per cent of the penalty but it has been proposed in the case of penalty imposed for e-way bill matter then appeal shall be filed subject to payment of twenty five percent of penalty.
10. Sub clauses (a) and (b) in section (1) of section 129 of the CGST Act “(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;

 

(b) on payment of penalty equal to fifty per cent of the value of the goods or two hundred per cent of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty;”

(a) on payment of the applicable tax and penalty equal to one 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 tax and penalty;

 

(b) on payment of the applicable tax and penalty equal to the fifty per cent of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent of the value of goods or twenty five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty;

This section is asking about release of detained or seized goods subject to such payment under mentioned clauses.

Proposed changed in clause (a) is asking to make payment of penalty equal to 200 per cent of the tax payable. At present it is asking for payment of applicable tax and penalty equal to 100 per cent of tax payable. Under proposed clause tax payable amount has been replaced to penalty amount. Quantum of Payment to be made as per present clause and proposed clause are equal to each other but nature of payment has been changed. At present there may be tax of Rs.1000 and penalty of Rs.1000. Total of its is Rs.2000.00. Under proposed it shall also be Rs.2000 in account of penalty i.e. 200 per cent on tax payable amount.

Under proposed changed in clause (b) tax component has been removed and in place of tax component only penalty shall be paid.

11. Section 129(2) of the CGST Act Proposed to Omit (2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.
Section 67(6) is asking for releasing of goods so seized on provisional basis upon execution of a bond and furnishing of a security or on payment of applicable tax, interest and penalty payable.
12. Section 129(3) of the CGST Act “(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).”; (3) The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).
Under the proposed changed order shall be passed only for payment of penalty. At present order is passed for both payment of tax and penalty.
13. Section 129(4) of the CGST Act in sub-section (4), for the words “No tax, interest or penalty”, the words “No penalty” shall be substituted; No tax, interest or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.
Under proposed section only penalty word is substituted in place of tax, interest or penalty.
14. Section 129(6) of the CGST Act “(6) Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub- section (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3):

Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less:

Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer.”.

Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within fourteen days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130:

Provided that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fourteen days may be reduced by the proper officer.

Under the proposed amendment in section 129(6) of the CGST Act it has been asked that if payment of penalty is not made within 15 days of the date of receipt of order then goods or conveyance shall be liable to be sold or disposed of otherwise.

If conveyance is to be released then imposed penalty as per section 129(3) or one lakh rupees whichever is less, shall have to pay.

Fifteen days may be reduced by the officer if goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time.

15. Section 130 of the CGST Act In section 130 of the Central Goods and Services Tax Act,––

(a) in sub-section (1), for the words “Notwithstanding anything contained in this Act, if ”, the word “Where” shall be substituted;

(b) in sub-section (2), in the second proviso, for the words, brackets and figures “amount of penalty leviable under sub-section (1) of section 129”, the words “penalty equal to hundred per cent. of the tax payable on such goods” shall be substituted;

(c) sub-section (3) shall be omitted

(3) Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in sub- section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance.
16. Section 151 of the CGST Act 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 (1) The Commissioner may, if he considers that it is necessary so to do, by notification, direct that statistics may be collected relating to any matter dealt with by or in connection with this Act.

(2) Upon such notification being issued, the Commissioner, or any person authorised by him in this behalf, may call upon the concerned persons to furnish such information or returns, in such form and manner as may be prescribed, relating to any matter in respect of which statistics is to be collected.

17. Section 152 of the CGST Act In section 152 of the Central Goods and Services Tax Act,––

(a) in sub-section (1),––

(i) the words “of any individual return or part thereof” shall be omitted;

(ii) after the words “any proceedings under this Act”, the words “without giving an opportunity of being heard to the person concerned” shall be inserted;

(b) sub-section (2) shall be omitted.

(1) No information of any individual return or part thereof with respect to any matter given for the purposes of section 150 or section 151 shall, without the previous consent in writing of the concerned person or his authorised representative, be published in such manner so as to enable such particulars to be identified as referring to a particular person and no such information shall be used for the purpose of any proceedings under this Act.

(2) Except for the purposes of prosecution under this Act or any other Act for the time being in force, no person who is not engaged in the collection of statistics under this Act or compilation or computerisation thereof for the purposes of this Act, shall be permitted to see or have access to any information or any individual return referred to in section 151.

(3) Nothing in this section shall apply to the publication of any information relating to a class of taxable persons or class of transactions, if in the opinion of the Commissioner, it is desirable in the public interest to publish such information.

18. Section 168 of the CGST Act In section 168 of the Central Goods and Services Tax Act, in sub-section (2),––

(i) for the words, brackets and figures “sub-section (1) of section 44”, the word and figures “section 44” shall be substituted;

(ii) the words, brackets and figures “sub-section (1) of section 151,” shall be omitted

19 Schedule II of the CGST Act In Schedule II of the Central Goods and Services Tax Act, paragraph 7 shall be omitted and shall be deemed to have been omitted with effect from the 1st day of July, 2017. 7. The following shall be treated as supply of goods, namely:—

Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.

The proposed amendment in the Schedule II relating to the amendment in Section 7 of the CGST Act by inserting of new section 7(1)(aa) by which any activity or transaction made by the club or association to its members shall be treated as Supply of goods or services.
20. Section 16 of the IGST Act In the Integrated Goods and Services Tax Act, 2017, in section 16,

(a) in sub-section (1), in clause (b), after the words “supply of goods or services or both”, the words “for authorised operations” shall be inserted;

(b) for sub-section (3), the following sub-sections shall be substituted, namely:––

“(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed:

Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 for receipt of foreign exchange remittances, in such manner as may be prescribed.

(4) The Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification, specify––

(i) a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid;

(ii) a class of goods or services which may be exported on payment of integrated tax and the supplier of such

Major changes proposed in section16 of the IGST Act are as under:

1. At present any supply of goods or services made to SEZ unit/Developer is treated as zero rated supply. Under proposed amendment supply made in relation to authorised operations shall be treated as zero rated supply.

2. Rule 96B with effect from 23-03-2020 was inserted if payment not received within statutory time allowed under FEMA against export of goods then the exporter shall deposit the refund amount within prescribed period with interest. The provision has been inserted under Act for deposit the refund amount with interest within 30 days after the expiry of time limit prescribed under the Foreign Exchange Management Act, 1999 for receipt of foreign exchange remittances.

3. At present there is no restriction for making zero rated supply of goods or services with payment of tax and the exporter may claim refund also. Under proposed amendment the Government may notify such class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid;

4. The Government may also notify a class of goods or services which may be exported on payment of integrated tax and the supplier of such.

5. Now under proposed provision export with payment of tax shall be done by the notified persons and for such notified goods or services.

Compiled by: (PARVEEN KUMAR MAHAJAN) – Advocate

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