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The Hon’ble Finance Minister of India presented the Final Union Budget 2024-25, under the new government with a compelling focus on employment, skilling, MSMEs, and the middle class. The budget unveiled, proposes significant tax and regulatory reforms to streamline procedures, ease compliances, reducing litigations etc.
The key proposals in indirect taxation relate to simplification of the current legal framework by proposing amendments to further simplify and rationalize tax structure. While proposals under Customs were undertaken to rationalize rate structure and simplify ease in trade, reduction in disputes etc., the proposals under GST laws were announced to implement the changes recommended in the 53rd Council meeting held on 22 June 2024.
Key amendments proposed under GST law:
- Availability of Input Tax Credit (ITC) for FY 2017-18, FY 2018-19, FY 2019-20 and FY 2020-21 in any GSTR-3B filed up to 30 November 2021. This proposal is a significant move which will culminate all the disputes wherein the ITC had been availed after the time limit as specified under section 16(4) of the Central Goods and Service Tax (CGST) Act, 2017. However, the registered persons who have reversed the ITC shall not be allowed to re-avail or claim the refund of the same.
- Further, if the registration of a registered person was cancelled and the said cancellation was subsequently revoked, the said person shall be eligible to claim ITC subject to the conditions specified.
- Amendment in Section 17(5) of the CGST Act, to restrict the non-availability of ITC in respect of tax paid under section 74 for demands up to Financial Year 2023-24. It also removes reference to sections 129 (Detention, seizure and release of goods and conveyances in transit) and section 130 (Confiscation of goods or conveyances and levy of penalty). From FY 2024-25, there would be no blockage of ITC for taxes paid by the supplier under demand raised by the assessing authorities ensuring that such persons are not penalized for disputed to be resolved subsequently.
- Amendment in Section 31(3)(f) of the CGST Act, to incorporate an enabling provision for prescribing the time period for issuance of invoice by the recipient in case of supplies from unregistered persons under reverse charge mechanism supplies.
- For all registered persons who are required to deduct TDS shall mandatorily furnish electronically Form GSTR-7, irrespective of whether any deduction has been made in the said month or not. Presently, return is to be filed only in case where TDS has been deducted.
- Insertion of section 54(15) in the CGST Act to provide that no refund of unutilized ITC or integrated tax shall be allowed in cases of zero-rated supply of goods where such goods are subjected to export duty.
- Presently, under section 70 of the CGST Act, 2017, only the person to whom summons have been issued can attend the summons. However, section 70(1A) is proposed to be inserted, to enable an authorized representative to appear on behalf of the summoned person before the proper officer in compliance of summons issued by the said officer.
- The provisions of section 73(12) and section 74(12) of the CGST Act, 2017 would be applicable only till the FY 2023-24.
- Insertion of section 74A in the CGST Act, to provide for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason pertaining to the Financial Year 2024-25 onwards. It also provides limitation period for issuing demand notices (42 months from the due date for furnishing of annual return for the relevant FY) and orders (12 months from the date of issue of notice plus extension of 6 months as granted by appropriate authority) in respect of demands from the FY 2024-25 onwards, irrespective of whether the charges of fraud, willful misstatement, or suppression of facts are invoked or not. However, a higher penalty, for cases involving fraud, willful misstatement, or suppression of facts has been proposed. The said provision aligns the timelines for issuing notices and orders irrespective of whether the charges of fraud, willful misstatement, or suppression of facts are invoked or not.
The below table provides the comparison of timelines and penalty between section 73, section 74 of the CGST Act, 2017 & proposed section 74A for easy understanding.
Comparison of timelines for issuance of notices and orders under section 73, section 74 of the CGST Act, 2017 & proposed section 74A
| Particulars | Cases other than fraud, willful misstatement, or suppression of facts | Cases involving fraud, willful misstatement, or suppression of facts | ||
| Section 73 up to 2023-24 | Section 74A From 2024-25 onwards | Section 74 up to 2023-24 | Section 74A From 2024-25 onwards | |
| Time limit for issuance of notice | 3 months prior to the time limit of issuance of order | 42 months from the due date for furnishing of annual return or erroneous refund | 6 months prior to the time limit of issuance of order | 42 months from the due date for furnishing of annual return or erroneous refund |
| Time limit for issuance of order | 3 years from the due date for furnishing of annual return or erroneous refund | 12 months from the date of issue of notice plus extension of 6 months as granted by appropriate authority | 5 years from the due date for furnishing of annual return or erroneous refund | 12 months from the date of issue of notice plus extension of 6 months as granted by appropriate authority |
Comparison of penalty prescribed under section 73, section 74 of CGST Act, 2017 & proposed section 74A
| Particulars | Cases other than fraud, willful misstatement, or suppression of facts | Cases involving fraud, willful misstatement, or suppression of facts | ||
| If tax & interest is paid | Section 73 up to 2023-24 | Section 74A From 2024-25 onwards | Section 74 up to 2023-24 | Section 74A From 2024-25 onwards |
| Voluntary before service of SCN | NIL | NIL | 15% | 15% |
| Within specified days of issuing SCN | NIL
If tax & interest is paid within 30 days |
NIL
If tax & interest is paid within 60 days |
25% penalty
If tax & interest is paid within 30 days |
25% penalty
If tax & interest is paid within 60 days |
| Within specified days of communication of order | 10% of tax or 10,000 Whichever is higher (paid within 30 days) | 10% of tax or 10,000 Whichever is higher
(paid within 60 days) |
50% penalty If tax & interest is paid within 30 days of communication of order | 50% penalty If tax & interest is paid within 60 days of communication of order |
| After specified days of communication of order | 10% of tax
or 10,000 Whichever is higher (paid after 30 days) |
10% of tax
or 10,000 Whichever is higher (paid after 60 days) |
100% | 100% |
- Reduction in the maximum amount of pre-deposit for filing appeal before the Appellate Authority from INR.25 crores to INR.20 crores in central tax.
- Amendment in Section 109 of the CGST Act, to empower the Government to notify types of cases that shall be heard only by the Principal Bench of the Appellate Tribunal.
- Amending Sub-sections (1) and (3) of section 112 of the CGST Act, to empower the Government to notify the date for filing appeal before the Appellate Tribunal and provide a revised time limit for filing appeals or application before the Appellate Tribunal. The said amendment is made effective from the 1 August 2024.
- Reduction in the amount of pre-deposit for filing appeals before the Appellate Tribunal from the existing 20% to 10% of the tax in dispute and also reduction in the maximum amount payable as pre-deposit from INR.50 crores to INR.20 crores in central tax.
- Insertion of section 128A in the CGST Act, to provide for an amnesty scheme for conditional waiver of interest and penalty in respect of demand notices issued under section 73 of the said Act for the FY 2017-18, FY 2018-19 and FY 2019-20, except the demand notices in respect of erroneous refund. It has been clarified that in cases where interest and penalties have already been paid in respect of any demand for the said financial years, no refund shall be admissible for the same.
- Amendment in section 140(7) of the CGST Act to enable availment of the transitional credit of eligible CENVAT credit on account of input services received by an Input Services Distributor prior to the appointed day, for which invoices were also received prior to the appointed date. The said amendment is made effective from 1 July 2017.
- Insertion of Paragraph 9 in Schedule III to the CGST Act,2017 to provide for activity of apportionment of co-insurance premiums by the lead insurer to the co-insurers in the co-insurance agreement shall neither be treated as supply of good nor supply of services provided that the lead insurer pays the tax liability on the entire amount of premium paid by the insured. Further, insertion of Paragraph 10 covers services by the insurer to the re-insurer, for which the ceding/reinsurance commission is deducted from reinsurance premium paid by the insurer to the reinsurer if tax liability on the gross reinsurance premium inclusive of reinsurance commission or the ceding commission is paid by the reinsure.
- Amendment in section 20 in the Integrated Goods and Services Tax (IGST) Act to reduce the maximum amount of pre-deposit payable for filing appeal before appellate authority from INR.50 crores to INR.40 crores of integrated tax. Further, it proposes to reduce the maximum amount payable as pre-deposit for filing appeal before the Appellate Tribunal from INR.100 crores to INR.40 crores of integrated tax.
- Amendment in section 16(4) of the IGST Act, to provide for notification of:
- class of persons who may make zero rated supplies of goods or services or both
- class of goods or services which may be supplied on zero rated basis (Previously, the benefit was provided only to the extent of goods or services exported. With the amendment, the scope has been widened to includes supplies to SEZ units/developers as well).
and refund of integrated tax in respect of which can be claimed, in accordance with the provisions of Section 54 of the CGST Act, subject to such conditions, safeguards and procedures as may be prescribed.
- Insertion of Section 16(5) in the IGST Act to provide that no refund on account of a zero-rated supply of goods shall be allowed in cases where they are subjected to export duty.
Several other amendments are proposed in the Finance Bill, 2024 while the focus on the present paper has been limited to the key announcements. Overall, the Union Budget 2024-25 has addressed multifaceted challenges faced by the registered persons and has introduced measures for streamlining the same. As the implementation unfolds, the budget’s success will be measured by its ability to translate policy announcements into tangible benefits for the economy and the general public.
The insights have been authored by Mr. Umang Shah (Asst. General Manager – GST) RSM India. Views expressed by the author are personal.
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Whether ITC available , if Supplier reported invoices in GSTR1 filed after the due date during FY2017-20 ?