cgst act amendment

Budget 2021: Top 10 Proposals for GST Act Amendment

cgst act amendment

13.02.2021: The Ministry of Finance has put the below proposals to amend the CGST Act 2017 in budget 2021. After going through the below summary you will come to know the future impact of GST on your business.

The major changes include, increase in the penalty to release seized goods, GST Audit, zero-rated supply, and refund on exports. Thus, the government is trying to push further to stop fraud invoicing and fake Input tax credit availability.

1. Conditions for Claiming Input Tax Credit

the Section 16(2)(aa) to be inserted in CGST Act, 2017: Eligibility And Conditions For Taking Input Tax Credit as below:

The details of the invoice or debit note referred to in clause 16(2)(a) has been furnished by the supplier in the statement of outward supplies (GSTR-1) and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37.

Therefore, the Input Tax Credit to be taken only for those invoices whose details are reflected in GSTR-2A/ 2B i.e the respective suppliers (vendors) have filed their GSTR-1 return.

2. GST Audit

Sub-section 5(35) will be omitted. Therefore, no requirement for the taxpayers to get books of accounts audited by a CA or CMA. A registered person will have to self comply as and where necessary.

In this regard Section, 44 proposed to be substituted. Thus, the responsibility of reconciliation shifts to the taxpayer. The taxpayer is liable for filing the annual return required to self-certify the reconciliation statement(GSTR 9C).

3. Interest on delayed Payment of Tax

The government will amend sub Section 1 of section 50. This is to mention “Interest will be on net cash liability and not on gross tax liability“. Also, this will be effective from 01.07.2017.

Similarly, the explanation clause to section 74(1)(ii) will be substituted as below:

(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.

Therefore, the conclusion of proceedings will lead to conclusion of proceedings u/s. 73 or 74 and the proceedings u/s. 122 and 125 but not the proceedings u/s. 129 and 130.

Also, This makes the seizure and confiscation of goods and conveyances in transit a separate proceeding from the recovery of tax.

4. Zero Rated Supply

Section 16(1)(b) to substituted as below:

(b) supply of goods or services or both for authorized operations to a Special Economic Zone developer or a Special Economic Zone unit.

Therefore, this will provide the benefit of zero rating supply only to the supplies of SEZ developer or SEZ Unit which are for authorised operations and not for any other supplies.

5. Refunds on Export

Section 16(3) substituted with below changes.

Only notified class of taxpayer/notified class of goods/services shall be eligible for claiming a refund in case the supplies are made with payment of tax. ( IGST Refund)

Similarly, the recovery of refund claimed on account of zero-rated supplies, in case of non-realization of sale proceeds within the stipulated time prescribed under FEMA

Ruther, The government may restrict zero-rated supply on payment of IGST and claim a refund of IGST so paid only to,-

  • Specified class of persons;
  • Class of goods or services

6. GST on Supply by clubs, Associations and on its members

An explanation clause will be inserted in Section 7(1)(aa) = Scope Of Supply w.e.f 01.07.2017 as below:

  • 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.
  • The person (Other than an individual) 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.

Also, paragraph 7 in Schedule II has been proposed to be omitted w.e.f 1st July 2017

7. Self Assessment of Tax

The explanation clause to section 75(12) inserted as below.

Explanation.––For the purposes of this subsection, 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.

Thus, the tax officer can straight away initiate the recovery for the outward supply liability shown in the statement filled u/s 37, if not reflecting in the GSTR-3B

8. Appeal on detention of Goods and Vehicle

Section 107(6) in Appeals to Appellate Authority to be inserted.

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

Thus, to file an appeal, 25% of penalty i.e 50% of tax amount to be paid.

9. Penalty on confiscation of Goods

Below are the changes that will be effective after the amendment of section 129

• Instead of 100% tax and 100% penalty, now penalty of 200% of tax payable is applicable

• Transporter can get the conveyance released on payment of penalty or Rs. 1 lakh w/ever is less

• The proceedings under section 129 relating to detention, seizure, and release of goods and conveyances in transit, delinked from the proceedings under section 130 relating to the confiscation of goods or conveyances and levy of penalty.

• The proceedings under section 130 relating to the confiscation of goods or conveyances and levy of penalty delinked from the proceedings under section 129 relating to detention, seizure, and release of goods and conveyances in transit.

• Penalty of 100% of tax payable is applicable ( Section 130 (2) amended)

• Section 151 of the CGST Act 2017 amended so as to empower the jurisdictional commissioner to call for information from any person relating to any matters dealt with in connection with the Act

• Section 168 of the CGST Act, 2017 amended so as to enable the jurisdictional commissioner to exercise powers under section 151 to call for information

• Section 152(1) of the CGST Act, 2017 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.

10. Provisional attachment to protect Revenue

Section – 83 (Provisional attachment to protect revenue in certain  cases) to be substituted as below:

Where after the initiation during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74 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 subsection (1A) of section 122, in such manner as may be prescribed

Previous Changes in GST Act

28.07.2018: The GST Council has suggested certain amendments in the CGST Act, IGST Act, UTGST Act and the GST (Compensation to States) Act in 28th GST Council Meet.  These are as below:

1.Composition Scheme Turnover Limit :

The Higher limit of turnover for choosing for composition scheme may get a rise from Rs. 1 crore to Rs. 1.5 crore. Present limit of turnover can now be raised on the approvals of the Council.

2. Approval to Supply of Services to Composite Dealers:

Composition dealers to be permissible to supply services (other than restaurant services). This has further condition that dealers can supply the value of services up to 10% of turnover in the previous year or Rs. 5 lakh whichever is at higher side.

3. Reverse Charge Mechanism Applicability:

A tax of GST on reverse charge mechanism on receipt of supplies from unregistered dealers, to be applicable to only specified goods in case of certain notified classes of registered persons, on the approvals of the GST Council.

4. Threshold Exemption Limit to the Certain States:

The threshold exemption limit for registration in the States of Assam, Arunachal Pradesh, Himachal Pradesh, Meghalaya, Sikkim, and Uttarakhand may get an increase to Rs. 20 Lakhs from Rs. 10 Lakhs.

5. Multiple Registration in the same state:

Taxpayers may apply for multiple registrations within a State/Union territory in respect of multiple places of business situated within the same State/Union territory.

6. Mandatory Registration to E-Commerce:

Compulsory registration may require for only those e-commerce operators who require to collect tax at source.

7. Temporary suspension of Registration:

Registration to remain temporarily in suspense state while the cancellation of registration is under process so that the taxpayer need not keep himself binding with compliance under the existing law.

8. Supply or No supply:

The following transactions to be treated as no supply (no tax payable) under Schedule III:

a. Supply of goods from a place in the non-taxable region to another place in the non-taxable region without such goods arriving in India;

b. Supply of warehoused goods to any person before clearance for home consumption; and

c. Supply of goods in case of high sea sales.

9. Extension of Scope of Availing Input tax credit:

The possibility of input tax credit is being broadened, and it would now be made available in respect of the following:

a. Most of the activities or transactions stated in Schedule III;

b. Motor vehicles for transportation of persons having a seating capacity of more than thirteen (including the driver), vessels and aircraft;

c. Motor vehicles for transportation of money for or by a banking company or financial institution;

d. Services of general insurance, repair, and maintenance in respect of motor vehicles, vessels and aircraft on which credit is available; and

e. Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force.

10. Payment to the Supplier within 180 days:

In case the receiver fails to pay the due amount to the supplier within 180 days from the date of issue of invoice, the input tax credit(ITC) availed by the receiver will be reversed, but a liability to pay interest is being done away with.

11. Consolidated Credit note and Debit Notes:

Registered dealers may issue consolidated credit/debit notes in respect of multiple invoices issued in a Financial Year.

12. Amount of Filing an appeal:

Amount of pre-deposit payable for the filing of appeal before the Appellate Authority and the Appellate Tribunal to be covered at Rs. 25 Crores and Rs. 50 Crores, respectively.

13. Job work Period Extension:

Commissioner to allow to extend the time limit for return of inputs and capital sent on job work, up to a period of one year and two years, respectively.

14. Receipt of payment in INR for Exports:

Supply of services to qualify as exports, even if payment is received in Indian Rupees, where allowable by the RBI.

15. Identification of Place of supply:

Place of supply in case of job work of any treatment or process done on goods temporarily imported into India and then exported without putting them to any other use in India, to be outside India.

16. Recovery of Tax from Distinct Person:

Recovery of tax can be made from distinct persons, even if present in different State/Union territories.

17. Input Tax Credit Utilization:

The order of cross-utilization of input tax credit is being rationalized.

Please note that GST council will place these amendments before the Parliament and the legislature of State and Union territories with legislatures for carrying out the amendments in the respective GST Acts. Therefore this will come into existence only after such further approval. kindly keep visiting GST India News portal for Changes in GST Act Recommendations.

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