The GST Council recommended inter alia
i. To amend section 38 of CGST Act, 2017, and rule 60 of CGST Rules, 2017, to provide a legal framework in respect of the generation of FORM GSTR-2B based on the action taken by the taxpayers on the Invoice Management System (IMS).
ii. To amend section 34(2) of the CGST Act, 2017, to specifically provide for the requirement of reversal of input tax credit as is attributable to a credit note by the recipient, to enable the reduction of output tax liability of the supplier.
iii. To insert a new rule 67B in CGST Rules, 2017, to prescribe the manner in which the output tax liability of the supplier shall be adjusted against the credit note issued by him.
iv. To amend section 39 (1) of CGST Act, 2017, and rule 61 of CGST Rules, 2017, to provide that FORM GSTR-3B of a tax period shall be allowed to be filed only after FORM GSTR-2B of the said tax period is made available on the portal.
Our Comments
Section 34(2) of the CGST Act 2017 will be amended to specifically provide for the requirement of reversal of ITC as is attributable to a credit note by the recipient to enable the reduction of output tax liability of the supplier. As of now, the provision is only there u/s 15(3)(b)(ii) of the CGST Act for CNs issued for discount. Now for all CNs, the said provision will prevail.
Simultaneously, new rule 67B in CGST Rules, 2017 would be inserted to prescribe the manner in which the output tax liability of the supplier shall be adjusted against the credit note issued by him. Hence it seems that this rule will prescribe that in case the recipient rejects the CN, then the supplier has to pay tax as his output tax liability. Interest would also apply herein.
Section 39 (1) of CGST Act, 2017, and rule 61 of CGST Rules, 2017 will provide that FORM GSTR-3B of a tax period shall be allowed to be filed only after FORM GSTR-2B of the said tax period is made available on the portal. Hence, IMS is there to stay, and the GSTR-2B figures would flow only from IMS going forward, it seems.
Section 38 of the CGST Act, 2017, and rule 60 of the CGST Rules, 2017, may be amended to provide a legal framework in respect of the generation of FORM GSTR-2B based on the action taken by the taxpayers on the Invoice Management System (IMS). As of now, IMS is not recognized by law. Section 38 and Rule 60 still refer to 'auto-generated GSTR-2B.'
Simultaneously, with these amendments, it seems that the CNs would also be allowed to be kept pending as demanded by the Trade & Industry.
To bring supply of the sponsorship services provided by the body corporates under the Forward Charge Mechanism: Analysis of the 55th GST Council's decision
Sponsorship services were brought into reverse charge with the intention of reducing the compliance burden on small and unorganized associations and organizations that run on sponsorship from their constituents (members or non-members). Furthermore, it was difficult for the government also to track these associations and organizations. Most of these associations and organizations are non-profit organizations (NPOs).
However, it is seen nowadays that these NPOs have also become quite big and are already in possession of a GST registration for their other services. Furthermore, many of them are registered as a Section 25 company under the Companies Act 2013. In case their sponsorship services are on a reverse charge basis, then to such an extent the service recipients pay GST on sponsorship services and not these NPOs. This requires that these NPOs reverse their Input Tax Credit (ITC) proportionately. For example, in the case of GST paid membership fees that are on Forward Charge (FCM), it is Rs.50 Lakhs, and RCM paid sponsorship services are Rs.1 Crore, then such a taxpayer has to reverse 2/3 of its ITC. Such a reversal is a substantial cost to the NPO and increases its operational cost.
Hence, for those entities that are registered as body corporates, their services of sponsorship have been proposed to be on FCM rather than RCM. Therefore, they do not require reversing their ITC anymore.
However, many big NPOs are registered even as trusts or co-operative societies and not as a Section 25 company. For example, certain Chambers of Commerce are not registered as a company. The definition of 'body corporate' as per 13/2017 CT (R) is that "(b) "Body Corporate" has the same meaning as assigned to it in clause (11) of section 2 of the Companies Act, 2013," which states -
"Body corporate" or "corporation" includes a company incorporated outside India but does not include
(i) a cooperative society registered under any law relating to cooperative societies; and
(ii) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification, specify in this behalf.
Hence these entities would still be under RCM.
These entities may now go to the council again for further relaxation.
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