CHANGES IN CGST ACT, 2017
1. Composition taxpayers are permitted to make intra-state supplies of goods through E-commerce operators [Clause No.128 of Finance Bill, 2023]
Section 10(2) and section 10(2A) of the CGST Act,2017 has been proposed to be amended to allow composition taxpayers to make intra-state supplies of “goods” through E-commerce operators.
H&A Comments: Small taxpayers (upto 1.5Crs of aggregate supplies in a year) have an option to pay GST at the composition rate of 1%/2% instead of the normal rate. However, this option is subject to certain conditions, one such condition is that the taxpayer should not be supplying goods though E- Commerce Operators (ECOs). This amendment relaxes this condition and the person opting to make the payment of tax at composition rate may also supply goods through e-commerce operator and charging the composition rate. The restriction for supply of service though ECOs continues.
Impact: This would help the composition dealer also to explore sales through ECOs without additional tax burden.
2. Alignment of ITC reversal to the return filing system [Clause No.129 of Finance Bill, 2023]
Second proviso to Section 16(2) of the CGST Act, 2017 has been amended to re-worded from ‘added to his output tax liability, along with interest thereon’ to pay by him along with interest payable under section 50. Further, the third proviso to Section 16(2) is proposed to be amended to clarify that the recipient is entitled to re-avail the ITC on making of payment towards value of supply along with tax payable to the supplier.
H&A Comments: The above proviso provides for the recipient to reverse the ITC availed by way of addition to the output tax liability along with interest where he fails to make payment to the supplier an amount towards the value of supply along with tax payable within 180 days from the date of issue of invoice. The proposed amendment aligns the provisions of law with the mechanism available on the GST portal which provides for reversal of ITC in case such failure to make payment to the supplier within 180 days from the date of invoice under Table 4(B)(2) of GSTR-3B. The ITC so reversed can be subsequently re-availed in Table 4(A)(5) of GSTR-3B with corresponding disclosure in Table 4(D)(1) of GSTR-3B upon payment of value with taxes to the supplier.
Impact: More of alignment of theory with practice. Clarity on rate of interest since the same is referring to the interest section (section 50).
3. Value of exempt supply for the apportionment of the common input tax credit to include supply of warehoused goods before clearance for home consumption [Clause No.130(a) of Finance Bill, 2023]
Explanation to Section 17(3) is proposed to be amended to further include supply of warehoused goods before clearance for home consumption (Paragraph 8(a) of Schedule III) within the ambit of exempt supply for the purpose of reversal of ITC under Section 17(2) r/w Rule 42 and Rule 43 of the CGST Rules, 2017.
H&A Comments: Section 17(2) of the CGST Act restricts the availability of ITC to the extent attributable to taxable supplies. Explanation to Section 17(3) provides that exempt supply for this purpose would exclude the value of activities or transactions specified in Schedule III (activities or transactions which are treated neither as supply of goods nor as supply of services). The activity of supply of the imported warehoused goods before clearance for home consumption (this is because the person filing the bill of entry i.e. the buyer would be paying IGST under The Customs Act, and would result in double payment if not excluded from supply) would be is also part of the schedule. Now the ITC of inputs, input services and capital goods attributable to such supply needs to be reversed.
Impact: The importer would be incurring various expenditure such as clearing and forwarding, CHA Charges, port charges, handling charges, freight etc. and GST would have been paid on the same. Hitherto to this amendment such supplier would have claimed exemption from tax on sale and would have also enjoyed the input tax credit. Now the input tax credit of the entire direct expenses pertaining to such sale and purchase along with proportionate common credit would be restricted.
4. ITC restricted on goods and services in relation to CSR activities [Clause No.130(b) of Finance Bill, 2023]
Clause (fa) is proposed to be inserted under Section 17(5) of the CGST Act to restrict availability of ITC in respect of goods or services or both received by a taxable person, which are used or intended to be used for activities of corporate social responsibility (CSR) as provided for under Section 135 of the Companies Act, 2013.
H&A Comments: Section 17(5) provides the list of the blocked credit. Goods and service received for the CSR activities is added to this, thereby restricting the input tax credit. The expenditure related to business is eligible for the credit, CSR being a mandated activity as per the Companies Act could have been considered as business related expenses for the purpose of input tax credit. This was also ruled in some Advance Rulings. This proposed amendment nullifies such ruling.
Impact: The ITC cannot be availed for such goods and services used for fulfilling the CSR obligation henceforth. The credit for the past would be eligible, since the intention of law to restrict such credit has been expressed only with this amendment. Further any voluntary CSR other than mandated by Companies Act, 2013 shall be eligible for ITC.
5. Clarity provided for exemption from registration [Clause No.131 of Finance Bill, 2023]
Amendment to Section 23 of the CGST Act, 2017 to override Section 22(1) and Section 24. This has been proposed retrospectively w.e.f., 01.07.2017
H&A Comments: Section 22 provides for registration requirement; section 23 provides for exemption from registration and section 24 provides the cases where mandatory registration is required. Under section 23, agriculturist, person engaged in exclusive exempted supplies and notified person were exempted from registration which overrides section 22 and 24.
Impact: Section 24 provides mandatory registration for person liable to pay tax under reverse charge mechanism. There are certain goods and services where tax need be paid by registered person (say cashew nuts, bidi leaves, GST, renting of residential dwelling). In such case it is clear that if the person is exclusive providing exempted supply and received GTA service there is no need for registration and payment of tax.
6. Time limit for filing GSTR-1 [Clause No.132 of Finance Bill, 2023]
Sub-section (5) to Section 37 of the CGST Act is proposed to be inserted to restrict a registered person from filing return in Form GSTR-1 under Section 37 after the expiry of a period of 3 years from the due date. However, the power is conferred upon the Government, by way of a notification subject to such conditions and restrictions, to allow a registered person or a class of registered persons to furnish the return in Form GSTR-1 even after the expiry of the said period of three years.
H&A Comments: GSTR-1 is a return for communicating the details of the outward supplies monthly, which needs to be filed before 11of the next month. This could have been filed along with late filing fee beyond the due date. With this amendment one cannot file the GSTR-1 after the expiry of a period of 3 years.
Impact: Where GSTR-1 for a tax period is not furnished by the supplier, then the supplier is restricted from filing GSTR-3B for the said period as well as GSTR-1 for the subsequent tax periods. Further Section 29 of the CGST Act, confers powers on the proper officer to cancel the registration where the returns are not furnished for a continuous period of 6 months. Therefore, the practical implications of the said restriction would be required to be tested. Further, in case where cancellation of registration is subsequently revoked upon appeal by the assessee, subject to furnishing of pending returns, where the said time limit of 3 years has expired, then the operationality of this provision may come into question.
7. Time Limit for GSTR-3B [Clause No.133 of Finance Bill, 2023]
Sub-section (11) to Section 39 of the CGST Act is proposed to be inserted to restrict a registered person from filing return in Form GSTR-3B under Section 39 after the expiry of a period of 3 years from the due date of furnishing the return for the said tax period. However, the power is conferred upon the Government, by way of a notification subject to such conditions and restrictions, to allow a registered person or a class of registered persons to furnish the return in Form GSTR-3B even after the expiry of the said period of three years.
H&A Comments: GSTR-3B is a return, which needs to be filed before 20th of the next month. This could have been filed along with late filing fee beyond the due date. With this amendment one cannot file the GSTR-3B after the expiry of a period of 3 years.
Impact: Where GSTR-3B for a tax period is not furnished by the supplier, then the supplier is restricted from filing GSTR-3B for the subsequent tax periods. Further Section 29 of the CGST Act, confers powers on the proper officer to cancel the registration where the returns are not furnished for a continuous period of 6 months. Therefore, the practical implications of the said restriction would be required to be tested. Further, in case where cancellation of registration is subsequently revoked upon appeal by the assessee, subject to furnishing of pending returns, where the said time limit of 3 years has expired, then the operationality of this provision may come into question.
8. Time Limit for GSTR 9 [Clause 134 of Finance Bill 2023]
Section 44 (2) of the CGST Act is proposed to be inserted to restrict a registered person from filing return in Form GSTR-9 after the expiry of a period of 3 years from the due date of furnishing the return for the said tax period. However, the power is conferred upon the Government, by way of a notification subject to such conditions and restrictions, to allow a registered person or a class of registered persons to furnish the return in Form GSTR-9 even
after the expiry of the said period of three years.
H&A Comments: GSTR-9 is an annual return, which needs to be filed before 31st December of the next financial year. This could have been filed along with late filing fee beyond the due date. With this amendment one cannot file the GSTR-9 after the expiry of a period of 3 years.
9. Time Limit for GSTR-8 [Clause 135 of Finance Bill 2023]
Section 52 (15) of the CGST Act is proposed to be inserted to restrict a registered person from filing return in Form GSTR-8 after the expiry of a period of 3 years from the due date of furnishing the return for the said tax period. However, the power is conferred upon the Government, by way of a notification subject to such conditions and restrictions, to allow a registered person or a class of registered persons to furnish the return in Form GSTR-8 even after the expiry of the said period of three years.
H&A Comments: GSTR-8 is monthly return, which needs to be filed before10th of the next month. This could have been filed along with late filing fee beyond the due date. With this amendment one cannot file the GSTR-8 after the expiry of a period of 3 years.
10. Correction in provisional refund for exporters [Clause 136 of Finance Bill 2023]
It is prosed to amend Sub-section (6) of Section 54 so as to provide that the refund on provisional basis, shall be calculated at 90% of the amount of refund claimed. The words “excluding the amount of input tax credit claimed on provisional basis” has been proposed to be omitted.
H&A Comments: Section 54(6) provides for the payment of 90% of the refund to exporter. However, the 90% has an excluded the provisional credit. The provisional credit scheme was provided under section 42 of the Act, at the beginning of GST, later the same was omitted and concept of provisional credit is done away with and hence such exclusion here would be irrelevant, there by this rectification amendment.
11. Powers provided for computing the interest in delay in refund. [Clause 137 of Finance Bill 2023]
It is proposed to substitute the wordings of section 56 of the Act, for the words “from the date immediately after the expiry of sixty days from the date of receipt of application under the said subsection till the date of refund of such tax”, the words “for the period of delay beyond sixty days from the date of receipt of such application till the date of refund of such tax, to be computed in such manner and subject to such conditions and restrictions as may be prescribed” shall be substituted.
H&A Comments: Section 56 provides for interest in case of delay in refund beyond 60 days. The proposed amendment intends to provide a basis of calculation of interest on delayed refunds in such manner and subject to such conditions and restrictions. That shall be provided in the Rules to be made post enactment of this section. While there seems to be no change in the period for which interest shall be granted.
12. Penalty proposed for e-commerce operators [Clause 138 of Finance Bill 2023]
It is proposed to insert a new sub-section, sub-section (1B) after sub-section (1A) in Section 122 of the Act so as to provide penal provisions applicable to E-commerce operators in case there is non-compliance of any of the provisions made in relation to supply of gods made through the said ECO by unregistered persons or composition tax payers.
A penalty amounting to rupees ten thousand or an amount equivalent to the amount of tax involved had such supply been made by a registered person other than a person paying tax under section 10, whichever is higher, has ben proposed on the following offences –
a) allows a supply of goods or services or both through it by an unregistered person other than a person exempted from registration by a notification issued under this Act to make such supply;
b) allows an inter-State supply of goods or services or both through it by a person who is not eligible to make such inter-State supply; or
c) fails to furnish the correct details in the statement to be furnished under sub-section (4) of section 52 of any outward supply of goods effected through it by a person exempted 99from obtaining registration under this Act,
H&A Comments: The above amendment has been proposed with a view to provide for a specific penalty in case the E-commerce operators are not ensuring compliance in terms of the provisions laid down under Section 52 of the Act. Further, due care has to be given by the ECO wherever any unregistered person has been allowed to make supplies through it in terms of specific exemptions from taking registration even if a person is making supplies through an e-commerce operator.
13. Changes in prosecution provisions [Clause No. 140 of Finance Bill, 2023]
Section 132 has been proposed to amend by deleting the following offences
(g) obstructs or prevents any officer in the discharge of his duties under this Act;
(j) tampers with or destroys any material evidence or documents;
(k) fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information;
H&A Comments: This is part of the de-criminalization activity which is not of very serios offence.
14. Changes in Compounding of offences [Clause No. 140 of Finance Bill, 2023]
1. The restriction for compounding of the offence in case where the assessee had been allowed to compound an offence committed under clause (h) of Sec 132 (i.e., concerns himself in any way with any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules), or under clause (i)(i.e., receives or in any way concerned with supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the Rules) for the value more than Rs. 1 crore is now proposed to restrict the compounding of the offence irrespective of the value involved in the offence.
2. If a person is accused of committing an offence under this act or any other act for the time being in force is prohibited from compounding of the offence is now proposed to impose such restriction only on the person who issues fake invoicing without supply.
3. The corresponding effect of decriminalization of offences has been made under the provisions of compounding of the offences.
4. The amount for compounding of the offences is minimum of not less than Rs.10,000 or 50% of tax whichever is higher and the maximum amount not less than Rs.30,000 or 150% of the tax involved whichever is higher. It is proposed to reduce the amount for compounding of the offences to minimum of 25% of the taxes and maximum of not less than 100% of the taxes.
H&A Comments: The government has proposed to reduce the compounding fee in order to reduce the litigation and provide an opportunity for the taxpayer correct himself.
15. Power of government to share the information of the taxpayer. [Clause No. 141 of Finance Bill, 2023]
Sec 158A is proposed to be inserted to enable the government to share the following information with prior consent of the supplier:
1. Particulars details given for registration under section 25 or in the return filed under section 39 or under section 44;
2. The particulars uploaded on the common portal for preparation of invoice, the details of outward supplies furnished under section 37 and the particulars uploaded on the common portal for generation of documents under section 68;
3. Such other details as may be prescribed;
Further the details as mentioned in point 2 and any other details which discloses the identity of the recipient would be shared on prior consent of the recipient.
It is also provided that the government or the common portal cannot be sued for any additional liability to the registered person due to sharing of the information and the liability of the taxpayer would not have any impact.
H&A Comments: With effect of this proposed change the government would have the power to share the information available like details provided at the time of registration, GSTR 3B, GSTR 9 and 9C, E-invoice, GSTR 1, E-way bill and any other details. Even the taxpayer would not have any power to sue the government for any liability arising out of such disclosure.
16. Retrospective applicability of changes made in Schedule III of CGST Act on 1.2.2019 [Clause No. 142 of Finance Bill, 2023]
Through CGST (Amendment) Act, 2018 w.e.f 1.2.2019, the following provisions are inserted under schedule III:
- Supply of goods from a place in the non-taxable territory to another place in the non- taxable territory without such goods entering into India.
- Supply of warehoused goods to any person before clearance for home consumption.
- Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.
The explanation 2, for the expression "warehoused goods" shall have the same meaning as assigned to it in the Customs Act, 1962 (50 of 1962).
Now, it is proposed that these provisions would have retrospective effect from 1.7.2017. However, it is clarified that the refund would not be granted in cases where the taxes are already paid to the government.
H&A Comments: The proposed amendment clarifies that supply of goods without such goods entering India, high seas sales and sale of warehoused goods before clearance for home consumption would not be taxable under GST from 1.07.2017 which would reduce the dispute from the department for demanding taxes for the period from 1.07.2017 to 31.1.2019 where there was uncertainty on taxability of these transaction. However, the government has clarified that refund would not be granted where the taxes were actually paid.
Article has been contributed by: Adv. Venkatanarayan and CA Ramya C
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