Clause by clause analysis of changes in GST vide Finance Bill 2020

1. As per Clause 116 of Finance Bill 2020 - In section 2 of CGST Act, 2017, in clause (114), for clauses (c) and (d), the following clauses shall be substituted, namely:-

"(c) Dadra and Nagar Haveli and Daman and Diu; (d) Ladakh;"

Comment - Ladakh has been inserted as Union Territory in the definition clause.

2. As per Clause 117 of Finance Bill 2020 - In section 10 of CGST Act, in sub-section (2), in clauses (b), (c) and (d), after the words "of goods", the words "or services" shall be inserted.

Comment- In the restriction list for Composition Levy, the word services has been added along with goods. Therefore now the supplier of services, providing the inter state services or supply through E Commerce Operator or services which are not leviable to tax, are not eligible to take composition Levy.

3. As per Clause 118 of Finance Bill 2020 - In section 16 of CGST Act, in sub-section (4), the words "invoice relating to such" shall be omitted.

Comment - As per the Existing provision of Sec 16(4)- "A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit not epertains or furnishing of the relevant annual return, whichever is earlier.[See Rule 37(4)]

4. As per Clause 119 of Finance Bill 2020 - In section 29 of CGST Act, in sub-section (1), for clause (c), the following clause shall be substituted, namely:- -

"(c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to opt out of the registration voluntarily made under sub-section (3) of section 25:".

Comment - As per Existing Provision of Sec 29(1)(c) the taxable person, other than the person registered under sub-section (3) of section 25, is no longer liable to be registered under section 22 o rsection 24.Now the person, who has taken registration voluntarily, can also apply for Cancellation of Registration.

Brief History - Prior to 23rd Jan 2018, no application for cancellation of registration can be made before the expiry of 1 year by the registered person taken registration voluntarily (Proviso to Rule 20(2)]. With the omission of this proviso vide Notification No 3/2018 - Central Tax dated 23rd Jan 2018, such person can submit the application for cancellation at any time after the date of registration.

5. As per Clause 120 of Finance Bill 2020 - In section 30 of CGST Act, in sub-section (1), for the proviso, the following proviso shall be substituted, namely:-

"Provided that such period may, on sufficient cause being shown, and for reasons to be recorded in writing, be extended,-

(a) by the Additional Commissioner or the Joint Commissioner, as the case may be, for a period not exceeding thirty days;
(b) by the Commissioner, for a further period not exceeding thirty days, beyond the period specified in clause (a)."

Comment - Revocation Period can be extended by Additional Commissioner/ Joint Commissioner by 30 days. This can be further extended by another 30 days (So total 60 days) by Commissioner.

6. As per Clause 121 of Finance Bill 2020 - In section 31 of CGST Act, in sub-section (2), for the proviso, the following proviso shall be substituted, namely:- -

"Provided that the Government may, on the recommendations of the Council, by notification,- -

(a) specify the categories of services or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed;

(b) subject to the condition mentioned therein, specify the categories of services in respect of which- - (i) any other document issued in relation to the supply shall be deemed to be a tax invoice; or (ii) tax invoice may not be issued.".

Comment - Existing proviso has been divided in two clauses giving the power to Govt for issuance of notifications.

In clause (a), Govt can specify the time limit and manner to issue the invoicefor certain category of services and

In the clause (b) Govt can notify that any document will be considered as Tax Invoice or Tax invoice is not at all require for certain category of services.

7. As per Clause 122 of Finance Bill 2020 - In section 51 of CGST Act,-

(a) For sub-section (3), the following sub-section shall be substituted, namely:- "(3) A certificate of tax deduction at source shall be issued in such form and in such manner as may be prescribed."

(b) Sub-section (4) shall be omitted."

Comment:- The existing provision require "Deductor shall furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the Government and such other particulars in such manner as may be prescribed.

Now the language has been modify and simply linked to rule without specifying any particular in the section itself.

Further there is a late fee of Rs100 per day subject to a maximum of Rs5,000 under section 51(4) of CGST Act for not furnishing the TDS Certificate within 5 days, has been omitted

8. As per Clause 123 of Finance Bill 2020 - In section 109 of CGST Act, in sub-section (6),-

(a) the words "except for the State of Jammu and Kashmir" shall be omitted;

(b) the first proviso shall be omitted.

Comment: - Section 109 is talking about Constitution of Appellate Tribunal and Benches thereof and necessary changes has been made for J&K.

9. As per Clause 124 of Finance Bill 2020 - In section 122 of CGST Act, after sub-section (1), the following sub-section shall be inserted, namely:-

"(1A) Any person 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, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on."

Comment: - Penalty for offences like Bogus Invoices, ITC on such Invoices etc has been extended to such person who retains the benefit and at whose instance such transaction is conducted. Penalty is equal to the tax evaded or ITC taken.

10. As per Clause 125 of Finance Bill 2020 - In section 132 of CGST Act, in sub-section (1),-

(i)For the words "Whoever commits any of the following offences", the words "Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences’’ shall be substituted;

(ii) For clause (c), the following clause shall be substituted, namely:- -

"(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;";

(iii) In sub-clause (e), the words, "fraudulently avails input tax credit" shall be omitted.

Comment: -

Prosecution has been extended to the person who commit or case to commit such offences. Also prosecution will be given to the person who retains the benefit from these offences.

Fraudulently avails input tax credit without any invoice or billwas mentioned earlier in the clause (e.) of Section 132(1) and now it has been omitted from there and added in the clause (b).

11. As per Clause 126 of Finance Bill 2020 -In section 140 of CGST Act, with effect from the 1st day of July, 2017,-

(a) in sub-section (1), after the words "existing law", the words "within such time and" shall be inserted and shall be deemed to have been inserted;

(b) in sub-section (2), after the words "appointed day", the words "within such time and" shall be inserted and shall be deemed to have been inserted;

(c) in sub-section (3), for the words "goods held in stock on the appointed day subject to", the words "goods held in stock on the appointed day, within such time and in such manner as may be prescribed, subject to" shall be substituted and shall be deemed to have been substituted;

(d) in sub-section (5), for the words "existing law", the words "existing law, within such time and in such manner as may be prescribed" shall be substituted and shall be deemed to have been substituted;

(e) in sub-section (6), for the words "goods held in stock on the appointed day subject to", the words "goods held in stock on the appointed day, within such time and in such manner as may be prescribed, subject to" shall be substituted and shall be deemed to have been substituted;

(f) in sub-section (7), for the words "credit under this Act even if", the words "credit under this Act, within such time and in such manner as may be prescribed, even if" shall be substituted and shall be deemed to have been substituted;

(g) in sub-section (8), for the words "in such manner", the words "within such time and in such manner" shall be substituted and shall be deemed to have been substituted;

(h) in sub-section (9), for the words "credit can be reclaimed subject to", the words "credit can be reclaimed within such time and in such manner as may be prescribed, subject to" shall be substituted and shall be deemed to have been substituted.

Comment: -

The word with in Such Time and Such manner has been added in Section 140, which means that the time limit can also be prescribed by the Govt. There may be certain relaxationby way of extension for TRAN-1 and TRAN-2 filling.

12. As per Clause 127 of Finance Bill 2020 -In section 168 of CGST Act, in sub-section (2), for the words, brackets and figures "sub-section (5) of section 66, sub-section (1) of section 143", the words, brackets and figures "sub-section (1) of section 143, except the second proviso thereof" shall be substituted.

Comment: - The commissioner specified in the second proviso to Section 143 will not be covered in Section 168. Second Proviso to Section 143(1) of CGST Act is as under -

[Provided further that the period of one year and three years may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively.]

13. As per Clause 128 of Finance Bill 2020 -In section 172 of CGST Act, in sub-section (1), in the proviso, for the words "three years", the words "five years" shall be substituted.

Comment:- Time period has been extended from 3 years to 5 years to issue the Order. This means that certain relaxation will be given by issuance of Removal of Difficulty Order.

14. As per Clause 129 of Finance Bill 2020 -In Schedule II to CGST Act, in paragraph 4, the words "whether or not for a consideration," at both the places where they occur, shall be omitted and shall be deemed to have been omitted with effect from the 1st day of July, 2017

Comment: - With and without Consideration word has been deleted in clause 4 of schedule II i.e. ‘Transfer of Business Assets’ with retrospective effect from 1st July 2017.

15. Retrospective exemption from, or levy or collection of, central tax in certain cases - As per Clause 130 of Finance Bill 2020(1) Notwithstanding anything contained in the notification issued by the Central Government, on the recommendations of the Council, in exercise of the powers under sub-section (1) of section 9 of CGST Act, 2017-

(i) no central tax shall be levied or collected in respect of supply of fishmeal (falling under heading 2301), during the period commencing from the 1st day of July, 2017 and ending with the 30th day of September, 2019 (both days inclusive);

(ii) Central tax at the rate of six per cent. shall be levied or collected in respect of supply of pulley, wheels and other parts (falling under heading 8483) and used as parts of agricultural machinery (falling under headings 8432, 8433 and 8436), during the period commencing from the 1st day of July, 2017 and ending with the 31stday of December, 2018 (both days inclusive).

(2) No refund shall be made of all such tax which has been collected, but which would not have been so collected, had sub-section (1) been in force at all material times.

Comment: -

1. Exemption on Supply of fishmeal has been given retrospectively from 1st July 2017 to till 30th Sep’ 2019

2. 6% CGST Rate for supply of pulley, wheels and other partsand used as parts of agricultural machinery has been specified from 1st July 2017 to till 31stDec’ 2018.

3. No refund shall be made.

16. As per Clause 131 of Finance Bill 2020 The notification dated the 30th September, 2019, issued by the Central Government, in exercise of the powers under clause (ii) of the proviso to sub-section (3) of section 54 of CGST Act, 2017, read with sub-section (2) of section 9 of GST (Compensation to States) Act, 2017, shall be deemed to have, and always to have, for all purposes, come into force on and from the 1st day of July, 2017.

Comment: - Notification No.3/2019-Compensation Cess (Rate) dated 30th September, 2019 has been issued to prescribe that no refund of unutilised input tax credit of compensation cess shall be allowedon ‘Tobacco and manufactured tobacco substitutes’. This restriction is effective from 1st July 2017.

Integrated Goods and Services Tax

17. As per Clause 132 of Finance Bill 2020In section 25 of the Integrated Goods and Services Tax Act, 2017, in sub-section (1), in the proviso, for the words "three years", the words "five years" shall be substituted.

Comment: - Similar to the clause 128 as explained above, Time period has been extended from 3 years to 5 years to issue the Order. This means that certain relaxation will be given by issuance of Removal of Difficulty Order.

18. As per Clause 133 of Finance Bill 2020- Same as Clause 130 (explained above) for Retrospective exemption from, or levy or collection of, central tax in certain cases.

Union Territory Goods and Services Tax

19. As per Clause 134 of Finance Bill 2020 In section 1 of UTGST Act, 2017, in sub-section (2), for the words "Dadra and Nagar Haveli, Daman and Diu", the words "Dadra and Nagar Haveli and Daman and Diu, Ladakh" shall be substituted

Comment - Ladakh has been inserted as Union Territory.

20. As per Clause 135of Finance Bill 2020In section 2 of the UTGST Act, in clause (8), for sub-clauses (iii) and (iv), the following sub-clauses shall be substituted, namely:- - "(iii) Dadra and Nagar Haveli and Daman and Diu; (iv) Ladakh;".

Comment: - Similar to the clause 116 (explained above), Ladakh has been inserted as Union Territory in the definition clause.

21. As per Clause 136 of Finance Bill 2020 In section 26 of the UTGST Act, in sub-section (1), in the proviso, for the words "three years", the words "five years" shall be substituted.

Comment: - Similar to the clause 128 as explained above, Time period has been extended from 3 years to 5 years to issue the Removal of Difficulty Order.

22. As per Clause 137of Finance Bill 2020Same as Clause 130 (explained above) for Retrospective exemption from, or levy or collection of, central tax in certain cases.

Goods and Services Tax (Compensation to States)

23. As per Clause 138of Finance Bill 2020In section 14 of the GST (Compensation to States) Act, 2017, in sub-section (1), in the proviso, for the words "three years", the words "five years" shall be substituted.

Comment: - Similar to the clause 128 as explained above, Time period has been extended from 3 years to 5 years to issue the Removal of Difficulty Order.