Comprehensive Guide to 13 Significant GST Changes w.e.f 1st Oct 2023

Changes affecting GST Liability

1. Ocean Freight on imported Goods

Ocean freight paid on import of goods where the supplier of services is a foreign shipping lineand trade-terms are CIF basis, was taxable on RCM and IGST was payable by importer.Now, an exemption has been granted to such services i.e. ocean freight charges paid to foreign shipping line on goods transported to India on CIF basiswill be exempt from tax.

So, all the persons who were dealing in import of goods on CIF basis through foreign shipping line and were paying RCM on ocean freight will not be required to do so from 1-10-2023. This position of law was established by Hon’ble SC in the case of Mohit Minerals since 24-5-2022 but has been incorporated in the provisions only since 1-10-2023.

It is important to note that persons importing goods on FOB basis through foreign shipping lines will still be liable to pay RCM on ocean freight since this becomes import of service, where,

Supplier of Ocean Freight - Foreign shipping line (Outside India)

Recipient of Ocean Freight - Importer (In India)

POS - Since the Sec 13(9) has been omitted since 1-10-2023, POS is place of importer i.e. India.

2. Online gaming brought into the tax-net

Online-Gaming Industry was stated to be in 28% tax-net bracket after the 50th and 51st GST Council Meeting. As decided in these council meetings, two new Acts, CGST (Amendment) Act, 2023 and IGST (Amendment) Act, 2023 were enacted on 18-8-2023. Through these laws the government has brought the Online-Gaming Industry into the tax-net.

As per Rule 31B of the CGST Rules, 2017 - Value of supply in case of online gaming including online money gamingis chargeable to GST on the total amount paid or payable to or deposited with the supplier by way of money or money’s worth.

Also,any amount returned or refunded by the supplier to the player for any reasons whatsoever, including player not using the amount paid or deposited with the supplier for participating in any event, shall not be deductible from the value of supply of online money gaming. i.e. tax  has to be paid on gross amount collected from player.

3. Value of supply of actionable claims in case of casino

Rule 31C of CGST Rules, 2017 has been introduced. It also states that tax on casino will be made on gross basis. Further no deduction will be made for amount returned. However, amount re-used after winning shall not be added to value of supply.

It is worthwhile to note that Rule 31B and Rule 31C are mandatory in nature and service providers will have to compulsorily calculate the value of supply according to this rule.

Inter/Intra status of transaction

Service of Transportation of Goods to a place outside India by aircraft/vessel - Tax has to be paid as CGST + SGST in case of transportation of goods by a registered person in India to registered person in India where goods are being transported to place outside India. This has been affectedthrough deletion of proviso to Sec 12(8). This proviso earlier stated that in case of export air freight and export ocean freight, even though between two persons registered in India, it will be chargeable to IGST.

Although such services were exempt butthat exemption was time-bound and was extended only till 30-09-2022. So, from 1-10-2022 to 30-9-2023, such services were liable to tax as inter-state supply.

Changes affecting ITC availability

1. Rule 42 and Rule 43 calculations have been amended

W.e.f. 1-10-2023, exempt supplies include the value of activities or transactions mentioned in sub-paragraph (a) of paragraph 8 of Schedule III of the Act i.e. Supply of warehoused goods to any person before clearance for home consumption.

The value of such exempt supplies shall be the value of supply of goods from Duty Free Shops at arrival terminal in international airports to the incoming passengers.

Just to recall value of exempt supplies already include supply of securities, RCM supplies and supply of land and building sold after completion certificate and one more supply i.e. supply of warehoused goods before clearance for home consumption is being added.

2. ITC denied on CSR Activities

Clause (fa) has been inserted in Sec 17(5) through which goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013.

3. Reversal of ITC on non-payment to Supplier within 180 days

Proviso to Sec 16 which talked about reversal of ITC by a recipient of service in case payment of taxable services along with tax has not been paid to the supplier within 180 days of invoice has been amended.

Now this proviso provides that if payment is not made ITC will be reversed and paid along with interest u/s 50.

This proviso before amendment stated that tax not paid within 180 days shall be added to output tax liability. This was in the view of GSTR-1, GSTR-2 and GSTR-3 mechanism, which was never made effective in its entirety.

There is a legal proposition based on the maxim"Expressiouniusestexclusioalterius", meaning thereby that if a statute provides for a thing to be done in a particular way, then it has to be done in that manner and in no other manner and following any other course is not permissible.

Thus, after amendment this proviso has become actually effective and this amendment has to be read along with Rule 37 of CGST Rules, 2017.

Refund of GST

1. Refund of balance in Electronic Cash Ledger

Application in RFD-01 to be filed for claiming refund of balance in electronic cash ledger in accordance with Sec 49(6). This was always the case since GSTR-1, GSTR-2, and GSTR-3 mechanism envisaged at the time of launch of GST was never implemented. Now Rule 89(1) of CGST Rules, 2017 has been amended to incorporate it in law.

2. SEZ Refund

SEZ is granted refund under Sec 16(1) of the IGST Act, 2017. But there is one condition that refund will be granted only when the supplies are used for authorised operations. This condition was imposed by the government through second proviso to Rule 89(1). Now the government has amended the Act and added the words for ‘authorised operations’ in Sec 16(1) of the IGST Act, 2017 so that the Rules cannot be challenged as superseding the Statute.

3. Refund of Zero-Rated Supplies in case of non-realisation of proceeds

Sec 16(3) of the IGST Act, 2017 has been amended. It also provides that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the CGSTAct within 30 days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 for receipt of foreign exchange remittances, in such manner as may be prescribed.

Sub-section (3) has been amended to make an authorising section to Rule 96B of the CGST Rules, 2017. Interestingly, Rule 96B is effective since 23-3-2020 and amendment in sub-sections has been made effective from 1-10-2023.

4. Filing LUT is the default route for claiming refund

Sec 16(4) of the IGST Act, 2017 has also been amended. It is stating that filing LUT and claiming refund of ITC on inward supply of goods and services is the default route to claim refund of zero-rated supplies and the government will specify through notification, either

1. class of persons or
2. class of goods or services,

which can be exported on payment of IGST.

Note - In exercise of the powers conferred by Sec 16(4) of the IGST Act, 2017, the Central Government has through NN 01/2023-IT dt 31-7-2023 w.e.f. 1-10-2023 notified all goods and services barring specific goods likecigarettes, pan-masala, and other tobacco related products, which can be supplied on payment of IGST.

5. Deletion of words ITC provisionally accepted

Sec 54(6) of the CGST Act, 2017 has been amended to allow 90% of refund within 7 days of filing refund application. Earlier the words ‘excluding the amount of ITC provisionally accepted’ were stated which have now been deleted to align Sec 54 to Sec 41 which has been amended from 1-10-22 to allow entire credit in GSTR-3B as final credit i.e. undoing the concept of provisionallyaccepted credit.

6. Interest on grant of Refund

Sec 56 has been amended to provide that the government will provide interest on refund which will be in such manner and subject to such conditions and restrictions as may be prescribed.

The government has thus inserted Rule 94(2) w.e.f. 1-10-2023. It states that if the taxpayer files reply in FORM GST RFD-09 within the stipulated 15 days, then the interest will be given for entire period of delay beyond 60 days from issuance of GST RFD-02.

But if the taxpayer does not file reply in FORM GST RFD-08 within 15 days, then interest will not be given for period beyond 15 days that the applicant takes to furnish reply in FORM GST RFD-09 or submit additional documents called for.

Example -

Calculation of delay

• Delay in granting refund - 2 days
• Less - Delay in furnishing reply - 2 days
• Net Delay - 0 days
• Thus, no interest will be granted on refund application.

Rule 94(2) further states that any period of time taken either by the applicant for furnishing the correct details of the bank account to which the refund is to be credited or for validating the details of the bank account so furnished, where the amount of refund sanctioned could not be credited to the bank account furnished by the applicant, shall be excluded while calculating period of delay in grant of refund.