Introduction: The last full-fledged budget of Modi 2.0 Government was tabled in the Lok Sabha on 1st February 2023 by Union Finance Minister Nirmala Sitharaman. The union minister stated the budget for 2023-24 as the first budget of Amrit Kaal. In her budget speech, the Union Minister did not touch upon the topic of GST. Despite being a crucial aspect of the Indian tax system, the Minister refrained from making any announcements or proposals related to GST. However, the union budget brought about several changes in the Goods and Services Tax law. These changes are aimed at simplifying the GST system and providing relief to small businesses. Union Budget 2023 was expected to bring about some much-needed structural changes to the Goods and Services Tax (GST) law with the aim of boosting the Indian economy and making the GST regime more accommodating for taxpayers. However, these changes were not addressed in the final print of the budget. Some of the key proposals in GST law are as under-
A] Changes proposed in CGST Act, 2017:
I) Changes in composition scheme: Amendment in clause (d) of sub-section (2) and sub-section (c) of Section (2A) of Section 10 is proposed to allow a registered person engaged in the supply of goods and opted for composition scheme to supply through an electronic commerce operator. However, restrictions to supplying services through an e-commerce operator by a registered person who opted for the composition scheme will remain.
ii) Interest on reversal of ITC, where payment is not made to the supplier within 180 days from the date of the invoice: A clarificatory amendment is proposed in the second proviso to Section 16(2) to notify Section 50 as the governing section to collect interest payable where the value of supply along with the tax is not paid to the supplier within a period of 180 days from the date of invoice. In the third proviso to Section 16 (2), the word “to the supplier” is proposed to be inserted after the word “made by him”. Said proviso allows recredit of credit reversed on account of non-payment to the supplier within 180 days. This amendment will create confusion regarding the availability of credit where payment is made by a recipient to a person other than the supplier with or without the direction of the supplier.
iii) Value of exempt supply for the purpose of reversal of common credit: In the case where a registered person is supplying taxable as well as exempted goods, he is required to reverse the credit in respect of goods or services partly used for the supply of exempted goods under Section 17 (2). The amendment is proposed to include the value of the supply of warehoused goods to any person before clearance for home consumption as the value of exempt goods for the purpose of reversal of common ITC.
iv) Credit on CSR activity: The uncertainty of credit on goods or services or both received by a taxable person, which is used or intended to be used in corporate social responsibility activity (CSR) is removed. An amendment in Section 17 (5) is proposed to disallow credit on goods or services used for CSR activity. This will dilute the very purpose of GST to provide seamless credit on purchases made for the business.
v) Person not liable for registration: Section 23 exempts certain categories of persons from registration under the CGST Act. A clarificatory amendment is made in Section 23 w.e.f. 01st July, 2017, so as to provide the overriding effect to Section 23 over sub-section (1) of section 22 or section 24 so as to provide an exemption from registration to a person who is required to get registered under Section 22 or Section 24.
vi) Restriction in filing FORM GSTR-1: Section 37 outlines the requirement for providing information about outward supplies in FORM GSTR-1. A proposal has been made in Section 37 to restrict a registered person from filing FORM GSTR-1 for a tax period beyond three years from the due date.
vii) Restriction in filing FORM GSTR-3B: Section 39 outlines the requirement for the filing of return in FORM GSTR-3B. A proposal has been made in Section 39 to restrict a registered person from filing FORM GSTR-3B for a tax period beyond three years from the due date.
viii) Restriction in filing FORM GSTR-9: Section 44 outline the requirement for the filing of annual return in FORM GSTR-9. A proposal has been made in Section 44 to restrict a registered person from filing FORM GSTR-9 for a financial year beyond three years from the due date.
ix) Restriction in filing FORM GSTR-8: Section 52(4) lays down the provision regarding filing of statement in FORM GSTR-8 by every electronic commerce operator. A proposal has been made in Section 52 to restrict operators from filing FORM GSTR-8 for a tax period beyond three years from the due date.
x) Refund in case of zero-rated supply: Presently, Section 54(6) of the CGST Act, in case of a refund claim for zero-rated supply, enables the proper officer to grant the refund equal to 90% of the total refund claim on provision basis excluding the amount of input tax credit provisionally accepted.
Sub-section (6) of section 54 of the CGST Act is being amended so as to remove the reference to the provisionally accepted input tax credit to align the same with the present scheme of availment of the self-assessed input tax credit as per sub-section (1) of section 41 of the said Act.
xi) Interest on delayed refund: Section 56 provides interest to the applicant in case a refund is not provided within 60 days from the date of receipt of the application. Amendment in Section 56 is proposed so as to provide the manner of computing interest on delayed receipt of refund beyond 60 days from the date of receipt of refund.
xii) Penalty for certain offences: A new sub-section (1B) in section 122 of the CGST Act is being inserted so as to provide for a penalty of Rs. 10000/- or tax involved whichever is higher to Electronic Commerce Operators in case of contravention in following cases-
a. Allows an unregistered person (except exempted by a notification) to supply goods or services or both through it.
b. Allows interstate supply to a person who is not eligible for inter-state supply and
c. Fails to furnish details in FORM GSTR-8 of the outward supply of goods of a person who is exempted from obtaining registration under GST law.
xiii) Punishment for certain offences: Section 132 provides for offences in certain cases. Amendment is proposed in Section 132(1) (g), (j), and (k) so as to decriminalize the following offences
(a) Obstructing and preventing any officer in the discharge of his duties under the CGST Act
(b) Tampering or destroying any material evidence or evidence
(c) Failing in supplying any information which is required to be supplied under the CGST Act or the rules made thereunder or supplying the false information.
Further, the amendment is proposed in Section 132(1)(iii) to increase the monetary threshold for launching prosecution for the offences under the said Act from one hundred lakh rupees to two hundred lakh rupees, except for the offences related to the issuance of invoices without the supply of goods or services or both.
xiv) Compounding of offence: First proviso to sub-section (1) of section 138 is proposed to be amended so as to simplify the language of clause (a), to omit clause (b) and to substitute clause (c) of said proviso so as to exclude the persons involved in offences relating to the issuance of invoices without a supply of goods or services or both from the option of compounding of the offences. Sub-section (2) is proposed to amend so as to rationalize the amount for compounding various offences by reducing the minimum as well as the maximum amount for compounding.
xv) Consent-based sharing of information furnished by taxable person: A new section 158A is proposed to be inserted to prescribe manner and conditions for sharing of the information furnished by the registered person in his return or in his application of registration or in his statement of outward supplies, or the details uploaded by him for generation of electronic invoice or E-way bill or any other details, as may be prescribed, on the common portal with such other systems, as may be notified. It is important to note that no action can be taken against the government or portal with respect to any liability arising consequent to information shared under this section.
xvi) Retrospective exemption to certain activities and transactions in Schedule III to the Central Goods and Services Tax Act.: It is clarified that Para 7 i.e., Supply from non-taxable territory to non-taxable territory without entering into India and Para 8 i.e., Supply of warehoused goods to any person before home consumption as inserted vide the Central Goods and Services (Amendment) Act, 2018 are made w.e.f. 01st July, 2017. It is also being clarified that where the tax has already been paid in respect of such transactions/ activities during the period from 01st July, 2017 to 31st January, 2019, no refund of such tax paid shall be available.
B] Changes in IGST Act, 2017:
i) Definition of OIDAR: Clause (16) of section 2 is proposed to be amended so as to amend the definition of “non-taxable online recipient” by removing the condition of receipt of online information and database access or retrieval services (OIDAR) for purposes other than commerce, industry or any other business or profession so as to provide for taxability of OIDAR service provided by any person located in non-taxable territory to an unregistered person receiving the said services and located in the taxable territory. It also clarified that the persons registered under Section 24 (vi) of CGST Act shall be treated as unregistered person for the purpose of the said clause.
Further, clause (17) of the said section is being amended to amend the definition of “online information and database access or retrieval services” to remove the condition of rendering of the said supply as it is essentially automated and involves minimal human intervention.
ii) Place of supply of service where the location of supplier and recipient is in India: It is proposed to omit the proviso to Section 12 (8) which prescribes the destination of goods as the place of supply in case of transportation of goods outside to place outside India.
It should be noted that all the above amendments will become effective once they are included in the relevant GST laws by the central government and all the states following approval by the GST Council.
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