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Finance Bill, 2023 Analysis of Proposed Changes in GST
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Finance Bill, 2023 Analysis of Proposed Changes in GST
The Clause 128 seeks to amend Section 10 of the CGST Act, 2017 to pave the way for persons working under composition levy to be eligible for supply of goods through Electronic Commerce Operator. As of now, under ss. 10 (2)(d) and 10 (2A) (c), the persons supplying “goods or services” through ECO are not eligible for composition levy. This clause seeks to omit the words “goods or” from these sub-sections. Thus, so far as suppliers of ‘goods’ through ECO are concerned, these will be eligible for composition levy, subject to other conditions contained in Section 10.
This clause proposes amendments in two provisos of Section 16 of CGST Act, 2017, the second and the third provisos.
The second proviso of Section 16 has a post ITC availment condition that where a recipient fails to pay the supplier within a period of 180 days, the ITC availed is to be added to his output tax liability, along with interest thereon, in such manner as may be prescribed. Now the language has been proposed to be amended to prescribe that the amount of ITC shall be ‘paid along with interest’.
The proposed change in the third proviso of Section 16 is to clarify that the payment is to be made by the recipient “to the supplier”, the earlier language simply prescribes that the payment is to be made by the recipient.
As per Memorandum Explaining The Provisions of Finance Bill, 2023, these changes are to align the said sub-section with the return filing system provided in the said Act
This clause proposes amendments in Section 17 of the CGST Act, 2017. Section 17 deals with the apportionment of credit and blocked credits.
Sub-clause (a) of clause 130 seeks to amend the Explanation to ss. 17(3).
As of now, the ‘Explanation’ provides that value of exempt supplies on which ITC will not be available shall not include the value of activities mentioned in Schedule –III, except those specified in paragraph 5 of the said Schedule.
Now, after the aforesaid exception in respect of activities mentioned in Schedule III, another exception has been added in respect of “the value of such activities or transactions as may be prescribed in respect of clause (a) of paragraph 8 of the said Schedule”. Clause (a) of paragraph 8 of the Schedule –III pertains to supply of warehoused goods to any person before clearance for home consumption.
The result is that whereas as of now the value of exempt supplies ( on which ITC is not available) does not include supply of warehoused goods to any person before clearance for home consumption, but on the change being notified, the value of such activity will be considered part of exempt supply, and ITC will be restricted in respect of such transactions.
Sub-clause (b) of clause 130 seeks to insert clause (fa) in ss. 17 (5) of the CGST Act, 2017 which deals with blocked credits. The proposed change contemplates to disentitle the recipient from ITC on those taxable goods and services which are used or intended to be used for activities relating to his obligations under CSR referred to in section 135 of the Companies Act, 2013.
Persons Not Liable for Registration
There is otherwise no change in respect of the persons not liable for registration. As per Section 23, both pre/post amendment–
the persons engaged exclusively in the business of supply of goods and/ or services which are non-taxable or wholly exempt goods,
or an agriculturist, to the extent of supply of produce out of cultivation of land,
or the persons as specified by the Government
-are not required to obtain registration.
This clause seek to revamp Section 23 of CGST Act, 2017. But the significant aspect is that proposed section begins with a non-obstante clause, “Notwithstanding anything to the contrary contained in sub-section (1) of section 22 or 24”. Thus, provisions for persons not liable for registration will have an overriding effect over the provisions of Section 22 (1) (specifying the persons liable for registration) and Section 24 (specifying the persons seeking compulsory registration).
As per Memorandum Explaining The Provisions of Finance Bill, 2023, this amendment is being made with retrospective effect from 01.07.2017.
The clause 132 seeks to insert a new sub-section, sub-section (5), in Section 37 of the CGST Act. As per the proposed insertion, a registered person shall not be able furnish the details of outward supplies after the expiry of three years from the due date of furnishing the said details. There is also an enabling proviso to provide for extension of the said time limit, if the Government so desires on the recommendations of GST Council
The clause 133 seeks to provide similar restriction of three years in respect of return required be furnished under Section 39, by inserting ss. (11) in section 39 of the CGST Act. And the clause 134 seeks provide a similar embargo of three years in respect of annual return required under Section 44 – by renumbering the provision as ss. 44 (1), and by inserting a new ss. 44(2).
The clause 135 seeks to insert a new ss. 52 (15), proposing the restriction on filing of return, as three years from the due date, in respect of a person collecting the tax at source.
The title of Section 41 of the CGST Act, prior to its amendment vide Finance Act, 2022, read as “ Claim of input tax credit and provisional acceptance thereof”. The same was changed to “Availment of Input Tax Credit” vide Finance Act, 2022. Further, as per the revamped Section 41, the ITC was self-assessed and credited to the electronic ledger; reference to provisional acceptance was omitted in Section 41. However, the SS. 54 (6), pertaining to refund, continued to allude to ITC as “provisionally accepted” credit. The Clause 136 proposes to remove this redundant relic from ss. 54 (6) by omitting the words, “excluding the amount of input tax credit provisionally accepted” from it.
This clause seeks to amend Section 56 of the CGST Act. The aforesaid Section 56 provides for interest on refunds delayed beyond sixty days from the date of receipt of application under Section 54 (1). The proposed amendment basically provides for enabling provision for interest, “to be computed in such manner and subject to such conditions and restrictions as may be prescribed”.
This clause contemplates penal provisions for an Electronic Commerce Operator in cases of specified violations. This clause seeks to insert a sub-section 122 (1B), after ss. 122 (1A). The clause proposes a penalty of ten thousand rupees or an equivalent penalty in
As per the Memorandum Explaining the Provisions of Finance Bill, 2023, amendments carried out through the Finance Bill, 2023 will come into effect
on the date of its enactment, unless otherwise specified. Further, Amendments carried out in the Finance Bill, 2023 except those in clause 142 ( which will be w.e.f 01.07.2017) will come into effect from the date when the same will be notified concurrently, as far as possible, with the corresponding amendments to the similar Acts passed by the States & Union territories with legislature.
respect of tax involved, whichever is higher, on an ECO if it allows unregistered persons to make supplies of goods or services (other than those exempted from registration), or allows inter-state supplies through it by ineligible persons, or fails to furnish correct details, in its return, of any outward supply by a person exempted from obtaining registration under this Act.
This clause seeks to amend section 132 (1) of the CGST Act, to decriminalize offences specified in clause (g), (j) and (k) of the said sub-section. Clause (g) pertains to obstructing and preventing any officer from performing his duty, clause (j) pertains to tampering with or destroying of any material evidence or documents; and clause (k) pertains to failure to supply information or supply of false information. These clauses are proposed to be omitted from ss. 132 (1).
This clause seeks to amend and rationalize the provisions Section 138, which pertains to compounding of offence. The clause, inter alia, revises the minimum amount for compounding to twenty five percent of the tax and the maximum amount to hundred percent of the tax.
This clause seeks to insert a new section, Section 158A, in the CGST Act. As per the proposed section, if the registered person gives consent, certain specified information furnished by him ( like registration, monthly/ annual return data, invoice uploaded data, e-way bill data, or any other data as may be prescribed) may be shared by the common portal with such other systems as may be notified by the Government, and such information will be shared subject to conditions as prescribed. No action shall lie against the Government or the common portal for information shared under this section.
Schedule-III of the CGST Act, specifies the activities or transactions which are to be considered neither as supply of goods nor supply of services. Vide CGST (Amnd.) Act, 2018 dated 30.08.2018, w.e.f 01.02.2019, also vide Notification No. 02/2019-Central Tax dated 29.01.2019, Para 7, 8(a) and 8 (b) were added to this schedule, making activities mentioned therein as neither supply of goods nor supply of services. Para 7 pertains to overseas supply of goods without these entering in India; Para 8 (a) pertains to supply of warehoused goods to any person before clearance for home consumption; and, Para 8 (b) refers to High Sea Sales. In view of the aforesaid, these provisions became applicable with effect from 01.02.2019. The proposed amendment vide clause 142 seeks to make these provisions applicable from 01.7.2017. The amendment also contemplates that no refund shall be made if some tax has already been collected in this regard.
The clause 143 (a) seeks to substitute the clause 2 (16) of the IGST Act, 2017, defining “non-taxable online recipient” with a new definition. The proposed definition omits references to “ any Government, governmental authority, an individual” receiving online services from the definition. The proposed definition restricts the meaning of the term “non-taxable online recipient” to mean “any unregistered person” receiving online information and database access or retrieval services located in the taxable territory. It further seeks to clarify that the persons registered solely in terms of clause (vi) of section 24 of the CGST Act (persons required to deduct tax at source) shall be treated as unregistered person for the purpose of the said clause.
The proposed definition also removes reference to “in relation to any purpose than commercial, industry, or any other business and profession”. So, in the proposed definition, the unregistered person may have been receiving the OIDAR services for any purpose. This enlarges the scope of purpose of OIDAR services for considering tax liability.
It is pertinent to mention here that as per Section 14 of the IGST Act, 2017, in case of supply of OIDAR services by a person in a non-taxable territory, and received by a non-taxable online recipient, such supplier will be liable to pay IGST. Thus, unregistered person in taxable territory, under the proposed amendment, could be receiving the OIDAR services for any purpose, but the tax liability in respect of said services received by such person will be of the supplier in non-taxable territory.
Section 2 (17) of the IGST provides definition of OIDAR services. The Clause 143 (b) proposes to amend clause 2(17) of the IGST Act by removing certain words therein so as to remove the condition of “essentially automated” and “involving minimal human intervention” from the said definition. This may also have the effect of widening the scope of OIDAR services, as non-automated services may also get covered as OIDAR services after the proposed amendment.
The sub-section (8) of section 12 of the Integrated Goods and Services Tax Act provides for “place of supply” in case of services by way of transport of goods; the proviso to said ss. provides that “where the transportation of goods is to a place outside India, the place of supply shall be the destination of goods”. Clause 144 of the Bill seeks to omit the said proviso to sub-section 12 (8) so as to remove the confusion regarding availment of input tax credit and other matters. It appears the proposed omission will be with retrospective effect to facilitate the availment of ITC by the service receivers located in India.
By: Vinay Goyal - February 2, 2023
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