THE CENTRAL GOODS AND SERVICES TAX (AMENDMENT) BILL, 2018

[Mr. M. GOVINDARAJAN]

Introduction

The Central Goods and Services Tax Act, 2017 (the Act) was enacted with a view to make a provision for levy and collection of tax on intra-State supply of goods or services or both by the Central Government.  The Act provides for certain provisions for smooth transition of existing taxpayers to new goods and services tax regime. However, the new tax regime had faced certain difficulties. One of the major inconveniences caused to the taxpayers, especially small and medium enterprises, was the process of filing return and payment of tax.  For this purpose the Government proposed to amend the Act so as to provide of ease of procedure.  The Government introduced ‘The Central Goods and Services Tax (Amendment) Bill, 2018 (‘Bill’ for short) on 07.08.2018. The details of amendments proposed in the Bill are discussed in this article.

Change of name of the Board

By this amendment bill the name of ‘the Central Board of Excise and Customs’ will be changed as ‘Central Board of Indirect Taxes and Customs’ (CBIC).

Clause 2(a)(ii) proposes to add the Authority for Anti Profiteering measure will not be included in the definition of ‘Adjudicating Authority’.

Definition of ‘business’

Section 2(17) (h) includes the services provided by a race club by way of totalisator or a licence to book maker in such club in the definition of ‘business.  Clause 2(b) of the bill proposes to substitute the above for – ‘activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club’.

Business vertical

Section 2(18) defines the expression ‘business vertical’.  Clause 2 (c) of the bill proposes to omit this section.

Cost Accountant

Section 2(35) defines the expression ‘Cost Accountant’ as a cost accountant as defined in clause (c) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959.  Section 2(1)(c) of the Cost and Works Accountants Act, 1959 defines the term ‘Council’ and not ‘Cost Accountant’.  Section 2 (1)(b) of the Cost and Works Accountant Act, 1959 defines the term ‘Cost Accountant’ as a person who is the member of the Institute.

To rectify the same clause 2(d) of the Bill proposes to substitute the section 2(1) (c)  by section 2 (1)(b).

Local authority

Clause 2(e) of the Bill proposes to expand the definition of ‘local authority’ under section 2(69) by including the Regional Council constituted under Article 371J of the Constitution.

Services

Section 2(105) of the Act defines the term ‘services’.  Clause 2(f) of the Bill proposes to add Explanation to this section which clarifies the expression “services” includes facilitating or arranging transactions in securities.

Scope of supply

Section 7(1) gives the scope of the term ‘supply’.  Section 7(1) has four sub clauses from (a) to (d).  Clause 3(a) proposes to omit the fourth clause (d) which reads - the activities to be treated as supply of goods or supply of services as referred to in Schedule II.

Clause 3(b) proposes to insert clause 7(1A) after section 7(1) which reads –

“(1A) where certain activities or transactions, constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.”;

The new insertion expands the scope of section 7(1)(d).

Reverse charge

Section 9(4) of the Act deals with the payment of tax by a registered person under reverse charge basis when he receives the same from an unregistered person.

Clause 4 of the Bill proposes to substitute section 9(4).  The newly substituted section 9(4) provides that the Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both

Composition levy

Clause 5(a) of the Bill proposes to increase the threshold limit for composition of levy from Re.1 crore to ₹ 1.5 crores.  This clause further proposes to add second proviso to the section 10(1) which reads as - a person who opts to pay tax under-

• clause (a) (1% of State or UT turnover by a manufacturer) or
• clause (b) (2.5% of State or UT turnover by a hotel) or
• clause (c) (0.5% of State or UT turnover by other suppliers)

may supply services (other than those referred to in clause (b) of paragraph 6 of Schedule II), of value not exceeding ten per cent. of turnover in a State or Union territory in the preceding financial year or five lakh rupees, whichever is higher.

Clause 5(b) of the bill proposes to substitute section 10(2)(a).  The newly substituted provision provides that the registered person shall not eligible to opt for composition levy save as provided in sub-section (1), he is not engaged in the supply of services.

Input tax credit

Section 16 of the Act deals with the eligibility and conditions for taking input tax credit.   Clause 8 of the bill proposes to substitute the explanation to section 16(2)(b) of the Act.  The newly substituted explanation provides that it shall be deemed that the registered person has received the goods or, as the case may be, services–

• where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;
• where the services are provided by the supplier to any person on the direction of and on account of such registered person.

Apportionment of credit and blocked credits

Clause 9(a) of the Bill proposes to add explanation to section 17(3) which defines the expression ‘value of exempt supply’ as not  including the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said Schedule.’

Clause 9(b) of the bill proposes to substitute section 17(5)(a) and 17(5)(b).  The newly substituted section 17(5)(a) provides that –

(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:-

(A) further supply of such motor vehicles; or

(B) transportation of passengers; or

(C) imparting training on driving such motor vehicles;

(aa) vessels and aircraft except when they are used––

(i) for making the following taxable supplies, namely:-

(A) further supply of such vessels or aircraft; or

(B) transportation of passengers; or

(C) imparting training on navigating such vessels; or

(D) imparting training on flying such aircraft;

(ii) for transportation of goods;

(ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa):

Provided that the input tax credit in respect of such services shall be available-

(i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;

(ii) where received by a taxable person engaged-

(I) in the manufacture of such motor vehicles, vessels or aircraft; or

(II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;

(b) the following supply of goods or services or both-

(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:

Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

(ii) membership of a club, health and fitness centre; and

(iii) travel benefits extended to employees on vacation such as leave or home travel concession:

Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide to its employees under any law for the time being in force.

Threshold limit for special States

Clause 11(a) proposes to enhance the threshold limit to the Special categories not exceeding ₹ 20 lakhs at the request of the respective Special State and on recommendations of the GST Council.

Clause 11(b) proposes that the States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand shall not be included in the list of Special Category States.

Compulsory registration

Clause 12 proposes to include the persons who is required to collect tax under section 52 shall be compulsory required to be registered under section 24.

Registration by SEZ

Clause 13 (a) proposes to insert a second proviso to section 25(1) which provides that that a person having a unit, as defined in the Special Economic Zones Act, 2005 (28 of 2005), in a Special Economic Zone or being a Special Economic Zone developer shall have to apply for a separate registration, as distinct from his place of business located outside the Special Economic Zone in the same State or Union territory.

Multiple registrations

Clause 13(b) proposes to substitute the proviso to section 25(2).  The newly substituted proviso provides that that a person having multiple places of business in a State or Union territory may be granted a separate registration for each such place of business, subject to such conditions as may be prescribed.

Suspension of registration

Clause 14(a) proposes to change the margin heading of section 29 from ‘Cancellation of registration’ to ‘Cancellation or suspension of registration.’

Clause 14(b) proposes to insert a proviso to section 29(1)(c) which provides that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed

Clause 14(c) proposes to insert a proviso to section 29(2) which provides that during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.

Applicability of section 35

Section 35 provides for the maintenance of accounts and records by the registered person. Clause 16 proposes to insert a proviso after section 35(5) which provides that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.

Furnishing of returns

The GST Council is in the way of reforming the procedure of filing the returns.  In this way the clause 17(a) proposes to omit the last date of filing return by 20^th of the following month and prescribed the return shall be filed within such time as may be prescribed.  This clause further proposes to insert a proviso to section 39(1) which provides that the Government may, on the recommendations of the Council, notify certain classes of registered persons who shall furnish return for every quarter or part thereof, subject to such conditions and safeguards as may be specified therein.

Clause 17(b) proposes to insert a proviso to section 39(7) which provides that the Government may, on the recommendations of the Council, notify certain classes of registered persons who shall pay to the Government the tax due or part thereof as per the return on or before the last date on which he is required to furnish such return, subject to such conditions and safeguards as may be specified therein.

Procedure for furnishing return and availing input tax credit

Clause 18 proposes to insert a new section 43A to deal with the procedure for furnishing return and availing input tax credit.  Section 43A provides-

43A(1) Notwithstanding anything contained in sub-section (2) of section 16, section 37 or section 38, every registered person shall in the returns furnished under sub-section (1) of section 39 verify, validate, modify or delete the details of supplies furnished by the suppliers.

(2) Notwithstanding anything contained in section 41, section 42 or section 43, the procedure for availing of input tax credit by the recipient and verification thereof shall be such as may be prescribed.

(3) The procedure for furnishing the details of outward supplies by the supplier on the common portal, for the purposes of availing input tax credit by the recipient shall be such as may be prescribed.

(4) The procedure for availing input tax credit in respect of outward supplies not furnished under sub-section (3) shall be such as may be prescribed and such procedure may include the maximum amount of the input tax credit which can be so availed, not exceeding twenty per cent. of the input tax credit available, on the basis of details furnished by the suppliers under the said sub-section.

(5) The amount of tax specified in the outward supplies for which the details have been furnished by the supplier under sub-section (3) shall be deemed to be the tax payable by him under the provisions of the Act.

(6) The supplier and the recipient of a supply shall be jointly and severally liable to pay tax or to pay the input tax credit availed, as the case may be, in relation to outward supplies for which the details have been furnished under sub-section (3) or sub-section (4) but return thereof has not been furnished.

(7) For the purposes of sub-section (6), the recovery shall be made in such manner as may be prescribed and such procedure may provide for non-recovery of an amount of tax or input tax credit wrongly availed not exceeding one thousand rupees.

(8) The procedure, safeguards and threshold of the tax amount in relation to outward supplies, the details of which can be furnished under sub-section (3) by a registered person,-

(i) within six months of taking registration;

(ii) who has defaulted in payment of tax and where such default has continued for more than two months from the due date of payment of such defaulted amount, shall be such as may be prescribed.

Utilization of input tax credit

Clause 20(b)(i) proposes to insert a proviso to section 49(5)(c) which provides that the input tax credit on account of State tax shall be utilized towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax.

Clause 20(b)(ii) proposes to insert a proviso to section 49(5)(d) which provides that the input tax credit on account of Union territory tax shall be utilized towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax.

New sections 49A and 49B

Clause 21 proposes to insert new sections 49A and 49B as detailed below-

Utilization of input tax credit subject to certain conditions

49A. Notwithstanding anything contained in section 49, the input tax credit on account of central tax, State tax or Union territory tax shall be utilized towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilized fully towards such payment.

Order of utilization of input tax credit.

49B. Notwithstanding anything contained in this Chapter and subject to the provisions of clause (e) and clause (f) of sub-section (5) of section 49, the Government may, on the recommendations of the Council, prescribe the order and manner of utilization of the input tax credit on account of integrated tax, central tax, State tax or Union territory tax, as the case may be, towards payment of any such tax.

Recovery of tax

Clause 24  of the bill proposes to insert an explanation  to section 79(4) which provides that the word person shall include “distinct persons” as referred to in sub-section (4) or, as the case may be, sub-section (5) of section 25.

Pre deposit on appeal

Section 107(6) provides that no appeal shall be filed unless the appellant has paid-

(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, in relation to which the appeal has been filed.

Clause 25 proposes to fix maximum amount of deposit in filing appeal as ₹ 25 crores.

Pre deposit on appeal before Tribunal

Clause 26 proposes to fix maximum amount of deposit in filing appeal before the Tribunal by the appellant is ₹ 50 crores.

Detention, seizure and release of goods and conveyances in transit

Clause 27 proposes to enhance the time limit to pay the tax and penalty by a person whose goods and conveyances are seized, from 7 days to 14 days.

Transitional arrangement

Clause 28(d) proposes to insert Explanation 3 to section 140(10) which clarified that the expression “eligible duties and taxes” excludes any cess which has not been specified in Explanation 1 or Explanation 2 and any cess which is collected as additional duty of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975.

Job work

Clause 29 proposes to insert a second proviso to section 143(1)(b) which provides 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.

Amendment to Schedule III

Clause 32 (i) proposes to add the following paras in Schedule III-

7. 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.

8. (a) Supply of warehoused goods to any person before clearance for home consumption;

(b) 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.

Clause 32(ii) proposes to give number to the existing explanation to Schedule III as Explanation 1 and also proposes to insert Explanation 2 which provides that the expression “warehoused goods” shall have the same meaning as assigned to it in the Customs Act.