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BUDGETARY CHANGES IN ‘GST’ LAWS

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BUDGETARY CHANGES IN ‘GST’ LAWS
By: Mr. M. GOVINDARAJAN
February 4, 2020
All Articles by: Mr. M. GOVINDARAJAN       View Profile
  • Contents

The Finance Minister has presented her budget for the year 2020 – 21 in the Parliament on 01.02.2020.  The Finance Bill, 2020 has proposed to amend GST laws.  Clauses 116 to 138 of the Finance Bill have brought various amendments to Central Goods and Services Tax Act, 2017 (‘CGST Act’ for short), Integrated Goods and Services Tax Act, 2017 (‘IGST Act’ for short), Union Territory Goods and Services Tax Act, 2017 (‘UTGST Act’ for short) and Goods and Services (Compensation to Cess) Act, 2017.

Changes to CGST Act

Union territory

Clause 116 of the Bill proposes to amend the definition ‘Union Territory’.  Clause (c) and (d) are proposed to be amended.  Section 2(114) (c) provides that Dadra and Nagar Haveli and Daman and Diu are Union territories.  Section 2(114) (d) was omitted.  Now said clauses have been substituted as-

(c) Dadra and Nagar Haveli and Daman and Diu;

(d) Ladakh.

Composition Levy

Section 10(2) provides the list of eligible persons to opt for composition levy.  After amendment Section 10(2) reads as follows-

The registered person shall be eligible to opt under sub-section (1), if–

  1. save as provided in sub-section (1), he is not engaged in the supply of services;
  2. he is not engaged in making any supply of goods or services which are not leviable to tax under this Act
  3.  he is not engaged in making any inter-State outward supplies of goods or services;
  4. he is not engaged in making any supply of goods or services through an electronic commerce operator who is required to collect tax at source under section 52;

Eligibility for taking input tax credit

Section 16(4) of the CGST Act provides that 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 note pertains or furnishing of the relevant annual return, whichever is earlier.

The Finance Bill, 2020 proposes to omit the words ‘invoice relating to such’ in section 16(4) of the CGST Act.

Cancellation or suspension of registration

Section 29(1) (c) of the CGST Act gives the circumstance under which the proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration –

(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 or section 24.

The said section 29(1)(c) has been substituted for the existing provision which reads as below-

‘(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.

Revocation of cancellation of registration

Section 30 provides for revocation of cancellation of registration.  Section 30(1) of the CGST Act provides that subject to such conditions as may be prescribed, any registered person, whose registration is cancelled by the proper officer on his own motion, may apply to such officer for revocation of cancellation of the registration in the prescribed manner within thirty days from the date of service of the cancellation order.

The Finance Bill proposes to insert the following proviso after section 30(1)-

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

  1. by the Additional Commissioner or the Joint Commissioner, as the case may be, for a period not exceeding 30 days;
  2. by the Commissioner for a further period not exceeding 30 days, beyond the period specified in clause (a).

Tax Invoice

Section 31(2) of the CGST Act provides that a registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as may be prescribed:

Provided that the Government may, on the recommendations of the Council, by notification and subject to such conditions as may be mentioned therein, specify the categories of services in respect of which––

  1. any other document issued in relation to the supply shall be deemed to be a tax invoice; or
  2. tax invoice may not be issued.

The Finance Bill proposes to substitute the proviso to section 31(2) as below-

“Provides that the Government may, on the recommendations of the Council, by notification-

  1. specify the categories of services or supplies in respect of which a tax invoice shall be issued,  within such time and such manner as may be prescribed;
  2. subject to the condition mentioned therein specify the categories of services in respect of which-
  1. any other document issued in relation to supply shall be deemed to be a tax invoice; or
  2. tax invoice may not be issued.

Tax deducted at source

Section 51(3) of the CGST Act provides that the 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.

The Finance Bill proposes to substitute the said section.  The newly substituted section 51(3) provides that a certificate for tax deduction at source shall be issued in such form and in such manner as may be prescribed.

Section 51(4) of the CGST Act provides that  if any deductor fails to furnish to the deductee the certificate, after deducting the tax at source, within five days of crediting the amount so deducted to the Government, the deductor shall pay, by way of a late fee, a sum of one hundred rupees per day from the day after the expiry of such five days period until the failure is rectified, subject to a maximum amount of five thousand rupees.

The Finance Bill proposes to omit the said section 51(4) and therefore no late fee is payable by the deductor.

Constitution of Appellate Tribunal

Section 109(6) of the CGST Act provides that the Government shall, by notification, specify for each State or Union territory except for the State of Jammu and Kashmir, a Bench of the Appellate Tribunal (hereafter in this Chapter, referred to as “State Bench”) for exercising the powers of the Appellate Tribunal within the concerned State or Union territory.

The first proviso to this section provides that for the State of Jammu and Kashmir, the State Bench of the Goods and Services Tax Appellate Tribunal constituted under this Act shall be the State Appellate Tribunal constituted under the Jammu and Kashmir Goods and Services Tax Act, 2017.

The Finance Bill proposes to omit the words ‘except for the State of Jammu and Kashmir’ since the same has been included in India by the Order of Hon’ble President of India.  The Bill also proposes to omit the first proviso to section 109(6).

Penalty to certain offences

The Finance Bill proposes to insert section 122(1A) after section 122.  The newly inserted section provides that any person who retains the benefit of a transaction covered under clause (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.

Clause (i) -  Where a taxable person who supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

Clause (ii) - Where a taxable person who issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made there under;

Clause (vii) – Where a taxable person who  takes or utilizes input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made there under;

Clause (ix) - Where a taxable person who takes or distributes input tax credit in contravention of section 20, or the rules made there under.

Punishment for certain offences

Section 132 of the CGST Act provides for punishment for 12 offences specified in section 132(1) to the person commits the said offence.  The Bill propose to extend the same as –Whoever commits or causes to commit and retain the benefits arising out of any of the following offences’.

The Bill also proposes to amend section 132(1)(c) and section 132(1)(e) which indicates certain offences. 

The offence under section 132(1)(c) - avails input tax credit using such invoice or bill referred to in clause (b) is substituted as-

132(1)(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.

The offence under section 132(1)(e) - evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d).  The Bill proposes to omit the words ‘fraudulently avails input tax credit’.

Transitional arrangements for input tax credit

The Finance Bill proposes amendments in section 140 of the CGST Act.

Section 140(1) of the CGST Act provides - A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit of eligible duties carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed.

The Bill proposes to insert the words ‘within such time and’ after the words ‘existing law’ and these shall be deemed to have been inserted.

Section 140(2) of the CGST Act provides - A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed.

The Bill proposes to insert the words ‘within such time and’ after the words ‘appointed day’ and these shall be deemed to have been inserted.

Section 140(3) of the CGST Act provides - A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012-Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely.

The Bill proposes to substitute  the words ‘goods held in stock on the appointed day, within such time and in such manner as may be prescribed, subject to’ for the words ‘goods held in stock on the appointed day’ and shall be deemed to have been substituted.

Section 140(5) of the CGST Act provides  -  A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or taxpaying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day.

The Finance Bill proposes to substitute the words ‘existing law, within such time and in such manner as may be prescribed’ for the words ‘existing law’ and shall be deemed to have been substituted.

Section 140(6) of the CGST Act provides - A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions.

The Finance Bill proposes to substitute the words ‘goods held in stock on the appointed day, within such time and in such manner as may be prescribed subject to’ for the words ‘goods held in stock on the appoint day subject to’ and shall be deemed to have been substituted.

Section 140(7) of the CGST Act provides - Notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as credit under this Act even if the invoices relating to such services are received on or after the appointed day.

The Finance Bill proposes to substitute the words ‘credit under this Act, within such time and in such manner as may be prescribed, even if’ for the words ‘credit under this Act even if’ and shall be deemed to have been substituted.

Section 140(8) of the CGST Act provides - Where a registered person having centralized registration under the existing law has obtained a registration under this Act, such person shall be allowed to take, in his electronic credit ledger, credit of the amount of CENVAT credit carried forward in a return, furnished under the existing law by him, in respect of the period ending with the day immediately preceding the appointed day in such manner as may be prescribed.

The Finance Bill proposes to substitute the words ‘within such time and in such manner as may be prescribed’ for the words ‘in such manner’ and shall be deemed to have been substituted.

Section 140(9) of the CGST Act provides - Where any CENVAT credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such credit can be reclaimed subject to the condition that the registered person has made the payment of the consideration for that supply of services within a period of three months from the appointed day.

The Finance Bill proposes to substituted the words ‘credit can be reclaimed within such time and in such manner as may be prescribed subject to’ for the words ‘credit can be reclaimed subject to’ and shall be deemed to have been substituted.

Power to issue instructions or directions

Section 168(2) of the CGST Act provides - The Commissioner specified in clause (91) of section 2, sub-section (3) of section 5, clause (b) of sub-section (9) of section 25, sub-sections (3) and (4) of section 35, sub-section (1) of section 37, sub-section (2) of section 38, sub-section (6) of section 39, sub-section (1) of section 44, sub-sections (4) and (5) of section 52, sub-section (5) of section 66, sub-section (1) of section 143, sub-section (1) of section 151, clause (l) of sub-section (3) of section 158 and section 167 shall mean a Commissioner or Joint Secretary posted in the Board and such Commissioner or Joint Secretary shall exercise the powers specified in the said sections with the approval of the Board.

The Finance Bill proposes to substitute the words ‘sub-section (1) of section 143, except the second proviso thereof’ for the words ‘sub-section (5) of section 66, sub-section (1) of section 143 and shall be deemed to have been substituted.

Removal of difficulties

Section 172(1) of the CGST Act provides - If any difficulty arises in giving effect to any provisions of this Act, the Government may, on the recommendations of the Council, by a general or a special order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act or the rules or regulations made thereunder, as may be necessary or expedient for the purpose of removing the said difficulty:

Provided that no such order shall be made after the expiry of a period of three years from the date of commencement of this Act.

The Finance Bill proposes to change the period of three years to five years.

Schedule II

Para 4(a) of Schedule II provides - where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person.

Para 4(b) of Schedule II provides - where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services.

The Finance Bill proposes to omit the words ‘whether or not for a consideration’ appearing in both clauses and shall be deemed to have been omitted.

Effective date

The amendments discussed as above will come into effect on such day as the Central Government may, by Notification in the Official Gazette, appoint.

Retrospective exemption

Clause 130(1) of the Finance Bill provides that notwithstanding anything contained in the notification of the Government of India in the Ministry of Finance (Department of Revenue) GSR 673(E), dated 28.06.2017, issued by the Central Government, on the recommendations of the Council, in exercise of the powers  under section 9(1) of the CGST Act-

  1. no central tax shall be levied or collected in respect of supply of fishmeal (falling under heading 2301), during the period commencing from 01.07.2017 and ending with 30.09.2019 (both days inclusive);
  2. central tax at the rate of 6% 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 01.07.2017 to 31.12.2018 (both days inclusive).

Clause 130(2) of the Finance Bill provides that 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.

Amendment to IGST Act

Section 25 of the IGST Act provides that if any difficulty arises in giving effect to any provision of this Act, the Government may, on the recommendations of the Council, by a general or a special order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act or the rules or regulations made there under, as may be necessary or expedient for the purpose of removing the said difficulty.  The proviso to this section provides that no such order shall be made after the expiry of a period of three years from the date of commencement of this Act.  The Finance Bill proposes to change the period of three years to five years.

Amendments to UTGST Act

Section 1(2) of the UTGST Act provides that the said Act extends to the Union territories of the Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli and Daman and Diu, Chandigarh and other territory.  The Finance Bill proposes to add ‘Ladakh’ to be included as a Union Territory.

Section 1(8) of the UTGST Act provides the list of Union Territories.  The Finance Bill proposes to add ‘Ladakh’ to be included as a Union territory.

Section 26 of the UTGST Act provides that If any difficulty arises in giving effect to any provision of this Act, the Central Government may, on the recommendations of the Council, by a general or a special order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act or the rules or regulations made there under, as may be necessary or expedient for the purpose of removing the said difficulty.  The proviso to this section provides that no such order shall be made after the expiry of a period of three years from the date of commencement of this Act.  The Finance Bill proposes to change the period of three years to five years.

Amendment to CGS (Compensation to States) Act

Section 14 of the CGST (Compensation to States) Act provides that If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, on the recommendations of the Council, by order published in the Official Gazette, make such provisions, not inconsistent with the provisions of this Act, as appear to it to be necessary or expedient for removing the difficulty.  The proviso to this section provides that no such order shall be made after the expiry of a period of three years from the date of commencement of this Act.  The Finance Bill proposes to change the period of three years to five years.

 

By: Mr. M. GOVINDARAJAN - February 4, 2020

 

 

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