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LATEST CHANGES IN GST

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LATEST CHANGES IN GST
By: Mr. M. GOVINDARAJAN
June 13, 2020
All Articles by: Mr. M. GOVINDARAJAN       View Profile
  • Contents

There are many changes in GST laws from time to time.  Many Notifications, circulars, orders have been issued so far.  In the month of June 2020, four notifications and two circulars have been issued as detailed below-

Notification No. 44/2020-Central Tax

Vide Notification No. 38/2020-Central Tax, dated 05.05.2020 the Central Government amended the Rules as CGST (Fifth Amendment) Rules, 2020.  In this amendment Rule, a new Rule has been proposed to be inserted.  Rule 67A is proposed to be inserted with effect from a date to be notified later. 

The newly inserted Rule 67A provides the manner of furnishing return by SMS facility.  The new Rule 67A provides that notwithstanding anything contained in this Chapter, for a registered person who is required to furnish a ‘Nil’ return under section 39 in FORM GSTR-3B for a tax period, any reference to electronic furnishing shall include furnishing of the said return through a short messaging service using the registered mobile number and the said return shall be verified by a registered mobile number based One Time Password facility.

The explanation to this Rule provides that a ‘Nil’ return shall mean a return under section 39 for a tax period that has nil or no entry in all the Tables in FORM GSTR-3B.

Vide Notification No. 44/2020-Central Tax, dated 08.06.2020, the Central Government appointed 08.06.2020 as the effective date for Rule 67A.

Notification No.45/2020-Central Tax

Vide Notification No. 10/2020-Central Tax, dated 21.03.2020 the Government, notified those persons whose principal place of business or place of business was in the erstwhile Union territory of Daman and Diu or in the erstwhile Union territory of Dadra and Nagar Haveli till the 26.01.2020 and is in the merged Union territory of Daman and Diu and Dadra and Nagar Haveli from the 27.01.2020 onwards, as the class of persons who shall, except as respects things done or omitted to be done before the notification, follow the special procedure as notified in this notification,  till the   31.05.2020, the transition date.

Vide Notification No. 45/2020-Central Tax, dated 09.06.2020 extended the date of 31.05.2020 to 31.07.2020.

Notification No. 46/2020-Central Tax

Vide Notification No. 46/2020-Central Tax, dated 09.06.2020, the Central Government in view of the spread of pandemic COVID-19 across many countries of the world including India, the Government notified that in cases where a notice has been issued for rejection of refund claim, in full or in part and where the time limit for issuance of order in terms of the provisions of sub-section (5), read with sub-section (7) of section 54 of the said Act falls during the period from the 20th day of March, 2020 to the 29th day of June, 2020, in such cases the time limit for issuance of the said order shall be extended to 15 days after the receipt of reply to the notice from the registered person or the 30.06.2020, whichever is later.

Notification No.47/2020-Central Tax

Vide Notification No. 35/2020-Central Tax, dated 03.04.2020, the Central Government provides that where an e-way bill has been generated under rule 138 of the Central Goods and Services Tax Rules, 2017 on or before the 24.03.2020 and its period of validity expires during the period 20th day of March, 2020 to the 15.04.2020, the validity period of such e-way bill shall be deemed to have been extended till the 31.05.2020.

Notification No. 47/2020-Central Tax, dated 09.06.2020 substitutes for the above a new only.  According to this where an e-way bill has been generated under rule 138 of the Central Goods and Services Tax Rules, 2017 on or before the 24.03.2020 and whose validity has expired on or after the 20.03.2020, the validity period of such e-way bill shall be deemed to have been extended till the 30.06.2020.

Circular No. 139/09/2020

This circular is issued for clarification on refund related issues.  The representations have been received by the Board that in some cases, refund sanctioning authorities have rejected the refund of accumulated ITC in respect of ITC availed on Imports, ISD invoices, RCM etc. citing the circular No. 125/44/2019-GST dated 18.11.2019, on the basis that the details of the said invoices/ documents are not reflected in FORM GSTR-2A of the applicant.

Before the issuance of Circular No. 135/05/2020- GST dated 31st March, 2020, refund was being granted even in respect of credit availed on the strength of missing invoices (not reflected in FORM GSTR-2A) which were uploaded by the applicant along with the refund application on the common portal. However, vide Circular No.135/05/2020 – GST dated the 31st March, 2020, the refund related to these missing invoices has been restricted. Now, the refund of accumulated ITC shall be restricted to the ITC available on those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant.

The aforesaid circular does not in any way impact the refund of ITC availed on the invoices/documents relating to imports, ISD invoices and the inward supplies liable to Reverse Charge (RCM supplies) etc.  The Board clarified that the treatment of refund of such ITC relating to imports, ISD invoices and the inward supplies liable to Reverse Charge (RCM supplies) will continue to be same as it was before the issuance of Circular No. 135/05/2020- GST dated 31st March, 2020.

Circular No.140/10/2020

This circular is to clarify the tax on the remuneration of directors of a company.  Doubts have been raised as to whether the remuneration paid by companies to their directors falls under the ambit of entry in Schedule III of the Central Goods and Services Tax Act, 2017 i.e. ‘services by an employee to the employer in the course of or in relation to his employment’ or whether the same are liable to be taxed in terms of notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017 (entry no.6).

The Board analyzed the issue of remuneration to directors has been examined under following two different categories:

  • leviability of GST on remuneration paid by companies to the independent directors defined in terms of section 149(6) of the Companies Act, 2013 or those directors who are not the employees of the said company; and
  • leviability of GST on remuneration paid by companies to the whole-time directors including managing director who are employees of the said company.

In order to ensure uniformity in the implementation of the provisions of the law across the field formations, the Board clarified the issue as below:

  • GST on directors who are not the employees of the company such as independent director, nominee director etc.

It is clarified that in respect of such directors who are not the employees of the said company, the services provided by them to the Company, in lieu of remuneration as the consideration for the said services, are clearly outside the scope of Schedule III of the CGST Act and are therefore taxable. In terms of entry at Sl. No. 6 of the Table annexed to notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis.

Accordingly, it is hereby clarified that the remuneration paid to such independent directors, or those directors, by whatever name called, who are not employees of the said company, is taxable in hands of the company, on reverse charge basis.

  • GST on directors who are considered as employees of the company

The Board observed that a director who has also taken an employment in the company may be functioning in dual capacities, namely, one as a director of the company and the other on the basis of the contractual relationship of master and servant with the company, i.e. under a contract of service (employment) entered into with the company.

  • It is clarified that the part of Director’s remuneration which are declared as ‘Salaries’ in the books of a company and subjected to TDS under Section 192 of the Income Tax Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017.
  • It is further clarified that the part of employee Director’s remuneration which is declared separately other than ‘salaries’ in the Company’s accounts and subjected to TDS under Section 194J of the IT Act as Fees for professional or Technical Services shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, taxable. Further, in terms of notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis.

 

By: Mr. M. GOVINDARAJAN - June 13, 2020

 

 

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