GST Law: Bird's Eye View of Amendments Proposed through Finance Bill 2021

[Pawan Arora]

Although the proposed amendments under CGST Act and IGST Act does not find place in the Budget Speech of our Hon'ble Finance Minister, but their are several amendments under CGST Act and IGST Act which are proposed through Finance Bill 2021. The proposed amendments are summarized below for quick understanding of the readers: 

1. GST Audit from CA/CMA – Not required

• The mandatory requirement of submitting audited annual accounts and reconciliation Statement under section 35(5) of the CGST Act has been omitted. The taxpayers are not required to get their accounts audited from CA/CMA under GST Law.

2. Self-Certification of Reconciliation Statement

• Along with the Annual Return the taxpayers are required to file Self certified reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statement for every financial year electronically.

3. Zero rated Supply

• Supply to SEZ Developer or SEZ Unit for its “Authorized Operations” shall be considered as Zero-rated Supply.

• In March’ 2020, Rule 96B of CGST Rules was inserted to provide the condition of realization of export proceeds within the time period prescribed under FEMA in respect to export of goods. However, the said condition was not provided under the IGST Act. Now, Section 16 of the IGST Act is amended to provide legal sanctity to Rule 96B.

• Option of Zero-rated Supply on payment of IGST and Refund of IGST so Paid shall only be available to:

1. Notified Class of Persons
2. Notified class of goods or services

4. Detention of Goods in Transit – More Stringent provisions and consequences for detention of goods in transit.   

• Cases shall continue under Section 74 even if admitted tax, interest and penalty paid
• 25% of penalty to be deposited for filing appeal under section 129(3)
• Penalty for release of goods – upto 200%
• Provision for provisional release on bond/ security – omitted
• Department has now power to sell the goods after 15 days from date of order

5. Interest on Net Liability paid in Cash

• The interest liability has been restricted to cash portion of tax payment with retrospective effect from 01.07.2017. Therefore, if the return is furnished after the due date, the interest will be payable only on the cash tax portion. [Section 50(1)]
• The said provision shall not be applicable where return is filed after commencement of any proceedings under Section 73/ 74 of the CGST Act.

6. Input Tax Credit of inward supply reflected in GSTR-2A [Section 16 amended to provide legal Sanctity to Rule 36(4)]

• Presently as per Rule 36(4) Input Tax Credit can be availed upto 105% of GST paid on inward supplies the details of which are uploaded by Supplier on GSTN Portal and reflected in GSTR 2A of the recipient in a tax period. However, various Writ Petitions have been filed by taxpayers to challenge this condition on one of the grounds that the said condition is imposed through Rules only and is not provided under the CGST/SGST Act.
• Section 16(2) of the CGST Act provides the conditions to avail the ITC. A new condition under Section 16(2) of CGST Act has been inserted to provide such condition.

7. Recovery of Self Assessed Tax – Details of outward supplies reflected in GSTR-1 but not in GSTR-3B – shall be considered as Self assessed Tax for Recovery

• Any unpaid tax self-assessed in GSTR-3B (or any other return filed under Section 39) can be recovered under Section 79 without initiation of proceedings under Section 73/74 of the CGST Act.
• Now the outward supplies reflected under GSTR-1 but not in GSTR-3B shall also be considered as self-assessed tax for recovery [Explanation under Section 75(12)].

8. Provisional Attachment of Property – Scope Increased

• The Scope of provisional attachment of property under section 83 has been expanded, and now property can be attached after initiation of any proceeding under:
• Chapter XII [assessment],
• Chapter XIV [inspection, search, seizure and arrest] or
• Chapter XV [demand and recovery],
• which includes issuance of summon also.
• Presently it can be done for Proceedings under 62, 63, 64, 67, 73 and 74.

9. Power to Call for Information - from any Person

• The Commissioner or an officer authorised by him may, by an order, direct any person to furnish information relating to any matter dealt with in connection with this Act, within such time, in such form, and in such manner, as may be specified therein [Section 151].

10. Amendment in Scope of Supply – To overcome the concept of Mutuality between Clubs/Associations and its Members

• Recently, the Hon’ble Supreme Court in the case of STATE OF WEST BENGAL & ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE & ORS. VERSUS M/S. RANCHI CLUB LTD. [2019 (10) TMI 160 - SUPREME COURT] has upheld the principle of mutuality between a club and its members. The Hon’ble Supreme Court despite the deeming fiction of Article 366 (29A)(e) of Constitution of India held that in absence of specific provisions to overcome mutuality, Article 366 (29A)(e) would not affect the taxability of member’s club.
• Under the GST Law also there is no specific provisions which overcomes the mutuality of a Member’s Club/ Association and it’s member. Thus, presently it may be argued under GST Law that supply made by club to its members do not constitute taxable supply based on principle of mutuality.
• Scope of supply under Section 7 has been expanded by including activities of club, association etc to its members or vice versa for consideration. It has been further explained that the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another. The amendment has been made retrospectively w.e.f. 01.07.2017.
• Entry 7 of Schedule-II shall also be omitted w.e.f. 01.07.2017.

For any query Authors can be reached at:

CA. Archana Jain - ca.archanajain11@gmail.com;  +91-99990 09508

Adv. Pawan Arora - pawan@athenalawassociates.com; +91-88000 91636