GST (GOODS AND SERVICES TAX) – CHANGES IN BUDGET 2021

Posted By on February 4, 2021

Amendments carried out in the Finance Bill, 2021, will come into effect from the date when the same will be notified (except where specifically mentioned otherwise), as far as possible, concurrently with the corresponding amendments to the similar Acts passed by the States and Union territories with Legislature:-

 

(A)    AMENDMENTS IN CGST ACT, 2017:-

 

Section

No.

Proposed Amendment Finance Bill Clause No. Remarks
7 A new clause (aa) in sub-section (1) of Section 7 of the CGST Act is being inserted, retrospectively with effect from the 1st July, 2017, so as to ensure levy of tax on activities or transactions involving supply of goods or services by any person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.

 

It is also proposed to insert an Explanation therein, to clarify that the person or 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 person to another.

99 This section is introduced to clarify governments stand under GST on AOP/ Societies etc. Section is introduced to ensure levy of tax on activities or transactions involving supply of goods or services by any person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.

Applicable w.e.f. 01-07-2017

Comments : This inclusion wants to done away the effect of Hon’ble Supreme Court Judgment in State of West Bengal & Ors. v Calcutta Club Limited [2019 (29) G.S.T.L. 545 (S.C.)] for erstwhile Service tax regime wherein it was held that there cannot be the sale of goods or provision of services between the unincorporated private clubs/associations and its members owing to the principle of mutuality which treats such clubs/associations and its members as the same person.

16 A new clause (aa) to sub-section (2) of the section 16 of the CGST Act is being inserted to provide that input tax credit on invoice or debit note may be availed only when the details of such invoice or debit note have been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note. 100 This clause is being inserted to strengthen the ITC Matching Provisions and to allow ITC only when the details of recipient are uploaded by the supplier and the same is communicated to the recipient. This amendment is in line with Rule 36(4) as amended by Notification No. 94/2020 dt 22-12-2020.

Comments : This provision is prone to litigation and even under the Service Tax era this matter has already been settled by the Hon’ble Supreme Court in favour of Assessee in the case of Arise India Limited and Ors v. Commissioner of Trade & Taxes, Delhi and Ors [W.P.(C) 6093/2017 & connected matters dated 26.10.2017

35 Sub-section (5) of section 35 of the CGST Act is being omitted so as to remove the mandatory requirement of getting annual accounts audited and reconciliation statement submitted by specified professional. 101 Remove the Mandatory requirement for getting annual accounts audited and certification of reconciliation statement (Form 9C) by a Chartered Accountant or Cost Accountant for persons having turnover in excess of prescribed limits.

Comments: This is a prospective amendment for which the date is yet to be notified and till FY 2019-20, the existing provision of Audit will continue.

44 Section 44 of the CGST Act is being substituted so as to remove the mandatory requirement of furnishing a reconciliation statement duly audited by specified professional and to provide for filing of the annual return on self- certification basis. It further provides for the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return. 102 Provides for filling of Annual Return (GSTR 9) on a self certification basis and remove the mandatory requirement of furnishing reconciliation statement (GSTR 9C) duly audited by a Chartered Accountant or Cost Accountant. The responsibility for reconciliation has been shifted to the Tax Payer now instead of the GST Auditor.

Comments: This is a prospective amendment for which the date is yet to be notified and till FY 2019-20, the existing provision of Audit will continue.

50 Section 50 of the CGST Act is being amended, retrospectively, to  substitute  the  proviso  to  sub-section  (1)  so  as  to charge interest on net cash liability with effect from the 1st July, 2017. 103 Charge of Interest on delayed payment of GST is made retrospectively applicable on Net Cash Liability.

Applicable w.e.f. 01-07-2017

Comments: This amendment will set right the earlier amendment in proviso to section 50(1) that was made effective from 01-09-2020. Though, press release and instructions were issued for recovery of interest on net cash liability w.e.f. 01-07-2017, but this amendment will finally settle all litigations in this matter.

74 Section 74 of the CGST Act is being amended so as make seizure and confiscation of goods and conveyances in transit a separate proceeding from recovery of tax. 104 Seeks to make seizure (Section 129) and confiscation proceedings (Section 130) of goods and conveyances in transit a separate proceeding from recovery of tax.

Comments: Conclusion of proceeding u/s 73 or 73 will not mean conclusion of proceedings u/s 129 (Goods in Transit) and 130 (Confiscation).

75 An explanation to sub-section (12) of section 75 of the CGST Act is being inserted to clarify that “self-assessed tax” shall include the tax payable in respect of outward supplies, the details of which have been furnished under section 37, but not included in the return furnished under section 39. 105 The ambit of ‘Self Assessed Tax’ has been widened to include outward supply liability shown in GSTR-1 which has not been included in the return furnished in GSTR-3B –  for which now recovery can be initiated.
83 Section 83 of the CGST Act is being amended so as to provide that provisional attachment shall remain valid for the entire period starting from the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV till the expiry of a period of one year from the date of order made thereunder. 106 Time limit of provisional attachment shall remain valid for the entire period starting from the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV till the expiry of a period of one year from the date of order made u/s 83(1).

 

Provisional Attachment of assets of person who causes to commit specified offences and retains the benefit arising out of such offences [Section 122(1A)] has been added.

107 A proviso to sub-section (6) of section 107 of the CGST Act is being inserted to provide that no appeal shall be filed against an order made under sub-section (3) of section 129, unless a sum equal to twenty-five per cent. of penalty has been paid by the appellant. 107 Increase in Pre-Deposit from 10% to 25% for appeal against the order u/s 129(3) (i.e. Goods/ Vehicle in Transit)
129 Section 129 of the CGST Act is being amended to delink the proceedings under that section relating to detention, seizure and release of goods and conveyances in transit, from the proceedings under section 130 relating to confiscation of goods or conveyances and levy of penalty. 108 1)    For release of taxable goods /vehicle in case of non compliance / default of E way bill etc:-

a)    If owner comes forward – penalty equal to 200% is payable.  (Earlier it was 100%); else

b)    If owner does not come forward – higher of 50% of Value of Goods or 200% of Tax;

2)    For release of Exempted goods /vehicle in case of non compliance:-

a)    If owner comes forward – penalty lower of 2% of value or Rs. 25000/-; else

b)    If owner does not come forward – penalty lower of 5% of value or Rs. 25000/-;

3)    Earlier for release of goods, tax was also required to be paid. Now no such requirement;

4)    Time limit of 7 days for notice and 7 days for order provided in act;

5)    If Penalty is not paid within 15 days of order – vehicle can be released on payment of lower of Penalty or Rs. 1 Lakhs.

130 Section 130 of the CGST Act is being amended to delink the proceedings under that section relating to confiscation of goods or conveyances and levy of penalty from the proceedings under section 129 relating to detention, seizure and release of goods and conveyances in transit. 109 Seeks to delink the proceedings under this section from the Proceedings u/s 129 (i.e. Goods/ Vehicle in Transit).
151 Section 151 of the CGST Act is being substituted to empower the jurisdictional commissioner to call for information from any person relating to any matter dealt with in connection with the Act. 110 Seeks to empower the jurisdictional commissioner to call for information from any person relating to any matter dealt with in connection with the CGST Act.

 

152 Section 152 of the CGST Act is being amended so as to provide that no information obtained under sections 150 and 151 shall be used for the purposes of any proceedings under the Act without giving an opportunity of being heard to the person concerned. 111 Seeks to provide that no information obtained under Sections 150 (i.e., obligation to furnish information return) and 151 (i.e., power to collect statistics) of the CGST Act shall be used for the purposes of any proceedings under the Act without giving an opportunity of being heard to the person concerned.
168 Section 168 of the CGST Act is being amended to enable the jurisdictional commissioner to exercise powers under section 151 to call for information. 112 Seeks to enable the jurisdictional commissioner to exercise powers under Section 44 (i.e., annual return) and omitted Section 151 of the CGST Act (i.e., power to collect statistics) to call for information.
Sch II Consequent to the amendment in section 7 of the CGST Act paragraph 7 of Schedule II to the CGST Act is being omitted retrospectively, with effect from the 1st July, 2017. 113 Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration will be treated as supply of goods consequential to insertion of sub-clause (aa) in Section 7(1).

 

(B)    AMENDMENTS IN IGST ACT, 2017:-

  • Section

    No.

    Proposed Amendment Finance Bill Clause No. Remarks
    16 In the Integrated Goods and Services Tax Act, 2017, in section 16, —

    (a) in sub-section (1), in clause (b), after the words “supply of goods or services or both”, the words “for authorised operations” shall be inserted;

     

    Supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit”

     

    (b) for sub-section (3), the following sub-sections shall be substituted, namely:–

     

    “(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed:

     

    Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 for receipt of foreign exchange remittances, in such manner as may be prescribed.

    42 of 1999.

     

    (4) The Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification, specify–

     

    (i) a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid;

     

    (ii) a class of goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim the refund of tax so paid.”

    114 Section 16 of the IGST Act is being amended so as to:

    (i) zero rate the supply of goods or services to a Special Economic Zone developer or a Special Economic Zone unit only when the said supply is for authorised operations;

    (ii) restrict the zero-rated supply on payment of integrated tax only to a notified class of taxpayers or notified supplies of goods or services; and

    (iii) link the foreign exchange remittance in case of export of goods with refund.

     

    Comments: It appears that now only notified class of taxpayer or notified class of goods/services will be eligible for claiming refund of IGST paid on zero-rated supplies, unlike present provision which allows both the options to all persons subject to Rule 96(10) of the CGST Rules.

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