Scope of Supply
- A new sub-section (aa) in Section 7 is proposed to be inserted retrospectively with effect from July 1, 2017 to levy tax on supply of services/goods by a person (other than an individual) to its members/constituents or vice-versa for a consideration.
- An Explanation is proposed to be inserted to the aforesaid sub-section to clarify that the person and its members/constituents shall be deemed to be two separate persons.
- Consequently, Entry 7 of Schedule II is proposed to be omitted retrospectively i.e. from July 1, 2017. The said Entry provided that supply of goods between unincorporated association/ body of persons to its members for a consideration would be liable to GST.
Our Comment
This amendment is brought in view of the Apex Court judgement in the case of CALCUTTA CLUB LTD – 2019-TIOL-449-SC-ST-LB. After the Apex Court judgment there was always a debate whether this judgment, which was given in the context of Service Tax, will apply to GST. Now this debate is set to rest although other debates such as whether retrospective amendment to TAX could made may be subject to challenge before judiciary if assessee chooses to be BRAVE enough.
[Refer clause 99 of Finance Bill, 2021]
Conditions for availing ITC
- Section 16(2) of the CGST Act prescribes the conditions for availment of ITC by a registered person. Clause(a) [amongst others] provides for availment of ITC when in possession of a tax invoice/ debit note/ other such tax paying document issued by a supplier.
- A new sub-section (aa) is proposed to be inserted in Section 16(2) to provide that ITC 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 his outward supplies i.e. in GSTR 1 and such details have been communicated to the recipient of such invoice or debit note.
Our Comment
Such condition has already been imposed vide GSTR-2B which has details of invoices only if the suppliers have filed their GSTR-1 before the due date.
Now we can say that matching of ITC is mandatory from date this clause is made effective – viz mostly by 1-2-2022 next year. Till then one gets additional plea to make that Rule 36(4) restrictions in ITC are without any support of CGST ACT till such date.
[Refer clause 100 of Finance Bill, 2021]
No- requirement of filing GSTR 9C and self-certification
- Section 35(5) of the CGST Act is proposed to be omitted to remove the mandatory requirement of getting annual accounts audited and submission of certified GSTR 9C i.e. reconciliation statement by a CA/ Cost Accountant.
- Corresponding amendments are proposed to be made in Section 44 of the CGST Act to remove the mandatory requirement for filing GSTR-9C with an option to file self-certified reconciliation statement.
- Further, Section 44 of the CGST Act is proposed to be amended to grant powers to the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return.
Our Comment
Now, Section 44 is being amended to provide for filing of the annual return, inter-alia, on ‘self-certification’ basis along with reconciliation of such Annual Return with the Audited Financial Statements. It further provides for the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return. Viz for FY 22-23 onwards when it will be effective.
NOTE: This will now mean that assessee will have to use the professional services of expert CA in this field to ensure that information is correctly reported as required & Departmental GST audit / assessment is smoothly done. Thus CA may not CERTIFY GSTR-9C but assessee will file it on self-certificate basis which will be onerous responsibility under GST. This cannot be lightly discharged without possible penal consequences.
[Refer clause 102 of Finance Bill, 2021]
Interest on delayed payment of tax
- Section 50(1) of the CGST Act levies interest on delayed payment of taxes by registered persons.
- A proviso to the said Section is proposed to be inserted with effect from July 1, 2017 to charge interest on late payment of tax on output tax liability debited through the electronic cash ledger i.e. on the net cash liability.
Our Comment
The said proviso was inserted with effect from September 1, 2020 vide Notification No. 63/2020 (Central Tax) dated August 25, 2020 to charge interest on net cash liability. Further, a Press Release dated August 26, 2020 was issued to clarify that Authorities would not undertake any coercive action in respect of recovery of interest for prior period. Making the proviso effective from July 1, 2017; provides legal sanctity to the Press Release and gives a much needed relief to the assessees.
[Refer clause 103 of Finance Bill, 2021]
Determination of tax not paid or short paid or erroneously refunded or ITC wrongly availed or utilised by reason of fraud or any willful- misstatement or suppression of fact
- Clause (ii) to Explanation 1 of Section 74 of the CGST Act is proposed to be amended so as make detention, seizure, confiscation of goods and conveyances in transit a separate proceeding from recovery of tax.
Self-assessed tax
- An Explanation is proposed to be included to Section 75(12) of the CGST Act [which deals with recovery of self -assessed tax] to include tax payable on outward supplies reflected in return filed under Section 37 (i.e. through GSTR-1) but not paid while filing return under Section 39 (i.e. GSTR-3B).
Our Comment
It signifies that if goods are moving without payment of tax and post seizure, necessary penalty have been made, still the registered person who caused the movement of goods would be liable for recovery of tax under section 74.
The Authorities can initiate recovery proceedings even in cases where the tax liability in GSTR-1 is more than that in GSTR-3B.
[Refer clause 104 of Finance Bill, 2021]
Powers of the Authority to provisionally attach property/ bank accounts
▪ Section 83(1) of the CGST Act is proposed to be substituted in order to expand the powers of Authorities to provisionally attach property/ bank accounts in case of assessments, inspection, search and seizure and all demand/ recovery proceedings.
▪ Further, the provisional attachment shall remain valid for the entire period starting from initiation of any proceedings till the expiry of one year from the date of order.
Our comment
Earlier, the Authorities were allowed to attach the property in case of specific scenarios i.e. assessment of non -filers of returns, assessment of unregistered persons, summary assessments, inspection, search and seizure.
Now, Section 83(1) has been amended to include other instances where the Commissioner can provisionally attach the property including bank account like provisional assessment, scrutiny of returns, inspection of goods in movement, tax collected but not paid to Government, etc.
[Refer clause 106 of Finance Bill, 2021]
Pre-deposit while filing an appeal against detention/seizure of goods & conveyances
▪ A proviso is proposed to be inserted to Section 107(6) of the CGST Act which requires an assessee to pay an amount equal to 25% of the penalty before filing an appeal against the order passed under Section 129(3) of the CGST Act (i.e. order for detention/seizure of goods and conveyances in transit).
Detention/seizure of goods & conveyances
▪ Section 129(1) of the CGST Act is proposed to be amended to increase the penalty quantum where any person transports/stores goods in contravention of the CGST Act while they are in transit and such goods/ conveyances are liable to detention or seizure. Proposed penalty is as under:
| Sr. No. | Scenario | Existing Penalty | Proposed Penalty |
| 1 | The owner of the goods available for payment of such penalty | • Exempted goods: 2% of value of goods or INR 25,000 whichever is less • Goods other than above: tax and penalty equal to 100% of tax payable on such goods | • Exempted goods: 2% of value of goods or INR 25,000 whichever is less • Goods other than above: penalty equal to 200% of tax payable on such goods |
| 2 | The owner of the goods does not available for payment of such penalty | • Exempted goods: 5% of value of goods or INR 25,000 whichever is less • Goods other than above: Tax and penalty equal to 50% of the value of goods reduced by tax paid thereon | • Exempted goods: 5% of value of goods or INR 25,000 whichever is less • Goods other than above: Penalty equal to 50% of the value of goods or 200% of tax payable on such goods, whichever is higher |
- Section 129(2) is proposed to be omitted which allows the assessee to release the seized goods under provisional basis upon execution of bond and furnishing of security.
- Section 129(3) is proposed to be amended to specify the duration of 7 days for issuance of notice for such detention and seizure and a duration of 7 days thereafter for passing an order.
Section 129(6) of the CGST Act is proposed to be amended wherein the powers have been given to the Authorities to sale/ dispose off the seized goods/ conveyances in the prescribed manner, where the penalty has not been paid within a period of 15 days from the date of receipt of order. An option has been given to the transporter to pay the penalty as determined above or INR 1 lakh, whichever is less, for release of conveyance
Our Comment
The proposed amendment specifies timelines for issuance of notice as well as for passing of an order – which may expedite the process of release/ seizure of goods as the case may be. It signifies that if goods are moving without payment of tax and post seizure, necessary penalty have been made, still the registered person who caused the movement of goods would be liable for recovery of tax under section 74.
The overall impact of the amendment suggests stringent approach towards non-compliance of provisions of goods/conveyance in transit.
[Refer clause 104 of Finance Bill, 2021
INTEGRATED GOODS AND SERVICES TAX ACT, 2017
Zero rated supply
- Section 16(1)(b) of the IGST Act is proposed to be amended to restrict the scope of “zero-rated supply” to the extent of such goods or services which are used for authorized operations in the context of supplies made to Special Economic Zone developer or a Special Economic Zone unit.
- Section 16(3) of the IGST Act is proposed to be substituted wherein the option of export on payment of IGST has been omitted. Consequentially, Section 16(4) is proposed to be inserted which restricts the option of zero-rated supply on payment of IGST to notified class of persons or notified supplies of goods/services.
- Further, a proviso is proposed to be inserted which provides that in case of non-realization of sale proceeds on account of export of goods, the exporter shall deposit the refund received on account of export under LUT along with applicable interest within 30 days from the date of expiry of time limit for collection of foreign exchange remittance as prescribed under FEMA.
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Our Comment
The aforesaid amendment provides more clarity in respect of taxation of SEZ supplies which is in line with the pre-GST era where the benefit of tax exemption in case of supplies to Special Economic Zone Developer/ Unit was granted only for authorized operations.
Effectively, exporters are now required to undertake zero-rated supplies under bond or LUT. Restriction with respect to export on payment of IGST would lead to blockage of working capital.
Additionally, export of goods is not only restricted to taking goods outside India, but it also requires receipt of payment in convertible foreign exchange. The said amendment may not have any impact on free supplies to unrelated parties outside India as the said transaction still does not qualify as a supply per-se. However, GST may be attracted on transactions of free supply with related parties outside India.
Conclusion
The humongous changes that came along proves that The Devil lies in the Details and the Fine Print.” Industry is expected to be on its TOES always – cautious & ALERT always to the mischiefs of Department.
Now the assesee will need more support of professionals than ever to comply with GST which is often touted as SIMPLE LAW by Government.
In never like before Budget, taxpayers were praying for ease in compliances in relief in stringent provisions but what they got is plethora of ADVERSE amendments to decode and abide with. The Government is very serious about TAXING its people & will go to any extent to EXTRACTS the life force of industry.
