Proposed Amendments in GST Law

Transcription

1 Proposed Amendments in GST Law On , the Goods and Service Tax Council has issued draft proposal for the amendment in the "Goods and Services Tax" Law. The entire proposal gives brief view on amendment required under GST law. The proposal contains total 46 amendments to be made in CGST Act 2017, IGST Act 2017 and GST (Compensation to States) Act It can be said that it is Tax friendly measure initiated by Government and for its implementation Government is taking a step ahead for approval. Proposal was out for public comments till After considering public comment and views of Trade and Industry; the said amendments will be approved in this Monsoon session in Parliament. We have compiled said proposal in simplified manner and summarised as under:

2 Sr. No. Reference (CGST Act,2017) 1. 2(4) Description Existing Law Proposed Law after amendment Impact of Proposed Law Adjudicating Authority excludes the Central Board of Excise and Customs. 2. 2(17)(h) Business includes service provided by race club by way of totalisator or a licence to book maker in such club. 3. 2(35) Cost Accountant refers to clause (c)(b) of 2(1) of Cost and Definitions Works Accountants Act, (69) Local Authority includes a Development Board constituted under article 371 of the Constitution. 5. 2(102) Definition of Goods as well as Services excludes the term securities hence it can be deduced that every transaction relating to security shall be excluded from ambit of GST Supply In definition of Supply it is directly provided that the activities which are specified in Schedule II shall be considered as supply. Adjudicating Authority excludes the Central Board of Indirect Taxes and Customs, National Anti- Profiteering Authority. The clause shall be substituted as under: activities of a race club including by way of totalisator or a licence to book maker or activities of a licensed book maker in such club. Clause (c) shall be omitted. A Development Board constituted under article 371J shall also be treated as a Local Authority. An explanation is provided clarifying that Services shall include facilitating or arranging transactions in securities. 7(d) shall be substituted with 1(A). It is proposed due to change in the name of governing board of the Indirect Taxes. The National Anti-Profiteering Committee is also excluded from it. Now, all the activities relating to race club shall be leviable to GST. Reference of clause (c) was a typo error hence need to be omitted. Article 371J includes backward district of Karnataka- Hyderabad region. A Board established for having a check on the distribution of budget for development in the above region shall be local authority. The impact of this explanation will lead to levy of GST on the transactions which are facilitating the issue of Security hence any service, broking or documentation charges would be liable to GST. The activities specified in Schedule II should be firstly qualify as supply u/s 7(1) of CGST Act, 2017 then only it will be treated as Supply.

3 7. Schedule I Activities to be treated as supply even if made w/o consideration 8. Schedule III Import of service by a Taxable person from a related person or his establishment outside India in the course or furtherance of business are subjected to GST under RCM. Supply of goods from "Non Taxable Territory" to "Non Taxable Territory" without such goods entering into taxable territory, there was ambiguity that whether it shall be treated as import of service or not. Transactions which shall be 9. Schedule III In case of "High Sea Sale" or treated neither as "Warehousing of Goods", there was a supply of goods a double taxation because IGST was nor a supply of levied under Customs Tariff Act, 1975 services as well as when they are cleared for home consumption. To avoid double taxation, it is clarified vide a Circular No. 33/2017 Cus that IGST shall be levied only at the time of goods cleared for home consumption (4) Levy & Collection of Tax (1) & (2) Composition Tax GST shall be levied under RCM on supply of taxable goods or service by an unregistered person to a registered taxpayer. Supplier opting for "Composition Scheme", the limits for aggregate T/o is One Crore rupees for other than The word Taxable is proposed to be omitted. New entry 7 is to be inserted in Schedule III. New entry 8(a) is to be inserted in Schedule III i.e. Supply of warehoused goods to any person before clearance for home consumption. Entry 8(b), supply of goods by consignee to any person by endorsement of document of title to the goods before clearance for home consumption. 9(4) shall be substituted where Government will specify class of registered person liable to pay GST under RCM purchasing from unregistered person. The limits of the aggregate turnover shall be increased. Not only the registered taxpayers but also an unregistered persons shall liable to pay GST under RCM on import of service from related person or his other establishment outside India. Now such transactions are not liable to GST and as the entry is inserted in Schedule III it shall be neither supply of goods nor supply of service. However for reversal of ITC, exempt supply does not include transaction covered under Schedule III hence ITC reversal is not required to be made on such supply. By the insertion of these entries, IGST shall be levied only at the time of home consumption and IGST is required to be levied at the time of warehousing of goods. Only specified class of the taxpayers are liable to pay GST under RCM on purchase from unregistered person. More small taxpayers can opt for Composition Scheme.

4 12. 12(2) Time of Supply of Goods (2) Time of Supply of Services (2)(b) 15. Second Proviso to 16(2) Eligibility and conditions for taking Input Tax Credit specified category of states and for specified category of states it is Seventy Five lakh rupees. (Notification No. 46/2017- Central Tax). Supplier engaged in supply of service other than supply of food, drink being part of any service is not eligible to opt for the said scheme. It is stated that the TOS shall be issue of invoice or the date invoice required to be issued under sub section (1) of 31. The words "Sub (2) of 31" is mentioned. Explanation states deeming fiction that goods are deemed to be received by registered person in case of bill to ship to transaction for claiming ITC. Recipient fails to pay value of supply and Tax charged thereon to the supplier within 180 days from invoice date then ITC claimed shall be added with interest in output tax liability of the recipient. Other than specified states - Rs. 1.5 Crore. A proviso is to be added in 10 clarifying that a person opting for scheme shall not supply a value of service exceeding 10% of T/o in State or UT in preceding F.Y. and Rs. 5,00,000 w. e. is higher. The words "Sub (1) of" shall be omitted. The words "Sub (2) of" shall be omitted. An explanation to be added in respect of service stating that service deemed to be received by registered person for claiming ITC where service are provided to other person on direction of registered person. The words "along with interest thereon" shall be omitted. It enables the manufacturer and traders who supply service as well to opt for the said scheme. As section 31 states that such other document may equates as of invoice. As section 31 states that such other document may equates as of invoice. It is now proposed to provide this deeming fiction in case of services as well which will be taxpayerfriendly. The recipient would not be liable to pay interest in case of failure of payment within 180 days to the supplier.

5 16. 17(3) (5) (a), new (aa) & (b) 18. Explanation (c) to Sec: 20 Apportionment of credit and blocked credits Manner of distribution of credit by Input Service Distributor ITC was blocked against the outward supply of transaction mentioned in Schedule III. ITC shall not be eligible in respect of all motor vehicle and other conveyance except used for specified purpose. - Currently it is not specifically mentioned that whether ITC of general insurance, servicing, repair and maintenance w.r.t. motor vehicle is allowed or not. Currently, ITC w.r.t. service of rent a cab, life insurance and health insurance provided to employee as an obligation is eligible for ITC. For distribution of credit, the Tax or Duty levied under entry 92A of List I of the Seventh Schedule to the Constitution is not included. An exclusion shall be added clarifying that exempt supply shall not include transaction or activities covered under Schedule III other than sale of land and sale of building. The words "for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), vessels and aircraft" shall be added and the words "other conveyance" shall be omitted. The words "for transportation of money for or by a banking company or a financial institution" shall be added. (aa) shall be Clause (iii) shall be omitted and a proviso to be added giving benefit of ITC, when such service are given to employee as an obligation. The words "and 92A" shall be The supplier engaged in transactions covered under Schedule III other than sale of land or building is eligible to avail ITC. If motor vehicle having capacity of not more than 13 persons, vessel or aircraft used for specified purpose then ITC shall be allowed else not allowed. ITC in respect of other type of motor vehicles shall be allowed. Banking Co. and F.I. are eligible to claim ITC of such motor vehicle used for transportation of money. It is clarified that ITC shall not be allowed of general insurance, servicing, repair and maintenance w.r.t. motor vehicle of which ITC is not eligible as specified in clause (a). ITC w.r.t. food beverages, health service or travel benefit shall be eligible when provided by employer as an obligation to the employees. It is proposed to correct the inadvertent omission.

6 19. Explanation to Sec: (x) Compulsory Reg. in certain cases 21. New second, third and fourth proviso to Sec: 25(2) Registration Special category states includes Assam. Procedure for Registration 22. New proviso to 23. Sec: 29(1) New proviso to Cancellation of Registration Sec: 29(2) (1) & 34(3) Tax Invoice, Credit and Debit Notes 25. New proviso to Sec: 35(5) (9) (A) new insertion Accounts and other records Returns Compulsory registration is required to be taken by electronic commerce operator. A separate registration shall be granted for a business vertical only. Proper officer can cancel the registration on own motion or on application made. A debit or credit note is required to be issued invoice wise. Every registered person is required to get its accounts audited by CA or ICWA subject to limit of turnover specified. Any omission or incorrect particulars in return can be rectified in the return of the period during which such mistake noticed. Law has provided returns for verification of ITC which are GSTR 2 The words "and Assam" shall be The words "who is required to collect tax at source under section 52" shall be A proviso to be added where separate registration can be taken for additional place of business and a person having more than one unit in SEZ. A new proviso is to be added stating that the proper officer may suspend the registration during such cancellation process. The words "one or more tax invoices" shall be A proviso to be added clarifying that any department of Central of State Govt. or local authority of which accounts are required to be audited by C&AG is not required to comply with section 35(5). The words "or in the amendment return prescribed for this purpose" shall be A new section 43(A) shall be For the supplier in the State of Assam, threshold limit of Rs. 20 Lakh will be applied instead of Rs. 10 Lakhs. Small ECO whose aggregate turnover does not exceed threshold limit are not required to take registration. In case of additional place of business or person having more than one unit in SEZ, can take separate registration. The taxpayers applied for cancellation of registration shall be relived from burden of compliance. Debit or credit note is not required to be issued invoice wise rather a consolidated note can be issued. Department of Central or State Govt. or local authority subjected to C&AG audit are relived from audit to be conducted by CA or ICWA. The mistakes can be rectified in the amendment return. By section 43(A), a procedure shall be specified for verifying, validating, modifying or deleting the

7 and GSTR 2A but right now this procedure is not in action GST Practitioner A GST practitioner was allowed to furnish details w.r.t. section 37, 38,39,44, (5)(c) & 49(5)(d) 30. New subsection 5A under Explanation (2) (e) to Sec: 54 Payment of Tax, interest, penalty & other documents Refunds (8)(a) Conditions of Unjust Enrichment 33. Explanation (2)(c) of Sec: 54 Relevant Date for Refund Currently, ITC of State Tax and Union Territory Tax shall be first utilised against liability of respective tax and if any balance of ITC remains then it can be set off against liability of Integrated Tax provided that credit of CGST and UTGST is not available. The order of Utilization of ITC is prescribed under law. In case of "Inverted Duty Structure", u/s 54(3)(ii), it is stated that refund of unutilized ITC can be claimed at the end of tax period however explanation 2(e) of 54 i.e. Relevant Date states that refund can be claimed till end of financial Year in which refund arises. In case of zero Rates Supply, the condition of unjust enrichment does not applies. In case of export of service, where service completed prior to receipt of The words "and to perform such other functions" shall be The words "only when the balance of the input tax credit on account of central tax is not available for payment of integrated tax" shall be A new sub 5A is to be The words "clause (ii) of" and due date for furnishing of return under section 39 for the period" shall be inserted in explanation 2(e) of 54. The words zero rated supplies shall be omitted and export shall be The words or in Indian Rupees where permitted by the Reserve supplies made by registered person for availing ITC. A procedure for recovery of ITC from recipient shall also be specified. It will enable a GST practitioner to perform such other functions as may be prescribed. There is no change in the order of utilization of ITC, only these words are to be inserted so as to comply with the mechanism provided on the portal for utilization of ITC. Because the section states that after utilization of respective Tax, ITC can be utilized against liability of IGST. This section gives power to Government to specify any specific order of utilization of ITC towards liability of payment of Tax. In case of Inverted Duty Structure the refund shall be claimed till the due date of return for the period in which such refund claim arises. It is proposed to correct an inherent contradiction of the relevant date in case of refund of unutilized ITC under section 54(3) of the said Act. In case of supplies to SEZ where DTA supplier charges IGST in the invoice and SEZ can take ITC of the IGST charged then in such case principle of unjust enrichment shall apply. In case of supply to Nepal and Bhutan, the remittance will be in Indian Rupees hence in such

8 payment, the relevant date shall be receipt of payment in convertible foreign exchange. For recovery of Tax from whom recovery can be made a word Person is used (1) Recovery of Tax A certificate shall be issued by a proper officer to a collector of district for recovery of tax where defaulter owns property (6) Currently at the stage of appeal to Appellate Authority, a pre deposit is required to be paid along with appeal which is 10% of the tax amount in dispute. Appeals to (8) Currently at the stage of appeal to Appellate Appellate Tribunal, a pre deposit is Authority required to be paid along with appeal which is 20% of the tax amount in dispute in addition to pre deposit paid when appeal filed to Appellate Authority (1) Transitional arrangements for Input Tax Credit For availing transitional credit under sub-sections (3),(4), (5) and (6), eligible duties includes the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act,1978. Bank of India shall be An explanation is to be inserted in the section. An explanation is to be inserted in the section clarifying the meaning of Collector. The words subject to a maximum of twenty-five Crore rupees shall be The words subject to a maximum of Fifty Crore rupees shall be The words eligible duties shall be inserted in sub section (1) & further, the said entry (iv) in the explanation 1 & 2 stating meaning of eligible duty shall be omitted. case relevant date shall be receipt of such Indian Currency and accordingly section 2(6)(iv) of the IGST Act shall be amended where a transaction shall be export even if the payment is received in Indian Rupees. By insertion of an explanation, recovery of Tax can be made from distinct person also for speedy recovery. Collector means collector of revenue district and includes a Deputy Commissioner or a district magistrate or head of the revenue administration. Where an appeal involves huge amount of Tax in dispute then in such cases it is a friendly measure to restrict the amount of pre deposit upto Rs. 25 Crore. Where an appeal involves huge amount of tax in dispute then in such cases it is a friendly measure to restrict the amount of pre deposit upto Rs. 50 Crore. In case of certain Textile and Textile Articles stated in chapter 50 to 63 of Second Schedule, an additional duty levied hence such duty is not covered under eligible duty. Hence transitional credit of such duty cannot be availed.

9 38. New proviso to 143(1) Job work process The eligible duties does not include the term Cess hence supplier cannot claim transitional credit of any cess. Currently, a job worker is required to send back the input or capital goods within 1 year and 3 years respectively to the principal after process of job work is done. An explanation 3 shall be inserted clarifying that any Cess levied or Cess collected as additional duty of customs u/s 3(1) of Customs Tariff Act, 1975 shall not be considered as eligible duties and taxes. A proviso is to be added providing for an extension of the time limit. Where it can be extended for further period of 1 year and 2 years for input and capital goods respectively. It has been clarified specifically that transitional credit of any Cess or Cess levied along with CVD on any imported goods cannot be availed. Hence credit of EC/SHEC/KKC or Cess with CVD shall not be allowed. In case of job work process which takes a time period of more than 1 year like construction of vessel for defence purpose, then it is taxpayer friendly. Sr. No. Reference (IGST Act,2017) 39. 2(6)(iv) 40. Explanation to 2 (16) Description Definitions Existing Law Proposed Law for amendment Impact of Proposed Law Condition stated in point (iv) of definition of Export of Service states that payment must be received in convertible foreign exchange. The definition of Governmental Authority includes an authority or board constituted for performing the function entrusted to a municipality under article 243W of the Constitution. The words or in Indian Rupees where permitted by the Reserve Bank of India shall be The words Panchayat under article 243G shall be If supplier exports goods to Nepal or Bhutan then remittance shall be made in Indian Rupees, hence in such case the transaction will fall under export of service. With respect to Governmental authority many exemptions are provided hence wherever exemption includes the word Governmental authority, it shall extend to function specified under 11 th schedule of the Constitution.

10 41. 12(8) Place of supply of service where location of supplier and recipient is in India 42. Proviso to 13 (3) (a) 43. New Proviso to 17 (1) & (2) Place of supply of service where location of supplier or location of recipient is outside India Apportionment of Tax and Settlement of funds In case of service of transportation of goods including mail or courier provided to registered person then POS shall be location of such person and provided to other than registered person then location where such goods are handed over for transportation. The Rule of place of supply in case of performance based service does not apply to services supplied w.r.t. goods temporarily imported into India for repair and without being put to use in India again exported. The section provides the apportionment of Taxes in case of inter-state supply of goods or services A proviso is to be added stating that if the goods are to be transported to a place outside India then POS shall be the location of destination of goods. The words or for any other treatment or process shall be The new proviso provides mechanism of proportion of IGST between Centre and State. It is tax friendly measure for transporters transporting goods to a place outside India. In such cases place of supply shall be location outside India hence GST shall not apply. Hence, the goods not only for repair purpose but for the purpose of any treatment or process imported then this rule does not apply. The proposed amendment provides that fifty percent of the amount of IGST which does not get apportioned under clauses (a) to (f) for the time being shall be apportioned to the Central Government on the recommendations of the Council and shall be adjusted against the amounts apportioned under clauses (a) to (f). 44. Similar provision is made for adhoc apportionment of the remaining fifty percent of IGST to the State Governments.

11 Sr. No. Reference (GST Compensation Act, 2017) Description 45. New 10 (3A) Crediting proceeds of Cess to the Fund 46. 7(4)(b)(ii) Calculation and release of compensation Existing Law Proposed Law for amendment Impact of Proposed Law Currently, Cess is collected on supply of goods and service. It will be used for paying compensation to the States against loss in transition period. On completion of transition period, 50% of the balance shall be transferred to consolidated Fund of India and remaining 50% shall be distributed to States in the ratio of revenue of last year of transition period. For calculation of actual revenue collected by States, it shall include IGST as certified by the Principal Chief Controller of Accounts of the Central Board of Excise and Customs. By inserting a new section the Central Government reserve a right to distribute such remaining unutilized fund between Centre and States on adhoc basis. The word Excise shall be omitted and Indirect Taxes shall be The proposed amendment provides for distribution of Cess remaining unutilized in the Fund on an adhoc basis among the Centre and the States on the recommendations of the Council. The change is to be made due to change in the name of governing board of Indirect Taxes. Disclaimer: KMS Updates is meant for information purpose only and does not purport to be advice or opinion, legal or otherwise, whatsoever. KMS updates are prepared based on the understanding of the provisions as stood applicable as on date. KMS is not responsible for any error or omission in this update or for any action taken based on its contents.