Finance Bill, 2023 - Proposed Amendments to GST

[Alan Dev]

The Finance Bill, 2023 has proposed to make multiple amendments to the GST law. Changes are proposed to provisions dealing with composition levy scheme, input tax credit, registration, filing of various returns, penalties etc. In this post, we discuss the changes proposed to be made to the GST Act. The changes will come into effect only after the GST council giving its nod to the proposed amendments and Centre and States making the amendments to the respective Acts.

Key Amendments to CGST Act

1. Registered Persons supplying goods through E-commerce platforms now eligible for paying tax under composition scheme

An amendment is proposed to clause (d) of sub-section (2) and clause (c) of sub-section (2A) in Section 10 of CGST Act. The amendment proposed is to omit the words “goods or” from the aforesaid sections.

The effect of the proposed amendment is to permit suppliers of goods through E-commerce platforms to opt for paying tax under composition levy scheme.

2.  Recipient to pay an amount equal to ITC availed along with interest if invoice amount not paid within 180 days of issue of tax invoice

Amendment is proposed to second proviso of sub-section (2) of section 16. For the words “added to his output tax liability, along with interest thereon”, the words and figures “paid by him along with interest payable under section 50” shall be substituted.

The substitution requires the recipient who fails to pay to the supplier the value of supply along with tax within a period of 180 days from the date of issue of invoice to pay an amount equal to the input tax credit availed along with applicable interest.

A substitution is proposed to third proviso of sub-section (2) of section 16. By virtue of the proposed substitution, words “to the supplier” shall be inserted after the words “made by him”. This substitution makes it clear that once the recipient makes the payment towards the value of supply to the supplier, she can avail ITC.

3. Scope of value of exempt supply widened to include supply of warehoused goods to any person before clearance for home consumption so as to restrict credit

Amendment by way of substitution is proposed in the explanation to sub-section (3) of Section 17 of the CGST Act.

By way of the proposed amendment, it is proposed to include Supply of warehoused goods to any person before clearance for home consumption in the value of exempt supply. As the section stands now, only those activities specified in para 5 of schedule III is included in the value of exempt supply.

As per sub-section (2) of Section 17, where goods/services or both are used partly for effecting taxable supplies and partly for effecting exempt supplies, the amount of credit shall be restricted to the said taxable supplies. The proposed amendment therefore attempts to restrict credit.

4. Input Tax Credit restricted on goods or services or both intended to be used in CSR Activities

It is proposed to insert a new clause, namely clause (fa) after clause (f) in sub-section (5) of section 16. Sub-section (5) of section 16 deals with supplies in case of which input tax credit is not available. As per the proposed amendment, goods or services or both received which are used or intended to be used for CSR activities shall not be eligible for input tax credit.

5. Persons named in Section 23 not liable to be registered even if they fall within section 22(1) or section 24

Section 23 is substituted in toto with retrospective effect from 01.07.2017. Section 23 list down persons not liable to take registration. The proposed amendment to section 23 aims to shed more clarity into interplay between sections 22(1), 23 and 24. As per the proposed amendment, persons who are exempted from registration under section 23, namely persons engaged in wholly exempt supply and agriculturists, need not register compulsorily under sections 22(1) or 24.

6. Belated Filing of GSTR – 1 not beyond three years

A new sub-section, namely Sub-section (5) is proposed to be inserted after sub-section (4) in section 37. The effect of the insertion would be that a maximum time limit of three years from the due date for filing is set for belated filing of GSTR-1. The said period of three years can be extended by the Government on the recommendations of the Council.

7. Belated Filing of GSTR -3B not beyond three years

A new sub-section, namely Sub-section (11) is proposed to be inserted after sub-section (10) in section 39. The effect of the insertion would be that a maximum time limit of three years from the due date for filing is set for belated filing of GSTR-1. The said period of three years can be extended by the Government on the recommendations of the Council.

8. Belated Filing of Annual Return/GSTR-9 not beyond three years

Section 44 as it stands now is to be renumbered as sub-section (1) of section 44 and following sub-section (1), a new sub-section (2) is proposed to be inserted.  The effect of the insertion would be that a maximum time limit of three years from the due date for filing is set for belated filing of GSTR-9. The said period of three years can be extended by the Government on the recommendations of the Council.

9. Belated Filing of GSTR-8 not beyond three years

A proposal is made to insert a new sub-section (15) to section 52 of the CGST Act. The effect of the insertion would be that a maximum time limit of three years from the due date for filing is set for belated filing of GSTR-8 by an e-commerce operator. The said period of three years can be extended by the Government on the recommendations of the Council.

10. Provisionally accepted ITC included in Provisional Refund

The words “excluding the amount of input tax credit provisionally accepted” is proposed to be omitted from sub-section (6) of section 54. The effect of the amendment would be that provisionally accepted input tax credit will be eligible for provisional refund of 90% of total amount claimed in zero-rated supplies.

11. Manner of calculating Interest on delayed refunds to be prescribed

An amendment by way of substitution is proposed to the words “from the date immediately after the expiry of sixty days from the date of receipt of application under the said sub- section till the date of refund of such tax”. The said words is proposed to be substituted by “for the period of delay beyond sixty days from the date of receipt of such application till the date of refund of such tax, to be computed in such manner and subject to such conditions and restrictions as may be prescribed”. This amendment seeks to prescribe the manner in which interest is to be calculated beyond a delay of sixty days.

12. Penalty on E-commerce operators

A new sub-section namely sub-section (1B) is proposed to be inserted after sub-section (1A) of Section 122. Section 122 envisages penalty for certain offences. The proposed sub-section seeks to penalise e-commerce operators who -

1. Allow supply by an unregistered persons other than a person exempted from registration;
2. Allow an inter-state supply by a person not eligible to make such inter-state supply; and
3. Fails to furnish correct details in FORM GSTR -8

The amount of penalty is ten thousand rupees, or an amount equivalent to the amount of tax involved had such supply been made by a registered person other than a person paying tax under section 10, whichever is higher.

13. Decriminalizing certain offenses

Section 132 deals with certain offences that are punishable with imprisonment. An amendment is proposed to section 132 to decriminalise offences such as obstruction or preventing any officer from discharging his duties under the GST Act, tampering or destruction of material evidence or documents and failure to supply any required information as required to supply under the GST Act.

14. Amount for compounding offenses  Reduced

The proposed amendment to sub-section (2) of Section 138 proposes to fix the minimum amount for compounding an offence at 25% of the tax involved instead of “ten thousand rupees or 50% whichever is higher” and the maximum at 100% of the tax involved instead of “not being less than thirty thousand rupees or 150% of the tax, whichever is higher”.

15. Consent based sharing of information furnished by registered persons with other systems

A new section, namely section 158A is proposed to be inserted after section 158. The proposed amendment permits the GST portal to share information with such other systems as prescribed by the Government in such manner and subject to conditions as may be prescribed.

16. Retrospective Exemption to certain activities

It is proposed to give retrospective effect from 1^st day of July, 2017 to paragraphs 7 and 8 in Schedule III of the CGST Act. The effect of the amendment would be to treat activities mentioned in paragraphs 7 and 8 of Schedule III neither as a supply of goods nor a supply of services since 01.07.2017. However, it is clarified that tax already collected on activities mentioned in paragraphs 7 and 8 of Schedule III will not be refunded.

 

Key Amendments to IGST

1. Definition of ‘Non-Taxable online recipient’

Amendment is proposed to substitute sub-section16 of section 2 of the IGST Act. Sub-section16 of section 2 of the IGST Act defines a ‘non-taxable online recipient’.

As per the proposed definition, a ‘non-taxable online recipient’ is any unregistered person receiving online information and database access or retrieval services located in taxable territory.

A ‘non-taxable online recipient’ as it now stands means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.

2. Place of supply where supplier of services and recipient are located in India

It is proposed to omit proviso to sub-section (8) of section 12 of the IGST Act so as to specify the place of supply, irrespective of destination of the goods, in cases where the supplier of services and recipient of services are located in India.