BUDGETARY CHANGES IN ‘INTEGRATED GOODS AND SERVICES TAX ACT, 2017’

[Mr. M. GOVINDARAJAN]

The finance minister submitted the present year budget on 23.07.2024.  So many changes have been brought in this budget in taxation matters.  In this article the changes that have been made in the ‘Integrated Goods and Services Tax Act, 2017’ (‘IGST Act’ for short) in the present budget.

The budget-

• amended Section 5 of the Act – Levy and collection;
• inserted a new Section 6A to the Act - Power not to recover Goods and Services Tax not levied or short-levied as a result of general practice.
• amended section 16 of the Act – Zero rated supply;
• amended Section 20 of the Act – Application of provisions of Central Goods and Services Tax Act, 2017.

Levy and Collection

Chapter III of the IGST Act deals with levy and collection of integrated tax. 

• Section 5 – Levy and Collection;
• Section 6 – Power to grant exemption to tax;
• Section 6A - Power not to recover Goods and Services Tax not levied or short-levied as a result of general practice.

Section 5(1) of the IGST Act provides that the integrated tax will be levied on all Inter-State supply of goods or services or both, except on the supply of alcoholic liquor for human consumption on the value determined under Section 15 of the Act at the rate not exceeding 40%.

Clause 147 of the Finance Bill inserted –‘and undenatured extra neutral alcohol or rectified spirit used for manufacture of alcoholic liquor, for human consumption’.

After amendment ‘undenatured extra neutral alcohol or rectified spirit used for manufacture of alcoholic liquor for human consumption is exempted from the levy of integrated tax in addition to the supply of alcoholic liquor for human consumption.

Power to Government

Clause 148 of the Finance Bill inserted a new Section 6A to the IGST Act.  According to this new section.  The newly inserted section 6A provides that if the Government is satisfied that-

• a practice was, or is, generally prevalent regarding levy of integrated tax (including non-levy thereof) on any supply of goods or services or both; and 
• such supplies were, or are, liable to –

• integrated tax, in cases where according to the said practice, integrated tax was not, or is not being, levied; or 
• a higher amount of integrated tax than what was, or is being, levied, in accordance with the said practice,

the Government may, on the recommendation of the Council, by notification in the Official Gazette, direct that the whole of the integrated tax payable on such supplies, the integrated tax in excess of that payable on such supplies, but for the said practice, shall not be required to be paid in respect of the supplies on which the integrated tax was not, or is not being, levied, or was, or is being, short levied, in accordance with the said practice.

Zero Rated Supply

Section 16 of the IGST Act deals with the taxation of integrated tax on zero rated supply.  The Finance Bill brought amendments to Section 16(4)(i) and (ii) of the IGST Act   and also inserted a new sub section 16(5) to the Act. 

After incorporating the amendments in Section 16 the section 16(4) provides that the Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification, specify–

1. a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made there under; *
2. a class of goods or services or both, on zero rated supply of which, the supplier may pay integrated tax and claim the refund of tax so paid, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made there under; **

*inserted vide clause 149(a)(i) of the Finance Bill.

** substituted for the words ‘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”, the words and figure’ vide Clause 149(a)(ii) of the Finance Bill. 

Clause 149(b) of the Finance Bill inserted sub section 16(5) which provides that notwithstanding anything contained in sub-sections (3) and (4), no refund of unutilized input tax credit on account of zero-rated supply of goods or of integrated tax paid on account of zero-rated supply of goods shall be allowed where such zero-rated supply of goods is subjected to export duty.

Application of the provisions of CGST Act

Section 20 of the IGST Act gives a list of provisions of sections of CGST Act that are also applicable to IGST Act.  The fifth proviso to this section provides that where the appeal is to be filed before the Appellate Authority or the Appellate Tribunal, the maximum amount payable shall be Rs.50 crore and Rs.100 crore respectively. 

The Finance Bill reduced the above said amount to Rs.40 crores for each appeal to be filed before the Appellate Authority or the Appellate Tribunal.