BUDGETARY CHANGES IN CGST ACT, 2017

[Mr. M. GOVINDARAJAN]

Amendment to section 16

Section 16 of the Act prescribes the eligibility conditions for taking input tax credit.  The Finance Bill, vide clause 114 inserted additional conditions vide section 16(5) and 16(6).  This amendment came into effect from 01.07.2024.

The newly inserted Section 16(5) provides that in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed up to the 30.11.2021.

The newly inserted Section 16(6) provides that where registration of a registered person is cancelled and subsequently the cancellation of registration is revoked by any order, either under section 30 or pursuant to any order made by the Appellate Authority or the Appellate Tribunal or court and where availment of input tax credit in respect of an invoice or debit note was not restricted under sub-section (4) on the date of order of cancellation of registration, the said person shall be entitled to take the input tax credit in respect of such invoice or debit note for supply of goods or services or both, in a return under section 39,––

• filed up to thirtieth day of November following the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier; or
• for the period from the date of cancellation of registration or the effective date of cancellation of registration till the date of order of revocation of cancellation of registration, where such return is filed within 30  days from the date of order of revocation of cancellation of registration, whichever is later.

Amendment to Section 30

Section 30 of the Act provides the procedure for revocation of cancelled certificate of registration.

Section 30(2) of the Act provides that the proper officer may, in such manner and within such period as may be prescribed, by order, either revoke cancellation of the registration or reject the application.  The first proviso to this section provides that the application for revocation of cancellation of registration shall not be rejected unless the applicant has been given an opportunity of being heard.

The Finance Bill inserted a second proviso to this Section.  The newly inserted second proviso provides that such revocation of cancellation of registration shall be subject to such conditions and restrictions, as may be prescribed.

Amendment to Section 31

Section 31 of the Act provides the procedure for issue of tax invoice.  The Finance Bill inserted the words ‘within the period as may be prescribed’ in Section 31(3)(f).  After this insertion the said section provides that a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 within the period as may be prescribed shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both.

The Finance Bill further inserted an explanation to Section 31(6)(g) of the Act.  This explanation provides that for the purposes of clause (f), the expression “supplier who is not registered” shall include the supplier who is registered solely for the purpose of deduction of tax under section 51.

Amendment to Section 39

Section 39 of the Act imposes obligations on the taxable persons to file returns within the time stipulated.  Section 39(3) of the Act provides that every registered person required to deduct tax at source under the provisions of section 51 shall furnish, in such form and manner as may be prescribed, a return, electronically, for the month in which such deductions have been made within ten days after the end of such month.

The Finance Bill substituted a new section for 39(3).  The newly substituted section 39(3) provides that every registered person required to deduct tax at source under section 51 shall electronically furnish a return for every calendar month of the deductions made during the month in such form and manner and within such time as may be prescribed.

The proviso to this section provides that the said registered person shall furnish a return for every calendar month whether or not any deductions have been made during the said month.

Amendment to Section 54

Section 54 of the Act provides the procedure for getting refund by the registered person. The Finance Bill omitted the second proviso to Section 54(3) which provides that no refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty.

The Finance Bill further inserted a sub section (15) to Section 54.  The newly inserted Sectio 54(15) provides that notwithstanding anything contained in this section, 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.

Amendment to Section 70

Section 70 of the Act gives powers to the Proper Officer to issue summons persons to give evidence and produce documents.  The Finance Bill introduced a new sub section (1A) of the said section.  The newly introduced Section 70(1A) provides that all persons summoned under sub-section (1) shall be bound to attend, either in person or by an authorized representative, as such officer may direct, and the person so appearing shall state the truth during examination or make statements or produce such documents and other things as may be required.

Amendment to Section 73

Sections 73 provides the procedure for determination of tax in case of tax not paid or short paid or erroneous refund etc., other than for the reasons of fraud etc.   The Finance Bill inserted the marginal headings to the said sections as ‘Determination of Tax pertaining to the period up to the Financial year 2023-24’

The Finance Bill inserted a new section 73(12) provides that the provisions of this section shall be applicable for determination of tax pertaining to the period up to Financial Year 2023-24.

Amendment to Section 74

Sections 74 provides the procedure for determination of tax in case of tax not paid or short paid or erroneous refund etc., by the reasons of fraud etc.   The Finance Bill inserted the marginal headings to the said sections as ‘Determination of Tax pertaining to the period up to the Financial year 2023-24’

The Finance Bill inserted a new section 74(12) provides that the provisions of this section shall be applicable for determination of tax pertaining to the period up to Financial Year 2023-24.

Insertion of Section 74A

This will be discussed in a separate acticle.

Amendment to Section 75

Section 75 deals with the general provisions relating to determination of tax.  The Finance Bill introduce a new section 75(2A) and substitute a new provision for Section 75(10).

The newly introduced Section 75(2A) provides that where any Appellate Authority or Appellate Tribunal or court concludes that the penalty under clause (ii) of sub-section (5) of section 74A is not sustainable for the reason that the charges of fraud or any willful misstatement or suppression of facts to evade tax has not been established against the person to whom the notice was issued, the penalty shall be payable by such person, under clause (i) of sub-section (5) of section 74A.

The substituted Section 75(10) provides that the adjudication proceedings shall be deemed to be concluded, if the order is not issued within the period specified in sub-section (10) of section 73 or in sub-section (10) of section 74 or in sub-section (7) of section 74A.

Amendment to section 109

Section 109 of the Act provides for the constitution of GST Appellate Tribunal and Benches thereof.  The Finance Bill inserted some words at the end of Section 109(1).  The said section, after incorporation of the said insertion provides that the Government shall, on the recommendations of the Council, by notification, establish with effect from such date as may be specified therein, an Appellate Tribunal known as the Goods and Services Tax Appellate Tribunal for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority or for conducting an examination or adjudicating the cases referred to in sub-section (2) of section 171, if so notified under the said section.

Amendment to Section 112

Section 112 of the Act provides the procedure for filing appeal to Appellate Tribunal.  The Finance Bill made some amendments to the provisions of this Section.

After insertion of some words in Section 112(1) the said section reads as - Any person aggrieved by an order passed against him under section 107 or section 108 of this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act may appeal to the Appellate Tribunal against such order within three months from the date on which the order sought to be appealed against is communicated to the person preferring the appeal or the date, as may be notified by the Government, on the recommendations of the Council, for filing appeal before the Appellate Tribunal under this Act, whichever is later.  This provision will come into effect from 01.08.2024.

After insertion of some words in Section 112(3) the said section reads as - The Commissioner may, on his own motion, or upon request from the Commissioner of State tax or Commissioner of Union territory tax, call for and examine the record of any order passed by the Appellate Authority or the Revisional Authority under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act for the purpose of satisfying himself as to the legality or propriety of the said order and may, by order, direct any officer subordinate to him to apply to the Appellate Tribunal within six months from the date on which the said order has been passed or the date, as may be notified by the Government, on the recommendations of the Council, for the purpose of filing application before the Appellate Tribunal under this Act, whichever is later for determination of such points arising out of the said order as may be specified by the Commissioner in his order.  This section will come into effect from 01.08.2014.

After insertion of some words in Section 112(3) the said section reads as - The Appellate Tribunal may admit an appeal within three months after the expiry of the period referred to in sub-section (1), or permit the filing of an application within three months after the expiry of the period referred to in sub-section (3) or permit the filing of a memorandum of cross-objections within forty-five days after the expiry of the period referred to in sub-section (5) if it is satisfied that there was sufficient cause for not presenting it within that period. 

Section 112 (8) (b) provides that no appeal shall be filed under sub-section (1), unless the appellant has paid a sum equal to 20%. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order subject to a maximum of Rs.50 crore, in relation to which the appeal has been filed.

The Finance Bill reduced the amount payable by 10% from 20% and the maximum amount Rs.20 crore from Rs.50 crore.

Amendment to Section 122

Section 122 of the Act provides for penalties for certain offences.  After amendments to Section 122 the first line of this section reads as - Any electronic commerce operator who is liable to collect tax at source under section 52.

Insertion of a new Section 128A

The Finance Bill inserted a new section 128A which provides for the waiver of interest or penalty or both relating to demands raised under Section 73, for certain tax periods.

The newly inserted Section 128A(1) provides that where any amount of tax is payable by a person chargeable with tax in accordance with-

1. a notice issued under section 73(1) or a statement issued section 73(3), and where no order under section 73 (9) has been issued; or
2.  an order passed section 73(9), and where no order under section 107 (11) or 108(1) has been passed; or
3. an order passed under section 107(11) or section 108(1) and where no order section 113(1) has been passed,

pertaining to the period from 01.07.2017 to 31.03.2020, or a part thereof, and the said person pays the full amount of tax payable as per the notice or statement or the order referred above on or before the date, as may be notified by the Government on the recommendations of the Council, no interest under section 50 and penalty under this Act, shall be payable and all the proceedings in respect of the said notice or order or statement, as the case may be, shall be deemed to be concluded, subject to such conditions as may be prescribed.

The first proviso to this section provides that where a notice has been issued under section 74(1), and an order is passed or required to be passed by the proper officer in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court in accordance with the provisions of section 75 (2), the said notice or order shall be considered to be a notice or order, as the case may be, referred to in clause (a) or clause (b) of this sub-section.

The second proviso to this section provides that the conclusion of the proceedings under this sub-section, in cases where an application is filed under section 107 (3) or under section 112(2) or an appeal is filed by an officer of central tax under section 117 (1) or under section 118(1) or where any proceedings are initiated section 108 (1), against an order referred to in clause (b) or clause (c) or against the directions of the Appellate Authority or the Appellate Tribunal or the court referred to in the first proviso, shall be subject to the condition that the said person pays the additional amount of tax payable, if any, in accordance with the order of the Appellate Authority or the Appellate Tribunal or the court or the Revisional Authority, as the case may be, within 3 months from the date of the said order.

The third proviso to this section provides that where such interest and penalty has already been paid, no refund of the same shall be available.

Section 128A(2) provides that sub section (1) shall be applicable in respect of any amount payable by the person on account of erroneous refund.

Section 128A(3) provides that Section 128A(1) is not applicable in respect of cases where an appeal or writ petition filed by the said person is pending before Appellate Authority or Appellate Tribunal or a court, as the case may be, and has not been withdrawn by the said person on or before the date notified under sub-section (1).

Section 128A (4) provides that where any amount specified under sub-section (1) has been paid and the proceedings are deemed to be concluded under the said sub-section, no appeal under section 107 (1) or section 112 (1) shall lie against an order referred to in clause (b) or clause (c) of sub-section (1), as the case may be.

Amendment to Section 140

Section 140(7), after amendment in the Finance Bill provides that notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as credit under this Act, within such time and in such manner as may be prescribed, whether the invoices relating to such services are received prior to, on or after, the appointed day.

Amendment to Section 171

Section 171 (2) provides that         the Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.        

The Finance Bill inserted proviso and explanation to Section 171.  The proviso provides that the Government may by notification, on the recommendations of the Council, specify the date from which the said Authority shall not accept any request for examination as to whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.

The newly inserted Explanation provides that for the purposes of this sub-section, “request for examination” shall mean the written application filed by an applicant requesting for examination as to whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.

The expression “Authority” shall include the “Appellate Tribunal”.

Amendment to Schedule III

The Finance Bill inserted paras 9 and 10 in the Schedule III.  Para 9 provides that activity of apportionment of co-insurance premium by the lead insurer to the co-insurer for the insurance services jointly supplied by the lead insurer and the co-insurer to the insured in coinsurance agreements, subject to the condition that the lead insurer pays the central tax, the State tax, the Union territory tax and the integrated tax on the entire amount of premium paid by the insured.

Para 10 provides that the Services by insurer to the reinsurer for which ceding commission or the reinsurance commission is deducted from reinsurance premium paid by the insurer to the reinsurer, subject to the condition that the central tax, the State tax, the Union territory tax and the integrated tax is paid by the reinsurer on the gross reinsurance premium payable by the insurer to the reinsurer, inclusive of the said ceding commission or the reinsurance commission.