RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

The Finance (No.2) Bill, 2024 introduced in Parliament on 23 July, 2024 has been passed with amendments in the Lok Sabha on 8^th August, 2024 and Rajya Sabha on 9^th August, 2024. The Budget session of Parliament has now been adjourned. The demand for exempting life insurance and medical insurance premium from levy of GST has been turned down. It has been stated that of the 18 percent GST on medical insurance, about half of the same goes to states directly and from the balance, 41% moves into the devolution pool which also goes to states, implying that a total of 74% of tax collection goes to states. Finance (No. 2) Act, 2024 has since been enacted on 16 August, 2024 after the assent of President. The specific sections of CGST shall be notified by way of separate notifications in due course.

GST is expected to constitute about 18% of total revenue whereas other indirect taxes may fetch about 10%. The amendments carried out in GST law are based on GST Council’s recommendations. It has been said that a comprehensive review of rates shall be done in next 6 months time to rationalize and simplify for ease of trade, removal of duty inversion and reduction of disputes. On a broader overview, budget is seen as a vision document for next five years. Tax revenue as well as tax revenue as percentage to GDP is also on a rise.

Recenlty, larger bench of Apex Court in majority decision (8:1) held that state’s power to tax is not limited by Parliament’s Mines and Minerals (Development and Regulation) Act, 1957. It thus held that royalty paid by mining companies to the Central Government is not a tax.

CAG of India has advised MOF to identify high risk parameters in GST composition scheme on a regular basis and also undertake verification to check tax evasion.

Revenue secretary in a recent conference of Enforcement Chiefs of State & Central GST formations stressed on maintainability a balance between enforcement actions and ease of doing business, besides focusing on real tax evasion. He also emphasized on staying connected to trade and industry and reducing the need for intrusive enforcement action by enabling proactive compliances.

Next (53^rd) GST Council meeting is scheduled to be held on 9^th September, 2024 in New Delhi. It may inter alia, discuss on taxability of TDR / JDA agreements, rate rationalization, notices issued to Infosys’s etc.

The second special drive to need out fake GST registration has begun w.e.f. 16.08.2024 and shall continue till 15.10.2024. Based on risk parameters, about 60,000 firms are already on radar. According to one press release of DGGI, it has detected tax evasion of Rs. 1.2 trillion by way of fake ITC since 2020.

The Constitution of GST Appellate Tribunal in India seems to be happening soon. MoF has issued notification for constitution of state benches on 31st July, 2024. On the GST Tribunal (GSTAT) front, the process of recruitment of members and setting up of infrastructure is on and with the notification of benches including circuit benches on 31st July, 2024, it can be expected that GST Appellate Tribunals may see the light of the day in near future.

Finance (No. 2) Act, 2024 notified

• Finance (No.2) Bill, 2024 has been notified after President’s assent on 16.08.2024.
• It will be called Finance (No. 2) Act, 2024, Act No. 15 of 2024.
• It has been notified by way of Extra ordinary Notification (No. CG-DL-E-16082024-256436) in The Gazette of India.
• Relevant sections relating to CGST shall come into force on such date as the Central Government, may by way of Notification, appoint in the official Gazette.

(Source: Extra ordinary Notification (No. CG-DL-E-16082024-256436) dated 16.08.2024)

Amendments in CGST Act, 2017 effected by the Finance (No. 2) ACT, 2024

The Finance (No. 2) Act, 2024 [Act No. 15 of 2024] obtained President’s asset on 16th August, 2024 and got notified vide Extra ordinary Notification (No. CG-DL-E-16082024-256436) dated 16.08.2024 to give effect to the financial proposals of the Central Government for the financial year 2024-25 as per Finance (No.2) Bill, 2024.

Following is the list of sections of Finance (No. 2) Act, 2024 through which sections of the Central Goods and Services Tax (CGST) Act, 2017 have been amended. These amendments will be effective from a notified date:

Section of Finance (No. 2)  Act, 2024	Corresponding Section of CGST Act, 2017	Brief Particulars
114	Section 9	Amendment to Section 9, which deals with the levy and collection of CGST, including certain additional goods.
115	Section 10	Amendment to Section 10, which relates to the composition scheme for taxpayers under GST.
116	Section 11A	Insertion of Section 11A, addressing the non-recovery of tax not levied due to general practice.
117	Section 13	Amendment to Section 13, related to time of supply of services under the CGST Act.
118	Section 16	Amendment to Section 16, regarding eligibility and conditions for Input Tax Credit (ITC).
119	Section 17	Amendment to Section 17, dealing with restrictions on ITC.
120	Section 21	Amendment to Section 21, which addresses issues regarding registration cancellation.
121	Section 30	Amendment to Section 30, concerning revocation of cancellation of registration.
122	Section 31	Amendment to Section 31, which involves the time limit for issuing invoices.
123	Section 35	Amendment to Section 35, pertaining to records and accounts that must be maintained by taxpayers.
124	Section 39	Amendment to Section 39, related to the furnishing of returns under the CGST Act.
125	Section 49	Amendment to Section 49, concerning the manner of utilizing ITC.
126	Section 50	Amendment to Section 50, which deals with interest on delayed payment of tax.
127	Section 51	Amendment to Section 51, regarding tax deduction at source (TDS) under GST.
128	Section 54	Amendment to Section 54, related to refunds under the CGST Act.
129	Section 61	Amendment to Section 61, which deals with scrutiny of returns.
130	Section 62	Amendment to Section 62, related to assessment of non-filers of returns.
131	Section 63	Amendment to Section 63, regarding assessment of unregistered persons.
132	Section 64	Amendment to Section 64, concerning summary assessment.
133	Section 65	Amendment to Section 65, related to audit by tax authorities.
134	Section 66	Amendment to Section 66, concerning special audit provisions.
135	Section 70	Amendment to Section 70, related to the power to summon persons for evidence.
136	Section 73	Amendment to Section 73, dealing with determination of tax not paid, short-paid, or erroneously refunded.
137	Section 74	Amendment to Section 74, which deals with the determination of tax for cases involving fraud or suppression.
138	Section 74A	Insertion of Section 74A, addressing tax  determinations from FY 2024-25 onwards.
139	Section 75	Amendment to Section 75, related to general provisions on determination of tax.
140	Section 104	Amendment to Section 104, concerning the appeals process under the CGST Act.
141	Section 107	Amendment to Section 107, related to appeals to the Appellate Authority.
142	Section 109	Amendment to Section 109, which addresses the establishment of the Appellate Tribunal.
143	Section 112	Amendment to Section 112, concerning the appeals process to the Appellate Tribunal.
144	Section 122	Amendment to Section 122, which deals with penalties under the CGST Act.
145	Section 127	Amendment to Section 127, related to the imposition of penalties for certain offenses.
146	Section 128A	Insertion of Section 128A, providing conditional waiver of interest and penalty for certain demand notices.
147	Section 140	Amendment to Section 140, concerning transitional provisions for Input Tax Credit.
148	Section 171	Amendment to Section 171, related to anti-profiteering measures under the CGST Act
149	Schedule III	Amendment to Schedule III, dealing with activities or transactions that are neither supply of goods nor services for Insurance premiums.
150	Specific to refund limitations	Restriction of Refund pertaining to ITC reversal made owing to Old Sec 16

Application of Investigation Guidelines to Audit matters

• CBIC has issued Instructions to apply guidelines for maintaining ease of doing business while engaging in investigation with regular taxpayers.
• Accordingly, para 2(g) of Instruction No. 1/2023-24-GST (Inv.) dated 30.03.2024 shall apply to audit matters.
• Thus, during the process of audit, wherever the relevant CGST Audit (Pr.) Commissioner comes across the following scenario, the Zonal (Pr.) Chief Commissioner should follow the procedure and endeavor prescribed by Board in para 2(g) of said Instruction.
• According to para 2(g) of Instruction dated 30.03.2024, in scenario where issue under investigation is passed on interpretation of law / rules / notifications / circulars etc leading to proposed non or short payment of tax but the taxpayer has been following a prevalent trade practice based on a particular interpretation in such industry, and such scenario results in more than one interpretation leading to litigation or change in practice etc, it would be desirable that the Zonal (Pr.) Chief Commissioner make a self-contained reference to the relevant policy wing of the Board i.e. the GST Policy or TRU.
• The endeavor, to make such reference before concluding investigation, and as much in advance, as is feasible, of the earliest due date for issuing of show cause notice, may be useful in promoting uniformity or avoiding litigation if the matter, after being processed, is amongst those that also gets placed before the GST Council.

(Source: CBIC Instruction No. 03/2024-GST dated 14.08.2024)