Section-wise Commentary on The Integrated Goods and Services Tax (Amendment) Act, 2018

[AttnVivek Jalan]

Section 1 :Short title, extent and commencement

(1)     This Act may be called the Integrated Goods and Services Tax (Amendment) Act, 2018.

(2)     It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

Previously it was read as :

(1)     This Act may be called the Integrated Goods and Services Tax Act, 2017.

(2)     It shall extend to the whole of India.

(3)     It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

Section 2 : Definitions.

clause 6 - “export of services” means the supply of any service when,––

(iv)    the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and

Previously it was read as :

“export of services” means the supply of any service when,––

(iv)     the payment for such service has been received by the supplier of service in convertible foreign exchange; and

clause 16 - Explanation.––For the purposes of this clause, the expression “governmental authority” means an authority or a board or any other body,––

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with ninety per cent. or more participation by way of equity or control, to carry out any function entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution;

Previously it was read as :

Explanation.––For the purposes of this clause, the expression “governmental authority” means an authority or a board or any other body,––

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with ninety per cent. or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution;

Commentary For Amendment u/s 2(6) – There are certain payments received in INR through Nostro/Vostro Accounts for Goods/Services supplied abroad. The payment for such transactions though such accounts are received in INR.

Here is an explanation to highlight how a Nostro and a Vostro account works in the most simplified terms. Nostro in Latin literally means ours and Vostro means yours.

Take a bank in India, Bank A for example. A gets a lot many remittances and trade related money sent home from Japan to India. However, A does not have a banking license in Japan.

So A reaches out to a bank like Bank of Japan (say) and asks them to open a bank account in A’s name, in Yen. On this, A can do all sorts of transactions as if they were themselves present in Japan and operating this account.

Another way to look at it is:

A’s Yen Account in Bank of Japan is A’s Nostro Account OR

Bank of Japan has a Vostro account for Ain Yen with Bank of Japan

When the situation is reversed, if Bank of Japan has an account with A in India in INR, then for A this would be Bank of Japan’s Vostro Account.

Section 5 : Levy and collection.

“(4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.”.

Previously it was read as :

(4)     The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

Commentary - The objective to amend Section 5 of the Act empowering the Central Government is to notify classes of registered persons to pay tax on reverse charge basis in respect of receipt of supplies of certain specified Categories of goods or services or both from unregistered suppliers; As decided by the GST Council, Reverse Chanrge u/s 5(4) of IGST Act may be applicable only on certain class of persons, maybe with a Turnover beyond a threshold.

Section 8 : Intra-State supply.

Explanation 1.––For the purposes of this Act, where a person has,––

(i) an establishment in India and any other establishment outside India;

(ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or

(iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory,

then such establishments shall be treated as establishments of distinct persons.

Section 12 : Place of supply of services where location of supplier and recipient is in India

(8)     The place of supply of services by way of transportation of goods, including by mail or courier to,––

(a)      a registered person, shall be the location of such person;

(b)     a person other than a registered person, shall be the location at which such goods are handed over for their transportation.

“Provided that where the transportation of goods is to a place outside India, the place of supply shall be the place of destination of such goods.”.

Previously it was read as :

(8)     The place of supply of services by way of transportation of goods, including by mail or courier to,––

(a)      a registered person, shall be the location of such person;

(b)     a person other than a registered person, shall be the location at which such goods are handed over for their transportation.

Commentary - The objective to amend Section 12 of the Act is to provide that if the transportation of goods is to a place outside India, the place of supply shall be the place of destination of such goods;

Section 13 :Place of supply of services where location of supplier or location of recipient is outside India.

(3)     The place of supply of the following services shall be the location where the services are actually performed, namely:-

(a)      services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services:

Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services:

“Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported in to India for repairs or for any other treatment or process and are exported after such repairs or treatment or process without being put to any use in India, other than that which is required for such repairs or treatment or process;”.

Previously it was read as :

(3)     The place of supply of the following services shall be the location where the services are actually performed, namely:-

(a)      services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services:

Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services:

Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs without being put to any other use in India, than that which is required for such repairs;

Commentary – Place of supply in case of any treatment or process (which may not come within the four corners of the definition of job work) done on goods temporarily imported into India and then exported without putting them to any other use in India, to be outside India.

Section 17 :Apportionment of tax and settlement of funds.

New sub section inserted after sub-section (2):

“(2A). The amount not apportioned under sub-section (1) and sub-section (2) may, for the time being, on the recommendations of the Council, be apportioned at the rate of fifty per cent. to the Central Government and fifty per cent. to the State Governments or the Union territories, as the case may be, on ad hoc basis and shall be adjusted against the amount apportioned under the said sub-sections.”.

Commentary - The objective to amend Section 17 of the Act is to make a provision for settlement of balance in the integrated tax account equally between the Central Government and the State Governments.

Section 20 : Application of provisions of Central Goods and Services Tax Act.

After the fourth proviso, the following proviso shall be inserted, namely -

“ Provided also that where the appeal is to be filed before the Appellate Authority or the Appellate Tribunal, the maximum amount payable shall be fifty crore rupees and one hundred crore rupees respectively. .’’.

Commentary - The objective to amend Section 20 of the Act is to specify the amount of pre-deposit payable for filing of appeals-

(a)     before the Appellate Authority to be capped at fifty crore rupees;

(b)     before the AppellateTribunal to be capped at one hundred crore rupees.