This year, first time in history, budget was introduced in paperless mode by honourable Finance Minister Smt. Nirmala Sitharaman on 1st February, 2021. In this artcile, we will go through the amendments proposed in Finance Bill of said Budget.
Amendments proposed in IGST Act 2017
Section 16 (1) of IGST Act, 2017 : Meaning of Zero rated supply
In sub-section (1), it is proposed to amend the meaning of Zero Rated Supply for supply to SEZ developer or SEZ units. Earlier, every supply made to “SEZ developer or SEZ unit” was treated as Zero Rated Supply, whereas, some judicial pronouncements allowed only those supplies which were meant for authorised operations of such SEZ developer or SEZ unit.
To bring parity among judicial pronouncements and provisions of IGST act, it is proposed to amend meaning of Zero Rated Supply. Now the Zero Rated Supply will include supply of goods or services or both for authorised operations only to a Special Economic Zone developer or a Special Economic Zone unit.
Section 16 (3) & 16(4) of IGST Act, 2017 : Refunds
Earlier, it was open to avail refunds on unutilised ITC or Tax paid as output on Exports with some exceptions.
Now, it is proposed to amend that position. After amendment, Ununitilised ITC can be refunded subject to the condition that sale proceeds must be received within stipulated time period, failure to that would be liabile to deposit the refund along with interest. Futher, there is no provision to avail/apply refunds again where sale proceeds received after deposit the refund with government. It is expected that the government will bring this provision through rules.
In the case of refund of tax paid at the time of exports, it is propsed that government will provide a particular list of class of persons or goods or services, which may be eligible for refunds. Where the class of persons excluded from notified list, they would not be eligible for refund under this option.
In this regard, followings are the amended provisions (reproduced): –
It is proposed to substitute Sub-section (3) vide Finance Bill, 2021, and, will be notified at later date for its applicability. After substitution, it would be read as :-
“(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed:
Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 for receipt of foreign exchange remittances, in such manner as may be prescribed.”
It is proposed to insert new Sub-section (4) vide Finance Bill, 2021, and, will be notified at later date for its applicability. After insertion, it would be read as :-
(4) The Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification, specify––
- a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid;
- a class of goods or services 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.
Amendments proposed in CGST Act 2017
Section 7 – Scope of Supply
Following clause (aa) in sub-section (1) inserted vide Finance Bill 2021 and shall be deemed to be to have been inserted with effect from the 1st day of July, 2017: –
“(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.
Explanation.–– For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;”
This provision has been inserted retrospectively w.e.f. 01/07/2017. There are so many disputes in country for applicability of GST on transactions between parties of fiduciary capacity. By insertion of this clause, government has cleared its intention to apply GST on transactions between society/clubs and its members.
Section 16 – Eligibility and conditions for taking input tax credit
Following clause (aa) in Sub-section (2) inserted vide Finance Bill 2021 and shall be applicable from the date to be notified later: –
“(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;”.
To claim ITC on purchases, it is now mandatory that the invoices must reflect in GSTR-2A of recipent of goods or services or both.
Section 35 – Accounts and other records
Sub-section (5) of Section 35 shall be omitted. The provision shall be applicable from the date to be notified later.
Through this, the government has scrapped the provisions of GST Audit (GSTR-9C).
Section 44 – Annual Return
Section 44 shall be fully substituted from the date to be notified later. After substitution, Section 44 shall be read as follows:-
“44. Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person shall furnish an annual return which may include a self-certified reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statement for every financial year electronically, within such time and in such form and in such manner as may be prescribed:
Provided that the Commissioner may, on the recommendations of the Council, by notification, exempt any class of registered persons from filing annual return under this section:
Provided further that nothing contained in this section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.”
Section 50 – Interest on delayed payment of tax
Interest on late payment of Tax shall be paid on cash portion only. The provision shall be applicable retrospectively w.e.f. 01/07/2017.
Section 74 – Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful-misstatement or suppression of facts
Earlier, it was provided that where the proceedings against main person liable to pay tax have been concluded under section 73 or section 74, the proceedings against all the persons (other than main person) liable to pay penalty under sections 122, 125, 129 and 130 were deemed to be concluded.
After amendment, only penalty proceedings under section 122 and 125 shall be deemed to be concluded against other persons involved in any fraud, etc.
Other proceedings like Detention, Seizure and release of goods and conveyances in transit or Confiscation of goods or conveyances and levy of penalty (u/s 129 & 130) shall be concluded only through relevant provisions.
Section 75 – General provisions relating to determination of tax
For the purposes of Sub-section (12),”self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.
Section 83 – Provisional attachment to protect revenue in certain cases
Powers of provisional attachement of property enhanced. Enhanced powers also include powers to attach property of other persons referred in Section 122 (1A) of CGST Act 2017.
Section 107 – Appeals to Appellate Authority
In case, appeal is filed against an order under sub-section (3) of section 129, pre-deposit of a sum equal to twenty-five per cent. of the penalty is mandatory.
Section 129 – Detention, Seizure and release of goods and conveyances in transit
Penalty povisions are delinked from Tax assessment. Amount of penalty enhanced. Penalty invoked even on offences in case of exempted goods.
Section 130 – Confiscation of goods or conveyances and levy of penalty
Provisions of Confiscation delinked from Tax Assessment.
Section 151- Power to collect statistics
Requirement to issue notification for invoking powers to collect statistics are now removed.
Section 152 – Bar on disclosure of information
Bar on disclosure of all type of information collected under section 150 or section 151.
Power given to proper officer to access information collected under section 150 or section 151 and to initiate proceedings on the basis of such information.
Section 168 – Power to issue instructions or directions
Corresponding changes proposed in respect of above said proposals.
Following paragraph no. 7 of Schedule -II removed.
“Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.”