The Finance Bill 2023 was presented in Lok Sabha by our Finance Minister Smt. Nirmala Sitharaman on 1st Feb 2023. Among other things, certain proposals were provided to amend GST Laws with respect to issues raised by industry and as discussed in various meetings of GST Council.
We have compiled a set of all those proposals here.
First we will discuss proposed changes in IGST Act 2017 :-
There are three changes proposed in IGST Act 2017 :-
- Revise the Definition of “non-taxable online recipient”
- Change in Definition of ““online information and database access or retrieval services”
- Omission of Proviso to Section 12(8) of Act
1) Revision of Definition of “non-taxable online recipient”
New Definition proposed as per below :-
‘(16) “non-taxable online recipient” means any unregistered person receiving online information and database access or retrieval services located in taxable territory.
Explanation.––For the purposes of this clause, the expression “unregistered person” includes a person registered solely in terms of clause (vi) of section 24 of the Central Goods and Services Tax Act, 2017’;
Previously, “non-taxable online recipient” was meant that any recipient other than Commerce, industry or any other business or profession. There was ambiguity among service providers whether to charge GST in forward charge from a person being a non-natural person. Now, it is clarified that where GSTIN not provided by recipient, it will be a forward charge transaction for OIDAR service.
2) Change in Definition of ““online information and database access or retrieval services”
Previously, OIDAR services were include only those services which were characterized with delivery of said service “essentially automated and involving minimal human intervention”.
Now, this essential automation condition removed. Hence, any service, which comes under purview of OIDAR category would be liable for GST without checking mode of service delivery.
3) Omission of Proviso to Section 12(8) of Act
Section 12 of IGST Act provides place of supply of services where location of Service Recipient and Service Provider is within India. In Sub-section (8), a proviso was inserted vide IGST Amendment Act 2018 to restrict ITC to service recipient where Destination of any transportation service for delivery of Goods is Outside India. Now, w.e.f. 1st October 2022, with the application of GST on Ocean Freight and Air Freight On Export Transactions, industry faced the heat of additional GST Cost without ITC benefit.
Thus, it becomes very important to remove the proviso to allow ITC for such transactions to industry.
Now, Proviso to sub-section (8) of section 12 of the IGST Act is being proposed to be omitted so as to specify the place of supply, irrespective of destination of the goods, in cases where the supplier of services and recipient of services are located in India.
Changes proposed in CGST Act 2017
In CGST Act 2017, there are 13 amendments proposed in said law.
- To allow Composition Dealers to deal through E-Commerce for Intra-State Transactions
- Drafting Changes in Section 16 for Payment to Suppliers within 180 days.
- To restrict ITC on common expenses taking certain Schedule-III transactions as Exempt Supply.
- To restrict ITC on CSR Spending
- To Amend Section 23 of Act to completely exempt registration of Certain Persons
- To restrict time period filing of returns within maximum three years from due date
- Drafting Changes in Section 54
- To provide enabling provision for providing calculation of Interest on delayed refunds.
- To add circumstances for Penalties and amount of Penalties in said circumstances.
- To Decriminalize of certain offences in Section 132
- To amend Compounding provisions
- To amend provisions for sharing of Information among authorities
- To notify certain entries in Schedule III w.e.f. 01.07.2017
1) To allow Composition Dealers to deal through E-Commerce for Intra-State Transactions
In the recent GST Council Meetings, this matter was concluded to allow Composition Dealers to deal through E-Commerce Platforms like Amazon, Flipkart, etc. However, detailed clarification was not provided at that time.
Now, in this Finance Bill, it is provided and clarified that Composition dealers can trade through E-Commerce platforms for GOODS only and only for INTRA-STATE Transactions.
Thus, it is hereby again clarified that Composition dealer is not allowed to deal in Inter – State Sales in any mode of Commerce.
2) Drafting Changes in Section 16 for Payment to Suppliers within 180 days
Second and third provisos to sub-section (2) of section 16 of the CGST Act are being amended to align the said sub-section with the return filing system provided in the said Act.
As GSTR-2 and GSTR-3 are discarded from Act, only way to file reversal of ITC for non payment to suppliers is GSTR-3B, so proposed amendments brought in.
3) To restrict ITC on common expenses taking certain Schedule-III transactions as Exempt Supply.
Section 17 (3) provides the manner of calculation for Value of Exempt Supplies (to be used for reversal of portion of ITC claimed on common expenses for Taxable as well as said Exempt Supplies).
In this calculation, Schedule -III transactions were specifically excluded by law except for Sale of Land and Building. Now, in this exception category, one more item added.
So, where following transactions entered into by any entity during the year, value of said transactions would also become part of exempt supply :-
(a) Supply of warehoused goods to any person before clearance for home consumption; (Clause (a) of Paragraph 8 of Schedule-III)
4) To restrict ITC on CSR Spending
Section 17(5) provides for list of expenses for which ITC is restricted. Continue with existing list, one more clause is proposed to add in this list to restrict ITC on CSR related Spends:-
Goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013
5) To Amend Section 23 of Act to completely exempt registration of Certain Persons
Section 23 provides for certain persons who are exempted from registration of GST. Drafting amendments proposed to remove ambiguity of applicability of Section 24 of said Act.
Section 24 provides for compulsory registration in certain cases. By this Finance Bill, it is proposed to clarify that Section 24 would not apply for those persons who comes under purview of Section 23.
6) To restrict time period filing of returns within maximum three years from due date
In present age of GST law, it is not allowed to file next return (R1/3B) if previous one not filed. However, this was not the case previously.
Now, to restrict old non-filers to move further, it is being proposed that :-
- R1 would not be allowed to file later than 3 years from its due date (Section 37)
- 3B would not be allowed to file later than 3 years from its due date (Section 39)
- 9/9C would not be allowed to file later than 3 years from its due date (Section 44)
- ECO (TCS) return would not be allowed to file later than 3 years from its due date (Section 52)
7) Drafting Changes in Section 54
Sub-section (6) of section 54 of the CGST Act is being amended so as to remove the reference to the provisionally accepted input tax credit to align the same with the present scheme of availment of self assessed input tax credit as per sub-section (1) of section 41 of the said Act.
8) To provide enabling provision for providing calculation of Interest on delayed refunds
Section 56 of the CGST Act is being amended so as to provide for an enabling provision to prescribe manner of computation of period of delay for calculation of interest on delayed refunds.
9) To add circumstances for Penalties and amount of Penalties in said circumstances.
A new sub-section (1B) in section 122 of the CGST Act is being inserted so as to provide for penal provisions applicable to Electronic Commerce Operators in case of contravention of provisions relating to supplies of goods made through them by unregistered persons or composition taxpayers.
“(1B) Any electronic commerce operator who––
(i) allows a supply of goods or services or both through it by an unregistered person other than a person exempted from registration by a notification issued under this Act to make such supply;
(ii) allows an inter-State supply of goods or services or both through it by a person who is not eligible to make such inter-State supply; or
(iii) fails to furnish the correct details in the statement to be furnished under sub-section (4) of section 52 of any outward supply of goods effected through it by a person exempted from obtaining registration under this Act, shall be liable to pay a penalty of ten thousand rupees, or an amount equivalent to the amount of tax involved had such supply been made by a registered person other than a person paying tax under section 10, whichever is higher.
10) To Decriminalize of certain offences in Section 132
Following offences are proposed to remove from list of Deemed to be criminal activities :-
Clauses (g), (j) and (k) of Section 132(1) :-
(g) obstructs or prevents any officer in the discharge of his duties under this Act;
(j) tampers with or destroys any material evidence or documents;
(k) fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or
Further, offences under monetary limit of Rs 1 Crore to Rs 2 Crore are restricted to offences related to issuance of invoices without supply of goods or services or both.
So, for all other offences, Section 132 would apply where monetary impact is more than Rs 2 Crores
11) To amend Compounding provisions
It is proposed to exclude the persons involved in offences relating to issuance of invoices without supply of goods or services or both from the option of compounding of the offences under the said Act.
Compound Fee proposed to revise as Minimum twenty-five per cent. of the tax involved and the maximum amount not being more than one hundred per cent. of the tax involved.
12) To amend provisions for sharing of Information among authorities
A new section 158A in the CGST Act is being inserted so as to provide for prescribing manner and conditions for sharing of the information furnished by the registered person in his return or in his application of registration or in his statement of outward supplies, or the details uploaded by him for generation of electronic invoice or Eway bill or any other details, as may be prescribed, on the common portal with such other systems, as may be notified.
13) To notify certain entries in Schedule III w.e.f. 01.07.2017
Schedule III of the CGST Act is being amended to give retrospective applicability to Para 7, 8 (a) and 8 (b) of the said Schedule, with effect from 01st July, 2017, so as to treat the activities/ transactions mentioned in the said paragraphs as neither supply of goods nor supply of services.
7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.
8. (a) Supply of warehoused goods to any person before clearance for home consumption;
8. (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.
It is also being clarified that where the tax has already been paid in respect of such transactions/ activities during the period from 01st July, 2017 to 31st January, 2019, no refund of such tax paid shall be available.