CHANGES IN SECTION 10(2) & SECTION 10(2A)
THE COMPOSITION SCHEME ALLOWED FOR PERSONS SUPPLYING GOODS THROUGH ECO
Section 10(2) and (2A) to be amended to allow persons supplying goods through ECO to opt for a composition scheme.
Our comments:
Earlier, taxpayers engaged in supplying goods through ECO were not allowed to opt for the composition scheme. Considering the increasing number of small taxpayers selling goods through ECO, the said change has been proposed to allow the benefit of reduced compliance through a composition scheme
CHANGE IN PROVISO TO SECTION 16(2)
CHANGE IN THE MANNER TO ADDRESS NON-PAYMENT OF CONSIDERATION TO THE SUPPLIER WITHIN 180 DAYS
In case of the recipient's failure to pay consideration or part thereof to the supplier within 180 days, the ITC availed is proposed to be paid by way of reversal instead of adding it to the output tax liability of the recipient.
Further, the recipient can re-avail the ITC after paying the consideration to the supplier
Our comments:
- The aforesaid changes have been proposed to bring the provision in line with the recent changes brought in Form GSTR 3B.
- The condition to pay consideration to the supplier to re-avail the ITC may create problems in cases of proceedings, wherein the amount is paid directly to the Govt. as a part of recovery proceedings under Section 79.
- Since it has been proposed to link the proviso to Section 50, interest shall be applicable only if the ITC has been utilized.
CHANGE IN EXPLANATION TO SECTION 17(3)
SUPPLY OF WAREHOUSED GOODS BEFORE CLEARANCE SHALL ATTRACT REVERSAL OF ITC UNDER RULE 42 & 43
'Supply of custom bonded warehoused goods before clearance for home consumption' to be included for the purposes of computing the value of exempt supplies.
Our comments:
ITC will become ineligible for goods and/or services exclusively or commonly used or intended to be used for the supply of goods while they are still in custom bonded warehouse.
NEW CLAUSE (FA) TO BE INsERTED IN SECTION 17(5)
NO ITC ON EXPENSE INCURRED TOWARDS CORPORATE SOCIAL RESPONSIBILITIES
It is proposed to disallow ITC on goods/services used or intended to be used for fulfilling the Corporate Social Responsibilities ['CSR'] under the Companies Act, 2013
Our comments:
This shall put to rest the confusion created by various contradictory rulings pronounced by the Authorities of Advance Ruling (AAR). However, the Companies will have to face the impact of lost ITC on mandatory CSR expenses. Advance rulings issued in favour of the taxpayer will become questionable if the change is effected retrospectively.
CHANGE IN SECTION 23
REMOVAL OF AMBIGUITY REGARDING THE AVAILABILITY OF EXEMPTION FROM REGISTRATION UNDER SECTION 23
Section 23 has been substituted in a way that it starts with a non-obstante clause i.e., 'Notwithstanding anything to the contrary contained in sub-section (1) of section 22 or section 24'
Our comments:
Earlier, a person who was exclusively engaged in making exempt supplies was still required to obtain GST registration due to mandatory registration under section 24 (e.g., in the case of RCM). As per the proposed change, if registration is not required under Section 23, there is no need to obtain registration irrespective of any mandate in terms of other provisions.
CHANGE IN SECTIONS 37, 39, 44 & 52
INSERTION OF TIME LIMIT OF 3 YEARs FOR FILING CERTAIN RETURNS UNDER THE GST LAW
Provisions relating to GSTR 1, GSTR 3B, GSTR 9 (Annual Return) & GSTR 8 (return filed by ECO) to be amended to restrict late filing of the returns by putting a capping of three years from their respective due dates
Our comments:
Although a taxpayer will be allowed to file the aforesaid returns within 3 years, however, in the case of GSTR 1 and GSTR 3B, there are immediate repercussions for their non-filing within due dates. Refer to our one-slider on 'What if your supplier doesn't file monthly returns or file them with a mismatch'
CHANGE IN SECTION 54(6)
REMOVAL OF PROVIsIONAL ITC CONCEPT FROM REFUND-RELATED PROVISIONS
Currently, the refund on account of zero-rated supply is initially sanctioned to the extent of 90% of the claim less provisional ITC before the final order
It is proposed to amend the above and remove the concept of provisional ITC and allow a refund of 90% of the claim
Our comments:
The concept of provisional ITC has been done away with in the recent changes. Accordingly, its relevance in the refund-related provisions shall also be done away with through the above proposition
NEW SUB-SECTION (1B) TO BE INsERTED IN SECTION 122
PENALTY ON ECOs FOR ON-BOARDING NON-COMPLIANT SUPPLIERS
An electronic commerce operator ('ECO') has been burdened with a penalty of Rs. 10,000 or an amount equivalent to the tax involved, whichever is higher, if -
- he allows an unregistered person (other than one who has been exempted by the Govt to obtain reg.) to supply goods/services through him
- he allows those persons to carry out interstate supplies through it who are ineligible to make such interstate supply [e.g., composition dealer]
- he fails to provide information on supplies made through it by persons exempted from obtaining GST registration
(In the case of a composition dealer, the tax for the purpose of penalty will be equal to the regular tax amount)
Our comments:
Once effective, it will be interesting to see how ECOs will ensure that their supplier are not violating GST provisions
CLARIFICATORY AMENDMENT
CLARIFICATION ON RETROSPECTIVE APPLICABILITY OF EXEMPTION TO CERTAIN ACTIVITIES COVERED UNDER SCHEDULE III
It is proposed to be clarified that, even though the following activities were inserted in Schedule III on 01-02- 2019, the same shall be deemed to have been kept outside the GST purview right from the inception of the GST
- Supply of goods between two non-taxable territories without the same entering India
- Supply of custom bonded warehoused goods before clearance for home consumption
- High sea sales
Our comments:
Such a clarificatory amendment shall put to rest the ongoing litigation in regard to the taxability of aforesaid activities undertaken prior to insertion in Schedule III. However, no refund shall be allowed for taxes already paid
CHANGE IN SECTIONS 132 & SECTION 138
DE-CRIMINALIZATION OF CERTAIN OFFENsEs AND REDUCTION IN COMPOUNDING FEE
Section 132 is to be amended to
1. Decriminalise the following offenses
- Obstructing or preventing any officer from discharging his duties
- Tampering or destroying any material evidence or documents
- Failing to supply any information which he is required to supply or supplying false information
2. Raise the minimum threshold for initiating prosecution from 1 crore to 2 crores (except in case of an offense involving issuance or invoice/bill of supply without supplying goods/services)
3. Section 138 is to be amended to reduce the percentages specified in minimum and maximum limits of compounding fee i.e., 50% to 25% and 150% to 100% respectively
INSERT ION OF A NEW SECTION 158A
CONSENT-BASED SHARING OF INFORMATION FURNISHED BY THE TAXABLE PERSON
Sharing of details/information (obtained during following compliances) with other systems based on the consent obtained from the supplier or the recipient, as the case may be -
- Application for GST registration
- Furnishing GSTR 1, GSTR 3B, GSTR 9, E-way bill
- Such other details as may be prescribed
Our comments:
More clarity is required in this regard as the manner and conditions to share such information are yet to be notified by the government. We believe such details may be shared with credit lending institutions etc
CHANGE IN SECTION 2(16) OF IGST ACT
CHANGE IN THE DEFINITION OF NON-TAXABLE ONLINE RECIPIENT (N-TOR)
The scope of N-TOR has been widened to include unregistered persons (including governmental agencies registered for deducting tax) availing OIDAR services for any purposes
Our comments:
Currently, N-TOR means Government, local authority, governmental authority, or an unregistered individual availing OIDAR services for the purpose other than commerce, industry, business, or profession. Pursuant to the above, tax on OIDAR services is paid by the foreign service provider in terms of Section 14 of the IGST Act. However, through the proposed changes, tax shall be payable even in cases where OIDAR services are availed for purposes of commerce, industry, or any other business or profession.
In the case of registered persons availing the OIDAR services, the same is already liable to tax under RCM
OMISSION OF PROVISO TO SECTION 12(8) OF IGST ACT
CHANGE IN PLACE OF SUPPLY OF SERVICES BY WAY OF TRANSPORTATION OF GOODS
The proviso to Section 12(8) to be omitted and thereby place of supply (POS) in case of transportation of goods shall be the following even if the destination of goods is outside India –
(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.
Our comments:
Currently, due to the proviso, POS is the destination outside India in case of goods are being transported outside India. This has led to concerns about the eligibility of ITC in the hands of the recipient. Although a circular had been issued to clarify the allowability of ITC, the above change has been proposed to remove the anomaly completely, by allowing ITC to the recipient regardless of the destination of goods.
Disclaimer: The Content of this update is solely for information purposes. It does not constitute professional advice or recommendation of the author. Neither the author nor this page and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this GST update or for any actions taken in reliance thereon.
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