There were certain important amendments in the financial proposal of the Central Government for the financial year 2021-2022 regarding GST which emphasised on collecting taxes, overruling all previous supreme court judgments or high courts judgements. An Act to give effect to such financial proposals received the assent of the President on the 28th of March 2021 but some of the important changes listed below shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
1) Section 7 of the CGST Act
A new clause under the definition of supply. Activities or transactions involving the supply of goods or services by any person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration falls under supply and will be liable to tax.
Writer’s Enlightenment: Such amendment in section 7 is aimed to treat person (other than individual) and its members or constituents as two distinct person and hence, any the activities or transactions between them will deemed as supply between two separate persons.
Earlier, this supply would have been considered as only supply of goods under schedule II.
But now, the scope is expanded for levy and collection of GST
2) Section 16 of the CGST Act
Allow taxpayers to claim input tax credit based on GSTR-2A and 2B. Henceforth, ITC on invoices and debit notes may be availed only when the details of such invoice or debit note have 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.
Writer’s enlightenment-A state of puzzlement have been experienced by the recipient of Input tax credit as they were lacking clarity as to whether GSTR-2A is to be considered for claiming ITC or GSTR-2B and what percentage is to be applied for claiming the eligible input tax credit.
Earlier, in accordance with Rule 36(4), the registered person could avail input tax credit towards tax invoices or debit notes which had not been furnished by the Supplier in GSTR-1 up to prescribed percentage of eligible input tax credit keeping in mind that the mistake of one cannot be put on any other person. but, with the rise in issuance of fake invoicing percentage of claiming ITC was subjected to changes from time to time.
Now, at present, amendment provides crystal clear approach that input tax credit on invoice or debit note may be availed only when the details 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. Thus, Rule 36(4) seems to lose its significance.
3) Section 50 of the CGST Act: Interest liability
Section 50 of the CGST Act has been amended to provide for a retrospective charge of interest on net cash liability, with effect from 1st July 2017.
Writer’s enlightenment Earlier, there was a lot of ambiguity whether interest would be payable on Gross Tax Liability or Net Tax Liability on late filing of GSTR-3B. Some Advance Rulings had specified that interest would be payable on Gross Tax Liability. The Govt. also issued notices in some states asking the registered persons to deposit interest on Gross Tax Liability. Several representations were sent to Govt. for clarifying the confusion within the trade & industry regarding payment of interest on Gross or Net Tax Liability.
Recently CBIC vide Notification No. 63/2020-Central Tax, dated 25th August 2020, has specified that Interest is to be levied on "Net Tax liability" w.e.f. 01/09/2020.
But this created further confusion in the minds of taxpayers as the amendment was made applicable prospectively w.e.f. 01/09/2020 hence, there was no clarity in respect of period prior to 01/09/2020. CBIC has clarified vide a tweet that no notices shall be sent to the registered persons demanding tax on Gross Tax Liability for the period prior to 01/09/2020
The Govt. has put to rest all the confusions surrounding payment of interest on Net Cash Tax Liability w.e.f. 01/07/2017. This has given a sigh of relief to all the persons in the trade & industry.
4) Section 74 of CGST Act,2017
Seizure and confiscation of goods and conveyances in transit are now made a separate proceeding from the recovery of tax from Section 74.
Writer’s enlightenment: Earlier, section 74 explanation 1 (ii) provides that when notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122,125, 129 and 130 are deemed to be concluded.
Now, Section 129 & 130 have been omitted from above explanation which means seizure and confiscation of goods and conveyance in transit is now a separate proceeding from recovery of tax under section 74.
5) Section 75 of CGST Act, 2017
Self-assessed tax referred to under section 75 of the CGST Act shall also cover the outward supplies/sales as reported in the GSTR-1 under Section 37 of the CGST Act, but which has been missed out while reporting in the GSTR-3B under Section 39.
Writer’s enlightenment: Section 75 states where there is any self-assessed tax, then it can be recovered without issuing show cause notice and the recovery proceedings under section 79 can be directly invoked. Now, the scope of self-assessed tax has been widened.
6) Section 130 of the CGST Act
Section 129 is delinked from Section 130. Accordingly, proceedings relating to detention, seizure and release of goods and conveyances in transit will be separate from the levy of penalty for the confiscation of goods and conveyance.
Writer’s enlightenment as earlier both section 129 and 130 provided for 200 percent of tax payable on such goods but now these two sections are penalty provision which states 100 percent of tax payable will be the penalty payable towards detention, seizure or confiscation of goods or conveyance and the reference of tax and interest has been deleted.
7) Section 152 of the CGST Act
The Jurisdictional Commissioner can now call for information from any person relating to any matter dealt with in connection with the Act under Section 151, together with section 168. Further, section 152 is amended to provide an opportunity of being heard before using information obtained under Sections 150 or 151 of the Act
Writer’s enlightenment as this provision relates to publishing of information, it is clarified that without giving an opportunity of being heard to the person concerned, no information produced for section 150 or 151 shall be used for the purpose of any proceedings under this Act.
8) Section 16 of the IGST Act
The IGST Act was also amended in Section 16, that defines a zero-rated supply. Three amendments were made – (1) To state that supply to SEZ units /developers will be zero-rated only if it is authorised operations. (2) Only notified persons or supplies of goods/services can avail the status of zero-rated when IGST is paid. (3) Foreign exchange remittance will be linked in case of export of goods with the refund.
Writer’s enlightenment Earlier, there was no restriction for making zero rated supply of goods or services with payment of tax and the exporter was eligible for refund of GST paid on such goods and services so exported.
But now, the Government may notify such class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid.
The payment route of IGST was beneficial for exporters as the refund of credit on capital goods was allowed which is not allowed under LUT method.