UNDER CGST LAW:

Amendment to Section & No.

Description

1.

Section 2(4)

CBIT and NAPA excluded from Adjudicating Authority

a) CBEC was earlier excluded from adjudicating authorities. After change of name of CBEC to CBIT (Central Board of Indirect Taxes and Customs), CBIT instead stands to be excluded.

b) National Anti-profiteering Authority referred in section 171(2) is to be excluded from adjudicating authorities.

As a result, now remedy of appeal will not be available for orders passed by this authority. Writ needs to be preferred against such orders.

2.

Sec. 2(17) (h)

Business to include all activities of race club

a) Activities of Race club fall within ambit of actionable claim, which specifically is included in goods. But the definition of service defined it as service. Hence in the context of “race club” the term “service” has been replaced by “activities”.

b) Further the activities of licensed book maker were earlier not included in definition of Business. Only the activities of race club were included. Hence the definition of business under S. 2(17)(h) has been expanded to include following activities:

a) Activities of race club

i) By way of totalisator

ii) License to book Maker

b) Activities of Book Maker

Impliedly activities of race club should hence forth be classified in Entry 453 of Schedule III @ 18%

3.

Sec. 2(18)

4.

Sec. 2(35)

Cost Accountant

In GST law, prior to amendment the term cost accountant meant cost accountant as defined in section 2(1) (c) of the Cost and Works Accountants Act. However the term is defined in section 2(1) (b) of the Cost and Works Accountants Act Instead. Hence typographical error is sought to be corrected.

5.

S. 2(69)

Local Authority to include Development Board under Article 371J

In Article 371J, development board of 6 backward districts of Karnataka has been empowered to be envisaged by President to ensure equitable distribution of State funds for the welfare of these backward districts.

The state of Karnataka requested to include development board in the definition of local authority so that this development board may enjoy similar privileges as the other local authorities. Hence the development board constituted under Article 371J has been specifically included in the definition of Local Authority.

6.

Sec.2(102)

Services to include facilitating or arranging transactions in securities

Although ‘securities’ has been excluded from the definition of ‘goods’ and ‘services’ in the CGST Act, facilitating or arranging transactions in securities is liable to GST.

This was clarified recently through a detailed FAQ on Banking and Insurance wherein it has been clarified that if some service charges or service fees or documentation fees or broking charges or such like fees or charges are charged in relation to transactions in securities, the same would be a consideration for provision of service and chargeable to GST.

An Explanation has been inserted in order to remove any doubts.

7.

Section 7

Schedule II for classification excluded from Supply

Classification of certain specified activities or transactions (which qualify as a supply under the CGST Act) either as supply of goods or supply of services is supposed to be done in Schedule II. However, it is observed that clause (d) being part of the subsection defining the term ‘supply’ leads to a situation where an activity listed in Schedule II would be deemed to be a supply even if it does not constitute a supply as per clauses (a), (b) and (c) of sub-section (1). Hence, clause (d) of sub-section (1) as it existed is omitted and a new sub-section (1A) in section 7 is inserted.

In Schedule I, Permanent transfer/ disposal of business assets without consideration where ITC has been taken is considered supply. But there was school of thought that in Schedule II in situations in clause 4(a) & (b) also ambit of supply was extendable. It would have created unnecessary litigation.

Now the amendment has made it clear that if it a supply under main section 7, then only Schedule II has to be used to classify said supply as that of goods or that of service.

Heading of Schedule II has been amended retrospectively to include words ‘Or transactions’ after the words ‘Activities’.

8.

Sch I Para (4)

Import of Service by non-taxable person also taxable

Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business, without consideration is taxable.

The word taxable person is omitted. This amendment is to ensure that import of services by entities which are not registered under GST (say, they are only making exempted supplies) but are otherwise engaged in business activities is taxed when received from a related person or from any of their establishments outside India.

9.

Schedule III, Cl. 7

Supply of goods from one non-taxable territory to another:

Following insertion is made in Schedule III

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 the taxable territory.

It is sought to exclude from the tax net such transactions which involve movement of goods, caused by a registered person, from one non-taxable territory to another non-taxable territory.

It is sought to keep international trading of goods from one country to another country outside the GST purview. Hence if a person sitting in India wishes to buy goods from China and sell it to USA, it shall neither be treated as supply of goods nor as supply of services.

However procurement of service outside India and also its further supply to some person in territory outside India has not been excluded. Hence amendment should provide for supply of services from one non-taxable territory to another also. If this amendment is not done, while the subscription of service may be treated as imports but for provision of service in intermediary capacity, the place of supply shall be in India u/s 13(8) (b) and the transaction shall get taxed.

The instances where place of supply is outside India, it shall be inter-State supply u/s 7(5) and also zero rated supply u/s 16, being export of service, resulting cash flow issues arising from refunds, if such amendment regarding services is not given effect to.

10.

Schedule III, Cl. 8

Supply of goods in course of import (Warehouse, High Sea Sale) included in Schedule III

8 (a) Supply of warehoused goods to any person before clearance for home consumption.

(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.

Explanation.- For the purposes of this clause, the expression “warehoused goods” shall have the meaning as assigned to it in the Customs Act, 1962 (52 of 1962)

It is sought to ensure that there is no double taxation of transactions where supply of goods occurs in the course of high sea sales and sale of warehoused goods, before clearance for home consumption. It was observed that in case of supply of goods as high seas sales and sale of warehoused goods, before being cleared for home consumption, IGST was being levied twice, once under the Customs Tariff Act, 1975 (read with the IGST Act) and then for a second time, on clearance for home consumption under the IGST Act. Since double taxation needs to be avoided, Circulars were issued to state that IGST would be payable only once at the time of clearance of goods for home consumption. However, it is imperative that such situations are squarely mentioned as ‘no supply’ in Schedule III.

Article 286 bars to tax supply in course of import.????? By State only and not by parliament. Already Customs Circulars 33/2017-Cus dated 1-8-2017 and Circular 3/1/2018-IGST dated 25-5-2018 also exhorted that no tax under GST shall be charged till the clearance for home consumption. At the point of clearance entire value addition shall get taxed.

Position due to clarification given by CBIC for the period 1-7-2017 to 31-3-2018 still is in limbo, unless these amendments are made retrospectively effective.

11.

Sec. 9(4)

Reverse Charge on inward supplies from unregistered persons to be taxed for specified class of registered persons:

Old section 9(4) which has been deferred till 30-9-2018 has been repealed and substituted by new section 9(4) as under :

The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of taxable goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such 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 the supply of such goods or services or both.

Section 9 (4), which mandates that all registered persons shall pay the tax on reverse charge basis on purchases made from unregistered persons, is presently under suspension. This subsection is being omitted for trade facilitation.

Instead, it is proposed to take an enabling power for the Government to notify a class of registered persons who would be liable to pay tax on reverse charge basis in case of receipt of goods from an unregistered supplier.

Fall out:

a) The term unregistered supplier is not defined under the law. The words used in present law are “supplier, who is not registered”.

b) RCM is sought to be applied only to “class of registered persons” and not all the registered persons. The class of registered persons may be

i) persons receiving goods or services falling under specific headings

ii) persons engaged in specified outward supplies

iii) Persons having inward supplies more than specified percentage

12.

Section 10(1)

Composition Scheme with extended limit and scope of services:

Amendment is to clarify that composition tax shall be paid in lieu of tax payable u/s 9(1). In present law, reference to section 9(1) is missing. Even nomenclature of amount paid under composition scheme is not “tax”. The amendment aims to provide for these misses.

Further in spite of GST Council recommending the limit of 1.5 crores in its meeting dated 10-11-2017, there was no corresponding amendment in law which provided for maximum limit at 1 crore only. The law is being amended to enhance the composition limit to 1.5crore

In the press release it was mentioned that maximum limit shall be increased to 2 crore and actual limit for composition scheme shall be enhanced to 1.5 crores. This seems to be left out.

Following 2nd proviso to section 10(1) is incorporated:

Provided further that a person who opts to pay tax under clause (a), clause (b) or clause (c) may supply services of value not exceeding ten percent of turnover in the preceding financial year in a State or Union territory or five lakh rupees, whichever is higher

At present, registered persons engaged in the supply of services (other than restaurant services) are not eligible for composition scheme. As a result, manufacturers and traders supplying services are unable to opt for the scheme even if its percentage is very small as compared to the supplies of goods. With a view to enable these taxpayers to avail of the benefit of composition scheme, a new proviso is being added in order to allow them to be eligible for the scheme even if they supply services of value not exceeding 10% of the turnover in the preceding financial year in a State/Union territory or ₹ 5 lakhs, whichever is higher.

In 23rd Council meeting dtd 10-11-17 press release number 116, interest on deposit was sought to be totally excluded for the purpose of composition scheme, hence 10% and Rs. 5 lakhs cap in such cases is not in sync with Council decision.

It is necessary that this amendment should be made retrospective, because many small retailers, who earn miniscule amount from Display income from FMCG products etc., would get hit below the belt, unless extension is granted from day 1.

Section 10(2)(a) is being amended to provide that The registered person shall be eligible to opt under sub-section (1), if—

(a) he is not engaged in the supply of services, save as provided in sub-section (1)

This is a consequential amendment, as a new proviso is being added to section 10 (1) which allows the registered person to opt for the scheme even if they supply services of value not exceeding 10% of the turnover in the preceding financial year in a State/Union territory or ₹ 5 lakhs, whichever is higher

13 & 14.

S.12(2)/13(2)

Time of Supply for goods and services under Forward Charge

In present law, invoice is required to be issued for the goods before the last day for issuance of invoice u/s 31(1)/31(2). Since issuance of invoice u/s 31 is required in many other cases, the law is being amended to provide that invoice is required to be issued on or before the last date for issuance of invoice u/s 31.

Impact

a) Issuance of Revised Invoice within 1 month from the date of issuance of registration certificate for the period beginning with the effective date of registration till the date of issuance of certificate of registration [u/s 31(3)(a)] shall not hit time of supply;

b) In case of continuous supply of goods, issuance of invoice at the time issuance of statement or receipt of payment u/s 31(4) shall meet the test of time of supply also.

c) In case of continuous supply of service, issuance of invoice at the time of due date of payment or date of receipt of payment or completion of payment u/s 31(5) shall meet the test of time of supply also.

d) In case of cessation of supply of service before completion u/s 31(6), the time of cessation of supply shall be the time of supply.

e) In case of goods sent for approval u/s 31(7), the date of removal shall not be the time of supply but the 6 months from the date of removal or the date of issuance of invoice, whichever is earlier.

Time of supply u/s 31(3) (f) is also not in synchronization with time of supply under reverse charge mentioned in section 12(3) and 13(3). This aspect seems to be left out.

15.

Expl to section 16(2)(b)

Supply provided on the direction of registered person to cover services also U/s 16(2)(b)

Receipt of goods or services is a pre-condition for availing ITC. For goods, there is already explanation inserted below S. 16(2) (b) that supply provided to recipient or any other person on the direction of registered person shall be deemed to be received by registered person.

For services, explanation is being expanded to provide that it shall be deemed that registered person has received services where the services are provided by the supplier to any person on the direction of and on account of such registered person;

If catering is done by supplier on the direction of some person who takes orders for getting done catering, the ITC shall be available to the person who takes order and not the customer who places order.

However, if services provided by the supplier are not on account of the registered person, the ITC shall not be available. Hence the invoice raised by the supplier should mention that though services are being provided to some other person but are being provided on account of registered person.

16.

S. 17(2)

Reversal of ITC for exempt supplies to exclude Sch III supplies

Reversal of ITC is required u/s 17(2) read with section 17(3) for exempt supplies which cover Schedule III supplies, being non-taxable supply.

Now section 17(2) is amended to provide that no reversal of ITC is required for Schedule III supplies except sale of land and building.

Hence no ITC reversal shall be required for :

1. Services by an employee to the employer in the course of or in relation to his employment.

2. Services by any court or Tribunal established under any law for the time being in force.

3. (a) the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities;

(b) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or

(c) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause.

4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

6. Actionable claims, other than lottery, betting and gambling.

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 the taxable territory.

8. (a) Supply of warehoused goods to any person before clearance for home consumption.

(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.

17.

Section 17(5)

Changes in Prohibitive List of ITC

ITC prohibitions stand relaxed or removed due to amendment

a) ITC on Motor Vehicle for transportation of persons having approved seating capacity of more than 13 passengers. However ITC on vessel and aircraft shall not be available unless used for transportation of goods or further supply or imparting training or transportation of money for banking company or financial institution.

In earlier clause, ITC was denied on motor Vehicle excluding motor vehicle for transportation of passengers. However now ITC is being denied only for motor vehicles for transportation of persons. Hence ITC on motor vehicles for transportation of goods shall be allowed as there is no specific exclusion for transportation of goods.

b) ITC on vessel or aircraft for further supply of vessel or aircraft or used for transportation of goods or imparting training or transportation of money for banking company or financial institution. As per Official Comments ITC on vessel and aircraft shall be denied only when used for personal purposes.

c) Irrespective of the prohibitions placed u/s 17(5), ITC shall be available for provision of goods or services (i.e. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, renting or hiring of motor vehicles, vessels and aircraft referred to in S.17(5) (a), life insurance and health insurance, membership of club, health and fitness centre, travel benefits extended to employees on vacation such as leave or home travel concession), where it is obligatory for employer to provide to its employees goods or services under any law for the time being in force.

Instances of provisions of facilities to Employees under law

As per section 46 of Factories Act, canteen facility is mandatory where number of workers is more than 250.

As per section 48 of Factories Act, any factory employing more than 30 women workers should provide for crèche facility.

ITC prohibition imposed [S. 17(5)(aa)]

Services of

a) general insurance,

b) servicing,

c) repair and maintenance

in so far as they relate to motor vehicles, vessels and aircraft for which the credit is not available in accordance with provisions u/s. 17(5)(a)

Hence ITC for general insurance, servicing and repair shall not be available for

a) Motor Vehicle for transportation of person up to 13 persons

b) Vessel

c) Aircraft in accordance with provisions u/s 17(5)(a)

ITC shall however be available for general insurance, servicing and repair for

a) Motor Vehicle for transportation of person up to 13 persons

b) Vessel

c) Aircraft

Used for

– Transportation of goods

– Further supply of motor vehicle, vessel, aircraft

– Imparting training

– Transportation of money for banking company or financial institution

ITC shall also be available for general insurance, servicing and repair for

a) Motor Vehicles not for transportation of persons

b) Motor Vehicles for transportation of more than 13 persons

Amendments made to section 17(5) regarding renting of motor vehicle, life insurance and health insurance to avoid repetition:

Section 17(5)(b)(iii) is proposed to be deleted and merged with 17(5)(b)(i) to deny ITC on :

1. Renting or hiring of Motor Vehicle, Vessel and Aircraft referred to in S. 17(5)(a) [Hence ITC shall be allowed on renting of motor vehicle for transportation of more than 13 passengers or for transportation of goods]

2. Life Insurance

3. Health Insurance

18.

Expl (c) to S.20

Turnover Calculation for distribution of ITC

Inadvertent omission to exclude CST under Entry 92A of Union list for calculation of turnover for the appropriation of ITC by Input service distributor is sought to be set right.

Similar amendment may be required in Explanation below R. 42(1)(i) also where aggregate value of exempt supplies and total turnover is defined

19.

Sec.22

Registration limit for Special Category States

Objective is to enhance the exemption limit for registration in the special category States from ten lakh rupees to twenty lakh rupees.

20.

Sec. 24(x)

Registration Requirement for Small E Commerce Operators relaxed

E-Commerce operators not required to collect tax u/s 52 henceforth are sought to be kept out of registration ambit unless they meet the registration limit.

Registration compliance burden for e-commerce operators, providing mere digital platform but not involved in payment aspect is sought to be reduced.

Separate registration for SEZ and Multiple places of business

Under originally enacted law, single registration was allowed qua State. Multiple registrations with in State were allowed only for different business verticals.

As per Comments along Proposals, Certain PSUs had requested for separate registration for their individual units in a State, a facility which was available prior to 1st July 2017.

21.

Sec. 25(2)

Hence 2nd proviso is inserted in section 25(2) as under:

Provided further that a person having multiple places of business in a State or Union territory may be granted a separate registration for each such place of business, subject to such conditions as may be prescribed:

Hence grant of multiple registrations is subject to prescribed conditions.

While this amendment shall increase the self-imposed compliance burden, but it shall not increase the tax revenue of the government. Some small units might resort to splitting to avoid onerous provisions like audit etc.Transfer between these separate registrations shall also constitute supply.

Compulsory Separate registration for SEZ Units

Single SEZ Unit

Provided also that a person having a unit, as defined in the Special Economic Zones Act, 2005 (28 of 2005), in a Special Economic Zone or being a Special Economic Zone Developer shall be granted a separate registration as distinct from his units located outside the Special Economic Zone in the same State or Union territory:

Multiple SEZ Units

Provided also that a person having more than one unit, as defined in theSpecial Economic Zones Act, 2005 (28 of 2005), in a Special Economic Zone shall be granted a separate registration for each such unit, subject to such conditions as may be prescribed.

As per proviso to Rule 8, a person having a unit(s) in a Special Economic Zone or being a Special Economic Zone developer shall make a separate application for registration as a business vertical distinct from his other units located outside the Special Economic Zone:

Proviso to Rule 8 does not compulsorily require separate registration for each unit of SEZ in case of Multiple Units of SEZ, while proviso to section 25(2) requires it mandatorily.

Suspension of Registration pending cancellation

Once a registered person has applied for cancellation of registration, the proper officer may temporarily suspend its registration till the procedural formalities for cancellation are completed. This measure would relieve the taxpayer of continued compliance burden under the law till such time as the process of allowing cancellation of registration is completed.

22 & 23

Filing of registration cancellation application under REG-16 [Rule 20] is required to be followed by cancellation order in REG-19 [Rule 22(3)] within 30 days from application. Within 3 months from REG-19, final return u/s 45 GSTR-10 is required to be filed.

There is no provision for deemed cancellation after 30 days unlike deemed registration u/s 25(12). Hence pending the issue of REG-19, it is being proposed to provide for suspension of registration so that compliance burden gets axed.

But when number is kept in suspension, amendment to GSTR-1 etc. should not be withheld; otherwise it will have adverse impact on ITC to which such dealers’ customers are entitled to.

24.

S. 34(1) & 34(3)

Consolidated Credit/Debit Notes

Prior to the amendment to GST law, one credit/debit note was required to be issued against every invoice. Now section 34(1) and 34(3) is amended to provide for issuance of one or more credit or debit notes against one or more tax invoices.

The purpose is to permit consolidated credit/debit notes for financial year.

It is necessary that corresponding changes should be made to GSTN portal and GSTR-1 template to accommodate such types of consolidated credit/debit notes.

25.

Sec. 35(5)

Government department to be kept out of purview of GST Audit

As per section 35(5), audit is required where turnover of registered person exceeds Rs. 2 crores. Ministry of Defence has represented that the annual accounts of Canteen Stores Department (CSD) are internally audited by the Controller of Defence Accounts (CDA) and therefore, should not be subject to audit by a Chartered Accountant or a Cost Accountant. Thus, it is provided that any department of the Central or State Government / local authority which is subject to audit by CAG need not get their books of account audited by any Chartered Accountant or Cost Accountant.

Hence proviso has been added to section 35(5)as under:

Provided that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority, whose books of accounts 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.

26.

Sec. 39(9)

Amendment Return

Amendments to sub section 1 and 7 are on account of new system of return uploading proposed by the Government.

Section 39(9) allows rectification of any omission or furnishing of incorrect particulars in subsequent return not beyond 20th October of next financial year.

There is no provision for amending the same return.

Section 39(9) is amended to take care of amendment return in prescribed form just like pre GST regime to enable correction of inadvertent mistakes

27.

Sec. 43A

New Return filing Procedure

43A. Procedure for furnishing return and availing input tax credit. –

(1) Notwithstanding anything contained in section 37 or section 38, the procedure for furnishing the details of outward supplies by a registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 (hereafter in this section referred to as the ‘supplier’), and for verifying, validating, modifying or deleting such supplies by the corresponding registered person (hereafter in this section referred to as the ‘recipient’) in connection with the furnishing of return under section 39 shall be such as may be prescribed.

(2) Notwithstanding anything contained in section 41, section 42 or section 43, the procedure for availing of input tax credit by the recipient and verification thereof shall be such as may be prescribed.

(3) the procedure for furnishing the details of outward supplies by the supplier on the common portal, for the purposes of availing ITC by the recipient shall be such as may be prescribed.

(4) The procedure specified under sub-section (1) and sub-section (2) may include the following:-

(i) the procedure for furnishing the details of a tax invoice by the supplier on the common portal for the purposes of availing input tax credit by the recipient in terms of clause (a) of sub-section (2) of section 16;

(ii) the amount of tax specified in an invoice for which the details have been furnished by the supplier under clause (i) but the return in respect thereof has not been furnished and tax has not been paid shall be deemed to be tax payable by him under the provisions of this Act;

(iii) the procedure for availing ITC in respect of outward supplies not furnished under sub section (3) shall be such as may be prescribed and such procedure may include the maximum amount of ITC which can be so availed, not exceeding 20% of ITC available, on the basis of details furnished by the suppliers.

(v) for the purposes of these clauses, the supplier and the recipient shall be jointly and severally liable to pay tax or to reverse the input tax creditavailed against such tax, as the case may be;

(vi) the procedure and threshold for availing input tax credit by the recipient on the basis of invoice for which details have not been furnished by the supplier under clause (i) and recovery thereof; and

(vii) the procedure, safeguards and threshold of tax amounts in the invoices, the details of which can be furnished under clause (i) by a newly registered person or by a registered person who has defaulted in payment of taxliability, exceeding the amount of tax or the period of time specified in the rules.

The new return procedure has been divided into following limbs:

1. Availment of ITC on the basis invoice uploading instead of filing of return and tax payment by the supplier. This is based on unidirectional flow of invoices in GSTR-1 of suppliers.

2. Fixing the liability of supplier for tax payment for invoices uploaded by him

3. Circumstances where tax to be collected from recipient who has availed credit instead of collection from supplier uploading invoices

4. Joint and several liability of supplier for tax payable on invoices and reversal of ITC against tax not paid

5. Procedure for claiming ITC on the basis of invoices not uploaded by supplier.

6. Safeguards for new registrants and defaulters regarding credit on the basis of invoice uploading.

28.

Sec. 48

Scope of functions of GST Practitioners expanded

Apart from filing of returns GST practitioners shall be authorized to perform other functions also such as filing refund claims, filing applications for cancellation of registrations etc.

29.

Sec. 49(5)

Change in Logic of payment of taxes (in accordance with GSTN portal)

Uptil now, SGST/UTGST credit was utilized first towards payment of SGST/UTGST. Balance credit was utilized for payment of IGST. However the law is amended to provide that SGST/UTGST credit shall be utilized for payment of IGST only if the credit balance of central tax is not available for payment of IGST.

This amendment is required since the GST common portal has placed this restriction in the utilization of input tax credit of State tax/Union territory tax towards payment of integrated tax.

Prima facie, it appears that this is done to defy Delhi High Court Judgment in A&M Design dated 08-09-2017 which said that portal cannot override the law.

Proviso to section 49(5) is inserted to provide that credit on account of central tax, State tax or Union territory tax shall be utilised towards payment of integrated tax only after the input tax credit available on account of integrated tax has been first utilised fully towards such payment. This is being done to minimize fund settlement on account of IGST.

30.

Sec. 49A & 49B

Government being empowered to decide order of utilization of ITC. Newly inserted sections state that utilisation of ITC may be made subject to certain conditions and also takes power to prescribe order of utilisation.

Sec. 49A states that

• Notwithstanding anything contained in section 49,

• ITC on account of CGST, SGST/UTGST

• shall be utilised towards payment of IGST, CGST, SGST/UTGST, only after ITC available on account of IGST has first been utilised fully towards such payment.

New subsection 49B inserted is as under:

• Notwithstanding anything contained in this section,

• The Government may, on the recommendations of the Council,

• prescribe the order of utilization of input tax credit

• of integrated tax, central tax, State tax or Union territory tax, as the case may be,

• towards payment of any such tax

The purpose of this sub section is provide enabling power for the Government to prescribe any specific order of utilization of input tax credit of any of the taxes

31, 32 & 33.

Sec. 54(8)

As per section 54(8)(a), in present form, refund for zero rated supply (including supply to SEZ units ) is required to be paid to applicant and not to be transferred to Consumer welfare fund. But in case of supply to SEZ Units after charging IGST, it is being proposed to allow ITC in the hands of SEZ Unit. (No such proposal in the 46 amendments notified, though section 16 provides for credit to all registered persons)

Further to bring consistency with policy matters and explanations given, receipt of payment for exports in Indian rupees wherever permitted by the Reserve Bank of India is also included in Expl. 2(c).

Receipt of payment in convertible foreign exchange is a pre-condition for export of service but not for export of goods. Export of service against payment in Indian rupees under present law does not qualify as zero rated supply. Normally against export of services, payment in Indian rupees is received from Nepal and Bhutan. Now it is being proposed to amend the definition of export of service to provide that even if payment is received in Indian rupees, where permitted by RBI, it shall be treated as export of service and can enjoy the refund.

It may be pertinent to mention that Service to Nepal and Bhutan are exempt but ITC on such services is not denied under Rule 42.

With this proposal services to Nepal and Bhutan in Indian Rupees, subject to permission by RBI, shall rank with exports against convertible foreign exchange.

Consequential Amendment has been made in definition of relevant date when defined with reference to export of services.

Relevant date in case of refunds for Inverted Duty Rate Structure [S. 54 Expl (2)(e)]

In case of inverted duty rate refunds, maximum period of 2 years to be counted from due date of furnishing of return u/s 39 for the period in which such claim for refund arises and not from the end of financial year in which such claim for refund arises. This amendment has been brought because as per section 54(3) refund is required to be applied for tax period and not for financial year. Since the relevant date was not in synchronization with section 54(3), the amendment has been brought.

34.

Sec.79

Recovery of Tax

It is provided that recovery may be made from distinct persons present in different States / UTs in order to ensure speedy recovery from other establishments of the registered person.

Hence explanation below section 79 is being amended to provide that For the purposes of this section, the word person shall include “distinct persons” as referred to in sub-section (4) or, as the case may be, sub-section (5) of section 25.

This will enable government to recover tax from all the registrations under same PAN. So, an entity shall be liable not only for its own dues but also all other establishments covered by the same PAN.

35 & 36.

Sec. 107(6)/ 112(8)

Payment of Tax in Dispute to Appellate Authorities

At the time of Ist Appeal against the order of adjudicating authority, 10% of tax is dispute is required to be deposited u/s. 107(6). Now against this 10% of tax in dispute, Maximum cap of Rs. 25 crore is placed.

Against 2nd appeal, in addition to amount paid u/s 107(6), 20% of remaining amount of tax in dispute is required to be deposited u/s 112(8). Now a maximum cap of Rs. 50 crores is placed.

Hence at the stage of 2nd appeal 30% of the remaining amount of tax in dispute gets paid.

37.

Sec. 140

Transitional Provisions [retrospectively amended with effect from 01/07/2017]

Amendment is being brought to deny credit of Education cess and Senior & High Secondary Education cess. This seems to be to justify stand taken in certain AARs and validated by High Courts. Since TRAN-1 has already been filed, this proposal shall result in genuine hardship to the tax payers and should not be done.

38.

Sec. 143

Job Work

Non return of inputs by Job worker with in 1 year and non-return of capital goods by Job Worker in 3 years is taxable by treated as supply.

The amendment is done that the period of one year or three years, as the case may be, may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively

UNDER IGST LAW:

39.

Sec. 2(6)

Export of Services: Refer to detailed discussion in clause 33 above.

40.

Sec. 2(16)

Governmental Authority : ‘Panchayat’ also included in definition of governmental authority

41.

Sec. 5(4)

Amendment to section for RCM. Refer to clause 11 above

42.

Sec. 8(2)

Consequential amendment on deletion of concept of ‘business vertical’.

43.

Sec. 12(8)

Place of supply in case of transportation of goods [S. 12(8)]

As per section 12(8)(b), The place of supply of services by way of transportation of goods, including by mail or courier to a person other than a registered person, shall be the location at which such goods are handed over for their transportation

Hence ocean freight on export of goods becomes taxable because foreign importer is not a registered person. But ocean freight was exempted by separate Notification dated 25-01-2018 till 30-09-2018. Now amendment proposes not to tax ocean freight by bringing change in law.

44.

Proviso to S. 13(3)(a)

Place of Supply of Job Work for goods imported into India shall be outside India

It is proposed to not tax job work of any treatment or process done on goods temporarily imported into India and which are then exported after such process without being put to any use in India, other than that which is required for such repairs or treatment.

45.

Sec. 17 (2A)

Regarding settlement of taxes by government under IGST and Compensation Cess; 50% to Central Govt. and 50% to States/UTs on ad-hoc basis and shall be adjusted against amount apportioned in sub-sections of this section.

46.

Sec. 20(8)

Fifth proviso has been inserted to read, “Provided also that where the appeal is to be filed before the appellate authority or the appellate Tribunal, the maximum amount payable shall be Rs. fifty crore and one hundred crores respectively.”

This is to bring on par IGST provisions on the lines of amendment made to CGST Act.

[Though due care has been taken while doing this analysis, the delegates are requested to refer to exact amendment notification thereto.]