Key Changes by CGST / IGST Amendment Bill 2018

Central Government has Passed 4 GST amendment bills in Lok Sabha on Eighth August 2018 which are

Key changes in GST by Central Goods and Services Tax (Amendment) Bill 2018

1. Scope of Supply [Section 7]

New sub-section is introduced to remove anomaly in section 7 and accordingly activities/transaction which constitute supply shall be treated either as supply of goods or supply of services as referred in Schedule II as against earlier provision which treated schedule II activities as supply.

2. Levy and Collection [Section 9]

Reverse charge tax mechanism on purchases from unregistered suppliers to be restricted to notified registered recipient of supplies of certain categories of goods or services or both similar amendment also proposed in IGST/UT Amendment Bill.

3. Composition levy [Section 10]

Threshold limit for Composition Scheme increased to Rs. 1.50 crores

As per existing Section 10 of the CGST Act, the composition scheme can only be opted for by those registered persons whose aggregate turnover in the preceding financial year does not exceed Rs. 1 crore. To cover more entities within the ambit of composition scheme and to extend simple compliance, the threshold limit for Composition Scheme has been extended to Rs. 1.5 crore in the preceding financial year. In other words, all registered suppliers engaged in supply of goods can opt for composition scheme if their turnover in preceding financial year does not exceed Rs. 1.50 crore.

Composition Scheme is available if small portion of service is also provided by trader or manufacturer

Currently, the registered persons engaged in the supply of services (other than restaurant services) are not eligible for the composition scheme. The manufacturers or traders, who are engaged in supply of goods, can’t take the benefit of composition scheme if they are also engaged in supply of service, even if its share is insignificant in total turnover.

The Amendment Bill, as passed by the Lok Sabha, allows the manufacturers or traders to opt for the composition scheme if proportion of service during the previous financial year is not more than 10% of total revenue or Rs. 5 lakhs, whichever is higher.

4. Eligibility and conditions for Input Tax credit [Section 16]

Sub-section (2) proposed to be amended in order to allow input tax credit for bill-to-ship-to model for supply of services

5. Apportionment of credit and blocked credits [Section 17]

Seek to amend the section to expand the scope of eligibility of input tax credit.

-Activities or Transactions specified in Schedule III which shall not be treated neither as a supply of Goods nor a supply of services’ (except para 5 of the schedule) not to be treated as exempt supply

-Ineligible credits in relation to motor vehicle have been restricted to the following

-Motor Vehicles for transportation of persons having seating capacity of not more than thirteen (including driver), vessels and aircraft except when they are used for making specified taxable supplies

-General Insurance, servicing, repairs and maintenance in respect of motor vehicles for transportation of persons having seating capacity of not more than thirteen (including driver), vessels and air craft on which credit is not available

-Credits on General Insurance, servicing, repairs and maintenance shall be available

-motor vehicles, vessels or aircrafts for making specified taxable supplies

-Taxable person engaged in Manufacture of motor vehicles, vessels or aircrafts; or

– Supply of general insurance services in respect of such motor vehicles, vessels or aircrafts insured by him

-Goods or services which are obligatory for an employer to provide to its employees under any law

6. Compulsory Registration [Section 24]

Exemption from compulsory GST registration for e-commerce operators who are not required to collect TCS

As per Section 24 of the CGST Act, every e-commerce operator is required to take compulsory GST registration, irrespective of turnover in the preceding financial year. Due to this small e-commerce operators are also required to take compulsory GST registration. Consequently, the suppliers, who are maintaining their own online platform, don’t get the benefit of the threshold exemption of Rs. 10/20 lakhs for registration.

Thus as per GST Amendment act passed by Lok Sabha , Compulsory registration is required only for those e- Commerce operator who are required to collect Tax at source.

Any e Commerce operator, who is not required to collect TCS, has been exempted from taking compulsory GST registration.

7. Separate registration each place [Section 25]

Business vertical Concept has been removed from GST

As per section 25 of the CGST Act, a person seeking registration shall be granted a single registration in a State or Union territory, except in case of multiple business verticals. This option is not currently available to a supplier who has just one vertical but multiple places of business in a State or Union Territory.

To ensure clarity in the registration process the concept of business vertical has been removed from GST. A supplier is now allowed to obtain separate registration for each place of his business in a State or Union territory.

8. Temporarily Suspension of Registration before Cancellation [Section 29]

Registration can be temporarily suspended during the tenure of cancellation proceedings

Even after applying for cancellation of GST registration, a taxpayer is required to file the GST returns till registration is actually cancelled. There should not be any need to file the GST returns as taxpayer has already applied for cancellation of registration. In absence of any provision in the law, the taxpayers are required to bear the compliance burden.

Once a registered person has applied for cancellation of GST registration, the proper officer should temporarily suspend its registration till the procedural formalities for cancellation are completed. This amendment would definitely provide relief to the small taxpayers.

9. Consolidated Credit and Debit Notes [Section 34]

Consolidated credit or debit notes can be issued for multiple invoices

As per Section 34 of the CGST Act, a credit or debit note is required to be issued invoice-wise which is quite cumbersome to correlate.

The Govt. has now allowed the registered person to issue consolidated credit or debit note in respect of multiple invoices issued in a financial year without linking the same with individual invoices. This amendment will reduce the compliance burden for taxpayers.

10. Accounts and Other records [Section 35]

No Compulsory Audit for Govt.’s dept. if their books are subject to CAG audit

Every registered person shall get his accounts audited by a Chartered Accountant or a Cost Accountant, if his turnover during a financial year exceeds Rs. 2 crore. These provisions of audit shall be applicable in case of all registered persons whose turnover exceeds the threshold limit including the Govt. Departments.

To avoid the multiple auditing of same books of account, the departments of Central Government or State Governments or local authorities have been exempted from compulsory GST audit, if their books of account are audited by the Comptroller and Auditor-General of India (CAG) or any other auditor under any law.

11. Furnishing of Returns [Section 39]

Amendment proposed to prescribe procedures for filing quarterly returns with monthly payment of taxes and also to prescribe procedures for rectification of returns.

12. Procedure for filing of return and availing Input tax credit [Section 43A]

For new returns which is proposed in coming months, new section is inserted as a step towards ‘Simplification of GST Return – Ease of doing business’. The insertion to provide for prescribing the procedure for quarterly filing of return and availing input tax credit.

13. Payment of Tax, interest, penalty and other amounts [Section 49]

Credit of State tax or Union Territory tax to be utilised for payment of integrated tax only when the balance of the input tax credit on account of central tax is not available for payment of integrated tax.

14. Utilisation of Input Tax credit and order of utilisation of Input tax [Section 49A and 49B]

New sections to specify that taxpayer would be able to utilise the input tax credit on account of central tax, State tax or Union territory tax only after exhausting all the credit on account of integrated tax available to him towards payment or integrated tax, Central tax, State tax or Union territory tax. Section 49B seeks to empower the Government to prescribe any specific order of utilisation of input tax credit of any of the taxes for payment of any tax.

Corresponding amendment also proposed in UT Amendment Bill.

15. Refund of Tax [Section 54]

Unjust enrichment principle to apply in case of refund claim arising out of supplies made to SEZ developer or unit
To allow receipt of payment in Indian rupees, where permitted by the Reserve Bank of India in case of export of services

16. Recovery of Tax [Section 79]

Scope of authorities enhanced to enable recovery to be made from distinct persons registered in different states/Union territory from other establishments of the registered person.

17. Appeals to Appellate Authority [Section 107 and 112]

To set upper limit for pre-deposits for filing of appeal

Appeal before appellate authority – 10 per cent of tax demand subject to maximum of 25 crore/50 crore
Appeal before appellate tribunal – 20 per cent of tax demand subject to maximum of 50 crore/100 crore

18. Transitional arrangement for Input tax credit [Section 140]

To clarify that with retrospective effect i.e. 1 July 2017, cesses and additional duty of excise (on textile and textile articles) levied under the pre- GST laws shall not form part of transitional input tax credit.This is a major retrospective amendment proposed.

19. Job Work procedures [Section 143]

To empower Commissioner to extend the time limit for return of inputs and capital goods sent on job work, up to a period of one year and two years respectively

20. Schedule I ‘Activities to be treated as supply even if made without consideration’–

To enhance the scope of Import of services made from a related person to include even ‘unregistered person’. Currently the entry is restricted only to taxable person.

21. Schedule III –

Following additional activity to be treated neither as a supply of goods nor a supply o services

Goods supplied from a place in a non- taxable territory to another place in non- taxable territory without goods entering into India
Supply of warehoused goods (bond sales) to any person before clearance for home consumption
High sea sales

Key highlights of the Integrated Goods and Services Tax(Amendment) Bill 2018

1. Export of Services [Section 2(6)]

Supply of services to qualify as export even were payment is received in Indian rupees wherever permitted by RBI.

2. Place of Supply of services where location of supplier and recipient is in India [Section 12]

Provide where the supply of service is towards transportation of goods and where the transportation is to a place outside India, the place of supply shall be the destination of such goods.

Though it exempts the transaction, the same would be required to be considered as exempts supply for the purpose of reversal of Input tax credit.

3. Place of Supply of services where location of supplier or recipient is outside India [Section 13]

Proposed to provide, where goods are temporarily imported into India for job work and then exported without putting them to use in India – Place of supply shall be deemed to be outside India

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Goods and Service Tax in India

Monday, August 13, 2018