AMIT BAJAJ ADVOCATE

Amendment in section 7-Scope of supply:

Section of 7 of the CGST Act, 2017 deals with the scope of supply. It defines supply in an inclusive manner. It is proposed to add clause (aa) in sub-section 1 of section 7 which runs as under:

“(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice versa, for cash, deferred payment or other valuable consideration.

Explanation.––For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of 77 activities or transactions inter se shall be deemed to take place from one such person to another;”

The above amendment seem to have been carried out to nulify the landmark judgement of Hon’ble Supreme Court  in the case of  Calcutta. Club Limited (2017) 5 SCC 356 wherein the court held that service tax need not be charged by clubs for services to its members. The verdict was seen as also being applicable in GST as GST has replaced service tax.

Now after this amendment such transaction and activities will be covered by scope of supply.

It is pertinent to mention here that along with this amendment simultaneously para 7 of Schedule II to CGST Act is also proposed to be omitted, which provided the similar provisions which was deemed to be as supply even without consideration. Now after the amendment the said activites are itself included in the definition of scope of supply with a specific explanation overriding any other law or judgement contrary to it.

Amendment in section 16-Additional condition for claiming ITC:

 Section 16 of the CGST Act deals with the conditions for claiming input tax credit by any person. An additional condition is proposed to be added in section 16 which mandates that the invoice or debit note on the basis of which credit is taken must be uploaded in GSTR-1 by the supplier and the same should also have been communicated to the recipient in terms of procedure laid down in section 37. The proposed amendment is as follows:

“(aa) the details of the invoice or debit note referred to in clause (a) 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 in the manner specified under section 37;”.

It is pertinent to mention here that the proposed amendment seem to have been added to provide a legal backing for Rule 36(4) of CGST Rules, 2017, which allows only 5% ITC in excess of eligible ITC available in respect of invoices or debit notes the details of which have been uploaded by the suppliers in GSTR-1 u/s 37(1) of CGST Act, if that be the case can it be said Rule 36(4) till date is ultra vires of the Act, is a question which could be subject to judicial scrutiny.

 Amendment in section 35 and 44-No requirement of GST audit:

 Section 35(5) which mandated for audit of annual accounts by a chartered accountant or cost accountant if turnover exceeded prescribed limit, is proposed to be omitted. Now after the amendment there will be no need of GST audit u/s 35(5). Section 44 simultaneously has also been proposed to be amended to provide that every registered person shall file an annual return  which may include a self certified reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statement for every financial year electronically, within such time and in such form and in such manner as may be prescribed.

The time period earlier prescribed for filing annual return as 31^st December every year now is also proposed to be amended within such time as may be prescribed.

Amendment in section 50-Interest only on tax paid through cash ledger:

 Section 50 is proposed to be amended to provide that interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in  accordance with section 39 of the Act, i.e. after the due date of GSTR-3B,   shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger.

In nut shel the proposed amendment provide for levy on interest only on that part of tax  which is paid from the cash ledger, if the return GSTR-3B is filed late.

 This amendment is proposed wef 01.07.2017. Similar amendment was also carried out in the Finance Act, 2019 however it was made applicable wef 01.09.2020. Now, the same is done with retrospective effect.

Amendment in section 75-change in definition of self assessed tax:

Section 75(12) which provides for the recovery of self assessed tax which remains unpaid as per GSTR-3b i.e. return filed u/s 39, is proposed to be amended to add an explanation which defines the word self assessment tax.

The proposed amendment defines self assessment tax  as including the tax payable in respect of details of outward supplies furnished u/s 37 but not included in a return furnished u/s 39.

 In other words the tax liability declared in  GSTR-1 but not declared in  GSTR-3b will be considered as self assessed tax u/s 75(12) and recovery of such tax can be initiated u/s 79 of CGST Act, 2017. It is pertinent to mention here that section 79 provides various modes of recovery of tax including attachment of immovable property etc.

Amendment in section 129, 130 and 74:  

Section 129 of CGST Act which deals with detention, seizure and release of goods and conveyance in transit  has been amended to a large extent.

 Unamended Section 129(1) provides that goods in  transit detained on the ground of their transportation in contravention of the provisions of the Act or rules shall be released either

(a)       on 100% payment of tax and penalty equal to 100% of tax payable in case of taxable goods and 2% of value of goods or 25000 which ever is less where the owner comes forward and

(b)       on deposit of applicable tax along with 50% of value of goods and in case of exempted goods in such case on deposit of 5% of value of exempted goods or 25000 whichever is less where the owner does not come forward

It is proposed to amend the above Clauses (a) and (b) of section 129(1) to provide that goods shall be released

(a) on penalty of 200% of tax payable on the goods in question, where owner comes forward

and

(b)on payment of penalty @ 50% of the value of goods or 200% of tax payable whichever is higher, where the owner does not come forward.

The word applicable tax has been omitted in the proposed amendment in both the above clauses. However the proposed  amendment would not result in any relief from the amount payable under section 129 as with deltetion of the words applicable tax, penalty amount has been doubled.

 The unamended provisions give an impression of double taxation because not only applicable tax is supposed to be paid u/s 129 but also is required to be paid in the returns filed u/s 39, since the ITC of tax paid u/s 129 is denied u/s 17(5) to the recipient, so in order to give ITC of the applicable tax on goods in question one has to pay applicable tax again u/s 39 in the return filed by such person.

After the amendment only penalty is payable u/s 129(1)(a) or (b), which can be further contested in appeal.

Amendment in section 74:

 Consequent to the amendment in section 129(1)(a) and (b) a simultaneous amendment is made in section 74 so as to make seizure and confiscation of goods and conveyances in transit a separate proceeding from recovery of tax.

No provisional release of goods detained u/s 129 on bond:

Sub-section 2 of section 129 is proposed to be omitted which provides for application of section 67(6) to the goods detained u/s 129. Section 67(6) provides for provisional release of goods seized upon execution of bond and furnishing of a security  or on payment of tax, interest and penalty payable.  Now after the amendment there will no provisional release of goods u/s 129.

Proceedings u/s 129 to be completed within 14 days:

Section 129(3)  is also proposed to be amended so as to provide that notice after detention or seizure will be issued within 7 days specifying the penalty payable and thereafter  an order shall be passed within a period of seven days from the date of service of notice for payment of penalty under clasue (a) or clause (b) of section 129(1).

Sub-section 6 of section 129 is also proposed to be amended to provide that if a person  transporting the goods or owner of the goods  fails to pay the amount of penalty u/s 129(1) within fifteen  days from the date of receipt of order then goods or conveyance so detained or seized shall be liable to be sold or disposed off in the manner and within the time prescribed.

The interesting thing in the amendment is that both goods and vehicle can be sold or disposed off to realize the penalty amount in case of non payment, However an option is proposed to be given to the transporter to get his conveyance released on payment of Rs. 1 Lakh or penalty u/s 129(3) which ever is less.

So the proposed amendment in section 129(6) itself provide for a procedure for realization of penalty instead of initiating  proceedings u/s 130

 Amendment in section 130:

 Consequent to amendment in section 129, amendment in second proviso to section 130(2)  is also made to provide for that the aggregate amount of fine in lieu of confiscation and penalty shall not be less than 100% of the tax payable on such goods, which in the pre-amended law is the amount equal to the penalty payable u/s 129(1).

Sub-section 3 of section 130 is also proposed to be omitted which makes the owner of the goods liable for payment of tax, penalty or other charges payable in respect of goods or conveyance confiscated. That means after the omission of sub section 3 only fine in lieu of confiscation and penalty which shall not be less than 100% of the tax payable, will be payable u/s 130 where the goods are confiscated.

Amendment in section 107-25% pre-deposit in appeal against  order u/s 129 :

 Section 107(6) is amended to provide that appeal against order u/s 129(3) will be filed only after a sum equal to 25% of the penalty has been paid by the appellant.

Amendment in section 83:

 Section 83 is amended so as to provide that that whenever proceedings under chapter XII(Assessments) Chapter XIV(Inspection , search and seizure) or Chapter XV(demand and recovery) are initiated the Commissioner may for the purpose of protecting interest of the Govt Revenue may provisionaly attach any propery belonging to any taxable person or any person specified u/s 122(1A). In the unamended section attachment could be done only during the pendency of proceedings u/s 62,64,67,73 or 74.

Amendment in section 16 of IGST Act-

There is a proposal for a major amendment in section 16 of IGST Act. Section 16(3) of IGST Act today provides that Export of goods or services can be done in two ways

One With payment of IGST where refund is automatically  given by customs

Two without payment of IGST where refund has to be applied of unutilized Input tax credit

Now the proposed amendment provides that export of goods or services will be done only without payment of IGST under a bond or LUT.

It is further provided in the proposed amendment that in case of non-realisation of sale proceeds within the time limit as specified under The Foreign exchange Management Act, 1999, the refund obtained would be deposited within 30 days along with interest.

It is pertinent to mention here that recently a similar Rule 96B was introduced vide Notification No 16/2020 Dated 23.03.2020. It seems this proposed amendment u/s 16 is also introduced to give a legal backing to the Rule 96B. It is strange that rules are introduced before the relevant amendment under the Act.

Under the proposed amendment it is further provided that export of goods or services with payment of IGST will be made only by those class of persons or in case of those class of goods, which are notified by the Government on the recommendation of the GST Council.

All the proposed amendments in the GST will be applicable from such date as the Central Government may by notification appoint.

BUDGET 2016 PROPOSALS

INCOME DECLARATION SCHEME 2016

·         Government to bring Income Declaration Scheme 2016, to give opportunity to persons who have not paid full taxes in the past to come forward and declare their undisclosed income and pay tax. Scheme will start from 1st June 2016 and will remain open till date to be notified. Tax @ 30%, Surcharge @ 7.5% and penalty @ 7.5% (Total 45% ) will be charged by the Government on the undisclosed income. The tax will have to be paid on or before the date to be notified by the Central Govt.

TAX RATES

·         No change in personal income tax slabs has been proposed. However Rebate of Rs.5000/- in tax will be allowed to individuals earning upto Rs.500000/- per year. Earlier this rebate was Rs.2000/-.

PRESUMPTIVE TAXATION SCHEME

·         Turnover limit for Presumptive Taxation for Businesses has been increased from Rs.1 Crore to Rs. 2 Crore. Net Profit @ 8% will have to be declared in the Income Tax Return, if Sale is less than 2 Crores, otherwise Tax Audit will apply. Firms will have to declare income @ 8% of the Sales and pay tax on the same. Salary and interest to partners will not be allowed as deduction, as was being allowed earlier.

·         Any person paying tax under presumptive taxation scheme (section 44AD) will have to pay tax under the scheme for a continuous period of 5 years. If he opts out of the scheme during any year, then the option to pay tax on presumptive basis will not be allowed to him for next 5 years, and he will have to maintain proper books of accounts and get them audited during those 5 years.

·         Presumptive Tax introduced for Professionals like doctors, engineers, chartered accountants, architects. Professionals will have to declare income @ 50% of Gross receipts, otherwise will have to get the books of accounts audited. Tax Audit Limit for professionals increased to Rs. 50 lakhs.

ADVANCE TAX & RETURNS

·         Advance Tax will now have to be paid in four installments by all assessees – 15th June, 15th September, 15th December, 15th March. Earlier these installments were only for the Companies.

·         If Income Tax Return (in which Refund is due) is filed late, then department will not pay interest for the delayed period.

·         Now Income Tax Return can be filed only till one year from the end of the Financial Year. Earlier this limit was 2 years.

·         Income Tax Return which was filed after the due date could not be revised. Now the late filed return can also be revised if there is any mistake in the original return.

·         Earlier Dividends were exempt in the hands of the recipients. Now Dividend recipient will be liable to pay tax @ 10% if dividend received during the year is more than 10 lakhs.

TDS/TCS

·         Threshold limit for deduction of TDS on Commission has been increased from Rs.5000/- to Rs.15000/-. TDS on Commission reduced from 10% to 5%.

·         Threshold limit for deduction of TDS on Contract (Section 194C) increased to Rs.100000/- per year from Rs.75000/-.

·         Recipients of  Rental Income can also file Form 15G/15H for non deduction of TDS, if total income is below taxable limit.

·         TCS @ 1% introduced on Sale of any Goods or Services in Cash exceeding Rs.2 lakhs. If any Goods/Services are sold and payment is received in Cash exceeding Rs. 2 lakhs, then TCS will have to be collected from the person and paid to the government on monthly basis.

SERVICE TAX

·         Krishi  Kalyan Cess @0.5% introduced. W.e.f. 1st June 2016, effective rate of service tax will be 15% (Service Tax 14%, Swach Bharat Cess 0.5%, Krishi Kalyan Cess @ 0.5%).

·         Annual Return of Service Tax introduced. Earlier there were only two half yearly returns of service tax. Now there will be three returns -  2 Half yearly and one annual.

·         Delayed payment of Service Tax, Interest @ 15% will have to be paid. However if Service Tax is collected but not paid to Government, then interest @ 24% will have to be paid