India’s first-ever digital budget 2021 was presented by the Finance Minister, Smt. Nirmala Sitharaman, on 1st February 2021.
The present article covers the analysis of ‘Goods and Services Tax’ amendments as proposed vide the Finance Bill, 2021.
Budget 2021 | CENTRAL GOODS AND SERVICES TAX ACT, 2017
Retrospective expansion in ‘scope of supply’ [new clause (aa) to section 7(1)]-
Following activities/ transactions for cash, deferred payment or any other valuable consideration are added within the scope of supply-
- By a person (other than an individual) to its members/ constituent; or
- By a members/ constituent to the person (other than an individual).
Consequently, the above amendment aims to clarify the inclusion of supply of any goods/ services by clubs/ associations to its members and vice versa within the GST ambit.
Importantly, the above amendment is effective retrospectively from 1st July 2017.
Further, newly inserted explanation clarifies that the person and its members/ constituent are two separate persons.
Accordingly, the supply of activities/ transactions between them will be deemed to take place from one such person to another.
Additional condition for availing ‘Input Tax Credit’ [new clause (aa) to section 16(2)]-
The recipient of goods/ services needs to satisfy the following additional condition in order to avail ‘Input Tax Credit’-
- The details of invoices/ debit notes should be furnished by the supplier in Form GSTR-1 or Invoice Furnishing Facility (i.e., IFF); and
- The details of invoices/ debit notes should have been communicated by the supplier to the recipient as per section 37 of the Central Goods and Services Tax Act, 2017.
Accordingly, an input tax credit will be available only if the details of invoice/ debit notes are uploaded as well as communicated by the supplier on the GST portal.
Budget 2021| Certification changes in GST audit and GST annual return [Section 35 and Section 44]-
Sub-section (5) to section 35 is omitted. Accordingly, the registered person is no longer required to get their annual accounts audited by the Chartered Accountants/ Cost Accountants.
Entire section 44 covering the provisions of annual return is substituted. The gist of new section 44 are-
- Every registered person (other than an Input Service Distributor; a casual taxable person; a non-resident taxable person; person deducting tax under section 51 and person collecting tax under section 52) shall furnish
- An annual return including a self-certified reconciliation statement (earlier the reconciliation statement in Form GSTR-9C was to be certified by the Chartered Accountant/ Cost Accountant)
- Audited annual financial statement.
Budget 2021 update| Interest payable on net cash liability [Section 50(1)]
Interest provisions are amended according to which interest is payable on taxes paid by debiting the electronic cash ledger.
In simple terms, interest is payable on net cash liability. The amendment is retrospectively effective from 1st July 2017.
Prosecution amendments after Budget 2021
Relevant section | Relevant amendment |
|---|---|
Section-74 | The words ‘section 122, 125, 129 and 130’ is replaced with the words ‘section 122 and 125’. |
Effect of amendment
Conclusion of proceedings under section 73 or section 74 will be deemed to mean the conclusion of proceedings against all the person liable to penalize under section 122 and section 125.
However, now, the same doesn’t mean the conclusion of proceedings under section 129 (i.e., Detention, seizure and release of goods/ conveyances in transit) and section 130 (i.e., confiscation of goods/ conveyances and levy of penalty thereon).
Relevant section | Relevant amendment |
|---|---|
Section-75 (12) | New explanation inserted which means: ‘self-assessed tax’ will include the tax payable as per outward supplies details furnished in Form GSTR-1 but not included in the return furnished under section 39. |
Effect of amendment after Budget 2021
Recovery of tax under section 79 can be initiated against outward supplies shown in Form GSTR-1.
Relevant section | Relevant amendment |
|---|---|
Section-107 (6) | The new proviso is inserted which means that pre-deposit of minimum 25% of the penalty is mandatory in order to file an appeal under section 129(3). |
Effect of amendment
For filing an appeal against the order in Form MOV-09 (i.e., detention, seizure and release of goods/ conveyance in transit) the appellant is required to make pre-deposit of 25% of the penalty amount (instead of 10%).
Relevant section | Relevant amendment |
|---|---|
Section -129 (1) | Clause (a) and (b) substituted- accordingly, the goods shall be released on payment of- |
Situation No: 1 | Payment of penalty |
|---|---|
When the owner of the goods comes forward for payment of penalty. | Lower of the following, in case of exempted goods- · 2% of the value of goods; or · INR 25,000. In any other case, 200% of the tax payable on such goods. |
Situation No: 2 | Payment of penalty |
|---|---|
When the owner of the goods doesn’t come forward for payment of penalty. | Lower of the following, in case of exempted goods- · 5% of the value of goods; or · INR 25,000. Higher of the following, in any other case- · 50% of the value of goods; or · 200% of the tax payable on such goods. |
Relevant section | Relevant amendment |
|---|---|
Section-129(3) | Entire sub-section (3) substituted. Accordingly, now the proper officer detaining/ seizing the goods/ conveyance should-
|
Effect of amendment
Earlier the time limit of issuance of notice/ order was not specified.
Relevant section | Relevant amendment |
|---|---|
Section-129(6) | Entire sub-section (6) substituted- In case the person transporting goods or owner of the goods fails to pay the specified penalty within fifteen days of the date of receipt of an order under section 129(3). Then, the detained/seized goods/ conveyance will be liable to be sold/ disposed of.
However, the conveyance shall be released on payment, of lower of the following amounts, by the transporter-
|
Relevant section | Relevant amendment |
|---|---|
Section-151 | Entire section 151 is substituted. The gist of the new section is- The Commissioner or an authorized officer can direct any person to furnish information relating to any matter in connection with the Act. |
Effect of amendment
The section now empowers the jurisdictional commissioner to call for any information from any person concerning any matter dealt with in connection with the Central Goods and Services Tax Act.
Relevant section | Relevant amendment |
|---|---|
Section-152 | ‘any proceedings under the Act’ is substituted by words ‘without giving an opportunity of being heard to the person concerned’ |
Effect of amendment
Information obtained under section 150 (i.e., obligation to furnish information return) and section 151 (i.e., the power to collect statistics) can be used for any proceedings under the Act only after giving an opportunity of being heard to the person concerned.
INTEGRATED GOODS AND SERVICES TAX ACT, 2017
Changes in the definition of ‘zero-rated supply’ [Section 16(1)]
As per the amendment, the supply of goods or services or both to Special Economic Zone developer/ unit will now qualify as ‘zero-rated supply’ only when the supply is undertaken for authorized operations.
The consequence of non-realization of sale proceeds vis-a-vis refund under ‘zero-rated supply’ [Section 16(3)]
According to the new proviso, in case the registered person, making zero-rated supply, doesn’t receive the sale proceeds within a period of 30 days from the date of expiry of the time limit prescribed under FEMA, 1999.
Then, such a registered person is liable to deposit the refund amount along with applicable interest.
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