Key Changes by CGST / IGST Amendment Bill 2018
Central Government has Passed 4 GST amendment bills in Lok Sabha on 09.08.2018 which were introduced on Eighth August 2018 which
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]
RCM shall be applicable only on notified registered persons for supplies made by unregistered persons
As per existing provisions of Section 9(4) of the CGST Act, a registered person is liable to pay GST under reverse charge on goods or services received from unregistered suppliers. In other words, goods purchased from unregistered SMEs by the registered persons shall increase their compliance burden and working capital requirements. However, this provision has been deferred till September 30, 2019.
The GST Amendment Bill as passed by the Lok Sabha provides that the provisions of reverse charge shall be applicable only in case of notified registered persons in respect of specified goods or services.
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]
No ITC of GST paid on repair and maintenance of motor vehicles
A registered supplier is not allowed to avail of the Input Tax Credit of GST paid in respect of motor vehicles. The Act is silent on the allowability of Input Tax Credit of GST paid on insurance, repair and maintenance of motor vehicles. So, the taxpayers were in dilemma whether such ITC should be claimed or not? It has now specifically been mentioned in Section 17(5) of the CGST Act (negative list of ITC)that Input tax credit of GST paid on services of insurance, servicing, repair and maintenance of motor vehicles shall not be allowed, except in a few cases.
Scope of ITC in respect of motor vehicles expanded
As per the existing provisions, the input tax credit shall not be available in respect of the motor vehicles and other conveyances, except when they are used for making further supply of such vehicles or conveyances or transportation of passengers or imparting training on driving, flying, navigating such vehicles or conveyances and for transportation of goods.
The recent amendment now provides that the Input Tax Credit shall be available in every situation, if the seating capacity of the motor vehicle is 13 or more (including driver). For other vehicles, the ITC shall be available only if these vehicles are used for the specified purposes as mentioned above.
Further, the words ‘Other conveyances’ have been removed. Therefore, input tax credit would now be available in respect of dumpers, work-trucks, fork-lift trucks and other special purpose motor vehicles.
ITC allowed for food and beverages provided to employees under any law
The input tax credit in respect of GST paid on food and beverages, health services, travel benefits provided to employees, etc., is specifically disallowed to the employer. The entities have raised concerns that Input tax credit of GST paid in respect of canteen services provided to employees should be allowed.
The Govt. had addressed these concerns by allowing the ITC in respect of food or beverages if canteen services are provided by the employer under any law for the time being in force. Further, the ITC of GST paid on health services and travel benefits provided to the employees shall be allowed only if these are provided by the employer under any law.
Seek to amend the section 17 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
6 Registration limit increased to Rs. 20 lakhs for 6 specified States
As per Section 22 of the CGST Act, every supplier making taxable supplies of goods or services, from any of the special category States, shall be liable to be registered if his aggregate turnover in a financial year exceeds Rs. 10 lakhs. The special category States are Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand, while the registration limit in other States is Rs. 20 lakhs. A few States have requested the Govt. to increase the threshold exemption for registration from Rs. 10 lakhs to Rs. 20 lakhs.
Now, the Govt. has made the amendment to Section 22 of the CGST Act to increase the threshold exemption limit for registration from Rs. 10 lakhs to Rs. 20 lakhs in the States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. Furnishing of Returns [Section 39]
Necessary amendments have been made to incorporate the proposals approved by the GST Council in respect of GST returns, which are as follows:
a) Provisions have been inserted to enable prescribed suppliers to file quarterly returns.
b) New provisions have been introduced to put reasonable restrictions on new taxpayers from availing of the Input Tax Credit in first 6 months from the date of registration.
c) A registered person (buyer) can verify, validate, modify or delete the details of supplies furnished by the suppliers (seller), which has been auto-populated in his return.
d) The Input Tax credit shall not be allowed to the buyer if seller (supplier) doesn’t furnish the GST returns for the prescribed no. of months.
e) In case of default in payment of GST, the supplier and recipient of a supply shall be jointly and severally liable to pay tax and ITC availed.
f) Different due dates shall be notified for different class of taxpayer for filing of GST returns. The due dates shall be based on the quantum of turnover of such taxpayers.
13. 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.
14. 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.
15. Utilisation of Input Tax credit and order of utilisation of Input tax [Section 49A and 49B]
Changes in cross-utilisation of ITC in line with GST portal
Presently, the amount of ITC available in the electronic credit ledger of a registered person on account of the State GST(Input SGST) shall be first utilized for payment of State GST(Output SGST) and the amount remaining, if any, can be utilized for payment of Integrated GST (Output IGST).
Now, the credit of State GST(Input SGST) or Union Territory GST (Input UTGST) can be utilized for payment of Integrated GST (Output IGST) only if balance of ITC on account of Central GST (Input CGST) is not available for payment of Integrated GST (Output IGST).
This amendment has been made to bring the law in sync with the GST portal which restricts the utilization of Input SGST and Input UTGST towards payment of Integrated GST.
16. 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
17 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.
18 Time period increased for release for seized goods
Time period increased to 14 days for payment of tax and penalty for release for seized goods
Proceedings initiated in respect of seized goods and conveyance shall be deemed to be concluded if tax and penalty are paid within 7 days of seizure by the person transporting the goods or the owner of the goods. The period of 7 days has now been increased to 14 days.
19. Appeals to Appellate Authority [Section 107 and 112]
As of now, there is no maximum limit on the amount of pre-deposit for filing of an appeal, which adversely impacts the working capital requirement of a taxpayer.
The recent amendment provides an upper limit on the pre-deposit 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
20. Transitional Cess not available as 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.
21. 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
22. 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.
23. New Entries in Schedule III
The Govt. has widened the scope of Schedule III of the CGST Act which provides a list of goods or services which are not treated as supplies. The following services have been inserted in this schedule:
a) The transactions which involve movement of goods by a registered person, from one non-taxable territory to another non-taxable territory.
b) Currently, in case of supply of goods as High Seas Sales the IGST is levied twice -First at the time of sale before clearance for home consumption and subsequently at the time of clearance for home consumption. Thus, in order to remove the double taxation, supply of goods by endorsement of documents before clearance for home consumption has been exempted from levy of IGST.
c) Similarly, in case of sale of warehoused goods the IGST is levied twice. Therefore, supply of warehoused goods before clearance for home consumption has been exempted from IGST.
Key highlights of the Integrated Goods and Services Tax(Amendment) Bill 2018
1. Export of Services [Section 2(6)]
Payment for export of services can be received in Indian rupees if permitted by RBI
As per existing provisions, the payment for export of services shall be received in convertible foreign exchange. The exporters contended that the payment of exports should be allowed in the Indian rupees in case of export of services to Nepal and Bhutan. Accordingly, the Govt. has allowed the registered suppliers to receive the payment in respect of export of services in Indian rupees, if permitted by the RBI.
2. Place of Supply of services where location of supplier and recipient is in India [Section 12]
Goods transported outside India shall be deemed to have place of supply outside India
As per the existing provisions, the place of supply in case of transportation of goods is determined on the basis of location of the parties.
As per amended provision, the place of supply in case of transportation of goods to a place outside India shall be the place of destination, i.e., outside India. In other words, if destination of goods is out of India, then place of supply will be out of India, even if supplier and recipient of service are in India. In order to promote the export of goods, the Govt. wishes to exempt this transaction from GST.
3. Place of Supply of services where location of supplier or recipient is outside India [Section 13]
No GST on processes done on goods temporarily imported into India which are exported
As per the existing provisions, GST would be applicable on the services supplied in respect of goods which are temporarily imported into India for any other treatment or process and are exported after such treatment or process without being put to any other use in India, other than that which is required for such treatment or process. The exemption from levy of GST was available only in respect of repair work.
The industry has demanded that the job work of any treatment or process done on goods temporarily imported into India (e.g., gold, diamonds)which are then exported should not be taxed.
The Govt. has made the amendment to the Section 13(3)(a) to provide that no GST shall be applicable on any treatment or process done on goods temporarily imported into India which are then exported out of India.