Goods and Services Tax Key Analysis on Indirect Tax Proposals - Budget 2021

Key Analysis on Indirect Tax Proposals - Budget 2021

Key Analysis on Indirect Tax Proposals - Budget 2021

Key Analysis of Proposed Amendments in GST in Budget 2021

No Requirement of GST Audit

  • Clause 101 of Finance Bill, 2021 has omitted the following Section 35(5) of CGST Act, 2017 which is made effective from the date to be notified:
  • This is a prospective amendment that needs to be notified. It will be applicable from the Financial year in which the notification to this effect will be published by the Government in the Official Gazette of India. For Instance, if Notification comes on 1st April 2021, this condition will be applicable for FY 2021-22.

Self-certification of Reconciliation Statement by the registered person

  • This is a prospective amendment that needs to be notified. It will be applicable from the Financial year in which the notification to this effect will be affected by the Government. For Instance, if Notification comes on 1st April 2021, this condition will be applicable for FY 2021-22.
  • With effect from this amendment, the mandatory requirement of getting the reconciliation in GSTR-9C certified by a Chartered Accountant/ Cost Accountant is proposed to be removed. Any registered person would be able to furnish the annual return along with a self-certified reconciliation statement reconciling the values between annual return and financial statements. In a real sense, the taxpayer will still get this work done and verified by professionals, so as to ensure that information is correctly reported so that there will not be an issue during Departmental Audit / Assessment

Interest on net tax liability made applicable retrospectively

  • Clause 103 of Finance Bill, 2021 has substituted the proviso to Sub-section (1) to Section 50 of CGST Act, 2017 as mentioned below which is made effective from 01-07-2017
  • Interest due to late furnishing of GSTR-3B was made applicable on the net tax liability i.e. on the amount paid from the electronic cash ledger only through the Finance Act 2020. However, this provision was given a prospective effect with effect from 1st September 2020. Now this relaxation has been given a retrospective effect from 1st July 2017 i.e. from the advent of GST.
  • Now, since the relevant amendment has been made in the GST Act itself, it has given relief to the taxpayer and all the related controversies have been put to rest.

Detention and Seizure or confiscation to be a separate proceeding from the Demand / Recovery provisions

  • Clause 104 of Finance Bill, 2021 has made an amendment to explanation 1 in Clause (ii) to Section 74 of CGST Act, 2017 as mentioned below which is made effective from the date to be notified.
  • With effect from this amendment the proceedings of the detention, seizure and confiscation of goods and conveyances in transit are made separate from the demand and recovery proceedings under Section 73 and 74 of the CGST Act 2017.

Direct recovery without SCN upon the furnishing of details in GSTR-1 without tax payment in GSTR-3B

  • Clause 105 of Finance Bill, 2021 has inserted the following explanation to Sub-section 12 of Section 75 of CGST Act, 2017 which is made effective from the date to be notified
  • It has been observed that for several GSTINs, the GSTR-1 details are considerably larger than the details furnished under GSTR-3B. Furthermore, a lot of cases have been noticed where GSTR 1 has been filed without filing the corresponding GSTR-3B.
  • Till now, Section 75(12) provides that where any self-assessed tax remains unpaid, the same can be directly recovered without any issuance of show cause notice. Self-assessment provides for taxes declared in GSTR-3B as per Section 39. Thereby, only taxes declared in GSTR-3B but remaining unpaid through it (a practical impossibility) could form the scope of this section 75(12).
  • Now, it has been provided that if a supplier only uploads details of outward supplies in GSTR-1 without including such supplies in GSTR-3B, then the Government can directly opt for recovery of taxes under Section 79 without the issuance of any show-cause notice u/s 73 or 74.

Provisional Attachment is now valid from initiation of the proceeding

  • Clause 106 of Finance Bill, 2021 has substituted Sub-Section 1 of Section 83 of CGST Act, 2017 as mentioned below which is made effective from the date to be notified:
  • Earlier only upon the pendency of certain proceedings of assessment, inspection, search and seizure and demand/recovery, the power of provisional attachment of property could be exercised. Now, Section 83 has been modified to allow provisional attachment of property wherever any proceedings of assessment, inspection, search and seizure and demand/recovery have been initiated. Such provisional attachment will remain valid from such initiation of proceedings till the expiry of one year from the date of order.
  • Thus, in place of specified sections, entire Chapters have been prescribed to enlarge the scope of proceedings under which provisional attachment of property can be made. Thus, while earlier the provisions listed were more of those undertaken to check tax evasions (inspection, search, seizure, adjudication of SCN), the amended provision provides for such coercive measure in case of regular proceedings in case of regular taxpayers like scrutiny of returns, assessment of nonfilers, access to business premises, etc. Thus, this may find misapplication in certain cases also.
  • Also, the provisions of provisional attachment of the property have been extended to include those persons who are the beneficiaries or at whose instance the fake invoicing transactions are carried out as provided under Section 122(1A) of the CGST Act 2017.

Filing of appeal against detention order upon payment of 25% penalty

  • Clause 107 of Finance Bill, 2021 has inserted the following proviso to sub-section 6 of Section 107 of CGST Act, 2017 which is made effective from the date to be notified:
  • With effect from this amendment, no appeal shall be filed against an order made under Sec 129(3), unless a sum equal to 25% of the penalty has been paid by the appellant. Before this amendment, a person can file an appeal against a detention order passed u/s 129(3) of the CGST Act 2017 only upon payment of 10% of the tax in dispute.

Amendments proposed in Section 129 of CGST Act

  • Payment of only increased penalty for release of goods on account of Detention and Seizure Clause 108 (i) and (iv) of Finance Bill, 2021 has substituted Section 129(1)(a) & (b) and 129(4) of the CGST Act, 2017 as mentioned below which is made effective from the date to be notified:
  • Upon detention and seizure of goods and conveyance u/s 129, one had to pay the tax along with a 100% penalty to get the goods released. After this amendment, the 200% penalty needs to be paid to secure the release of goods. Earlier one could have paid tax through available ITC balance and penalty in cash. Now post the amendment, all payment needs to be made through debiting electronic cash ledger only.
  • However, the penalty amount under this provision has been modified for non-exempted goods as follows:
  1. Where owner comes forward for payment of penalty- 200% of the tax payable as a penalty
  2. Where the owner does not come forward for penalty payment- Higher of:
    • 50% of the value of goods
    • 200% of the tax payable

Time limit provided for the issuance of notice and order u/s 129

  • Clause 108 (iii) of Finance Bill, 2021 has substituted Section 129(3) of the CGST Act, 2017 as mentioned below which is made effective from the date to be notified:
  • The law now prescribes a time limit for issuance of notice and passing the order of detention or seizure. The time limit for issuance of notice has been provided as 7 days of such detention or seizure and that of order is 7 days from the date of such notice.

Delinking of Section 67(6) from Section 129 of CGST Act

  • Clause 108 (ii) of Finance Bill, 2021 has omitted Section 129(2) of the CGST Act, 2017 as mentioned below which is made effective from the date to be notified:
  • With effect from this amendment, the provisions of Section 67(6) for release of goods on a provisional basis upon execution of bond and security as per the specified manner and quantum have been delinked with Section 129 of CGST Act.

Sell or dispose of goods upon non-payment of penalty for detention

  • Clause 108 (v) of Finance Bill, 2021 has omitted Section 129(6) of the CGST Act, 2017 as mentioned below which is made effective from the date to be notified:
  • Earlier non-payment of tax and penalty within 14 days of detention and seizure u/s 129 led to the introduction of confiscation proceedings u/s 130.
  • However, with effect from this amendment, now upon non-payment of the penalty within 15 days (or less for perishable/hazardous goods) of receipt of order copy of detention, the detained goods or conveyance can directly be sold or disposed of in the prescribed time and manner. Further, the transporter has been given an option to get his conveyance released upon payment of applicable penalty or Rs. 1 lakh whichever is less.

Delinking of Detention and Confiscation proceedings

  • Clause 109 of Finance Bill, 2021 has amended Section 130 of the CGST Act, 2017 as mentioned below which is made effective from the date to be notified:
  • With effect from this amendment, firstly, the confiscation provision no longer overrides any other provision of the Act.
  • Also, the minimum aggregate fine and penalty for confiscation were provided to be the penalty for detention under Section 129. This has now been modified to provide the amount to be equivalent to 100% of the tax payable on such goods.
  • Also, the requirement to pay a fine in addition to the tax, penalty, and charges payable in respect of the goods has been omitted.

Empowerment of Commissioner to call for information

  • Clause 110 of Finance Bill, 2021 has substituted Section 151 of the CGST Act, 2017 as mentioned below which is made effective from the date to be notified:
  • With effect from this amendment, Jurisdictional Commissioner is empowered to call for information from any person relating to any matter dealt with in connection with the Act. This amendment enlarges the scope of power provided to the Jurisdictional Commissioner.

Providing of the opportunity of being heard before using the called for information in any proceedings

  • Clause 111 of Finance Bill, 2021 has amended Section 152 of the CGST Act, 2017 as mentioned below which is made effective from the date to be notified
  • With effect from this amendment, no information obtained under sections 150 and 151 shall be used for the purposes of any proceedings under the Act without giving an opportunity of being heard to the person concerned.

The power under Section 151 to call for information transferred from the Board to the Jurisdictional Commissioner

  • Clause 112 of Finance Bill, 2021 has amended Section 168(2) of the CGST Act, 2017 as mentioned below which is made effective from the date to be notified:
  • Section 168(2) of the CGST Act 2017 provides for the powers which can only be exercised by the Commissioner or Joint Secretary posted in the Board. This has been amended to enable the jurisdictional Commissioner (and not the Board) to exercise powers under section 151 to call for information.

Amendment made to Section 16 of IGST Act

Supply to SEZ for authorized operations only to be treated as a zero-rated supply

  • Clause 114 of Finance Bill, 2021 has amended 16(1)(b) of the IGST Act, 2017, as mentioned below which is made effective from the date to be notified:
  • Earlier, all supplies made to SEZ unit were covered under the definition of Zero Rated Supply. However, Rule 89(1) of the CGST Rules, 2017 provided that a refund would be allowed to be claimed by a supplier only when such supplies have been admitted for authorized operations. The department in its circular use to make reference to this rule to conclude that a supply to SEZ would be zero-rated only when it is admitted for authorized operations. This conclusion however did not have any statutory backing. Thus, the aforesaid amendment was carried out to include only supply on account of authorized operations as zero-rated supplies

The time limit for the realization of Foreign Exchange in case of Exports

  • Clause 114 of Finance Bill, 2021 has amended 16(3) of the IGST Act, 2017, as mentioned below which is made effective from the date to be notified:
  • Rule 96B provides for recovery of refund in case of non-realization of sale proceeds in case of export of goods. Till now, there was no empowering provision for this rule under the Act. Now, the Act itself provides that the registered person making zero rated supplies in case of non-realization of sale proceeds within the specified time is liable to deposit the refund received along with interest. The time limit provided is 30 days after the expiry of the time limit prescribed under the FEMA Act 1999 for receipt of foreign exchange remittances.

Export with payment of tax to be allowed to notified persons or notified goods /services only

  • Clause 114 of Finance Bill, 2021 has inserted sub-section (4) to Section 16 of the IGST Act, 2017, as mentioned below which is made effective from the date to be notified:
    • With effect from this amendment, now, the taxpayers cannot opt for zero-rated supplies on payment of integrated tax. Instead, zero-rated supplies without payment of integrated tax are the default mechanism. Only notified class of person can claim a refund of IGST paid on zero-rated supplies. In addition, suppliers of notified goods or services can claim a refund of IGST paid on zero-rated supplies.

Goods and Services Tax (GST) Rules & GST Acts

Sr. No

GST Rules

GST Acts

1.

CGST RULES, 2017 (UPDATED UPTO 01.06.2021)

THE CONSTITUTION (101 AMENDMENT ACT) 2016

2.

IGST RULES, 2017

CGST ACT UPDATED TILL 01.01.2021

3.

 

EXTENSION TO JAMMU & KASHMIR CGST ACT, 2017

4.

 

IGST ACT UPDATED TILL 01.10.2020

5.

 

EXTENSION TO JAMMU & KASHMIR IGST ACT, 2017

6.

 

UTGST ACT, 2017

7.

 

GST (COMPENSATION TO STATES) ACT, 2017

 

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