Key 30 suggestions on Proposed Amendments in the GST Law
By: – Bimal jain
Goods and Services Tax – GST
Dated:- 18-7-2018
To iron out the practical hindrances and issues being faced by the Industry Inc since the implementation of GST, the GST Council on July 9, 2018 had unveiled the draft of 46 proposed changes in GST law as a major step towards facilitating trade and ease of doing business.
After detailed analysis of various amendments, following suggestions were compiled by Mr. Bimal Jain, Chairman, Indirect Tax Committee, PHD Chamber of Commerce which have been submitted to the Government for their kind consideration:
I Definition of 'supply'
The term 'supply' is proposed to be amended to exclude activities/ transactions listed in Schedule II to ensure that the activities/ transactions as per Schedule II is to decide only whether the same is supply of goods or services. Hence, activities/ transactions listed in Schedule II (as supply of service or supply of goods)
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nt Circular No. 47/21/2018 – GST dated 08.06.2018 wherein while discussing servicing of car issue, it was clarified that where a supply involves supply of both goods and services, values of which are shown separately, the goods and services would be liable to tax at their respective rates. Hence, it is suggested that the concept of composite and mixed supply should be dealt and clarified as legislator intended while framing the section 8 of the CGST Act and should be more emphasized and explained by way of an example in the respective section of the CGST Ac and dominant/ principal supply concept would be determining factor for arriving at the composite supply irrespective of the fact of portion of material & services involved in the contract.
* Clarifying the meaning of term 'immovable property' under Para 6(a) of Schedule II – Meaning of term 'immovable property' must be clarified to avoid disputes whether particular activity is 'works contract' or not.
II Schedule III
The scope o
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HR, Management carried out from the Central Head Office for all branches etc.
* Inclusion of export duty credit scrips in Schedule III – Duty credit scrips viz. MEIS/ SEIS, issued on export of goods/ services are presently treated as exempted goods and therefore are subject to reversal of credit provisions of Section 42/Section 43 of the CGST Act on inputs/input services/Capital goods. As an encouragement to exporters, this Duty credit scrips should be included here as neither as supply of goods nor services.
III Reverse Charge under Section 9(4) of the CGST Act
GST Council has proposed to omit existing Section 9(4) of the CGST Act and instead, granting an enabling power for the Govt. to notify a class of registered persons who would be liable to pay tax on reverse charge basis in case of receipt of taxable goods or services from an unregistered supplier. The details of such specified persons are to be notified in future.
Suggestion(s):
* Similar changes are also required in Se
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* Uncertainty on inclusion of clause (b) – Draft amendment states “that a person who opts to pay tax under clause (a), clause (b) or clause (c) may supply services of value not exceeding ten percent of turnover in the preceding financial year in a State or Union territory or five lakh rupees, whichever is higher”
Clause (b) mentions about composite rate of tax on restaurant service providers. There seems no essence to include this clause while allowing supply of services upto specified amount to manufacturers and traders. Else, it may be clarified that that for clause (b), this limit shall apply for services supplied other than restaurant service providers.
* Restricting value of ₹ 5 Lakh to only taxable supply – It should be clarified that this amount of ₹ 5 Lakhs should only be the taxable value of services – Order no. 01/2017 dated 13.10.2017 already clarifies that person supplying exempt services along with goods or restaurant services are not ineligible for compos
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true sense.
V Input Tax Credit – No interest on reversal of ITC for non-payment to supplier
It is proposed to delete interest applicability when GST ITC is reversed for non-payment of invoice amount after 6 months from date of invoice
Suggestion(s):
* Retrospective effect – This provision should be made applicable retrospectively from 01.07.2017 and payment of interest already made in intervening period should be refunded/ reinstated.
VI Input Tax Credit – Blocked credit
It is proposed to prune down blocked credit list in Section 17(5) of the CGST Act. ITC shall be available in case of motor vehicles having approved capacity of not more than 13 persons (including the driver) only in case it is used for specified purposes. It is also proposed that ITC in respect of food and beverages, health services, renting or hiring of motor vehicles, vessels and aircraft, travel benefits to employees etc., can be availed where the provision of such goods or services is obligatory for an emplo
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ar pharmaceuticals/ medicinal industries where medicines cannot be sold without providing test samples. Here, the intention of the registered person is to promote their business i.e. it is a promotional or advertising activity. The company itself understand the same and such advertising cost is generally taken into account while finalizing pricing of other items manufactured. Hence, denial of credit on goods supplied as free samples is not justified.
* Clarification that term 'gift' shall not include promotional items – It may be clarified that supply of promotional items along with supply of goods as a combo supply (undertaken as a part of business promotional activity), shall not be covered under the ambit of 'gift' for reversal of ITC.
* Allow ITC on 'gifts' when tax is paid on outward supply – In terms of Para 2 of Schedule I, supply of goods and services between related persons, shall be treated as supply even if made without consideration. However, gifts not exceeding INR 50,
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ept of seamless flow of credit.
* Any other civil structure not to be excluded from Plant and machinery – Explanation in Section 17 for the purposes of Chapter V (Input Tax Credit) and Chapter VI (Registration) provides that the 'Plant and Machinery' means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes –
* land, building or any other civil structures;
* telecommunication towers; and
* pipelines laid outside the factory premises
It is therefore suggested that the words “other civil structures” be removed from the said Explanation. Inclusion of the term “Other civil structures” may lead to numerous disputes on the eligibility of credit on various plant and machineries as various plant and machineries require civil works to support their operation.
* Pipe line used outside the factory should be covered un
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(78) of the CGST Act]. Like, supply of five specified petroleum products and alcoholic liquor for human consumption may be termed as non-taxable supply. Then, what constitutes non-GST supply? Whether Schedule III items are being taken as non-GST supply? Clarity in this regard is required.
* Clarification on meaning of 'non-taxable supply' – A concrete list of activities constituting non-taxable supplies in GST be provided to avoid any confusion as to its inclusion in aggregate turnover and reversal of common credit.
VIII Registration
It is proposed to insert the provisions of separate registration for multiple units in an SEZ.
Suggestion: Word 'shall' be replaced with 'may' – It should not be made mandatory for the existing SEZ units which is having a single registration if located in the same SEZ. This will create confusion and additional work for the existing units. This should be an optional facility only.
Further, the proposed amendment in Section 25(2) of the CGST Act allo
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posed Section 43A makes supplier and the recipient jointly and severally liable to pay tax or to reverse the input tax credit availed against such tax, for which the details have been furnished by the supplier but the return in respect thereof has not been furnished and tax has not been paid.
It is advisable that the supplier shall be made primarily responsible to pay taxes and the recipient shall not be made liable to reverse ITC availed against such taxes already paid by the recipient to the supplier. Only on failure of recovery of taxes from supplier under exceptional circumstances, as affirmed by the GST Council in their 27th GST Council meeting, the recipient could be approached for discharge of liability or reversal of ITC, as the case may be. In this regard, strict safeguards must be ensured so that GST authorities cannot deny ITC if the supplier has not paid the taxes as a first recourse. Further, appropriate provisions must be inserted/ amended in the GST ITC provisions also
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bility shall be adjusted in such manner as may be prescribed, should be done away as there are lot many situation viz. quantity discounts/ trade discounts, etc., when DN/CN to be issued nearly at the end of next FY, following the end of relevant financial year in which such supply was made
* Issuance of DN/CN without GST may also be allowed as an option to deal with financial adjustments wherein no adjustment of the tax liability is required in the hands of the supplier and corresponding reversal of ITC in the hands of recipient.
XI GST Refund
Amendments are proposed under Section 54(3) of the CGST Act to file refund claim for the unutilized ITC on Inputs & Input Services by due date for furnishing of returns under Section 39 for the period for which the claim for refund of ITC arises, which is presently the end of the financial year.
Suggestion(s):
* Facility on GSTN portal should be enabled to allow monthly and/ or quarterly refund – As of now Form RFD – 01A allows only monthl
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ount to be deposited to file appeal from the appellate authority to appellate tribunal is 20% of the disputed tax amount along with the amount deposited u/s 107(6) subject to maximum of ₹ 50 crores.
Suggestion(s):
* Maximum ceiling should be 10 crores – Under Excise and Service tax, pre-deposit @ 7.5% of tax in dispute at first level and 2.5% at second level was applicable subject to maximum of ₹ 10 Crores. Keeping such high pre-deposit amount of 10%/20% with maximum ceiling as high as ₹ 25 crores/ 50 crores will cause undue hardship on innocent assesses having genuine case and not easing business for SME/ MSME Sectors.
It is suggested that, pre-deposit amount under GST also should be 7.5% at first level of appeal and 2.5% at second level, totalling together 10% of disputed tax amount subject to maximum of ₹ 10 Crores.
XIII Recovery of Tax
It is proposed to provide that recovery may be made from distinct persons present in different States / UTs in order t
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f the enactment without interest or penalty implication.
Other changes to be considered:
I Definition of 'composite supply'
Section 2(30) of the CGST Act defines Composite supply as a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
Suggestion(s):
* Clarification as to separate consideration – It is suggested that suitable clarification be provided that if separate considerations are charged for various goods and services supplied in conjunction with each other in ordinary course of business, the same shall also amount to composite supply.
* Suitable clarification be issued to provide certainty for determining whether a bundle of supply is a composite supply and also to determine principal supply therein.
II Time of supply
Section 14 of
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l goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher:
Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined under section 15.
Suggestion(s):
* Words 'plant and machinery' be deleted – The use of word plant and machinery is not required as they are already covered under the meaning of capital goods.
* Clarification on no reversal of ITC in case of renting of capital goods – Section 18(6) uses the term 'supply' which includes even renting of those capital goods or plant and machinery, on which ITC has been taken i.e. to say in case such capital goods/ plant or machinery are rented out, Section 18(6) triggers and there would be reversal of ITC which is not the intention. Suitable proviso be inserted
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n(s):
* Two crores limit must be computed per registration wise – Anomaly of word 'turnover' in Section 35(5) viz-a-viz word 'aggregate turnover' in Rule 80(3) be removed. Further, clarity must be provided that two crores limit for GST audit shall be determined per State wise turnover rather than taking aggregate turnover on PAN India basis of an assessee. Considering aggregate turnover of an assessee will create a situation where one unit of such assessee having only ₹ 1,00,000 (assumed) turnover shall be required to conduct GST Audit just because its other units are crossing two crore limit.
V Centralised Authority for Advance Ruling
Considering the contrary rulings coming from different States' Advance Ruling Authorities, necessary provision for establishing centralised Authority for Advance Ruling or Appellate Authority for Advance Ruling be inserted. The issue has been identified as a concern by the GST Council also and hence necessary amendments in this regard be initia
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