Draft proposals for amending GST Laws for comments of the stakeholders till 15.07.2018
GST
Dated:- 9-7-2018
Sl. No.
Section/Sub-section/Clause
Amendments as shown in Red and Strikethrough
Rationale/Remarks
CGST Act, 2017
Definitions
1.
2 (4)
2 (4) “adjudicating authority” means any authority, appointed or authorised to pass any order or decision under this Act, but does not include the Central Board of Excise Indirect Taxes and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate Authority, and the Appellate Tribunal and the Authority referred to in sub-section (2) of section 171;
This is in pursuance of the change in name of the Central Board of Excise and Customs to the Central Board of Indirect Taxes and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963).
Further, the National AntiProfiteering Authority constituted by the Central Government under section 1
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this article, the President is empowered to establish a separate Board to ensure equitable distribution of funds in the State's budget to meet the developmental needs of the region. It is being added now based on the request received from the State of Karnataka.
5.
2 (102)
(102) “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;
Explanation-For the removal of doubts, it is hereby clarified that the expression “services” includes facilitating or arranging transactions in securities.
Although 'securities' has been excluded from the definition of 'goods' and 'services' in the CGST Act, facilitating or arranging transactions in securities is liable to GST. This has been clarified recently through a detailed FAQ on Banking and Insurance wherein
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es or transactions, when constituting a supply in accordance with the provisions of sub-section (1), shall be treated either as supply of goods or supply of services as referred to in Schedule II.
(2) Notwithstanding anything contained in sub-section (1),
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council,
shall be treated neither as a supply of goods nor a supply of services.
(3) Subject to the provisions of sub-sections (1), (1A) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as-
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.
Classification of certain specified activities or
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tivities is taxed when received from a related person or from any of their establishments outside India.
8.
Schedule III, new insertion
7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into the taxable territory
It is sought to exclude from the tax net such transactions which involve movement of goods, caused by a registered person, from one non-taxable territory to another non-taxable territory
9.
Schedule III, new insertion
8 (a) Supply of warehoused goods to any person before clearance for home consumption.
(b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.
Explanation.- For the purposes of this clause, the expression “warehoused goods” shall have the meaning as assigned to it in the Customs Act, 1962
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such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
9 (4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of taxable goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both
Section 9 (4), which mandates that all registered persons shall pay the tax on reverse charge basis on purchases made from unregistered persons, is presently under suspension. This sub-section is being omitted for trade facilitation.
Instead, it is proposed to take an enabling power for
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y in case of other suppliers,
subject to such conditions and restrictions as may be prescribed:
Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding one hundred and fifty lakh crore rupees, as may be recommended by the Council.
Provided further 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.
(2) The registered person shall be eligible to opt under sub-section (1), if-
(a) he is not engaged in the supply of services, other than supplies referred to in clause (b) of paragraph (6) of Schedule II save as provided in sub-section (1);
(b) he is not engaged in making any supply of goods which are not leviable to tax under this Act;
(c) he is not engaged in making any inter-State outward supplies of goods;
(d)
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by the GST Council.
At present, registered persons engaged in the supply of services (other than restaurant services) are not eligible for composition scheme. As a result, manufacturers and traders supplying services are unable to opt for the scheme even if its percentage is very small as compared to the supplies of goods. With a view to enable these taxpayers to avail of the benefit of composition scheme, a new proviso is being added in order to allow them to be eligible for the scheme even if they supply services of value not exceeding 10% of the turnover in the preceding financial year in a State/Union territory or ₹ 5 lakhs, whichever is higher.
This is a taxpayer-friendly measure and it is believed that small taxpayers would immensely benefit from this amendment.
This is a consequential amendment, as a new proviso is being added to section 10 (1) which allows the registered person to opt for the scheme even if they supply services of value not exceeding 10% of the turno
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f section 31 or the date of receipt of payment, whichever is earlier;
The amendment seeks to correct a drafting error as the provisions for issuance of invoices/other documents are also contained in other sub-sections of section 31.
Input Tax Credit
14.
16 (2) (b)
16 (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,
(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;
(b) he has received the goods or services or both.
Explanation.- For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services,-
(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwi
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Subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and
(d) he has furnished the return under section 39:
Provided that :
Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed:
It is proposed to remove the liability to pay interest in case where the recipient has been made liable to pay an amount equal to the ITC availed in case he fails to pay to the supplie
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n sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building) by excluding it from the ambit of 'exempt supply' on which ITC is blocked.
The proposed amendment is a taxpayer friendly measure.
17.
17 (5) (a), new (aa) & (b)
17(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:-
(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), vessels and aircraft and other conveyances except when they are used
(i) for making the following taxable supplies, namely:-
(A) further supply of such vehicles or ; vessels or aircraft conveyances; or
(B) transportation of passengers; or
(C) imparting training on driving, flying, navigating such vehicles, vessels or aircraft or conveyances;
(ii) for transportation of goods;
and
(iii) for transportatio
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ment notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or
(B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and
(iii) travel benefits extended to employees on vacation such as leave or home travel concession:
Provided that the input tax credit in respect of such goods or services or both shall be available, where the provision of such goods or services or both is obligatory for an employer to provide to its employees under any law for the time being in force.
It is proposed to expand the scope of ITC availability in case of motor vehicles having approved capacity of not more than 13 persons (including the driver) in case it is used for specified purposes.
The amendment is sought to make it clear that input tax
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nce with the provisions of section 17(5)(b), ITC is not available in respect of food and beverages, health services, travel benefits to employees etc. This sub-section is being amended to allow ITC in respect of such goods or services or both where the provision of such goods or services or both is obligatory for an employer to provide to its employees under any law for the time being in force.
This is a taxpayer-friendly amendment.
18.
20, Explanation (c)
Clause (c) of Explanation to section 20:
(c) the term ''turnover'', in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied under entry entries 84 and 92A of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule.
It is proposed to exclude the amount of tax levied under entry 92A of List I from the value of turnover for the purposes of di
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to correct this inadvertent omission.
Registration
19.
22 Explanation
Explanation (iii) to section 22 the expression “special category States” shall mean the States as specified in sub-clause (g) of clause (4) of article 279A of the Constitution except the State of Jammu and Kashmir and Assam.
The State of Assam has requested that the threshold exemption for registration in their State should be raised from ₹ 10 lakhs to ₹ 20 lakhs
20.
24 (x)
24 (x) every electronic commerce operator who is required to collect tax at source under section 52;
An e-commerce operator is presently required to take compulsory registration in terms of section 24(x) even if his aggregate turnover in a financial year does not exceed ₹ 20 lakhs. Clause (x) of section 24 is being amended to provide that only those e-commerce operators who are required to collect tax at source under section 52 would be required to take compulsory registration. Other e-commerce operators who are not requ
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cribed:
Provided also that a person having a unit, as defined in the Special Economic Zones Act, 2005 (28 of 2005), in a Special Economic Zone or being a Special Economic Zone Developer shall be granted a separate registration as distinct from his units located outside the Special Economic Zone in the same State or Union territory:
Provided also that a person having more than one unit, as defined in the Special Economic Zones Act, 2005 (28 of 2005), in a Special Economic Zone shall be granted a separate registration for each such unit, subject to such conditions as may be prescribed.
It is proposed to allow persons having multiple places of business in a State or Union territory to obtain separate registrations for each such place of business.
As per the extant provisions, a person seeking registration under the Act shall be granted a single registration in a State or Union territory. However, if he has multiple business verticals in a State or Union territory, he may obtain sepa
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is legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where,
(a)..
(b)..
(c) the taxable person, other than the person registered under subsection (3) of section 25, is no longer liable to be registered under section 22 or section 24.
Provided that pending cancellation
of registration, the proper officer
may suspend the registration of
the person subject to such
conditions and limitations as may
be prescribed.
It is proposed to provide that once a registered person has applied for cancellation of registration, the proper officer may temporarily suspend its registration till the procedural formalities for cancellation are completed.
This measure would relieve the taxpayer of continued compliance burden under the law till such time as the process of allowing cancellation of registration is completed.
23.
29 (2), new proviso
Provided that the proper offic
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istered person, who has supplied such goods or services or both, may issue to the recipient a one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.
(2)..
(3) ..Where a tax invoice has one or
more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice the said tax invoices is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a one or more debit notes for supplies made in a financial year containing such particulars as may be prescribed.
At present, a credit/debit note which is issued by the registered person is required to be issued invoice-wise. This causes avoidable compliance burden for tax payers. Thus, it is proposed to allow issuance of consolidated credit/debit which is in line with the best international practi
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, every registered person whose turnover during a financial year exceeds the prescribed limit (presently, ₹ 2 crore) shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and other prescribed documents.
In this regard, Ministry of Defence has represented that the annual accounts of Canteen Stores Department (CSD) are internally audited by the Controller of Defence Accounts (CDA) and therefore, should not be subject to audit by a Chartered Accountant or a Cost Accountant.
Thus, it is proposed to provide that any department of the Central or State Government / local authority which is subject to audit by CAG need not get their books of account audited by any Chartered Accountant or Cost Accountant.
Returns
26.
39(9)
Subject to the provisions of sections 37 and 38, if any registered person after furnishing a return under sub-section
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ers to correct inadvertent mistakes in the returns by filing an amendment return.
27.
43A new insertion
43A. Procedure for furnishing return and availing input tax credit. – (1) Notwithstanding anything contained in section 37 or section 38, the procedure for furnishing the details of outward supplies by a registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 (hereafter in this section referred to as the 'supplier'), and for verifying, validating, modifying or deleting such supplies by the corresponding registered person (hereafter in this section referred to as the 'recipient') in connection with the furnishing of return under section 39 shall be such as may be prescribed..
(2) Notwithstanding anything contained in section 41, section 42 orsection 43, the procedure for availing of input tax credit by the recipient andverification thereof shall be such as m
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t tax has not been paid by the said supplier;
(v) for the purposes of clause (ii) and (iii), the supplier and the recipient shall be jointly and severally liable to pay tax or to reverse the input tax credit availed against such tax, as the case may be;
(vi) the procedure and threshold for availing input tax credit by the recipient on the basis of invoice for which details have not been furnished by the supplier under clause (i) and recovery thereof; and
(vii) the procedure, safeguards and threshold of tax amounts in the invoices, the details of which can be furnished under clause (i) by a newly registered person or by a registered person who has defaulted in payment of tax liability, exceeding the amount of tax or the period of time specified in the rules.
A new section is being introduced in order to enable the new return filing procedure as proposed by the Returns Committee and approved by GST Council.
GST Practitioner
28.
48
48 (2) A registered person may authorise an appr
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, in that order;
(b) the central tax shall first be utilised towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax;
(c) the State tax shall first be utilized towards payment of State tax and the amount remaining, if any, may be utilized towards 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;
(d) the Union territory tax shall first be utilized towards payment of Union territory tax and the amount remaining, if any, may be utilized towards 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;
(e) the central tax shall not be utilised towards payment of State tax or Union territory tax;
(f) the State tax or Union territory tax shall not be utilized towards payment of central tax:
Provided that input tax credit on account of central
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x credit of State tax/Union territory tax towards payment of integrated tax.
It is sought to insert a new proviso to sub-section (5) in order to specify that a taxpayer would be able to utilise credit on account of CGST, SGST/UTGST, only after exhausting all the credit on account of IGST available to him.
This is being done to minimise fund settlement on account of IGST.
30.
New sub-section 5A in section 49
Notwithstanding anything contained in this section, the Government may, on the recommendations of the Council, prescribe the order of utilization of input tax credit of integrated tax, central tax, State tax or Union territory tax, as the case may be, towards payment of any such tax.
It is proposed to take an enabling power for the Government to prescribe any specific order of utilization of input tax credit of any of the taxes viz., integrated tax, central tax, State tax or Union territory tax for the payment of the said taxes.
Refunds
31.
54, Explanation (2) (e)
Expla
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nd of tax paid on zero rated supplies export of goods or services or both or on inputs or input services used in making such zero-rated supplies exports;
Section 54 (8) provides a list of situations where the principle of unjust enrichment does not apply for the purposes of payment of refund. One such situation is zero-rated supplies of goods or services.
Zero-rated supply under section 16 (1) of the IGST Act includes physical exports of goods or services and supplies made to an SEZ unit/SEZ developer and the principle of unjust enrichment does not apply in such cases. Presently, under section 16 (3) of the IGST Act, only the supplier making supplies of goods or services to an SEZ unit/SEZ developer can claim refund. It is proposed to allow ITC to the SEZ developer or SEZ unit and the supplier in DTA may recover the tax amount from such SEZ unit, etc.
Thus, it is proposed to amend section 54(8)(a) in order to provide that the principle of unjust enrichment will apply in case of ref
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gulations.
In this respect, the provisions of section 2(6)(iv) of the IGST Act are also being amended to provide that services shall qualify as exports even if the payment for the services supplied is received in Indian rupees as per RBI regulations.
Recovery of Tax
34.
79 (1)
In this section, two Explanations are proposed to be inserted as under:
Explanation .-
(1) For the purposes of this section, the word person shall include “distinct persons” as referred to in sub-section (4) or, as the case may be, sub-section (5) of section 25.
(2) For the purposes of this clause, the term “Collector” means the Collector of a revenue district and includes a Deputy Commissioner or a district magistrate or head of the revenue administration in a revenue district.
It is proposed to provide that recovery may be made from distinct persons present in different States / UTs in order to ensure speedy recovery from other establishments of the registered person.
It is proposed to clarify the
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of rupees.
36.
112 (8)
No appeal shall be filed under sub-section (1), unless the appellant has paid
(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and
(b) a sum equal to twenty per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order, subject to a maximum of fifty crore rupees, in relation to which the appeal has been filed.
In terms of section 112 (8), the appellant is required to pay a sum equal to 20% of the tax in dispute, in addition to the amount paid under section 107 (6), arising from the order of the Appellate Authority for filing an appeal before the Appellate Tribunal.
This section is being amended to provide a ceiling of ₹ 50 crores for filing an appeal before the Appellate Tribunal.
This is a taxpayer-friendly amendment especially in cases where the tax demand is of hundreds of cro
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he Additional Duties of Excise (Textile and Textile Articles) Act, 1978;”
(v)… ”
Explanation 3.-For removal of doubts, it is clarified that the expression “eligible duties and taxes” excludes any cess which has not been specified in Explanation 1 or Explanation 2 above and any cess which is collected as additional duty of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975.
It is proposed to clarify that only transitional credit of eligible duties can be carried forward in the return and not all credits. This provision is already contained in rule 117(1) of the CGST Rules.
The eligible duties do not include the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978.
For removal of doubts, it is proposed to clarify that the expression “eligible duties and taxes” excludes any cess which has not been specified in Explanation 1 or Explanation 2 above and any cess which is collected as
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India, or with or without payment of tax for export, as the case may be:
Provided that the period of one year or three years, as the case may be, may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively.
In terms of section 143 of the CGST Act, a registered person (Principal) is allowed to send inputs or capital goods to a job worker for job work without payment of tax subject to the conditions inter-alia, that the inputs and capital goods are brought back within a period of one year and three years respectively.
It is proposed to insert a proviso in section 143 to provide that the period of one year or three years may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively.
This is a taxpayer-friendly amendment to cover situations where the period of one year specified is not adequate in respect of job works such as h
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tions.
This is a taxpayer-friendly amendment.
40.
2 (16), Explanation
'governmental authority' means “an authority or a board or any other body, –
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government,
with ninety per cent. or more participation by way of equity or control, to carry out any function entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution”.
The reference to Panchayat under article 243G is sought to be added in the definition of Governmental authority which was left out inadvertently.
41.
12 (8)
12 (8) The place of supply of services by way of transportation of goods, including by mail or courier to,
(a) a registered person, shall be the location of such person;
(b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation.
Provided that if the transportation of goods is to a place outside India, th
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of supply of services:
Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs or for any other treatment or process and are exported after repairs or such treatment or process without being put to any other use in India, than that which is required for such repairs or such treatment or process;
It is proposed to not tax job work of any treatment or process done on goods temporarily imported into India (e.g., gold, diamonds) which are then exported. This is a taxpayer-friendly amendment which would encourage skill development in our country.
43.
17 (1), new proviso
17 (1):
Provided that fifty per cent. of such amount as may be decided on the recommendation of the Council, which does not get apportioned under clauses (a) to (f) for the time being, shall be apportioned to the Central Government on ad hoc basis and shall be adjusted against amounts apportioned unde
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