KEY CHANGES IN GOODS AND SERVICES TAX ACT 2017
– Section 2(114) of CGST Act 2017
The definition of Union Territory is amended to replace/include the UTs of Dadra and Nagar Haveli and Daman and Diu; and Ladakh. This amendment would be effective from a future notified date.
Our Comments: This amendment was made to give effect to making Ladakh a Union Territory with effect from 31.10.2019 and making Dadra and Nagar Haveli and Daman and Diu as one Union Territory from 26th January 2020. A similar amendment has been carried out in the UTGST Act also.
- Section 10(2) of CGST Act 2017
A composition dealer was not allowed to supply goods which are not leviable to tax under the GST law, was not allowed to engage in inter-state supplies of goods and was not allowed to supply goods through an e-commerce operator who collects tax at source. However, these restrictions did not cover the supply of services and thereby a composition of dealer could supply services which are not leviable to tax, in the course of inter-state trade and also through e-commerce operator who collects tax at source.
However, the amendment now restricts the supply of these services as covered under clause (b), (c) and (d) of clause 2 of section 10(2).
This amendment would be effective from a future notified date.
Our Comments: Initially the composition scheme u/s 10 of the CGST Act, 2017 was available only to a certain class of persons supplying goods and w.r.t. services only for the supply of food covered under entry 6(b) of Schedule II. Subsequently, these suppliers were made eligible to the scheme even if they made supply of services to the extent of 10% of turnover or Rs. 10 lakhs, whichever is higher. However, the corresponding amendment in section 10 was not done to extend the above-mentioned restrictions to these services, which is now achieved by this amendment. This restriction would not have any impact on the composition dealer who has supplied services as mentioned above before the amendment is in force.
- Section 16(4) of CGST Act 2017
The time-limit for availing input tax credit in respect of debit note would now be dependent on the date when such debit note is issued rather than the date of the invoice in respect of which it is issued.
This amendment would be effective from a future notified date.
For Example –
If an invoice is issued, say during Feb ’19 and a debit note pertaining to such invoice is issued during Sep ’19 then, prior to this amendment, the last date for taking credit in respect of this debit note would have been the due date of filing Form GSTR-3B for the month of September 2019.
However, post this amendment, the last date for taking such credit would be the due date of Form GSTR-3B for the month of September 2020 as the debit note was issued in the FY 2019-20.
Our Comments: This is a welcome move as the time available for availing credit w.r.t. debit notes is effectively increased.
- Section 29(1) of CGST Act 2017.
The registration w.r.t. persons who have taken voluntary registration under GST (i.e. registration is taken by a person even when not liable to register under the Act) can now be cancelled by the proper office, either on his own motion or an application filed by such person.
This amendment would be effective from a future notified date.
Our Comments: This amendment will enable the persons who have taken voluntary registration to apply for cancellation in case such person wishes to opt-out and also gives power to the proper officer to cancel on his own motion. This facility was not available earlier as section 29 carved out an exception for such persons who had taken voluntary registration.
- Section 30 of CGST Act 2017
By virtue of section 30(1) any person whose registration is cancelled by the proper officer on his own motion may apply for revocation of cancellation of such registration within 30 days of service of cancellation order.
This time limit can now be further extended on sufficient cause being shown, and for reasons to be recorded in writing, by
- Additional Commissioner or the Joint Commissioner - for a period not exceeding 30 days;
- Commissioner for a further period not exceeding 30 days, beyond (a).
This amendment would be effective from a future notified date.
Our Comments: Earlier the taxpayers were allowed a time-limit of 30 days to apply for revocation of the cancellation of registration. With the amendment, this time limit is further extendable to another 60 days on sufficient cause and reasons recorded in writing. The amendment provides that the proviso to section 30(1) is substituted however there was no proviso earlier and hence this seems to be a drafting error.
- Power to Specify the category of service or supplies for which tax invoice shall be issued
-Section 31of CGST Act, 2017.
This amendment provides power to the Government, on the recommendations of the Council, to specify a category of services or supplies in respect of which a tax invoice shall be issued, within such time and such manner as may be prescribed.
This amendment would be effective from a future notified date.
Our Comments: The existing provision only allows the Government to specify supplies in respect of which
- any other document can be issued which would be deemed as tax invoice, or
- no tax invoice may be issued. However, no provision allowed to notify categories of supplies in respect of which it can prescribe issuance of an invoice.
The above amendment will enable the Government to notify the category of services/ supplies where issuance of a tax invoice can be mandated within such time and manner as may be prescribed.
– Section 51 of CGST Act 2017
The provision relating to TDS under GST has been amended to provide that the TDS certificate will have to be issued in the form and manner as may be prescribed. Further, the late fee applicable for non-issuance of certificate by the deductor has been removed.
This amendment would be effective from a future notified date.
Our Comments: The late fee of Rs. 200 per day on the deductor for non-furnishing of the TDS certificate to the deductee has been removed.
- Section 109 of CGST Act 2017
The State Governments were required to notify an area bench for appellate Tribunal. However, an exception to this was carved out earlier for the State of Jammu and Kashmir, which has now been removed.
This amendment would be effective from a future notified date.
Our Comments: As a result of the above amendment Jammu and Kashmir shall be able to constitute its own Bench of Appellate Tribunal.
- Section 122, 132 of CGST Act 2017
Section122 - Any person who retains the benefit and at whose order or instance, the following transactions are undertaken would also be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.
- Supply of any goods or services or both without the issue of any invoice or issue of an incorrect or false invoice;
- Issuing any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder;
- Taking or utilising input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;
- Taking or distributing input tax credit in contravention of section 20 (Input service distributor), or the rules made thereunder;
Amendment to section 132–The punishment of imprisonment mentioned in section 132 would also extend to the person who causes to commit and retain the benefits arising out of any of the offences mentioned u/s 132(1).
This amendment would be effective from a future notified date.
Our Comments: The intention behind this amendment is to also penalise/ punish (including the person who has contravened), the persons who have benefited from the specified contravention and at whose instance the specified contravention is undertaken.
Earlier the penalty/punishment was only for the person who committed such offence while now this is being extended to the other person who is also involved in such activity.
However, it is to be noted that collusion and benefit from contravention are a necessity to attract these provisions and it cannot be applied to cases where there has been a genuine error or mistake or omission.
Further, the offence of fraudulent availment of credit without invoice or bill would now be cognizable and non-bailable.
- Section 140 of CGST Act 2017.
The provisions relating to transitional credit u/s 140 are amended w.e.f. 1st Jul ‘17 to enable prescription of the time and manner in which the transition credit eligible under such provision can be taken.
This amendment would be effective from a future notified date.
Our Comments: The above amendments are made to nullify the effect of the judgment given in the case of Siddhartha Enterprises by the Hon’ble Gujrat High court wherein it was held that the Rules that prescribe the time limit to avail the transitional credit cannot override the Act.
- Section 168 of CGST Act 2017
Section 168 of the CGST Act has been amended to enable the Commissioner to issue instructions or directions relating to the expense in case of special audit u/s 66 and extension of a time limit in the case of inputs and capital goods sent for job work u/s 143, without requiring the Board approval.
Our Comments: This would enable the Commissioner to issue directions for the above-mentioned purposes without having to approach the Board for approval.
-Section 172 of CGST Act 2017.
As per section 172, the removal of difficulty orders (RoD) can be issued only up to 3 years from the implementation of GST i.e. up to 30.06.2020. This has been extended to another 2 years whereby the RoDs can be issued up to 30.06.2022.
This amendment would be effective from a future notified date.
Our Comments: This would be a welcome move for the reason that the GST law has not stabilised and hence any amendments required or any extensions required can be done by these RoDs which will then be placed before each House of the Parliament. A similar amendment has been done in the IGST Act and the UTGST Acts.
-Schedule II to CGST Act 2017.
Clause 4 of Schedule II which provided that transfer of business asset would be treated as goods or services also included transfers where no consideration was involved. However, the same has now been removed by w.e.f. 01-Jul-2017. Now clause 4 of Schedule II only includes a transfer of business assets done for a consideration.
This amendment would be effective from a future notified date.
Our Comments: This was a defect where the levy failed as there was no consideration involved however Schedule II was deeming it to be a supply till 31.01.2019. However, this defect has been corrected now.
-Schedule 9(1) to CGST Act 2017 r/w Notifications
The Government has provided a retrospective amendment on the supply of fishmeal (covered by heading 2301) during the period 01-July-2017 to 30-Sep-2019 (both days inclusive).
Further, reduced rate of 12% has been prescribed retrospectively in respect of the supply of pulley, wheels and other parts (falling under 8483) and used as parts of agricultural machinery (falling under 8432, 8433 and 8436), during the period 01-July-2017 to 31-Dec-2018(both days inclusive).
However, under both these benefits, the refund of tax which has already been collected would not be available.
This amendment would be effective from the date of passing of the bill and assent of the President.
Our Comments: This is a welcome amendment which has provided relief to the ones who has not paid the tax then.
-Schedule 54(3)(ii) to CGST Act 2017
The Government has retrospectively restricted the supplier of tobacco products from claiming refund under inverted duty structure w.e.f. 01-Jul-2017.
This amendment would be effective from the date of passing of the bill and assent of the President.
Our Comments: This would increase the cost of manufacture as there would be ITC accumulation which though lying in the e-credit ledger would not be practically fully utilised with output turnover unless there are other supplies under the same registration.
All retrospective amendment which leads to a benefit being denied may see the challenge at the Courts.KEY CUSTOMS NON-TARIFF CHANGES
In section 11 of the Customs Act, 1962 (hereinafter referred to as the Customs Act), in sub-section (2), in clause (f), for the words “gold or silver”, the words “gold, silver or any other goods” shall be substituted
Our Comments: Prior to the amendment the prohibition of uncontrolled import or export of goods to prevent injury to the economy of the country was restricted only to gold or silver by the above amendment, such powers have extended to “any other goods”.
In section 28 of the Customs Act, for Explanation4, the following Explanation shall be substituted and shall be deemed to have been substituted with effect from the 29th day of March 2018, namely: –– “Explanation 4. —
For the removal of doubts, it is hereby declared that notwithstanding anything to the contrary contained in any judgment, decree or order of the Appellate Tribunal or any Court or in any other provision of this Act or the rules or regulations made thereunder, or in any other law for the time being in force, in cases where notice has been issued for non-levy, short-levy, non-payment, short-payment or erroneous refund, prior to the 29th day of March 2018, being the date of commencement of the Finance Act, 2018, such notice shall continue to be governed by the provisions of section 28 as it stood immediately before such date.”
Our Comments: Prior to the amendment the explanation provided the time limit of governance of the notices issued prior to Finance Bill 2018 till the date of receipt of assent from the president. By this retrospective amendment, they have inserted the certain date of receipt of assent from President i.e. 29th March 2018 as the cut off date.
In section 28AAA of the Customs Act, in sub-section (1), ––
(a) for the words “by such person”, the words “or any other law, or any scheme of the Central Government, for the time being in force, by such person” shall be substituted;
(b) after the words “the rules”, the words “or regulations” shall be inserted;
(c) in Explanation 1, for the words “with respect to”, the words, figures and letter “or duty credit issued under section 51B, with respect to” shall be substituted.
Our Comments: Prior to the amendment the recovery power was limited only to the instruments which means i.e. Scrips, authorisation or licence or certificate or such other document issued under FT(D&R) Act or customs Act. By virtue of this amendment, the meaning of term “instrument” has been extended to include duty credit issued under the newly inserted section 51B[1] of Customs Act, 1962and powers has extended to initiate recovery proceedings on instruments obtained under any other law or any scheme of the central government for time being in force and utilized under provisions of this act or rules or regulations made or notification issued thereunder.
A new chapter VAA (a new section 28DA) is being incorporated in the Customs Act, 1962 to provide enabling provision for administering the preferential tariff treatment regime under trade agreements and to specifically provide for certain obligations on the importer and prescribed for time-bound verification from exporting country in case of doubt.
Our Comments: Hon’ble Finance Minister Smt. Nirmala Sitharaman has pronounced” It has been observed that imports under Free Trade Agreements (FTAs) are on the rise. Undue claims of FTA benefits have posed threat to a domestic industry. Such imports require stringent checks. In this context, suitable provisions are being incorporated in the Customs Act. In the coming months, we shall review Rules of Origin requirements, particularly for certain sensitive items, so as ensure that FTAs are aligned to the conscious direction of our policy”.
By virtue of this amendment a new chapter VA “ADMINISTRATIONOF RULES OF ORIGIN UNDER TRADE AGREEMENT” has been inserted in order to provide the procedure regarding the claim of preferential rate of duty on goods imported under a trade agreement entered between the Government of India and the Government of a foreign country or territory or economic union.
In Chapter VIIA of the Customs Act, in the heading, after the word “LEDGER”, the words “AND ELECTRONIC DUTY CREDIT LEDGER” shall be inserted.
Our Comments: Chapter VIIA discusses about the amount available in the electronic cash ledger which may be used for making any payment towards duty, interest, penalty, fees or any other sum payable under the provisions of this Act or under the Customs Tariff Act, 1975 or under any other law. Prior to the amendment the payable was only through electronic cash ledger by virtue of this amendment read with newly inserted section 51B of Customs Act, the payment facility has been extended through electronic duty credit ledger also.
Our Comments: A new section 51B has been inserted for enabling the law to issue duty credit in lieu of remission of duty tax/or levy and to provide any financial benefit subject to conditions and restrictions as may be prescribed. Further it provides the manner of maintaining in a customs automated system in the form of electronic credit ledger of the person to whom it is issued or to whom it is been transferred towards making payment of duties under customs act and customs tariff act in such manner subject conditions and restrictions as may be prescribed.
In section 111 of the Customs Act, after clause (p), the following clause shall be inserted, namely: –
“(q) any goods imported on a claim of a preferential rate of duty which contravenes any provision of Chapter VAA or any rule made thereunder.".
Our Comments: By virtue of this amendment any contravention made under newly inserted section 28DA Procedure regarding a claim of a preferential rate of duty would make such improperly imported goods liable for confiscation u/s 111 (q) of Customs Act 1962 under the category of smuggling.
In section 156 of the Customs Act, in sub-section (2), after clause (h), the following clause shall be inserted, namely: ––
“(i) the form, time limit, manner, circumstances, conditions, restrictions and such other matters for carrying out the provisions of Chapter VAA”.
Our Comments: The inserted provision enables the Government to make rules in relation to the procedure regarding a claim of a preferential rate of duty.
In section 157 of the Customs Act, in sub-section (2), after clause (j), the following clause shall be inserted, namely: –
“(ja) the manner of maintaining electronic duty credit ledger, making payment from such ledger, transfer of duty credit from the ledger of one person to the ledger of another and the conditions, restrictions and time limit relating thereto;”.
Our Comments: The inserted provision enables the customs act to make regulations regarding the manner of maintenance and utilization conditions for electronic duty credit ledger.
By virtue of section 139 of Finance Bill 2020, the Government has proposed to impose Health Cess at the rate of 5% is proposed to be imposed on the import of medical devices.
Our Comments: This Health Cess shall be a duty of Customs. Health Cess shall not apply to medical devices which are exempt from BCD. Further, inputs/parts used in the manufacture of medical devices shall also be exempt from Health Cess. The proceeds of Health Cess shall be used for financing the health infrastructure and services.
Section 8B of the Customs Tariff Act, 1975, which provided for the imposition of safeguard duty as a trade remedy against a surge in imports of a commodity
Our Comments: It is being amended to make provisions for the application of other safeguard measures such as Tariff Rate Quota and other safeguard measures as the Central Government may deem necessary to protect the domestic industry from injury due to significant surge in imports.
In the Budget speech the Hon’ble finance minister has proposed to provide the following additional benefits for exporters:
- To digitally refund to exporters, duties and taxes levied at the Central, State and local levels, such as electricity duties and VAT on fuel used for transportation, which are not getting exempted or refunded under any other existing mechanism.
- To achieve higher export credit disbursement, a new scheme, NIRVIK is being launched, which provides for higher insurance coverage, reduction in premium for small exporters and simplified procedure for claim settlements.
Our Comments: The above benefits are being part of the budget speech. However, there are no suitable provisions inserted in Finance Bill 2020
The Government have to notify the Foreign Trade Policy for the upcoming five years, it is expected that the aforementioned benefits may form part of the policy.
Changes are being made in the Rules to strengthen the anti-circumvention measures by making them more comprehensive and wider in scope to take care of all types of circumventions of antidumping duty in line with best international practice. Certain other changes are being made in these Rules for bringing clarity in the scope of these rules.
At present, there is no provision for investigation in case of circumvention of countervailing duties. A provision is being incorporated in the Countervailing Duty Rules to enable investigation into the case of circumvention of countervailing duty for enabling the imposition of such duty.
KEY CHANGES IN CUSTOMS RATE AND CESS
|
S. No. |
Notification No. |
Description |
|
1.
|
01/2020-Customs, dated 2nd February 2020 |
Seeks to further amend notification No. 50/2017-Customs dated 30th June 2017 so as to prescribe effective rate of Basic Customs Duty (BCD) |
|
2.
|
02/2020-Customs, dated 2nd February 2020 |
Seeks to further amend notification No. 57/2017-Customs, dated the 30th June 2017 so as to change the applicable BCD rate on specified parts of Cellular Mobile Phones. |
|
3.
|
03/2020-Customs, dated 2nd February 2020 |
Seeks to further amend notification No. 19/2019-Customs dated the 6th July 2019 so as to extend the exemption from BCD and IGST on specified military equipment, if imported by DPSUs and PSUs for the defence forces. |
|
4.
|
04/2020-Customs, dated 2nd February 2020 |
Seeks to further amend notification No. 148/1994-Customs dated the 13th July 1994 to exempt wool, woollen fabrics and apparels received as gifts by the Indian Red Cross Society. |
|
5.
|
05/2020-Customs, dated 2nd February 2020 |
Seeks to amend notification No. 25/99-Customs dated 28th February 1999 so as to withdraw BCD exemption on Gold used in the manufacture of semiconductor devices or light-emitting diode and to provide an exemption to specified parts for use in the manufacture of fuses and connectors. |
|
6.
|
06/2020-Customs, dated 2nd February 2020 |
Seeks to further amend notification No. 24/2005-Customs, dated the 1st March 2005 so as to exclude copper and articles thereof from the exemption provided to raw materials use for manufacturing of ITA goods specified therein the notification. |
|
7.
|
07/2020-Customs, dated 2nd February 2020 |
Seeks to further amend notification No. 25/2005-Customs, dated the 1st March 2005 so as to exclude copper and articles thereof from the exemption provided to raw materials use for manufacturing of ITA goods specified therein the notification. |
|
8 |
10/2020-Customs, dated 2nd February 2020 |
Seeks to further amend notifications mentioned in the Column (2) of the Table of the notification No. 10/2020-Customs, dated the 2nd February 2020 so as to align the notification mentioned in Column (2) with the new tariff lines created as per Finance Bill, 2020. |
|
9
|
11/2020-Customs, dated 2nd February 2020 |
Seeks to further amend notification No. 82/2017-Customs dated the 27th October 2017 so as to omit a redundant entry at S. No. 31A. |
|
10
|
12/2020-Customs, dated 2nd February 2020 |
Seeks to rescind certain customs notifications which have become redundant or entries in these notifications are being merged with other similar notifications granting exemptions. |
Our Comments:
With effect from 02/02/2020 the rate of applicable customs duty for notified goods[2] has been amended as follows:
|
Sl. No |
Category of goods |
Specific items |
Rate of Duty |
|
|
From |
To |
|||
|
1. |
Household goods and appliances |
Tableware and kitchenware of porcelain or china, ceramic, clay, iron, steel, copper and aluminium, glassware, padlocks, brooms, hand-sieves, combs, vacuum flasks, etc. |
10%/ 15% |
20% |
|
2. |
Electrical Appliances |
Fans, food grinders/mixers, shavers and hair-removing appliances, water heaters, hair/hand drying apparatus, ovens, cookers, toasters, coffee/ tea makers, insect repellents, heaters, irons, etc. |
10% |
20% |
|
3. |
Footwear |
|
25% 15% |
35% 20% |
|
4. |
Furniture goods |
Seats, articles of bedding including mattresses, lamps, lighting, illuminated signs, and other articles of furniture |
20% |
25% |
|
5. |
Stationery items |
Filing cabinets, paper trays, binders, clips, staples, sign- plates, nameplates, numbers and symbols etc. made from base metal |
10% |
20% |
|
6. |
Toys |
Tricycles, scooters, scale models, dolls, etc. |
20% |
60% |
|
7. |
Machinery |
a. Specified goods used in high voltage power transmission project |
5% |
7.5% |
|
b. Railway carriage fans |
7.5% |
10% |
||
|
c. Compressors of refrigerators and air conditioners |
10% |
12.5% |
||
|
d. Commercial freezers |
7.5% |
15% |
||
|
e. Welding and plasma cutting machine |
7.5% |
10% |
||
|
f. Rotary tillers/weeder |
2.5% |
7.5% |
||
|
8. |
Other miscellaneous items |
ornaments, photograph, frames, mirrors etc. of base metal. |
10% |
20% |
|
a. |
Changes in customs duty under Phased Manufacturing Programme for Electric Vehicles |
Rate of Duty |
||
|
From |
To |
|||
|
1. |
Completely Built Units of Bus and Trucks (with effect from 01.04.2020) |
25% |
40% |
|
|
2. |
Semi Knocked Down (SKD) units of bus, trucks and two-wheelers (with effect from 01.04.2020) |
15% |
25% |
|
|
3. |
Semi Knocked Down (SKD) units of passenger vehicles and three-wheelers (with an effect from 01.04.2020) |
15% |
30% |
|
|
4. |
Completely Knocked Down (CKD) units of passenger vehicles, three-wheelers, two-wheelers, bus and trucks (with effect from 01.04.2020) | |||