Union Budget 2019 - H&A Update

06-07-2019 Hiregange Team

 GOODS AND SERVICES TAX ACT 2017

1.     Amendment for Composition scheme 

– Section 10 of CGST Act 2017

  1. An alternative composition scheme for payment of tax at 6% is provided for supplier of services or mixed suppliers (not eligible for the earlier composition scheme) having an annual turnover in preceding FY upto Rs 50 lakhs. Following are the points to be noted 

    1. To avail this scheme such persons 

      • Do not supply of goods or services which are leviable to tax like liquor, petrol, diesel etc.

      • Do not make any inter-State outward supplies;

      • Do not supply through an electronic commerce operator who is required to collect tax at source;

      • Is not be a manufacturer notified goods or is not a supplier of notified services and

      • Is not be a casual taxable person or a non-resident taxable person

      • Do not collect any tax from the recipient of supply and also not entitled to avail ITC.

    2. Where more than one registered person having same PAN shall opt for all registration under the same exemption

  2. Casual Taxable Person and Non-Resident Taxable Person is not eligible for the composition scheme. 

  3. Further, explanation is being added to section 10 to clarify that: 

    1. For computing the aggregate turnover to determine eligibility for the composition scheme, interest or discount on deposits, loans or advances would not be taken into account; and 

    2. For payment of tax, the following values will not be considered –

      • interest or discount on deposits, loans and advances;

      • Value of the first supplies from 1st of April till the date when the taxpayer becomes liable for registration shall not be taken into account

H&A Comments:

  1. Person supplying services of the value not exceeding 10% of the turnover in a state/ Union territory in the preceding FY or 10 lakh whichever is higher could opt for composition scheme. Amendment has been proposed to exclude the income in the nature of interest or discount by way of extending deposits, loans etc. for computing such service turnover.

  2. Earlier, there was no specific provision in the Act for restricting casual taxable person and non-resident taxable person to opt for composition scheme. However, Rule 5 of CGST Rule provided for the same. Now the provision has been inserted in the Act itself.

  3. The persons having turnover up to 50 Lakhs may opt for payment of tax at the rate of 6% notified under notification.02/2019 dated 7th March, 2019 effective from 1st April 2019 is given legal sanctity by making corresponding provision in the Act.

 

2.     Higher threshold exemption for registration 

- Section 22(3) of CGST Act 2017 Higher threshold exemption limit for registration under GST Act from Rs. 20 lakhs to such amount not exceeding Rs. 40 lakhs in case of supplier who is engaged in exclusive supply of goods and also to the persons having interest earned from extending deposits, loans or advances along with supply of goods.

H&A Comments:

  1. This was the welcome benefit provided for the small tax payers supplying only goods including interest provided through notification.10/2019 dated 7th March, 2019 effective from 1st April 2019 which has been proposed to amendment in the Act itself. The exemption also has been provided to the persons having exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.

  2. Further, restriction for claiming exemption had been provided under notification stating persons required to take compulsory registration under section 24 of the said Act and persons engaged in making supplies of the specified goods. Such restriction has not been provided under the proposed amendment to act which may be prescribed under the notification issued at the later date.

3.     Aadhaar Authentication mandatory 

- Section 25(6A) of CGST Act 2017

  1. Aadhaar authentication has been mandatory for taxpayers and manner of authentication would be prescribed.

  2. For person other than individual, Aadhaar authentication shall be undergone of the Karta, Managing Director, whole time Director, such number of partners, Members of Managing Committee of Association, Board of Trustees, authorised representative, authorised signatory and such other class of persons

  3. Following are the gist of proposed provisions of the Act

    1. Following are the ways provided prescribed for Aadhaar Authentication  

    • undergo authentication through Aadhaar

    • furnish proof of possession of Aadhaar number

    • if an Aadhaar number is not assigned to the registered person, such person shall be offered alternate and viable means of identification

  1. In case of failure to make Aadhaar Authentication in the above prescribed ways then for the registration allocated shall be deemed to be invalid and prosecution provisions shall apply as if such person does not have registration. iii. The expression “Aadhaar number” shall have the same meaning as assigned to it in section 2(a) of the Aadhaar (Targeted Delivery of Financial and Other

Subsidies, Benefits and Services) Act, 2016 iv. Government on recommendation of Council, may recommend person or class of person to whom above provision shall not apply. 

H&A Comments: 

Over the period of time, Aadhaar Authorisation has been mandatory to all the Act passed by the Government. It has been also proposed to be inserted in GST law for Aadhaar authentication for registration. In case the Aadhar authentication has not been made by the ways provided then 

  1. For registered person, registration shall be deemed to be invalid and even prosecution provisions shall be applied. 

  2. For new registration, registration shall not be completed. 

4.     Payment method disclosure on invoice 

-  Section 31A of CGST Act 2017. A new section 31A is being inserted in the CGST Act to provide to the specified suppliers of goods and services to mandatorily give the option of specified modes of electronic payment in the invoice to their recipients.

H&A Comments:

As the government’s motive of moving towards the cashless economy, a new section 31A has been inserted. The government may specify the class of registered person who shall provide the prescribed modes of payment in the invoice which will ensure that such persons receive through electronic modes only.

5.     Proposition of New Returns 

- Section 39 (1), (2) and (7) of CGST Act 2017 Section 39 of the CGST Act is being amended so as to allow –

  • The composition taxpayers to furnish annual return along with quarterly payment of taxes; 

  • Other specified taxpayers may be given the option for furnishing quarterly returns or monthly returns and payment of taxes under the proposed new return system.

H&A Comments: 

In place of current system of filing returns i.e. GSTR-1 and GSTR-3B, in order to ease of doing business and to reduce the compliance burden to the assesses, government proposed to bring only one return per month/quarter along with annual return. The proposed returns will be rolled out from Oct 2019 phase wise and from Jan 2020 will be implemented fully for the all the tax payers.

6. Empowerment of power to Commissioner to extend time limit of furnishing Returns 

Section 44(1), Section 52(4) & (5) and Section 168 of CGST Act 2017.

  1. Commissioner has been empowered to extend the due date for furnishing of following forms which was previously extended by special order (Removal of Difficulty order) issued by Government

    1. Annual return (FORM GSTR-9/9A) 

    2. Reconciliation statement (FORM GSTR-9C).

    3. Monthly (GSTR 8) and annual statement (GSTR 9B to be notified) to be furnished by person collecting tax at source. 

  2. Commissioner or Joint Secretary shall exercise the powers specified in the said sections with the approval of the Board

H&A Comments: 

Earlier, due date of furnishing all the above-mentioned forms could be extended only through Removal of Difficulty order (special order) issued by Government in exercise of powers under Section 172. Amendment has been proposed to empower the commissioner to extend the due date by issuing notification.

7. Transfer of cash balance of particular head to other head

- Section 49(10) & (11) & Section 53A of CGST Act 2017 and Section 17 of IGST Act 2017.

  1. Any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger can be transferred to the electronic cash ledger for integrated tax, central tax, State tax or Union territory tax or cess in FORM GST PMT-09. The date from which such facility would be available would be notified subsequently. The Form PMT-09 has been notified.

  2. Once the taxes are transferred from one account to other settlement between Centre and States shall be made.

H&A Comments: 

This is a welcome facility which will enable the taxpayers to consider the cash ledger as one account whereby deposits can be made in the electronic cash ledger any head i.e. IGST, CGST, SGST, Cess or any other head, which can then be used to pay either IGST, CGST, SGST,UTGST or Cess. However, penalties and interests cannot be paid from the already existing cash balances under other heads. Such facility had been provided under notification 31/2019 dated 28th June 2019 which has been inserted in the law itself. Settlement of taxes between Centre and States consequent to transfer of taxes from one account to other has also been provided in the law.

8. Interest delayed payment of taxes on net cash tax liability 

- Section 50(1) of CGST Act 2017. New proviso in sub-sections (1) is being inserted in section 50 of the CGST Act so as to provide for charging interest for delayed payment of tax on only the net cash tax liability, except in those cases where returns are filed subsequent to initiation of any proceedings under section 73 or 74 of the CGST Act.

H&A Comments: 

Though the concept of levying interest on net liability of tax was there under the erstwhile tax regime. However, under GST interest has to be discharged on the gross liability. After various cases filed on the same now government proposed to levy interest on the net liability of cash payment after adjusting the input tax credit. There is no clarity in the Act as to the applicability of the amendment whether prospective or retrospective.  It would be better if Government clarify that the amendment is retrospective so that the intent of amendment could be achieved w.e.f. implementation of GST.

9. Empowerment of CG to disburse the refund of State taxes 

- Section 54(8A) of CGST Act. New sub-section (8A) is being inserted in section 54 of the CGST Act so as to provide that the Central Government (CG) may disburse refund amount to the taxpayers in respect of refund of State taxes as well.

H&A Comments: 

Earlier there was no power to the Central Government to disburse the refund amount to the tax payers in respect of refund of State taxes. However, the government has proposed to give power to the Central Government to disburse the refund amount of State taxes. This has reduced the complications of requesting state government authorities once the order has been passed by the Central Government. Complementary amendment will be made in all the state legislatures as well.

10. Exclusion of the ‘National Appellate Authority’ for Advance ruling as

Adjudicating Authority 

- Section 2(4) of CGST Act 2017 The definition of “adjudicating authority” in clause (4) of section 2 of the CGST Act is being amended so as to exclude “the National Appellate Authority for Advance Ruling” (which is being created by various amendments in Chapter XVII of the CGST Act) from the definition of “adjudicating authority”.

H&A Comments: 

The National Appellate Authority for Advance Ruling has been defined as Adjudicating Authority.

11. Amendment to definition under Advance Ruling Section

- Section 95 of CGST Act 2017. 

  1. Advance ruling definition has been amended to include the decision of National Appellate Authority for Advance Ruling to applicant on the matters specified in Section 101C.

  2. “National Appellate Authority for Advance Ruling” has been defined an Authority known as the National Appellate Authority for Advance Ruling for hearing appeals made under section 101B

H&A Comments: 

Amendment to Advance ruling definition and insertion of definition of National Appellate Authority for Advance Ruling has been provided to bring constitute the National Appellate Authority for Advance Ruling.

12. Provisions for National Appellate Authority for Advance Ruling 

- Section 101A, 101B and 101C of CGST Act 2017.

  1. Where ruling of Appellate Authority of Advance Ruling of two or more state or union territories are conflicting, officer from the state in which advance rulings have been given who are aggrieved by such advance ruling, may prefer an appeal to National Appellate Authority within 30days or extended period from the date of communication of the last conflicting ruling

  2. However, Commissioner may file the appeal within 90days or extended period from the date of communication of the last conflicting ruling sought to be appealed.

  3. Forms and fees to be submitted to prefer the appeal may be prescribed under notification issued at later date.

  4. Opportunity to be heard to both the parties of appeal shall be given.

  5. Constitution, qualification, appointment, tenure, conditions of services of the National Appellate Authority for Advance Ruling (NAA) has been prescribed; to provide for procedures to be followed for hearing appeals against conflicting advance rulings pronounced on the same question by the Appellate Authorities of two or more States or Union territories in case of distinct persons; and to provide that the National Appellate Authority shall pass order within a period of 90 days from the date of filing of the appeal respectively

  6. Following would be the members of the NAA

Member

Qualification

Appointed by

Tenure

President

has been a Judge of the Supreme Court or is or has been the Chief Justice of a High Court, or is or has been a Judge of a High Court for a period not less than five years

Government after consultation with the Chief Justice of India

3years upto 45years of age.

 

Technical

Member

(Centre)

is or has been a member of Indian Revenue (Customs and Central Excise) Service, Group A, and has completed at least fifteen years of service in Group A

Government on the recommendations of a Selection Committee

5 years upto 65 years of age

Technical

Member

(State)

is or has been an officer of the State Government not below the rank of

Additional Commissioner of VAT or the Additional Commissioner of State tax with at least 3 years of experience in the administration of an existing law or the State Goods and Services Tax Act or in the field of finance and taxation

Government on the recommendations of a Selection Committee

5 years upto 65 years of age

 

  1. Following are the points relating to vacancy, salary and allowance and resignation of

President and Member to be noted – 

  1. In case of vacancy in office of president by reason of his death, resignation or otherwise, the senior most Member shall act as the President until the appointment of new President.

  2. Where the President is unable to discharge his functions owing to absence, illness or any other cause, the senior most Member shall act as the President until the existing President resumes the office.

  3. No appointment of the Members shall be invalid merely by the reason of any vacancy or defect in the constitution of the Selection Committee.

  4. Before appointing any person as the President or Members, the Government shall satisfy itself that such person does not have any financial or other interests which are likely to prejudicially affect his functions.

  5. The salary, allowances and other terms and conditions of service of the President and the Members shall be prescribed.

  6. Resignation by both President and any Member shall be provided notice in writing under his hand addressed to the Government, resign from his office. From the date of notice provided, the President or Member shall continue to hold office until the expiry of 3months from the date of receipt of such notice by the Government, or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest.

  7. Removal of following President or Member by the Government may, after consultation with the Chief Justice of India and the enquiry of Judge of Supreme court nominated by the Chief Justice of India. Such persons shall be suspended from the office 

    • been adjudged an insolvent; or

    • been convicted of an offence which, in the opinion of such Government involves moral turpitude; or

    • become physically or mentally incapable of acting as such President or Member; or

    • acquired such financial or other interest as is likely to affect prejudicially his functions as such President or Member (opportunity of being heard to be given); or

    • so abused his position as to render his continuance in office prejudicial to the public interest (opportunity of being heard to be given):

  8. Any order passed by it shall be amended so as to rectify any error apparent on the face of the record, within a period of 6 months from the date of the order, except under certain specified circumstances.

  9. The advance ruling pronounced by the National Appellate Authority shall be binding, unless there is a change in law or facts, on the applicants, being distinct person and all registered persons having the same Permanent Account Number and on the concerned officers or the jurisdictional officers in respect of the said applicants and the registered persons having the same Permanent Account Number.

  10. Advance ruling pronounced shall be void where the ruling has been obtained by fraud or suppression of material facts or misrepresentation of facts.

  11. NAA shall have all the powers of a civil court under the Code of Civil Procedure, 1908 for the purpose of exercising its powers under the Act.

  12. the National Appellate Authority shall have power to regulate its own procedure.

H&A Comments: 

Advance Authority Rulings of one state or union territory are binding on the applicant of that state or union territories and the jurisdictional officer. However, same is not binding on the same person having same PAN being a distinct person as the powers of AAR’s are confined to that state or union territory. Hence, with proposition of constituting National Appellate Authority, the decision given by such authority will be binding on the all the distinct persons under the same PAN and the jurisdictional officers of different state of the distinct persons under the same PAN.

 

13. Empowerment National Anti-profiteering Authority to impose penalty 

- Section 171(2) of CGST Act 2017.

  1. Amended has been proposed in the Act to empower the National Anti-profiteering Authority to impose penalty equivalent to 10% of the profiteered amount where on examination comes to the conclusion that any registered person has profiteered. 

  2. However, no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority.

  3. Expression “profiteered” shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services or both

H&A Comments: 

There was no specific penalty for the non-compliance of the order passed by the National Antiprofiteering Authority and the orders were given only to recovery of amount so profiteered. In order to prevent the so profiteering and to recover the amounts early government has proposed to penalise the non-complaints with amount equivalent to ten per cent of the amount so profiteered. Profiteered amount has also been defined on which penalty has to be paid.

 

14. Exemption from tax for Uranium Ore Concentrate 

(to be notified)

Supplies of “Uranium Ore Concentrate” was exempted from 14th November 2017 wide Notification No. 2/2017-Central Tax (Rate), Integrated Tax (Rate) and Union Territory Tax (Rate) dated the 28th June 2017. The retrospective exemption has been provided for 1st July 2017 to 14th November 2017. No refund shall be made of all such tax which has been collected from the recipient and paid to the government.

H&A Comments:  

Earlier Uranium Ore Concentrate was taxable till 14th November 2017 @ 5% which was subsequently been exempted prospectively. It has been proposed the exempt for the period from 1st July 2017 to 14th November 2017. No refund will be provided for the taxes deposited to the exchequer. However, taxes due which were not paid shall not be questioned.

  

          

SABKA VISHWAS (LEGACY DISPUTE RESOLUTION SCHEME)

2019

1. Background

In order to curb the pending litigations under the erstwhile Indirect Tax Enactments, a dispute resolution scheme namely Sabka Vishwas (Legacy Dispute Resolution Scheme), 2019 (“LDRS” or “the scheme”) has been proposed in Chapter V of the Finance Bill, 2019 (55 of 2019). The scheme offers to grant relief from tax amount, penalty, interest, etc. and immunity from prosecution on account of pending disputes upon payment of the specified tax dues.

The scheme would be applicable from a date to be notified.

2. Important Definitions

Amount                  in

Arrears [Section

120 (c)]

means the amount of duty which is recoverable as arrears of duty under the indirect tax enactment, on account of—

(i) no appeal having been filed by the declarant against an order or an order in appeal before expiry of the period of time for filing appeal; or (ii) an order in appeal relating to the declarant attaining finality; or

(iii) the declarant having filed a return under the indirect tax enactment on or before the 30th day of June, 2019, wherein he has admitted a tax liability but not paid it;

Amount of duty

[Section 120 (d)]

means the amount of central excise duty, the service tax and the cess payable under the indirect tax enactment

Amount payable

[Section 120 (e)]:

means the final amount payable by the declarant as determined by the designated committee and as indicated in the statement issued by it, in order to be eligible for the benefits under this Scheme and shall be calculated as the amount of tax dues less the tax relief 

H&A Comments: It is unknown where the amount finally not determined by the designated committee is challengeable on merits or not, though from the intent of the scheme it appears that the scheme ipso facto fails where the amount determined by DC is challenged.

Audit         [Section

120(g)

Means any scrutiny, verification and checks carried out under the indirect tax enactment, other than an enquiry or investigation, and will commence when a written intimation from the central excise officer regarding conducting of audit is received.

Enquiry                 or

Investigation

[Section 120 (m)]

Means enquiry or investigation under any of the indirect tax enactment, shall include the following actions, namely:—

(i) search of premises;

 

  1. issuance of summons;

  2. requiring the production of accounts, documents or other evidence;

  3. recording of statements;

 

3. Eligibility of the declaration

In terms of Section 124, any person can file the declaration covering the amount payable by him except ineligible declarants.

 

  1. In-eligible declarants: 

In general the scheme is available to all persons except few persons as listed down in Section 124

(1), as follows;

    1. An appeal which was filed and such appeal has been heard finally before 30th June 2019. 

    2. An SCN which was issued before 30th June 2019, of which final hearing has taken place before such date.

    3. Cases where SCN has been issued for recovery of “erroneous refund” or “refund otherwise”

    4. Persons who have been convicted for an offense punishable under indirect tax enactment cannot file declaration with respect to such matter

    5. Persons who have been subjected to enquiry/ investigation/ audit and the amount of duty thereon has not been quantified before 30th June 2019 –  

H&A Comments: 

The language of this exclusion is ambigious in as much as the clause appears to apply qua person rather than qua matter in subject to enquiry/ investigation/ audit – accordingly, disqualifying a person subject to enquiry/ investigation/ audit as on 30th June 2019 to make any disclosure other than quantified amount therein.

    1. persons cannot make voluntary disclosure –  o where they have been subject to enquiry/ investigation/ audit

o where they have filed the return and indicated the tax payable but have not paid it 

H&A Comments: 

Similar to above, the language of this clause is ambiguous in as much as persons who have been subject enquiry/ investigation/ audit won’t be able to make any declaration – on the other hand the intent appears to be disqualify only those matters which have been identified in enquiry/ investigation/ audit or amount that has been indicated in returns but not paid.

    1. Persons who have filed application before Settlement Commission for settlement of case

    2. Declarations with respect to excisable goods set forth in Fourth Schedule of Central Excise Act, 1944 i.e. Tobbacco and Petroleum Products

H&A Comments: 

Many of the restrictions really do not make sense as there is no substantial difference between the cases where the relief is being granted and relief is being restricted. The differences are as minor as hearing of the case happened and not happened, gone for settlement of case on payment of tax not gone. These conditions may be relooked by the committee to grant relief even for such assesses.

 

  1. Amount Payable under Scheme:

The “amount payable” under the scheme shall be “tax dues” less “tax relief”. The manner of computation of tax dues and the cases which can be declared under the scheme are enlisted in Section 122, which as follows:

  1. Appeal stage: Amount of duty being contested in an appeal which has been filed before appellate forum [either by assessee or by the department] and is pending disposal as on 30th June 2019 which is not finally heard before that date.

  2. SCN stage: Amount of duty as stated to be payable in a show cause notice which has been received by the assessee and is pending adjudication as on 30th June 2019 and is not 

      1. Finally heard by the adjudicating authority before 30th June 2019;

      2. No Application is made before the settlement commission for settlement of the case before 30th June 2019. 

  3. Audit/ Enquiry stage: Amount of duty payable which has been quantified also on account of an enquiry or investigation or audit which is pending.

  4. Voluntary disclosure: Any amount which the assessee wishes to declare voluntarily.  

H&A comments: 

In case of amount already declared in returns and remains unpaid will be considered as arrears and there is no need to consider and make it as voluntary disclosure.

  1. Amount in arrears: Any amount which is in arrears against the assessee 

    1. Determination order (OIO) stage: Amount of duty determined under an order in original which is outstanding as on 30th June 2019 and the time-limit to file appeal against such order has elapsed.

    2. Outstanding Order in Appeal: Amount of duty confirmed under an order in appeal which is outstanding as on 30th June 2019 and the appeal has not been filed whether the time-limit to file appeal against such order has elapsed.

    3. Amounts payable declared in returns but not paid.  

    4. Confirmed demands after exhausting of appellate remedy

 

6. Quantification of reliefs in the declaration

Section 123 envisage the relief of taxes & Section 128 provides additionally complete waiver of interest and penalty is also provided along with the tax relief mentioned below. 

Sl

No.

 

Particulars

Duty is up to INR

50 Lakhs

Duty exceeds INR

50 Lakhs

Relief

Payable

 

Relief 

Payable

1

Tax dues at SCN stage

70%

30%

 

50%

50%

2

Tax dues at appeal stage [appeal being pending disposal as on 30th June 2019]

70%

30%

 

50%

50%

3

Tax dues at outstanding OIO/ OIA stage

[where appeal is not filed]

60%

40%

 

40%

60%

4

Tax dues – in arrears otherwise

60%

40%

 

40%

60%

5

Tax dues which have been declared in returns but not paid by the assessee

60%

40%

 

40%

60%

6

Tax dues which are linked to enquiry, investigation or audit – amount being quantified before 30th June 2019

70%

30%

 

50%

50%

7

Tax dues at SCN stage with respect to penalties, late fees – where the amount of duty is Nil or has been paid

100%

0%

 

100%

0%

8

Voluntary Disclosure

0%

100%

 

0%

100%

  

7. Procedure of making declaration

The steps involved in the admission of the declarations are as follows:

Filing of application: In terms of Section 124 (4) a declaration shall be made by the eligible person in electronic form as per rules prescribed in this behalf

Verification by designated committee: An authority constituted as “the designated committee” (DC) shall verify the correctness of the declaration in such manner as may be prescribed.

In case of voluntary disclosure it shall not be verified and declaration is accepted.

                                         Declared dues accepted                      Assessed dues more than accepted

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