On 22 December 2020, the Central Government has issued Notification No.92/2020-Central Tax to appoint 01 January 2021 as the date Sections 119, 120, 121, 122, 123, 124, 126, 127 and 131 of the Finance Act, 2020 will be applicable. These sections in the Finance Act, 2020 relate to amendments in the provisions of the CGST Act, 2017.
In this article, we will discuss these amendments in the CGST Act, 2017 and its impact on the taxpayers:
|Section of the Finance Act, 2020||Current Provisions of the CGST Act, 2017||Impact on Taxpayers|
|119: In section 10 of the central goods and services tax act, in sub-section (2), in clauses (b), (c) and (d), after the words “of goods”, the words “or services” shall be inserted.||Section 10 discusses conditions applicable for Composition Levy of GST. Sub-section 2 to Section 10 discusses eligibility to opt-out of Composition Levy. These sub-sections read as follows:|
(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) he is not engaged in making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52
|Only taxpayers making a supply of goods were eligible to opt-out of Composition Levy in the erstwhile provisions. This has now been updated to reflect the supply of services. This change helps bring parity between taxpayers engaging in the supply of goods or services.|
|120: In section 16 of the Central Goods and Services Tax Act, in sub-section (4), the words “invoice relating to such” shall be omitted.||Section 16 discusses the eligibility and conditions for taking the input tax credit. As per sub-section 4:|
A registered person shall not be entitled to take the input tax credit in respect of any invoice or debit note for the supply of goods or services or both after the due date of furnishing of the return under section 39 for September following the end of the financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.
|The existing provisions were vague, and the updated language of the sub-section clearly states that invoice or debit note related to a financial year received after 30 September from the end of the financial year or date of filing the annual return, whichever is earlier, is not eligible for input tax credit.|
|121: In section 29 of the Central Goods and Services Tax Act, in sub-section (1), for clause (c), the following clause shall be substituted: “(c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to opt-out of the registration voluntarily made under sub-section (3) of section 25:”.||Section 29 discusses the cancellation or suspension of GST registration. As per sub-section 1(c): the taxable person, other than the person registered under sub-section (3) of section 25, is no longer liable to be registered under section 22 or section 24.||Section 25(3) allowed voluntary GST registration for taxpayers for whom GST registration was not mandatory. However, such taxpayers were not eligible to cancel the GST registration on their own accord. The language of the clause has been revised to bring clarity to such GST registrants.|
|122: In section 30 of the Central Goods and Services Tax Act, in sub-section (1), for the proviso, the following proviso shall be substituted: “Provided that such period may, on sufficient cause being shown, and for reasons to be recorded in writing, be extended,— (a) by the Additional Commissioner or the Joint Commissioner, as the case may be, for a period not exceeding thirty days; (b) by the Commissioner, for a further period not exceeding thirty days, beyond the period specified in clause (a).”||Section 30 discusses the revocation of cancellation of registration. Sub-section 1 allows taxpayers to appeal to the officer who has revoked the taxpayers’ registration within 30 days from the date of service of the cancellation order. The proviso to sub-section 1 read: Provided that the registered person who was served notice under sub-section (2) of section 29 in the manner as provided in clause (c) or clause (d) of sub-section (1) of section 169 and who could not reply to the said notice, thereby resulting in the cancellation of his registration certificate and is hence unable to file an application for revocation of cancellation of registration under sub-section (1) of section 30 of the Act, against such order passed up to 31.03.2019, shall be allowed to file an application for revocation of cancellation of the registration not later than 22.07.2019||The existing proviso was outdated, and taxpayers did not have any provision to appeal to tax officers if 30 days had elapsed. The amendment provides taxpayers with relief to extend the deadline by a maximum of 60 days provided sufficient cause is shown and recorded in writing.|
|123: In section 31 of the Central Goods and Services Tax Act, in sub-section (2), for the proviso, the following proviso shall be substituted: “Provided that the Government may, on the recommendations of the Council, by notification,— (a) specify the categories of services or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed;|
(b) subject to the condition mentioned therein, specify the categories of services in respect of which—
(i) any other document issued in relation to the supply shall be deemed to be a tax invoice; or
(ii) tax invoice may not be issued.”.
|Section 31 discusses the tax invoice. Sub-section 2 requires a registered person supplying taxable services to issue a tax invoice with a prescribed period before or after the provision of service. As per the proviso to sub-section 2: the Government may, on the recommendations of the Council, by notification and subject to such conditions as may be mentioned therein, specify the categories of services in respect of which— |
(a) any other document issued in relation to the supply shall be deemed to be a tax invoice; or
(b) tax invoice may not be issued
|The amendment to the provision provides the Central Government more powers to notify any changes to the Tax Invoice. This is critical as the Government has introduced e-invoicing and other initiatives.|
|124: In section 51 of the Central Goods and Services Tax Act: (a) for sub-section (3), the following sub-section shall be substituted: “(3) A certificate of tax deduction at source shall be issued in such form and in such manner as may be prescribed.”; (b) sub-section (4) shall be omitted.||Section 51 discusses the Tax Deduction at Source. Sub-section 3 states: The deductor shall furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the Government and such other particulars in such manner as may be prescribed.|
Sub-section 4 notes that If any deductor fails to furnish to the deductee the certificate, after deducting the tax at source, within five days of crediting the amount so deducted to the Government, the deductor shall pay, by way of a late fee, a sum of one hundred rupees per day from the day after the expiry of such five days until the failure is rectified, subject to a maximum amount of five thousand rupees.
|The revision of sub-section 3 has given the Central Government powers to specify and revise the TDS certificate format. Sub-section 4 has been removed to reduce the burden of a deadline on taxpayers to furnish the TDS certificate within 5 days of crediting the amount to the Government. This provides some flexibility.|
|126: In section 122 of the Central Goods and Services Tax Act, after sub-section (1), the following sub-section shall be inserted: “(1A) Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.”||Section 122 discusses penalties for certain offences by a taxable person. The following clauses in sub-section 1 of section 122 have been impacted:|
(i) supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;
(ii) issues 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;
(vii) takes or utilises 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;
(ix) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder
|The Central Government has widened the net of the penalty by introducing sub-section 1A. Along with the taxable person, any person who stands to benefit from a transaction as specified in clauses (i), (ii), (vii) and (ix) of Section 122 (1), will be liable for a penalty of an amount equal to the tax evaded or input tax credit availed of or passed on to any other party.|
|127: In section 132 of the Central Goods and Services Tax Act, in sub-section (1),|
(i) for the words “Whoever commits any of the following offences”, the words “Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences’’ shall be substituted;
(ii) for clause (c), the following clause shall be substituted, namely:—
“(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;”;
(iii) in clause (e), the words “, fraudulently avails input tax credit” shall be omitted.
|Section 132 discusses punishment for certain offences for whoever commits offences noted in the section. The relevant clauses under sub-section 1 are:|
(c) avails input tax credit using such invoice or bill referred to in clause (b);
(e) evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d)
|Similar to the addition in Section 122, section 132 widens the net for persons on whom punishment is applicable. Instead of punishing only the person(s) who commit offences, the amendment now includes whoever commits or causes to commit and retain the benefits arising out of the offences noted in section 132.|
The amendments to clauses (c) and (e) to section 132(1) are in similar lines.
|131: In Schedule II to the Central Goods and Services Tax Act, in paragraph 4, the words “whether or not for a consideration,” at both the places where they occur, shall be omitted and shall be deemed to have been omitted with effect from the 1st day of July 2017.||Schedule II discusses activities or transactions to be treated as a supply of goods or supply of services. The relevant portions of Para 4 are:|
Transfer of business assets:
(a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business whether or not for a consideration, such transfer or disposal is a supply of goods by the person;
(b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services;
|The Central Government has retrospectively amended Para 4 (a) and (b) of Schedule II. The existing wording in the schedule was causing ambiguity for taxpayers. For, e.g., If a taxpayer being a sole proprietor is in the business of selling refrigerators and the proprietor uses one of the refrigerators temporarily for 2 weeks – after this retrospective amendment, the supply that is in the form of the personal use of the fridge by the proprietor without any consideration is not taxable.|