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1st Feb 2019

An insight into the GST Amendments Acts, 2018

  On August 29, 2018 the GST Amendment Bills, 2018 received the assent of President of India. The Act provides for more than 40 amendments to the GST Act. These amendments aim to simplify the GST law. These amendments had to come into force in two phases. First category of amendments were done retrosepctively. Second category of amendments had to come from a date to be notified by Govt. Now, Govt. notified the date vide Notification No. 02/2019-Central Tax and Notification No. 01/2019-Integrated Tax as 1st February 2019. Below is the summary of those amendments:

A. Amendments effective retrospectively i.e. 1st July 2017

1. SUPPLY does not include the entries in schedule II

The intent behind the introduction of Schedule II is to determine the activity as goods or service. But Sec. 7(1) of  CGST act i.e. Definition of Supply, gives the reference to schedule II, which had widened the scope of ‘Supply. This has been studied as the activities stated in schedule II is ‘Supply. The correction has been made by omitting the reference to Schedule II from the definition of Supply. Now, the schedule II can be read independently u/s 7(1A) of the said act, just to determine the activity as supply of goods or supply of services.

2. Non-allowability of cess credit in TRAN-1

Sec 140(1) of CGST Act, 2017 has been amended for disallowing the credit of Krishi Kalyan Cess or other cess outrightly..

B. Amendments effective w.e.f. 1st February 2019

1. RCM on supply from unregistered person

The provision for levying tax on the supply from unregistered person u/s 9(4) of CGST Act, 2017 & 5(4) of IGST Act, 2017 has already been deferred till September 30, 2019. This amendment provides that the provisions of reverse charge shall be applicable only in case of notified registered persons in respect of specified goods or services only.

2. Threshold limit for Composition Scheme increased to Rs. 1.50 crores

As per existing Section 10 of the CGST Act, the composition scheme can only be opted for by those registered persons whose aggregate turnover in the preceding financial year does not exceed Rs. 1 crore. To cover more entities within the ambit of composition scheme and to extend simple compliance, the threshold limit for Composition Scheme has been extended to Rs. 1.5 crore in the preceding financial year.

3. Composition dealer is allowed to provide services 

Currently, the registered persons engaged in the supply of services (other than restaurant services) are not eligible for the composition scheme. The Amendment Act allows the manufacturers or traders or restaurant owner to opt for the composition scheme if proportion of service (other than restaurant service) during the previous financial year is not more than 10% of total turnover in a state/UT or Rs. 5 lakhs, whichever is higher.

4. Determination of value of exempt supply for reversal of ITC

In précising the determination of value of exempted supply, an explanation has been inserted to sec. 17(5) of CGST Act, 2017 i.e. the expression ‘value of exempt supply shall not include the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said Schedule.

5. Scope of ITC in respect of motor vehicles expanded

As per the existing provisions, the availability of ITC on motor vehicle is very much comprehensive. To broaden the scope & more clarity, the recent amendment now provides that the ITC shall be available in every situation, if the seating capacity of the motor vehicle is 13 or more (including driver). For other vehicles, the ITC shall be available only if these vehicles are used for the specified purposes. Further the ITC in respect of motor vehicle including dumpers, work-trucks, fork-lift trucks and other special purpose motor vehicles, used for transportation of goods shall be allowed in all cases.

6. ITC on Vessels or Aircraft

Earlier, there is no special entry for availment of ITC on vessels or aircraft. It is inclusive in the word ‘other conveyance. A separate entry has been inserted stating that the ITC on vessels & aircraft shall not be available. But it becomes eligible when it is used for further supply or transportation of passengers or imparting training.

7. No ITC of GST paid on repair and maintenance of motor vehicles 

Earlier, the Act was silent on the allowability of Input Tax Credit of GST paid on insurance, repair and maintenance of motor vehicles. It has now specifically been mentioned in Section 17(5) of the CGST Act that Input tax credit of GST paid on services of insurance, servicing, repair and maintenance of motor vehicles shall not be allowed except in few cases.

8. ITC allowed for food and beverages provided to employees under any law

The ITC in respect of tax paid on food and beverages, health services, travel benefits provided to employees, etc. shall be allowed only if these are provided by the employer under any law.

9. Registration limit increased to Rs. 20 lakhs for 6 specified States

As per Section 22 of the CGST Act, every supplier making taxable supplies of goods or services, from any of the special category States, shall be liable to be registered if his aggregate turnover in a financial year exceeds Rs. 10 lakhs. Now, the Govt. has made the amendment to Section 22 of the CGST Act to increase the threshold exemption limit for registration from Rs. 10 lakhs to Rs. 20 lakhs.

10. Exemption from compulsory GST registration for e-commerce operators who are not required to collect TCS

As per Section 24 of the CGST Act, every e-commerce operator is required to take compulsory GST registration, irrespective of turnover in the preceding financial year. An e-commerce operator, who is required to collect TCS has only liable to take GST registration.

11. Allowing separate registration for SEZ & non-SEZ unit in same state

Earlier the said provision has only being prescribed in the rule 8 of CGST rules, 2017. Now a  proviso to Sec. 24 has been inserted i.e. a separation registration is required by a taxable person having units in both SEZ & non-SEZ area in same state.

12. Concept of business vertical has been removed from GST

As per section 25 of the CGST Act, a person seeking registration shall be granted a single registration in a State or Union territory, except in case of multiple business verticals. This option would not be available to a supplier who has just one vertical but multiple places of business in a State or Union Territory.

To ensure clarity in the registration process the concept of business vertical has been removed from GST. A supplier is now allowed to obtain separate registration for each place of his business in a State or Union territory by substituting proviso to sec. 24(2) of CGST Act, 2017.

13. Temporary suspension of Registration during the tenure of cancellation proceedings

Once a registered person has applied for cancellation of GST registration, the proper officer should temporarily suspend its registration till the procedural formalities for cancellation are completed. This amendment would definitely provide relief to the small taxpayers.

14. Consolidated credit or debit notes can be issued for multiple invoices

As per Section 34 of the CGST Act, a credit or debit note is required to be issued invoice-wise which is quite cumbersome to correlate. The Govt. has now allowed the registered person to issue consolidated/multiple credit or debit note in respect of multiple/single invoices issued in a financial year without linking the same with individual invoices.

15. No Compulsory Audit for Govt.'s dept. if their books are subject to CAG audit

Every registered person shall get his accounts audited by a Chartered Accountant or a Cost Accountant, if his turnover during a financial year exceeds Rs. 2 crore. To avoid the multiple auditing of same books of account, the departments of Central Government or State Governments or local authorities have been exempted from compulsory GST audit, if their books of account are audited by the Comptroller and Auditor-General of India (CAG) or any other auditor under any law.

16. Changes made in the GST Act for new returns approved by GST Council

Necessary amendments have been made via insertion of section 43A in respect of GST returns, which are as follows:

  • a) New provisions have been introduced to put reasonable restrictions on new taxpayers from availing of the Input Tax Credit in first 6 months from the date of registration.
  • b) A registered person (buyer) can verify, validate, modify or delete the details of supplies furnished by the suppliers (seller), which has been auto-populated in his return.
  • c) The Input Tax credit shall not be allowed to the buyer if seller (supplier) doesn't furnish the GST returns for the prescribed no. of months.
  • d) In case of default in payment of GST, the supplier and recipient of a supply shall be jointly and severally liable to pay tax and ITC availed.
  • e) Different due dates shall be notified for different class of taxpayer for filing of GST returns. The due dates shall be based on the quantum of turnover of such taxpayers.

17. Changes in cross-utilisation of ITC in line with GST portal

The amendment has been made for utilization of SGST or UTGST credit for payment of Output IGST only if balance of ITC on account of IGST is not available for payment of Output IGST. This amendment has been made to bring the law in sync with the GST portal which restricts the utilization of Input SGST and UTGST towards payment of Integrated GST.

18. Payment for export of services can be received in Indian rupees if permitted by RBI

As per existing provisions, the payment for export of services shall be received in convertible foreign exchange. The exporters contended that the payment of exports should be allowed in the Indian rupees in case of export of services to Nepal and Bhutan. Accordingly, the Govt. has allowed the registered suppliers to receive the payment in respect of export of services in Indian rupees, if permitted by the RBI.

19. Govt. notifies upper limit of pre-deposit for filing of an appeal

As of now, there is no maximum limit on the amount of pre-deposit for filing of an appeal, which adversely impacts the working capital requirement of a taxpayer. The recent amendment provides an upper limit on the pre-deposit, which shall be Rs. 25 Crores and Rs. 50 Crores in addition to the amount of tax, interest, fine, fees & penalty, if admitted, for filing of an appeal before the Appellate Authority and the Appellate Tribunal respectively.

20. Increase in time limit after payment of tax & penalty for Releases for seized goods

Proceedings initiated in respect of seized goods and conveyance shall be deemed to be concluded if tax and penalty are paid within 7 days of seizure by the person transporting the goods or the owner of the goods. The period of 7 days has now been increased to 14 days.

21. Scope of taxability of import of services extended

With the amendment to the CGST act, the import of services would be taxed even if any person other than a taxable person receives the service with or without consideration.

22. New entries in Schedule III of CGST Act, i.e., transactions not deemed as supplies

The Govt. has widened the scope of Schedule III of the CGST Act which provides a list of goods or services which are not treated as supplies as:-

  • a) The transactions which involve movement of goods by a registered person, from one non-taxable territory to another non-taxable territory.
  • b) Supply of goods by endorsement of documents of title to goods after the goods has been dispatched from the port of origin located outside India but before clearance for home consumption has been exempted from levy of IGST.
  • c) Supply of warehoused goods before clearance for home consumption.

23. Service by way of transportation of goods outside India shall be deemed to have place of supply outside India

As per amended provision u/s 12 of IGST Act, 2017, the place of supply of service by way of transportation of goods to a place outside India shall be the place of destination, i.e., outside India. In other words, supply of service of transportation of goods terminates outside India, then place of supply will be out of India, irrespective of location of supplier and recipient of service.

24. No GST on processes done on goods temporarily imported into India which are exported

The Govt. has made the amendment to the Section 13(3)(a) to provide that no GST shall be applicable on any treatment or process done on goods temporarily imported into India which are then exported out of India.