Blog Details

The Goods and Services Tax (GST) was implemented in India on July 1, 2017, following the passage of the Goods and Services Tax Act by Parliament on March 29, 2017. The budget 2023 proposes several amendments to the GST Law in the Finance Bill, 2023. Some of the most significant changes are as follows:

• Composition scheme for supply through e-commerce operator

The provision outlined in Section 10 of the Central Goods and Services Tax pertains to the Composition Scheme and stipulates that registered persons who are suppliers of goods or services through an e-commerce operator are not eligible to opt for the composition scheme. However, an amendment has been introduced to Section 10, which permits taxpayers to opt for the Composition Scheme even if they supply goods through e-commerce operators and Tax Collected at Source (TCS) is collected under Section 52. Nevertheless, it should be noted that restrictions regarding the supply of services remain unchanged.

• Conditions for availing ITC

Section 16 has been modified with a new provision, that in case a recipient taxpayer fails to make the payment of the invoice value, inclusive of GST, to their supplier within 180 days of the invoice date, they will be liable to pay interest as calculated under Section 50.

• Reversal of ITC attributable to exempt supply

The Explanation to Section 17(3) has been amended to limit the availment of proportionate ITC on transactions covered by paragraph 8(a) of Schedule III (i.e. High Sea Sales) by including it in the value of exempt supplies. As a result, taxpayers will have to reverse even more ITC.

• Input tax credit for Corporate Social Responsibility (CSR)

Section 17(5) of the Central Goods and Services Tax Act, 2017, is amended to include subclause (fa). According to the new sub-clause (fa), the input tax credit (ITC) will not be available on goods or services or both received by the person for the purpose of fulfilling CSR obligations.

• Persons not liable for GST registration

Section 23 of the Central Goods and Services Tax Act, 2017 contains provisions relating to persons who are not required to obtain GST registration. The aforementioned provisions take effect retroactively on July 1, 2017. The provisions are changed to give section 23 of the Central Goods and Services Tax Act, 2017 precedence over sections 22(1) and 24 of the Central Goods and Services Tax Act, 2017. As a result, a person who is not required to obtain GST registration under section 23 is not required to obtain GST registration even if they are required to pay tax (GST) under RCM (Reverse Charge Mechanism) and fall under compulsory registration, as defined in section 24.

• GST return filing in Form GSTR-1, GSTR- 3B and GSTR-9

Sections 37, 39, 44, and 52 have been amended to restrict taxpayers from filing GSTR-1 (for outward supplies), GSTR-3B (summary returns), GSTR-9 (annual returns), and GSTR-8 (for e-commerce operators) after three years from the due date.

• Refund

The words "excluding the amount of input tax credit provisionally accepted" in section 54 of the Central Goods and Services Tax Act shall be omitted in sub-section (6). Section 54(6) allows for the provisional approval of 90% of ITC refund claims due to zero-rated supply. However, ITC obtained on a provisional basis will not be considered when calculating the 90%. Section 54(6) is appropriately amended because there is no concept of provisional ITC at this time. Earlier section 41 which stood prior to 01.10.2022 contained the words "ITC on provisional basis".

• Interest on delayed Refunds

Section 56 of the Central Goods and Services Tax Act has been amended to substitute the words "from the date immediately after the expiry of sixty days from the date of receipt of application under the said subsection till the date of refund of such tax" with "for the period of delay beyond sixty days from the date of receipt of such application till the date of refund of such tax, to be computed in such manner and subject to such conditions and restrictions as may be prescribed." This amendment to Rule 96(5A) provides that in cases where IGST refund claims are withheld, system-generated RFD-01 will be considered as the date of receipt of the refund application, and interest will be calculated accordingly, with the date of filing the Shipping Bill not taken into account.

• Penalty provisions for e-commerce operator

Section 122 of the Central Goods and Services Tax Act of 2017 has been amended to add subsection (1B), which imposed fine on e-commerce operators for a list of offences, such as-

• permitting an unregistered person to supply products or services through it.

• permitting those who are not qualified to make such an interstate supply to supply products or services through it.

• failing to provide accurate information in GSTR-8 return.

In the event of any of the aforementioned offences, the clause specifies a fine higher of: equivalent to the tax amount involved if the supply was made by a registered person other than the taxpayer under Section 10; or Rs.10,000.

• Decriminalization of certain offences

The following offences have been decriminalised:

• When a person obstructs or prevents an officer from carrying out their duties under the CGST Act,

• When a person tampers with or destroys material evidence or documents, 

• When a person fails to supply information required by the CGST Act or Rules, or supplies false information.

The limits for compounding offences have been reduced to 25% of the tax involved up to a maximum of 100% of the tax involved.

• Sharing of information

The CGST Act now includes a new section 158A that allows businesses to share GST data digitally with consent. It specifies the manner and conditions for sharing information furnished by a registered person on the GST portal with such other systems as may be notified, as declared in- Returns filed under GSTR-1/3B/9, Application for registration, Statement of outward supplies, Generation of an e-invoice or e-way bill, or Any other details, as prescribed.

• Amendment in Schedule – III

Paragraphs 7 and 8 of Schedule III, which were previously inserted by the Finance Act of 2018, now have retroactive effect. High Sea Sales and the sale of warehoused (custom bonded) goods are treated as 'No Supply' from 01.02.2019 onwards. However, there are some litigations pending on the above issue prior to 01.02.2019. To avoid ambiguity, the government has made the above amendments retroactive, effective from July 1, 2017.

• Place of Supply of services where supplier and recipient are in India

Section 12, sub-section (8) of the Integrated Goods and Services Tax Act has been amended to remove a proviso. This clarifies confusion among taxpayers regarding whether IGST or CGST & SGST should be charged on outbound ocean freight when the supplier and recipient are in the same state. The determination of whether a supply is intra-state or inter-state depends on the ‘Place of Supply’, and with the proviso omitted, such transactions will now be considered intra-state supply, and CGST & SGST will be payable.

References:

https://www.indiafilings.com/learn/highlights-of-gst-proposals-in-union-budget-2023/

https://taxguru.in/goods-and-service-tax/impact-analysis-budget-2023-gst-perspective.html