Following are the key changes relating to Goods and services tax –
Decriminalisation of certain offences
The government has been focussing on ease of doing business for a long time and decriminalisation of offences under business laws is an important part of it. The minimum threshold to launch a prosecution under GST law is currently set at INR 1 crore, except for offences relating to the issue of invoices without a supply of goods or services or both. Now, the same limit has been increased to INR 2 crore. The compounding range of taxes is reduced from the present range of 50 to 150 per cent of the tax amount, to the range of 25 to 100 per cent. Section 132 and section 138 of the CGST Act have been amended for this purpose. Offences specified under section 132(1)(g), (j) and (k) of the CGST Act which relates to creating an obstruction or preventing tax officers from discharging their duties, deliberate tempering of material evidence and failure to supply the required information, have been decriminalised now.
Input Tax Credit shall not be available for Corporate Social Responsibility (CSR) expenses
For the past few years, the issue relating to Input Tax credits on corporate social responsibility has been part of several litigations. The government has clarified its stance by clearly specifying that Input Tax Credit on such expenses towards CSR will not be available. Thereby, section 17(5) of the CGST Act has been amended to provide that input tax credit will not be available in respect of goods or services used or intended to be used, for activities relating to obligations under corporate social responsibility as per section 135 of the Companies Act, 2013.
Composition scheme for enterprises operating through e-commerce
Section 10(2) and section 10(2A) of the CGST Act allow certain categories of registered taxpayers to opt for composition schemes. However, registered taxpayers who were engaged in the supply of goods or services through an electronic commerce operator were not eligible for the composition scheme, if the operator was required to collect TCS under section 52. This has been amended now to allow such taxpayers operating through electronic commerce operators, to opt for a composition scheme. However, there is no change in the provisions related to the interstate supply of goods by such taxpayers. Therefore, taxpayers opting for a composition levy, cannot sell their goods outside the state, as earlier.
Input tax credit on sale of warehoused goods
When a taxpayer is engaged in supplying both taxable and exempt supplies, sections 17(2) and 17(3) restrict the availing of the proportionate input tax credit on exempt supplies. Explanation to section 17(3) has been amended to restrict the availing of the proportionate input tax credit on a transaction covered in Para 8(a) of Schedule III by including it in the value of exempt supplies. Thereby, the value of exempt supply, to apportion input tax credit will include the value of warehoused goods sold to any person, before clearance for home consumption. Earlier only transactions specified in Para 5 of Schedule III i.e. sale of land and the incomplete building was included in the value of exempt supply.
Amendments to Schedule III
Schedule III of the CGST Act has been amended retrospectively apply Para 7, 8(a) and 8(b) of the said Schedule which relates to high seas sales, supply of warehoused goods before clearance, and supply by the endorsement of documents of title before clearance for home consumption. These provisions will be effective from July 1, 2017. Thus, these activities or transactions will neither be treated as a supply of goods nor a supply of services. It has been further clarified that tax shall not be refunded in cases where such tax has been already paid in respect of such transactions during the period from July 1, 2017, to January 31, 2019.
Belated returns cannot be filed after three years
A time limit of three years from the due date of filing the return has been specified for filing the GSTR-1, GSTR-3B, GSTR-8 and Annual returns. An extension may be provided in future to certain classes of taxpayers, subject to certain conditions and restrictions. To restrict the filing of returns to a maximum period of three years from the due date of filing of the relevant return or statement, sections 37, 39, 44 and 52 of the CGST Act have been amended.
Provisional refund in case of zero-rated supplies
Section 54(6) of the CGST Act provides for a provisional refund of 90 per cent of the provisionally claimed input tax credit in case of zero-rated supplies. This rule is now amended to remove the reference to the provisionally accepted input tax credit to align the same with the present scheme of availing of the self-assessed input tax credit.
Sharing of information
Section 158A has been introduced in CGST Act to enable sharing of the information received from taxpayers with other systems. This information can be from returns filed by taxpayers, registration applications, statements of outward supplies, details uploaded for the generation of electronic invoices, or any other details on the common portal. Rules will be prescribed later on this behalf.
Definition of Non-taxable online recipient
Section 2(16) of the IGST Act has been amended to revise the definition of ‘Non-taxable online recipient’. The amendment has removed the condition of receipt of online information and database access or retrieval services for purposes other than commerce, industry or any other business or profession, to provide for taxability of OIDAR service provided by any person located in non-taxable territory to an unregistered person, receiving the said services and located in the taxable territory. The amendment also clarifies that the persons registered under section 24(vi) of the CGST Act will be treated as unregistered persons for the aforementioned clause.
Definition of Online information and database access or retrieval services
Section 2(17) of the IGST Act has been amended to revise the definition of ‘Online information and database access or retrieval services’. The condition of rendering the said supply essentially automated and involving minimal human intervention has been removed.
Place of supply in transportation
Proviso to section 12(8) of the IGST Act has been omitted. Thereby, the place of supply in case of services by way of transportation of goods to a registered person shall be the location of the recipient, or else the location at which goods are handed over for their transportation if the supplier of services and recipient of services are located in India. The destination of the goods will be disregarded for this purpose.
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