An Analysis of Finance Act, 2020 vis-à-vis GST – By Anandaday Misshra, Founder & Managing Partner, AMLEGALS

The Finance Act, 2020 has made several amendments to the CGST Act, 2017 and corresponding amendments to the IGST Act, 2017 and UTGST Act, 2017. We have attempted to analyse the provision wise amendment made by the Finance Act, 2020 to the CGST Act, 2017.

Analysis:

The above amendment has been made due to reorganization of Union Territories by way of merger in case of ‘Dadra and Nagar Haveli and Daman and Diu’ and constitution of new Union Territory ‘Ladakh’.

Analysis:

Section 10(1) of the CGST Act, 2017 provides that a class of registered person may opt to pay a fixed rate of tax on his aggregate turnover subject to conditions and restrictions as may be prescribed. This facility is referred as Composition Scheme or Composition Levy. Section 10(2) of the CGST Act, 2017 provides the conditions upon satisfaction of which a person will be eligible to opt for Composition Scheme.

The above amendment provides for additional condition on the person who wants to opt for Composition Scheme under Section 10(1) of the CGST Act, 2017. The additional conditions are as under:

There might be a confusion that ‘not leviable to tax under CGST Act’ will include supply of services which are exempt. In our view, ‘non-leviable to tax under CGST Act’ will only include non-taxable supplies and not exempt supplies.

“(47) “exempt supply” means supply of any goods or services or both which attracts  nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;

(78) “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act;”

It is important to note that the above conditions shall be applicable to the proviso to Section 10(1) of the CGST Act, 2017 which allows the person paying tax under Composition Scheme to make Supply of services upto 10% of turnover in a State or UT. Thus, the person who wants to opt for Composition Scheme can make Supply of services upto 10% of turnover but such supply of services shall not be a:

Analysis:

Section 16(4) of the CGST Act, 2017 provided a time limit for availing Input Tax Credit with respect to an invoice or debit note. The time limit for availing Input Tax Credit against a debit note was linked with the date of invoice against which such debit note was issued.

For example: An invoice was issued in FY 2017-18 and a debit note against the said invoice was issued in November 2018, than the recipient of supply shall not be eligible to avail Input Tax Credit based on such debit note as the due date for availing Input Tax Credit was the due date of furnishing of the GSTR-3B for the month of September following the end of financial year to which such invoice relating to such debit note pertains.

The lacuna in the law is addressed by the above amendment. However, unless the Central Government makes the above amendment effective from 1st July 2017, the said amendment will lead to the litigation with respect to its date of applicability.

Analysis:

After the amendment, the person who has taken voluntary registration under Section 25(3) of the CGST Act, 2017, who was otherwise not required to get registered under Section 22 or Section 24 of the CGST Act, 2017, can now apply for cancellation of registration.

Analysis:

Section 30(1) of the CGST Act, 2017 provides that if the registration of any person has been canceled suomotu by the proper officer than such person can apply for revocation of cancellation within 30 days of the order of cancellation. Many taxpayers faced difficulty to revoke the cancellation as they could make the revocation application within 30 days from the service of the order and the proper officer had no authority to condone the delay.

Accordingly, the Central Government inserted a proviso to Section 30(1) of the CGST Act, 2017 to provide that the registered persons who registration has been cancelled till 31st March 2019 can file a revocation application till 22nd July 2019.

The above amendment has addressed the above issue and empowered the Additional Commissioner and the Joint Commissioner to extend the time period of filing of application for revocation of cancellation by 30 days and thereafter, the Commissioner has been empowered to extend the said period further by 30 days. In other words, delay of upto 60 days, after the expiry of initial 30 days for filing of application for revocation of cancellation, can be condoned by the appropriate authorities.

Analysis:

The proviso to Section 31(2) of the CGST Act has been amended to widen the powers to the Central Government to notify the categories of services in respect of which a tax invoice shall be issued within such time and in such manner as may be prescribed.

Thus, the Central Government can now even prescribe a different time limit for issuance of tax invoices for such categories of services as may be notified.

Analysis:

Section 51(1) of the CGST Act, 2017 mandates certain class of person, specified therein and as notified by the Central Government, to deduct tax at source at the time of making payment to the supplier.

The above amendment provides that the form and manner of issuing certificate for deduction of tax at source shall be provided in the CGST Rules, 2017. Further, the provision imposing late fee for not issuing the certificate within the prescribed time limit has been omitted.

The amendment seems to protect the interest of the Government as the class of persons liable to deduct tax includes the department of Central or State Government, Local Authorities, Government Agencies and PSUs.

Analysis:

The above amendment has been made due to reorganization of erstwhile State of Jammu and Kashmir. The Central Government has been empowered to notify the bench of Appellate Tribunal for the newly constituted Union Territory of Jammu & Kashmir.

Analysis:

Sub Section (1A) has been inserted to Section 122 of the CGST Act, 2017 to provide that the transactions where:

a) any goods or services or both have been supplied without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

b) any invoice or bill has been issued without supply of goods or services or both in violation of the provisions of the CGST Act, 2017 or the rules made thereunder;

c) input tax credit has been taken or utilised 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;

d) input tax credit has been taken or distributed in contravention of section 20, or the rules made thereunder

then a person who retains the benefit of the above transaction and at whose instance such transaction is conducted shall be liable to penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.

The purpose of the above amendment is to penalize the person who is the ultimate beneficiary of the fraud transactions and the person at whose direction the fraud transaction has been conducted.

Analysis:

The purpose to amend Sub-section (1) of Section 132 of the CGST Act, 2017 is to penalize the person who actually gets benefited from the fraudulent transactions and the person at whose instance such fraudulent transactions are committed.

Analysis:

The term “within such time” has been inserted among various provisions of Section 140 of the CGST Act, 2017. The said amendment has been given a retrospective effect from 1st July 2017.

There were several petitions filed before various High Courts challenging the validity of the time limit provided under Rule 117 of the CGST Rules, 2017 to carry forwards the balance of Cenvat Credit of the existing laws. However, the validity of Rule 117 of the CGST Rules, 2017 has been recently upheld by the Hon’ble High Court of Bombay in the case of NELCO Ltd. vs. UOI & Ors. (Writ Petition No.6998 of 2018).

The amendment seeks to regularize the lacuna in the law and end the litigation with respect to validity of Rule 117 of the CGST Rules, 2017.

Analysis:

Section 168(2) of the CGST Act, 2017 provides that the Commissioner specified in various provisions of the Act mentioned therein shall mean the Commissioner or Joint Secretary posted in the Board and such Commissioner or Joint Secretary shall exercise the powers specified in the said sections with the approval of the Board.

The above amendment removed sub-section (5) of section 6 and the second proviso to sub- section (1) of section 143 from Section 168(2) of the CGST Act, 2017. In other words, the Commissioner determining the expenses and the remuneration for the special audit directed under Section 66 of the CGST Act, 2017 need not be the Commissioner or Joint Secretary posted in the Board.

Similarly, the Commissioner empowered under the second proviso to Section 143(1) of the CGST Act, 2017 to extend the period for bringing back the goods given for job-work shall also need not be the Commissioner or Joint Secretary posted in the Board.

Analysis:

Section 172 of the CGST Act, 2017 empowers the Central Government to issue orders to remove difficulties (for examples: extending due date of filing of annual return) arising in giving effect to the provisions of the CGST Act, 2017 or rules made thereunder.

The above provision was due to expire on 30th June 2020 but now the same has been extended upto 30th June 2022.

Analysis:

The above amendment has been given retrospective effect from 1st July 2017. Schedule II of the CGST Act, 2017 provides classification of certain transaction or activities as goods or services.

In terms of Section 7(1)(c) of the CGST Act, 2017 the transaction or activities which will be deemed to be ‘Supply’ under the CGST Act, 2017 even if made without consideration are already enlisted under Schedule I of the CGST Act, 2017.

The intention of the above amendment may be the possible overlapping of Schedule II into Schedule I of the CGST Act, 2017.

Analysis:

The GST Council in its 37th meeting recommended that the Fishmeal shall be exempted from GST for the period 1st July 2017 to 30th September 2018 due to classification issue.

Similarly, the Council also recommended for concessional rate of GST @12% on supply of pulley, wheels and other parts used as a part of agriculture machinery for the period 1st July 2017 to 31st December 2018.

The above amendment give effect to the decision of the GST Council. The amendment also provides that if any tax (in case of Fishmeal) or tax at the higher rate (in case of supply of pulley, wheels and other parts) has been collected than the same shall not be refunded.

Analysis:

The above amendment gives retrospective effect to Notification No. 3/2019-CT (Rate) dated 30.09.2019. The said notification has been issued under Section 54(3)(ii) of the CGST Act, 2017 and prohibits refund of accumulated Compensation Cess credit on account of inverted duty structure to the manufacturer of Tobacco and manufactured tobacco substitutes.

Thus, the manufacturer of Tobacco and manufactured tobacco substitutes will not be eligible to claim refund of accumulated Compensation Cess credit on account of inverted duty structure w.e.f. 1st July 2017.

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Anandaday Misshra is the Founder & Managing Partner, AMLEGALS, a multi-specialized law firm. He is a practising High Court Advocate with two decades of experience in litigation and arbitration. He specializes in GST, Contractual Laws, Arbitration, Business Laws & Insolvency Laws. He has authored book on GST- Law & Procedure (Taxmann). His other two upcoming books are on Insolvency & Bankruptcy Code and Arbitration.

Disclaimer: The views or opinions expressed are solely of the author.