Goods and Services Tax

Draft proposals for amending GST Laws for comments of the stakeholders till 15.07.2018

Goods and Services Tax – GST – Dated:- 9-7-2018 – Sl. No. Section/Sub-section/Clause Amendments as shown in Red and Strikethrough Rationale/Remarks CGST Act, 2017 Definitions 1. 2 (4) 2 (4) adjudicating authority means any authority, appointed or authorised to pass any order or decision under this Act, but does not include the Central Board of Excise Indirect Taxes and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate Authority, and the Appellate Tribunal and the Authority referred to in sub-section (2) of section 171; This is in pursuance of the change in name of the Central Board of Excise and Customs to the Central Board of Indirect Taxes and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963). Further, the National AntiProfiteering Authority constituted by the Central Government under section 171 of the CGST Act is also required to be excluded from the definition of adjudicating

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the State s budget to meet the developmental needs of the region. It is being added now based on the request received from the State of Karnataka. 5. 2 (102) (102) services means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; Explanation-For the removal of doubts, it is hereby clarified that the expression services includes facilitating or arranging transactions in securities. Although securities has been excluded from the definition of goods and services in the CGST Act, facilitating or arranging transactions in securities is liable to GST. This has been clarified recently through a detailed FAQ on Banking and Insurance wherein it has been clarified that if some service charges or service fees or documentation fees or broking charges or such like fees or c

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supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of sub-sections (1), (1A) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. Classification of certain specified activities or transactions (which qualify as a supply under the CGST Act) either as supply of goods or supply of services is supposed to be done in Schedule II. However, it

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on-taxable territory to another place in the non-taxable territory without such goods entering into the taxable territory It is sought to exclude from the tax net such transactions which involve movement of goods, caused by a registered person, from one non-taxable territory to another non-taxable territory 9. Schedule III, new insertion 8 (a) Supply of warehoused goods to any person before clearance for home consumption. (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption. Explanation.- For the purposes of this clause, the expression warehoused goods shall have the meaning as assigned to it in the Customs Act, 1962 (52 of 1962) It is sought to ensure that there is no double taxation of transactions where supply of goods occurs in the course of high sea sales and sale of warehoused goods, before clearance f

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ds or services or both. 9 (4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of taxable goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both Section 9 (4), which mandates that all registered persons shall pay the tax on reverse charge basis on purchases made from unregistered persons, is presently under suspension. This sub-section is being omitted for trade facilitation. Instead, it is proposed to take an enabling power for the Government to notify a class of registered persons who would be liable to pay tax on reverse charge basis in case of receipt of goods from an unregistered supplier Composition Scheme 11. 10 (1) & (2)

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nt, not exceeding one hundred and fifty lakh crore rupees, as may be recommended by the Council. Provided further that a person who opts to pay tax under clause (a), clause (b) or clause (c) may supply services of value not exceeding ten percent of turnover in the preceding financial year in a State or Union territory or five lakh rupees, whichever is higher. (2) The registered person shall be eligible to opt under sub-section (1), if- (a) he is not engaged in the supply of services, other than supplies referred to in clause (b) of paragraph (6) of Schedule II save as provided in sub-section (1); (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; and (e) he is not a manufacturer of such goods as may be notified by the

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le to opt for the scheme even if its percentage is very small as compared to the supplies of goods. With a view to enable these taxpayers to avail of the benefit of composition scheme, a new proviso is being added in order to allow them to be eligible for the scheme even if they supply services of value not exceeding 10% of the turnover in the preceding financial year in a State/Union territory or ₹ 5 lakhs, whichever is higher. This is a taxpayer-friendly measure and it is believed that small taxpayers would immensely benefit from this amendment. This is a consequential amendment, as a new proviso is being added to section 10 (1) which allows the registered person to opt for the scheme even if they supply services of value not exceeding 10% of the turnover in the preceding financial year in a State/Union territory or ₹ 5 lakhs, whichever is higher. Time and Value of Supply 12. 12 (2) 12 (2) The time of supply of goods shall be the earlier of the following dates, namely:- (

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Credit 14. 16 (2) (b) 16 (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (b) he has received the goods or services or both. Explanation.- For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services,- (i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person; One of the

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der section 39: Provided that : Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: It is proposed to remove the liability to pay interest in case where the recipient has been made liable to pay an amount equal to the ITC availed in case he fails to pay to the supplier of goods or services or both the amount towards the value of supply along with tax payable thereon within a period of 180 days from the date of issue of invoice by the supplier. Since upon payment of the due amount to the supplier, the recipient shall be eligible to

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g anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), vessels and aircraft and other conveyances except when they are used- (i) for making the following taxable supplies, namely:- (A) further supply of such vehicles or ; vessels or aircraft conveyances; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles, vessels or aircraft or conveyances; (ii) for transportation of goods; and (iii) for transportation of money for or by a banking company or a financial institution. (aa) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels and aircraft for which the credit is not available in accordance with the provisions of clause (a)

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ices or both or as part of a taxable composite or mixed supply; and (iii) travel benefits extended to employees on vacation such as leave or home travel concession: Provided that the input tax credit in respect of such goods or services or both shall be available, where the provision of such goods or services or both is obligatory for an employer to provide to its employees under any law for the time being in force. It is proposed to expand the scope of ITC availability in case of motor vehicles having approved capacity of not more than 13 persons (including the driver) in case it is used for specified purposes. The amendment is sought to make it clear that input tax credit would now be available in respect of dumpers, work-trucks, fork-lift trucks and other special purpose motor vehicles. After the amendment is carried out, input tax credit would be denied only in respect of motor vehicles for transport of persons having approved seating capacity of not more than 13 persons (including

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rovide to its employees under any law for the time being in force. This is a taxpayer-friendly amendment. 18. 20, Explanation (c) Clause (c) of Explanation to section 20: (c) the term turnover , in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied under entry entries 84 and 92A of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule. It is proposed to exclude the amount of tax levied under entry 92A of List I from the value of turnover for the purposes of distribution of credit. The same was inadvertently left out from clause (c) of Explanation to section 20. Section 20 deals with the manner of distribution of credit by the Input Service Distributor. Section 20 (2) (d) provides that where the credit is attributable to more than one recipient, such credit shall be distributed amongst the recip

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ption for registration in their State should be raised from ₹ 10 lakhs to ₹ 20 lakhs 20. 24 (x) 24 (x) every electronic commerce operator who is required to collect tax at source under section 52; An e-commerce operator is presently required to take compulsory registration in terms of section 24(x) even if his aggregate turnover in a financial year does not exceed ₹ 20 lakhs. Clause (x) of section 24 is being amended to provide that only those e-commerce operators who are required to collect tax at source under section 52 would be required to take compulsory registration. Other e-commerce operators who are not required to collect tax at source under section 52 would henceforth not be required to take registration if their aggregate turnover in a financial year did not exceed ₹ 20 lakhs. This is a taxpayer-friendly measure. Small e-commerce operators who are not required to collect tax at source under section 52 would now be eligible for availing the threshold ex

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g more than one unit, as defined in the Special Economic Zones Act, 2005 (28 of 2005), in a Special Economic Zone shall be granted a separate registration for each such unit, subject to such conditions as may be prescribed. It is proposed to allow persons having multiple places of business in a State or Union territory to obtain separate registrations for each such place of business. As per the extant provisions, a person seeking registration under the Act shall be granted a single registration in a State or Union territory. However, if he has multiple business verticals in a State or Union territory, he may obtain separate registration for each business vertical. Certain PSUs have requested for separate registration for their individual units in a State, a facility which was available prior to 1st July 2017. This amendment is a taxpayerfriendly measure. It is proposed to insert the provisions of separate registration for a person having a unit(s) in a Special Economic Zone or being a

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ation of registration, the proper officer may suspend the registration of the person subject to such conditions and limitations as may be prescribed. It is proposed to provide that once a registered person has applied for cancellation of registration, the proper officer may temporarily suspend its registration till the procedural formalities for cancellation are completed. This measure would relieve the taxpayer of continued compliance burden under the law till such time as the process of allowing cancellation of registration is completed. 23. 29 (2), new proviso Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard.: Provided further that pending cancellation of registration, the proper officer may suspend the registration of the person subject to such conditions and limitations as may be prescribed. The insertion of this proviso seeks to ensure that once it is sought to cancel the registration of a registered person

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ices is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a one or more debit notes for supplies made in a financial year containing such particulars as may be prescribed. At present, a credit/debit note which is issued by the registered person is required to be issued invoice-wise. This causes avoidable compliance burden for tax payers. Thus, it is proposed to allow issuance of consolidated credit/debit which is in line with the best international practices. The amendment seeks to permit a registered person to issue consolidated credit / debit notes in respect of multiple invoices issued in a Financial Year without linking the same to individual invoices. 25. 35 (5), new proviso Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shal

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annual accounts of Canteen Stores Department (CSD) are internally audited by the Controller of Defence Accounts (CDA) and therefore, should not be subject to audit by a Chartered Accountant or a Cost Accountant. Thus, it is proposed to provide that any department of the Central or State Government / local authority which is subject to audit by CAG need not get their books of account audited by any Chartered Accountant or Cost Accountant. Returns 26. 39(9) Subject to the provisions of sections 37 and 38, if any registered person after furnishing a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the return to be furnished for the month or quarter during which such omission or incorrect particulars are noticed, or in t

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der the provisions of section 10 or section 51 or section 52 (hereafter in this section referred to as the supplier ), and for verifying, validating, modifying or deleting such supplies by the corresponding registered person (hereafter in this section referred to as the recipient ) in connection with the furnishing of return under section 39 shall be such as may be prescribed.. (2) Notwithstanding anything contained in section 41, section 42 orsection 43, the procedure for availing of input tax credit by the recipient andverification thereof shall be such as may be prescribed. (3) The procedure specified under sub-section (1) and sub-section (2) may include the following:- (i) the procedure for furnishing the details of a tax invoice by the supplier on the common portal for the purposes of availing input tax credit by the recipient in terms of clause (a) of sub-section (2) of section 16; (ii) the amount of tax specified in an invoice for which the details have been furnished by the sup

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overy thereof; and (vii) the procedure, safeguards and threshold of tax amounts in the invoices, the details of which can be furnished under clause (i) by a newly registered person or by a registered person who has defaulted in payment of tax liability, exceeding the amount of tax or the period of time specified in the rules. A new section is being introduced in order to enable the new return filing procedure as proposed by the Returns Committee and approved by GST Council. GST Practitioner 28. 48 48 (2) A registered person may authorise an approved goods and services tax practitioner to furnish the details of outward supplies under section 37, the details of inward supplies under section 38 and the return under section 39 or section 44 or section 45, and to perform such other functions and in such manner as may be prescribed. Presently, they are authorised to furnish the details of outward and inward supplies and various returns under sections 39, 44 or 45 on behalf of a registered pe

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ax; (d) the Union territory tax shall first be utilized towards payment of Union territory tax and the amount remaining, if any, may be utilized towards payment of integrated tax only when the balance of the input tax credit on account of central tax is not available for payment of integrated tax; (e) the central tax shall not be utilised towards payment of State tax or Union territory tax; (f) the State tax or Union territory tax shall not be utilized towards payment of central tax: Provided that input tax credit on account of central tax, State tax or Union territory tax shall be utilised towards payment of integrated tax under clause (b), clause (c) or clause (d) only after the input tax credit available on account of integrated tax has been first utilised fully towards such payment. This sub-section deals with the order of utilization of input tax credit. Section 49(5)(c) provides that the amount of ITC available in the electronic credit ledger of the registered person on account o

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the Government may, on the recommendations of the Council, prescribe the order of utilization of input tax credit of integrated tax, central tax, State tax or Union territory tax, as the case may be, towards payment of any such tax. It is proposed to take an enabling power for the Government to prescribe any specific order of utilization of input tax credit of any of the taxes viz., integrated tax, central tax, State tax or Union territory tax for the payment of the said taxes. Refunds 31. 54, Explanation (2) (e) Explanation.-For the purposes of this section,- (2) relevant date means- (e) in the case of refund of unutilised input tax credit under clause (ii) of sub-section (3), the end of the financial year due date for furnishing of return under section 39 for the period in which such claim for refund arises; It is proposed to correct an inherent contradiction of the relevant date in case of refund of unutilized ITC under section 54(3) since as per Explanation (2)(e) to section 54, t

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unit/SEZ developer and the principle of unjust enrichment does not apply in such cases. Presently, under section 16 (3) of the IGST Act, only the supplier making supplies of goods or services to an SEZ unit/SEZ developer can claim refund. It is proposed to allow ITC to the SEZ developer or SEZ unit and the supplier in DTA may recover the tax amount from such SEZ unit, etc. Thus, it is proposed to amend section 54(8)(a) in order to provide that the principle of unjust enrichment will apply in case of refund claim arising out of supplies of goods or services made to SEZ developer/unit. 33. 54, Explanation (2)(c)(i) Explanation.-For the purposes of this section,- (2) relevant date means- (c) in the case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of- (i) receipt of payment in convertible foreign exchange , or in Indian Rupees where permitted

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y be, sub-section (5) of section 25. (2) For the purposes of this clause, the term Collector means the Collector of a revenue district and includes a Deputy Commissioner or a district magistrate or head of the revenue administration in a revenue district. It is proposed to provide that recovery may be made from distinct persons present in different States / UTs in order to ensure speedy recovery from other establishments of the registered person. It is proposed to clarify the definition of the term Collector since the same varies across different States. Appeals to Appellate Authority and Appellate Tribunal 35. 107 (6) No appeal shall be filed under sub-section (1), unless the appellant has paid- (a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and (b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, subject to a maximum of twenty-five crore rupees, in

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2 (8), the appellant is required to pay a sum equal to 20% of the tax in dispute, in addition to the amount paid under section 107 (6), arising from the order of the Appellate Authority for filing an appeal before the Appellate Tribunal. This section is being amended to provide a ceiling of ₹ 50 crores for filing an appeal before the Appellate Tribunal. This is a taxpayer-friendly amendment especially in cases where the tax demand is of hundreds of crores of rupees. Transitional Provisions 37. 140 (1) (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit of [eligible duties] carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed…… ….Explanation 1.-For the purposes of sub-sections [(1)], (3), (4) and (6), the expre

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contained in rule 117(1) of the CGST Rules. The eligible duties do not include the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978. For removal of doubts, it is proposed to clarify that the expression eligible duties and taxes excludes any cess which has not been specified in Explanation 1 or Explanation 2 above and any cess which is collected as additional duty of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975. 38. 143 (1), new proviso (1) A registered person (hereafter in this section referred to as the principal ) may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker and likewise, and shall,- (a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtur

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three years respectively. It is proposed to insert a proviso in section 143 to provide that the period of one year or three years may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively. This is a taxpayer-friendly amendment to cover situations where the period of one year specified is not adequate in respect of job works such as hull construction/fabrication of vessels (for defence purposes), since these processes complete in a period of around 14 to 16 months. IGST Act, 2017 39. 2 (6) (iv) (6) export of services means the supply of any service when, – (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian Rupees where permitted by the Reserve Bank of India; and (v) the suppl

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) 12 (8) The place of supply of services by way of transportation of goods, including by mail or courier to,- (a) a registered person, shall be the location of such person; (b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation. Provided that if the transportation of goods is to a place outside India, the place of supply shall be the place of destination of such goods. In order to provide a level playing field to the domestic transportation companies and promote export of goods, it is proposed that the transportation of goods from a place in India to a place outside India by a transporter located in India would not be chargeable to GST, as place of supply will be outside India. This is a taxpayer-friendly amendment. 42. Proviso to 13 (3) (a) (3) The place of supply of the following services shall be the location where the services are actually performed, namely:- (a) services supplied in respect of goods which are

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e skill development in our country. 43. 17 (1), new proviso 17 (1): Provided that fifty per cent. of such amount as may be decided on the recommendation of the Council, which does not get apportioned under clauses (a) to (f) for the time being, shall be apportioned to the Central Government on ad hoc basis and shall be adjusted against amounts apportioned under clauses (a) to (f). The proposed amendment provides that fifty percent of the amount of IGST which does not get apportioned under clauses (a) to (f) for the time being shall be apportioned to the Central Government on the recommendations of the Council and shall be adjusted against the amounts apportioned under clauses (a) to (f). 44. 17 (2), new proviso 17 (2): Provided also that fifty per cent. of the amount referred to in the first proviso to sub-section (1) shall be apportioned to the State Government on ad hoc basis and shall be adjusted against amounts apportioned under clauses (a) to (f). Similar provision is made for adh

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