1. AMENDMENTS IN GOODS AND SERVICE TAX
1.1. Introduction:
A King/Ruler is the one who creates and acquires wealth, protects and distributes it for common good - is the opening statement for Part B of the Budget Speech. The instant changes are replica of the same. The changes have assured a full stop to those who are motivated with fraud and guilty mind. Further, the changes have also assured reduced compliance cost and enhanced governance with a view to have first-hand interaction with assesse.
1.2. Change in Scope of Supply:
The term scope of supply1 has been expanded with retrospective effect from 01.07.2017 to include all activities or transactions between a person other than individual and its members or constituents for cash, deferred payments or other valuable consideration by undertaking suitable amendments.
KSAA Comments:
Supply of goods by an unincorporated association or body of persons to its member for cash, deferred payment or other valuable consideration were considered as supply2. The said entry did not include supply of services. The instant amendment has been brought to make all activities including supply of services under the ambit of GST. Recently, Supreme Court in case of Calcutta Club3, held that for any amount to be identified as "surplus" the identity of contributors contributing any amount and that of participants receiving such amount should be different which is not in the case of a society and hence the principles of mutuality hits them and accordingly there are no two separate persons in the transaction. With the said amendment, the legislature intends to tax the same with effect from 01.07.2017.
1.3. Mandatory mapping of inwards in GSTR 2A:
Presently, there are 4 criteria's for availing ITC. An additional criteria is being prescribed by way of an amendment4 to state that ITC of a particular invoice/debit note is available only when the same is furnished by the supplier in his statement of outward supply i.e. FORM GSTR-1 and it has been communicated to the recipient in the prescribed manner i.e. in FORM GSTR-2A.
KSAA Comments:
From 09.10.2019, a new rule5 was introduced which allowed ITC of only such invoices which are being uploaded by the supplier in his respective FORM GSTR-1 subject to certain conditions. Several writ petitions were filed to challenge the said rule on the concept that since the section allows ITC of such invoices, such rule so introduced is ultra vires. However, the instant provision so introduced negates the argument and strengthens the very root of the rule. Further, the applicability of the rule for the period prior to the implementation of the instant provision will always be subject to litigation.
1.4. Defacing GST Audit:
Any person having turnover exceeding Rs. 5 Crore is mandated to get his accounts audited and file the annual return6 (i.e. Form GSTR-9) along with reconciliation statement (i.e. Form GSTR-9C) certified by Chartered Accountant or Cost Accountant. The requirement for audit has been omitted and accordingly all the registered person would only be required to file annual return along with self-certified reconciliation statement7.
KSAA Comments:
The said change is a bold move. Going forward from notified date, the company would have to prepare annual return along with the reconciliation statement on their own. Accordingly, the burden of certifying the transaction executed by company from the perspective of GST would solely lie on the tax payer himself. Thus, a chartered accountant is absolved from the liability of certification. Accordingly, the tax payer would himself be liable for all the transactions executed and the risk of true & correct view would be of the tax payer.
1.5. Interest on delayed payment of liability
The provision of interest has been retrospectively amended8 from 01.07.2017 so as to state that interest is calculated on unpaid net liability (Net Liability = Gross Liability (-) Input Tax Credit Utilized).
KSAA Comments
The said amendment9 was already introduced in the Finance Act, 2019 but its application was prospective10 in nature. Further, as per press release dated 26.08.2020, it was assured that there shall be no recovery of interest on delayed payment of tax through input tax credit for past period by the GST department. The present proviso addresses to the situation by making retrospective changes however it also categorically states that if any returns are filed after issuance of Show Cause Notice u/s 73 or 74 of the CGST Act, 2017 then interest has to be calculated on gross liability. Thus, all the cases will have to be analysed in light of this proposed amendment.
Procedural Changes
1.6. Assessments:
Appropriate amendments11 have been proposed to make seizure and confiscation of goods and conveyances in transit a separate proceeding from recovery of tax.
Appropriate amendments12 have been proposed to clarify that "self-assessed tax" shall include transactions declared as tax payable on any outward supplies in respective statements [i.e. FORM GSTR-1] but actually not paid [i.e. in FORM GSTR-3B].
KSAA Comments:
This proposed amendment is a big sigh of relief as it clarifies that no penalty is payable for any liability arising on account difference between FORM GSTR-1 vs. FORM GSTR-3B.
1.7. Power to attach properties:
Power to attach properties have been amended13 to state that the provisional attachment shall remain valid for the entire period starting from the initiation of any proceedings till the expiry of a period of one year from the date of order made. Further, the scope of attachment is expanded so as to state that the commissioner can provisionally attach property, including bank account, of not only of the taxable person but also of the person who retains benefits of the transaction and at whose instance the transaction is conducted.
KSAA Comments:
The proposed amendment plans to attach properties of even such persons who avails and/or utilizes ITC pertaining to fake invoices. The same draconian and can have huge effects if not executed under wise instructions.
1.8. Filing of Appeals
The tax payer is required to pay 10% as pre-deposit of the disputed tax liability subject to maximum of Rs 25 cr before filing any appeal before the appellate authority. Appropriate amendments14 has been proposed wherein the taxpayer is required to pay 25% of the penalty as pre-deposit in cases where an appeal is filed for cases pertaining to detention or seizure of goods or conveyance.
1.9. Proceedings with respect to detention, seizure and release
Appropriate amendments15 have been proposed to delink the proceedings pertaining to detention, seizure and release of goods and conveyances in transit from proceedings relating to confiscation of goods or conveyances and levy of penalty.
1.10. Power to collect information
Appropriate amendments16 have been made so as to empower the jurisdictional commissioner to call for information from any person relating to any matter dealt with in connection with the Act.
1.11. Bar on disclosure of Information17
No information shall be published without obtaining a previous written consent by the concerned officer or his authorized officer. This information shall cannot be used for the purpose of any proceedings under this Act without giving an opportunity to such person.
1.12. Provisions relating to Zero Rated Supply:
The term zero-rated supply18 has been amended to state that zero rated supply of goods or services or both means such supplies provided for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit.
The mechanism for claiming refund of zero-rated supplies of goods has been amended19 to state that refund claimed u/r 89 of the CGST Rules, 2017 is linked to the time limit prescribed under FEMA Act, 1999. In case of non-realization of export proceeds the said refund should be deposited alongwith applicable interest.
The Government may notify such class of taxpayers who may make zero rated supply on payment of integrated tax and claim refund of tax.
The Government may notify such goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim refund of tax so paid.
KSAA Comments:
Supply provided by way of goods or services to SEZ would qualify as zero rated supplies provided that the same is being supplied towards authorised operations of SEZ which was not a pre-condition earlier. Accordingly, not all supplies provided to SEZ units would be considered as zero-rated supplies. Accordingly, all the circulars, notification and instructions issued in the past would be subject to verification in light of the concept of provision of supplies towards authorised operation.
Further, it can be said that any supply provided to SEZ units which do not qualify as authorised operation would be subject to GST.
The facility for refund of ITC by opting the option of exporting goods with payment of integrated tax towards zero-rated supply of goods or services would be restricted to a notified class of taxpayers and the same would not be applicable to all.
In case of zero rated supply of goods or services or both under LUT or bond without payment of tax, the supplier will be mandated to recover the export proceeds from the foreign customers. In case of any non-recovery of sale proceeds in convertible foreign currency within time limit prescribed under FEMA Act, 1999 the tax payer will be required to deposit the refund with applicable interest within 30 days of the expiry of such time limit. The said provisions strengthen the very foundation20 of Rule 96B of the CGST Rules, 2017 which prescribes the same.
2. AMENDMENTS IN CUSTOMS
2.1. Rate Change:
There is no change in the rate of basic customs duty. However, for some products the rate has been changed including the relaxations granted by way of exemption which is enumerated in subsequent paras as Annexure-1.
2.2. Imposition of Agriculture Infrastructure & Development Cess:
Clause 115 of Finance Bill, 2021 has proposed Agriculture Infrastructure and Development Cess (AIDC) on import of specified goods. The amount so collected in the nature of cess shall be used to finance the improvement of agriculture infrastructure and other development expenditure. To ensure that imposition of cess does not lead to additional burden in most of these items on the consumer, the Basic Customs Duty has been lowered. The list of such items is enumerated in subsequent paras as Annexure-2.
2.3. Introduction of Common Customs Electronic Portal:
The CBIC board may notify21 a common portal to be termed as Common Customs Electronic Portal for facilitating registration, filing of bill of entry, shipping bills, other documents and forms prescribed under the act. Further, even order, summons, notices, etc. would be made available on the said common portal. At presently, majority of the functions specified are being done under ICE GATE Portal. The instant move will ensure effective sharing and use of information.
2.4. Time limit of conditional exemption:
Any conditional exemption issued in public interest will be valid22 till 31st March falling immediately two years after the date of such grant or variation. All existing conditional exemptions in force as on the date on which the Finance Bill 2021 receives the assent of the President unless having a prescribed end date, shall come to an end on 31st March, 2023 (if not specifically extended/ rescinded earlier) on review
KSAA Comments:
The instant provision would bring a new check on all the unilateral exemptions granted till date on BCD, IGST and the same would be subject to review periodically. Further, a company would have to plan its imports in the said manner. The same is a remarkable change which has been witnessed for the first time under Customs Act where all the exemptions granted so far till date are subject to review.
2.5. Time limit for adjudication:
A two year limit23 has been attached for concluding the proceedings from the date of initiation of audit, search, seizure or summons. Further, the Principal Commissioner of Customs on sufficient cause and for reasons recorded in writing may increase the said time limit by a further period of one year.
Further, the said time limit of 1 year shall exclude the following -
- Period during which stay was granted by an order
- Period seeking information from an overseas authority through a legal process
2.6. Time limit for filing bill of entry:
The time limit24 for filing bill of entry has been amended so as to mandate filing of bill of entry before the end of the day preceding the day (including holidays) of arrival of goods.
2.7. Cases before Commissioner (appeals):
The relevant provisions25 have been amended so as to empower the Commissioner (Appeals) to adjudicate applications made by a proper officer in relation to seizure of gold for the purpose of certifying the correctness of the seized gold, taking photographs and certifying the same and carrying out such other procedures as prescribed, before the disposal of the gold in a manner as may be determined by the Central Government.
2.8. Confiscation of goods:
To strengthen the economy and to discourage IGST refund frauds goods confiscation provisions have been amended26 so as to provide for the confiscation of any goods entered for exportation under claim of remission or refund of any duty or tax or levy, so as to make a wrongful claim which is in contravention of the Customs Act, 1962 or any other law for the time being in force..
KSAA Comments:
For ease of business, the Government introduced schemes of speedy refund against export of goods. Accordingly, ITC was refunded alongwith drawback by the Customs authorities in cases where goods were exported. The instant scheme was wrongly explored and many exporters claimed ITC refund of such invoices for which the duty was not deposited with the Central Government and as a consequence of which government suffered heavy losses. Accordingly, many measures were taken to recover such money and to curb it. Further, even certain instances were drawn whereby the drawback was being wrongly claimed. It seems that after due consultation the Government felt the need for introduction of the instant provision whereby an exporter would be discouraged to export goods and claim undue refund of IGST, drawback as the goods so exported will carry the risk of confiscation.
2.9. Specific penalty:
Any person who has obtained any invoice by fraud, collusion, willful misstatement or suppression of facts to utilize Input Tax Credit on the basis of such invoice for discharging any duty or tax on goods that are entered for exportation under claim of refund of any duty or tax would be liable for penalty not exceeding five times27 the refund claim.
KSAA Comments:
The government is very serious on the issue of refund on account of fake invoices and the same can be understood from the series of amendments wherein provisions have been amended to introduce rejection of refund, recovery of such refund granted, confiscation of goods and lastly penalty for claiming such refund which would be 5 times of the refund amount.
2.10. Rectification of Documents:
Rectification of documents can be done through the customs automated system on the basis of risk evaluation through appropriate selection criteria. Further, certain amendments28, as may be specified by the Board, may be done by the importer or exporter on the common portal.
KSAA Comments:
The instant provision has cleared major difficulty of such cases which qualify for amendment of bill of entry, shipping bill or bill of export already generated on Customs automated system i.e. ICEGATE Portal and the goods have been cleared for home consumption or shipped for export. The formal instructions regarding implementation of the same would be very much awaited for its correct application.
2.11. Other Changes under Tariff including Anti-dumping duties:
Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 provide for manner and procedure for investigation into dumping of goods that cause injury to domestic industry. Changes are being made in the Rules, to provide that with effect from 01.07.2021, to provide that final findings are to be issued by the designated authority, in review cases, at least three months prior to expiry of the ADD under review. The ADD Rules are also being amended to provide for provisional assessment in cases of anti-circumvention investigation. Certain other changes are being made for bringing clarity in the scope of these rules.
Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidized Articles and for Determination of Injury) Rules, 1995 provide for manner and procedure for causing investigation into the cases of imports of subsidized goods that cause injury to domestic industry. Changes are being made in the Rules to provide that with effect from 01.07.2021, the final findings are to be issued by the designated authority, in review cases, at least three months prior to expiry of the CVD under review. The CVD Rules are also being amended to provide for provisional assessment in cases of anti-circumvention investigation. Certain other changes are being made for bringing clarity in the scope of these rules.
Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997 (Safeguard Duty being changed to Safeguard Measures) provide for manner and procedure for causing investigation into the cases of imports in increased quantity that cause injury to domestic industry. Changes in the rules are being proposed to elaborate in detailed manner the modalities of implementation of safeguard measure, along with technical modifications consequent to the changes made earlier in section 8B of the Customs Tariff Act vide Finance Act, 2020.
Notification No. 12/2018-Customs, dated 02.02.2018 prescribing effective rates of 3% on certain items, including gold and silver, is being rescinded.
Social Welfare Surcharge is also being rescinded on goods falling under heading 2515 11 and 2515 12.
Social Welfare Surcharge is being exempted on the value of AIDC imposed on gold and silver. Accordingly, these items would attract SWS, at normal rate, only on value plus basic customs duty.
Anti-Dumping duty is being temporarily revoked for the period commencing from 2.2.2021 till 30.09.2021, on imports of the following-
- Straight Length Bars and Rods of alloy-steel, originating in or exported from People's Republic of China, imposed vide notification No. 54/2018-Cus (ADD) dated 18.10.2018;
- High Speed Steel of Non-Cobalt Grade, originating in or exported from Brazil, People's Republic of China and Germany, imposed vide notification No. 38/2019-Cus (ADD) dated 25.09.2019;
- Flat rolled product of steel, plated or coated with alloy of Aluminium or Zinc, originating in or exported from People's Republic of China, Vietnam and Korea RP, imposed vide notification No. 16/2020-Cus (ADD) dated 23.06.2020.
Countervailing duty is being temporarily revoked for the period commencing from 2.2.2021 till 30.09.2021, on imports of Certain Hot Rolled and Cold Rolled Stainless Steel Flat Products, originating in or exported from People's Republic of China, imposed vide notification No. 1/2017-Cus (CVD) dated 07.09.2017.
Provisional Countervailing duty is being revoked on imports of Flat Products of Stainless Steel, originating in or exported from Indonesia, imposed vide notification No. 2/2020- Customs (CVD) dated 9.10.2020.
In Sunset Review, anti-dumping duty on Cold-Rolled Flat Products of Stainless Steel of width 600 mm to 1250 mm and above 1250 mm of non bonafide usage originating in or exported from People's Republic of China, Korea RP, European Union, South Africa, Taiwan, Thailand and United States of America has been discontinued upon expiry of the anti-dumping duty hitherto leviable vide notifications no. 61/2015-Customs (ADD) dated 11th December, 2015 and 52/2017-Customs (ADD) dated 24th October, 2017.
Footnotes
1. Section 7(1) (aa) of the CGST Act, 2017 introduced vide clause 99 of Finance Bill, 2021
2. Entry 7 of Schedule II to Section 7 of the CGST Act, 2017 which is deleted vide clause 113 of Finance Bill,2021
3. State of West Bengal vs Calcutta Club Limited 2019 (29) GSTL 545 [SC]
4. Section 16(aa) of the CGST Act, 2017 introduced vide clause 100 of Finance Bill, 2021
5. Rule 36(4) of the CGST Rules, 2017 introduced vide notification 49/2019 dated 09.10.2019
6. Section 35(5) of the CGST Act, 2017 which is omitted vide clause 101 of Finance Bill, 2021
7. Section 44(1) of the CGST Act, 2017 amended vide clause 102 of Finance Bill, 2021
8.Proviso to Section 50 of the CGST Act, 2017 introduced vide clause 103 of Finance Bill, 2021
9. Old proviso to Section 50 of the CGST Act, 2017 introduced vide Finance Bill, 2019
10. Effective from 01.09.2020 vide Notification No 63/2020 (CT) dated 25.08.2020
11. Explanation 1 to Section 74 of the CGST Act, 2017 vide clause 104 of Finance Bill, 2021
12. Explanation to Section 75(12) of the CGST Act, 2017 vide clause 105 of Finance Bill, 2021
13. Section 83(1) of the CGST Act, 2017 vide clause 106 of Finance Bill, 2021
14. Section 107(6) of the CGST Act, 2017 amended vide clause 107 of the Finance Bill, 2021
15. Section 129 of the CGST Act, 2017 amended vide clause 108 of the Finance Bill, 2021
16. Section 151 of the CGST Act, 2017 amended vide clause 110 of the Finance Bill, 2021
17. Section 152 of the CGST Act, 2017 amended vide clause 111 of the Finance Bill, 2021
18. Section 16(1) of the IGST Act, 2017 amended vide clause 114 of the Finance Bill, 2021
19. Section 16(3) of the IGST Act, 2017 amended vide clause 114 of the Finance Bill, 2021
20. Notification 16/2020 -CT Dated 23.03.2020
21. Section 2(7B) & 154C of the Customs Act, 1962 introduced vide clause 80 & 91 of the Finance Bill, 2021
22. Section 25(4A) of the Customs Act, 1962 introduced vide clause 82 of the Finance Bill, 2021
23. Section 28BB of the Customs Act, 1962 introduced vide clause 83 of the Finance Bill, 2021
24. Section 46 of the Customs Act, 1962 amended vide clause 84 of the Finance Bill, 2021
25. Section 110(1D) & Section 139 of the Customs Act, 1962 amended vide clause 85 & 88 of the Finance Bill, 2012 respectively
26. Section 113 of the Customs Act, 1962 amended vide clause 86 of the Finance Bill, 2021
27. Section 114AC of the Customs Act, 1962 amended vide clause 87 of the Finance Bill, 2021
28. Section 149 of the Customs Act, 1962 amended vide clause 89 of the Finance Bill, 2021
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