Recently, the provisions of the Integrated Goods and Services Tax Act, 2017 (IGST Act), the Central Goods and Services Tax Act, 2017 (CGST Act), the Union Territory Goods and Services Tax Act, 2018 (UTGST Act) and the Goods and Services Tax (Compensation to States) Act, 2017 have been amended by the Parliament. The amendment acts of 2018 have received Presidential assent on 29 August 2018. The amendments shall come in force on the date as notified by the Central Government. The notification shall be issued after the amendment of the State Goods and Services Tax Acts (SGST Act) by the respective State Legislatures.
The major amendments are discussed below.
of the CGST Act:
Definition of Supply
|The definition of supply
has been amended to remove the inference that any activity included
in Schedule II of the CGST Act would automatically qualify as a
The amendment brings clarity that Schedule II of the CGST Act shall be referred to only to determine whether a supply is supply of goods or services but not whether an activity, per se, is a supply.
of the CGST Act & Section 5(4) of the IGST
Taxability of inward supplies from unregistered dealers
|The existing provision
has been substituted to provide that the Government shall notify
class of persons who shall be liable to pay tax on procurement of
specified supplies from the unregistered persons. The existing
provisions required payment of tax by all registered persons
procuring any kind of supply from an unregistered person.
The amendment removes a major irritant which was seen as disincentivising supply by the unregistered suppliers mainly comprising artisans, professionals and tiny and small sectors.
of the CGST Act:
Composition Levy Scheme
|The threshold turnover
for eligibility of the composition scheme has been enhanced from
INR 10,000,000 to INR 15,000,000. Further, compositions dealers are
also allowed to supply services (other than restaurant services)
not exceeding ten percent of the total turnover in the state in the
previous financial year or INR 500,000, whichever is higher.
The widening of the eligibility criteria for composition levy was driven by the reason that each registered person who may supply goods may also be providing certain incidental services which would debar them from enjoying the benefit of a composition levy.
16(2) of the CGST Act:
Deeming fiction for receipt of supply of goods and service
|The existing explanation
to Section 16(2)(b) has been substituted to provide that a
registered person shall be deemed to have received goods or
services where the goods are delivered or the services are provided
by a supplier to a person on the direction of the said registered
The amendment broadens the deeming fiction to include receipt of service by a third person (agent or otherwise). This makes the recipient eligible for input tax credit (ITC) on such services. This will encourage contract manufacturing and job work.
17(3) of the CGST Act:
Value of exempt supply for ITC reversal
|The definition of value
of exempt supply has been revised to exclude value of activities or
transactions specified in Schedule III of the CGST Act, except the
value of sale of land and /or sale of building for which occupation
certificate has been received.
The amendment reduces the quantum of ITC to be reversed due to activities which are considered neither as supply of goods not services, for example, the supply of actionable claim.
17(5) of the CGST Act:
|ITC has been allowed
The amendment regarding ITC availment on supplies received by an entity while discharging its statutory obligations towards employees, has been effected by way of a proviso which is inserted after sub-clause (iii) of Section 17(5)(b) of the CGST Act which relates to travel benefits extended to employees on vacation. Considering the placement of the proviso, it could be interpreted that ITC would be available only in relation to supplies received by the entity which is required to discharge any statutory obligation in relation to an employee's leave travel benefits. However, if an inference is drawn from the decisions taken in the 28th GST Council Meeting (held on 21 July 2018)it is clear that the intention was to allow ITC in relation to all supplies received by the employer while discharging its statutory obligations towards its employee. It is to be seen that in case of a dispute regarding availment of ITC, which of the two views, presented above, will be taken by the authorities as this is now reduced to a question of interpretation.
24(x) of the CGST Act:
Registration of e-commerce players
compulsory registration of e-commerce players has been relaxed to
the extent that only such e-commerce players, who are required to
comply with Tax collected at source (TCS) provisions under Section
52 of the CGST Act, are compulsorily required to take registration
even if they do not cross the minimum threshold in terms of their
This amendment provides the much needed relief to e-commerce players who operate on a small scale.
2(18), 25(2) of the CGST Act & Section 8 of the IGST
Business vertical and registration of multiple units
|The definition of
"business vertical'' under the IGST and CGST Acts have
been deleted. Further, the reference to business vertical, under
the provisions relating to registration under the CGST Act has also
This will allow an entity to have multiple GST registrations within the same state even if they do not qualify as separate business verticals.
of the CGST Act:
Revision of returns
|A new provision under
Section 43A has been introduced to allow amendment of the section
relating to inward supplies in the returns filed. Further there is
also a mechanism involved for availment of credit up to a certain
limit even in cases where the supplier does not supply adequate
details in its returns.
This provision will provide persons an option to amend the portion relating to inward supplies which did not exist before. Further, the proposal of a mechanism to allow availment of ITC even when the supplier does not discharge its reporting obligations, alleviates the concerns of the trade to a large extent.
54(2) of the CGST Act:
Period for filing of refund claim
|The due date for filing
of refund claims for accumulated ITC has been revised to the date
on which the monthly return has to be filed.
This is a step towards ensuring that the working capital of eligible entities does not get tied up till the end of the year.
of the CGST Act:
Transition of CENVAT Credit
|Section 140 of the CGST
Act has been amended to state that only CENVAT credit of eligible
duties will be allowed to be carried forward to the GST
This amendment has retrospective operation since it is made effective from 1 July 2017. The registered persons who have availed the credit of Education Cess (EC), Secondary and Higher Education Cess (SHEC) and Krishi Kalyan Cess (KKC), may now receive show cause notices / demand notices asking them to pay an amount equivalent to the amount of EC, SHEC and KKC that has been availed (through the GSTR TRAN-1) along with interest. However, it is to be seen if such demand of interest on the amount of credit availed in relation to such Cess is appropriate considering that it is only this retrospective amendment which makes such availment / utilisation of credit illegal. Further, there are a plethora of decisions wherein the courts have ruled that no assessee can be penalized in case of retrospective amendments to the taxing statutes.
of the CGST Act:
Activities / transactions not considered as a supply under GST
|The scope of the
Schedule has been increased to include-
12(8) of the IGST Act:
Place of supply of services in case of transportation of goods to a place outside India
|A proviso has been
inserted to clarify that the place of supply in case where services
were being provided in relation to transportation of goods to a
place outside India shall be the destination of the goods even if
supplier and recipient are located in India.
This amendment is in line with the erstwhile service tax provisions.
13(3)(a) of the IGST Act:
Place of supply in case of other processes / treatments being administered on goods temporarily imported into India
|By way of amendment the
place of supply in case of goods which are temporarily imported
into India for treatment or process other than repairs and
maintenance and are exported without being put to any use in India
has been fixed to be outside India.
This amendment has been made in recognition of the fact that repair and maintenance services performed on goods temporarily imported cannot be distinguished from other processes and treatments.
Another interesting point to be noted is that during the 28th GST Council Meeting (held on 21 July 2018) while approving the amendments to be made to the GST laws, certain decisions were taken and amendments mirroring all but one of the decisions have been made. There has been no amendment made to put into effect the decision to do away with the interest that would be payable at the time of reversing the ITC availed by the recipient in respect of services, when payment has not been made within 180 days from the date of issue of invoice. It is to be seen if this relaxation will be brought about by way of a notification under the general powers given to the Government under the CGST Act in the absence of an express provision therein.
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