1. Transactions between an Organisation and Members deemed to be a
supply.
Proposal
Any activity with respect to goods and services for cash between an organization like Club and its members is constituted as a supply. Also, an Explanation has been inserted to hold that the ‘Organisation’ and its members are two distinct persons under GST.
Comments
This amendment is in contradiction to the Principle laid down in the
recent landmark judgment by the Hon’ble Calcutta High Court in the case
of Calcutta Club Ltd. [Civil Appeal No. 4184/2009] wherein
the Hon’ble Court held that as per the Doctrine of Mutuality, a club cannot
charge service tax on the services rendered to its own members. The rationale
behind this ruling was that if there are no members, there is no club and
vice-versa. However, the newly proposed insertion contradicts the very
established principle.
2. Responsibility on the Supplier to file GSTR-01 u/s 37 of the CGST Act
to avail ITC by recipient
Proposal
If a recipient has to avail the ITC on the tax paid on supply of goods
and services, then the supplier of the said goods/services has an obligation to
file his GSTR-01 and the same has to be mandatorily reflected in his GSTR-2A.
Comments
Earlier, as per Section 16(2) of the CGST Act, returns under Section
39(GSTR-3B) were alone a condition precedent for availing ITC. Currently, both
GSTR-01 and GSTR-3B are to be filed by the supplier for the recipient to avail
the credit. This very aspect of entrusting the responsibility on the supplier
for the benefit accruing to the recipient could open the gates for numerous
litigations.
3. Audit Return under GST scrapped
Proposal
Section 35(5) of the CGST Act, which mandates the registered person to
file GSTR-9C after Certification from a Chartered Account, if their turnover is
above the specified limit, has been omitted.
Comments
The government has intended to remove the mandatory requirement of
getting the accounts audited under GST and reconciling the same through a
qualified professional. However, removing this provision would not mean that
the activity of reconciling the statements would be done away with.
4. Annual Return under GST to include the Reconciliation statement
Proposal
Section 44 of the CSGT Act has been substituted and the new
provision states that the registered person shall file an annual return which
includes a Reconciliation statement that reconciles the value of supplies
declared in the returns with the values specified in the Audited Financial
statement.
Comments
The new provision has expanded the scope of Annual Returns. Earlier, a
registered person was under an obligation to file GSTR-9 which was a summary of
the GSTR-3B returns filed during the year and GSTR-9C was a Reconciliation
statement wherein the Qualified professional was required to reconcile the
income/Turnover reported under Income Tax Act with the Income/Turnover reported
under the GST. This provision enables the registered person to file such a
reconciliation as a part of the Annual returns and makes the entire filing
under self-certification basis thereby removing the mandate of certification by
a Chartered Accountant. The intention with which this amendment was made is to
remove the exercise by the professional. It further empowers the Commissioner
to exempt a class of taxpayers from the requirement of filing the annual
return. This would only increase the scope of audit by the officers and would
lead to unnecessary litigation.
5. Interest on delayed payment of tax to be calculated on Amount debited
from cash ledger
Proposal
In case of delayed payment of tax, as per proposed Section 50, the
Interest for such delayed payment shall be calculated on the amount that is
debited from the cash ledger and not on the entire amount that is paid
belatedly.
Comments
This amendment is deemed to be introduced with effect from 1st July
2017. Being a retrospective amendment, this should clear the air with regard to
numerous recovery made by the officers claiming the interest on the entire delayed
payment. However, unless specifically clarified by the Board, the answer to the
recoveries made by the Department earlier claiming the interest on the entire
amount is unclear.
6. Proceedings for Seizure and Confiscation to continue even if the case
of the main accused u/s 73 and 74 is concluded.
Proposal
If a notice is issued u/73 or 74 to the main accused and the same is
concluded, the proceedings initiated against the other persons under section
129 and 130 in terms of seizure and confiscation continues.
Comments
The government intends to make the recovery of tax and the confiscation
proceedings independent of each other. This might keep the confiscation
proceedings prolonged even though the basic recovery is made. The purpose of
the proceedings, even if closed will not necessarily close the confiscation
cases.
7. Recovery can be initiated if no tax is paid corresponding to the
supplies declared under GSTR-01.
Proposal
If the tax assessed as per GSTR-01 is not paid through GSTR-3B, then the
officer is empowered to recover the same under Section 79 of the CGST Act.
Comments
The word “Self-assessed” tax under Section 75 has been amended to
include the tax payable in respect of details of outward supplies furnished
under section 37, but not included in the return furnished under section 39. A
mandatory reconciliation of GSTR-3B and GSTR-01 is required to be done to
ensure that the officers do not issue recovery notices merely due to any
clerical errors.
8. Pre-deposit of 25% of the Penalty is mandatory for filing appeal
against Seizure Order
Proposal
If an appeal against a Seizure Order is to be made, then the appellant
is required to pay 25% of the Penalty as a pre-requisite.
Comments
In addition to the payment of disputed tax, the appellant is now required
to pay Penalty equivalent to 25%. This provision was not so, under the
erstwhile indirect taxes. If an order demanding tax and penalty was issued,
then the pre-deposit was mandated only on the tax amount.
9. Detention and Seizure- No way out
Proposal
·
The payment of tax on the goods to be detained has been done away with.
Instead penalty equal to two hundred percentage of the tax amount is required
to be paid and in case of exempted goods, payment of an amount equal to two per
cent. of the value of goods or twenty-five thousand rupees, whichever is less,
has to be made by the owner of the goods if he comes forward to pay the
penalty.
·
The payment of tax on the goods to be detained has been done away with.
Instead penalty equal to fifty percentage of the value of goods or two hundred
percentage of the tax amount whichever is higher, is required to be paid and in
case of exempted goods, payment of an amount equal to five per cent. of the
value of goods or twenty-five thousand rupees, whichever is less, has to be
made by the owner of the goods if he does not come forward to pay the penalty.
·
The earlier provision of providing Bond/Bank Guarantee equivalent to the
tax, interest, penalty is done away with.
·
The proper officer has to issue a notice for detention/seizure within 7
days from the date of detention/seizure for penalty and thereafter within a
period of 7 days pass order for payment of such penalty.
·
The officer can entertain a personal hearing only for the penalty amount
so specified in the notice and not for the tax or interest amount calculated
thereunder.
·
If the person transporting the goods/owner of the goods fails to pay the
penalty, within 15 days from the date of receipt of the order, then such goods
will be sold/disposed off to recover the same.
·
The conveyance can be released on payment of Rs.1 lakh or as per the
order whichever is less.
·
In case of hazardous items, the time of disposal/sale can be reduced by
the officer.
Comments
- The owner of the goods has no option but
negotiate in terms of payment to get the consignment released. The option
of providing a Bank Guarantee is no more in existence.
- The opportunity of personal hearing shall not
be provided for the liability assessed by the officer in terms of tax and
interest. This is very much against the principle of “Audi Alteram
Partem”.
- Earlier, if there is a delay in payment of
penalty or tax, the officer had to proceed with the confiscation. But as
per the proposed amendment, the goods are subjected to sales/disposal.
This rigid timing can be very detrimental to the business fraternity if
the communication by the transporter is delayed due to reasons beyond the
control of the owner of the goods.
10. Confiscation provision no more has overriding effect
Proposal
The confiscation proceedings are independent of the penalty proceedings
u/s 129 of the CGST Act. The words “Nothing contained in this Act” has been
replaced conveying that this provision is no more an overriding provision.
Further, the penalty payable is equivalent to 100 percent of tax payable on the
goods.
No fine in lieu of confiscation can be made.
Comments
This paves way for multiple proceedings under the Act. The owner of the
goods is mandated to pay an amount equivalent to tax as a penalty which will
monetarily create a block in the funds. Paying an amount in lieu of
confiscation is now not an option. The owner has no option but to litigate and
prove his stand. This will push the flow of business behind and make the job of
answering queries to the Department a primary one.
11. Power of the officer to collect any information required under the
Act
Proposal
The earlier provision empowering the officer to collect information for
statistical purpose has been removed. Instead, the officer is currently
empowered to collect any information from any person for the purpose of this
Act.
Comments
This will mean that the registered person will be deemed to provide any
random information about any supplier merely because he is connected with the
issue.
12. Attention to Personal hearing
Proposal
If the information about the registered person is obtained under Section
150 and 151, then such information should not be used to initiate the
proceedings under the Act without the consent of the concerned person and such
proceedings cannot be initiated without giving an opportunity of personal
hearing.
Comments
Even the Authorised representative can appear and explain the stand if
required.
13. Amending the section in line with newly proposed section 44, 151.
Proposal
Since section 44 and 151 has no subsections, the words “sub-section of
44 and 151” are removed. This also enables the jurisdictional commissioner to
exercise powers under section 151 to call for information.
Comments
The section is amended to bring the new provisions in alignment with the
amended ones.
14. Supply of goods by unincorporated body to its members excluded
Proposal
The supply of goods by unincorporated body to its members was treated as
a supply of goods. This has been proposed to be omitted wef July 1, 2017 as the
definition of supply has been amended to include all the activities between the
body and members to be a supply.
Comments
The scope of unincorporated bodies and the applicability of Doctrine of
Mutuality is now a question.
15. Changes to Zero rated sales and payment of IGST thereof
Proposal
·
Limits the supply of goods or services to SEZ. Not all supplies to SEZ
will be zero rated. It is proposed to include only authorized operations i.e
either specified class of taxpayers or specified supplies of goods or services.
·
·
The registered person making zero rated supply of goods shall, in case
of non-realisation of sale proceeds, be liable to deposit the refund so
received under this sub-section along with the applicable interest under
section 50 of the Central Goods and Services Tax Act within thirty days after
the expiry of the time limit prescribed under the Foreign Exchange Management
Act, 1999 for receipt of foreign exchange remittances and only then he will be
eligible for refund of unutilized input tax credit.
·
The Government may specify a class of persons who may make zero rated
supply on payment of integrated tax and claim refund of the tax so paid; and a
class of goods or services which may be exported on payment of integrated tax
and the supplier of such goods or services may claim the refund of tax so paid.
Comments
The concept of Zero rated supply is henceforth very restrictive in
nature.
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