The President of India gave assent on 29th August 2018 to make amendments to following GST laws:
The Central Goods and Services Tax (Amendment) Act 2018
The Integrated Goods and Services Tax (Amendment) Act 2018
The Union Territory Goods and Services Tax (Amendment) Act 2018
The Goods and Services Tax (Compensation to States) Amendment Act 2018.
The GST council in its 31st GST Council Meeting held on 22nd December 2018, has announced through the press release that the effective date of applicability of amendments in GST Act(s) 2018 will be from 1st February 2019.
Following are Some Key Changes in the Relevant Sections of CGST Act 2017 that are to be replaced with the Central GST Amendment Act 2018:
1. Omission of the definition of business vertical [Amendment of Section 2(18) of the CGST Act, 2017]
Multiple registrations of GSTIN were allowed earlier in case of separate business verticals. The law now allows a separate registration for each place of business in respect of persons having multiple places of business in a state. So, the definition of business verticals is not required anymore under the GST law
2. Definition of services modified to cover facilitation or arranging transactions and securities [Amendment of Section 2(102)]
Service charges or service fees or documentation fees or broking charges or such like fees or charges are charged in relation to transactions in securities, the same would be a consideration for provision of service and chargeable to GST.
3. Restrictive applicability of Section 9 (4) [Amendment of section 9 (4)]
Section 9(4) which deals with payment of tax on reverse charge basis by a registered person upon receipt of supply from unregistered persons is now under suspension
It has been proposed that the government will notify certain class of registered person who shall be liable to pay tax on reverse charge basis in case of receipt of goods from an unregistered person.
Only a notified class of registered taxpayers are purported to be covered by this substituted section now. This will bring a huge sigh of relief to those registered taxpayers who will now be outside the scope of this section as it involved a substantial burden of compliance and cash flow on their part.
4. Amendment of section 10 Increase in composition threshold limit, rationalization of reverse charge provisions and allowance of provision of services for composition dealers
It has been specified that the tax payable under composition scheme will only be in lieu of tax leviable under normal charge/forward charge.
Any reverse charge tax liability upon composition dealers will continue as applicable to a normal taxpayer.
The limit has been raised from Rs 1 Crore to Rs 1.5 Crore so as to facilitate trade practices.
At present, traders and manufacturers engaged in supply of services are not eligible for composition scheme even if a small proportion of their supplies relate to services.
A new provision has been inserted which allows registered person engaged in supply of services (other than restaurant services) to opt for composition scheme subject to a threshold limit.
The registered person shall be eligible for composition only if they supply services of value not exceeding 10% of their turnover in the preceding financial year in a State/ Union Territory or Rs 5 lakhs, whichever is higher.
5. Amendment of section 16 ITC on services provided to any person on direction of/on account of another person
To avail ITC the registered person must be in receipt of goods or services
In Bill-to-ship-to model, it is deemed that goods are received when the supplier delivers the goods to any other person on direction of the recipient
This deemed assumption shall now be applicable in case of services as well.
So, ITC will be allowed to a person on whose direction and account, the third person receives the services.
6. ITC availability on Schedule III items [Amendment of section 17(3)
The new provision has been inserted so as to allow ITC on activities mentioned in Schedule III (other than sale of land and subject to clause (b) of paragraph 5 of Schedule II, sale of building) by removing it from the ambit of exempt supplies. Hence, these clauses will not entail any reversal of credit.
Excluding of supplies covered under Schedule III from the scope of exempt supplies under Section 17(3) will result in lower reversal of credit particularly in case of high sea sales, Merchant trade transactions and supply of warehoused goods before clearance for home consumption.
7. Expansion of Scope of availability of ITC on motor vehicles [Section 17(5) clause (a)]
The amendment is brought to expand the scope of availability of ITC on motor vehicles having approved capacity of not more than 13 persons (including the drivers) if used for specified purposes.
ITC shall be available in respect of dumpers, work-trucks, fork-lift trucks.
ITC shall not be available in respect of motor vehicles having capacity of not more than 13 persons (including the drivers), vessels and aircrafts if they are used for personal purpose.
A new provision has been inserted allowing ITC on motor vehicles if they are used for transportation of money for or by banking company and financial institutions.
ITC in respect of services of general insurance, servicing, repair and maintenance in respect of those motor vehicles, vessels and aircraft on which ITC is not available under clause (a) or (aa)
Unrestricted ITC is allowed in respect of vehicles for transportation of goods
ITC cannot be taken in respect of motor vehicles for transportation of persons even if used for transportation of goods
In respect of vessels and aircrafts, ITC will be blocked except if it is used for certain specified purposes
When used for an insurance company for supply of insurance services, Input tax credit will be available in respect of motor vehicles, vessels or aircraft insured by him.
For all other conveyances, Input tax credit will be freely available (eg. motor vehicles for transportation of persons > 13 persons)
8. Expansion of Scope of ITC for Section 17(5) clause(b) [Section 17(5) clause (b)]
The provisions have been amended so as to allow ITC in respect of goods or services or both specified above if it is made obligatory for an employer to provide such services under any law for the time being in force.
ITC has been enabled on food and beverages, outdoor catering, beauty treatment, Health services etc. if required to be provided by the employer through any obligation Imposed under any law
Renting or hiring of motor vehicles, vessels and aircraft are blocked only if the purchase of such motor vehicles, vehicles and aircrafts are blocked as per clause (a) of (aa)
9. Threshold exemption limit for registration increased for certain states [Amendment of section 22]
The aggregate turnover limit for certain states has been increased from Rs 10 lakhs to Rs 20 lakhs.
The power has been provided under the law to increase the threshold limit for registration for certain special category states on their request from Rs. 10 lakhs to Rs. 20 lakhs
Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand have been excluded from the definition of special category states
10. Compulsory registration only for e-commerce operator required to collect TCS [Amendment of section 24]
All E-commerce operators were required to compulsorily register themselves irrespective of whether they were required to collect TCS
Even a person engaged in supply of goods or services through own website would have required compulsory registration irrespective of their turnover.
This is now rationalized to compulsorily require registration only for those e-commerce operators who are required to collect TCS.
This will benefit small e-commerce operator who are not required to collect tax at source under section 52 to enjoy the threshold exemption limit for registration purposes.
11. Multiple registrations for each place of business and separate registration for SEZ [Amendment of section 25]
Multiple registrations were allowed earlier only in case of separate business verticals. The law now allows a separate registration for each place of business in respect of persons having multiple places of business in a state.
It has now been expressly provided in the Act that a person in a SEZ or being a SEZ developer have to apply for separate registration as compared to his registration in respect of the place of business located outside the SEZ in the same state or territory. Earlier the said provision was contained only in the CGST Rules. To rationalize such provision, the empowering provision is now given in the Act.
12. Suspension allowed upon cancellation of registration [Amendment of section 29]
The new proviso ensures that once the registration has been sought to be cancelled, the proper officer may suspend the registration till the procedural formalities have been completed
The suspension will only be for the period and the manner as may be prescribed in the rules
The registration suspended will not be required to file returns till the suspension is in effect
A person who applied for cancellation and stopped collection and payment of taxes may face extreme hardships if the application for cancellation is rejected. He may not have any recourse as to collect the tax and paying the taxes out of his own pocket may be a huge burden for him.
13. Issue of consolidated credit note and Debit Note in a financial year [Amendment of section 34]
The suppliers are now not required to link Credit and Debit notes with individual invoices.
The supplier may now issue a consolidated credit and Debit note in respect of multiple invoices issued in the financial year.
14. Empowerment of time limit and periodicity for filing of return through rules [Amendment of section 39]
Earlier the provisions of the Act required a person to file their GSTR 3/GSTR 3B by 20th of the next month. So, even though the government wished to make this return quarterly for a select group of taxpayers, it could not circumvent the provisions of the Act
Through this amendment, the periodicity and time for filing of this return is now allowed to be prescribed through the rules
Further, an enabling proviso has been inserted to allow the Government to notify certain category of taxpayers who will be allowed to file this return on a quarterly basis.
15. Utilization of IGST first against payment of any tax [Amendment of section 49]
The new process of utilization requires the utilization of IGST first against payment of any output tax liability in the form of CGST/SGST/UTGST/IGST
The balance of CGST/SGST/UTGST can be used only when the balance of IGST is exhausted
This proviso has been inserted to minimise fund settlement on account of IGST
This has been amended to restrict the utilisation of SGST/UTGST credit available against payment of IGST only when the balance in CGST credit is not available for payment of IGST.
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About Manoj Jain
Manoj Jain, a CA and CS, has been working with IRIS for over 8 years and is currently one of the key subject matter experts for IRIS’ GST compliance offerings. He also has been guiding the clients for GST law related matters. Before GST he was handling US compliance analyzing US financial statements and reviewing XBRL filings for US and India market. He enjoys listening to music and traveling.