Union Budget 2021: Overview of changes under GST

The Finance Minister (FM) presented the Finance Bill on February 1, 2021, during the Union Budget presentations 2021.

Through the Budget, from GST perspective, to safeguarding the government's revenue, some powers have been granted to the commissioner. In addition, the GST Act has been amended to include, restriction on availing ITC (Input Tax Credit), change in scope of supply, certain relaxation in filing of annual return, clarification in payment of interest liability, option of export with payment of tax or without payment of tax and refund will be available notified class of taxpayers.

Amendment in the Central Goods and Services Tax Act, 2017 (CGST Act, 2017)

  1. Section 7(1) (aa): Scope of Supply (Insertion of new sub-section): Irrespective of supply made by unincorporated clubs or association to its members or vice versa, it will be considered a supply in the GST regime. It would be liable for tax on cash collected from members. This change will have a retrospective effect from the date of GST implementation, i.e., 01.07.2021.
  2. Section 16(2) (aa): Eligibility and conditions for taking input tax credit: Considering this effect, now Input tax credit (ITC) will be available to the recipient only for those invoices which the supplier has duly uploaded in its return (GSTR-1). It means the invoice reflecting in the recipient's auto-populated Form GSTR-2A. For those invoices, only the recipient will be eligible to avail the ITC.
  3. Section 44: Annual Return: As per the amendment in section 44, now Annual returns can be furnished with self-certified reconciliation statement and reconciling the value of supplies declared in the furnished return i.e., Form GSTR 3B and Form GSTR-1. Further, power has been granted to the commissioner to exempt a class of persons from annual returns.
  4. The omission of Section 35(5): It has been proposed to remove the mandatory requirement of getting annual accounts audited and filing reconciliation statements from the practitioner like a chartered accountant (CA) or Cost Accountant (CMA).
  5. Section 44: Annual return: As per the amendment in section 44, now annual returns can be furnished with self-certified reconciliation statement and reconciling the value of supplies declared in the furnished return, i.e., Form GSTR 3B and Form GSTR-1. Further, power has been granted to the commissioner to exempt a class of persons from annual returns.
  6. Section 50(1): Interest on delayed payment of tax: Interest will be liable to pay on the net cash tax liability, which means cash balance which is available in electronic cash ledger (ECL) will be deducted from the actual tax liability, and on the remaining portion to off-set, the tax liability will be liable for the interest as mentioned in Section 50(1) of CGST Act, 2017. This is in line with the 39th GST council meeting. This change will affect retrospectively from 01.07.2017.
  7. Section 75(12): General provisions relating to the determination of tax: The word "self-assessed tax" shall include the tax payable in respect of outward supplies, the details of which have been furnished under section 37 (Form GSTR-1) but not included in the return delivered under section 39 (Form GSTR-3B). This has widened the scope of self-assessment and consists of the supply declared the Form GSTR-1.
  8. Section 83(1): Provisional attachment to protect revenue in certain cases: If the Commissioner thinks fit, he/she can order in writing to attach the provisionally any property, including bank account and belonging even after the initiation of the proceedings rather than pendency of any proceedings. This attachment shall remain valid till one year from the date of order given in Section 83(1) of CGST Act, 2017. 
  9. Section 107(6): Appeals to Appellate Authority: No appeal shall be filed, in case of the first appeal to appellate authority in case of seizure and confiscation of goods and conveyance during the transit, without payment of the pre-deposit amount of 25% of the penalty amount imposed.  
  10. Section 151: Power to collect statistics: This amendment has enhanced the commissioner's power to call for any information from any person relating to a matter dealt with.
  11. Section 152: Bar on disclosure of information: As amendment in section 151 commissioner can ask for any information from anyone involved in the matter but before accessing any information opportunity of being heard has to give.
  12. As the introduction of new subsection (aa) in Section 7(1) of the scope of supply of CGST Act, 2017, Schedule II paragraph 7 has been omitted from the CGST Act,2017.

Amendment in the Integrated Goods and Services Tax Act, 2017 (IGST Act, 2017)

Considering this amendment in Section 16 of IGST Act, 2017, now supplies of goods and services to only special economic zone developers or special economic zone units for authorized operations will enjoy the benefit of the zero ratings.

In the current scenario as per section 16(3) of IGST Act, 2017 there is two way of claiming refund of accumulated input tax credit (ITC):

  1. Making supplies with payment of integrated tax and claiming refund thereof;
  2. Making supplies without payment of integrated tax and claiming accumulated ITC based on formula mentioned in Rule 89(3) of CGST Act, 2017.

Considering the above amendment, it restricts the zero-rated supply on payment of integrated tax only to a notified class of taxpayers or notified supplies of goods or services. 

Further, it has been proposed that in case of a refund without payment of integrated tax, the foreign realization shall be received on or before the time limit prescribed in the Foreign Exchange Management Act, 1999 (FEMA, 1999). On non-realization on such foreign exchange, the applicant shall be liable to deposit the refund within thirty days after expiry of the time limit given in FEMA, 1999, along with the interest as mentioned in Section 50 of CGST Act, 2017

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