By Surbhi Premi
GST associated proposals produced in the Union Budget pivot about enhanced enforcement to safeguard the interest of income by removing anomalies and plugging the loopholes in the law top to tax evasion or wrongful availment and/or utilization of ITC. Further, some of the adjustments aimed at assisting enterprises by decreasing the compliance burden and so forth.
Most of the proposed amendments obtain their roots in the agenda notes of the 39th GST council meeting held on March 14, 2020, just prior to the outbreak of the Covid-19 pandemic.
The crucial adjustments that had been announced –
ENHANCED ENFORCEMENT
Safeguarding the levy of GST on supplies by an association or body of persons to its members
GST on supplies of goods or services by an unincorporated or incorporated entity to its members has usually been a topic matter of litigation. There are a bunch of conflicting rulings by AARs and AAARs on the topic matter. Now the controversy on this concern has been place to rest by amending the scope of “supply” beneath GST law retrospectively by introducing a deeming fiction thinking of club and its members as separate persons. This was particularly introduced to more than the Supreme Court selection in the case of Calcultta Club Ltd.
The amendment has taken away the doctrine of mutuality and all supplies of goods and services by several clubs and RWAs to their members shall be leviable to GST retrospectively from 1st July 2017.
ITC readily available to recipient only when particulars of relevant invoices/debit notes are furnished by suppliers in their GSTR-1
Due to poor filing of Kind GSTR-1, there are big gaps in between credit readily available beneath Kind GSTR-2A and self-assessed credit beneath Kind GSTR-3B. Earlier, the division was issuing notices to taxpayers for restricting ITC to the extent reflected in GSTR 2A. Now these actions of division have been provided a statutory force prospectively. However, it is however to be clarified no matter whether the added ITC of 5% (provisional ITC) shall be readily available even if the suppliers have not furnished particulars of relevant invoices/debit notes in their GSTR-1. Also, there is doubt prevalent in the Industry as to ascertainment of ITC basis GSTR-2A or GSTR-2B. Further, the applicability of amendment requires to be examined for invoices raised prior to amendment but received post amendment.
Changes pertaining to Zero Rated Supplies
The amendment has been proposed to provide that supplies to a SEZ developer or a SEZ unit to qualify as zero rated provide only when the stated provide is for authorized operations.
Further, the alternative to make zero-rated provide with payment of IGST and then, claim refund of the tax so paid has been restricted only to notified class of persons or notified class of goods or services. This amendment has been produced to bring uniformity with international practice and place a verify on utilization of fraudulent credit for payment of IGST on exports. However, this will hit these exporters who have no domestic supplies due to the fact the ITC on capital goods shall not be readily available for refund and shall grow to be a price to them.
Refund of unutilized ITC to persons producing zero rated provide of goods linked to realization of sale proceeds in foreign exchange. This amendment has been proposed to give statutory force to rule requiring realization of foreign exchange and in lines with the earlier central excise regime.
Quantum of penalty doubled for release of taxable goods and conveyance upon detention or seizure
Post amendment, detained or seized goods are to be released upon payment of penalty equal to 200% of the tax payable on such goods rather of one hundred% of the tax payable and there is no will need to spend applicable tax beneath these proceedings. This amendment puts to rest the disputes pertaining to payment of tax twice for the identical transaction in some circumstances such as transportation of tax paid goods, requirement to spend tax in appropriate GSTIN via GSTR-3B even right after payment of tax in short-term ID and so forth. However, the provision requires to be tested prior to the courts on the ground of Constitutional validity thinking of liability to spend 200% penalty regardless of the nature of the dereliction.
Further, detention and seizure proceedings have been delinked from confiscation proceedings to make them operational independently.
Self-assessed tax in GSTR-1 which remains unpaid in GSTR-3B can be straight recovered devoid of issuance of Show Cause Notice
It was brought to the notice of the GST Council that for a quantity of GSTINs, the GSTR-1 particulars are significantly bigger than GSTR-3B. Furthermore, a lot of circumstances have been noticed exactly where GSTR-1 has been filed devoid of filing the corresponding GSTR-3B. Therefore, it has been proposed to clarify that scope of self-assessed tax shall include things like tax payable on outward supplies reported in GSTR-1 which remains unpaid in GSTR-3B. Such quantity shall be straight liable to be recovered even devoid of issuance of Show Cause Notice. However, the proposed amendment would place even the genuine taxpayers into problems for the cause that distinction in between GSTR-1 and GSTR-3B can take place on account of several genuine causes as nicely unintentional reporting errors.
Scope of provisional attachment widened
For guarding the interest of income, the spending budget has proposed for provisional attachment of house, such as bank account belonging even to these persons at whose instance the topic transaction has been carried and who has been benefitted out of transaction. Earlier the provisional attachment was applicable only in respect house, such as bank account belonging to taxable persons.
Further, provisional attachment can be produced right after initiation of specified proceedings such as inspection, search, seizure and so forth. The requirement of pendency of any proceedings is no more a precondition for provisional attachment.
Also, the scope has been widened by enabling provisional attachment even right after scrutiny of returns.
TRADE FACILITATION MEASURES
Removal of requirement of GST Audit and reconciliation statement by experts
GST has been criticized for numerous compliances that prove difficult for taxpayers, specifically for smaller and medium-sized enterprises. The spending budget has proposed to eliminate the mandatory requirement of furnishing audited annual accounts and reconciliation statement for registered persons possessing turnover more than specified threshold. Filing of the annual return such as reconciliation statement shall be carried out on a self-certification basis.
It may perhaps be noted that the proposed amendment shall come into impact from a date to be notified later. For Financial Year 2019-20, the current provisions shall continue.
Interest on Net Cash Liability
Finance (No.2) Act, 2019 inserted provision stating that interest is leviable only on that portion of output liability which is discharged by way of money. Now that provision has been proposed to be provided a retrospective impact from 1st July 2017.
Therefore, the hallmark of the 2021 spending budget is enlarging the powers of tax authorities. The only expectation is that the identical is not misused by them against genuine taxpayers.
(Surbhi Premi is the Joint Director at Lakshmikumaran & Sridharan Attorneys. The views expressed are the author’s personal.)