Standard Operating Procedure (SOP) for implementation of the provision of suspension of registrations under sub-rule (2A) of rule 21A of the CGST Rules, 2017 – Circular No. 145/01/2021-GST dated 11th February, 2021
New Rule 21A (2A) has been introduced for immediate suspension of Registration of a person. In the above Circular, guidelines are given to the field formations about implementation of the Rule.
Extension for sanction of pending IGST refund claims where the records have not been transmitted to ICEGATE due to GSTR1 and GSTR3B mismatch error – Circular No. 12/2018-Customs dated 29th May, 2018; Cir-04 of 2021-Customs dated 16th February, 2021
For getting IGST refund by exporters, matching of data in GSTR1 and GSTR3B is required to match with ICEGATE. Due to representations the time was already extended for doing the needful by the stakeholders. The Customs Department has issued the above Circular to give further extended time as well as giving relaxation for the period up to 31st March, 2021. The stakeholders may refer to the above Circular for more details. Further, Cir-05 of 2021-Customs dated 17th February, 2021 has been issued providing for an alternate mechanism.
FAQ on QRMP Scheme
The Department has issued an FAQ on the QRMP scheme which is available on the site. The provisions are explained stepwise for easy understanding.
BUDGET – 2021-2022
Proposed amendments to the CGST Act
The Finance Bill, 2021 introduced in the Budget session of Parliament contains certain proposals of far-reaching consequences in the CGST Act. The indicative changes (amendments) are as under:
1. Amendment in section 7 of the CGST Act
Section 7 defines the meaning of ‘supply’. In the said section 7, clause (aa) in sub-section (1) is proposed to be added.
The intention of the amendment appears to be to do away with the concept of mutuality in relation to the applicability of GST. There are on-going and possible future disputes as to whether transactions of clubs, societies, etc., with their members amount to supply. The main thrust in such disputes is on the fact that a club and its members are not separate entities and that there is a concept of mutuality between them. The judgment of the Supreme Court in the case of State of West Bengal vs. Calcutta Club Limited in Civil Appeal No. 4189 of 2009 dated 3rd October, 2019 is being considered as supporting the above theory. It appears that the above amendment is proposed to tide over the possible disputes. The amendment, with an Explanation thereto, seeks to treat particular entities and their members to be separate persons and activities / transactions inter se to be treated as supply.
The insertion is proposed to be retrospective, i.e., to be effective from 1st July, 2017.
Simultaneously, paragraph (7) in Schedule II to the CGST Act, which provides similar treatment in case of unincorporated associations, etc., is proposed to be deleted. This may be due to the above proposed amendment which is considered to be wide enough to cover contingencies covered by the above paragraph (7).
2. Amendment in section 16
Section 16 is to provide for ITC to Registered Person (RP). The availability of ITC is subject to various conditions. Now, one more condition is proposed to be added by way of insertion of clause (aa) in section 16(2) of the CGST Act.
To be eligible to get ITC, the claimant RP should possess the tax invoice or debit note. In addition to this, the proposed amendment requires that the invoice or debit note should be reflected in the outward details furnished by the supplier and also should have been communicated to the claimant in the manner specified in section 37.
The onerous burden on the recipient is increasing and he will now be at the mercy of the supplier to get his lawful ITC.
3. GST audit by professionals
Section 35(5) of the CGST Act provides for submission of a reconciliation statement audited by a professional like a CA or a Cost Accountant if the turnover exceeds the prescribed limit. Now, this section 35(5) is proposed to be deleted. The effect will be that there will be no requirement of such an audit by any professional.
4. Self-certified annual reconciliation statement
A new requirement of filing a self-certified reconciliation statement as part of the annual return by the RP is proposed to be introduced by substituting the existing provisions of section 44.
5. Interest – On cash portion
Section 50(1) provides for payment of interest in respect of delay in tax payment on supplies in relation to a tax period.
In other words, section 50(1) provides that the delay in payment of tax shown in the return should be liable to interest. There was confusion as to whether it is attracted on gross liability on supplies or net liability, i.e., after adjustment of ITC against outward tax liability. The issue is under resolution.
Although it was sorted out in previous amendments, the issue still remained whether it is from 1st July, 2017 or prospective.
Now the proviso is added in section 50(1) and it has been made clear that the amended provision will apply from 1st July, 2017. As per this provision interest will get attracted on the cash portion involved in the discharge of the liability as per the return. The above provision is subject to other inclusions and exclusions.
6. Conclusion of proceedings – section 74
Sections 73 and 74 are in the nature of assessment provisions. Sub-clause (ii) to Explanation I of section 74 provides that if the proceedings against the main person are concluded, then they shall also be deemed to be concluded in the case of the other connected persons in respect of penalty under sections 122, 125, 129 and 130.
The scope of this deemed conclusion is now sought to be curtailed. Such conclusion will be in respect of proceedings under sections 122 and 125 and not in relation to sections 129 and 130 which relate to detention, confiscation and penalty. It appears that in spite of the conclusion of proceedings against the main person, the penalty proceedings under sections 129 and 130 against connected persons are intended to be continued independently.
7. Recovery – section 75
Amongst others, section 75(12) provides for the recovery of unpaid tax as per the returns. It can be recovered as per section 79. Now, the scope of the said section is proposed to be expanded by providing that it will include differential tax shown in the details of the outward supplies furnished u/s 37 (GSTR1) and return in section 39 (GSTR3B).
The intention appears to be that if a person shows more tax payable in GSTR1 but shows lesser liability in GSTR3B, then the difference can be recovered under the provisions of section 79 without going through the proceedings of sections 73 and 74, etc.
8. Provisional attachment – scope widened
Section 83 provides for provisional attachment of property of a taxable person in specific circumstances. Now, the said power can be exercised in case of other persons also who are specified in sub-section (1A) of section 122. The above provision is also made applicable in relation to all proceedings under Chapter X.
Section 122(1A) covers persons such as the one who retains benefit and at whose instance the given transactions are conducted. In other words, section 122(1A) makes the beneficiary liable to penalty leviable u/s 122. Now, provisional attachment provisions will also apply to such other persons. The implication will be far-reaching and may cover a wide range of persons.
9. Appeal – mandatory payment
Section 129 relates to detention, seizure and release of goods and conveyances in transit. Section 129(3) provides for levy of tax / penalty in relation to offences u/s 129.
As per the present appeal provisions in section 107, no amount is payable against penalty before filing an appeal.
However, now an amendment is proposed in section 107(6) to provide that in case of an appeal against an order u/s 129(3), no appeal can be filed unless 25% of the penalty amount is paid.
10. Increase in penalty amount u/s 129
Section 129 is regarding detention, seizure and release of goods and conveyances in transit.
In clause (a) of section 129(1), the penalty limit is 100% of tax payable, which is now proposed to be enhanced to 200%. However, reference to payment of tax is proposed to be deleted.
Similarly, in clause (b) of section 129(1), the penalty limit is being reset and it can be equal to 50% of the value of the goods or 200% of the tax payable, whichever is higher. Sub-section (2) of section 129 is proposed to be omitted. This section is regarding applicability of provisions of section 67 to section 129.
Section 129(3) provides for passing of order by the proper officer. There is no time limit in the said section. Now, a time limit of seven days is proposed to be provided for issue of notice and seven days for passing of order from the date of service of the notice.
At present, section 129(4) directs to give opportunity of hearing before determining tax, interest and penalty attracted u/s 129. Now, the said hearing is proposed to be restricted to tax only as per proposed amendment in section 129(4).
Sub-section 129(6) gives powers for initiation of proceedings as per section 130 in case of failure to pay tax and penalty within seven days. Section 130 provides for confiscation and disposal of goods and conveyances.
Section 129 is now delinked from section 130 and an independent provision is being proposed by substitution of section 129(6).
As per the proposed provision, the disposal can be made u/s 129(6) itself on failure to pay the penalty levied u/s 129(3) within 15 days.
The section has other attributes, too, to be seen in detail.
11. Penalty u/s 130
Changes are proposed in section 130, which is regarding confiscation of goods and conveyances and disposal thereof.
There is reference to levy of penalty and in the second proviso to section 129(2) the quantum is restricted to penalty leviable as per section 129(1). Now, the penalty quantum is proposed to be specified in the second proviso itself which will be equal to 100% of tax payable on such goods.
12. Section 151 relates to collection of statistics by issue of notification, etc. Section 151 is now proposed to be substituted. As per the proposed substituted section 151, the Commissioner or an Officer authorised by him can call for information by issue of order.
The proposed amendment may have substantial implications.
13. Proposed amendment to section 152 is about a bar on disclosure of information. As per section 152(1) the information about any individual return or part
thereof cannot be disclosed without the consent of the person concerned. Now, the proposed change omits reference to individual returns. The effect will be that
no information can be disclosed without the consent of
the person concerned. The proposed change also provides for an opportunity of a hearing to the person concerned.
Section 152(2) provided for restrictions about the use of this section. But now section 152(2) is proposed to be omitted, resulting in removal of such restrictions.
There are also proposed changes in section 168 which are procedural in nature.
Proposed Amendments in IGST Act
Supply to SEZ units
Section 16 of the IGST Act deals with zero-rated supply. Sub-clause (b) in section (1) of section 16 covers zero-rated supply to SEZ developer / unit. Till now there is no speaking condition in the Act that supply to such entities should be for authorised operations only. Now, by an amendment in section 16(1)(b) the words ‘for authorised operation’ are proposed to be added.
The implication of this is that the supply should be for authorised operations of SEZ developer / units. How to find out and substantiate that the supplies are for the authorised operations of such entities is going to be difficult.
Under earlier laws, there used to be a scheme of obtaining declaration forms, etc., from buyers. It is felt that a similar scheme is required to be brought in otherwise it will be very difficult to sustain the claim by a supplier who has no control over such recipient entities.
Refund in relation to zero-rated supply
Section 16(3) specifies about entitlement of claim of refund in the case of zero-rated supplies. The said section is proposed to be substituted. The proposed substituted section intends to continue refund of unutilised ITC in the case of zero-rated supply under bond and LUT, but with added conditions.
By a proviso to the proposed substituted section 16(3), it is being provided that in case of non-realisation of sale proceeds as per the Foreign Exchange Management Act, 1999 (FEMA) such refund should be returned back with interest u/s 50 within 30 days from expiry of the time limit of realisation.
Classification
Section (4) is proposed to be inserted in section 16 by which the Government will take over power to specify the class of persons who can make zero-rated supply on payment of IGST as also the class of goods or services in relation to which the supplier of such goods / services can claim refund.
Some of the budget proposals are intricate in nature. The above is only an indicative note and there is no in-depth analysis. The readers should refer to the provisions in detail to understand the implications.
ADVANCE RULING
ITC in relation to temporary structure created for wedding and other banquet functions
M/s VDM Hospitality Pvt. Ltd. [Advance Ruling No. HAR/HAAR/R/2019-20/02 dated 21st June, 2020] (Haryana)
The applicant is a company engaged in the business of organising weddings and other banquet functions on a large scale at its premises at Ambience Golf Drive, Gurugram, Haryana. The said site is among the premier locations for wedding functions in Delhi NCR.
For carrying out the above functions, the applicant creates a temporary structure (i.e., a ‘hall’) on the said premises. The hall is prepared with different materials such as iron and steel pillars, sheets, pumps, angles which are tightened with nuts and bolts. The frame is further covered with iron sheets and canvas for coverage and waterproofing and plywood is used on the inner portion which makes the roof smooth, and then the decoration is done.
The applicant approached the Haryana Authority for Advance Ruling (AAR) seeking determination whether he is entitled to ITC in relation to inward supply for the above temporary structure. The issue involved was whether it is movable property or immovable property. If the structure is considered as immovable property, then the ITC will not be eligible in view of section 17(5)(d) of the CGST Act.
The applicant cited many judgments in relation to the nature of movable and immovable properties. The learned AAR also referred to the meaning of ‘immovable property’ in the General Clauses Act, 1897 as well as the Transfer of Property Act, 1882. One of the aspects of immovable property is that it is attached to the earth.
The learned AAR observed on the facts that the structure is erected on the premises of the applicant and it is not intended to be dismantled but it is for permanent enjoyment. There is also large-scale civil work which further supports the view that it is permanent in nature. The AAR finally observed that although the walls and roof are replaced with prefabricated structures, it cannot be categorised as movable goods. Therefore, he held that it is immovable property and ITC is ineligible.
