Applicable GST Provisions of Finance Act, 2020 from 01.01.2021 

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Pradeep Sharma
Pradeep Sharma
I am a CS Student. I believe, the knowledge & wisdom that reading gives has helped me shape my perspective towards life, career, and relationships. I enjoy meeting new people & learning about their lives & backgrounds. My mantra is to find inspiration from everyday life & thrive to be better each day.

Finance Act, 2020 had made certain amendments in the provisions of the Act. Now vide Notification No 92/2020-Central Tax Dated 22.12.2020, the following amendments, shall come into effect from 01.01.2021:

a. Composition Scheme under GST

Provisions of Sec. 10(2) of the CGST Act, 2017 have been amended to provide that a registered person seeking to pay the tax under composition scheme shall not be engaged in making any supply of even services which is not leviable to tax (over and above the goods not leviable to tax) or shall not be engaged in making any inter-state outward supplies of even services or shall not be engaged in making any supplies or even services through an electronic commerce operator who is required to collect TCS.

Thus, in other words, the 10% permissible limit to even enable the supply of services for a composition supplier of goods shall not however permit the supply of services not leviable to tax, the inter-state supply of services as well as the supply of services through an E-commerce operator required to collect TCS.

It may also be noted that the exempt supply of services provided by way of extending deposits, loans, or advances in so far as the consideration is represented by way of interest or discount shall not be taken into account while reading the said restriction due to specific exclusion of the same by virtue of the third proviso to Sec. 10(1) of the CGST Act, 2017.

b. ITC qua the debit note

It may be noted that the time limit to avail ITC with respect to the tax charged on the debit note before the amendment u/s 16(4) of the CGST Act, 2017 is also linked to the invoice date and not the date of the debit note.

As an example, if the invoice is of FY 2017-18, even if the debit note is issued in FY 2019-20 (e.g. for levy of interest on delayed payment by the customer), the ITC with respect to the said debit note cannot be claimed for the reason that Sec. 16(4) provides for the time limit for claiming the ITC pertaining to the said debit note with reference to the invoice date and as the invoice is for FY 2017-18, the time limit to claim ITC even with respect to the debit note linked with the invoice has expired in March 2019 and as the debit note was issued thereafter ITC cannot be claimed.

Said lacuna is amended by omitting the words “invoice relating to such” and hence the time limit for availing ITC with respect to the debit note would be linked with the date of the debit note and not the date of invoice.

c. Cancellation of a voluntary registration

An amendment has been made u/s 29(1) of the CGST Act, 2017 to provide that even a registered person who has obtained the registration voluntarily can opt for cancellation if such person is otherwise not required to be registered mandatorily u/s 22 (on crossing the threshold) or Sec. 24 (compulsory registration in certain cases).

d. Extension for making revocation application

Sec. 30(1) of the CGST Act, 2017 has been amended to provide that on sufficient cause, the Additional/Joint Commissioner can extend the period for making the revocation application by 30 more days and the Commissioner can extend even further by 30 more days. In other words, a condonation for late filing of the revocation application can be sought up to 60 days from the end of the normal 30 days period subject to sufficient cause.

e. Tax invoice for supply of services

Sec. 31(2) of the CGST Act, 2017 has been amended to grant the power to the Government specify, with respect to categories of services or supplies in respect of which a tax invoice shall be issued, the time limit within which it shall be issued and also the manner in which it shall be issued.

f. TDS Certificate

The procedural part contained in Sec. 51 dealing with the issuance of the TDS certificate and the consequences on certain failures is now to be dealt with by way of a delegated legislation (viz. Rules) and hence the concerned provisions contained in the Act are omitted.

g. Beneficiaries of fake invoicing

New subsection (1A) is introduced in Sec. 122 wherein it has been proposed that a person who retains the benefit of the following transactions:

(i) supplies any goods or services or both without the issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

(ii) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder;

(iii) takes or utilizes input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;

(iv) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder and at whose instance such transactions are conducted shall also be liable to the penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.

The need for the amendment stems from the fact that the actual beneficiaries of fraudulent issuance of invoices and availment of fake credits are different from the registered persons in whose name they are undertaken. Hence to nab the kingpin of such racquets, the penalty will also be imposed on the kingpin who has retained the benefit of such fraudulent transactions and at whose instance they were made.

Parallel to the provisions to impose a penalty on the kingpin of fake credit racquets, an amendment has also been made u/s 132 to punish such kingpin by way of imprisonment and fine. Therefore the person who even causes to commit and retains the benefit of the given offenses would be liable to prosecution. It may also be noted that such offenses of fake invoicing/credits are cognizable and non-bailable if the evasion amount exceeds INR 5 crores.

h. Schedule II

Schedule II is merely a classification schedule and does not determine whether a transaction is a supply or not. Paragraph 4 of the said Schedule provides that the transfer or disposal of goods forming part of the assets of a business shall be considered as a supply of goods even if such transfer or disposal is for consideration or not.

Similarly where the goods held for the purpose of business are put to any private use or made available to any person for a use other than business, then such usage or making available of such goods would be treated as supply of services even if such usage or making available is without consideration.

With this background, it may be noted that Sec. 7(1)(c) of the CGST Act, 2017 only allows the activities specified in Schedule I as supply even if the same is made without a consideration. Hence unless the transaction in question is not covered by Schedule I, Schedule II by way of the above-referred paragraph 4 cannot deem it as a supply if it is made without a consideration.

Therefore the said anomaly is corrected by way of a retrospective amendment effective from 01.07.2017 to the effect that the aspect of presence/absence of consideration will be dealt with by Schedule I only and Schedule II shall merely classify the said transaction once it is established that it is a supply.

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