RATIO OF LATEST JUDGEMENTS ON GST
- Kushalchand International Pvt. Ltd. & Anr. Vs The Additional Director, Directorate General of GST Intelligence & Anr. (R/Special Civil Application No. 15904 Of 2023) (Gujarat High Court)
The Gujarat High Court has affirmed that the Directorate General of Goods and Service Tax Intelligence (DGGI) has the authority to transfer the adjudication of a Show Cause Notice (SCN) in GST evasion cases.
The case involved a petition by a company and its Director challenging three SCNs issued by the DGGI, Ahmedabad Zonal Unit. The petitioners argued that the Additional/Joint Commissioner, Kanpur was not the appropriate adjudicating authority as per the relevant jurisdictional provisions.
The Hon’ble bench ruled that SCNs issued by the DGGI should be adjudicated by the competent Central Tax Officer within the jurisdiction where the noticee is registered.
Unity Traders Vs. Govt of NCT of Delhi {W.P.(C) 15847/2024 & CM APPL. 66541/2024 (STAY)} (Delhi High Court)
The Court has held that the parallel enquiry cannot be conducted by the State and Central GST authorities. The bench of Hon’ble Delhi Court has quashed the show cause notice in light of the investigation which has been initiated by the Directorate General of GST Intelligence in terms of a SCN.
The petitioner/assessee has challenged the Show Cause Notice and which had alleged a violation of Rule 21(c) of the Central Goods and Services Tax Rules, 2017. In terms of that SCN and in view of further proceedings being taken thereon, the Goods and Services Tax registration of the petitioner was also suspended.
The court accorded liberty to the State GST authorities to transmit all material information that may be in their possession, and which may be considered as relevant to the inquiry presently being undertaken by the DGGI.
Deltatech Gaming Limited Vs. Union of India & Ors. (WPA 30044 of 2024) (Calcutta High Court)
The Hon’ble High Court has ruled that the non-disclosure of sensitive information gathered by the Directorate General of Goods and Services Tax Intelligence (DGGI) during a search operation does not violate the principles of natural justice. The Hon’ble Court vide this judgment, stated that revealing such information could compromise confidentiality and the integrity of the investigative process, which is essential for safeguarding third-party interests and national security.
The court referred to the Supreme Court’s decision in T. Takano v. Securities and Exchange Board of India (2022), which emphasized the importance of protecting sensitive information during investigations to prevent harm to third parties, market stability, and investor interests. The court clarified that the right to natural justice does not extend to the indiscriminate disclosure of sensitive materials
The court agreed with the department’s stance, ruling that withholding the sensitive information was justified. The petitioner had already received all relevant documents in the form of the show cause notice, ensuring transparency and upholding natural justice.
BUDGET OVERVIEW- KEY CHANGES IN GST
- CLAUSE 116 – AMENDMENT IN SECTION 2 i.e. Definitions
A new Clause (61) of Section 2 of the Central Goods and Services Tax Act is being amended to explicitly provide for distribution of input tax credit by the Input Service Distributor in respect of inter-state supplies on which tax has to be paid on reverse charge basis.
(61)“Input Service Distributor” means an office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9 of this Act or under subsection (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017, for or on behalf of distinct persons referred to in section 25, and liable to distribute the input tax credit in respect of such invoices in the manner provided in section 20;
A new Clause (69) is being inserted in Section 2 so as to clarify the scope of the terms “local fund” and “municipal fund”.
(69) “local authority” means-
(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal fund or local fund;
‘Explanation.–– For the purposes of this sub-clause–
(a) “local fund” means any fund under the control or management of an authority of a local self-government established for discharging civic functions in relation to a Panchayat area and vested by law with the powers to levy, collect and appropriate any tax, duty, toll, cess or fee, by whatever name called;
(b) “municipal fund” means any fund under the control or management of an authority of a local self-government established for discharging civic functions in relation to a Metropolitan area or Municipal area and vested by law with the powers to levy, collect and appropriate any tax, duty, toll, cess or fee, by whatever name called.’;
- CLAUSE 117 & 118 – AMENDMENT IN SECTION 12 & 13
- In section 12 of the Central Goods and Services Tax Act, sub-section (4) shall be omitted.
(4) In case of supply of vouchers by a supplier, the time of supply shall be- (a) the date of issue of voucher, if the supply is identifiable at that point; or (b) the date of redemption of voucher, in all other cases.
- In section 13 of the Central Goods and Services Tax Act, sub-section (4) shall be omitted.
(4) In case of supply of vouchers by a supplier, the time of supply shall be- (a) the date of issue of voucher, if the supply is identifiable at that point; or (b) the date of redemption of voucher, in all other cases.
Comments: As per Clauses 117 & 118 under Notes to Finance Bill, 2025, the above amendment of removing the ‘provision for time of supply in respect of transaction in voucher’, it has also been specifically noted that since the referred ‘supply of vouchers’ is neither a ‘supply of goods nor supply of services’ so there is no requisite of having time of supply of Vouchers as was respectively prescribed under sub-section (4) of Section 12 & sub-section (4) of section 13. But a question arises if the referred ‘supply of vouchers’ is neither a ‘supply of goods nor supply of services’ as mentioned in the Notes then why no amendment in Schedule III pertaining to the “voucher” has been specifically proposed so that such transaction of vouchers could also be unambiguously (without taking rescue of Actionable Claims) treated as “Activities or Transactions which shall be treated neither as a Supply of Goods nor a Supply of Services” under Schedule III
- CLAUSE 119 – AMENDMENT IN SECTION 17 (5) Clause (d)
The Amendment proposed in Sub-section (5) in clause (d) of Section 17 of the Central Goods and Services Tax Act signifies the importance of use of WORDS “and”/ “or” in the provisions of Law––
(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) (other than “plant and machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
Explanation 1.- For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;
The following Explanation shall be inserted, namely: ––
‘Explanation 2.- For the purposes of clause (d), it is hereby clarified that notwithstanding anything to the contrary contained in any judgment, decree or order of any court, tribunal, or other authority, any reference to “plant or machinery” shall be construed and shall always be deemed to have been construed as a reference to “plant and machinery”.
Comments: The said amendments have been done in order to overrule the Judgment of Hon’ble Supreme Court in the case of Chief Commissioner, CGST v Safari Retreat, (2024) 23 Centax 62 (S.C.) by substituting the expression “plant or machinery” with the expression “plant and machinery” in clause (d) to Section 17 and insertion of “Explanation 2” to remove any ambiguity in interpretation for the purpose of availment of input tax credit in such cases.
This amendment shall take effect retrospectively from 1st day of July 2017. But still the claim of ITC in such cases needs to be decided considering the “Functionality Test”, the ray of hope is present.
- CLAUSE 120 – AMENDMENT IN SECTION 20
20 (1) Any office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9 of this Act or under subsection (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017, for or on behalf of distinct persons referred to in section 25, shall be required to be registered as Input Service Distributor under clause (viii) of section 24 and shall distribute the input tax credit in respect of such invoices.
(2) The Input Service Distributor shall distribute the credit of central tax or integrated tax charged on invoices received by him, including the credit of central or integrated tax in respect of services subject
to levy of tax under sub-section (3) or sub-section (4) of section 9 of this Act or under subsection (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017, paid by a distinct person registered in the same State as the said Input Service Distributor, in such manner, within such time and subject to such restrictions and conditions as may be prescribed.
Comments: The said simple amendments in Section 20 would provide for distribution of input tax credit by the ‘Input Service Distributor’ in respect of Inter-State supplies also, on which tax is required to be paid on reverse charge basis. Thus, the scope of Section 20 has been enhanced by providing benefit to ‘Input Service Distributor’ in respect of ‘Tax Invoice’ received for the Inward Supplies of Services received at the place of Distinct Person from outside the State. The amendment will be effective from 1st April 2025 along with the re-drafted provision of Law by Finance Act 2024.
- CLAUSE 121 – AMENDMENT IN SECTION 34
In Section 34 of the Central Goods and Services Tax Act which pertains to Credit & Debit Notes, in sub-section (2), for the proviso, the following proviso shall be substituted, namely:––
(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than 5 [the thirtieth day of November] following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed:
Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.
“Provided that no reduction in output tax liability of the supplier shall be permitted, if the––
(i) input tax credit as is attributable to such a credit note, if availed, has not been reversed by the recipient, where such recipient is a registered person; or
(ii) incidence of tax on such supply has been passed on to any other person, in other cases.”
Comments: This otherwise small substitution has a very major effect on the compliance requirement, to avail the benefit of non-levy of GST on the amount of Credit Note provided by outward supplier. The responsibility on outward supplier of proving that the ITC attributable to Credit Note has either not been availed or have been reversed by the Registered Recipient requires humongous efforts in real business world. Practically speaking many of the large organization shall not be able to avail the benefit of lesser liability of GST attributable to Credit Note more-so the verification of such transaction data shall be challenging
- CLAUSE 122 – AMENDMENT IN SECTION 38
In sub-section (1) of Section 38 pertaining to Communication of Details of Inward Supplies & ITC through GSTR-2B & 2A, for the words “an auto-generated statement”, the words “a statement” shall be substituted;
The details of outward supplies furnished by the registered persons under sub-section(1) of section 37 and of such other supplies as may be prescribed, and a statement containing the details of input tax credit shall be made available electronically to the recipients of such supplies in such form and manner, within such time, and subject to such conditions and restrictions as may be prescribed
(2) The statement under sub-section (a) shall consist of –
- details of inward supplies in respect of which credit of input tax may be available to the recipient; and
(b) details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the recipient including, on account of the details of the said supplies being furnished under sub-section (1) of section 37,– …………………..
“(c) such other details as may be prescribed.”
Comments: Removing the words ‘auto generated’ would mean that the ‘statement’ generated in GSTR2A/2B shall be based on the actions taken by the taxpayer in IMS as now the Revenue Authorities have totally shifted the burden of claiming the ITC through the process of accept/ reject/ pending on the monthly basis for the inward tax invoices reflecting in IMS after due ‘application of mind’ of the taxpayer.
In case the taxpayer does not take any action in IMS then all the tax invoices/ credit notes/ debit notes shall deemed to be accepted.
Now, the taxpayer (inward suppliers) will not be able to deny that he has not claimed ineligible ITC in case of Fake Invoice/ Section 16(2) matters.
- CLAUSE 123 – AMENDMENT IN SECTION 39
In section 39 of the Central Goods and Services Tax Act, in sub-section (1), for the words “and within such time”, the words “within such time, and subject to such conditions and restrictions” shall be substituted.
39[(1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time within such time, and subject to such conditions and restrictions, as may be prescribed:
Provided that the Government may, on the recommendations of the Council, notify certain class of registered persons who shall furnish a return for every quarter or part thereof, subject to such conditions and restrictions as may be specified therein.
Comments: The said amendment would impose some more conditions & restrictions on furnishing of Returns which is nothing but again a hassle for a tax payer in furnishing of its Returns. Instead of making compliance easier for the tax payer, the scenario is made tough and full of hurdles.
The Rule prescribing such new conditions & restrictions has not yet been proposed.
However, the burden of compliance by adhering the new conditions & restrictions will make the process of filing of Returns under Section 39 more cumbersome & complicated for the Taxpayers.
CLAUSE 124 & 125 – AMENDMENT IN SECTION 107 & 112
Section 107(6) & Section 112(8) are being amended to provide for 10% mandatory pre-deposit of penalty amount for Appeals before the First Appellate Authority & Appellate Tribunal respectively in cases involving demand of only ‘penalty’ without any demand for tax in the same Impugned Order.
107 (6) No appeal shall be filed under sub-section (1), unless the appellant has paid-
(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and
(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, [subject to a maximum of twenty crore rupees], in relation to which the appeal has been filed.
[Provided that no appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to twenty-five per cent. of the penalty has been paid by the appellant.
“Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten per cent. of the said penalty has been paid by the appellant.”
112 (8) No appeal shall be filed under sub-section (1), unless the appellant has paid-
(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him, and
(b) a sum equal to ten per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order, [subject to a maximum of twenty crore rupees], in relation to which the appeal has been filed.
“Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten per cent. of the said penalty, in addition to the amount payable under the proviso to sub-section (6) of section 107 has been paid by the appellant”.
Comments: The requirement of mandatory per-deposit of 10% at Frist Appeal stage and then again additional 10% at Tribunal stage has been mandated in cases where only the nature of dispute is ‘penalty’ without involvement of any disputed ‘tax’. This provision is against the principal of approaching Judicial Forums prescribed under Law and could possibly enhance the harassment of the genuine litigants.
Further, it is certainly a hurdle for the taxpayer in its ‘Right to Appeal’ and get justice as an ‘ease of doing business’. Suppose if the penalty is for Rs. 100 crores, then the taxpayer have to deposit Rs. 10 crores at the First Appeal Stage and Rs. 20 crore at Tribunal Stage as pre-deposit which is nothing but an extra financial burden on the litigant tax payer for filing of appeal and exercise its Right under the regular Judicial Process provided under GST Law.
In order to avoid the liability to make pre-deposit of 10% at the First Appeal Stage and further additional 10% at the Tribunal stage on large demand of Penalty, the said amendment would force the taxpayer to directly approach Hon’ble High Courts through Writ Petitioners which may result in further burdening of High Courts.
- CLAUSE 116 – INSERTION OF NEW CLAUSE (116A) OF SEC 2,
BUDGET OVERVIEW- KEY CHANGES IN GST v CLAUSE 116 – AMENDMENT IN SECTION 2 i.e. Definitions
A new Clause (61) of Section 2 of the Central Goods and Services Tax Act is being amended to explicitly provide for distribution of input tax credit by the Input Service Distributor in respect of inter-state supplies on which tax has to be paid on reverse charge basis. (61)“Input Service Distributor” means an office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9 of this Act or under subsection (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017, for or on behalf of distinct persons referred to in section 25, and liable to distribute the input tax credit in respect of such invoices in the manner provided in section 20; A new Clause (69) is being inserted in Section 2 so as to clarify the scope of the terms “local fund” and “municipal fund”. (69) “local authority” means- (c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal fund or local fund; ‘Explanation.–– For the purposes of this sub-clause– (a) “local fund” means any fund under the control or management of an authority of a local self-government established for discharging civic functions in relation to a Panchayat area and vested by law with the powers to levy, collect and appropriate any tax, duty, toll, cess or fee, by whatever name called; (b) “municipal fund” means any fund under the control or management of an authority of a local self-government established for discharging civic functions in relation to a Metropolitan area or Municipal area and vested by law with the powers to levy, collect and appropriate any tax, duty, toll, cess or fee, by whatever name called.’; v CLAUSE 117 & 118 – AMENDMENT IN SECTION 12 & 13
Ø In section 12 of the Central Goods and Services Tax Act, sub-section (4) shall be omitted. (4) In case of supply of vouchers by a supplier, the time of supply shall be- (a) the date of issue of voucher, if the supply is identifiable at that point; or (b) the date of redemption of voucher, in all other cases. Ø In section 13 of the Central Goods and Services Tax Act, sub-section (4) shall be omitted. (4) In case of supply of vouchers by a supplier, the time of supply shall be- (a) the date of issue of voucher, if the supply is identifiable at that point; or (b) the date of redemption of voucher, in all other cases. Comments: As per Clauses 117 & 118 under Notes to Finance Bill, 2025, the above amendment of removing the ‘provision for time of supply in respect of transaction in voucher’, it has also been specifically noted that since the referred ‘supply of vouchers’ is neither a ‘supply of goods nor supply of services’ so there is no requisite of having time of supply of Vouchers as was respectively prescribed under sub-section (4) of Section 12 & sub-section (4) of section 13. But a question arises if the referred ‘supply of vouchers’ is neither a ‘supply of goods nor supply of services’ as mentioned in the Notes then why no amendment in Schedule III pertaining to the “voucher” has been specifically proposed so that such transaction of vouchers could also be unambiguously (without taking rescue of Actionable Claims) treated as “Activities or Transactions which shall be treated neither as a Supply of Goods nor a Supply of Services” under Schedule III. v CLAUSE 119 – AMENDMENT IN SECTION 17 (5) Clause (d)
The Amendment proposed in Sub-section (5) in clause (d) of Section 17 of the Central Goods and Services Tax Act signifies the importance of use of WORDS “and”/ “or” in the provisions of Law–– (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) (other than “plant and machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation 1.- For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; The following Explanation shall be inserted, namely: –– ‘Explanation 2.- For the purposes of clause (d), it is hereby clarified that notwithstanding anything to the contrary contained in any judgment, decree or order of any court, tribunal, or other authority, any reference to “plant or machinery” shall be construed and shall always be deemed to have been construed as a reference to “plant and machinery”. Comments: The said amendments have been done in order to overrule the Judgment of Hon’ble Supreme Court in the case of Chief Commissioner, CGST v Safari Retreat, (2024) 23 Centax 62 (S.C.) by substituting the expression “plant or machinery” with the expression “plant and machinery” in clause (d) to Section 17 and insertion of “Explanation 2” to remove any ambiguity in interpretation for the purpose of availment of input tax credit in such cases.
This amendment shall take effect retrospectively from 1st day of July 2017. But still the claim of ITC in such cases needs to be decided considering the “Functionality Test”, the ray of hope is present.
v CLAUSE 120 – AMENDMENT IN SECTION 20
20 (1) Any office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9 of this Act or under subsection (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017, for or on behalf of distinct persons referred to in section 25, shall be required to be registered as Input Service Distributor under clause (viii) of section 24 and shall distribute the input tax credit in respect of such invoices. (2) The Input Service Distributor shall distribute the credit of central tax or integrated tax charged on invoices received by him, including the credit of central or integrated tax in respect of services subject to levy of tax under sub-section (3) or sub-section (4) of section 9 of this Act or under subsection (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017, paid by a distinct person registered in the same State as the said Input Service Distributor, in such manner, within such time and subject to such restrictions and conditions as may be prescribed. Comments: The said simple amendments in Section 20 would provide for distribution of input tax credit by the ‘Input Service Distributor’ in respect of Inter-State supplies also, on which tax is required to be paid on reverse charge basis. Thus, the scope of Section 20 has been enhanced by providing benefit to ‘Input Service Distributor’ in respect of ‘Tax Invoice’ received for the Inward Supplies of Services received at the place of Distinct Person from outside the State. The amendment will be effective from 1st April 2025 along with the re-drafted provision of Law by Finance Act 2024.
v CLAUSE 121 – AMENDMENT IN SECTION 34
In Section 34 of the Central Goods and Services Tax Act which pertains to Credit & Debit Notes, in sub-section (2), for the proviso, the following proviso shall be substituted, namely:–– (2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than 5 [the thirtieth day of November] following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed: Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person. “Provided that no reduction in output tax liability of the supplier shall be permitted, if the–– (i) input tax credit as is attributable to such a credit note, if availed, has not been reversed by the recipient, where such recipient is a registered person; or (ii) incidence of tax on such supply has been passed on to any other person, in other cases.” Comments: This otherwise small substitution has a very major effect on the compliance requirement, to avail the benefit of non-levy of GST on the amount of Credit Note provided by outward supplier. The responsibility on outward supplier of proving that the ITC attributable to Credit Note has either not been availed or have been reversed by the Registered Recipient requires humongous efforts in real business world. Practically speaking many of the large organization shall not be able to avail the benefit of lesser liability of GST attributable to Credit Note more-so the verification of such transaction data shall be challenging v CLAUSE 122 – AMENDMENT IN SECTION 38 In sub-section (1) of Section 38 pertaining to Communication of Details of Inward Supplies & ITC through GSTR-2B & 2A, for the words “an auto-generated statement”, the words “a statement” shall be substituted; (1) The details of outward supplies furnished by the registered persons under sub-section(1) of section 37 and of such other supplies as may be prescribed, and a statement containing the details of input tax credit shall be made available electronically to the recipients of such supplies in such form and manner, within such time, and subject to such conditions and restrictions as may be prescribed. (2) The statement under sub-section (1) shall consist of – (a)details of inward supplies in respect of which credit of input tax may be available to the recipient; and (b) details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the recipient including, on account of the details of the said supplies being furnished under sub-section (1) of section 37,– ………………….. “(c) such other details as may be prescribed.” Comments: Removing the words ‘auto generated’ would mean that the ‘statement’ generated in GSTR2A/2B shall be based on the actions taken by the taxpayer in IMS as now the Revenue Authorities have totally shifted the burden of claiming the ITC through the process of accept/ reject/ pending on the monthly basis for the inward tax invoices reflecting in IMS after due ‘application of mind’ of the taxpayer. In case the taxpayer does not take any action in IMS then all the tax invoices/ credit notes/ debit notes shall deemed to be accepted. Now, the taxpayer (inward suppliers) will not be able to deny that he has not claimed ineligible ITC in case of Fake Invoice/ Section 16(2) matters. v CLAUSE 123 – AMENDMENT IN SECTION 39 In section 39 of the Central Goods and Services Tax Act, in sub-section (1), for the words “and within such time”, the words “within such time, and subject to such conditions and restrictions” shall be substituted. 39[(1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time within such time, and subject to such conditions and restrictions, as may be prescribed: Provided that the Government may, on the recommendations of the Council, notify certain class of registered persons who shall furnish a return for every quarter or part thereof, subject to such conditions and restrictions as may be specified therein. Comments: The said amendment would impose some more conditions & restrictions on furnishing of Returns which is nothing but again a hassle for a tax payer in furnishing of its Returns. Instead of making compliance easier for the tax payer, the scenario is made tough and full of hurdles. The Rule prescribing such new conditions & restrictions has not yet been proposed. However, the burden of compliance by adhering the new conditions & restrictions will make the process of filing of Returns under Section 39 more cumbersome & complicated for the Taxpayers. v CLAUSE 124 & 125 – AMENDMENT IN SECTION 107 & 112 Section 107(6) & Section 112(8) are being amended to provide for 10% mandatory pre-deposit of penalty amount for Appeals before the First Appellate Authority & Appellate Tribunal respectively in cases involving demand of only ‘penalty’ without any demand for tax in the same Impugned Order. 107 (6) No appeal shall be filed under sub-section (1), unless the appellant has paid- (a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and (b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, [subject to a maximum of twenty crore rupees], in relation to which the appeal has been filed. [Provided that no appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to twenty-five per cent. of the penalty has been paid by the appellant. “Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten per cent. of the said penalty has been paid by the appellant.” 112 (8) No appeal shall be filed under sub-section (1), unless the appellant has paid- (a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him, and (b) a sum equal to ten per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order, [subject to a maximum of twenty crore rupees], in relation to which the appeal has been filed. “Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten per cent. of the said penalty, in addition to the amount payable under the proviso to sub-section (6) of section 107 has been paid by the appellant”. Comments: The requirement of mandatory per-deposit of 10% at Frist Appeal stage and then again additional 10% at Tribunal stage has been mandated in cases where only the nature of dispute is ‘penalty’ without involvement of any disputed ‘tax’. This provision is against the principal of approaching Judicial Forums prescribed under Law and could possibly enhance the harassment of the genuine litigants. Further, it is certainly a hurdle for the taxpayer in its ‘Right to Appeal’ and get justice as an ‘ease of doing business’. Suppose if the penalty is for Rs. 100 crores, then the taxpayer have to deposit Rs. 10 crores at the First Appeal Stage and Rs. 20 crore at Tribunal Stage as pre-deposit which is nothing but an extra financial burden on the litigant tax payer for filing of appeal and exercise its Right under the regular Judicial Process provided under GST Law. In order to avoid the liability to make pre-deposit of 10% at the First Appeal Stage and further additional 10% at the Tribunal stage on large demand of Penalty, the said amendment would force the taxpayer to directly approach Hon’ble High Courts through Writ Petitioners which may result in further burdening of High Courts. v CLAUSE 116 – INSERTION OF NEW CLAUSE (116A) OF SEC 2, CLAUSE 126 & 127 – INSERTION OF NEW SECTION 122B & 148A Track and Trace Mechanism A new clause (116A) is being inserted in section 2 to provide definition of ‘Unique Identification Marking’ for implementation of Track and Trace Mechanism. Insertion of (116A) “unique identification marking” means the unique identification marking referred to in clause (b) of sub-section (2) of section 148A and includes a digital stamp, digital mark or any other similar marking, which is unique, secure and non-removable;’ New section 122B for Penalty in case of failure to comply with Track and Trace Mechanism. “122B. Notwithstanding anything contained in this Act, where any person referred to in clause (b) of sub-section (1) of section 148A acts in contravention of the provisions of the said section, he shall, in addition to any penalty under Chapter XV or the provisions of this Chapter, be liable to pay a penalty equal to an amount of one lakh rupees or ten per cent. of the tax payable on such goods, whichever is higher.”. New section 148A is being inserted to provide for an enabling mechanism for Track and Trace Mechanism for specified commodities. “148A. (1) The Government may, on the recommendations of the Council, by notification, specify,– (a) the goods; (b) persons or class of persons who are in possession or deal with such goods, to which the provisions of this section shall apply. (2) The Government may, in respect of the goods referred to in clause (a) of sub-section (1),– (a) provide a system for enabling affixation of unique identification marking and for electronic storage and access of information contained therein, through such persons, as may be prescribed; and (b) prescribe the unique identification marking for such goods, including the information to be recorded therein. (3) The persons referred to in sub-section (1), shall,–– (a) affix on the said goods or packages thereof, a unique identification marking, containing information in prescribed manner; (b) furnish such information and details within such time and maintain such records or documents, in such form and manner; (c) furnish details of the machinery installed in the place of business of manufacture of such goods, including the identification, capacity, duration of operation and such other details or information, within such time and in such form and manner; (d) pay such amount in relation to the system referred to in sub-section (2), as may be prescribed.”. Comments: The introduction of “trace and track mechanism” is another method of checking tax evasion. But it should be taken into consideration that implementation of these mechanism would be detrimental for ‘small players’. Further, the penal clause could drain out their whole profits. In our opinion, Government shall reconsider this before implementing the said Amendments. Better Tax Administration with transparency and honesty could be a solution to avoid such further stringent measures on businesses. This insertion in Section 2 in the shape of new definition Clause (116A) is in respect to new insertion of Section 148A providing “trace and track mechanism” along with Section 122B which prescribes ‘Penalty’ for non-compliance of provisions under newly inserted Section 148A. A completely new requirement of compliance has been introduced by providing new Section 148A by way of defining under Sec 2 Clause (116A) “unique identification marking” in respect of the Goods to be adhered with by the Persons or Class of Persons who are in possession or deal with such goods as may be specified in the Notification to be issued by the Government. Non-compliance of such strict requirement of identification of Goods and information related therewith shall entail a minimum Penalty of Rs. 1,00,000/- which may go maximum to the extent of 10% of the value of Goods whichever is higher. The Government may provide a system in respect of specified Goods for enabling affixation of ‘unique identification marking’ for electronic storage and access of information. The person or class of persons who are in possession or deal with such goods shall affix ‘unique identification marking’ on the said goods or packages thereof. Such person or class of persons has to furnish such information and details within such time and maintain such records or documents, in such form and manner as may be prescribed by the Notification. This requirement of information shall include details of the machinery installed in the place of business of manufacture of such goods, including the identification, capacity, duration of operation and such other details or information. v CLAUSE 128 – AMENDMENT IN SCHEDULE III In paragraph 8, after clause (a), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of July, 2017, namely: –– 8. (a) Supply of warehoused goods to any person before clearance for home consumption; “(aa) Supply of goods warehoused in a Special Economic Zone or in a Free Trade Warehousing Zone to any person before clearance for exports or to the Domestic Tariff Area;” (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption. Explanation 8 [1].-……… [Explanation 2.- For the purposes of paragraph 8, the expression “warehoused goods” shall have the same meaning as assigned to it in the Customs Act, 1962 (50 of 1962).] “Explanation 3.- For the purposes of clause (aa) of paragraph 8, the expressions “Special Economic Zone”, “Free Trade Warehousing Zone” and “Domestic Tariff Area” shall have the same meanings respectively as assigned to them in section 2 of the Special Economic Zones Act, 2005.” Comments: This amendment have provided that the supply of goods warehoused in SEZ or in Free Trade Warehousing Zone to any person before clearance for exports or to the Domestic Tariff Area shall be treated neither as supply of goods nor as supply of services which is a very good move for the people engaged in exports of Goods or providing service of warehousing such Goods before Export in specified area. AS PER CLAUSE 129, no refund shall be made of all such tax which has been collected, but which would not have been so collected, had section 128 been in force at all material times. Thus, no refund would be available for the relief now granted retrospectively as per the above amendment in Para 8 of Sch. III, if the tax on such transactions of supply has been collected or deposited. |
Disclaimer: Pursuant to the Bar Council of India rules, we are not permitted to solicit work and advertise. You, the reader acknowledges that there has been no advertisement, personal communication, solicitation, invitation or inducement of any sort whatsoever from us or any of our members to solicit any work through this newsletter. The information provided in this newsletter is solely available at your request and is for informational purposes only, it should not be interpreted as soliciting or advisement. We are not liable for any consequence of any action taken by the reader relying on material/ information provided in the newsletter. In cases where the reader has any legal issues, he/she must in all cases seek independent legal advice. Any information obtained or materials used from this newsletter is completely at the reader’s volition and any transmission, receiptor use of the contents of this newsletter would not create any lawyer-client relationship.