In this post, we have discussed the recent GST changes effective from the 1st of October 2023. Sections 137 to 162 of the Finance Act, 2023 (the FA,2023) (except Sections 149 to 154) wef October 01, 2023 vide Notification no. 28/2023-Central Tax dated July 31, 2023.
From August 01, 2023 Sections 149 to 154 of the FA, 2023 came into force and that does not count under this blog.
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Latest Modifications in CGST ACT
Here are some of the latest changes in the Central Goods and Services Tax Act (CGST ACT) effective from 1st Oct, 2023:
Clarificatory Revision to GST Section 138 Regarding Payment to the Supplier
In order to align the legal language with the return filing system established in the CGST Act, the updated provision now states that if a recipient fails to settle the invoice amount, which includes taxes, to the supplier within 180 days from the invoice date, the recipient must pay an amount equivalent to the Input Tax Credit (ITC) they have claimed. This payment is in addition to the interest outlined in Section 50 of the CGST Act. The amendment brings a change to the previous provision, where ITC was considered an addition to the output tax liability. Instead, it now imposes a new requirement for either payment or ITC reversal.
As a result, the determination of interest liability on aforesaid reversal will follow the guidelines of Section 50(3) rather than 50(1) of the CGST Act, but only when the incorrectly claimed credit is used by the registered person.
GST Section 139: Supply of Warehoused Goods to Individual
For objectives of changing the common ITC U/S of 17(2) and (3) of the CGST Act, warehoused goods sold before filing BOE are contained in the value of GST-exempt supplies under
This modification pertains to paragraph 8(a) of Schedule III in the CGST Act, which involves the supply of warehoused goods to any individual before their clearance for home consumption. This change categorizes it as an exempted supply for the purpose of reversing the common Input Tax Credit (ITC) under Section 17(2) and (3) in conjunction with Rules 42 and 43 of the CGST Rules.
Section 17(5)(fa) of the CGST Act deals with the blocking of ITC for CSR activities
Starting from now, there will be limitations on the eligibility for ITC on goods or services received by a taxable person when these goods or services are utilized or intended to be used for activities associated with fulfilling Corporate Social Responsibility (CSR) obligations. Please note that this restriction applies prospectively.
GST Section 137: Supply of Goods via ECO
Previously, registered individuals involved in supplying goods through an E-commerce operator (ECO) did not have access to the Composition Scheme’s benefits. Now, these benefits will be extended to them. However, certain restrictions will still apply to registered individuals engaged in providing services through an E-commerce operator.
The Central Board of Indirect Taxes and Customs (CBIC) has issued Notification Nos. 36/2023 and 37/2023 – Central Tax on August 04, 2023. These notifications outline a special procedure that E-commerce operators must follow when dealing with the supply of goods by individuals who are tax-paying Composition Dealers under Section 10 of the Act.
Below are the mentioned processes:
- The E-commerce operator (ECO) is forbidden from facilitating any inter-state supply of goods through its platform for the mentioned individual.
- The ECO will only permit the supply of goods through its platform for the mentioned individual if they have been allotted an enrollment number on the common portal.
- The ECO is obligated to collect tax at source, as per subsection (1) of Section 52 of the CGST Act, for the goods supplied by the mentioned individual through its platform.
- The ECO must electronically submit the details of the goods supplied by the mentioned individual through its platform in the statement using GST FORM GSTR-8.
GST Section 146: Refunds and Interest on Late Refunds
This amendment aims to harmonize the treatment of input tax credit (ITC) by eliminating the mention of provisionally accepted ITC. It brings it in line with the self-assessed ITC procedure outlined in Section 41(1) of the CGST Act.
Under Section 54(6), a provisional refund of ninety per cent of the total claimed amount is permitted, excluding the amount of provisionally accepted input tax credit, in the case of zero-rated supply.
Section 147 of the FA, 2023 – Section 56 of the CGST Act:
The government will have the authority to establish the procedures, calculations, methods, and limitations for the payment of interest on refunds that are delayed beyond 60 days from the date of receiving the refund application until the actual refund date.
[Notification No. 38/2023- Central Tax dated August 04, 2023]
GST Section 140: Retrospective Overriding Effect
This modification will have a retroactive effect starting from July 01, 2017. It grants an exemption to individuals from the requirement of registering for GST as per Section 22(1) of the CGST Act and from mandatory registration under Section 24 of the CGST Act. For instance, individuals who were already exempt from compulsory registration, such as those who exclusively make supplies under the Reverse Charge Mechanism (RCM), those providing services through an E-Commerce Operator with an aggregate turnover not exceeding INR 20 lakhs in a fiscal year, those involved in the supply of handicraft goods with an aggregate turnover not exceeding INR 20 lakhs in a fiscal year, or those engaged in inter-state supplies of taxable services with an aggregate turnover not exceeding INR 20 lakhs in a fiscal year, are not required to obtain GST registration.
GST Section 141: Revocation or Cancellation of GST Registration
Section 30(1) of the CGST Act will extend the time limit of 30 days for moving an application for revocation or cancellation of GST registration. The time duration has now surged to 90 days from the order date of cancellation or such further period as may be authorized by the commissioner but not more than 180 days as specified under Rule 23 of the CGST Rules.
[Notification No. 38/2023- Central Tax dated August 04, 2023]
GST Section 155: Tax Liability for Specific Offences
A new penalty provision is being introduced that applies to E-commerce operators (ECO). They may face a penalty of INR 20,000 (comprising both CGST and SGST) or the tax amount engaged in the supply, whichever is greater. This penalty is applicable in cases of violations of specified provisions related to supplies of goods made through ECO via unregistered persons or composition taxpayers.
[Notification No. 37/2023- Central Tax dated August 04, 2023]
GST Sections 142-145: Limitation of 3 years on GST Returns
After the expiry of three years from the due date of filing the pertinent returns, the Registered person shall not be permitted to file the belated returns in Form GSTR-1, GSTR-3B, GSTR-8, GSTR-9, and GSTR-9C.
GST Section 148: Unregistered Person Assessments
The time limit for submitting either Form GSTR 3B or Form GSTR 10 (Final Return) in the case of Best Judgment Assessment, when the Best Judgment order is considered withdrawn, will be extended from 30 days to 60 days. Furthermore, this 60-day period may be prolonged to 120 days upon payment of an additional late fee, in addition to the standard late fee.
GST Section 156: Decriminalization of Specific Tax Offences
The decriminalization pertains to offences outlined in clauses (g), (j), and (k) of Section 132(1) of the CGST Act. These offences involve actions such as obstructing or impeding an officer in the execution of their duties, altering or destroying material evidence or documents, failing to provide information, or providing wrong details.
Monetary limit for the prosecution: Moreover, this amendment raises the prosecution threshold from INR 1 Crore to INR 2 Crores for most offences, with the exception being the offence of issuing invoices without supplying goods or services.
Consequently, for all offences, except those involving fake invoices, prosecution proceedings will commence if the tax value exceeds Rs. 2 Crores. In the case of fake invoices, prosecution will still be triggered at the previous threshold of Rs. 1 Crore for tax amounts.
GST Section 157: Fake Invoice
No compounding violations: Bogus invoice cases are not included in the option of compounding offences.
Decrease in compounding prices: The reduction of compounding amounts for various offences, with the exception of fake GST invoice-related offences, involves lowering both the minimum and maximum compounding thresholds as indicated below:
| Before | Present | |
|---|---|---|
| Minimum | More elevated of INR 10,000 or 50% of tax concerned | Apply 25% of the tax |
| Maximum | More elevated of INR 30,000 or 150% of the tax concerned | Apply 100% tax |
[Notification No. 38/2023- Central Tax dated August 04, 2023]
GST Section 158: Provision Allows the Sharing of Data
This new provision enables the sharing of information or details provided by taxpayers (such as particulars in their registration application, returns, e-invoice, e-Waybill, or any other prescribed documents) on the GST Common portal with other systems, subject to the taxpayer’s consent.
[Notification No. 38/2023- Central Tax dated August 04, 2023]
CGST Rule 64: Inclusion of ‘Non-taxable Online Recipient’
Rule 64 has been notably updated to incorporate the term “non-taxable online recipient,” as defined in the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”). This modification broadens the applicability of Rule 64, encompassing a wider range of recipient categories and, consequently, fostering enhanced tax compliance.
[Notification No. 38/2023- Central Tax dated August 04, 2023]
GST Section 159: Retrospective Applicability Para 7, 8(a) and 8(c) of Schedule III
To resolve ongoing or potential litigations where no tax has been paid by a taxpayer on certain supplies, the following entries in Schedule III (non-taxable supplies) are considered to have been inserted with retroactive effect from July 01, 2017:
- Supply of goods from a location outside the taxable territory to another place outside the taxable territory, without these goods entering India (high seas sales).
- Before clearance for home consumption supply of warehoused goods to any individual.
- No tax refund will be available for transactions or activities falling within this category, provided that tax has already been paid for such transactions or activities during the period from July 01, 2017, to January 31, 2019.
[Notification No. 38/2023- Central Tax dated August 04, 2023]
Latest Modifications in IGST Act
From October 01, 2023, the below-mentioned revisions to the IGST act will come into force-
GST Section 161: Place of Supply for Goods Transportation
This modification has removed the provision in Section 12(8) of the IGST Act, which addresses the determination of the place of supply for the transportation goods, regardless of the goods’ destination, in cases where both the service supplier and recipient are situated in India. Under this change, the POS will be the location of the service recipient, provided that the recipient is a registered individual.
[Notification 13/2023 – Integrated Tax (Rate) dated September 26, 2023]
Section 162 of the FA, 2023 – Section 13(9) of the IGST Act:
In accordance with Section 13(9) of the IGST Act, 2017, which governs the determination of the place of supply for services related to the transportation of goods (excluding mail or courier services), the default provision outlined in Section 13(2) of the IGST Act applies. This means that the place of supply will be deemed to be the location of the service recipient when either the service provider or the service recipient is situated outside India. Consequently, services provided to recipients located outside India will be classified as exports, and services received from providers outside India will be considered imports of services, regardless of the destination of the goods being transported.
[Notification 11/2023 – Integrated Tax (Rate) dated September 26, 2023]
GST Section 160: Scope OIDAR Services
The term “non-taxable online recipient” has been redefined to expand the reach of Online Information and Database Access or Retrieval Services (OIDAR). Starting from October 01, 2023, any unregistered individual within the taxable jurisdiction of India who receives OIDAR services, regardless of the purpose, will be classified as a non-taxable online recipient.
Previously, OIDAR services provided by entities in non-taxable foreign jurisdictions were exempt from taxation when received by the central government, state government, government authorities, or individuals for non-business purposes. However, this tax exemption has been discontinued as of October 01, 2023.
GST Section 123: Zero-rated Supplies to SEZ
The CBIC, through Notification No. 27/2023-Central Tax dated July 31, 2023, implemented a significant modification. This change eliminates the uncertainty surrounding the eligibility of supplies for zero-rated status, ensuring that only supplies intended for authorized operations within a Special Economic Zone (SEZ) unit or by a developer will be considered zero-rated. Previously, Rule 89 necessitated obtaining an endorsement from the designated SEZ officer to claim a refund of accumulated Input Tax Credit (ITC) or Integrated Goods and Services Tax (IGST) by a supplier operating in the Domestic Tariff Area (DTA). This requirement has now been incorporated into the statutory framework, preventing any challenge to the Rules on the grounds of superseding the Statute.
IGST Section 16(3) & (4): Zero-rated supplies
The new default option is to supply goods and services under a Letter of Undertaking (LUT) without making a tax payment upfront, and then seeking a refund of accumulated Input Tax Credit (ITC). The government has the authority to specify which categories are allowed to make IGST payments and follow the refund process.
Through Notification No. 1/2023-Integrated Tax dated July 31, 2023, the CBIC has enabled tax payments for all exports of goods and services, except for specific goods such as cigarettes, pan masala, and other tobacco-related items. As of now, there has been no notification issued to permit supplies to Special Economic Zone (SEZ) units or developers with IGST payment, so the default option of using a LUT without paying IGST remains the only available route.
Sept 26 2023, Three IGST Notifications 11/2023, 12/2023, and 13/2023
Three Notifications, namely 11/2023, 12/2023, and 13/2023, under the Integrated Tax (Rate), all dated September 26, 2023, have introduced revisions to the Rate, Exemption, and Reverse Charge Mechanism (RCM) notifications of the Integrated Goods and Services Tax (IGST). These changes aim to abolish the liability imposed on importers for services provided by entities located in non-taxable territories, specifically foreign shipping lines, to individuals situated in non-taxable territories (foreign suppliers). This pertains to the transportation of goods by vessel from a location outside India to the customs clearance station in India, applicable in the context of CIF imports, where reverse charge mechanisms were previously in place.
These amendments have been implemented more than a year following the Hon’ble Supreme Court’s ruling in the case of Union of India v. M/s Mohit Minerals Pvt. Ltd. In this landmark judgment, the Supreme Court ruled that imposing a reverse charge levy on importers as import of services contravened Section 8 of the Central Goods and Services Tax (CGST) Act, 2017. The Court’s decision favoured Indian importers.
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