Extracts from the GST-related amendments that were included in the Finance Bill for 2023 (Budget 2023-24), which Union Minister of Finance Mrs Nirmala Sitharaman submitted to the Loksabha on February 01, 2023.
Except for those in clause 142, modifications proposed in the Finance Bill, 2023 will go into effect on the date they are announced, ideally concurrently with revisions to comparable Acts approved by the States and Union territories with the legislature. Changes to the Finance Bill of 2023 pursuant to clause 142 will be retroactively effective as of July 1, 2017.
CGST Act 2017 Related Amendments in the Finance Bill 2023
The Finance Bill 2023 proposes a number of changes to the CGST Act, such as lowering the compounding amount from 50-150 per cent of the tax amount to 25-100 per cent, raising the GST prosecution threshold from one crore to two crores, except for the offence of issuing invoices without providing goods or services, decriminalizing CGST offences like obstructing an officer, tampering with evidence, or failing to provide information, and allowing filing returns and statement in three years from the due date.
Modification in GST Section 10
A change to Sections 10(2)(d) and 10(2A)(c) of the CGST Act, 2017, is proposed in Clause 128 of the Finance Bill 2023 to eliminate the prohibition on registered individuals who supply goods through electronic commerce operators (ECOs) from choosing to pay tax under the composition levy.
- In the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the Central Goods and Services Tax Act), in section 10,-
(a) in sub-section (2), in clause (d), the words “goods or” shall be omitted;
(b) in sub-section (2A), in clause (c), the words “goods or” shall be omitted.
Finance Bill 2023 Amends Section 16
The second and third provisos to Section 16(2) of the CGST Act, 2017 are proposed to be changed in accordance with the return filing mechanism made available by the aforementioned Act in Clause 129 of the Finance Bill 2023.
- In section 16 of the Central Goods and Services Tax Act, in sub-section (2),-
(i) in the second proviso, for the words “added to his output tax liability, along with interest thereon”, the words and figures “paid by him along with interest payable under section 50” shall be substituted;
(ii) in the third proviso, after the words “made by him”, the words “to the supplier” shall be inserted.
GST Section 17(3) Modification
In order to limit or restrict the use of input tax credits for certain transactions listed in clause (a) of paragraph 8 of Schedule III of the aforementioned Act, as may be provided by rules, Clause 130 of the Finance Bill 2023 proposes amending Explanation to Section 17(3) of the CGST Act 2017 by including the value of such transactions in the value of exempt supply.
Additionally, it proposes to change Section 17(5) to state that a taxable person’s receipt of goods or services, or both, that are used or intended to be used for activities related to his corporate social responsibility obligations as described in Section 135 of the 2013 Companies Act, shall not be eligible for an input tax credit.
- In section 17 of the Central Goods and Services Tax Act,-
(a) in sub-section (3), in the Explanation, for the words and figure “except those specified in paragraph 5 of the said Schedule”, the following shall be substituted, namely:–
“except,–
(i) the value of activities or transactions specified in paragraph 5 of the said Schedule; and
(ii) the value of such activities or transactions as may be prescribed in respect of clause (a) of paragraph 8 of the said Schedule”;
(b) in sub-section (5), after clause (f), the following clause shall be inserted, namely:–
“(fa) goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013;”
Changes in Section 23 of CGST Act in Finance Bill 2023
Clause 131 of the Finance Bill 2023 seeks to retroactively replace Section 23 of the CGST Act 2017 related to people not required to register, giving the said section precedence over Sections 22(1) and 24 of the said Act, with effect from July 1, 2017.
- For section 23 of the Central Goods and Services Tax Act, the following section shall be substituted and shall be deemed to have been substituted with effect from the 1st day of July, 2017, namely:–
- Persons not liable for registration: Notwithstanding anything to the contrary contained in sub-section (1) of section 22 or section 24,–
(a) the following persons shall not be liable to registration, namely:–
(i) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act, 2017;
(ii) an agriculturist, to the extent of supply of produce out of cultivation of land;
(b) the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, specify the category of persons who may be exempted from obtaining registration under this Act.
Section 37 Offers a New Sub-section Under CGST Act
Section 37 of the CGST Act, 2017 is proposed to have a new sub-section (5) added as part of Clause 132 of the Finance Bill 2023, which would set a three-year deadline for a registered person to report information on outward supplies under Section 37(1) for a tax period. Additionally, it aims to grant the government the power to extend the time limit for a registered person or class of registered people by notice, subject to a number of requirements and limitations, on the GST Council’s proposal.
- In section 37 of the Central Goods and Services Tax Act, after sub-section (4), the following sub-section shall be inserted, namely:–
(5) A registered person shall not be allowed to furnish the details of outward supplies under sub-section (1) for a tax period after the expiry of a period of three years from the due date of furnishing the said details:
Provided that the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow a registered person or a class of registered persons to furnish the details of outward supplies for a tax period under sub-section (1), even after the expiry of the said period of three years from the due date of furnishing the said details.
GST Section 39 Amendment
Section 39 of the CGST Act, 2017 proposed to have a new sub-section (11) added as part of Clause 133 of the Finance Bill 2023, which would set a three-year deadline for a registered person to submit a return for a given tax period. Additionally, it aims to grant the government the power to extend the time limit for a registered person or class of registered people by notice, subject to a number of requirements and limitations, on the GST Council’s proposal.
- In section 39 of the Central Goods and Services Tax Act, after sub-section (10), the following sub-section shall be inserted, namely:–
(11) A registered person shall not be allowed to furnish a return for a tax period after the expiry of a period of three years from the due date of furnishing the said return:
Provided that the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow a registered person or a class of registered persons to furnish the return for a tax period, even after the expiry of the said period of three years from the due date of furnishing the said return.
Annual Return Related Amendment U/S 44 of CGST Act
In order to give registered persons three years to submit the annual return required by section 44(1) for a fiscal year, clause 134 of the Finance Bill 2023 seeks to incorporate a new sub-section (2) into section 44 of the CGST Act, 2017. Additionally, it aims to grant the government the power to extend the time limit for a registered person or class of registered people by notice, subject to a number of requirements and limitations, on the GST Council’s proposal.
- Section 44 of the Central Goods and Services Tax Act shall be re-numbered as sub-section (1) thereof, and after subsection (1) as so re-numbered, the following sub-section shall be inserted, namely:–
(2) A registered person shall not be allowed to furnish an annual return under sub-section (1) for a financial year after the expiry of a period of three years from the due date of furnishing the said annual return:
Provided that the Government may, on the recommendations of the Council, by notification, and subject to such conditions and restrictions as may be specified therein, allow a registered person or a class of registered persons to furnish an annual return for a financial year under sub-section (1), even after the expiry of the said period of three years from the due date of furnishing the said annual return.
CGST Section 52 Amendment for Electronic Commerce Operators
Section 52 of the CGST Act, 2017 is proposed to have a new sub-section (15) added as part of Clause 135 of the Finance Bill 2023, setting a three-year deadline for an electronic commerce operator to make a statement under Section 52(4) for a month. Additionally, it aims to provide the government with the authority to, upon the GST Council’s advice and subject to a number of criteria and limitations, extend the time limit for a particular operator or class of operators by notification.
- In section 52 of the Central Goods and Services Tax Act, after sub-section (14), the following sub-section shall be inserted, namely:–
(15) The operator shall not be allowed to furnish a statement under sub-section (4) after the expiry of a period of three years from the due date of furnishing the said statement:
Provided that the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow an operator or a class of operators to furnish a statement under sub-section (4), even after the expiry of the said period of three years from the due date of furnishing the said statement.
Section 54 of the CGST Act in Finance Bill 2023
In order to bring section 54(6) of the CGST Act, 2017 into line with the present system of claiming self-assessed input tax credits under section 41(1), clause 136 of the Finance Bill 2023 recommends amending that section by deleting the reference to the provisionally accepted input tax credit.
In section 54 of the Central Goods and Services Tax Act, in sub-section (6), the words “excluding the amount of input tax credit provisionally accepted,” shall be omitted.
Changes to Section 56 as per Clause 137 Under GST
In order to establish the method of determining the duration of delay for the computation of interest on delayed refunds through the CGST Rules, clause 137 of the Finance Bill 2023 seeks to alter section 56 of the CGST Act, 2017.
In section 56 of the Central Goods and Services Tax Act, for the words “from the date immediately after the expiry of sixty days from the date of receipt of application under the said subsection till the date of refund of such tax”, the words “for the period of delay beyond sixty days from the date of receipt of such application till the date of refund of such tax, to be computed in such manner and subject to such conditions and restrictions as may be prescribed” shall be substituted.
Finance Bill 2023 Adds a New Section 122 Under Clause 138
Clause 138 of the Finance Bill 2023 seeks to insert the new sub-section (1B) in section 122 of the CGST act 2017 for furnishing the penal provisions relevant to the electronic commerce operators for the case of the breach of provisions concerned with the goods or services incurred through them via unregistered persons or composition taxpayers.
- In section 122 of the Central Goods and Services Tax Act, after sub-section (1A), the following sub-section shall be inserted, namely:–
(1B) Any electronic commerce operator who–
(i) allows a supply of goods or services or both through it by an unregistered person other than a person exempted from registration by a notification issued under this Act to make such supply;
(ii) allows an inter-State supply of goods or services or both through it by a person who is not eligible to make such inter-State supply; or
(iii) fails to furnish the correct details in the statement to be furnished under sub-section (4) of section 52 of any outward supply of goods effected through it by a person exempted from obtaining registration under this Act,
shall be liable to pay a penalty of ten thousand rupees, or an amount equivalent to the amount of tax involved had such supply been made by a registered person other than a person paying tax under section 10, whichever is higher.
Changes in Section 132 Related to GST Offenses
In order to decriminalize the offences listed in clauses (g), (j), and (k) of the CGST Act, 2017, section 132(1) of that Act would need to be changed, Clause 139 of the Finance Bill 2023 proposes. Additionally, the financial threshold for filing a charge under that Act would be raised from Rs. 100 lac to Rs. 200 lac, with the exception of offences involving the issuance of invoices without the provision of goods or services or both.
- In section 132 of the Central Goods and Services Tax Act, in sub-section (1),–
(a) clauses (g), (j) and (k) shall be omitted;
(b) in clause (l), for the words, brackets and letters “clauses (a) to (k)”, the words, brackets and letters “clauses (a) to (f) and clauses (h) and (i)” shall be substituted;
(c) in clause (iii), for the words “any other offence”, the words, brackets and letter “an offence specified in clause (b),” shall be substituted;
(d) in clause (iv), the words, brackets and letters “or clause (g) or clause (j)” shall be omitted.
GST Section 138 Modification
The first proviso to section 138(1) of the CGST Act, 2017, is proposed to be changed in clause 140 of the Finance Bill 2023 to exclude people who commit crimes involving the issuance of invoices without the supply of goods or services, or both, from the option of compounding the offences under the aforementioned Act.
- In section 138 of the Central Goods and Services Tax Act,-
(a) in sub-section (1), in the first proviso,-
(i) for clause (a), the following clause shall be substituted, namely:-
(a) a person who has been allowed to compound once in respect of any of the offences specified in clauses (a) to (f), (h), (i) and (l) of sub-section (1) of section 132;
(ii) clause (b) shall be omitted;
(iii) for clause (c), the following clause shall be substituted, namely:-
(c) a person who has been accused of committing an offence under clause (b) of sub-section (1) of section 132;
(iv) clause (e) shall be omitted;
(b) in sub-section (2), for the words “ten thousand rupees or fifty per cent. of the tax involved, whichever is higher, and the maximum amount not being less than thirty thousand rupees or one hundred and fifty per cent. of the tax, whichever is higher”, the words “twenty-five per cent. of the tax involved and the maximum amount not being more than one hundred per cent. of the tax involved” shall be substituted.
New GST Section 158A Added in Finance Bill 2023
The Finance Bill 2023’s clause 141 suggests adding a new section 158A to the CGST Act, 2017, to specify how and under what circumstances a registered person may share the information provided in his registration application, return filed, or statement of outward supplies, or the details uploaded by him for the generation of an electronic invoice or E-way bill, or any other information as may be provided by CGST Rules, on the common portal, with such other parties.
- The following provision of the Central Goods and Services Tax Act shall be placed after section 158, namely:-
158A. Consent based sharing of information furnished by taxable person:
(1) Notwithstanding anything contained in sections 133, 152 and 158, the following details furnished by a registered person may, subject to the provisions of subsection (2), and on the recommendations of the Council, be shared by the common portal with such other systems as may be notified by the Government, in such manner and subject to such conditions as may be prescribed, namely:-
(a) particulars furnished in the application for registration under section 25 or in the return filed under section 39 or under section 44;
(b) the particulars uploaded on the common portal for preparation of invoice, the details of outward supplies furnished under section 37 and the particulars uploaded on the common portal for generation of documents under section 68;
(c) such other details as may be prescribed.
(2) For the purposes of sharing details under sub-section (1), the consent shall be obtained, of-
(a) the supplier, in respect of details furnished under clauses (a), (b) and (c) of sub-section (1); and
(b) the recipient, in respect of details furnished under clause (b) of sub-section (1), and under clause (c) of sub-section (1) only where such details include identity information of the recipient,
in such form and manner as may be prescribed.
(3) Notwithstanding anything contained in any law for the time being in force, no action shall lie against the Government or the common portal with respect to any liability arising consequent to information shared under this section and there shall be no impact on the liability to pay tax on the relevant supply or as per the relevant return.
New Changes in Schedule II Under the CGST Act
According to clause 142 of the Finance Bill 2023, Schedule III of the CGST Act 2017 would be changed such that, as of July 1, 2017, paragraphs 7 and 8 and Explanation 2 will apply retroactively.
- Retrospective exemption to certain activities and transactions in Schedule III to the Central Goods and Services Tax Act.
(1) In Schedule III to the Central Goods and Services Tax Act, paragraphs 7 and 8 and the Explanation 2 thereof (as inserted vide section 32 of Act 31 of 2018) shall be deemed to have been inserted therein with effect from the 1st day of July, 2017.
(2) No refund shall be made of all the tax which has been collected, but which would not have been so collected, had subsection (1) been in force at all material times.
IGST Act 2017 Changes in the Finance Bill 2023
The IGST Act, 2017, is also subject to the following proposed modifications in the Finance Bill 2023:
Changes in Section 2 of the IGST Act
For restricting the definition of “non-taxable online recipient” to any unregistered person obtaining online information and database access or retrieval services located in the taxable territory, clause 143 of the Finance Bill 2023 proposes to amend clause (16) of section 2 of the IGST Act, 2017, by ignoring certain words.
Additionally, it seeks to make it clear that individuals who have been registered exclusively in accordance with clause (vi) of section 24 of the CGST Act, 2017 shall be regarded as unregistered for the purposes of the aforementioned provision.
Additionally, it suggests deleting several phrases from clause (17) of the aforementioned section in order to eliminate the definitions of “basically automated” and “having minimum human participation.”
- In the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the Integrated Goods and Services Tax Act), in section 2,-
(a) for clause (16), the following clause shall be substituted, namely:-
(16) “non-taxable online recipient” means any unregistered person receiving online information and database access or retrieval services located in taxable territory.
Explanation.- For the purposes of this clause, the expression “unregistered person” includes a person registered solely in terms of clause (vi) of section 24 of the Central Goods and Services Tax Act, 2017’;
(b) in clause (17), the words “essentially automated and involving minimal human intervention and” shall be omitted.
Section 12 Amendment of the IGST Act 2017
In order to clarify the availability of input tax credits and other matters, Clause 144 of the Finance Bill 2023 seeks to eliminate the proviso from section 12(8) of the IGST Act, 2017.
In section 12 of the Integrated Goods and Services Tax Act, in sub-section (8), the proviso shall be omitted.
