The Finance Bill, 2019 saw some important amendments made to the Central Goods and Services Tax Act.
Here are all the major updates, along with our take on how this affects GST-registered taxpayers-
1. Composition Scheme
A new sub-section has been introduced to bring in a similar Composition Scheme for Service Providers, as well as suppliers of both goods and services (mixed suppliers), having an annual turnover of up to Rs 50 lakhs in the preceding financial year.
Two further explanations have been added to this section-
(i) Value of exempt supplies of services provided by way of extending deposits, loans or advances, with interest or discount as the consideration shall not be considered as part of the aggregate turnover, for determining eligibility into the scheme.
(ii) Value of exempt supplies of services provided by way of extending deposits, loans or advances, with interest or discount as the consideration shall not be considered as part of the aggregate turnover, to determine the value of turnover in a particular State or Union Territory.
In addition, any supplies made from 1st April of the year till the date the taxpayer becomes liable for registration shall not be taken into account.
Our take: As committed by the GST Council this amendment brings into effect the composition scheme for mixed suppliers. It also clarifies that services that include extending deposits etc shall not be part of aggregate turnover. This brings clarity for taxpayers who were worried about including such supplies while estimating aggregate turnover and whether they will have higher GST composition liability on account of such services.
- Section 10: Composition Scheme
The threshold limit for Registration under GST has been increased from Rs 20 lakhs to Rs 40 lakhs for a supplier of goods only.
Our take: The GST Council has proposed this change in the 32nd Council Meet, to come into force from the 1st of April, 2019. However, this has now been passed in Parliament. Only those suppliers of goods whose turnover exceeds Rs 40 lakhs will now come under the purview of GST registration. This amendment is beneficial especially for small and medium taxpayers who do not need to get themselves registered under GST unless their turnover exceeds Rs 40 lakhs. This applies only to those who are exclusive suppliers of goods.
- Section 22: Persons liable for registration
A new sub-section has been introduced to mandate authentication using Aadhaar number for every registered person under GST. This section also prescribes the manner in which Aadhaar authentication needs to be done. In case a person fails to undergo Aadhaar authentication, then his registration would be deemed invalid.
This provision will also be applicable in cases where registration is being granted for the first time. In addition to this, the Aadhaar number of the authorized signatory such as Karta, Managing Director, Board of Trustees, etc as per the list specified by the Government, shall also need to be authenticated.
Our take: The mandatory disclosure of the Aadhaar number, first under the Income Tax Act, and now under the Central Goods and Services Act, shows the importance the Government has now placed on the Aadhaar Card. The government plans to administer both direct and indirect taxes via Aadhaar while PAN may continue to be in use for routine compliances.
- Section 25: Procedure for Registration
3. Mode Of Making Supplier Payments
This will be a new section inserted in the CGST Act which will mandate certain registered suppliers to give their recipients the option of prescribed modes of electronic payment.
Our take The Government is moving towards a cashless economy, and one such measure is the introduction of electronic modes of payment for certain payment and certain registered persons. Under this new section, these registered suppliers will have to mandatorily give their recipients the option of making electronic payments. This move will also help prevent the evasion of taxes. This is in line with an amendment made in the direct tax act, which requires businesses with a turnover in excess of Rs 50 crores to mandatorily provide electronic means of payment. E-payment charges for such suppliers shall also not be borne by them, Giving cashless economy an essential push.
- Section 31A: Mode of Payment
4. Furnishing Of Returns
This section has been amended to introduce an option for specified taxpayers to furnish their returns on a quarterly basis instead of monthly. Taxes will need to be paid monthly.
Likewise, the sub-section prescribes the time limit for Composition taxpayers to file their returns, which as per the Act, formerly need to have been filed every quarter. The Government has now introduced the annual filing of returns for Composition Taxpayers, however, the tax will still need to be paid on a quarterly basis.
Our take: Small and Medium Businesses, as well as Composition dealers, had found the compliance under GST to be cumbersome and costly. As per the latest update in the Finance Bill, now a specified class of taxpayers can file a single quarterly return, and in the case of Composition taxpayers, an annual return can be filed instead. This will greatly reduce the cost and burden of compliance to these small businesses, who had to file as many as 24 monthly returns in the past. This is line with announcements made in the GST Council meetings.
- Section 39: Furnishing of Returns
5. Payment Of Taxes And Interest
To remove inconveniences for taxpayers, a new sub-section has been added to facilitate the transfer of amounts paid under tax, interest, penalty, fee or any other amount that is available in the electronic cash ledger to the correct head under integrated tax, central tax, State tax, Union territory tax or cess in the electronic cash ledger, as applicable.
Our take: This was a long-standing problem that causes grievances amongst taxpayers who have mistakenly paid taxes under the wrong head of tax, in the past. Previously, this tax could not be utilised and would need to be paid again under the correct head. The introduction of this sub-section means that henceforth, all taxes that are incorrectly paid under the wrong heads of tax can now be simply transferred to the correct head.
- Section 49: Payment of tax, interest, penalty and other amounts
This section has been amended to levy interest on unpaid taxes only to the extent of that portion paid in cash i.e. through the electronic cash ledger.
Our take: This will be a welcome move for taxpayers who, earlier, had to pay interest on the entire portion of unpaid taxes without allowing ITC, if taxes had not been paid within the due dates prescribed. However, with the amendment in this section, taxpayers now only need to pay on that portion of tax which is paid by cash or in other words, through the electronic cash ledger, thus reducing their tax burden.
This benefit will not extend to those cases where proceedings have been initiated under Section 73 and Section 74, i.e if there is a pending investigation and tax is due, interest shall have to be paid on the gross tax liability.
- Section 50: Interest on delayed payment of tax
This section has been amended to empower the National Anti-profiteering Authority to impose a penalty that is equivalent to 10% of the profiteered amount.
The National Anti-profiteering Authority examines whether the benefit of input tax credit has been passed on to the recipient by way of reduction in prices, and that no supplier unlawfully benefits from the same.
Our take: This move will help in preventing the suppliers from using the benefit of input tax credit to reduce their tax costs while at the same time, not reduce prices for consumers.
- Section 171: Anti-profiteering measure