You are all familiar with the CGST act. The Finance Bill of 2016 added the latest amendment to CGST Act. On March 31, 2016, the President gave his consent. This amendment includes changes to the definition of goods and services and levying additional GST for gold jewellery.
Did you know? The Indian GST system is based on the Canadian GST system.
What Changes Were Made to the CGST Act?
These amendments will be in effect from the date notified by the government. These amendments permit certain circumstances where GST input credit is not available.
(i) An enterprise engaged in activities related to specified goods and services in any financial year in which the specified goods or services are supplied either exclusively or predominantly in one or more States. These also include exports of these goods from India.
(ii) Imports the same type of goods as specified without prior written authorisation from Commissioner for Customs. This is a restricted exception to the availability of input tax credits.
It may benefit businesses that export or import specific goods to get advice about whether this amendment applies to their business to avoid legal issues later.
Businesses that import or export specified goods and those involved in supply chain transactions could be affected by the decision to amend the CGST Act. Every business considering new investment plans or developing supply chains involving overseas vendors should keep up to date with the latest developments and plan accordingly.
This latest amendment could also affect the international marketability of your product because it could impact your ability to claim input credit credits for expenses incurred abroad.
Latest Amendment to CGST Rules
Rule 36(4) was amended as of January 20, 2022.
To receive credit, suppliers must provide invoice/credit note details through IFF or GSTR-1. Self-policing mechanisms for validating ITC.
Modification to Rule 80
Due dates for Annual Return- GSTR 9 and Self certified reconciliation statement (form GSTR-9C) of F.Y. are extended. 20-21 extended to February 28, 2022
Rule 95 was amended as of April 1, 2021. The following provision was inserted
If the Unique Identity Number of an applicant is not included in a tax invoice for reimbursement, that invoice must be submitted with the refund request in FORM GST RFD-10.
Rule 142 modified w.e.f. January 1, 2022
To conclude any further proceedings, if Goods are seized in transit, payment must be made within 7 (earlier 14) days of the issue of notice under section 293(3).
Incorporated a new rule regarding the recovery of penalties through the sale of goods and conveyances detained or seized during transit
Sections 100 through 114 of the Union Finance Act 2022, referred to as FA22, reflect the changes made in the 2017 central goods and services tax act, hereafter referred to as CGST. These amendments, even if passed by parliament and given permission by the President of India, will only be in force on the date the Central Government may notify the official Gazette.
Changes in the CGST Act Section 37
(i) Provide for prescribing conditions and limitations for furnishing details of outward supply and communicating details of such outward supplies with concerned recipients.
(ii) Stop two-way interaction between the provider and the recipient during the return process of filing.
(iii). Allow for an extended period up to November 30 in the next financial year for correction of errors about details outward supply details;
(iv) Allow for tax period-wise sequential filing details of outward supply details
Section 38 of the CGST Act will be replaced to specify the conditions and limitations for communicating details about inward supplies or input tax credits to recipients by way of an auto-generated statement. This will also eliminate the need for two-way communication in return filing.
Changes in Section 39 of the CGST Act
- Require non-resident taxable persons to file their monthly returns by the 13th day of the month.
- Allow those who file a return under subclause (1) to choose between paying the self-assessed tax or a stipulated amount.
- Allow for an extended time, up to November 30 in the next financial year, to rectify errors in the return provided under section 39.
- As a condition of furnishing the return according to section 39, you must provide details about outward supplies for a tax period according to subsection (1) of section 37.
Section 41 of the CGST Act will be replaced to eliminate the provisional claim for eligible input credit and allow for self-assessed input credit, subject to any conditions or restrictions that may be required.
Changes in Section 49 of the CGST Act
- Provide for the restrictions on using the electronic credit ledger's amount.
- Allowing transfers of sums from a registration person's electronic cash record under the CGST Act to a unique person's electronic cash ledger underneath that Act or the IGST Act.
- Provide for the prescribing of the maximum output tax liability that can be discharged via the electronic credit ledger.
Changes in Section 54 of the CGST Act
As per changes, any refund claim for any balance in the electronic money ledger must be made in such a form, and such a manner as required.
The following changes were also made:
- Extended the range of withholding or recovering refunds for all types of refunds;
- Clarified the deadline for filing a refund claim for supplies purchased from a Special Economic Zone development company or Special Economic Zone unit. This is achieved by implementing a new clause (ba) in clause (2) of Explanation.
The Advantages of CGST
Here, we will discuss some of the benefits of the advantages of CGST.
Multiple Taxes are Eliminated
One of the advantages of CGST is the removal of various indirect taxes. All taxes imposed will be out of line, i.e. existing taxes such as sales tax, turnover tax, service tax, and many others will be incorporated into a general GST (Good and Service Tax).
It Keeps Costs Down
The CGST allows the average person to save more money by lowering the cost of goods and services. Therefore, it is expected that the prices of fast-moving consumer products, movie tickets, small ticket prices, electrical items, etc., will fall.
The CGST combines the tax idea for the entire nation with no separate theory for states. As a result, this theory is consistent across all jurisdictions and is hugely helpful for interstate trade.
Finest in Tax Filing and Paperwork
Central GST is hugely helpful to business owners. As a result, tax filing, conformance, and paperwork tasks are relatively simple for business professionals. Furthermore, the return filing, tax payment, and reimbursement processes will be simple.
Cascade Effect Decreases
GST and applies to all phases of business, from creation to consumption. Furthermore, it offers tax breaks at every phase. You will benefit from a tax credit added benefit in GST, and tax would be dealt with solely on the margin price. As a result, it reduces the drastic impact of taxation, reducing the price of goods.
GST implementation leads to lower taxes in the long run. This would also help businesses lower the pricing, in turn, pushing up the demand for products. This increase in demand, leads to increase in production and for this companies would need to hire more people. Therefore, this also lowers the unemployment rates as well.
The Impact on eCommerce Businesses
GST will be presented at 12% upon entry to a free trade zone. This will occur once before any manufacturing activity can be carried out in free-trade zones.
Stock-in-trade is exempted from the input tax credit as per new Section 29A. Stock-in trade includes both raw materials and finished goods, which are in the process of being sold or processed. This means you don't have to account for GST for stock-in-trade that enters or leaves factory premises.
Manufacturers can now claim input credit for inputs they have purchased within the last three months.
Effect on Sellers
Construction projects is exempted from tax under the HRA (House Rent Allowance) and SADA (Special Area Development Authority). This relief is for consumers who wouldn't have had to pay this tax. The 2017-18 amendment had only allowed HRA and SADA exemption until December 31, 2020. The new amendment allows for an indefinite exemption.
- When a registered individual purchases goods or services from an unregistered vendor, the registered taxpayer is obligated to pay the GST.
- However, a provision now exists that an unregistered dealer can sell goods and be subject to supply tax at 2% of the consideration.
- The tax payable to special economic zone operators or developers has been raised from 20% to 25%.
- If the GST portal India service provider acquired inputs during rendering services under any agreement with any Government Agency, Local Authority or other Authority, no input tax credit would apply.
- The output value does not include inputs that service providers acquire while providing such services.
- Additional Taxes - Luxury Tax, Krishi Kalyan Cess, Education Cess, and Rural Development Cess etc.
Also read: GST Council – 33 Members Governing GST
- India has introduced certain taxes. A person who imports goods from overseas with zero or exempt duty will have to deposit and deduct any additional tax imposed in India by the Central Government. The GST rate has been kept low to ensure consumers are not affected.
- Beginning September 1, 2017, imported goods subject to an ad valorem tax exceeding 4% but below 6% will be exempted from the levy of basic customs duties. In this case, the importer would have to subtract from his normal cost for imports any additional tax imposed as directed by Central Government by Parliament.
- All excisable goods were subject to a Krishi Kalyan Cess of 1.5% effective November 1, 2016.
- These amendments include the duty refund on inputs used in manufacture, export, and refundable exemptions.
Some of these amendments may appear unnecessary or needless, but it is important for business owners and traders to keep up with all the latest developments under GST and taxation. These changes should be familiarised with, and you can seek professional advice if needed. Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.