Introduction

The Union Budget 2024 ushered in a wave of changes across various sectors of the Indian economy, and the Goods and Services Tax (GST) regime was no exception. To simplify compliance, boost revenue collection, and foster a more conducive business environment, the government introduced several amendments to the GST laws. This article delves into the key changes brought about by Budget 2024, analyzing their implications for taxpayers, businesses, and the overall GST ecosystem. From revised timelines for GST demand notices to modifications in input tax credit (ITC) rules, we examine how these alterations will shape the GST landscape in the coming months and years.

Removal of ENA from GST

The amendment to Section 9 of the Central Goods and Services Tax (CGST) Act, along with similar amendments in the Integrated Goods and Services Tax (IGST) Act and the Union Territory Goods and Services Tax (UTGST) Act, removes Extra Neutral Alcohol (ENA) from the scope of central tax when used in the manufacture of alcoholic liquor for human consumption. ENA is a key input in the production of alcoholic beverages. By excluding ENA from the GST, the amendment aims to streamline the tax process for the alcohol industry. This move can potentially reduce the tax burden on manufacturers of alcoholic beverages.

Powers to address non-levy or short-levy 

The CGST Act currently includes provisions for the levy, assessment, and collection of central GST. It governs how tax is imposed, administered, and enforced. A new Section 11A is being proposed to empower the government to address issues related to non-levy or short levies of central tax that may arise due to general practices prevalent in trade. The proposed insertion of Section 11A into the CGST Act, along with similar provisions in the IGST Act, UTGST Act, and Cess Act, aims to empower the government to regularize cases of non-levy or short levy of taxes due to general practices prevalent in trade.

Time of Supply in case of RCM transactions

Section 13 of the CGST Act pertains to the time of supply of services. It determines when the supply of services is deemed to occur, which is crucial for establishing the tax period in which the tax should be paid. Section 31(3)(f) currently provides the time limits within which a supplier must issue an invoice for goods and services, including those under reverse charge mechanisms. Under existing rules, the time of supply of services is generally determined by when the invoice is issued or when payment is made, whichever is earlier. For services where the recipient of the service is liable to pay tax under the reverse charge mechanism, the invoice must be issued by the recipient, which can complicate the timing of supply. The proposed amendment section 13(3) aims to clarify and specify the time of supply for services where the invoice is required to be issued by the recipient of the service under the reverse charge mechanism. An exemption has been provided from these provisions to a supplier registered solely for tax deduction at source under section 51.

Relaxation in the time limit to claim ITC

Section 16 of the CGST Act deals with the eligibility and conditions for availing of the input tax credit. Sub-section (4) of this section specifies the time limit within which input tax credit can be claimed. Registered persons can now claim an input tax credit for invoices or debit notes if they have filed the GSTR-3B by November 30, 2021. This is a relaxation from the original time limits prescribed under Section 16(4). The relaxation applies retrospectively from July 1, 2017, covering the initial years of GST implementation, specifically financial years 2017-18, 2018-19, 2019-20, and 2020-21. If a registration is cancelled and subsequently revoked, the time limit to claim the input tax credit for invoices or debit notes from the period between cancellation and revocation is extended. The extended period for claiming ITC is until the date of filing the GSTR-3B return provided the return is filed within thirty days of the order of revocation of cancellation.

Restriction of Non-Availability of ITC

Section 17 of the CGST Act deals with the apportionment of input tax credit (ITC) and its eligibility for various purposes. he proposed amendment removes references to Sections 129 and 130 from Sub-section (5) of Section 17. The existing provision in section 17(5) restricts the availability of ITC in cases where tax demands are raised under Section 74 of the CGST Act, which deals with tax evasion and fraud. The amendment restricts this non-availability of ITC only to demands up to the Financial Year 2023-24. This means that for tax demands raised under Section 74 for periods before or up to FY 2023-24, ITC will not be available. However, for demands arising from FY 2024-25 onwards, this restriction will not apply.

Revocation of Cancellation of GST Registration

Section 30 of the Central Goods and Services Tax (CGST) Act pertains to the revocation of cancellation of GST registration. It outlines the procedure and conditions under which a registered person can request the reinstatement of their GST registration after it has been cancelled. A new proviso to section 30(2) provides an enabling clause to prescribe conditions and restrictions for the revocation of the cancellation of GST registration. The amendment will allow the government to set specific conditions and restrictions for the revocation of registration. Taxpayers seeking to reinstate their cancelled registration will need to comply with these newly prescribed conditions.

TDS deductors to file returns every month mandatorily

Section 39 of the Central Goods and Services Tax (CGST) Act pertains to the filing of returns by registered persons. This section outlines the procedures and requirements for submitting GST returns. An amendment substitutes sub-section (3) to mandate the electronic furnishing of returns every month by registered persons who are required to deduct tax at source, regardless of whether any tax has been deducted in that month or not. Earlier, several taxpayers often skipped filing returns during months when there were no TDS transactions.

No ITC if exported goods are subject to duty

Section 54 of the Central Goods and Services Tax (CGST) Act deals with the process and conditions for claiming refunds, including those related to unutilized input tax credit (ITC) and integrated tax on zero-rated supplies. Section 54(3) currently allows for the refund of unutilized ITC and integrated tax on zero-rated supplies of goods or services. An amendment has been made whereby no refund of unutilized ITC or integrated tax shall be allowed if the zero-rated supply of goods is subject to export duty. This means that if goods are exported with an export duty levied, businesses cannot claim a refund on the ITC or integrated tax related to those goods. A new sub-section in Section 16 of the IGST Act will also reflect the restriction on the refund of ITC in cases where zero-rated supplies are subjected to export duty.

A representative can appear before a tax officer

Sub-section (1A) is being inserted into Section 70 to allow an authorized representative to appear on behalf of the summoned person before the proper officer. This amendment facilitates compliance with summons by enabling someone other than the summoned individual to represent them during the proceedings. Taxpayers will now have the option to appoint an authorized representative to appear on their behalf when summoned by tax authorities. Authorities will need to verify the credentials and authority of representatives to ensure that they are duly authorized to act on behalf of the summoned person.

Sunset clause for Sections 73 and 74

Sections 73 and 74 of the Central Goods and Services Tax (CGST) Act deal with the determination of tax not paid, short paid, or erroneously refunded. It provides the framework for assessing and demanding taxes under non-fraudulent circumstances. The amendment limits the applicability of Sections 73 and 74 to demands arising up to the financial year 2023-24. This means that for periods before FY 2024-25, the provisions of Sections 73 and 74 will be used to address tax demands.

New Section 74A for Assessments

Section 74A is being introduced into the Central Goods and Services Tax (CGST) Act to establish a unified framework for determining tax issues related to non-payment, short payment, erroneous refunds, or wrongly availed input tax credit starting from the financial year 2024-25. The section provides for a standardized limitation period for issuing demand notices and orders. This period applies regardless of whether the case involves fraud, willful misstatement, or suppression of facts. While the limitation period is standardized, a higher penalty is prescribed for cases involving fraud, willful misstatement, or suppression of facts.

Maximum Pre-deposit in case of Advance Ruling

An amendment has been introduced to Section 107(6) of the CGST Act to reduce the maximum pre-deposit amount required for filing an appeal before the Appellate Authority from 25 crores to 20 crores.

Maximum Pre-deposit in case of Appeals

The maximum amount of pre-deposit required for filing an appeal before the Appellate Authority is being reduced from INR 50 crores to INR 40 crores of tax. The maximum pre-deposit amount for filing an appeal before the Appellate Tribunal is being reduced from INR 100 crores to INR 40 crores of tax.

Change in Authority for Anti-Profiteering

The amendments to Section 171 of the CGST Act involve the insertion of a proviso and explanation to manage the transition of anti-profiteering cases. The proviso empowers the Government to set a date from which the Authority will no longer accept new applications, while the explanation includes the Appellate Tribunal as a potential Authority for these cases.

Trans Credit for ISDs

The amendment to Sub-section (7) of Section 140 of the CGST Act enables Input Service Distributors (ISDs) to avail transitional credit for eligible CENVAT credit related to input services received and invoiced before the GST implementation date. This change, effective from July 1, 2017, aims to facilitate a smoother transition to the GST regime by ensuring that transitional credits are properly recognized and utilized.