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Finance Bill, 2023 passed with many more amendments. GST Changes by the Bill (Explained).

(Updated - 27 Mar 2023) Finance Bill, 2023 has been passed with many amendments as compared to the original bill introduced in February. Kindly read all the changes carefully.

1. Section 10 - Removal of restriction on Composite Dealers for supply goods through e-commerce operator.

Background : Section 10 deals with composition dealers and provides restriction on composite dealers to not to supply any goods or services through e-commerce operator.

Changes: Section 10 of CGST Act has now been amended to remove such restriction on composite dealers for supply of goods through e-commerce operator. However restriction for supply of services shall continue as earlier. 

To give effect the above change, the words "goods or" have been omitted from clause (d) of sub-section (2) and clause (c) of sub-section (2A).

Another important aspect is whether composite dealers will be allowed to sell goods outside state through e-commerce operator or not? The answer is negative. There is no change in these provisions and composite dealers will not be allowed to sell their goods outside state as earlier. So this is going to be a challenging task before e-commerce operators.

Penalty on e-commerce operators if they allow composite dealers selling their goods outside state?

A new penalty clause has been inserted in Budget 2023 vide sub-section (1B) in section 122 of CGST Act to penalize the e-commerce operators, if they allow composite dealers selling their goods outside state. These penalty provisions have been discussed in detail in the later part of this article. Kindly scroll down for more details on it.

Refer : Finance Bill for more details.

 

2. Section 16(2) - Language correction to align it with the existing return filing system as per Act.

Background : Second Proviso of section 16(2) of CGST Act deals with the reversal of ITC by taxpayer upon failure to pay the amount to the supplier within 180 days of date of invoice. 

And Third Proviso deals with the re-availment of ITC reversed on subsequent payment by taxpayer to the supplier.

Changes : A slight correction has been made in the legal language of these two provisos to align it with the existing return filing system as per Act.

In Second Proviso, it was earlier mentioned that on failure to pay the amount within 180 days by taxpayer, previous ITC claimed shall be added to the output tax liability of taxpayer, however there was no automatic mechanism in place to add the same in output tax liability of taxpayer by GSTN. Taxpayers were paying this liability at their own only. So now it has been corrected and the words "shall be added to the output tax liability" have been replaced replaced with the words "shall be paid by taxpayer". As a effect, taxpayers will need to continue paying this liability at their own. There is no practical effect of this amendment. This is just a language correction in the law to align this section with the existing return filing system.

Third Proviso has been amended to include the words "to the supplier", to ensure that payment has been made by the taxpayer to the supplier only and not any third person. Previously there was a lacuna in the law, which has now been removed. There were instances and possibility, where payment was done by taxpayer to third person, but supplier did not actually receive the same. The said amendment aims to target that lacuna.

Refer : Finance Bill for more details.

 

3. Section 17 - Inclusion of sale of warehoused goods before custom clearance for home consumption under value of exempt supplies to restrict availment of proportionate ITC on the same.

Background : Section 17(2) & 17(3) provides restriction on availment of proportionate ITC on exempt supplies when taxpayer is engaged in supplying taxable and exempt supplies both.

Changes : Changes have been made in Explanation of Section 17(3) to restrict the availment of Proportionate ITC on transaction covered in para 8(a) of Schedule III (i.e. Sale of warehoused goods before custom clearance for home consumption) by including it in the value of exempt supplies. So as a result taxpayer will need to reverse more ITC. 

ITC on CSR Activities:

Further, sub-section (5) of said section is also being amended so as to provide that ITC shall not be available in respect of 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 (CSR) referred to in section 135 of the Companies Act, 2013. This was quite a debatable issue and the government now aims to settle it with this amendment.

Refer : Finance Bill for more details.

4. Section 23 - Exemption from GST Registration in certain cases by over-ruling section 22 & section 24.

Background : Section 23 of the CGST Act deals with the provision, where a person is not liable to obtain GST Registration. Whereas section 22 and section 24 deals with the registration & compulsory registration under GST.

Changes : Sub-section (2) of Section 23 has been replaced w.e.f. 01.07.2017. The substituted sub-section (2) starts with a non obstante clause to override the provisions of compulsory registration as required under section 22 & section 24.

A non-obstante clause is added to a provision in order to uphold its enforceability over another provision that is contradictory to it.

The same been done to provide that persons covered under compulsory registration in terms of section 22 & section 24 need not register if they are exempt by virtue of section 23.

E.g. if a person is dealing in exclusive supply of exempted goods and services then he will not be required to take registration as per section 23, even if he is required to take registration and pay tax under RCM as per section 24. In that case section 23 will prevail over section 24. 

Earlier, there was no non-obstante clause in section 23, so section 24 being a special section used to prevail.

Refer : Finance Bill for more details.

 

5. Section 30 - Removal of restriction of 30 days for filing revocation of cancellation of GST Registration.

Background : Section 30(1) of the CGST Act provides restriction of 30 days for taxpayers to file revocation of cancellation of GST Registration.

Changes : Sub-section (1) of Section 30 has been amended to remove such restriction. Now revocation application may be filed within such time as may be prescribed by govt. Therefore govt. will surely notify a new time limit with more days to file revocation application in the interest of taxpayers.

Refer : Finance Bill for more details.

  6. Section 37, 39, 44 & 52 - Introduces the maximum time limit of 3 years for filing GSTR-1, GSTR-3B, GSTR-9 / 9A /.......

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Budget Changes

VERY GOOD.

Replied to BRAHMANI RIVER PELLETS LIMITED

very good

Replied to BRAHMANI RIVER PELLETS LIMITED

Best Explaination

Very good presentation . Please prepare likewise for income tax also.

Great... Very detailed analysis. Thank you

Very useful presentation.

Thank you all amendments are provided in simple language

This is a great work sir. The amendment have been explained in good length. Keep up the good work.

Great explanation.

Superb... Thank you for this detailed analysis of GST Budget.

Superb. Explanation to the point and in simple language. Good work 👍

Excellent. This can be very much useful.

At S. No. 03 of this article, high seas sale has been shown as included in definition of exempt supply for the purpose of reversal of ITC. High seas transaction has been mentioned at pera 8 (b) of schedule-III. While the Budget is talking about pera 8 (a) of schedule-III (Supply of warehoused goods). Kindly clarify.

Further, It will lead to higher reversal of ITC. What is the logic behind this.

Nicely explained the amendments..!

Amendments explained simple to understand & to follow the updates which are necessary to gst professionals.
Sir, thanks a lot for the effort.

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