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05 February 2020

Budget 2020 – Important changes proposed by the Finance Bill 2020 in GST regime

Budget 2020 was presented by the Finance Minister in the lower House of the Indian Parliament on 1st of February 2020. The Finance Bill, 2020 in this regard proposes many changes in the Central Goods and Services Tax Act, 2017, Integrated Goods and Services Tax Act, 2017, Union Territory Goods and Services Tax Act, 2017 and the Goods and Services Tax (Compensation to States) Act, 2017. Some of the important changes are elaborated below.

ITC – Delinking of date of debit note from date of issuance of underlying invoice: Section 16(4) of the Central GST Act, 2017 has been proposed to be amended to delink the date of debit note from the date of issuance of underlying invoice. The provision will extend the time-period to avail ITC on debit notes i.e. up to the due date of September month return or annual return following the financial year corresponding to the debit note.

Transitional credit – Time limit prescribed: Section 140 of the CGST Act has been proposed to be amended to prescribe the manner and time limit for making transitional credit. It may be noted that this amendment is proposed to come into force from 1-7-2017, i.e. from the date of effect of the GST regime. Various sub-sections of Section 140 have been proposed to be amended for this purpose. The present amendment puts to rest the controversy that there is no time limit prescribed under Section 140.

Penalty on person who retains benefit of specified transaction: Penalty equivalent to tax evaded or ITC wrongly availed or passed on the person who retains the benefit and, on whose instance, certain specified transaction is conducted, has been proposed. According to the new sub-section (1A) proposed to be inserted in Section 122 of the CGST Act, 2017, transactions specified for this purpose cover supplies without issue of invoice or issue of incorrect or false invoice, issue of any invoice or bill without supply of goods or services, taking or utilising ITC without actual receipt of goods or services, or takes or distributes ITC in contravention of Section 20 or the rules made thereunder.

Prosecution – Person causing to commit and retaining the benefits arising out of specified transactions also to be liable: Section 132 of the CGST Act, 2017 is being amended to enhance its scope to also cover persons who cause to commit and retain the benefit arising out of the offences enumerated in said section. Section 132 at present provides prosecution liability only on persons committing any of the specified offences. Further, the amendment also proposes to make the offence of fraudulently availing input tax credit without any invoice or bill, a cognizable and non-bailable offence, if the amount of tax or ITC involved exceeds 5 crores.

Rate of GST on certain goods – Retrospective amendments: Exemption has been proposed to Fishmeal for the period 1-7-2017 to 30-9-2019 owing to confusion on applicable rate under S. No. 102 of Notification No. 2/2017-Central Tax (Rate) vs. S. No. 103 of Notification No. 1/2017-Central Tax (Rate). Further, 12% GST has been proposed on pulley, wheels and other parts (falling under heading 8483) and used as parts of agricultural machinery, during the period 1-7-2017 to 31-12-2018. It may be noted that according to clause 130 of the Finance Bill, 2020, there would be no refund for tax already collected and deposited.

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