Central GST Amendment Act, 2018

Ever since the new form of tax, i.e., Goods and Services Tax, lovingly called GST has been rolled out in 2017, the tax system is constantly under revision for one or the other reason. In the 31^st meeting of the GST Council held on 22^nd December, 2018, it was announced that the effective applicability of the amendments of the GST Acts will be from 1^st of Feb, 2019. This means already by now the GST amendments are in practice.

The GST Act, 2017 underwent amendments in the following GST Acts –

 

1. The Central Goods and Services Tax (Amendment) Act 2018
2. The Integrated Goods and Services Tax (Amendment) Act 2018
3. The Union Territory Goods and Services Tax (Amendment) Act 2018
4. The Goods and Services Tax (Compensation to States) Amendment Act 2018.

 

Now, let’s understand the various important amendments made in the Central Goods and Services Tax system and how they will bring changes in the overall functioning of businesses and the government.

 

Amendment of section 2(18) of the CGST Act, 2017

Definition of business vertical

Earlier in the CGST Act, 2017, when a business with multiple verticals used to operate in multiple locations in a state, multiple registrations of GSTIN were required. According to the recent amendments, separate registration for each location of business is allowed. This omits the definition of business verticals in the law.

 

Amendment of Section 2(102) of the CGST Act, 2017

Definition of services

Various fees for providing services which includes the service charge, documentation fees, broking charge that are charged for transactions in securities. These charges now can be considered to charge for the provision of service and chargeable to GST.

 

Amendment of section 9 (4)] of the CGST Act, 2017

Limited applicability of section 9(4)

In the CGST Act, 2017, a registered person had to pay tax on reverse charge basis upon receipt of goods from unregistered person. This has been now eliminated in the amendment. Now, the government will notify certain class of registered person liable to pay tax under such circumstances. Thus, only a notified class of registered taxpayers is now covered in this amendment and the rest will get a relief from the burden of paying tax.

 

Amendment of section 10 of the CGST Act, 2017

Composition scheme and services

This amendment clarifies that the tax payable under composition scheme will be in practice in place of tax leviable under normal charge or forward charge.

Any reverse charge tax liability upon composition dealers will continue as applicable to a normal taxpayer.

Earlier, the traders and manufacturers who are engaged in supply of services were not eligible for the composition scheme. According to the amendment in the act, now the registered trader or manufacturer engaged in supply of services, except restaurant services, upto a certain threshold limit can opt for the composition scheme.

The composition threshold limit has been increased from Rs. 1 crore to Rs. 1.5 crores in order to facilitate trade.

Such registered traders or manufacturers can choose composition scheme only if they supply services of value not more than 10% of their turnover in the previous financial year in the State or UT or Rs. 5 lakhs, whichever is higher.

 

Amendment of section 16 of the CGST Act, 2017

ITC on services

Input Tax Credit is a major concern for the registered person. The registered person can avail ITC when he receives goods and/or services.

The assumption in the Bill-to-ship-to model that goods are received when the supplier delivers them to other person is directed by the recipient is now applicable to services as well.

Thus, a registered person can avail ITC if a third person receives services on his direction and account.

 

Amendment of section 17(3) of the CGST Act, 2017

ITC on Schedule III items

According to the new amendment in the CGST Act, 2017 activities mentioned in Schedule III will be allowed to avail ITC. These activities were excluded from the ambit of exempt supplies. This action will resultantly cause lower reversal of credit especially for high sea sales, merchant trade transactions, and supply of warehoused goods before clearance for home consumption.

 

 

Amendment of Section 17(5) clause (a) of the CGST Act, 2017

Expansion of ITC availability on motor vehicles

Amongst the various activities brought under the scope of ITC is the motor vehicle of approved capacity of not more than 13 persons including the driver as mentioned in this amendment. However, it should be noted that ITC will not be available for such motor vehicles, aircrafts, or vessels if they are to be used for personal works.

ITC can be also availed in case of dumpers, work-trucks, and fork-lift trucks.

ITC is also allowed on motor vehicles to be used for transportation of money for and by banking and financial institutions.

Earlier ITC was not available for motor vehicles, vessels and aircraft for general insurance services, servicing, repair and maintenance under clause (a) of (aa), now it is made available in this amendment.

Those vehicles which are utilized for transportation of goods are allowed to avail the ITC. However, if motor vehicles for transportation of persons are used for transportation of goods, then in such cases, ITC cannot be taken.

Only in cases if the vessels and aircrafts are used for certain specified purposes, ITC can be taken, else, it will be blocked.

Motor vehicles, vessels or aircrafts insured by a person if used for an insurance company for supply of insurance services are included in the availability list of ITC.

ITC will be available for rest all other transportations, like motor vehicles for transportation of persons more than 13.

 

Amendment of Section 17(5) clause (b) of the CGST Act, 2017

Availability of ITC for employer made obligatory under certain law

If in case, an employer is made mandatory by any law to provide services like food and beverages, outdoor catering, beauty treatment, health services, etc., ITC is available for these services.

If according to the clause (a) of (aa), purchase of motor vehicles, vessels and aircrafts is blocked, then renting or hiring of such vehicles is also blocked in ITC.  

 

Amendment of Section 22 of the CGST Act, 2017

Increase in threshold exemption limit for registration in certain states

According to the recent amendment, for certain special category states, the aggregate turnover limit has been increased from Rs. 10 lakhs to Rs. 20 lakhs.

States named Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand are no longer included in the definition of special category states.

 

Amendment of Section 24 of the CGST Act, 2017

Registration mandated for only TCS collecting e-commerce companies

The previous law mandated all e-commerce companies to register themselves under CGST, irrespective of their requirement of tax collected at source, TCS.

Also, a person selling goods and services through his own website was made to register compulsorily, irrespective of his turnover.

The new law now makes compulsory to only those e-commerce companies to register who require collecting TCS.

Thus, it will make the small e-commerce companies which do not require TCS to enjoy threshold exemption limit for registration purposes.

 

Amendment of Section 25 of the CGST Act, 2017

Registration for multiple locations and SEZ

In the previous law, if a business operates at multiple locations in a state, multiple registrations were allowed for its separate business verticals. The amendment now allows separate registration for each business location.

The new law provides that a person in a SEZ or being a SEZ developer who has his business operating outside the SEZ in the same state or territory now has to register separately for his business. Thus, there will be now separate registration for SEZ.

 

Amendment of Section 29 of the CGST Act, 2017

Suspension on cancellation of registration

If a registration made previously is to be cancelled, it will be done so after the procedural formalities are completed by the officer concerned. Till then, the registration is suspended and it will be according to the rules prescribed and the person does not need to file returns.

But, if the cancellation is denied and by that time, the person who has applied for it did not stop collection and payment of taxes, then he has to face burden because he has no any option but to collect and pay the taxes out of his own pocket.

 

Amendment of Section 13 of the CGST Act, 2017

Consolidated Credit and Debit note

Earlier, the supplier of goods and services has to link the credit and debit notes with each invoice for a financial year. According to the new law, the goods and services suppliers do not need to link Credit and Debit notes with individual invoices. Rather, he can issue a consolidated Credit and Debit note for multiple invoices for the financial year.  

 

Amendment of Section 39 of the CGST Act, 2017

Simplification of filing GST returns

The biggest issue that can be called was the requirement of filing the GSTR 1 / GSTR 3B by 20^th of the next month. The amendment addressed this issue and now the period and time for filing the return is allowed to be prescribed through rules. This means that the filing of GSTR3/ GSTR 3B will be in place until the new monthly return is notified.

The council suggested a single monthly return filing system instead of earlier 3 monthly returns. Also, for certain category of taxpayers, the government can notify them to file the return on quarterly basis.

It should be noted that this amendment will not be effective from 1^st February, 2019 but will be effective only when the new system of returns is ready.

 

Amendment of Section 49 of the CGST Act, 2017

Utilization of IGST first against payment of any tax

To minimize fund settlement due to IGST, the amended law allows utilization of IGST first against payment of any output tax liability in the form of CGST/SGST/UTGST/IGST. Also, the balance of CGST/SGST/UTGST can be used only when the balance of IGST is exhausted.

 

Thus, considering all the amendments made in the CGST Act, 2017, it can be said that the government has tried to minimize the load of filing the returns and has made the understanding and implementation of GST system simpler and easier for even the small businessman.