CBIC Notifies applicability of CGST (Amendment) Act, 2018 with effect from 1.02.2019 vide Notification No. 02/2019 Central Tax Dated 29.01.2019. The amendment has following effects:
1. Provision of Reverse Charge Mechanism under Section 9(4) of CGST Act:
Erstwhile Section 9(4) of the CGST Act provided that GST shall be paid on reverse charge mechanism on supplies to registered persons from unregistered persons. The provision was not in operation vide Notification 08/2017 dated 28/06/2017 till 30.09.2019 through various amendments. Now CBIC rescinded this notification as Section 9(4) of the CGST Act has been replaced by a new section, brought in operation with effect from 01.02.2019 vide Notification No. 02/2019 – Central Tax New Delhi, the 29th January, 2019.
The new Section 9(4) reads as,
“(4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.”
Thus now, reverse charge mechanism can be applied only on specified class of registered persons, receiving specified categories of goods or services. No such notification has been issued as yet. In view of this, presently there is no tax liability on reverse charge mechanism from supplies received from unregistered persons.
2. The scope of supply under section 7 of CGST Act, 2018:
Newly inserted (1A) after sub-section (1) of Section 7: “where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.”
Thus, while tax is there on supply of goods or services or both; once it is found that there is taxability, it is necessary to classify the supply as either supply of goods or supply of services. Earlier also it was mandatory for proper classification of goods, determining time or place or value of supply. Now it has been stated explicitly.
3. Changes in Schedules of CGST Act:
In Schedule I of the principal Act, in paragraph 4, for the words “taxable person”, the word “person” shall be substituted. Schedule-I of the CGST Act refers to transaction which shall amount to supply, even when there is no consideration. Clause 4 of Schedule-I refers to import of service. Thus “import of service”, by any person [not only taxable person] shall be treated as supply even when there is no consideration.
Schedule-III refers to transactions which amounts to neither supply of goods nor supply of services. Following two entries have been inserted in Schedule-III,
“7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.
8. (a) Supply of warehoused goods to any person before clearance for home consumption; (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.”;
‘Explanation 2.––For the purposes of paragraph 8, the expression “warehoused goods” shall have the same meaning as assigned to it in the Customs Act, 1962.”
Thus, these transactions shall not be taxable under the GST provisions.
4. Composition levy Scheme under section 10 of CGST Act, 2018:
Section 10 has been amended so as to raise the statutory threshold of turnover for a taxpayer to be eligible for the composition scheme from Rs 1 crore to Rs 1.5 crores, and to allow the composition taxpayers to supply services (other than restaurant services), for up to a value not exceeding ten per cent of turnover in the preceding financial year, or five lakh rupees, whichever is higher.
5. Eligibility and conditions for taking Input Tax Credit under Section 16 of CGST Act, 2018:
The amended in order to provide for the input tax credit in cases of “Bill- to-ship-to” model in the case of supply of services. The said Amendment further seeks to include the provisions relating to the new return format as specified in the proposed new section 43A, for availing the input tax credit [Section 43A of the CGST Act has not been brought in force as yet].
6. Credit on Motor Vehicles:
Vide CGST Amendment Act, 2018, Section 17(5)(a) was replaced with following Section;
“(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:— (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles”
Thus, credit of not all motor vehicles is denied. What is being denied is credit of motor vehicles for transportation of persons, having seating capacity of not more than 13 persons. In view of this credit on all other motor vehicle is allowed. For example, credit of motor vehicle for transportation of goods is allowed unconditionally. Even in respect to motor vehicles for transportation of persons having approved seating capacity of not more than 13 persons, credit is available if the motor vehicle is used for further supply of such motor vehicle or transportation of passengers or imparting training on driving.
7. Person liable for registration under Section 22 of CGST Act, 2018:
Amended so as to empower the Government to increase the threshold turnover for registration in special category States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand from ten lakh rupees to twenty lakh rupees. Jammu & Kashmir is not a special category state and normal threshold limit shall apply in the state.
8. Compulsory registration in certain cases under Section 24 of CGST Act, 2018:
Amended so as to provide for mandatory registration for only those e-commerce operators who are liable to collect tax at source under section 52 of the Act. Replaced clause (x) by the clause,“every electronic commerce operator who is required to collect tax at source under section 52”. Thus, every electronic commerce operator is not required to be compulsorily registered.
9. Credit note and Debit Notes under Section 34 of CGST Act, 2018:
Amended so as to allow registered persons to issue consolidated credit or debit notes in respect of multiple invoices issued in a Financial Year, by replacing sub-section (1) and (3), at words: “Where a tax invoice has” or “a credit note” or “a debit note” with “Where one or more tax invoices have” or “one or more credit notes for supplies made in a financial year” or “one or more debit notes for supplies made in a financial year” respectively.
10. Utilization of Input Tax Credit subject to certain conditions under section 49A of CGST Act, 2018:
The input tax credit on account of central tax, State tax or Union territory tax shall be utilised towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilised fully towards such payment. Thus, it is necessary to exhaust credit of IGST to pay IGST, before credit of Central tax, State tax or Union territory tax can be used to pay IGST.
Explanation in Section 49 has been added providing that firstly credit of Central tax shall be used to pay IGST before credit of State/Union territory tax can be used.
11. Appeal to the Appellate Authority/Appellate Tribunal under section 107 of CGST Act, 2018:
Pre-deposit amount of Rs. 25 crores have been specified as upper limit for filing appeal before the Appellate authority and Rs. 50 crores for appeal before Appellate Tribunal.
12. Job-work procedure newly inserted second proviso to Section 143(1)(b) of CGST Act, 2018:
Commissioner has been empowered to extend the time limit of return of inputs/capital goods by a period of one year/ two years respectively on sufficient cause being shown.
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