The 2023 Union Budget presented by Finance Minister Nirmala Sitharaman included several changes to the GST Act.
This is Part II of clause-by-clause analysis for the proposed amendments.
In case you missed reading Part I, don't worry, just click here and catch up!
Clause 138 - E-commerce operator with the responsibility to conduct Due Diligence of suppliers : Budget 2023 has proposed an amendment to the CGST Act, which would require electronic commerce operators (ECOs) to take more responsibility for the suppliers they engage on their platforms. The amendment would insert a new Section 122(1B) in the CGST Act, which would provide for penal provisions applicable to ECOs in case of contravention of provisions relating to supplies of goods made through them by unregistered persons or composition taxpayers.
In the event of an ECO failing to comply with following provisions, they would be liable for a penalty of Rs 10,000 or an amount equivalent to the amount of tax involved, whichever is higher :
(i) if it Allows a Supply of goods or Services or both through it by an Unregistered person who is not exempt from registration;
(ii) if it Allows an inter-State supply of goods or services or both through it by a person who is not eligible to make such inter-State supply; or
(iii) if it Fails to furnish the correct details in the statement to be furnished under section 52(4), for facilitating the supply of goods or services by an unregistered person who is not exempt by any notification.
Clause 139 - Decriminalizing Offences and Increasing Monetary Threshold : The sub-section (1) of Section 132 of the Central Goods and Services Tax (CGST) Act, 2017 has been been proposed to be amended to decriminalize certain offences and increase the monetary threshold for launching prosecution. This amendment aims to reduce the severity of punishment for less grave offences and to increase the financial threshold for prosecution proceedings under the CGST Act.
Under the current provisions, the minimum monetary threshold for initiating prosecution proceedings for offences listed in clauses (a) to (l) is Rs. 1 crore, with imprisonment as a punishment. With the amendment, the monetary threshold for offences other than those related to issuance of fake invoices has been increased from Rs 1 crore to Rs 2 crore.
The offences that have been decriminalized include clause (g) - obstructing or preventing any officer in the discharge of his duties under the Act,
clause (j) - tampering with or destroying any material evidence or documents, and
clause (k) - failure to supply information required under the Act or supplying false information.
This means that prosecution for these offences will no longer result in imprisonment, except in cases of fake invoices.
Clause 140 - Excluding offences relating to Fake Invoices under Compounding of Offences : The GST law in India provides an option to compound certain offenses and offers protection from further proceedings by paying a specified amount. The First proviso to Section 138(1) of the CGST Act is being amended to simplify the language of Clause (a), to omit Clause (b) and to substitute Clause (c) so as to exclude the offenses related to the issuance of invoices without the supply of goods or services or both from the option of compounding. The amendment further aims to rationalize the amount for compounding of various offenses by reducing the minimum and maximum amounts.
The background to the amendment lies in the fact that the current Section 138 of CGST Act provides for compounding of offenses upon payment of the prescribed amount. However, certain offenses cannot be compounded, as listed in the proviso to sub-section (1). The Finance Bill, 2023 proposes to exclude the cases of fake or bogus invoices from the option of compounding of offenses. Clause (c) of the proviso to sub-section (1) will be substituted in its entirety, meaning that post the amendment, there will be no option to compound offenses involving fake or bogus invoices.
It also aims to modify Sec 138(2) in order to standardize the amount for compounding different offenses by reducing the minimum and maximum compounding amount.
| Limit | At Present | Proposed |
| Minimum Limit | Higher of Rs. 10,000 or 50% of tax involved | 25% of tax involved |
| Maximum Limit | Higher of Rs. 30,000 or 150% of tax involved | 100% of tax involved |
Clause 141 - Consent-Based Sharing of Tax Information :
Budget 2023 has proposed the insertion of Section 158A, which lays out the guidelines for sharing information furnished by registered taxpayers with other government systems.
Under the new provisions of Sec 158A, the GST Portal can share following information with the consent of the supplier or recipient :
a) Information provided in the registration application under Section 25 or in the returns filed under Section 39 (GSTR-3B) or Section 44 (GSTR-9/9C).
b) Information uploaded on the common portal for invoice creation, details of outward supplies under Section 37 (GSTR-1), and information uploaded for document generation under Section 68.
c) Any other information, as may be prescribed.
This amendment is aimed at streamlining the information-sharing process between the GST portal and other government systems and providing a more efficient system for taxpayers. However, it is crucial to note that the liability of paying taxes remains with the registered person and no action will be taken against the government or the GST portal for any liabilities arising from the shared information.
Clause 142 - Retrospective Amendment in Schedule III : CGST Act's Schedule III is proposed to be amended to give retrospective applicability to Para 7, 8 (a), and 8 (b) of the said Schedule viz High Seas Sale, Supply of Warehoused Goods before clearance and Supply by Endorsement of documents of Title before clearance for home consumption. The provisions aim to treat the transactions and activities mentioned in the paragraphs as neither a supply of goods nor a supply of services, with effect from July 1st, 2017. This change is being made to resolve ongoing and prospective litigations where tax has not been paid on such supplies.
It's important for taxpayers to note that if tax has already been paid on these transactions and activities from July 1st, 2017 to January 31st, 2019, no refund of such tax paid will be available.
Clause 143 - Amended Definition of Non-Taxable Online Recipient and OIDAR Services : Budget 2023 has proposed amendments to the definition of "non-taxable online recipient" and "online information and database access or retrieval services" under the IGST Act. The changes aim to provide for the taxability of online information and database access or retrieval services (OIDAR) supplied by a person located in a non-taxable territory to an unregistered person receiving the services and located in a taxable territory.
The definition of "non-taxable online recipient" has been proposed to be revised by removing the condition that the OIDAR services must be received for purposes other than commerce, industry or any other business or profession.
Additionally, the definition of "online information and database access or retrieval services" has been proposed to be revised to remove the condition of being essentially automated and involving minimal human intervention.
The scope of OIDAR services has been expanded by omitting the second condition of being essentially automated and involving minimal human intervention. The only requirement for OIDAR services is that they must be provided using information technology and cannot be provided without it.
Clause 144 - Clarifying the Place of Supply for Transportation of Goods Services under the IGST Act : Budget 2023 has proposed a amendment to the IGST Act, 2017, for the omission of the proviso to sub-section (8) of section 12. This amendment is being proposed to specify the place of supply for services by way of transportation of goods in cases where the supplier and recipient of services are located in India.
As per the previous provisions, the place of supply of transportation services was considered as the place of destination of goods, in cases where the goods were being transported to a place outside India. This was causing issues with revenue accrual to state governments, leading to ambiguity in regards to the place of supply and availment of Input Tax Credit (ITC).
With the recent amendment, the place of supply of services by way of transportation of goods to a registered person shall be considered as the location of the recipient, while for a person who is not registered, the place of supply shall be considered as the location where the goods are handed over for transportation.
The CBIC has also already issued a circular, Circular no. 184/16/2022 - GST, to clarify the issue regarding the availment of ITC, stating that the recipient will be eligible for ITC even if the place of supply falls outside India or outside the state where the recipient is located.
This Article was authored by Tushant a passionate blogger by .
Co-founded Tax Ninja with the aim to serve knowledge digitally.
He's on a valiant quest to share his knowledge of Income Tax and GST.
Life motto : Do my best, so that I can't blame myself for anything
