GST related Amendments in Finance Bill, 2023

Extracts of the GST related Amendments proposed in the Finance Bill, 2023 (Budget 2023-24), presented by the Union MoF Mrs. Nirmala Sitharaman in the Loksabha on 01/02/2023.

Amendments proposed in the Finance Bill, 2023, except those in clause 142, will take effect on the date they are notified, as far as possible concurrently with the corresponding amendments to similar Acts passed by the States and Union territories with legislature. Amendments made in the Finance Bill, 2023, under clause 142, will take effect retrospectively from July 1, 2017.

Amendments related to Central Goods and Services Tax (CGST)

The Finance Bill 2023 proposes a number of changes to the CGST Act, including raising the GST prosecution threshold from one crore to two crore, except for the offence of issuing invoices without providing goods or services; lowering the compounding amount from 50-150 percent of the tax amount to 25-100 percent; decriminalising CGST offences such as obstructing an officer, tampering with evidence, or failing to provide information; and allowing filing returns and statements within 3 years from the deadline.

1. Amendment of Section 10 of the CGST Act, 2017

Clause 128 of the Finance Bill 2023 proposes to amend Sections 10(2)(d) and 10(2A)(c) of the CGST Act, 2017 to remove the restriction on registered persons supplying goods through electronic commerce operators (ECOs) from opting to pay tax under the composition levy.

128. In the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the Central Goods and Services Tax Act), in section 10,-

(a) in sub-section (2), in clause (d), the words “goods or” shall be omitted;

(b) in sub-section (2A), in clause (c), the words “goods or” shall be omitted.

2. Amendment of Section 16 of the CGST Act, 2017

Clause 129 of the Finance Bill 2023 proposes amending the second and third provisos to Section 16(2) of the CGST Act, 2017 in order to align it with the return filing system provided by the said Act.

129. In section 16 of the Central Goods and Services Tax Act, in sub-section (2),-

(i) in the second proviso, for the words “added to his output tax liability, along with interest thereon”, the words and figures “paid by him along with interest payable under section 50” shall be substituted;

(ii) in the third proviso, after the words “made by him”, the words “to the supplier” shall be inserted.

3. Amendment of Section 16 of the CGST Act, 2017

Clause 130 of the Finance Bill 2023 proposes to amend Explanation to Section 17(3) of the CGST Act 2017 so as to limit or restrict availment of input tax credit in respect of certain transactions specified in clause (a) of paragraph 8 of Schedule III of the said Act, as may be provided by rules, by including the value of such transactions in the value of exempt supply.

Further, It proposes to amend Section 17(5) so as to provide that input tax credit 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 referred to in section 135 of the Companies Act, 2013.

130. In section 17 of the Central Goods and Services Tax Act,-

(a) in sub-section (3), in the Explanation, for the words and figure “except those specified in paragraph 5 of the said Schedule”, the following shall be substituted, namely:–

“except,–

(i) the value of activities or transactions specified in paragraph 5 of the said Schedule; and

(ii) the value of such activities or transactions as may be prescribed in respect of clause (a) of paragraph 8 of the said Schedule”;

(b) in sub-section (5), after clause (f), the following clause shall be inserted, namely:–

“(fa) 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 referred to in section 135 of the Companies Act, 2013;”

4. Amendment of Section 23 of the CGST Act, 2017

Clause 131 of the Finance Bill 2023 proposes to retrospectively substitute Section 23 of the CGST Act 2017 relating to persons not liable for registration, so as to provide overriding effect to the said section over Sections 22(1) and 24 of the said Act, with effect from July 1, 2017.

131. For section 23 of the Central Goods and Services Tax Act, the following section shall be substituted and shall be deemed to have been substituted with effect from the 1st day of July, 2017, namely:–

23. Persons not liable for registration: Notwithstanding anything to the contrary contained in sub-section (1) of section 22 or section 24,–

(a) the following persons shall not be liable to registration, namely:–

(i) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act, 2017;

(ii) an agriculturist, to the extent of supply of produce out of cultivation of land;

(b) the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, specify the category of persons who may be exempted from obtaining registration under this Act.

5. Amendment of Section 37 of the CGST Act, 2017

Clause 132 of the Finance Bill 2023 proposes to insert a new sub-section (5) in section 37 of the CGST Act, 2017 to provide a time limit of three years for a registered person to furnish details of outward supplies under section 37(1) for a tax period. It also seeks to give the government the authority, on the recommendation of the GST Council, to extend the time limit for a registered person or a class of registered persons by notification, subject to certain conditions and restrictions.

132. In section 37 of the Central Goods and Services Tax Act, after sub-section (4), the following sub-section shall be inserted, namely:–

(5) A registered person shall not be allowed to furnish the details of outward supplies under sub-section (1) for a tax period after the expiry of a period of three years from the due date of furnishing the said details:

Provided that the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow a registered person or a class of registered persons to furnish the details of outward supplies for a tax period under sub-section (1), even after the expiry of the said period of three years from the due date of furnishing the said details.

6. Amendment of Section 39 of the CGST Act, 2017

Clause 133 of the Finance Bill 2023 proposes to insert a new sub-section (11) in section 39 of the CGST Act, 2017 to provide a time limit of three years for a registered person to furnish a return for a tax period. It also seeks to give the government the authority, on the recommendation of the GST Council, to extend the time limit for a registered person or a class of registered persons by notification, subject to certain conditions and restrictions.

133. In section 39 of the Central Goods and Services Tax Act, after sub-section (10), the following sub-section shall be inserted, namely:–

(11) A registered person shall not be allowed to furnish a return for a tax period after the expiry of a period of three years from the due date of furnishing the said return:

Provided that the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow a registered person or a class of registered persons to furnish the return for a tax period, even after the expiry of the said period of three years from the due date of furnishing the said return.

7. Amendment of Section 44 of the CGST Act, 2017

Clause 134 of the Finance Bill 2023 proposes to insert a new sub-section (2) in section 44 of the CGST Act, 2017 to provide a time limit of three years for a registered person to furnish the annual return required under section 44(1) for a fiscal year. It also seeks to give the government the authority, on the recommendation of the GST Council, to extend the time limit for a registered person or a class of registered persons by notification, subject to certain conditions and restrictions.

134. Section 44 of the Central Goods and Services Tax Act shall be re-numbered as sub-section (1) thereof, and after subsection (1) as so re-numbered, the following sub-section shall be inserted, namely:–

(2) A registered person shall not be allowed to furnish an annual return under sub-section (1) for a financial year after the expiry of a period of three years from the due date of furnishing the said annual return:

Provided that the Government may, on the recommendations of the Council, by notification, and subject to such conditions and restrictions as may be specified therein, allow a registered person or a class of registered persons to furnish an annual return for a financial year under sub-section (1), even after the expiry of the said period of three years from the due date of furnishing the said annual return.

8. Amendment of Section 52 of the CGST Act, 2017

Clause 135 of the Finance Bill 2023 proposes to insert a new sub-section (15) in section 52 of the CGST Act, 2017 to provide a time limit of three years for an electronic commerce operator to provide a statement under section 52(4) for a month. It also seeks to empower the government, on the recommendation of the GST Council, to extend the time limit for an operator or a class of operators by notification, subject to certain conditions and restrictions.

135. In section 52 of the Central Goods and Services Tax Act, after sub-section (14), the following sub-section shall be inserted, namely:–

(15) The operator shall not be allowed to furnish a statement under sub-section (4) after the expiry of a period of three years from the due date of furnishing the said statement:

Provided that the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow an operator or a class of operators to furnish a statement under sub-section (4), even after the expiry of the said period of three years from the due date of furnishing the said statement.

9. Amendment of Section 54 of the CGST Act, 2017

Clause 136 of the Finance Bill 2023 proposes to amend section 54(6) of the CGST Act, 2017 by removing the reference to the provisionally accepted input tax credit in order to align it with the current scheme of availing self-assessed input tax credit as per section 41(1).

136. In section 54 of the Central Goods and Services Tax Act, in sub-section (6), the words “excluding the amount of input tax credit provisionally accepted,” shall be omitted.

10. Amendment of Section 56 of the CGST Act, 2017

Clause 137 of the Finance Bill 2023 proposes to amend section 56 of the CGST Act, 2017 to provide the method of calculating the period of delay for the calculation of interest on delayed refunds through the CGST Rules.

137. In section 56 of the Central Goods and Services Tax Act, for the words “from the date immediately after the expiry of sixty days from the date of receipt of application under the said subsection till the date of refund of such tax”, the words “for the period of delay beyond sixty days from the date of receipt of such application till the date of refund of such tax, to be computed in such manner and subject to such conditions and restrictions as may be prescribed” shall be substituted.

11. Amendment of Section 122 of the CGST Act, 2017

Clause 138 of the Finance Bill 2023 proposes inserting a new sub-section (1B) in section 122 of the CGST Act, 2017 to provide for penal provisions applicable to electronic commerce operators in the event of a violation of provisions relating to supplies of goods or services made through them by unregistered persons or composition taxpayers.

138. In section 122 of the Central Goods and Services Tax Act, after sub-section (1A), the following sub-section shall be inserted, namely:–

(1B) Any electronic commerce operator who–

(i) allows a supply of goods or services or both through it by an unregistered person other than a person exempted from registration by a notification issued under this Act to make such supply;

(ii) 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) fails to furnish the correct details in the statement to be furnished under sub-section (4) of section 52 of any outward supply of goods effected through it by a person exempted from obtaining registration under this Act,

shall be liable to pay a penalty of ten thousand rupees, or an amount equivalent to the amount of tax involved had such supply been made by a registered person other than a person paying tax under section 10, whichever is higher.

12. Amendment of Section 132 of the CGST Act, 2017

Clause 139 of the Finance Bill 2023 proposes to amend section 132(1) of the CGST Act, 2017 to decriminalise offences specified in clauses (g), (j), and (k), and to raise the monetary threshold for launching prosecution for offences under the said Act from Rs. 100 lac to Rs. 200 lac, except for offences related to issuance of invoices without supply of goods or services or both.

139. In section 132 of the Central Goods and Services Tax Act, in sub-section (1),–

(a) clauses (g), (j) and (k) shall be omitted;

(b) in clause (l), for the words, brackets and letters “clauses (a) to (k)”, the words, brackets and letters “clauses (a) to (f) and clauses (h) and (i)” shall be substituted;

(c) in clause (iii), for the words “any other offence”, the words, brackets and letter “an offence specified in clause (b),” shall be substituted;

(d) in clause (iv), the words, brackets and letters “or clause (g) or clause (j)” shall be omitted.

13. Amendment of Section 138 of the CGST Act, 2017

Clause 140 of the Finance Bill 2023 proposes to amend the first proviso to section 138(1) of the CGST Act, 2017 to exclude persons involved in offences involving the issuance of invoices without the supply of goods or services, or both, from the option of compounding the offences under the said Act.

It also proposes to change section 138(2) to rationalise the amount for compounding of various offences by lowering both the minimum and maximum amount for compounding.

140. In section 138 of the Central Goods and Services Tax Act,-

(a) in sub-section (1), in the first proviso,-

(i) for clause (a), the following clause shall be substituted, namely:-

(a) a person who has been allowed to compound once in respect of any of the offences specified in clauses (a) to (f), (h), (i) and (l) of sub-section (1) of section 132;

(ii) clause (b) shall be omitted;

(iii) for clause (c), the following clause shall be substituted, namely:-

(c) a person who has been accused of committing an offence under clause (b) of sub-section (1) of section 132;

(iv) clause (e) shall be omitted;

(b) in sub-section (2), for the words “ten thousand rupees or fifty per cent. of the tax involved, whichever is higher, and the maximum amount not being less than thirty thousand rupees or one hundred and fifty per cent. of the tax, whichever is higher”, the words “twenty-five per cent. of the tax involved and the maximum amount not being more than one hundred per cent. of the tax involved” shall be substituted.

14. Insertion of new Section 158A of the CGST Act, 2017

Clause 141 of the Finance Bill 2023 proposes inserting a new section 158A in the CGST Act, 2017 to provide for the manner and conditions for sharing of the information furnished by the registered person in his application for registration, in his return filed, or in his statement of outward supplies, or the details uploaded by him for generation of electronic invoice or E-way bill, or any other details, as may be provided by CGST Rules, on the common portal with such other systems, as may be notified.

141. After section 158 of the Central Goods and Services Tax Act, the following section shall be inserted, namely:-

158A. Consent based sharing of information furnished by taxable person:

(1) Notwithstanding anything contained in sections 133, 152 and 158, the following details furnished by a registered person may, subject to the provisions of subsection (2), and on the recommendations of the Council, be shared by the common portal with such other systems as may be notified by the Government, in such manner and subject to such conditions as may be prescribed, namely:-

(a) particulars furnished in the application for registration under section 25 or in the return filed under section 39 or under section 44;

(b) the particulars uploaded on the common portal for preparation of invoice, the details of outward supplies furnished under section 37 and the particulars uploaded on the common portal for generation of documents under section 68;

(c) such other details as may be prescribed.

(2) For the purposes of sharing details under sub-section (1), the consent shall be obtained, of-

(a) the supplier, in respect of details furnished under clauses (a), (b) and (c) of sub-section (1); and

(b) the recipient, in respect of details furnished under clause (b) of sub-section (1), and under clause (c) of sub-section (1) only where such details include identity information of the recipient,

in such form and manner as may be prescribed.

(3) Notwithstanding anything contained in any law for the time being in force, no action shall lie against the Government or the common portal with respect to any liability arising consequent to information shared under this section and there shall be no impact on the liability to pay tax on the relevant supply or as per the relevant return.

15. Amendment of Schedule II of the CGST Act, 2017

Clause 142 of the Finance Bill 2023 proposes to amend Schedule III of the CGST Act 2017 to give retrospective applicability to paragraphs 7 and 8 and the Explanation 2 to the said Schedule with effect from July 1, 2017.

142. Retrospective exemption to certain activities and transactions in Schedule III to the Central Goods and Services Tax Act.

(1) In Schedule III to the Central Goods and Services Tax Act, paragraphs 7 and 8 and the Explanation 2 thereof (as inserted vide section 32 of Act 31 of 2018) shall be deemed to have been inserted therein with effect from the 1st day of July, 2017.

(2) No refund shall be made of all the tax which has been collected, but which would not have been so collected, had subsection (1) been in force at all material times.

Amendments related to Integrated Goods and Service Tax (IGST)

The Finance Bill 2023 also proposes certain changes to the IGST Act, 2017, as under:

1. Amendment of Section 2 of the IGST Act, 2017

Clause 143 of the Finance Bill 2023 proposes to amend clause (16) of section 2 of the IGST Act, 2017, by omitting certain words, in order to limit the definition of “non-taxable online recipient” to any unregistered person receiving online information and database access or retrieval services located in the taxable territory.

Further, it proposes to clarify that persons registered solely in accordance with clause (vi) of section 24 of the CGST Act, 2017 will be treated as unregistered for the purposes of the said clause.

It also proposes to change clause (17) of the said section by removing certain words in order to remove the terms “essentially automated” and “involving minimal human intervention” from the definition.

143. In the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the Integrated Goods and Services Tax Act), in section 2,-

(a) for clause (16), the following clause shall be substituted, namely:-

(16) “non-taxable online recipient” means any unregistered person receiving online information and database access or retrieval services located in taxable territory.

Explanation.- For the purposes of this clause, the expression “unregistered person” includes a person registered solely in terms of clause (vi) of section 24 of the Central Goods and Services Tax Act, 2017’;

(b) in clause (17), the words “essentially automated and involving minimal human intervention and” shall be omitted.

2. Amendment of Section 12 of the IGST Act, 2017

Clause 144 of the Finance Bill 2023 proposes to remove the proviso to section 12(8) of the IGST Act, 2017 in order to clarify the availability of input tax credit and other issues.

144. In section 12 of the Integrated Goods and Services Tax Act, in sub-section (8), the proviso shall be omitted.

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