Budget 2019: GST Related Proposals

Finance Minister has proposed various amendments to Central Goods and Services Tax Act, 2017. We provide below the changes proposed.

Mandatory Provision of Prescribed Electronic Mode of Payment by Specified Class of Registered Persons

In continuation of impetus to increase the digital payments, Budget 2019 has proposed mandatory provision of electronic mode of payment to recipient of goods and services. The Government will specify the class of registered persons mandated to provide such facility and also the mode of electronic payment facility to be provided.

Transfer of Tax under One Head to Another Head

Presently, as per the GSTN architecture, a taxpayer is required to deposit tax or other amount under different head. The amount once deposited cannot be transferred from one head to another. Now it has been proposed to allow such a facility to taxpayer and is a welcome step to save the taxpayer from the rigours of refund processes.

An associated change has been made relating to transfer of money by Central Government to State Government in view transfer of money from CGST / IGST head to SGST head.


Disbursal of Refund by Central Government

Presently, the respective Government disburses their part of refund claim e.g. the State Governments disburse the SGST portion of refund claim, the Central Government disburses the CGST and IGST component. It has been experienced that invariably there are delays in sanctioning the refund by the authority other than the refund sanctioning authority.

It has been proposed that the Central Government will disburse the entire refund amount including the SGST portion of the refund amount,


Interest Calculation for Late Payment of GST on Net Tax Liability after Adjusting Credit Balances

With the judgment of High Court of Telangana, there were anxieties in the trade as to whether the interest for late payment of GST is applicable on the gross unpaid taxes as per the said judgment. The Government has proposed to amend Section 50 of the CGST Act, 2017 to provide that except in cases where late returns have been filed pursuant to SCN issued, the interest will be calculated on the portion of tax that is paid by debiting the electronic cash ledger. In other words, the Government has maintained the legal position as prevailed under Central Excise regime and gave due benefit of the available credit balance.

An associated question to be answered is whether this beneficial provision will be applicable to interest calculation for past period and paid after enactment of Budget 2019. While there are many arguments against, some of the arguments in favour can be:

  • Historically, under the erstwhile Central Excise and Service Tax, similar position prevailed. Accordingly, the benefit should be extended to past period computations as well;
  • The provision provides for determination of base for applying the interest rates as applicable at respective times. Also, it is an established position that penalty provisions as applicable on the date of show cause notice are applied for determination of penalty amount, similar position should also be taken for calculation of interest amount i.e. the provision as applicable on the date of interest payment should be applicable.

Enabling provisions for New System of GST Returns

Budget 2019 has proposed to amend Section 39 of CGST Act to provide the enabling provisions for new system of filing the GST returns. The GST Council has already provided a roadmap for new returns in a phased manner.

Constitution of National Appellate Authority (NAA)

Of late it has been experienced that different Authorities of Advance Ruling (AAR) and Appellate Authority of Advance Ruling (AAAR) in different States have given conflicting ruling on same facts. This has led to confusion in the trade.

The Government has proposed to establish NAA which will cater to these scenarios. The officers in State where AR was pronounced or any applicant (being a person have same PAN for more than one place in a State or States).

The advance ruling so pronounced will be binding on the applicant (and all registered persons under same PAN) and concerned officer and jurisdictional officers.

Amendment to Composition Scheme for Small Registered Persons

Since the inception of GST w.e.f. 01.07.2017, the Government has given various exemptions from registration in accordance with CGST Act, 2017. One such scenario related to small scale suppliers who do not qualify under the erstwhile Composition Scheme (e.g. providing other than prescribed service) but are liable to pay tax at reduced rate subject to certain conditions. Budget 2019 has incorporated certain enabling provisions in this respect with following essential features:

  • Value of interest or discount earned on loans, deposits or advances will not be included while determining the aggregate turnover;
  • Similarly, the value of such interest or discount will not be included while determining the value of exempted supplies for the purposes of determining the limit of Rs. Lacs or  10% of turnover of State for provision of services other than the restaurant related services;
  • Although already mentioned in the CGST Rules, an amendment have been made to provide that Composition Scheme is not available to Casual Taxable Persons or Non-Resident Taxable Persons;
  • Enabling provisions have been proposed to be incorporated in respect of allowing the benefit of payment of GST at lower rate (6% to be precise) by the service providers (other than restaurant services). Government has already issued a Notification to such an extent in the past;


Amendments to Registration Provisions

Higher Threshold for supplier of only goods

Enabling provisions have been proposed to be incorporated in CGST Act to provide that the Government at the request of States will enhance the threshold limit for registration to Rs. 40 Lacs in case a supplier is engaged in supply of goods only. The Government has already issued a notification to such an extent.

It has also been provided that even if a person is engage in supplying the exempt services of loan, advance or deposit  consideration of which is represented only by either interest or discounts along with supply of goods, such persons will still be treated as engaged only in supply of goods.


AADHAR Validation

Enabling provisions have been proposed to be incorporated in CGST Act to provide that the registered persons are mandatorily required to authenticate himself by either AADHAR or in the absence of AADHAR any alternate viable means in the prescribed manner.

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