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Published on:
October 19, 2023
By
Shaik Musrath

India's Evolving GST: Key Changes from October 2023

The Goods and Services Tax (GST) system in India is constantly evolving to meet the changing needs of businesses in the tax structure. Starting from October 1, 2023, a significant wave of GST amendments will come into effect. These changes will have far-reaching implications for businesses and taxpayers across the country. In this blog, we'll explore the 

What are the most prominent GST changes and their implications

Composition Levy for E-commerce Suppliers

Section 137 of the Finance Act, 2023 brings a significant change to the composition scheme. Previously, this scheme was not available to registered persons supplying goods through E-commerce operators (ECOs). However, as of October 2023, this benefit will be extended to them. This change will simplify the tax process for suppliers using E-commerce platforms. There are, however, restrictions for registered persons supplying services through ECOs.

Timely Payment to Suppliers

A crucial change is the clarification regarding payment to suppliers within 180 days. If a recipient fails to settle the invoice amount, including taxes, to the supplier within 180 days from the invoice date, the recipient must pay an amount equivalent to the Input Tax Credit (ITC) they have claimed. This change eliminates the previous provision where ITC was added to the output tax liability. The interest on such reversal will be determined according to Section 50(3) instead of 50(1) of the CGST Act, only when the wrongly availed credit is utilized.

ITC Restrictions on CSR Activities

Section 139 of the FA, 2023 introduces a restriction on Input Tax Credit (ITC) for goods and services related to Corporate Social Responsibility (CSR) activities. Taxable persons receiving goods or services intended for CSR will face limitations on their ITC claims. This change will impact businesses' tax planning strategies going forward.

Retrospective Exemption from GST Registration

Section 140 of the FA, 2023 brings a retrospective change, exempting certain persons from GST registration as of July 1, 2017. This includes persons making supplies exclusively covered under Reverse Charge Mechanism (RCM), supplying handicraft goods, making inter-state supplies of taxable services, and more. This exemption will simplify compliance for small businesses.

Extended Time for Revocation of Canceled GST Registration

Under Section 141, the time limit for moving an application to revoke a canceled GST registration has been extended from 30 days to 90 days from the date of cancellation. This extension provides taxpayers with more flexibility in reinstating their GST registration.

Limitation on Filing of Belated Returns

Sections 142-145 introduce a limitation on the filing of belated returns. Registered persons will no longer be allowed to furnish belated returns for GSTR-1, GSTR-3B, GSTR-8, GSTR-9, and GSTR-9C after three years from the due date. This change emphasizes the importance of timely compliance.

Refunds and Interest on Delayed Refunds

Section 146 amends Section 54(6) of the CGST Act, removing the reference to provisionally accepted ITC to align with self-assessed ITC as per Section 41(1) of the CGST Act. This change will impact how refunds are processed, particularly in the case of zero-rated supply.

Assessment of Unregistered Persons

Section 148 extends the time period for furnishing Form GSTR 3B or Form GSTR 10 under the Best Judgment Assessment from 30 days to 60 days, with the possibility of further extension to 120 days upon payment of additional late fees.

Penalties for Offenses

Section 155 introduces penalties for E-commerce operators (ECOs) involved in the violation of specified provisions related to supplies made by unregistered persons or composition taxpayers. This provision empowers authorities to impose penalties of INR 20,000 or the tax amount involved in such supplies, whichever is higher.

Decriminalization of Offenses

From October 1, 2023, decriminalization of specific offenses became effective and through this government made certain offenses like obstructing or preventing a tax officer from carrying out their duties, tampering with or destroying important documents or evidence, and providing false information  less severe in terms of legal consequences

They also raised the threshold limit for initiating criminal prosecution against individuals or entities for these offences. Earlier, the value of tax evasion or fraud was more than INR 1 Crore. Now, the threshold has been increased to INR 2 crore for most offences, except for the issuance of fake invoices. In the case of issuing fake invoices, the prosecution threshold remains at INR 1 Crore.

Changes in Compounding Offenses

Section 157 excludes fake or bogus invoice cases from the option of compounding offenses. It also reduces the minimum and maximum compounding amounts, making it more flexible for taxpayers.

Consent-Based Information Sharing

Section 158 allows the sharing of information furnished by taxpayers on the GST common portal with other systems, but only with the taxpayer's consent. This change enhances data-sharing capabilities while respecting taxpayer privacy.

Retrospective Applicability of Schedule III Entries

Section 159 introduces retrospective applicability to entries in Schedule III, which pertain to non-taxable supplies. This change aims to address ongoing and prospective litigations related to supplies made without tax payments.

Rule 64 Inclusion

Rule 64 of the CGST Rules introduces the term "non-taxable online recipient" as referred to in the IGST Act. This change expands the scope of Rule 64 to cover more categories of recipients, enhancing tax compliance.

Integrated Goods and Services Tax (IGST) Act

The IGST Act also undergoes several changes:

Widening the Scope of OIDAR Services

Section 160 of the FA, 2023 broadens the definition of "non-taxable online recipient" in the IGST Act, expanding the scope of Online Information and Database Access or Retrieval Services (OIDAR). This change will impact unregistered individuals receiving OIDAR services.

Changes in Place of Supply for Transportation of Goods

Sections 161 and 162 introduce modifications to the place of supply for the transportation of goods, affecting the location of the recipient of services when the supplier and recipient are outside India. These changes will impact the classification of services as exports or imports.

Zero-Rated Supplies to SEZ

Section 123 of the FA Act, 2021 brings clarity to zero-rated supplies to Special Economic Zones (SEZ). This change eliminates the need for SEZ endorsement while claiming a refund of accumulated ITC or IGST by the DTA supplier.

Conclusion

The GST landscape in India is continuously evolving, and these changes from October 2023 reflect the government's efforts to simplify tax compliance, prevent tax evasion, and promote transparency. Businesses and taxpayers should stay informed and adapt to these changes to ensure smooth operations and compliance with the new GST regulations.

Suggestions

GST- E-way Bill – Transporter’s Guide to Compliance
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GST Law Amended Multiple Times: A Comprehensive Guide

Updated on:
October 19, 2023