All you need to know about Major Changes under GST in Union Budget 2021

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Finance Minister Nirmala Sitharaman, in Budget 2021, announced multiple changes to the goods and services tax framework aimed at helping small and medium businesses to tide over pandemic-induced disruptions. This includes relaxation in the mandatory audit requirement for registered businesses, determination of interest payable against outstanding tax liability and specifying conditions under which input tax credit can be utilised.

All you need to know about Major Changes under GST in Union Budget 2021 class=

Key changes in Union Budget 2021 from GST Perspective

Key changes that were announced are as follows:

  • The coverage of the expression supply has been further enhanced : A new clause (aa) in sub-section (1) of Section 7 of the CGST Act is being inserted, retrospectively with effect from the 1’st July, 2017, so as to ensure levy of tax on activities or transactions involving supply of goods or services by any person, other than an individual, to its members or constitutes or vice-versa, for cash, deferred payment or other valuable consideration. 
  • Additional eligibility condition to avail ITC – Section 16 of the CGST Act: A new clause (aa) to sub-section (2) of the section 16 of the CGST Act is being inserted to provide that input tax credit on invoice or debit note may be availed only when the details of such invoice or debit note have been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note.
  • Audit under GST has been scrapped :Sub-section (5) of section 35 of the CGST Act is being omitted so as to remove the mandatory requirement of getting annual accounts audited and reconciliation statement submitted by specified professional. 
  • Filing of Annual return on self certification basis: Section 44 of the CGST Act is being substituted so as to remove the mandatory requirement of furnishing a reconciliation statement duly audited by specified professional and to provide for filing of the annual return on self-certification basis. It further provides for the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return. 

  • Interest on Net Cash Liability: Section 50 of the CGST Act is being amended, retrospectively, to substitute the proviso to sub-section (1) so as to charge interest on net cash liability with effect from the 1st July, 2017. 

  • Separate recovery of tax proceeding in Transit checking :Section 74 of the CGST Act is being amended so as make seizure and confiscation of goods and conveyances in transit a separate proceeding from recovery of tax. 
  • “Self-assessed Tax” clarified: An explanation to sub-section (12) of section 75 of the CGST Act is being inserted to clarify that “self-assessed tax” shall include the tax payable in respect of outward supplies, the details of which have been furnished under section 37, but not included in the return furnished under section 39. 
  • Validity period of attachment one year: Section 83 of the CGST Act is being amended so as to provide that provisional attachment shall remain valid for the entire period starting from the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV till the expiry of a period of one year from the date of order made thereunder. 
  • Pre-deposit of 25% of penalty for filing Appeal: A proviso to sub-section (6) of section 107 of the CGST Act is being inserted to provide that no appeal shall be filed against an order made under sub-section (3) of section 129, unless a sum equal to twenty-five per cent. of penalty has been paid by the appellant.
  • Delink the proceedings in transit for detention: Section 129 of the CGST Act is being amended to delink the proceedings under that section relating to detention, seizure and release of goods and conveyances in transit, from the proceedings under section 130 relating to confiscation of goods or conveyances and levy of penalty.
  • Delink the proceedings in transit for confiscation: Section 130 of the CGST Act is being amended to delink the proceedings under that section relating to confiscation of goods or conveyances and levy of penalty from the proceedings under section 129 relating to detention, seizure and release of goods and conveyances in transit.

  • Jurisdictional Commissioner empowered to collect information: Section 151 of the CGST Act is being substituted to empower the jurisdictional commissioner to call for information from any person relating to any matter dealt with in connection with the Act.
  • Opportunity of hearing made mandatory for the purposes of proceeding: Section 152 of the CGST Act is being amended so as to provide that no information obtained under sections 150 and 151 shall be used for the purposes of any proceedings under the Act without giving an opportunity of being heard to the person concerned.
  • Jurisdictional Commissioner empowered to collect information: Section 168 of the CGST Act is being amended to enable the jurisdictional commissioner to exercise powers under section 151 to call for information.

  • Schedule II to the CGST Act omitted: Consequent to the amendment in section 7 of the CGST Act paragraph 7 of Schedule II to the CGST Act is being omitted retrospectively, with effect from the 1st July, 2017

  • SEZ provisions amended: Section 16 of the IGST Act is being amended so as to:
    • zero rate the supply of goods or services to a Special Economic Zone developer or a Special Economic Zone unit only when the said supply is for authorised operations;
    • restrict the zero-rated supply on payment of integrated tax only to a notified class of taxpayers or notified supplies of goods or services; and
    • link the foreign exchange remittance in case of export of goods with refund.

Takeaway:

Gone are the days when manufacturers/ service providers kept their fingers crossed on the Budget day expecting change in rate of duty/tax for their products/services in Central Excise / Service Tax regime. After rolling out of GST- a new indirect taxation which replaced the earlier laws- Budget has lost it’s importance with respect to change in rate of tax for Goods and Services, as the same is being decided in GST Council which became the supreme body as far as GST is concerned. However, the Finance Bill 2021 has proposed some amendments in CGST ; IGST Act,2017. 

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CS Urvashi Jain is an associate member of the Institute of Company Secretaries of India. Her expertise, inter-alia, is in regulatory approvals, licenses, registrations for any organization set up in India. She posse’s good exposure to compliance management system, legal due diligence, drafting and vetting of various legal agreements. She has good command in drafting manuals, blogs, guides, interpretations and providing opinions on the different core areas of companies act, intellectual properties and taxation.

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