Latest changes in GST Law and Rules-2019
Services under Reverse Charge Mechanism
Central Government vide Notification No. 29/2018- CT (R) dated 31st Dec, 2018 notified the following amendments in the Notification No. 13/2017- CT (R) dated 28th June, 2017, namely:-
1. Insertion of proviso to item (g) serial number 2:
“Provided that nothing contained in this entry shall apply to services provided by a goods transport agency, by way of transport of goods in a goods carriage by road, to, -
a) A Department or Establishment of the Central Government or State Government or Union territory; or
b) local authority; or
c) Governmental agencies,
which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for the purpose of deducting tax under section 51 and not for making a taxable supply of goods or services.”;
Comment: Services provided by GTA to Government departments/local authorities exempted which have taken registration only for the purpose of deducting tax under Section 51 not liable under RCM
2. Insertion of new services to RCM u/s 9(3) of CGST Act under serial number 14, 15 and 16:
3. Clause (h) to the explanation inserted:
Clause (h) states that the provisions of this notification, in so far as they apply to the Central Government and State Governments, shall also apply to the Parliament and State Legislatures.
Amendment in the meaning of Advance Authorisation
The Central Government vide Notification No. 1/2019- CT dated 15th Jan, 2019 made the following amendments in the Notification No. 48/2018- CT dated 18th October, 2019 with a view to amend the meaning of Advance Authorisation:-
i. Proviso to Serial No. 1
Serial No. 1 column number (2) provides that the supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation shall be deemed exports. To this, a proviso has been added as under:
“Provided that goods so supplied, when exports have already been made after availing input tax credit on inputs used in manufacture of such exports, shall be used in manufacture and supply of taxable goods (other than nil rated or fully exempted goods) and a certificate to this effect from a chartered accountant is submitted to the jurisdictional commissioner of GST or any other officer authorised by him within 6 months of such supply,
Sl. No.
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Category of Supply of Services
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Supplier of service
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Recipient of Service
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Comment
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(1)
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(2)
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(3)
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(4)
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(5)
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12
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Services provided by business facilitator (BF) to a banking company
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Business facilitator (BF)
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A banking company, located in the taxable territory
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13
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Services provided by an agent of business correspondent (BC) to business correspondent (BC).
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An agent of business correspondent (BC)
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A business correspondent, located in the taxable territory.
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14
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Security services (services provided by way of supply of security personnel) provided to a registered person: Provided that nothing contained in this entry shall apply to, - (i)
(a) a Department or Establishment of the Central Government or State Government or Union territory; or (b) local authority; or (c) Governmental agencies; which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for the purpose of deducting tax under section 51 of the said Act and not for making a taxable supply of goods or services; or (ii) a registered person paying tax under section 10 of the said Act.
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Any person other than a body corporate
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A registered person, located in the taxable territory.”
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Therefore when Security services are provided to registered persons only then no need to take registration as per Section
23 of CGST Act, 2017, However, when supplier of security services provides services to registered as well as unregistered person then such supplier is required to take registration for supply to unregistered recipient and those under composition.
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Provided further that no such certificate shall be required if input tax credit has not been availed on inputs used in manufacture of export goods.”
Comment: In case of supplies against Advance Authorization, proviso is being inserted to require post-export end-use monitoring based on CA certificate where credit has been availed only. Effect of this amendment will relieve concerns raised by trade since original notification was issued.
ii. Omission of words ”pre-import” from Explanation 1
Explanation 1 earlier defined the term “advance authorisation” as an authorisation issued by the Director General of Foreign Trade under Chapter 4 of the Foreign Trade Policy 2015-20 for import or domestic procurement of inputs on pre-import basis for physical exports.
The given notification now aims to omit “on pre-import basis” from the explanation 1 so as to give effect to the above mentioned proviso.
Comment: Please note that the amendment is by way of ‘omission’ and not ‘repeal’. As per General Clauses Act, a repeal will save acts done previous but not so in case of omission. Whether this was always intended and therefore must be given retrospective effect will be a bone of contention. CGST Act does not empower retrospective exemptions under section 11 but whether the same applies to notification under section 147 is to be seen.
GST Amendment Act, 2018 applicable from 1st day of February, 2019
The Central Government vide Notification No. 02/2019 – CT dated 29th Jan, 2019 has provided that the provisions of the CGST (Amendment) Act, 2018 (31 of 2018), except the following shall be applicable from 1st February, 2019:
- · clause (b) of section 8, section 17, section 18,
- · clause (a) of section 20,
- sub-clause (i) of clause (b) and sub-clause (i) of clause (c) of section 28,
Comment: Please note that these provisions are relatable to the newly inserted section 43A and the changes to section 39 and 140. Care may be taken to identify the effect of the delay in implementation of these provisions as rest of the Amendment Act comes into effect from 1 Feb, 2019.
Change in value of taxable supplies for calculation of tax under composition
The Central Government vide Notification No. 05/2019 – CT dated 29th Jan, 2019 has substituted the rate of tax for suppliers other than (manufacturers and Restaurant service providers) under composition scheme.
Earlier
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Revised
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Comment
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An amount calculated at the rate of half per cent of the turnover in State in case of other suppliers.
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An amount of tax calculated at the rate specified in rule 7 of the Central Goods and Services TaxRules, 2017.
[Rule-7 provides that rate of tax for suppliers other than (manufacturers and Restaurant service providers) is 0.5% of the turnover of taxable supplies of goods and services in the State or Union territory]
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Therefore rate of composition for eligible suppliers other than (manufacturers and Restaurant service providers) is 0.5% of the turnover of taxable supplies of goods and services in the State or Union territory.
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Central Goods and Services Tax (Amendment) Rules, 2019
The Central Government vide Notification No. 03/2019 –Central Tax dated 29th January, 2019 has amended CGST Rules, 2017 details of which are explained below:
Rule
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Change
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Comment
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Omission of proviso to Rule 8
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Application for registration
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SEZ developer/units are to continue with separate registration (apart from registration in respect of non-SEZ operations) and with this mandate now included by way of second proviso to section 2(51), the rule stands amended”
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Insertion of Rule 21A
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Suspension of registration
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With this insertion, where cancellation is applied but continues to appear online, please ensure that suspension order is obtained to avoid late fee. The exemption from late fee is only in respect of returns up to Sept 2018.
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Insertion of Rule 41A
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Transfer of credit on sale, merger, amalgamation, lease or transfer of a business
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Please note that this rule is especially where separate registration is obtained under the amended section 25(2).
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Insertion in Explanation to Rule 42 and Rule 43
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Manner of determination of input tax credit in respect of inputs or input services /capital goods and reversal thereof
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Rule
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Existing
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Revised
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Comment
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Substitution in heading of Chapter-II
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Composition Rules
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“Composition Levy”
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Substitution in Rule 7:
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In the Table, against serial number (3), in column (3), for the word “goods”, the words, “goods and services” shall be substituted.
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Therefore rate of composition for eligible suppliers other than (manufacturers and Restaurant service providers) is 0.5% of the turnover of taxable supplies of goods and services in the State or Union territory. Extreme care should to taken that this rate of 1% (CGST-SGST) will apply on the entire ‘taxable turnover’ in the State
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Substitution in 2nd proviso to Rule 83 (3)
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Provided further that no person to whom the provisions of clause (b) of sub-rule (1) apply shall be eligible to remain enrolled unless he passes the said examination within a period of [eighteen months] from the appointed date
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Provided further that no person to whom the provisions of clause (b) of sub- rule (1) apply shall be eligible to remain enrolled unless he passes the said examination within a period of [thirty months] from the appointed date
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Allows time to complete the exam after enrolment.
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Substitution in Rule 89 (2) (f)
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(f) a declaration to the effect that the SEZ unit or the SEZ developer has not availed the input tax credit of the tax paid by the supplier of goods or services or both, in a case where the refund is on account of supply of goods or services made to a SEZ unit or a SEZ developer.
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(f) a declaration to the effect that tax has not been collected from the SEZ unit or the SEZ developer, in a case where the refund is on account of supply of goods or services or both made to a SEZ unit or a SEZ developer;
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Determination of question of whether tax incidence has not been passed on, now flows from customer’s (SEZ) certificate.
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Integrated Goods and Services Tax (Amendment) Rules, 2018
Central Government vide Notification No. 04/2018- Integrated Tax dated31st December, 2018 notified the following rules as Integrated Goods and Services Tax (Amendment) Rules, 2018:-
1) Rule 3 in clause (h):
The words “the service shall be deemed to have been provided all over India and” inserted after the words “in the case of advertisements over internet”to clarify that the services provided over internet is not specific to 1 or more State or Union territory and shall be deemed to be provided all over India.
2) Insertion of Rule 4:
The place of supply in case of the supply of services attributable to different States or Union territories, undersub section (3) of section 12 of the IGST Act, 2017 shall be:-
a) Where such immovable property or boat or vessel is located inmore than one State or Union territory- each of the respective States or Union territories and
b) In the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory- to be determined in the following manner namely:-
- · Services provided by way of lodging accommodation by a hotel, inn, guest house, club or campsite, by whatever name called and services ancillary to such services:
A. Where such property is a single property located in two or more contiguous States or Union territories or both: the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the area of the immovable property lying in each State or Union territory.
B. Cases except where such property is a single property located in two or more contiguous States or Union territories or both: the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the number of nights stayedin such property.
- All other services in relation to immovable property including services by way of accommodation in any immovable property for organising any marriage or reception etc : the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the area of the immovable property lying in each State or Union territory
- Services provided by way of lodging accommodation by a house boat or any other vessel and services ancillary to such services: the supply shall be treated as made in each of the respective States or Union territories, in proportion to the time spent by the boat or vessel in each such State or Union territory, determined on the basis of a declaration made to the effect by the service provider.
3) Insertion of Rule 5:
The place of supply in case of supply of services attributable to different States or Union territories, under subsection (7) of section 12 of the said Act, in the case of-
a) services provided by way of organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, including supply of services in relation to a conference, fair exhibition, celebration or similar events;or
b) services ancillary to the organisation of any such events or assigning of sponsorship to such events,
4) Insertion of Rule 6: Supply under section 12(11) of the IGST Act
In the case of supply of services relating to a leased circuit, where the leased circuit is installed in more than one State or Union territory and a consolidated amount is charged for supply of such services, shall be taken as being in each of the respective States or Union territories, and in the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, shall be determined in the following manner, namely:-
a) The number of points in a circuit shall be determined in the following manner:
- in the case of a circuit between two points or places, the starting point or place of the circuit and the end point or place of the circuit will invariably constitute two points;
- any intermediate point or place in the circuit will also constitute a point provided that the benefit of the leased circuit is also available at that intermediate point;
b) the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the number of points lying in the State or Union territory.
5) Insertion of Rule 7
In the case of services supplied in respect of goods which are required to be made physically available by the recipient to the supplier, or to a person acting on behalf of the supplier, or in the case of services supplied to an individual, represented either as the recipient or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, where the location of the supplier of services or the location of the recipient of services is outside India, and where such services are supplied in more than one State or Union territory,
Shall be taken as being in each of the respective States or Union territories, and the proportion of value attributable to each such State and Union territory in the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, shall be determined in the following manner, namely:-
a) in the case of services supplied on the same goods, by equally dividing the value of theservice in each of the States and Union territories where the service is performed;
b) in the case of services supplied on different goods, by taking the ratio of the invoice value of goods in each of the States and Union territories, on which service is performed, as theratio of the value of the service performed in each State or Union territory;
c) in the case of services supplied to individuals, by applying the generally acceptedaccounting principles.
6) Insertion of Rule 8
In case of supply of services directly in relation to an immovable property, including services supplied by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators, where the location of the supplier of services or the location of the recipient of services is outside India, and where such services are supplied in more than one State or Union territory, in the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, shall be determined by applying the provisions of rule 4, mutatis mutandis.
7) Insertion of Rule 9
In case of supply of services by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organisation, where the location of the supplier or the location of the recipient is outside India, and where such services are provided in more than one State or Union territory , in the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, shall be determined by applying the provisions of rule 5, mutatis mutandis”.