Key Aspects of the Union Budget 2021-2022
The Union Budget for the Financial Year 2021-2022 was presented by Hon’ble Finance Minister Smt Nirmala Sitharaman ji on 01st February The budget principally focuses on quick recovery and growth of economy, especially after the greatest dip ever seen due
to the Covid-19 pandemic.
The key areas which are noted to be the pillars of the Budget as envisaged in the Budget speech of the Hon’ble Finance Minister are as follows.
- Health and Wellbeing.
- Physical and Financial Capital and Infrastructure.
- Inclusive Development.
- Reinvigorating Human Capital.
- Innovation and R&D.
- Mimimum Government and Maximum Governance
| Sr No | Provision Prior to Amendments | Provision after the proposed amednment | Analysis and Impacts |
| 1 | As per entry 7, Schedule II to the CGST Act 2017, Supply of Goods The following shall be treated as supply of goods, namely Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. | Bill seeks to amend section 7 of the Central Goods and Services Tax Act, 2017, with retrospective effect from the 1st July, 2017, by inserting a new clause (aa) in subsection (1) thereof, 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 constituents or viceversa, for cash, deferred payment or other valuable consideration. It is also proposed to insert an Explanation therein, to clarify that the person or its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one person to another. | There has always been a buzz about the supplies made by the associations/clubs to its members and taxability thereof. The insertion of this provision clarifies the tax charging intent of the law in this regard. Also, in addition to this, we believe that the specific insertion in Schedule II earlier, limited the scope to taxability only in case of goods now even the services will be brought under its ambit. Entry in Sch II now stands omitted retrospectively. It would be however interesting to see as to how classification as goods or services will be taken care of especially in case of bundled supplies. |
| 2 | P r o visions of Section 16(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed | Clause 100 of the Bill seeks to amend section 16 of the Central Goods and Services Tax Act by inserting a new clause (aa) in sub-section (2) thereof, so as to provide that input tax credit on invoice or debit note may be availed only when the details of such invoice or debit note has 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. | By virtue of making changes under Rule 36(4), which limited ITC availment from 120% to 105% of amount of tax credit appearing in GSTR 2A/2B, Industry was always in a fix as to adherence to the same. The point of argument was, can rules override the act?. A big full stop on all such arguments will come in effect. Its now an open and shut case. If the inward supplies (taxable under forward charge and procured from registered supplier), do not appear in GSTR-2A/2B, then even when all other conditions are satisfied ITC for the tax period cannot be availed. (RCM inward supplies will continue on self claim basis along with other provisions of Section 16). |
| 3 | ( 5 ) Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under subsection (2) of section 44 and such other documents in such form and manner as may be prescribed | Clause 101 of the Bill seeks to omit sub-section (5) of section 35 of the Central Goods and Services Tax Act So as to remove the mandatory requirement of getting annual accounts audited and the reconciliation statement submitted by specified professional. | GST annual returns and reconciliation statement now will have to be self certified by the registered person. This move will definitely hurt the professional body as the attest function is being taken away. However, the professionals can continue to guide in arriving at the reconciliation and self certification. On a lighter note ‘Protest’s mehenge pad gaye’ |
| 4 | (1) Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year. (2) Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 shall furnish, electronically, the annual return under sub-section (1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed | “44. Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person shall furnish an annual return which may include a self certified reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statement for every financial year electronically, within such time and in such form and in such manner as may be prescribed: Provided that the Commissioner may, on the recommendations of the Council, by notification, exempt any class of registered persons from filing annual return under this section. | The furnishing of information in annual returns and reconciliation will be made on self certification basis. However we believe that the applicability of this provision will be from a future date yet to be notified. Professionals viz CA/CMA undertaking such audits will need to take the heat of this. However, as mentioned earlier they can guide the clients to get the reconciliations prepared and vouch for the numbers therein. |
| 5 | 50 . (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council | In section 50 of the Central Goods and Services Tax Act, in sub-section (1), for the proviso, the following proviso shall be substituted and shall be deemed to have been substituted with effect from the 1st day of July, 2017, namely. “Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in 78 accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger.”. | During the year 2020, by virtue of the press release and a notification followed by the same, this provision was brought in public domain. However, despite the same, surprisingly many tax payers were receiving notices, wherein the calculation of interest was still being done on Gross tax liability and not on Net tax liability. Thus, this amendment will certainly bring an end to this tasking challenge faced by the taxpayers. |
| 6 | E x p lanation 1 to Section 74 clause (ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded. | In section 74 of the Central Goods and Services Tax Act, in Explanation 1, in clause (ii), for the words and figures “sections 122, 125, 129 and 130”, the words and figures “sections 122 and 125” shall be substituted | The penalty proceedings if any under section 129 and 130, will now not be given an automatic status of being concluded just because the proceedings of tax recovery have been concluded u/s 73 and 74 of the CGST Act 2017. |
| 7 | S e c tion75(12) Notwithstanding anything contained in section 73 or section 74, where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79. | In section 75 of the Central Goods and Services Tax Act, in sub-section (12), the following Explanation shall be inserted, namely ‘Explanation. For the purposes of this sub-section, the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.’ | Any tax declared as payable by virtue of the taxable supplies declared under GSTR-1 returns and where the said tax amount is not being reported in the return GSTR- 3B for the same tax period, then the difference between tax payable between GSTR1 and GSTR3B return, shall be considered as a self assessed tax payable under this Act. Currently, notices are being served wherever there are discrepancies in tax payable as per GSTR-1 vis-à-vis tax payable as per GSTR-3B. Only if tax as per GSTR-1>GSTR-3B. |
| 8 | 1 ) W here during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed. (2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1). | In section 83 of the Central Goods and Services Tax Act, for subsection (1), the following subsection shall be substituted, namely:–– “(1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed | The scope of the existing provisions has been expanded. Also the time limit for which the assets and bank accounts were allowed to remain ceased has been taken away. The provisions are very much a move to ensure no loss to government in case of defaulting tax payers. |
| 9 | S e ction 107 (6) No appeal shall be filed under sub-section (1), unless the appellant has paid— (a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and (b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, in relation to which the appeal has been filed. | In section 107 of the Central Goods and Services Tax Act, in sub-section (6), the following proviso shall be inserted, namely “Provided that no appeal shall be filed against an order under subsection (3) of section 129, unless a sum equal to twenty-five per cent. of the penalty has been paid by the appellant | In case of any appeals against the detention or seizing of goods or conveyance, is to be filed then the quantum of pre-deposit shall be raised to 25% instead of 10% currently applicable. However as this is a specific insertion of proviso only in reference to appeal u/s 129(3), in case of other appeals, we believe the pre deposit % for penalty will be only 10%. |
| 10 | Section 129(1) (a) on payment of the applicable tax and penalty equal to one hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty; (b) on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty; | “(a) on payment of penalty equal to two hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty; (b) on payment of penalty equal to fifty per cent. of the value of the goods or two hundred per cent. of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty; | In case of detention and seizure of goods or conveyance thereof the penalty now stands increased. The purpose is to further tighten the grip and ensure legitimate movement of goods and conveyances. These would however be seemingly punishable in case of some small clerical errors in Eway bills which unfortunately lead to detention and seizure. The only brighter part is that instead of earlier demand of (tax+penalty) now goods can be released only on payment of penalty |
| 11 | Section 129 (2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances. Section 129 (3) The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c). | (ii) sub-section (2) shall be omitted; “(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).”; | The mutatis mutandis applicability of provisions of Section 67(6) stands withdrawn for the provisions of section 129. The time limits have been regulated in order to ensure that the detention and release of goods/conveyance will be time bound. |
| 12 | Section 129 (4) No tax, interest or penalty shall be determined under subsection (3) without giving the person concerned an opportunity of being heard. | (iv) in sub-section (4), for the words “No tax, interest or penalty”, the words “No penalty” shall be substituted; | Since now penalty needs to be paid for releasing the detained goods/conveyance, the words tax and interest have been eliminated. |
| 13 | Section 129(6) Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within seven days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130 | (6) Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under subsection (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3) | Now, only penalty needs to be paid for release of the detained goods/conveyance and the time limit also stands increased to 15 days. |
| 14 | Proviso to Section 129 Provided that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of seven days may be reduced by the proper officer. | Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer.”. | This is a newly inserted proviso. In case the penalty is payable then in case of higher penalty, the transporter can get conveyance released by making the said payment. Same proviso continues only where the original time limit was 7 days, now with increased time limit of 15 days, the nature of the proviso remains the same. |
| 15 | Section 130. (1) Notwithstanding anything contained in this Act, if any person Section 130(2) Second Proviso Provided further that the aggregate of such fine and penalty leviable shall not be less than the amount of penalty leviable under sub-section (1) of section 129 (3) Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in subsection (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance | (a) in sub-section (1), for the words “Notwithstanding anything contained in this Act, if ”, the word “Where” shall be substituted. (b) in sub-section (2), in the second proviso, for the words, brackets and figures “amount of penalty leviable under sub-section (1) of section 129”, the words “penalty equal to hundred per cent. of the tax payable on such goods” shall be substituted; Sub-section 3 stands omitted | Elimination of Non-obstante clause |
| 16 | (1) The Commissioner may, if he considers that it is necessary so to do, by notification, direct that statistics may be collected relating to any matter dealt with by or in connection with this Act. (2) Upon such notification being issued, the Commissioner, or any person authorised by him in this behalf, may call upon the concerned persons to furnish such information or returns, in such form and manner as may be prescribed, relating to any matter in respect of which statistics is to be collected . | “151. The Commissioner or an officer authorised by him may, by an order, direct any person to furnish information relating to any matter dealt with in connection with this Act, within such time, in such form, and in such manner, as may be specified therein.”. | This will increase the pace at which the authorities will get the necessary data. Also the extension of power will give a broader ground for gathering necessary data. |
| 17 | (1) No information of any individual return or part thereof with respect to any matter given for the purposes of section 150 or section 151 shall, without the previous consent in writing of the concerned person or his authorised representative, be published in such manner so as to enable such particulars to be identified as referring to a particular person and no such information shall be used for the purpose of any proceedings under this Act. | (i) the words “of any individual return or part thereof” shall be omitted; (ii) after the words “any proceedings under this Act”, the words “without giving an opportunity of being heard to the person concerned” shall be inserted; | Gesture is good one but practical implementation seems difficult. |
| 18 | Supply of Goods The following shall be treated as supply of goods, namely:— Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration | In Schedule II of the Central Goods and Services Tax Act, paragraph 7 shall be omitted and shall be deemed to have been omitted with effect from the 1st day of July, 2017 | Discussed in point 1. |
| 19 | (1) “zero rated supply” means any of the following supplies of goods or services or both, namely:–– (a) export of goods or services or both; or (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit | (a) in sub-section (1), in clause (b), after the words “supply of goods or services or both”, the words “for authorised operations” shall be inserted; | Going forward, not anything and everything supplied to a SEZ will constitute to be a Zero rated supply. Only if the goods or services which will be for the purpose of ‘Authorized operations’ as applicable to the recipient in SEZ, will be eligible to be supplied as a Zero rated supply and thus consequent benefits relating thereto (refunds) will not be eligible if the supply to SEZ unit is for other than the recipients ‘Authorized operations’ |
| 20 | (3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely (a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit | “(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed: Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 for receipt of foreign exchange remittances, in such manner as may be prescribed. | Non realization of export proceeds in foreign currency leads to non fulfilment of the very purpose for which zero rated supplies are permitted. Thus in order to ensure that no benefits are unduly passed on, the refunds granted for export of goods will be liable to be paid as a liability along with applicable interest, if the export proceeds are not received within time allowed under FEMA. In case of services this would not be applicable, as the same is checked in the very refund application through EBRC/FIRC |
| 21 | (b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder. | (4) The Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification, specify–– (i) a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid; (ii) a class of goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim the refund of tax so paid.” | This doesn’t seem to be a very welcome move. Now if the choice of making export with/without payment of tax gets a capping of a category of exporter or category of goods or services specifically, then its harsh to say that there are two methods of making Zero rated supplies viz- with/without payment of IGST |
Disclaimer: The views expressed above are on the basis of our understanding of the provisions of GST Law, Rules and Regulations. The adjudicating authorities, courts may or may not agree with the views expressed above.