Draft changes to GST regulations

The central government has put in the public domain all draft amendments to the goods and services tax (GST) laws. After due consideration and approval by the GST Council, these will be placed before Parliament and state legislatures, to be brought into effect on an agreed date.

Mostly, these are taxpayer-friendly measures and correction of inadvertent errors. The major amendment proposed is introduction of a new section, 43A, in the Central GST Act of 2017, to enable the new return filing procedure as approved by GST Council. Another is to allow taxpayers to amend the returns.

A useful proposal is to deny input tax credit only in respect of motor vehicles for transport of persons having approved seating capacity of not more than 13 persons; also vessels and aircraft when used for personal purposes. And, input tax credit in respect of food and beverages, health services and travel benefits to employees shall be available, where the provision of such goods or services or both is obligatory for an employer to provide to employees under any law. Input tax credit of cesses and certain additional duties of excise will be denied through an explanation.

A welcome move is to omit the reverse charge mechanism under Section 9(4) of the Central GST Act which mandates tax on supplies by unregistered dealers to registered dealers. A useful proposal is to permit a registered person to issue consolidated credit/debit notes in respect of multiple invoices issued in a financial year, without linking the same to individual invoices. 

Utilisation of the credit of state tax or Union territory tax will be allowed for payment of integrated tax only when the balance of input tax credit on account of central tax is not available for payment of integrated tax. Also, a taxpayer would be able to utilise credit on account of Central GST, State GST or Union Territory GST only after exhausting all the credit on account of Integrated GST available to him. It is proposed to prescribe ceilings for deposits for filing an appeal before the appellate authority or appellate tribunals.

Persons having multiple places of business in a state or UT will be allowed to take separate registrations for each place of business. A person having multiple units in a Special Economic Zone (SEZ) is also being allowed to take separate registration for each such unit. The principle of unjust enrichment will apply in cases of refund claim arising out of supplies of goods or services made to an SEZ developer/unit. 

Services shall qualify as export even if the payment for these is received in rupees in line wth Reserve Bank regulations. Transport of goods from a place in India to a place outside by a transporter located in India would not be chargeable to GST, as the place of supply will be outside India. Job work or any treatment or process done on goods temporarily imported into India (for example, gold, diamonds) which are then exported will not be taxed. 

Logically, the rectification of mistakes and amendments intended to clarify the laws should take place with retrospective effect from July 1, 2017, when the GST laws took effect. Similarly, the measures friendly to taxpayers should also be, wherever possible, effective with retrospective effect.

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