Analysis of Indirect Tax Proposals made in Union Budget 2024

26 Jul 2024 | [2024] 164 taxmann.com 591 (Article) | GST | Opinion | 507 Views
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The Hon'ble Finance Minister presented the Union Budget 2024 on 24.07.2024 wherein certain amendments have been
proposed in CGST Act, 2017. In this article, I am going to present analysis of certain important proposals:

1. Amendment of Section 9 of CGST Act, 2017:Clause 110 of the Finance Bill, 2024 seeks to amend section 9 so as
not to levy Central Tax on un-denatured extra neutral alcohol or rectified spirit used for manufacture of alcoholic
liquor for human consumption. This amendment is proposed because of the ongoing litigations regarding levy of
central or state taxes on undenatured extra neutral alcohol or rectified spirit. By virtue of this amendment, there would
be no tax on raw material (i.e. un-denatured extra neutral alcohol or rectified spirit) and the state will earn higher
revenue on the final alcoholic products.
2. Insertion of Section 11A of CGST Act, 2017: The newly proposed section 11A grants special power to Government
to not to recover the GST which is not levied or short levied as a result of general practice. For this purpose, the Govt.
will notify the specified products in Official Gazette. This provision is carried forward from pre-GST regime which is
effective in those cases wherein the tax authorities identified that certain practice was followed by a significant portion
of the industry resulting into non-levy or short-levy of taxes. This will reduce the undue hardships of the assessee
providing a shield to them from retrospective penalties and recoveries. On a plain reading, the provision only says that
the Govt. shall not recover the tax not paid or short paid but, however, there is no provision for refund to those
taxpayers who have already paid tax from their own pocket.
3. Amendment of Section 13 and Section 31 of CGST Act, 2017: The clauses 113 and clause 118 of Finance Bill
2024 seeks to amend Section 13 and Section 31 related to time of supply and issuance of tax invoice respectively. The
provisions of Section 13 are proposed to be amended to specify time of supply of services in cases where invoice is
issued by recipient under RCM supplies i.e. self-invoicing mechanism. Hence, separate time of supply has been
provided for supplies from registered suppliers and unregistered suppliers.
If supply is received from registered supplier, time of supply shall be earlier of:
♦ Date of payment as per books of recipient or debit in bank whichever is earlier
♦ Date immediately following 60 days of the date of issue of invoice by the supplier in all cases where supplier is
required to issue invoices.
If supply is received from unregistered supplier, time of supply shall be earlier of:
♦ Date of payment as per books of recipient or debit in bank whichever is earlier
♦ Date of issue of invoice where invoice is to be issued by recipient
 However, it is still not clear as to whether the above amendment is applicable prospectively or retrospectively?
Simultaneous amendment is also made under Section 31 related to tax invoice which will prescribe time period for
issuance of invoice by recipient under RCM. The amendment also proposes to include those suppliers who are solely
registered for the purpose of deducting TDS under section 51. Therefore, now the liability to issue invoice in such cases
lies on the shoulder of recipient only.
4. Insertion of Section 16(5) and 16(6) of CGST Act, 2017: Clause 114 of Finance Bill 2024 seeks to make insertion
of section 16(5) and (6) after section 16(4) retrospectively w.e.f. 01.07.2017. The newly proposed section 16(5) is carved
out of section 16(4) wherein the time-limit to avail input tax credit in any return under section 39 for initial financial
years i.e. FY 2017-18, 2018-19, 2019-20 and 2020-21 is extended upto 30.11.2021. The unanswered question is what
will happen if any matter is pending in appeal? Whether the taxpayer be able to get benefit of the above newly
proposed section? There are several issues in this model which are yet unclear.
The above clause also seeks to insert Section 16(6) to allow availment of ITC in respect of an invoice or debit note in a
return filed within a period of 30 days for the period from the date of cancellation of registration till date of order of
revocation of cancellation of registration provided the time-limit to avail the input tax credit in respect of said invoice
or debit note was not expired on date of cancellation order.
Simultaneous amendment is also proposed under Section 114 vide clause 146 of Finance Bill 2024 proposing that no
refund shall be made of taxes paid or input tax credit already reversed in both above cases.
5. Amendment of Section 17(5) of CGST Act, 2017:Theproposed amendment in Section 17(5)(i) seeks to substitute
the words "Section 74 in respect of any period upto Financial Year 2023-24" in place of "Sections 74, 129 and 130".
This means that the input tax credit shall be restricted for demands under section 74 only up to Financial Year 2023-
24. The said amendment has been introduced in the light of proposed Section 74A. Furthermore, reference of Section
129 and 130 is also removed. It is worth mentioning that from Financial Year 2024-25 onwards there would be no
blockage of ITC for taxes paid by the supplier through demand and recovery provisions.
6. Amendment of Section 39 of CGST Act, 2017: The proposed amendment is made in section 39(3) which seeks to
mandate electronic filing of GST return i.e. GSTR-7 for every calendar month by a person who is required to deduct
TDS under Section 51 whether or not there are any deductions made during the month. The proposed section also
empowers Govt. to prescribe form and manner in which return shall be filed. This will help in ensuring consistency in
compliance and preventing any lapses in filing any returns.
7. Amendment of Section 54 of CGST Act, 2017: Clause 124 of Finance Bill 2024 seeks to amend section 54 related
 to refund of tax. It is proposed that in sub-section (3), second proviso is omitted and a new sub-section (15) shall be
inserted. The effect of the both the amendments is no refund of Unutilised Input Tax Credit on account of Zero-Rated
Supply Of Goods or of IGST paid on Zero-Rated Supply Of Goods shall be granted where such goods are subject to
export duty. This will ensure that goods which are subject to export duty will not get benefit of refund thereby ensuring
stability in prices of goods.
8. Amendment of Section 70 of CGST Act, 2017: This amendment is proposed to enable an authorised person to
appear on behalf of summoned person in compliance of summons issued by the Proper Officer. Presently, only the
summoned person can attend the summon proceedings. However, after the proposed amendment, authorized
representative would also be allowed to attend the summon proceedings but only under the direction of Proper Officer.
It is worth noting that the proposed change is made in alignment with Central Excise Act and Customs Act. This will
bring uniformity in GST framework.
9. Insertion of Section 74A of CGST Act, 2017: Clause 134 of Finance Bill 2024 seeks to insert newly proposed
Section 74A in lieu of Section 73 and 74. Simultaneous effect is also made under Section 73 and 74 vide Clause 132 and
133 of Finance Bill 2024 changing their marginal heading and stating that these sections shall be applicable for period
upto Financial Year 2023-24. As such, Section 74A shall be applicable for determination of tax not paid or short paid or
erroneously refunded or input tax credit wrongly availed or utilised for any reason (be it wilful suppression of facts or
otherwise) pertaining to the Financial Year 2024-25 onwards. The detailed comparison of Section 73, 74 and 74A is as
under for better understanding:
Old provision New proposal

Particular Non-fraud cases – Section 73 Fraud cases - Section 74 Non-fraud cases Fraud cases –
s Section 74A Section 74A

Scope

Tax has been not paid or short paid or Tax has been not paid or short paid Uniform approach i.e. tax has been
erroneously refunded, or where input or erroneously refunded, or where not paid or short paid or erroneously
tax credit has been wrongly availed or input tax credit has been wrongly refunded, or where input tax credit
utilised for any reason other than availed or utilised for reason of has been wrongly availed or utilised
fraud, wilful misstatement, or fraud, wilful-misstatement, or for reason of fraud or otherwise.
suppression of facts. suppression of facts.

Threshold amount for SCN

Nil Nil Rs. 1,000/-.

Therefore, no SCN to be issued if

demand is less than Rs. 1000.

Time limit for issuance of SCN

At least 3 months before the expiry of At least 6 months before the expiry Within 42 months from the due date
3 years from the due date of filing the of 5 years from the due date of filing for furnishing of annual return for the
annual return. the annual return. financial year or from the date of
erroneous refund.

Time limit for issuance of Demand Order

Within 3 years from the due date of Within 5 years from the due date of Within 12 months from the date of
filing the annual return. filing the annual return. issuance of SCN. This can be further
extended to maximum of 6 months on
prior approval of senior officer as
specified.

Penalty provisions
 10% of tax dues or Rs. 10% of tax dues or Rs.
10,000, whichever is -- 10,000, whichever is --
higher higher

-- 100% of tax Dues -- 100% of tax dues

Option for voluntary payment

(i) Before
No penalty 15% of tax as penalty. No penalty 15% of tax as penalty
SCN

No penalty if payment No penalty if payment 25% of tax as penalty if

25% of tax as penalty if payment
(ii) After SCN within 30 days of the within 60 days of the payment within 60 days of
within 30 days of the SCN
SCN SCN the SCN.

(iii) After 50% of tax as penalty if payment 50% of tax as penalty if

demand -- within 30 days of the Demand -- payment within 60 days of
Order Order.d Order. the Deman

Note: The above table depicts the provisions relating to penalties only. However, in all cases, the assessee shall be liable
to pay tax and interest as applicable.
Therefore:
♦ For FY 23-24, last date of issuance of SCN under section 73 of CGST Act, 2017 shall be 30.06.2029. However,
the time limit for adjudication by the authorities shall be 6 months after issuance of SCN.
♦ For FY 24-25, due date of annual return is 31.12.2025 and hence, SCN can be issued till 30.06.2029 and order
can be issued upto 30.06.2030.
♦ Earlier there were different time-limits for issuance of SCN and adjudication in non-fraud and fraud cases by
virtue of two separate sections 73 and 74 respectively. Now, new section 74A prescribes uniform time
 limitation for both types of cases. In a way, this has increased limitation for non-fraud cases and reduced
limitation for fraud cases.
10. Amendment of Section 109and Section 171 of CGST Act, 2017: Clause 138 of Finance Bill 2024 seeks to
empower and extend the scope of GST 'Appellate Tribunal' to adjudicate cases related to Anti-profiteering measures
under section 171. This amendment is proposed because earlier there was no provision to file any appeal against Anti-
profiteering cases. The orders decided by Standing Committee were considered as final. The amendment also provides
that the matters shall be examined or adjudicated by Principal Bench only. The amendment further states that the
Government on recommendation of GST Council can notify other cases as well which shall be heard by Principal Bench
only. Simultaneous amendment is also proposed in section 171 vide Clause 144 of Finance Bill 2024 by adding
'Appellate Tribunal' in the definition of 'Authority' in Anti-profiteering cases.
11. Amendment of Section 112 of CGST Act, 2017: The proposed amendment in Section 112 seeks to empower Govt.
to notify a date for filing appeal before the Appellate Tribunal and provide a revised time limit for filing of appeals or
application before the Appellate Tribunal. The above proposed amendment will be effective from 01.08.2024. The
amendment also permits filing of application by department within 3 months after expiry of 6 months. Moreover, the
amendment also reduced the pre-deposit amount for filing of appeal from 20% to 10% and maximum cap is reduced
from 50 crores to 20 crores.
12. Insertion of Section 128A of CGST Act, 2017: This insertion is proposed to grant one-time conditional waiver of
interest and penalty for notices issued under section 73 for initial period from 01.07.2017 to 31.03.2020 if full tax
demanded is paid by taxpayer. The last date of payment of tax demanded is 31.03.2025 as per press release by GST
Council. The conditions to avail benefit of this scheme are as under:
♦ The demand should be of notice under section 73 but adjudication order not yet issued or adjudication order
issued under 73 but first appeal order not yet issued or first appeal order issued but order from Tribunal has
not been issued.
♦ No such benefit shall be available to assessee in case of erroneous refund.
♦ Demand notices should not be issued under Section 74 of CGST Act, 2017.
♦ The Appeal or Writ Petition before the Appellate Authority / Tribunal / Court should have been withdrawn.
♦ Once the proceedings stand concluded upon payment, no appeal can be made against the relevant adjudication
/ appeal order.
 13. New entry in Schedule III: Clause 145 of the Bill seeks to amend Schedule III to provide that the activity of
apportionment of co-insurance premium by the lead insurer to the co-insurer for the insurance services jointly
supplied by the lead insurer and the co-insurer to the insured in coinsurance agreements provided that the lead insurer
pays the tax liability on the entire amount of premium paid by the insured. Further, it also proposes to provide that the
services by the insurer to the re-insurer, for which the ceding commission is deducted from reinsurance premium paid
by the insurer to the reinsurer provided that tax liability on the gross reinsurance premium inclusive of reinsurance
commission or the ceding commission is paid by the reinsurer.
The above proposed amendments will be enacted by the Government by way of passing of Finance Act, 2024.