The Finance Bill, 2025 has
proposed changes in the CGST Act, 2017 through Clauses 116 to 129 of the Finance
Bill, 2025 in the CGST Act, 2017.
Unless specified otherwise,
amendments proposed in the Finance Bill, 2025, vide Clauses 116 to 129 will
come into effect from a date when the same will be notified concurrently, as
far as possible, with the corresponding amendments to the similar Acts passed
by the States & Union territories with legislature.
Note:
(a) CGST Act means Central Goods and Services Tax Act, 2017
(b) IGST Act means Integrated Goods and
Services Tax Act, 2017
(c) UTGST Act means Union Territory Goods
and Services Tax Act, 2017
|
Current provisions |
Proposed provisions |
Effect |
|
Clause 116 of the Finance Bill, 2025 Section 2– Definitions |
||
|
Section
2(61): (61)
“Input Service Distributor” means an office of the supplier of goods or
services or both which receives tax invoices towards the receipt of input
services, including invoices in respect of services liable to tax under
sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct
persons referred to in section 25, and liable to distribute the input tax
credit in respect of such invoices in the manner provided in section 20; . |
Section
2(61) (61)
“Input Service Distributor” means an office of the supplier of goods or
services or both which receives tax invoices towards the receipt of input
services, including invoices in respect of services liable to tax under sub-section
(3) or sub-section (4) of section 9 of this Act or under subsection (3) or
sub-section (4) of section 5 of the Integrated Goods and Services Tax Act,
2017, for or on behalf of distinct persons referred to in
section 25, and liable to distribute the input tax credit in respect of such
invoices in the manner provided in section 20; |
Section 2(61) of the CGST Act is
being amended to explicitly provide for the distribution of input tax credit
(ITC) by the Input Service Distributor (ISD) in respect of inter-state
supplies on which tax has to be paid on a reverse charge basis, by inserting
reference to sub-section (3) and sub-section (4) of Section 5 of IGST Act.
This amendment will be effective
from 1st April, 2025.
Under this change, the ISD can
pay GST under reverse charge for inter-state supply of common input services
and distribute the corresponding credit among distinct persons registered
under the same PAN.
For the past periods, Circular
199/11/2023-GST dated July 17, 2023, was issued to clarify the issues
on ‘Cross Charge’ vs, ‘ISD’ for the past period as per the the
recommendations of the 50th GST Council meeting held on July 11,
2023.
Additionally, corresponding
amendments have been made to Section 20 of the CGST Act.
Further, the GST Council in its
52nd meeting on October 07, 2023, proposed making the ISD
mechanism mandatory on a prospective basis for the distribution of ITC for
such common input services. |
|
Section
2(69): (69) “local authority” means––
(a) a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
(b) a “Municipality” as defined in clause (e) of article 243P of the
Constitution;
(c) a Municipal Committee, a Zilla Parishad, a District Board, and any
other authority legally entitled to, or entrusted by the Central Government
or any State Government with the control or management of a municipal or
local fund;
(d) a Cantonment Board as defined in section 3 of the Cantonments Act,
2006 (41 of 2006);
|
Section
2(69): (69) “local authority” means–
(a) a “Panchayat” as defined in clause (d) of article 243 of the
Constitution;
(b) a “Municipality” as defined in clause (e) of article 243P of the
Constitution;
(c) a Municipal Committee, a Zilla Parishad, a District Board, and any
other authority legally entitled to, or entrusted by the Central Government
or any State Government with the control or management of a municipal fund or local fund;
Explanation.–– For the purposes of this sub-clause–
(a) “local fund” means any fund under the control or management of an
authority of a local selfgovernment established for discharging civic
functions in relation to a Panchayat area and vested by law with the powers
to levy, collect and appropriate any tax, duty, toll, cess or fee, by
whatever name called;
(b) “municipal fund” means any fund under the control or management of
an authority of a local selfgovernment established for discharging civic
functions in relation to a Metropolitan area or Municipal area and vested by
law with the powers to levy, collect and appropriate any tax, duty, toll,
cess or fee, by whatever name called.
(d) a Cantonment Board as defined in section 3 of the Cantonments Act,
2006 (41 of 2006);
|
Section 2(69)(c) of the CGST Act
is being amended to insert an Explanation to provide for definitions of the
terms 'Local Fund' and 'Municipal Fund' used in the definition of "local
authority" under the said clause to clarify the scope of the said terms.
|
|
After Section 2(116):
|
After Section 2(116): (116A) unique
identification marking” means the unique identification marking referred to
in clause (b) of sub-section (2) of section 148A and includes a digital
stamp, digital mark or any other similar marking, which is unique, secure and
non-removable; |
A new clause after Section
2(116) is being inserted to provide definition of Unique Identification
Marking for implementation of Track and Trace Mechanism.
The GST Council in its 55th
Meeting, recommended inserting a provision in the CGST Act through Section
148A, empowering the government to implement a Track and Trace Mechanism for
specified commodities prone to tax evasion.
Section 148A of the CGST Act
introduces the track and trace mechanism, which applies to specified goods
and certain classes of taxable persons dealing with these goods. This
provision overrides other provisions of the CGST Act and mandates the use of
software-readable technologies, such as barcodes or RFID tags, to track the
movement of goods. The goods and persons subject to this mechanism will be
specified by the government through notifications. The primary objective is
to prevent tax evasion by ensuring that the movement of goods is traceable
throughout the supply chain.
In the event of non-compliance
with the provisions of the track and trace mechanism, a penalty will be
imposed. This penalty is in addition to any penalties prescribed under
Chapter 15 or other relevant sections of the CGST Act.
Non-compliance with Section 148A
of the CGST Act will attract penalties under Section 122B of the CGST Act,
where the taxpayer will be liable to pay either INR 1 Lakh or 10% of the
disputed tax, whichever is higher.
Goods that are considered prone
to tax evasion, such as tobacco, pan masala, scrap, plastic, and paper, are
expected to be included in the list of items subject to this mechanism, with
the final list being notified by the government.
This provision is intended to
strengthen GST compliance by ensuring effective monitoring of specified goods
and reducing opportunities for tax evasion.
|
|
Clause 117 of the Finance Bill, 2025 Section 12– Time of supply of goods |
||
|
(4) In case of supply of vouchers by a supplier, the time of supply
shall be- (a) the date of issue of voucher, if the supply is identifiable at
that point; or (b) the date of redemption of voucher, in all other cases.
|
|
Section 12(4) of the CGST Act relating
to time of supply for goods in respect of Vouchers is being omitted.
The GST Council in its 55th
meeting, recommended that transactions
involving vouchers should not attract GST, as vouchers do not qualify as
either goods or services.
Subsequently, Circular No.
243/37/2024-GST, dated December 31, 2024, was issued to further clarify
provisions related to vouchers. The circular has clarified that a voucher is
considered either money or a transaction in an actionable claim. As a result,
the issuance or transfer of vouchers is not subject to GST. Instead, vouchers
function as prepaid payment instruments, meaning that GST will be applicable
only on the underlying goods or services purchased using the voucher.
Since GST applies to the actual
supply of goods or services, the concept of time of supply for vouchers
becomes irrelevant, thereby omited the relevant time of supply provisions
pertaining to vouchers. |
|
Clause 118 of the Finance Bill, 2025 Section 13– Time of supply of services |
||
|
Section 13(4): (4) In
case of supply of vouchers by a supplier, the time of supply shall be–– (a) the date of issue of voucher, if the supply is
identifiable at that point; or (b) the date of redemption of voucher, in all other cases. . |
.
|
Section 13(4) of the CGST Act relating to time of supply for services in
respect of Vouchers is being omitted.
The GST Council in its 55th meeting, recommended that transactions
involving vouchers should not attract GST, as vouchers do not qualify as
either goods or services.
Subsequently, Circular No.
243/37/2024-GST, dated December 31, 2024, was issued to further
clarify provisions related to vouchers. The circular has clarified that a
voucher is considered either money or a transaction in an actionable claim.
As a result, the issuance or transfer of vouchers is not subject to GST.
Instead, vouchers function as prepaid payment instruments, meaning that GST
will be applicable only on the underlying goods or services purchased using
the voucher.
Since GST applies to the actual
supply of goods or services, the concept of time of supply for vouchers
becomes irrelevant, thereby omited the relevant time of supply provisions
pertaining to vouchers. |
|
Clause 119 of the Finance Bill, 2025 Section 17–Apportionment of credit and blocked
credits |
||
|
Section 17(5): (5) Notwithstanding anything contained in sub-section (1) of section
16 and subsection (1) of section 18, input tax credit shall not be available
in respect of the following, namely:- -------- (d) goods or services or both received by a taxable person for
construction of an immovable property (other than plant or machinery) on his
own account including when such goods or services or both are used in the
course or furtherance of business.. Explanation.––For the purposes of
clauses (c) and (d), the expression “construction” includes re-construction,
renovation, additions or alterations or repairs, to the extent of
capitalisation, to the said immovable property;
|
Section
17(5): (5) Notwithstanding anything contained in sub-section (1) of section
16 and subsection (1) of section 18, input tax credit shall not be available
in respect of the following, namely:- -------- (d) goods or services or both received by a taxable person for
construction of an immovable property (other than plant Explanation 1.––For the purposes of clauses (c) and (d),
the expression “construction” includes re-construction, renovation, additions
or alterations or repairs, to the extent of capitalisation, to the said
immovable property; Explanation
2.––For the purposes of clause (d), it is hereby clarified that
notwithstanding anything to the contrary contained in any judgment, decree or
order of any court, tribunal, or other authority, any reference to “plant or
machinery” shall be construed and shall always be deemed to have been
construed as a reference to “plant and machinery”. |
Section 17(5)(d) of the CGST Act
is being amended to substitute the words "plant or machinery" with
the words "plant and machinery" with effect from July 01, 2017.
The Hon’ble Supreme Court, in
the case of Chief Commissioner of CGST v. M/s. Safari Retreats Private
Limited & Ors [Civil Appeal No. 2948 of 2023 dated October 03, 2024],
has held that GST credit can’t be denied on “plant” in Section 17(5)(d) of
the CGST Act. Restriction per se applicable on immovable properties.
‘Plant’ is different from the
term "plant and machinery", which excludes land, buildings, or
other civil structures. The Court held that in certain cases, a building
could be considered a plant on satisfying functionality test, thereby, making
it eligible for ITC under Section 17(5)(d) of the CGST Act.
However, with this retrospective
amendment as recommended in the 55th GST Council meeting, the
impact of the Supreme Court’s decision stands nullified.
Hence, it is advisable that GST
Council should clarify any dispute pertaining to availing credit on the basis
of Section 17(5)(d), should not be a subject matter of Section 74 (fraud)
case, as the issue involves an interpretation issue.
|
|
Clause 120 of the Finance
Bill, 2025 Section 20–Manner of
distribution of credit by Input Service Distributor. |
||
|
Section 20: (1) Any office of the supplier of goods or
services or both which receives tax invoices towards the receipt of input
services, including invoices in respect of services liable to tax under
sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct
persons referred to in section 25, shall be required to be registered as
Input Service Distributor under clause (viii) of section 24 and shall
distribute the input tax credit in respect of such invoices. (2) The Input Service Distributor
shall distribute the credit of central tax or integrated tax charged on
invoices received by him, including the credit of central or integrated tax
in respect of services subject to levy of tax under sub-section (3) or sub-section
(4) of section 9 paid by a distinct person registered in the same State as
the said Input Service Distributor, in such manner, within such time and
subject to such restrictions and conditions as may be prescribed. |
Section 20: (1) Any office of the supplier of goods or
services or both which receives tax invoices towards the receipt of input
services, including invoices in respect of services liable to tax under
sub-section (3) or sub-section (4) of section 9 of this Act or under subsection
(3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax
Act, 2017, for or on behalf of distinct
persons referred to in section 25, shall be required to be registered as
Input Service Distributor under clause (viii) of section 24 and shall
distribute the input tax credit in respect of such invoices. (2) The Input Service Distributor shall
distribute the credit of central tax or integrated tax charged on invoices
received by him, including the credit of central or integrated tax in respect
of services subject to levy of tax under sub-section (3) or sub-section (4)
of section 9 of this Act or under subsection (3) or sub-section (4) of
section 5 of the Integrated Goods and Services Tax Act, 2017, paid by a distinct person registered in the same State as
the said Input Service Distributor, in such manner, within such time and
subject to such restrictions and conditions as may be prescribed.
|
Section
20(1) and Section 20(2) of the CGST Act are being amended to explicitly
provide for distribution of input tax credit by the ISD in respect of
inter-state supplies, on which tax has to be paid on reverse charge basis, by
inserting reference to sub-section (3) and sub-section (4) of Section 5 of IGST
Act in sub-section (1) of section 20 of the CGST Act.
The
amendment will be effective from 1st April, 2025.
Under
the revised provisions, the ISD will be permitted to pay tax under RCM for
inter-state supply of services and subsequently distribute the input tax
credit accordingly among distinct persons under same PAN. |
|
Clause 121 of the Finance
Bill, 2025 Section 34– Credit and
debit notes |
||
|
Section 34(2): (2) Any registered person who issues a credit note in
relation to a supply of goods or services or both shall declare the details
of such credit note in the return for the month during which such credit note
has been issued but not later than the thirtieth day of
November following the end of the financial year in which such supply
was made, or the date of furnishing of the relevant annual return, whichever
is earlier, and the tax liability shall be adjusted in such manner as may be
prescribed: Provided that no reduction in output tax liability of the
supplier shall be permitted, if the incidence of tax and interest on such
supply has been passed on to any other person. |
Section 34(2): (2) Any registered person who issues a
credit note in relation to a supply of goods or services or both shall
declare the details of such credit note in the return for the month during
which such credit note has been issued but not later than the thirtieth
day of November following the end of the financial year in which such supply
was made, or the date of furnishing of the relevant annual return, whichever
is earlier, and the tax liability shall be adjusted in such manner as may be
prescribed:
Provided that no reduction in output tax liability of the
supplier shall be permitted, if the–– (i) input tax credit as is attributable to such a credit note,
if availed, has not been reversed by the recipient, where such recipient is a
registered person; or (ii) incidence of tax on such supply has been passed on to any
other person, in other cases. |
The
Proviso to sub-section (2) is being amended to explicitly provide for
requirement of reversal of conesponding input tax credit in respect of a
credit-note issued by a supplier, if benefit of same is availed, by the
registered recipient, for the purpose of reduction of tax liability of the
supplier in respect of the said credit note.
To
implement this, Section 34(2) of the CGST Act, is being amended to clearly specify
that the recipient must reverse the ITC attributable to a credit note,
thereby enabling the supplier to reduce their output tax liability
accordingly.
If
a supplier issues a credit note, the adjustment of the tax component against
their outward tax liability is permitted only when the recipient reverses the
ITC corresponding to the credit note. This ensures that the reduction in tax
liability for the supplier is valid only when the buyer or recipient does not
retain the credit associated with the tax component of the credit note.
Additionally,
Form GSTR-3B has been automated to ensure compliance with this requirement.
Further,
in the Invoice Matching System (IMS), an action by the recipient can not be
kept in ‘Pending’ action for the original credit note or upward/ downward
amendment of the original credit note issued by the supplier, reinforcing the seamless reconciliation of
tax adjustments between suppliers and recipients.
|
|
Clause 122 of the Finance
Bill, 2025 Section 38–Communication of
details of inward supplies and input tax credit. |
||
|
Section 38: (1) The details of outward supplies furnished by the
registered persons under sub-section (1) of section 37 and of such other
supplies as may be prescribed, and an auto-generated statement containing the
details of input tax credit shall be made available electronically to the
recipients of such supplies in such form and manner, within such time, and
subject to such conditions and restrictions as may be prescribed. (2)
The auto-generated statement under sub-section (1) shall consist of–– (a)
details of inward supplies in respect of which credit of input tax may be
available to the recipient; and (b)
details of supplies in respect of which such credit cannot be availed,
whether wholly or partly, by the recipient, on account of the details of the
said supplies being furnished under sub-section (1) of section 37,–– (i) by any registered person within such period of taking
registration as may be prescribed; or (ii) by any registered person, who has defaulted in payment of
tax and where such default has continued for such period as may be
prescribed; or (iii) by any registered person, the output tax payable by whom
in accordance with the statement of outward supplies furnished by him under
the said sub-section during such period, as may be prescribed, exceeds the
output tax paid by him during the said period by such limit as may be
prescribed; or (iv) by any registered person who, during such period as may be
prescribed, has availed credit of input tax of an amount that exceeds the
credit that can be availed by him in accordance with clause (a), by such
limit as may be prescribed; or (v) by any registered person, who has defaulted in discharging
his tax liability in accordance with the provisions of sub-section (12) of
section 49 subject to such conditions and restrictions as may be prescribed;
or (vi) by such other class of persons as may be
prescribed
|
Section 38: (1) The details of outward supplies furnished by the
registered persons under sub-section (1) of section 37 and of such other
supplies as may be prescribed, and an (2)
The (a)
details of inward supplies in respect of which credit of input tax may be
available to the recipient; (b)
details of supplies in respect of which such credit cannot be availed,
whether wholly or partly, by the recipient, including
on account of the details of the said supplies being furnished
under sub-section (1) of section 37,–– (i) by any registered person within such period of taking
registration as may be prescribed; or (ii) by any registered person, who has defaulted in payment of
tax and where such default has continued for such period as may be
prescribed; or (iii) by any registered person, the output tax payable by whom
in accordance with the statement of outward supplies furnished by him under
the said sub-section during such period, as may be prescribed, exceeds the
output tax paid by him during the said period by such limit as may be
prescribed; or (iv) by any registered person who, during such period as may be
prescribed, has availed credit of input tax of an amount that exceeds the
credit that can be availed by him in accordance with clause (a), by such
limit as may be prescribed; or (v) by any registered person, who has defaulted in discharging
his tax liability in accordance with the provisions of sub-section (12) of
section 49 subject to such conditions and restrictions as may be prescribed;
or (vi) by such other class of persons as may be prescribed (c) such other details as may be prescribed.
|
Section
38(1) of the CGST Act is being amended
to omit the expression "auto-generated".
Section
38(2) of the CGST Act is being amended to omit the expression
"auto-generated" and to insert the expression "including"
after the words "by the recipient" in clause (b) to make the said
clause more inclusive.
Section
38(2) of the CGST Act is also being amended to insert a new clause (c) to
provide an enabling clause to prescribe other details to be made available in
statement of input tax credit.
All
the above changes are made to make the Invoice Management System (IMS) now
possible and obligatory, with corresponding amendments being made under the
respective sub-sections of Section 38 of the CGST Act.
The
IMS is being introduced to streamline ITC reconciliation, enabling the
generation of FORM GSTR-2B based on taxpayer actions on inward supplies.
To
provide a legal framework for this, the 55th GST Council Meeting recommended
amendments to Section 38 of the CGST Act, and Rule 60 of the CGST Rules. |
|
Clause 123 of the Finance
Bill, 2025 Section 39–Furnishing of
returns |
||
|
Section 39(1): (1) Every registered person, other
than an Input Service Distributor or a non-resident taxable person or a
person paying tax under the provisions of section 10 or section 51 or section
52 shall, for every calendar month or part thereof, furnish, a return,
electronically, of inward and outward supplies of goods or services or both,
input tax credit availed, tax payable, tax paid and such other particulars,
in such form and manner, and within such time, as may be prescribed:
|
Section 39(1): (1) Every registered person, other
than an Input Service Distributor or a non-resident taxable person or a
person paying tax under the provisions of section 10 or section 51 or section
52 shall, for every calendar month or part thereof, furnish, a return,
electronically, of inward and outward supplies of goods or services or both,
input tax credit availed, tax payable, tax paid and such other particulars,
in such form and manner, |
Section
39(1) of the CGST Act is being amended to provide an enabling clause to
prescribe certain conditions and restriction for filing of return.
Rule
59(6) of the CGST Rules stipulates that if a taxpayer fails to pay taxes for
a preceding tax period, they will not be able to file Form GSTR-3B for the
current period.
Additionally,
there are several provisions from Rule 59(6) of the CGST Rules that impose
restrictions on the filing process.
Rule
37 of the CGST Rules outlines the time limit for filing Form GSTR-1, which
cannot be filed for the current tax period unless Form GSTR-1 for the
previous period is filed.
A
maximum time limit of 3 years for belated filing of GSTR-1, effective from
October 01, 2023, is also specified.
Further,
Section 39 of the CGST Act indicates that if Form GSTR-3B for a previous tax
period is not filed, the taxpayer will not be able to file Form GSTR-3B for
the current period.
Additionally,
Form GSTR-1 must be filed before Form GSTR-3B for the current period to be
enabled, and Form GSTR-1 and Form GSTR-3B must match; otherwise, notices
under Section 75(12) of the CGST Act read with Rule 88C of the CGST Rules will
be issued.
These
provisions impose conditions and restrictions on registered persons, ensuring
compliance with tax filing requirements.
|
|
Clause 124 of the Finance
Bill, 2025 Section 107–Appeals to
Appellate Authority |
||
|
Section 107(6): (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 subject to a maximum of twenty crore rupees, in
relation to which the appeal has been filed. Provided that no appeal shall be
filed against an order under sub-section (3) of section 129, unless a sum
equal to twenty-five per cent. of the penalty has been paid by the appellant.
|
Section 107(6): (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 subject to a maximum of twenty crore rupees, in
relation to which the appeal has been filed.
Provided that in case of any order
demanding penalty without involving demand of any tax, no appeal shall be
filed against such order unless a sum equal to ten per cent. of the said
penalty has been paid by the appellant.
|
Proviso
to Section 107(6) of the CGST Act is being amended to provide for a 10%
mandatory pre-deposit of penalty amount for appeals before Appellate
Authority in cases involving only demand of penalty without any demand for
tax.
The
GST Council in its 55th meeting, recommended amending the proviso to Section
107(6) to reduce the pre-deposit requirement from 25% to 10% in such cases.
Previously,
the stated provisio was applicable for filing an appeal against a penalty
order issued under Section 129(3) of the CGST Act violations related to e-way
bill non-compliance attracted a 200% penalty, with a 25% pre-deposit
requirement effective from January 01, 2022.
The
stated pre-deposit was set at 25%, but now it is being reduced to 10%. At
first glance, this may seem like a reduction in the pre-deposit requirement;
however, it’s important to consider the broader context. Numerous penalty
orders are issued under Section 122, Section 122(1A), etc., of the CGST Act
for offences committed by taxable persons and/ or any persons, where
penalties are levied for specified offences.
A
recent Supreme Court judgment in the case of Union of India & Ors.
v. Shantanu Sanjay Hundekari & Anr. etc. [Special Leave Petition (Civil)
Diary No.55427/2024 date January 24, 2025], wherein the Court upheld
the Bombay High Court's decision to vacate a penalty notice against a
taxation manager, who was served with a show cause notice for a penalty of INR
3,731 Cr., illustrating the potential issues with penalty notices.
After
the amendment, when an appeal is to be filed, a minimum pre-deposit of 10% of
the disputed penalty amount will be required.
This
change as introduced in the Union Budget of 2025, raising concerns among
stakeholders about the financial burden on taxpayers.
|
|
Clause 125 of the Finance
Bill, 2025 Section 112–Appeals to
Appellate Tribunal |
||
|
Section 112(8): (8)
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, in addition to the amount paid under sub-section (6) of section
107, arising from the said order subject to a maximum of twenty
crore rupees, in relation to which the appeal has been filed.
|
Section 112(8): (8)
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, in addition to the amount paid under sub-section (6) of section
107, arising from the said order subject to a maximum of twenty
crore rupees, in relation to which the appeal has been filed.
Provided that in case of any order demanding penalty without
involving demand of any tax, no appeal shall be filed against such order
unless a sum equal to ten per cent. of the said penalty, in addition to the
amount payable under the proviso to sub-section (6) of section 107 has been
paid by the appellant.
|
Section 112(8) is amended to provide for 10%
mandatory pre-deposit of penalty amount for appeals before Appellate Tribunal
in cases involving only demand of penalty without any demand for tax.
The appeal process now includes an additional 10%
pre-deposit requirement at the tribunal level in case of penalty orders,
which does not provide ease of business and will impact financially also, as
pre-deposit of penalty is to be paid through Electronic Cash Ledger only.
Lastly, there is no upper limit is being
prescribed for the pre-deposit of a penalty.
|
|
Clause 126 of the Finance
Bill, 2025 Section 122B– Penalty for
failure to comply with track and trace mechanism |
||
|
After Section 122A:
|
After Section 122A: Section 122B: Notwithstanding anything contained
in this Act, where any person referred to in clause (b) of sub-section (1) of section 148A acts in contravention of the
provisions of the said section, he shall, in addition to any penalty under
Chapter XV or the provisions of this Chapter, be liable to pay a penalty
equal to an amount of one lakh rupees or ten per cent. of the tax payable on
such goods, whichever is higher.
|
A new Section 122B of the CGST Act, starting with a
non obtance clause is being inserted to provide penalties for contraventions
of provisions related to the Track and Trace Mechanism provided under Section
148A of the CGST Act.
In the event of non-compliance with the provisions
of the track and trace mechanism, a penalty will be imposed. This penalty is
in addition to any penalties prescribed under Chapter 15 or other relevant
sections of the CGST Act. The
GST Council in its 55th meeting, recommended inserting Section 148A into the
CGST Act, establishing an enabling provision to empower the government to
implement a Track and Trace Mechanism for specified commodities prone to tax
evasion. This provision will function as a non-obstante clause, ensuring its
applicability despite any conflicting provisions in the law.
Non-compliance
with Section 148A of the CGST Act will attract penalties under Section 122B
of the CGST Act, where the taxpayer will be liable to pay either INR 1 Lakh
or 10% of the disputed tax, whichever is higher.
Goods
that are considered prone to tax evasion, such as tobacco, pan masala, scrap,
plastic, and paper, are expected to be included in the list of items subject
to this mechanism, with the final list being notified by the government. |
|
Clause 127 of the Finance
Bill, 2025 Section 148A – Track and trace mechanism for certain goods |
||
|
After Section 148:
|
After Section 148: Section 148A: 148A.
(1) The Government may, on the recommendations
of the Council, by notification, specify,– (a) the goods; (b) persons or class of
persons who are in possession or deal with such goods, to which the provisions of this
section shall apply. (2) The Government may, in respect
of the goods referred to in clause (a) of sub-section (1),–– (a) provide a system
for enabling affixation of unique identification marking and for electronic
storage and access of information contained therein, through such persons, as
may be prescribed; and (b) prescribe the
unique identification marking for such goods, including the information to be
recorded therein. (3) The persons referred to in
sub-section (1), shall,–– (a) affix on the said
goods or packages thereof, a unique identification marking, containing such
information and in such manner; (b) furnish such
information and details within such time and maintain such records or
documents, in such form and manner; (c) furnish details of
the machinery installed in the place of business of manufacture of such
goods, including the identification, capacity, duration of operation and such
other details or information, within such time and in such form and manner; (d) pay such amount in
relation to the system referred to in sub-section (2), 69 as may be
prescribed.
|
Section 148A is being inserted to provide for enabling mechanism for a
Track and Trace Mechanism for specified goods or persons or class of persons,
who are in possession or deal with specified goods.
A "Track and
Trace Mechanism" refers to a system that allows for the monitoring and
recording of a product's movement throughout its entire supply chain, from
the point of origin to the final consumer, using unique identifiers like
barcodes or RFID tags, essentially providing complete visibility into where a
product is at any given time and enabling traceability.
Non-compliance with
Section 148A of the CGST Act will attract penalties under Section 122B of the
CGST Act, where the taxpayer will be liable to pay either INR 1 Lakh or 10%
of the disputed tax, whichever is higher.
Goods that are
considered prone to tax evasion, such as tobacco, pan masala, scrap, plastic,
and paper, are expected to be included in the list of items subject to this
mechanism, with the final list being notified by the government.
|
|
Clause 128 of the Finance
Bill, 2025 Schedule III-Activities or
transactions which shall be treated neither as a supply of goods nor a supply
of services |
||
|
Para 8:
(a) Supply of warehoused goods
to any person before clearance for home consumption;
(b) Supply of goods by the
consignee to any other person, by endorsement of documents of title to the
goods, after the goods have been dispatched from the port of origin located
outside India but before clearance for home consumption.
---- ---- Explanation 2.––For the purposes
of paragraph 8, the expression “warehoused goods” shall have the same meaning
as assigned to it in the Customs Act, 1962.
|
Para 8:
(a) Supply of warehoused goods
to any person before clearance for home consumption;
(aa) Supply of
goods warehoused in a Special Economic Zone or in a Free Trade Warehousing
Zone to any person before clearance for exports or to the Domestic Tariff
Area;
(b) Supply of goods by the
consignee to any other person, by endorsement of documents of title to the
goods, after the goods have been dispatched from the port of origin located
outside India but before clearance for home consumption. ---- ---- Explanation 2.––For the purposes
of clause (a) of paragraph 8, the
expression “warehoused goods” shall have the same meaning as assigned to it
in the Customs Act, 1962.
Explanation 3.––
For the purposes of clause (aa) of paragraph 8, the expressions “Special
Economic Zone”, “Free Trade Warehousing Zone” and “Domestic Tariff Area”
shall have the same meanings respectively as assigned to them in section 2 of
the Special Economic Zones Act, 2005
|
Schedule III is being amended, w.e.f. July 01, 2017 to, -
(i) Insert a new Entry (aa) in paragraph 8 to
provide that the supply of goods warehoused in a Special Economic Zone or in
a Free Trade Warehousing Zone to any person before clearance for exports or
to the Domestic Tariff Area shall be treated neither as supply of goods nor
as supply of services. (ii) Amend Explanation 2, w.e.f. 01.07.2017 to
clarify that the said explanation would be applicable in respect of entry (a)
of Paragraph 8. (iii) Insert Explanation 3 to define the terms
'Special Economic Zone', 'Free Trade Warehousing Zone' and 'Domestic Tariff
Area', for the purpose of the proposed entry ( aa) in Paragraph 8. The GST Council, in its 55th Council Meeting, recommended inserting a
new clause (aa) in Schedule III of the CGST Act, effective from July 01,
2017, to explicitly clarify that the supply of goods warehoused in a Special
Economic Zone (SEZ) or Free Trade Warehousing Zone (FTWZ), to any person
before clearance for export or to the Domestic Tariff Area (DTA), shall be
treated as neither a supply of goods nor a supply of services. This amendment
aligns the SEZ/FTWZ warehousing transactions with the existing provisions for
goods stored in a customs bonded warehouse, where such transactions are not
subject to GST until the goods are cleared for consumption or export.
This change applies retrospectively from July 01, 2017, meaning
that no GST will be applicable on such transactions within SEZ/ FTWZ warehouses.
Additionally, no refund will be provided for any tax collected
on these transactions before the amendment, as the tax would not have been
applicable if the amendment had been in force at the time.
In our opinion, a transaction conducted in a SEZ/ FTWZ warehouse
does not constitute a supply, and therefore, the collected tax should be refunded,
as it cannot be levied at the first stage in accordance with Article 265 of
the Constitution, rendering the matter subjective and potentially litigative. |
|
Clause 129 of the Finance Bill, 2025 No refund of tax collected |
||
|
No refund shall be made of all such tax which has been
collected, but which would not have been so collected, had section 128 been
in force at all material times. |
||
Bimal Jain
FCA, FCS, LLB, B. Com (Hons)
Author of a book on Goods and Services Tax, titled, “GST Law and Commentary (with Analyses and Procedures)” [9th Edition]
COMMENTS