Budget changes in GST-Finance Act, 2024 extract dated 16.08.2024-Part 1!

To give effect to the financial proposals in Budget 2024 of the Central Government for the financial year 2024-25, THE FINANCE (No. 2) ACT, 2024 is published by the Government on 16^th August 2024. 

Let's understand the changes!

Amendment of section 9 of the CGST Act, 2017

Section 9 of the CGST Act, 2017 deals with Levy and Collection of tax. In its sub-section (1), new wordings are added as follows:

“Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption and un-denatured extra neutral alcohol or rectified spirit used for the manufacture of alcoholic liquor, for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.

By way of this amendment, un-denatured extra-neutral alcohol or rectified spirit used for the manufacture of alcoholic liquor for human consumption is also kept out of the purview of GST.

Introduction of section 74A

New section 74A is added to the CGST Act, 2017. This section is applicable from FY 2024-25. It covers the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason about Financial Year 2024-25 onward. To read more about it, read our blog “GST Litigations for FY 2024-25 - Section 74A inserted!”.

Introduction of section 11A

New section 11A is inserted in the CGST Act, 2017. This section covers provisions relating to the power not to recover GST not levied or short-levied as a result of general practice.

This section is read as follows:

“11A. Notwithstanding anything contained in this Act, if the Government is satisfied that-

(a) A practice was, or is, generally prevalent regarding levy of central tax (including non-levy thereof) on any supply of goods or services or both; and

(b) Such supplies were, or are, liable to,-

• Central tax, in cases where according to the said practice, central tax was not, or is not being, levied, or
• A higher amount of central tax than what was, or is being, levied, by the said practice,

the Government may, on the recommendation of the Council, by notification in the Official Gazette, direct that the whole of the central tax payable on such supplies, or, as the case may be, the central tax over that payable on such supplies, but for the said practice, shall not be required to be paid in respect of the supplies on which the central tax was not, or is not being levied, or was, or is being, short-levied, following the said practice.”

This section empowers the government to waive the recovery of GST that was not levied or was short-levied due to a generally prevalent practice in trade.

Amendment to section 13

Section 13 of the CGST Act, 2017 deals with the Time of supply and value thereof. Some wordings are added in the section to make changes in the time of supply in case of reverse charge is applicable. The changed sub-section 3 of section 13 is as follows:

“(3) In case of supplies in respect of which tax is paid or liable to be paid on a reverse charge basis, the time of supply shall be the earlier of the following dates, namely:

(a) The date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

(b) The date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier, in cases where the invoice is required to be issued by the supplier; or

(c) The date of issue of invoice by the recipient, in cases where the invoice is to be issued by the recipient:

Provided that where it is not possible to determine the time of supply under clause (a) clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply:

Provided further that in case of supply by associated enterprises, where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier.”

This change covers the determination of the time of supply in the cases where the recipient of the supply is required to prepare a self-invoice for the supplies under RCM, for example, if the supplier of the supply is unregistered.

Amendment to section 16

Section 16 of the CGST Act, 2017 deals with Eligibility and conditions for taking input tax credits. New sub-sections 5 and 6 are added in the said section as follows:

“(5) Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for the supply of goods or services or both about the Financial Years 2017-18, 2018-19, 2019-20, and 2020-21, the registered person shall be entitled to take the input tax credit in any return under section 39 which is filed up to the thirtieth day of November 2021.

(6) Where registration of a registered person is cancelled under section 29 and subsequently the cancellation of registration is revoked by any order, either under section 30 or under any order made by the Appellate Authority or the Appellate Tribunal or court and where availing of input tax credit in respect of an invoice or debit note was not restricted under sub-section (4) on the date of order of cancellation of registration, the said person shall be entitled to take the input tax credit in respect of such invoice or debit note for the supply of goods or services or both, in a return under section 39-

• Filed up to the thirtieth day of November following the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier; or
• For the period from the date of cancellation of registration or the effective date of cancellation of registration, as the case may be, till the date of order of revocation of cancellation of registration, where such return is filed within thirty days from the date of order of revocation of cancellation of registration, whichever is later.”

Newly inserted sub-section 5 allows full ITC of the invoices about FYs 2017-18, 2018-19, 2019-20, and 2020-21 if availed up to 30^th November 2021.

Also,  sub-section 6 allows the ITC in cases where the registration was cancelled, but cancellation was revoked afterwards. It allows the taxpayer to claim ITC in the same return period if GSTR 3B of such period is filed within 30 days from the date of order of revocation of cancellation of registration. If it is not filed within 30 days, the ITC can be taken up to 30^th November of next year of the date of filing the annual return, whichever is earlier.

Conclusion

Budget 2024 changes to the GST framework, as reflected in the Finance Act, 2024, introduce significant amendments aimed at refining the tax system for better compliance and clarity. Understanding these updates is crucial for ensuring that compliance with the revised GST laws is maintained, thereby avoiding potential penalties and maximizing the benefits under the updated provisions.

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