Impact of newly inserted section 11A of the CGST Act, 2017!

The 53rd GST Council Meeting, held on June 22, 2024, introduced several important changes to the GST Act and related compliances. Among these key changes was the introduction of Section 11A to the CGST Act, 2017. This section grants power to the Government not to recover duties not levied or short-levied as a result of general practice under GST Acts.

Let’s dive deeper into this significant change!

Wordings of Section 11A of the CGST Act, 2017

“Power not to recover Goods and Services Tax not levied or short-levied as a result of general practice.

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,-

(i) Central tax, in cases where according to the said practice, central tax was not, or is not being, levied, or

(ii) A higher amount of central tax than what was, or is being, levied, under 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, under the said practice.”

Key Highlights of Section 11A

• This section applies to supplies where central tax was either not levied or was short-levied according to the general practice.
• For application of this section, the Government must be satisfied that a practice was commonly followed concerning the levy of central tax on specific goods or services.
• The Government shall issue a directive via notification in the Official Gazette for applying this section.
• This section applies to the supplies where central tax was either not levied or was short-levied according to the general practice. This section aims to clarify the circumstances under which the government may waive the requirement for payment of certain taxes based on established practices.

Impact of Section 11A

Over the seven years since the implementation of GST law, taxpayers have encountered various challenges stemming from genuine interpretational issues and ambiguities within the GST provisions, resulting in unpaid or short-paid taxes. Taxpayers have repeatedly sought relief from the GST Council, leading the Department to issue Circulars aimed at regularizing the past practices followed by taxpayers.

The introduction of Section 11A in the CGST Act addresses the uncertainties arising from the methods employed by the Department to regularize past practices, specifically through issuing circulars based on the GST Council’s recommendations.

Importantly, these circulars have not only resolved complex issues but have also legitimized the industry’s past practices on an "as is" basis. Although the term "as is" is not clearly defined in all circulars, it appears that the Government intends to indicate that taxpayers who have previously paid taxes will not be eligible for refunds, while those who did not meet their tax obligations in the past will not face demands for payment.

However, this practice of regularizing through circulars has raised questions about the legitimacy of such directives, as there was no specific provision granting the Government the authority to regularize past practices. With the addition of Section 11A, the Government appears to have addressed these concerns by explicitly empowering itself to regularize past practices.

Conclusion

In conclusion, the introduction of Section 11A in the CGST Act, 2017, represents a significant step toward addressing the uncertainties and challenges faced by taxpayers in the GST landscape. By granting the government the authority to not recover GST that was not levied or was short-levied due to general practices, this section aims to provide much-needed clarity and relief to businesses. It not only legitimizes past practices but also reassures taxpayers that they will not be penalized for relying on commonly accepted interpretations of the law.

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