Changes In GST Law Effective From 1 October 2023- Part I

On 31st July, 2023, CBIC issued Notification no. 28/2023-Central Tax. It was mentioned in the said notification that the provisions of sections 137 to 162 (except sections 149 to 154) of the Finance Act, 2023 shall come into force w.e.f. 01st of October, 2023.

Also, it specified that the provisions of sections 149 to 154 of the said Act shall come into force w.e.f. 01st of August, 2023.

Let's discuss section 137 to 139 of the Finance Act, 2023 in this part!

Section 137 of the Finance Act, 2023

Section 137 deals with the following amendments in section 10 of the CGST Act, 2017:

(a) in sub-section (2), in clause (d), the words "goods or" shall be omitted;
(b) in sub-section (2A), in clause (c), the words "goods or" shall be omitted.

• Section 10 of the CGST Act, 2017 deals with Composition levy under GST. Clause (d) of sub-section 2 of the same stated that a registered person can not opt for composition levy if he is engaged in making any supply of goods or services through an electronic commerce operator who is required to collect tax at source under section 52. Now, the word “goods” is removed from this provision. It means w.e.f. 01st of October, 2023, a person supplying goods through an e-commerce operator is eligible for opting for a composition levy. However, restrictions will continue to apply for such registered persons who are engaged in the supply of services through an E-commerce operator.
• Section 10(2A)(c) has similar amendment.

Section 138 deals with the following amendments in section 16 of the CGST Act, 2017.
Section 16 of the CGST Act deals with Eligibility and conditions for taking input tax credit.

• Section 16(2) specifies conditions for claiming ITC. The following amendments are made to section 16(2):
  1. in the second proviso, for the words "added to his output tax liability, along with interest thereon", the words and figures "paid by him along with interest payable under section 50" shall be substituted;
  2. in the third proviso, after the words "made by him", the words "to the supplier" shall be inserted.
• The 2nd proviso to section 16(2) stated that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon.
  
  Now, CBIC has substituted the words “paid by him along with interest payable under section 50” are substituted for “added to his output tax liability, along with interest thereon”. The amendment changes the previous provision, where the ITC was treated as an addition to the output tax liability, to a new requirement for either payment or reversal of the ITC.
  
  Consequently, the liability of interest on such reversal shall be determined in accordance with Section 50(3) instead of 50(1) of the CGST Act, only when such wrongly availed credit is utilised by the registered person.
• 3rd proviso to section 16(2) stated that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. The meaning is made more clear by adding the words “payment made by him to the supplier”.

Section 139 of the Finance Act, 2023

Section 139 deals with following amendments in section 17 of the CGST Act, 2017.
Section 17 deals with Apportionment of credit and blocked credits. It has following amendments:

1. in sub-section (3), in the Explanation, for the words and figure "except those specified in paragraph 5 of the said Schedule", the following shall be substituted, namely:-
   "except,-
   (i) the value of activities or transactions specified in paragraph 5 of the said Schedule; and
   (ii) the value of such activities or transactions as may be prescribed in respect of clause (a) of paragraph 8 of the said Schedule.";
2. (b) in sub-section (5), after clause (f), the following clause shall be inserted, namely:-
   "(fa) goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013);".

• Section 17(2) states that Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. Explanation to Section 17(3) stated that for the purpose of this section, the expression "value of exempt supply" shall not include the value of activities or transactions specified in Schedule III, except the value of activities or transactions specified in paragraph 5 of the said Schedule. Now, one more exception added is the value of such activities or transactions as may be prescribed in respect of clause (a) of paragraph 8 of the said Schedule.

This change will be in respect to para 8(a) of Schedule III of the CGST Act, which includes the supply of warehoused goods to any person before clearance for home consumption within the meaning of exempted supply for the purpose of reversal of common ITC under Section 17(2) and (3) read with Rule 42 and 43 of the CGST Rules. It means ITC will be reversed on supply of warehoused goods to any person before clearance for home consumption.

• Section 17(5) deals with blocked credit i.e. it states the cases in which input tax credit shall not be available. New clause (fa) has been added in section 17(5) which states that ITC should not be available on goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013).

Conclusion :

Goods suppliers through e-commerce can now opt for composition levy from October 1, 2023, as the term "goods" is omitted from Section 10(2) of the CGST Act, 2017. Changes in Section 16(2) alter the treatment of Input Tax Credit (ITC) reversal. The ITC amount is now required to be paid along with interest under Section 50, providing clarity on the process.

Section 17(5) is amended to exclude Input Tax Credit on goods or services used for Corporate Social Responsibility (CSR) activities as per Section 135 of the Companies Act, 2013. Stay updated for more insights on evolving GST regulations.