10 Changes in GST law by GST (Amendment) Act 2018

he Provisions of GST (Amendment) Act 2018 have been made applicable from 1st February 2019. Below is the gist of the amendments made thereon :

1. Definitions

i. Central Board of Excise & Customs (CBEC) has been substituted with Central Board of Indirect Taxes & Customs (CBIC)

ii. Following has been included in the definition of business : Activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club

iii. Definition of Business vertical has been removed

iv. It has been clarified that – “services” includes facilitating or arranging transactions in securities

2. Reverse Charge for supplies from unregistered to registered persons

Now only the goods or services, which will be notified by government, will be taxable under reverse charge, if supplied from unregistered person to the notified registered persons. Accordingly, coverage of this section is restricted now.

3. Composition Scheme:

1. Limit for composition scheme has been increased from Rs. 1 crores to Rs. 1.5 Crores

2. Composition dealers may now supply services of value not exceeding- 10% of turnover in a State or Union territory in the preceding financial year or 5 Lakhs, whichever is higher

3. Rate of tax on services by composition dealer- 0.5% and 0.5%- SGST and CGST

4. Inadmissible Input Tax Credits (ITC) under GST- Section 17(5) of CGST Act 2017

Following are amendments in regards to the same:

1. Earlier the ITC on all types of motor vehicles was restricted, however, the same has not been restricted only to motor vehicles having approved seating capacity up to 13 persons (including driver). However, it shall be allowed, If input service used for following taxable supplies:

a) further supply of such vehicles or conveyances

b) transportation of passengers

c) imparting training on such motor vehicles

2. ITC is not available on Vessels. However, it shall be allowed, if input service used for following taxable supplies:

a) further supply of such vessels & aircrafts

b) transportation of passengers

c) imparting training on navigating such vessels or flying aircrafts

d) transportation of goods

3. ITC has been blocked on Services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft, as specified in clause (a) and (b) above

4. Restriction of ITC in following cases:

ITC not available on	Exceptions
Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft as referred in clause (a) & (aa) above, except when used for the purposes specified therein, life insurance and health insurance	When used in supply of similar nature of business
Membership of a club, health and fitness centre	NO EXCLUSION
Travel benefits extended to employees on vacation such as leave or home travel concession	If input service used for: a) employees, if made obligatory by government under any law

5. GST Registration –

1. Earlier every Electronic commerce operator was liable to mandatorily get registered under GST, however, such has now been made mandatory, only if he is liable to collect tax at source.

2. Earlier a person was not allowed to take multiple registrations within same state for same business vertical. Only different verticals were allowed to take separate registration. However, now multiple registrations can be taken within same state for same business & each of them shall be treated as distinct person.

3. During the ongoing process of cancellation of registration, there would be temporary suspension of registration. This would result into releasing the compliance burden while the cancellation of registration is under process.

6. Invoicing

Now consolidated debit notes / credit notes can be issued for more than one number of original invoices.

7. GST Audit

 The same is not applicable now to any Government Department, whose accounts are audited by Comptroller & Auditor General (C&AG) of India.

8. Place of Supply

1. New proviso has been inserted in Section 12 of IGST Act 2017, which states that the place of supply in case of transportation of goods to a place outside India shall be place of destination of such goods, i.e. place outside India. Accordingly, transportation of goods is not liable to GST when goods transported outside India from a place in India

2. As per the earlier provision of Section 13 of IGST Act 2017, tax exemption was available in case of job work services supplied in respect of goods which are temporarily imported into India only for the purpose of repairs and the said goods are exported back after such repairs.

However, amendment with effect from 1st Feb 2019 has been made to extent the tax exemption benefit in case of job work services supplied in respect of goods which are temporarily imported into India for repairs or for any other treatment or process and the said goods are exported back after such repairs or treatment or process.
Accordingly, now the scope of exemption has been extended and covered all the process and treatment done on goods imported temporarily

9. Returns

It has been mentioned that Government may notify certain classes of registered persons who shall pay the tax due or part thereof as per the return on or before the last date on which he is required to furnish such return.

10. Input Tax Credit (ITC):

1. No reversal of common input tax credit is required on activities or transactions specified in schedule III other than sales of land and sale of building

2. New Section 43A has been introduced, which mentions to prescribe the procedure for furnishing return & availment of Input Tax Credit. It mentions that new rules may include that maximum ITC that can be utilized in that period shall not exceed 20% of ITC available.

3. The supplier and the recipient shall be jointly held liable for payment of tax or payment of input tax credit availed in relation to the outward supplies for which details have been furnished but the return has not been furnished.

4. The criteria for setting off of Input Tax Credit (ITC) has been changed by introduction of Section 49A & 49B

As per old rules, following was the priority of set-off of ITC was as below:

• For CGST Output – First set off thru ITC of CGST, then IGST
• For SGST Output – First set off thru ITC of SGST, then IGST
• For IGST Output – First set off thru ITC of IGST, then CGST & then SGST

As per CGST (Amendment) Act 2018, the priority of set-off of ITC is as below:

• For CGST Output- First set off thru ITC of IGST, then CGST
• For SGST Output – First set off thru ITC of IGST, then SGST
• For IGST Output – First set off thru ITC of IGST, then CGST & then SGST

Let us understand the same with help of an example:

Head	Output Liability	Input Tax Credit available (ITC)	As per old Set-off rules		As per revised Set-off rules (applicable from 1st Feb 2019)
			Paid thru ITC	Paid thru Cash	Paid thru ITC	Paid thru Cash
CGST	800	500	CGST- 500 IGST- 300	0	IGST- 800	0
SGST	400	200	SGST-200 IGST-200	0	SGST- 200	200
IGST	0	800	–	0	–

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Time of supply

In order to calculate and discharge tax liability it is very import to know the date when the tax liability arises

Time of supply of goods

Earliest of the following dates:

• Date of issue of invoice by the supplier.

• Date on which the supplier receives the payment

Time of supply of services

Earliest of the following dates:

• Date of issue of invoice by the supplier

• Date of provision of service

• Date on which the recipient shows the receipt of service in his books of account, in case the aforesaid two provisions do not apply

To understand the provision of advance payment on goods or services

Let’s take an example

Firm ‘A’ receives an advance of Rs. 2500/- on 29.07.17 for goods worth Rs. 10000/- to be supplied in the month of September, then it is deemed that firm ‘A’ has made a supply of Rs. 2500/- on 29.07.17 and tax liability on Rs. 2500/- is to be discharged by 20.08.17.

But government will be set a maximum limit for the advance of payment. If any advance received for a supply of goods or services the amount will be 1000 or less than it is the choice of the supplier that the invoice will be issue on the date of supply of goods or services.

What is the time limit for issue of invoice for goods and services?

As per section 31 of the CGST Act, an invoice for supply of goods needs to be issued before or at the time of removal of goods for supply to the recipient, where the supply involves movement of goods.

Similarly an invoice for supply of services needs to be issued before or after the provision of service but not later than thirty days from the date of provision of service.

Time of supply in case of Reverse Charger

Time of supply of goods

Earliest of the following dates:

• Date of receipt of goods

• Date on which the payment is entered in the books of accounts of the recipient or the date on which the payment is debited in his bank account, whichever is earlier?

 • Date immediately following 30 days from the date of issue of invoice or any other legal document in lieu of invoice by the supplier

Time of supply of services

Earliest of the following dates:

• 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?

 • Date immediately following 60 days from the date of issue of invoice or any other legal document in lieu of invoice by the supplier

Time of supply of services in case of supply by Associated Enterprises located outside India

 In this case, the time of supply is the date of entry in the books of account of the recipient or the date of payment, whichever is earlier.

Change in Rate of Tax in respect of supply of goods or services

 The normal time of supply rules changes if there is a change in the rate of tax of supply of goods or services. In this scenario, time of supply has to be determined in the following manner:

 Supply is completed before the change in rate of tax

Invoice issued before the date of change in tax rate	Payment received before the date of change in tax rate	Time of supply	Applicable rate of tax
No	No	Earliest of the date of invoice or payment	New rate of tax
Yes	No	Date of issue of invoice	Old tax rate
No	Yes	Date of receipt of payment	Old tax rate

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Credit note & Debit note

Reason of issue of credit note

                                                                                  • The supplier has erroneously declared a value which is more than the actual value of the goods or services provided.

• The supplier has erroneously declared a higher tax rate than what is applicable for the kind of the goods or services or both supplied.

• The quantity received by the recipient is less than what has been declared in the tax invoice.

• The quality of the goods or services or both supplied is not to the satisfaction of the recipient thereby necessitating a partial or total reimbursement on the invoice value.

• Any other similar reasons.

In order to regularize these kinds of situations the supplier is allowed to issue what is called as credit note to the recipient. Once the credit note has been issued, the tax liability of the supplier will reduce.

Format of credit note

There is no prescribed format but credit note issued by a supplier must contain the following particulars, namely:

 (a) name, address and Goods and Services Tax Identification Number of the supplier;

(b) Nature of the document;

(c) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year;

(d) Date of issue;

(e) Name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;

(f) Name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered;

(g) Serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;

(h) Value of taxable supply of goods or services, rate of tax and the amount of the tax credited to the recipient; and

(i) Signature or digital signature of the supplier or his authorised representative.

Reason of issue of Debit note

The supplier has erroneously declared a value which is less than the actual value of the goods or services or both provided.

• The supplier has erroneously declared a lower tax rate than what is applicable for the kind of the goods or services or both supplied.

• The quantity received by the recipient is more than what has been declared in the tax invoice.

• Any other similar reasons.

In order to regularize these kinds of situations the supplier is allowed to issue what is called as debit note to the recipient. The debit note also includes supplementary invoice.

Tax liability

The issuance of a debit note or a supplementary invoice creates additional tax liability. The treatment of a debit note or a supplementary invoice would be identical to the treatment of a tax invoice as far as returns and payment are concerned.

Records

The records of the debit note or a supplementary invoice have to be retained until the expiry of seventy two months from the due date of furnishing of annual return for the year pertaining to such accounts and records. Where such accounts and documents are maintained manually, it should be kept at every related place of business mentioned in the certificate of registration and shall be accessible at every related place of business where such accounts and documents are maintained digitally.

Invoice in case of continuous supply of goods

 In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

Invoice in case of continuous supply of services

In case of continuous supply of services, where:

(a) The due date of payment is as certain able from the contract, the invoice shall be issued on or before the due date of payment.

(b) The due date of payment is not as certain able from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment.

(c) The payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.

Issue of invoice in case, where supply of service ceases under a contract before the completion of supply

 In a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply made before such cessation

 Sale on approval basis

Where the goods being sent or taken on approval for sale or return are removed before the supply takes place, the invoice shall be issued before or at the time of supply or six months from the date of removal, whichever is earlier.

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