Author: Khushi J Prajapati
THE FINANCE (No. 2) ACT, 2024 No. 15 of 2024 got president Asset on 16th August, 2024. This Act to give effect to the financial proposals of the Central Government for the financial year 2024-25. Here is the mapping of the major amended sections in the Finance Act to the corresponding sections in the Central Goods and Services Tax (CGST) Act. This article covers major amendments which ever taxpayer should know.
1. Amendments to Section 9(1) of the Central Goods and Services Tax Act, 2017: The section 114 of Finance (No. 2) Act
The new law that amends subsection 9(1) of the Central Goods and Services Tax Act of 2017 (Amendment Act no 26 of 2017). It states that “un-denatured extra neutral alcohol or rectified spirit used for manufacture of alcoholic liquor, for human consumption” is exempt from GST as such. Therefore, except when its production was not deemed as taxable transactions, there will be no GST on alcoholic liquor for human consumption since there is no un-debased exceptional/purified alcohol or rectified spirit without mixing something else that exists in alcohol like ethanol that is generated from taxes on fermentation products like rice beer etc.
2. Section 116: Insertion of Section 11A, addressing the non-recovery of tax not levied due to general practice Section 116 of Finance act
Section 11A, which has been newly added to the Central Goods and Services Tax (CGST) Act, 2017, grants authority to the government not to recover the GST that has not been imposed or short levied due to prevalent practice. If the government on the recommendation of the GST Council finds that in respect of non-levy or under-levy of central tax on supply of goods and services any specific practice was or is generally followed then it can issue notification for exemption from payment of such GST which should have been charged. This provision thus helps those businesses where non-compliance could have occurred due to older practices and ensures that they are not punished retrospectively for tax amounts that were not collected because these practices had already gained acceptance
3. Eligibility and conditions for Input Tax Credit (ITC)
It governs input tax credit (ITC) eligibility for certain financial years together with instances where GST registrations used to be cancelled in the past as per section 16 of CGST Act. New subsections (5) and (6) elaborate on two key aspects: (1) Registered persons may claim ITC based on invoices or debit notes concerning the financial year 2017-18, 2018-19, 2019-20 and 2020-21 in GST returns until November 30, 2021 even though there were earlier restrictions; (2) Where an individual had their GST registration cancelled then restored, they can also claim ITC regarding those invoices or debit notes but such must be done by last date for the relevant financial year or within sixty days from when it was ordered cancelled so that anyone who loses his/her registration can still recover their ITC if they regain registration.
4. Section 35: Amendment to Section 35, Retention to records and accounts that must be maintained by taxpayers
It means that for litigation matter regarding section 74A, taxpayers have to keep their records for an extraordinarily long time that is up to six years. It serves as a remedy for complicated tax disputes or fraud cases touching on property taxes and even local services delivery fees. The idea behind including section 74A is to investigate where long term tax transaction records are vital especially when it’s huge failure where state-sponsored initiatives against any illegal tax evasion cases establish compliance.
5. Amendment of Appeal Provisions and Penalty Thresholds as Embedded in Section 107 of the CGST Act: Section 141 of Finance act
An amendment has been made to Section 107 of the Central Goods and Services Tax (CGST) Act (2017) consisting of two major changes. First of all, a new clause has been inserted in sub-section (6) which raises the minimum fine level for some appeal clauses from “twenty-five” to “twenty” likely to conform with the modified penalty limits or enforcement practices. Second, in subsection (11), the second proviso has been amended by adding references to Section 74A as there was already Sections 73 and 74 earlier. Consequently, it ensures that appeals also capture those relating to the newly introduced section dealing with severe or elaborate forms of tax evasion namely Section 74A. The primary objective is thus validating the process of appeal while at the same time making it more extensive through new forms of compliance.
6. Insertion of Section 74A, addressing tax determinations from FY 2024-25 onwards: Section 138 of Finance act
For dealing with events of unpaid taxes, short paid taxes, erroneously refunded amounts or wrongfully claiming input tax credit, §74A introduces a detailed framework. The proper officer must serve a notice to the taxpayer requiring him/her to justify such discrepancies as there is no need for notice below ₹1,000 .This advisory must ideally reach the concerned officer within a duration of not more than 42 months computed from when the annual return was supposed to be lodged or if wrong amount has been returned back by an officer. Depending on what went wrong different penalty payments apply: non-fraudulent cases attract a penalty of 10% t of the taxes owed or ten thousand Rupees while that for fraud cases equals to actual tax owed. Taxpayers could settle all these inconsistencies either before or after receiving this notice by clearing their debts together with interest that goes hand in hand with it at differing rates depending upon period taken as well as kind(s) of offense(s) committed. The enforcement of this section will begin with the financial year 2024-25.
7. Transactions involving Insurance may be exempt from GST: Modifications in Schedule III: Section 149 of finance act
This amendment, which is incorporated in Schedule III of the Central Goods and Services Tax (CGST) Act, comprises two additional paragraphs that cover exclusively insurance-related dealings. Paragraph 9 states that there would be no introduction of Goods and Services Tax (GST) on the co-insurance premium allocation by lead insurers to co-insurers in case of co-insurance contracts; as long as lead insurers pay applicable central, state, union territory or integrated taxes on total premiums received from insured persons. Furthermore, Paragraph 10 provides that an insurer’s services towards its reinsurer where ceding or reinsurance commissions are deducted from its reinsurance fee are also not subject to GST provided that a reinsurer pays up all such fees with other necessary taxes.
8. Amendment to Section 112 CGST Act, concerning the appeals process to the Appellate Tribunal: Section 143 of finance act
The modifications in Section 112 of the Central Goods and Services Tax Act will take effect from the 1st of August, 2024. They will have an impact on procedures for appeals and the addition of penalties. With the changes from subsections (1) and (3) of the amended provisions, time has been extended so that any day set by the government through recommendations made by councils may be utilized to lodge appeals with the Appellate Tribunal. By the time the initial order is communicated, it could be later. Additionally, it states that an application could also be made within three months after the given timeframe in this subsection 6. Additionally, subsection 8 has implied some revisions in sanction policies: for example; penalties have been decreased from 20% down to simply 10% while margins have moved upward from 50 crore downwards up to 20 crores where penalties may apply. The purpose of such changes is to make certain.