Changes in GST law under the Interim Union Budget that might affect you

On the arrival of Union Budget 2024, many people anticipated the changes to be made in the GST law of the country. Finance Minister Nirmala Sitaraman covered a wide range of topics in GST. There are various changes made under the GST act. Today, we discuss the various changes proposed by the government of India, trying to explain the most important of changes in the simplest of words to help you better understand it.

1. Exclusion of Extra Neutral Alcohol from GST

One of the noted changes in the GST law under the Union Budget 2024 was exclusion of Extra Neutral Alcohol from GST. Earlier only purchase of Alcohol was kept outside the preview of GST. Now purchase of extra neutral alcohol that is used in the manufacturing of alcohol is also kept outside the preview of GST in order to make GST laws simpler for taxpayers to understand and provides clarity and cosistency in the GST law.

2. New Section 11A: Non-Recovery of GST Based on General Practice

There has been a new section 11A introduced which helps the government to excempt the recovery of GST not exercised permanently or for a short period of time due to it being general practise in trade. This provision helps the government to regularise the past practises practised by various industry heads and provide relief to various businesses that followed the widely practised industry norms but were not compliant with the GST tax law.

3. Time of Supply for Reverse Charge

Amendments in Section 3 discuss the time period for supply of services in the time when the invoice is issued by the recipient in reverse charge situations. This amendment helps clarify in cases of reverse charge mechanisms, by specifying the date of issue of the invoice by the recipient as the relevant date.

4. Input Tax Credit (ITC) for Past Financial Years

The addition of new sub-sections (5) and (6) in Section 16 helps explain the working of tax in exceptional cases. It allows registered persons to avail ITC for past financial years (2017-18 to 2020-21) if they meet specific conditions. This amendment provides businesses with great relief as it extends the timeline for availing ITC.

5. Conditional Waiver of Interest and Penalty

A new section has been proposed that helps the taxpayers by introducing a conditional waiver of tax and penalty for demands raised under Section 73 from the Financial year 2017-18 to 2019-20, if the taxpayers pay the full amount of tax due till a certain date. This provides the taxpayers with a special oppurtunity to settle their past dues without any additional financial burden.

6. Transitional Credit for Input Services

The changes proposed under this section allow the Input Services Distributor to avail for transitional credit for input services before the appointed date, even if the invoices available to the Input Service Distributor are of prior to, on, or after the appointed date. This change will be made effective from 1 July 2024 and it helps address the GST roolout caused trasitional credit issues faced by businesses.

7. Anti-Profiteering Measures

A provision has been added under section 171 that helps better explain the specific dates from which the government of India will no londer accept anti-profiteering cases. This provision also includes the Appellate Tribunal within the Authority, which further streamlines the anti-profiteering measures.

8. New Schedule III Activities

Insertion of new paragraphs under Schedule 3 help clarify the activity of apportionment of co-insurance premium by the lead insurer to the co-insurer and thus the services provided by the insurer to the reinsurer can never be treated as goods or services, if certain conditions are met. This amendment helps better clarify the rules regaring tax liabilities in insurance sector.

9. Insertion of Section 74A

One of the most significant changes in the GST tax is tyhe insertion of Section 74A, as it deals with tax penalties in cases where tax is not paid or short paid, erroneosly refunded, or input tax credit (ITC) wrongly claimed, for fraudulent intentions or otherwise. Section 74A will replace Section 73 and 74 and will be applicable from financial year 2024-25 onwards.

The new section provides that no notice will be issued if the tax amount involved is less than Rs. 1000 and that the proper officer will have to issue a notice within 42 months of the due date of annual retuen or erroneous refund. The penalty related to tax liability under Section 74A includes 10% of tax due or Rs. 10000 for reasons other than fraud or willful mistatement under Section 73, and equivalent to tax due for fraud or willful misstatement as similar to the penalty under Section 74.