Key Amendments Proposed by the Finance Act (No. 2), 2024 under Goods and Services Tax

Key Amendments Proposed by the Finance Act (No. 2), 2024 under Goods and Services Tax

The Finance Act (No. 2), 2024 introduces several critical amendments to the Goods and Services Tax (GST) laws. These changes aim to streamline tax processes, enhance compliance, and address key challenges faced by taxpayers. Below are the major updates as per the amendments made to the Central GST Act, Integrated GST Act, and Union Territory GST Act:

1. Amendment to Section 9: Expansion of Taxable Alcoholic Products

The amendment expands the scope of GST on alcohol products. Now, apart from "alcoholic liquor for human consumption," un-denatured extra neutral alcohol or rectified spirit used for manufacturing alcoholic liquor is also taxable under GST. This addition helps clarify the taxability of raw materials used in alcoholic beverages.

2. New Section 11A: Power Not to Recover GST in Cases of General Practice

A significant addition is Section 11A, which allows the government to waive GST recovery in cases where certain tax practices were widely accepted. If a supply was not levied or was short-levied based on prevalent practice, the government may exempt the recovery of such taxes. This provision offers relief to taxpayers where a commonly followed practice is later deemed non-compliant.

3. Amendment to Section 16: Extension of Input Tax Credit (ITC) Timelines

The timeline for availing Input Tax Credit (ITC) on invoices or debit notes for certain financial years has been extended. Registered persons are now allowed to claim ITC for invoices relating to FY 2017-18 to FY 2020-21, provided returns are filed by November 30, 2021.

Additionally, for those whose GST registrations were cancelled but later restored, there is a window to reclaim ITC for the period during which the registration was inactive.

4. Amendment to Section 74 and Introduction of Section 74A: Streamlined Tax Determination

The act introduces Section 74A, which provides specific timelines and penalties for determining unpaid or underpaid GST starting from FY 2024-25. The section differentiates between cases involving fraud and those due to errors or misstatements. This amendment brings clarity and sets clear guidelines for tax authorities when addressing discrepancies in tax payments.

5. Amendment to Refund Provisions – Section 54

A major change restricts the refund of unutilized input tax credit (ITC) on zero-rated supplies of goods that are subject to export duty. This ensures that businesses exporting goods liable to duties do not claim ITC refunds, preventing double benefits.

6. Other Significant Amendments

• Section 13 has been amended to provide clarity on the issue date of invoices by recipients in cases where invoices are issued by them.
• Section 30 introduces new conditions for revoking the cancellation of GST registration.
• Section 31 clarifies the timing requirements for issuing invoices related to reverse charge mechanisms.
• Amendments to Section 39 and Section 49 refine return filing procedures for taxpayers required to deduct tax at source (TDS).

1. 1. Appeals under GST

The GST Act allows taxpayers and the Department to challenge the orders passed by adjudicating authorities. The first level of appeal resides at the Appellate Authority, which hears appeals against the decisions of adjudicating authorities. The statutory provisions related to appeals are outlined in Chapter XIII of the CGST Act, 2017, supplemented by the CGST Rules, 2017.

1. 2. Who Can File an Appeal?

As per Section 107(1) of the CGST Act, any person aggrieved by a decision or order passed by an adjudicating authority may file an appeal before the Appellate Authority. This appeal can be filed against:

• Any decision or order passed against the person by the adjudicating authority.
• A decision in favor of the taxpayer can also be challenged by the Department with proper authorization from the Commissioner.

3. Time Limit for Filing an Appeal [Section 107(2)]

According to Section 107(2), an appeal must be filed within three months from the date of communication of the decision or order to the appellant. If the Department wishes to file an appeal, it must do so within six months from the communication of the decision.

Extension of Time Limit (Condonation of Delay):

• As per Section 107(4), the Appellate Authority may condone a delay of one additional month if the appellant can demonstrate a sufficient cause for the delay.

4. Mandatory Pre-Deposit for Filing Appeals [Section 107(6)]

Before an appeal can be filed, the appellant must pay:

• The admitted amount of tax, interest, fine, fee, or penalty.
• 10% of the disputed tax amount for the remaining part of the demand, subject to a maximum of ?25 crores for CGST and ?25 crores for SGST.

• According to Section 107(7), once the pre-deposit is made, the recovery proceedings for the balance amount are deemed to be stayed until the disposal of the appeal.

5. Procedure for Filing an Appeal [Section 107(5) and Rule 108]

To file an appeal, the appellant must submit the appeal in FORM GST APL-01 along with the required documents electronically through the GST portal. The form must be verified and signed digitally, as per Rule 26 of the CGST Rules.

• If the order or decision is not available on the GST portal, the appellant can submit a self-certified copy of the decision within seven days.
• Once the appeal is accepted, an acknowledgment is issued in FORM GST APL-02.

6. Hearing Process and Personal Hearing [Section 107(8)]

Under Section 107(8), the Appellate Authority must provide the appellant with an opportunity to be heard before passing any adverse order. This ensures adherence to the principles of natural justice. In Bharat Mint and Allied Chemicals v. Commissioner of Commercial Tax (2022), the High Court ruled that providing an opportunity for a personal hearing is mandatory, even if the appellant does not request one.

7. Adjournments and Additional Grounds [Sections 107(9) and 107(10)]

• The Appellate Authority may grant adjournments for valid reasons but not more than three times during the hearing of the appeal, as per Section 107(9).
• The appellant may add additional grounds to the appeal at the time of the hearing if it is proven that the omission was not willful or unreasonable, as per Section 107(10).

8. Order in Appeal [Section 107(11)]

After hearing the appeal, the Appellate Authority can confirm, modify, or annul the decision of the adjudicating authority. However, it cannot refer the case back to the adjudicating authority.

• The order must be communicated to the appellant, respondent, and the adjudicating authority.
• A summary of the order is issued in FORM GST APL-04 as per Rule 113.

9. Amendments and Special Notifications

Finance Act, 2021: A proviso was added to Section 107(6), increasing the pre-deposit amount to 25% of the penalty for appeals related to the detention and seizure of goods under Section 129(3).

Further, Amnesty Scheme (Notification No. 53/2023): Issued on 2^nd November 2023, which  provides relief for appeals rejected due to time limits under Sections 73 and 74. Taxpayers can refile appeals for orders passed up to 31^st March 2023, with a deadline of 31^st January 2024.

Conclusion

The appeal process under GST is structured to ensure that disputes between taxpayers and authorities are resolved through a systematic and fair approach. By adhering to the provisions of Section 107 and relevant rules, taxpayers can ensure that their appeals are properly considered. Awareness of the mandatory pre-deposit, time limits, and personal hearing procedures is crucial for a successful appeal process.