As FY 2024-25 ends, ensure a seamless transition to FY 2025-26 with these essential GST tasks.

I. Outward Supplies: Get Your Records in Order

• Reconcile GSTR 1 with GSTR 3B & GST Returns with Books of accounts and rectify any mismatches between books and filed returns.
• Reconciliation of “E-Invoice and E-way bills” generated with actual sales
• Check applicability of E-Invoice
• From February 2025, reporting 6-digit HSN codes via dropdown is mandatory, as manual entry is disabled. The HSN master description will auto-fill the “Description as per HSN Code” field.
• Ensure shipping bill details for the export of goods with payment of tax are correctly entered in GSTR-1 and transmitted to the ICEGATE portal for IGST refund claims.
• Ensure all credit/debit notes are issued and reported in GSTR-1
• Ensure tax liability against receipt of advances (services) and adjustment thereof to derive at unadjusted advances
• Ensure correct bifurcation of B2B and B2C transactions in GSTR-1
• In case of the export of goods/services without payment of tax, make sure to file application for LUT for FY 2025-26 on or before 31st March 2025.
• Check tax compliance on branch/stock transfers
• Ensure correct reporting of Taxable, Exempt, Non-GST and Nil-rated supplies
• Verify if any corrections/amendments in invoices or details are required

II. Input Tax Credit (ITC) & RCM

1.Reconciliation of Input Tax Credit (ITC) as per Books and GSTR 3B:

While filing GSTR-3B as per Circular 170 of CGST Act and claiming ITC recorded in books and matched with GSTR-2B, it is essential to verify any discrepancies at the year end, such as:

• ITC matched with GSTR 2B but missed to claim in GSTR-3B
• ITC reversed in Table of Permanent Reversal [4(B)(2)] instead of Temporary Reversal [4(B)(1)] in GSTR 3B
• RCM ITC wrongly reported in Regular ITC
• Interchange claims of SGST /CGST as IGST and vice versa, etc

Note: Any such correction/ claim shall be made up to the October month return filed by 30th November of the subsequent Financial Year or filing of annual return, whichever is earlier.

2. Other Important points to check under ITC are:

Note: Rule 37 – Check for ITC reversal required on account of non-payment to vendors within 180 days or reclaim of any ITC in respect of supplies for which payment has been made.

3. Reverse Charge Mechanism (RCM):

• Reconcile expenses attracting RCM with amounts reported in GSTR-3B and books.

• Ensure GST is paid on RCM basis for imports of goods/services.

• Claim eligible ITC in GSTR-3B by November 30th of the following financial year or before filing of the annual return, whichever is earlier.

• Ensure correct reporting, payment and claiming of RCM in GSTR-3B.

III. Rule 96A Compliance (Exports under LUT/Bond)

1. Goods must be exported within 3 months from the invoice date.

2. Payment for export of services must be received in convertible foreign exchange/INR (as per RBI) within 1 year [or the period allowed under FEMA (9 months), including extensions] from the invoice date.

3. Regularly review compliance for each invoice; ensure no defaults before Financial Year ends.

4. Refund Timeline-

• Refund applications must be filed within 2 years from the relevant date as per the act.

• It may be noted that it is a regular activity to ensure that the refund is claimed periodically.

However, we shall check the same at the end of FY to plug any gap and apply for refund without any default.

IV. Other Compliances

• If the conditions of Rule 86B are met, ensure that at least 1% of the total tax liability is paid in cash.
• Obtain declarations from vendors exceeding the prescribed aggregate turnover threshold but exempt from e-invoicing under clause (s) of Rule 46.
• Check for any GST TDS/TCS credit available on our GST Portal and claim the same after checking its authenticity from the books of accounts
• Ensure registered persons with turnover up to ₹5 Cr opt in/out of the QRMP Scheme on time for seamless tax compliance
• If opted for the Composition Scheme for FY 2025-26, ensure Form CMP-02 is filed by March 31, 2025.

Note:

1. Check whether the material sent for job work has been returned within the prescribed time limit (i.e. for Inputs – 1 year and for Capital goods – 3 years) and whether the same has been duly reported in ITC 04.

2. Ensure that goods sent on an approval basis are either returned within six months or sold with the issuance of a tax invoice to comply with regulations.

V. Credit Note Declaration Compliance

As per reference vide Circular No.-212/6/2024-GST-

Ensure that if the discount given by the supplier to a recipient through tax credit notes in a Financial Year exceeds ₹5,00,000/-, then the supplier must obtain a CA/CMA certificate from the recipient confirming ITC reversal.

If the discount given by the supplier to a recipient through tax credit notes in a Financial Year is up to ₹5,00,000, a self-declaration from the recipient is sufficient.

Note: To avoid a last-minute rush during assessments, it is advisable to maintain these documents for scrutiny, audit, or investigation.

VI. Input Service Distributor (ISD) Registration Requirement

(Effective from 01 April 2025)

Applicability

• Any office of a supplier of goods or services or both that receives tax invoices for input services on behalf of distinct persons under Section 25.
• It also includes invoices subject to reverse charge tax.

Mandatory Registration

• Entities meeting the above criteria must register as an ISD under GST.
• The ISD will distribute Input Tax Credit (ITC) in respect of such invoices to the respective recipients.

Action Required

• Identify such offices/ entities on or before 31st March 2025.
• Apply for ISD registration to comply with the new mandate.
• This ensures proper ITC distribution and compliance with GST laws.

VII. The Hotel Industry!

Two major notifications were issued on 16th January 2025, impacting GST compliance for hotels and restaurants from 1st April 2025. Key changes as per notification no. are as follows-

Notification No. 05/2025 – CT (Rate)

Introduction of the “Specified Premises” concept (Hotels with high-value accommodations).

Removal of the “Declared Tariff” concept (Earlier tariff-based taxation is removed).

Mandatory Opt-In/Opt-Out Declaration before 31st March 2025.

Notification No. 08/2025 – CT (Rate)

E-Commerce Operators (like Swiggy, Zomato) will no longer be liable to pay GST on restaurant services provided in “Specified Premises”.

GST liability will now shift to restaurant owners, and they must pay 18% GST with Input Tax Credit (ITC) benefits.

Note-

What are “Specified Premises”?

1. Any hotel or restaurant where room rent exceeded ₹7500 per day in the previous financial year.

2. Any new hotel registering as a Specified Premises must file an Opt-In form (Annexure VII, VIII, IX).

Revised GST Rates from 1st April 2025

• Standalone Restaurants (Not attached to any hotel) – 5% GST (No ITC)
• Restaurants in Specified Premises (₹7500+ per day hotel rooms – 18% GST (ITC allowed)
• Restaurants in hotels with room rent below ₹7500 per day – 5% GST (No ITC)

Important Notes:

• Hotels falling under “Specified Premises” must file Opt-In Declaration (Annexure VII) before 31st March 2025.
• New GST registrations must file Annexure VIII within 15 days of ARN generation.
• For opting out, hotels/restaurants must file Annexure IX
• Once an option is selected, it cannot be changed for the financial year unless an Opt-Out Declaration is filed.

Key Changes in Safe Harbour Rules as per the CBDT Notification

Executive Summary

SBC TP Update on the CBDT Amendments to Safe Harbour Rules vide Notification No. 21/2025 dated March 25, 2025.

1. The definition of core auto components under Rule 10TA has been expanded to encompass lithium-ion batteries for use in electric and hybrid electric vehicles.
2. The threshold limits under Rule 10TD for software development services, IT-enabled services (ITeS), Knowledge Process Outsourcing (KPO), Contract R&D in software development, and Contract R&D in generic pharmaceutical drugs have been increased from ₹200 crores to ₹300 crores.

The aforementioned amendments shall be applicable for the assessment years 2025-26 and 2026-27.

Summary of changes pre and post amendment

Definition and purpose of Input Service Distributor

Definition

As per Section 2(61) of CGST Act, 2017, “Input Service Distributor (ISD)” means an office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax u/s 9(3) or 9(4), for or on behalf of distinct persons referred to in section 25, and liable to distribute the input tax credit in respect of such invoices in the manner provided in section 20.

Purpose of ISD

When a business entity has large share of common expenditure on services and the billing is made to a single location, the ITC available should not be wholly claimed by that centralised location as services are utilised by one or more distinct persons. So, it may take a separate registration as ISD to distribute the ITC to its distinct persons proportionately.

Background of ISD

Earlier, Taxpayers have an option to distribute common input services from third parties either through ISD or cross charge mechanisms.

But, Section 20(1) has been amended with effective from 1st April 2025 vide Notification No. 16/2024-CT dated 06.08.2024 making it mandatory to have registration under ISD for the entities having centralized offices where services are procured for or on behalf of distinct persons referred to in section 25.

Meaning of ISD and Cross Charge

1.Cross charge is a charge of tax on deemed supplies made by HO/centralized office to its distinct entities.

2.ISD is meant for distribution of common ITC on invoices received by HO/ centralized office among its distinct entities referred to in Section 25.

What are External and Internally Generated Services?

1.Common input services/ External services – Procuring input services (common to one or more distinct persons) from external/third party suppliers. (eg– audit services, legal services, Accounting software, Consultation services, Advertisement services, Bank charges, insurance, tele – communication services, Membership fee etc.)

2.Internally generated services – Activities performed by Head office as a whole benefitting its branches having separate GSTIN. (eg- Accounting services, IT services, CEO/CFO/CS/HR services)

Before 01st April 2025

After 01st April 2025

Any entity which has a centralized location receiving input services on behalf of its distinct persons is now required to obtain ISD registration. The Finance Bill removes the option previously available to taxpayers to choose between cross charge and ISD.

Note: Cross charge for internally generated services is not mandatory vide Circular 199/11/2023 – GST dated 17th July 2023. It clarified that in situations where no invoice is raised for ‘internally generated services’ the value can be deemed as NIL where the recipient is eligible to claim ITC.

Functions of ISD

Note:

• ISD mechanism cannot be used for transfer of credit to holding company, subsidiary company, group entities, related parties as they have different PAN.

• ISD can neither be a supplier nor recipient of goods/services.

Compliances by ISD

A. Forms/ Returns

• Every taxable person registered as an ISD shall, for every calendar month or part thereof, furnish GSTR 6, as prescribed under Rule 65, a return, electronically, within thirteen days after the end of such month on the basis of details contained in FORM GSTR-6A.

• Just like GSTR 2A, GSTR 6A is an auto-populated form based on GSTR 1 filed by the suppliers.

• Eg: For the month of February 2025, the date of filing GSTR 6 shall be 13th March 2025

• Late filing of GSTR-6 attracts a late fee of ₹100 per day u/s 47 of the CGST Act (₹50 per CGST & SGST each per day)

B. Documentation

1. Documents issued to ISD

Invoices issued by the supplier of services u/s 31 of CGST Act Debit Notes issued by supplier of services u/s 34 of CGST Act

Invoice issued as per Rule 54(1A)(a) to transfer ITC from regular registration located in the same state as ISD

2. Documents issued by ISD

ISD shall distribute the amount of tax credit to recipients by issuing an ISD invoice as per Rule 54(1).

Distribution of ITC (Rule 39)

A. Conditions/Restrictions for Distribution of ITC

• ISD can be used only for transfer of ITC pertaining to Input Services including activities listed in Schedule II of CGST Act as deemed services.

Note : ISD cannot avail and distribute ITC on goods/capital goods

• Amount of credit distributed should not exceed Amount of credit available.

• ITC should be distributed on monthly basis, i.e., ITC available for distribution in a month should be distributed in the same month.

• ISD shall distribute all the ITC received in GSTR 6A. Further, ISD should separately distribute eligible ITC and ineligible ITC. Reversal of Ineligible ITC shall be on part of the recipient.

• The excess/wrongly distributed credit can be recovered as per Section 21 from the recipients of credit along with interest by initiating action under section 73 /74 or 74A.

B. Manner of Allocation of ITC

C. Manner of Distribution of ITC

Note: the term “turnover”, in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act reduced by amount of any duty or tax levied under specific entries of the Seventh Schedule to the Constitution of India.

Therefore, Turnover includes all taxable supplies, Zero – rated Supplies, Exempt Supplies and Non – Taxable Supplies but excludes any duty or tax levied.

D. Pro – rata distribution of ITC

ITC to be distributed to one of the recipients is to be calculated by applying the following formula:

C1= (T1/ T) x C

R1 = one of the recipients, whether registered or not

C1 = ITC to be distributed to R1

C = Total ITC available for distribution

T1 = Turnover of R1 during the relevant period

T = Aggregate Turnover during the relevant period of all recipients to whom the input service is attributable the term “relevant period” shall be—

1. Rate Decreased:

The council meeting held on December 21, 2024, thoughtfully addressed the long-awaited concerns and hopes expressed by taxpayers

Recommendations with respect to Changes in rates

1. GOODS

1. Reduction of GST rate on Fortified Rice Kernel (FRK) to 5%

2. Reduction of compensation cess to 0.1% on supplies to merchant exporters at par with GST rate on such supplies

3. To extend the Concessional rate of 5% on food inputs used in making food for free distribution to economically weaker sections under government schemes

2. SERVICES

1. Restaurant Services:

• The concept of ‘declared tariff’ is to be replaced with the ‘value of supply’ to determine tax rates:

• 𝟏 18% GST with ITC: If the value of supply exceeds ₹7,500 per unit

• 5% GST without ITC: If below ₹7,500.

• Restaurants in hotels can choose between 5% GST (without ITC) or 18% GST (with ITC).

2. Increase of GST rate from 12% to 18% on the sale of all old and used vehicles, including EVs (except specified categories already taxed at 18%). GST is applicable only on suppliers’ margins (difference between purchase and selling price or depreciated value if claimed). However, it is not applicable to unregistered persons.

Recommendations with respect to Exemptions

1. GST on Gene Therapy to be exempted

2. To extend the IGST exemption to systems, sub-systems, equipment, parts, sub-parts, tools, test equipment, and software used for the assembly or manufacture of the LRSAM system.

3. To exempt from IGST imports of all equipment and consumable samples by the Inspection Team of the International Atomic Energy Agency (IAEA) subject to the specified condition

4. To exempt GST on contributions made by general insurance companies from third- party motor vehicle premiums to the Motor Vehicle Accident Fund.

Recommendations with respect to Exemptions

1. To exclude taxpayers registered under the composition levy scheme from the scope of Sr. No. 5AB of Notification No. 09/2024-CTR (dated 08.10.2024), which brought the renting of commercial/immovable property (excluding residential dwellings) by unregistered persons to registered persons under the reverse charge mechanism. Additionally, to regularize the period from the effective date of the notification (10.10.2024) until the issuance of the proposed notification on an “as-is-where-is” basis.

2. The supply of sponsorship services provided by body corporates is to be brought under the Forward Charge Mechanism.

Clarifications Recommended

1. Autoclaved Aerated Concrete (AAC) blocks with a fly ash content exceeding 50% are classified under HSN code 6815 and are subject to a 12% GST rate.

2. Pepper whether fresh green or dried pepper and raisins when supplied by an agriculturist is not liable to GST.

3. Proposed amendment to redefine “Pre-Packaged and Labelled” to include all retail commodities up to 25 kg or 25 litres, either pre-packed as per the Legal Metrology Act or labeled in compliance with its declaration requirements Clarifications On GST rates of “Ready to eat popcorn” which is mixed with salt and spices classifiable under HSN 21069099

• If supplied as other than pre-packaged and labelled-5%
• If supplied as pre-packaged and labelled-12%
• However, when popcorn is mixed with sugar thereby changing its character to sugar confectionery (eg: Caramel Popcorn) it would be classifiable under HS 17049090 and attract 18%

4. Payment Aggregators regulated by the RBI are eligible for the exemption under entry at Sl. No. 34 of Notification No. 12/2017-CT(R) dated 28.06.2017, as they fall within the scope of the term ‘acquiring bank’ defined in the said entry. However, this exemption does not extend to payment gateways (PG) or other fintech services that do not involve the settlement of funds.

5. No GST is applicable on ‘penal charges’ levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms.

Recommendations with respect to Exemptions

1. The supply of goods warehoused in Special Economic Zones (SEZ) or Free Trade Warehousing Zones (FTWZ) is treated as Neither a supply of goods nor a supply of services:

▪ This applies when the goods are supplied to any person before clearance for:

▪ Export or Domestic Tariff Area (DTA).

▪ The provision aligns SEZ/FTWZ warehousing transactions with existing GST rules for Customs bonded warehouses.

2. Omission of Sections 12(4) and 13(4) of the CGST Act, 2017, and Rule 32(6) of the CGST Rules, 2017, to resolve existing ambiguities regarding vouchers.

Clarifications on Transactions Involving Vouchers:

• Non-Supply Nature: Transactions in vouchers will neither be treated as a supply of goods nor as a supply of services.

• Principal-to-Principal Basis: The distribution of vouchers on a principal-to-principal basis will not attract GST. However, for distribution on a principal-to-agent basis, GST will apply to the commission, fee, or other amounts charged by the agent.

• Associated Services: Additional services like advertisement, marketing, co-branding, customization, and technological or customer support associated with vouchers will be subject to GST based on the charges for these services.

• Unredeemed Vouchers (Breakage): Income recognized from unredeemed vouchers will not be treated as supply, and no GST will be levied on such breakage income.

3. No proportional reversal of ITC under Section 17(1) or Section 17(2) of the CGST Act, 2017, is required to be made by the ECO for supplies on which they are required to pay tax under Section 9(5) of the CGST Act, 2017.

4. Clarification regarding the availability of Input Tax Credit (ITC) under Section 16(2)(b) of the CGST Act, 2017, in the context of Ex-Works contracts:

o In an Ex-Works contract, goods are considered “received” by the recipient when:

▪ Delivered to the recipient or transporter at the supplier’s premises.

▪ Ownership transfers to the recipient at that point.

o This interpretation aligns with Section 16(2)(b) of the CGST Act, 2017, enabling the recipient to claim Input Tax Credit (ITC).

o TC claims are subject to compliance with:

▪ Sections 16 and 17 of the CGST Act.

▪ All eligibility and procedural requirements.

o This clarification ensures smooth ITC claims in cases where ownership transfers at the supplier’s location.

5. Clarification on Late Fees on Delay filing of GSTR 9 and 9C

a. The GST Council recommended clarifying through a circular that the late fee under Section 47(2) of the CGST Act, 2017, is applicable for delays in filing the complete annual return under Section 44 of the CGST Act. This includes both:

• FORM GSTR-9 (Annual Return)

• FORM GSTR-9C (Reconciliation Statement) (where applicable).

▪ All eligibility and procedural requirements.

b. Waiver of Excess Late Fees for Past Returns (FY 2017-18 to 2022-23):

• The GST Council proposed issuing a notification under Section 128 of the CGST Act, 2017 to waive the excess amount of late fees for delayed filing of FORM GSTR-9.

The waiver is conditional:

• The delayed FORM GSTR-9 for these years must be filed on or before March 31, 2024.

• The related FORM GSTR-9C (if applicable) must also be filed within the same timeline.

3. No proportional reversal of ITC under Section 17(1) or Section 17(2) of the CGST Act, 2017, is required to be made by the ECO for supplies on which they are required to pay tax under Section 9(5) of the CGST Act, 2017.

Measures for Streamlining GST Compliance

1. Track and Trace Mechanism:

o A new provision (Section 148A) in the CGST Act, 2017 will enable the government to enforce a Track and Trace Mechanism for specified evasion-prone commodities.

o This system will use a Unique Identification Marking on goods or packages to trace them throughout the supply chain.

2. Clarification on Online Services:

For supplies of online services (e.g., online gaming, OIDAR) to unregistered recipients, the supplier must:

o Record the State name of the recipient on the tax invoice.

o Treat this State name as the recipient’s address under Section 12(2)(b) of IGST Act, 2017 and Rule 46(f) of CGST Rules, 2017.

Key Measures for GST Law and Procedure

1. Retrospective Amendment to Section 17(5)(d):

The phrase “plant or machinery” will be replaced with “plant and machinery” in the CGST Act, effective from July 1, 2017.

SBC Comments:

• The amendment aligns the provision with the explanation of Section 17.

• The Supreme Court, in Safari Retreat, highlighted two exceptions under Section 17(5)(d):

• ITC eligibility for goods or services used to construct “plant or machinery.“

• ITC eligibility for construction of immovable property not made on one’s own account.

• While the amendment addresses the first exception, it leaves ambiguity around the second, potentially leading to further disputes.

• The amendment to Section 17(5)(d) is anticipated but considered incomplete.

• The second exception highlighted by the Supreme Court remains unresolved, leaving scope for litigation

2. Reduction of Pre-deposit for Penalty Appeals:

Pre-deposit for appeals under Section 129(3) reduced from 25% to 10%.Identical provision introduced under Section 112 for first appellate authority orders involving penalties under Section 129(3).

3. ISD Mechanism:

Include inter-state RCM transactions under ISD and amend related provisions (effective from 01.04.2025).

4. Temporary ID Numbers:

Introduce Rule 16A for generating temporary IDs for unregistered persons making payments under Rule 87(4).

5. Composition Levy Modification:

Allow taxpayers to update the “category of registered person” in FORM CMP-02 through FORM GST REG-14.

Key Measures for GST Law and Procedure

6. Amendment to Invoice Management System (IMS)

Key recommendations by the GST Council to strengthen IMS functionality under the CGST Act and Rules:

• Amendment to Section 38 and Rule 60:

• Legal framework for generating FORM GSTR-2B based on taxpayer actions in IMS.

• Ensures consistency in Input Tax Credit (ITC) claims.

• Amendment to Section 34(2): Mandates ITC reversal by recipients for credit notes to enable suppliers to reduce output tax liability.

• Insertion of Rule 67B: Standardized procedure for adjusting suppliers’ output tax liability against credit notes.

• Amendment to Section 39(1) and Rule 61: Links FORM GSTR-3B filing to the availability of FORM GSTR-2B for reconciliation.

SBC Comments:

• Enhances transparency, prevents fraudulent ITC claims, and ensures accurate tax compliance.

• Effective implementation depends on GST portal readiness and taxpayer adaptability.

RULE 86B-Restrictions on use of amount available in electronic credit ledger In cases where –

₹50 Lakh Threshold

Applies if monthly taxable supplies (excluding exempt/zero-rated) exceed ₹50 lakh.

99% ITC Utilization Cap

Maximum 99% of output tax liability can be paid using the electronic credit ledger.

1% Cash Payment Mandate

At least 1% of tax liability must be paid in cash

Exceptions to the 99% ITC Utilization Restriction:

High-Income Tax-Payers

Applies if the person or key individuals (e.g., proprietor, MD, partners) paid over ₹1 lakh as income tax in each of the last two financial years.

Refund Recipients

Applies for those receiving refunds exceeding ₹1 lakh in the preceding year for unutilized ITC under clause (i) and (ii) of first proviso Section 54(3).

Excess Cash Payment

Registered persons who paid more than 1% of cumulative output tax liability through the electronic cash ledger during the financial year.

Specific Entities

Government departments, PSUs, local authorities, and statutory bodies are exempt.

Introduction-

As per Sec 44 of the CGST Act, 2017, Every registered person, other than specified persons shall

furnish an annual return (GSTR-9) and a self-certified reconciliation statement (GSTR-9C) annually

before 31st December of the following financial year.

CGST ACT, 2017

1. INTRODUCTION

Section 128A has been introduced in the Central Goods and Services Tax Act, 2017, vide the Finance Act, 2024, effective from November 1, 2024, based on recommendations from the GST Council’s 53rd meeting held on June 22, 2024. It provides for the waiver of interest, penalties, or both, related to tax demands under Section 73 for the financial years 2017-18, 2018-19, and 2019-20, subject to specific conditions. This amendment aims to offer relief to taxpayers while ensuring compliance with past GST obligations.

2. WHAT IS COVERED UNDER THIS AMNESTY SCHEME?

2.1. Scope: Applies specifically to demands under Section 73, which generally deals with non-fraudulent tax discrepancies and refunds.

2.2. Time-Frame: Relief applicable for tax periods from FY 2017-18 to FY 2019-20.

2.3. Due Date for Payment: All taxes must be paid on or before March 31, 2025, as per the 53rd GST Council meeting. However, currently, the law remains silent and an official notification from the government is yet to be issued.

2.4. Relief: Complete waiver of interest and penalty.

3. WHAT IS NOT COVERED IN THE SCHEME?

While the proposed GST Amnesty Scheme under Section 128A offers significant relief to taxpayers, it is important to understand that certain cases are not eligible for this scheme. This exclusion aims to maintain the integrity of the tax system and ensure that the scheme benefits those who comply with the law in good faith. The following are the

a. Demand raised under Section 74, i.e., cases involving fraud, willful misstatement, or suppression of facts to evade tax.

b. c. Erroneous refunds received by the assesses.

No refund will be issued for interest and penalties already paid by the taxpayers.

4. ADVANTAGES OF THE SCHEME

4.1. Reduction in Litigation: By offering a waiver of interest and penalties, the scheme incentivizes taxpayers to settle disputes without further legal proceedings, reducing the burden on tax tribunals and courts.

4.2. Revenue Generation: The scheme encourages the payment of outstanding taxes, leading to immediate revenue generation for the government.

4.3. Relief for Taxpayers: Provides significant relief to taxpayers who faced difficulties during the initial years of GST implementation, offering a chance to settle their dues with a reduced financial burden.

5. IS THE SCHEME APPLICABLE AT ALL STAGES OF LITIGATION?

The applicability extends to:

5.1. Notice issued under section 73 of the CGST Act:

The scheme covers cases where a notice has been issued under Section 73 for recovery of tax not paid, or short paid or erroneously refunded, or input tax credit wrongly availed or utilized.

5.2. Notice issued under section 74, deemed as issued under section 73 due to the absence of elements of fraud/suppression/ willful misstatement:

If a notice initially issued under Section 74 is later deemed to be issued under Section 73 because it lacks elements of fraud, suppression, or willful misstatement, it falls under the purview of this amnesty scheme.

5.3. Order issued under section 73 of the CGST Act, where no order under sub-section (11) of section 107 [Appellate Authority] or sub-section (1) of section 108 [Revisional Authority] has been issued:

If an order has been issued under Section 73, and there is no subsequent order from the Appellate Authority (Section 107) or the Revisional Authority (Section 108), this situation is also covered by the amnesty scheme.

5.4. Appeal Order or Revisional Authority Order:

The scheme also includes cases where orders have been issued by the Appellate Authority or the Revisional Authority.

Section 128A targets non-compliant taxpayers who haven’t filed returns on time. The scheme aims to bring them back into compliance and reduce the number of non-compliant GST accounts.

AMENSTY RULES

Vide Notification no.20/2024-Central Tax dated 8th October 2024 Rule 164 of CGST Rules, 2017 Government of India introduces a detailed procedure for the closure of proceedings related to tax demands issued under Section 73 of the Goods and Services Tax (GST) Act. This rule outlines the process and conditions under which a taxpayer can seek a waiver of interest or penalties, or both, in connection with notices, statements, or orders issued under Section 128A. It sets forth the application methods, timelines, required documentation, and necessary payments for eligibility, ensuring an organised framework for taxpayers and GST officers to resolve disputes.

1. Application for Waiver:

Persons eligible for the waiver of interest, penalty, or both may apply electronically on the common GST portal using-

a) FORM GST SPL 01- applies to SCNs under Section 128A(1)(a) (i.e., Section 73(1), or a statement is issued under Section 73(3) (for unpaid or short-paid tax)

b) FORM GST SPL 02- applies to orders under Section 128A(1)(b) (i.e., determining the amount of tax) and Section 128A(1)(c) (i.e., Section 73(9) or through appeals under Sections 107 or 108)

2. Payment Conditions for orders under Section 128A(1)(b) and (c):

a) Tax payments must be made by crediting the amount to the Electronic Liability Register against the debit entry created.

b) Additionally, if any payment has already been made using GST DRC 03, an application in FORM GST DRC 03A must be filed for the transfer of such amounts to the Electronic Liability Register against the debit entry created.

3. Partial Demands:

If the demand partially involves erroneous refunds or periods not covered by Section 128A, the applicant must ensure the full tax amount is paid before filing the application.

4. Deadline for Applications:

a) Applications must be submitted within three months from the notified date under Section 128A(1).

b) An extended deadline of six months applies if the application in Form GST SPL 02 refers to the first proviso (for cases involving fraud or willful misrepresentations) of Section 128A(1)

5. Withdrawal of Appeals:

a) To qualify for the waiver of interest or penalty, applicants must show evidence of having withdrawn appeals or writ petitions filed with appellate authorities, tribunals, or courts.

b) If the order for withdrawal isn’t issued by the time of application, a copy of the filed withdrawal request should be uploaded. The final order of withdrawal must be uploaded within one month after it is issued.

6. Rejection of Applications:

If the officer deems that the application made in FORM GST SPL 01 or FORM GST SPL 02 is ineligible for the waiver, a notice in FORM GST SPL 03 will be issued within three months. The applicant can then respond via FORM GST SPL 04 within one month.

7. Approval and Finalization:

a) Upon successful review, the officer issues an approval order in FORM GST SPL 05, which concludes the proceedings.

b) If the application is rejected, an order in FORM GST SPL 07 will be issued.

8. Issuance of Orders and Modification of Liability under FORM GST SPL-05:

a) If an application is filed in FORM GST SPL-01 for a notice under Section 128A(1)(a), the proper officer does not need to issue FORM GST DRC-07

b) If an application is filed in FORM GST SPL-02 for orders under Section 128A(1)(b) or 128A(1)(c), the Electronic Liability Register will be modified accordingly to reflect any changes in liability after the waiver or order.

9. Time limit for issuance of order:

a) If notice in FORM GST SPL 03 has not been issued, then the proper officer shall issue the order within three months from the date of receipt of the application in FORM GST SPL 01 or FORM GST SPL 02.

b) If the above notice is issued, then the proper officer shall issue the order within three months from the date of receipt of the reply of the applicant or within four months if no reply is received.

10. Deemed Approval:

If no order is passed by the proper officer within the prescribed time, the application in FORM GST SPL 01 or FORM GST SPL 02 as the case may be, is deemed to be approved and the proceedings concluded.

11. Appeal and Restoration of Appeals:

a) If the application for waiver is rejected (FORM GST SPL 07), the applicant can appeal. If the appeal is successful, the order shall be passed in FORM GST SPL 06 and the waiver will be granted.

b) Otherwise, any previously withdrawn appeal related to the original demand will be restored in FORM GST SPL 08.

12. Voidance of Waiver:

If any additional tax amount is not paid within the specified time, the waiver of interest or penalty will become void.

13. Conditions under which a taxpayer is required to pay interest, penalties, or both:

a) Interest or Penalty Payment Requirement: If a taxpayer receives a demand for an erroneous refund or for a tax period not covered under section 128A, and the details of the interest or penalty are mentioned in FORM GST SPL-05 or FORM GST SPL-06, the taxpayer is obligated to pay the specified amount.

b) Three-Month Time Frame: The taxpayer must pay the interest, penalty, or both within three months from the date of the order issued in FORM GST SPL-05 or FORM GST SPL-06.

c) Consequences of Non-Payment: Failure to pay within the specified three-month period voids any waiver of interest or penalty previously granted under section 128A, removing eligibility for that waiver.

GSTN Advisory for Taxpayers: Waiver Scheme Under Section 128A

Forms availability:

• FORM GST SPL-01 and SPL-02 will be available on the common portal starting January 2025.

Immediate Action for Taxpayers:

• Payments can be made now under “Payment towards demand” for demand orders.

FORM GST DRC-03:

• If payments have already been made, taxpayers should link FORM GST DRC-03 to the demand order using FORM GST DRC-03A, now available on the common portal.

Rule 164 of CGST Rules is comprehensive almost covers all the aspects while filing the GST Amnesty scheme application. However, a delay in the availability of forms on the GST portal are not expected

GST Amnesty Scheme

CLARIFICATIONS AND FAQS

CBIC Vide Circular No.238/32/2024-GST dated 15th October 2024 CBIC clarified various issues in relation to the implementation of the scheme. The clarifications and FAQs are as follows:

Clarification on Section 16(5) or (6):

a. Deduction of Non-Payable Amounts:

Tax amounts related to the contravention of Section 16(4) that are no longer payable due to the retrospective addition of Sections 16(5) and 16(6) should be deducted when calculating the total tax payable under Section 128A.

b. No Rectification Required for Reinstated ITC:

If input tax credit (ITC) previously denied under Section 16(4) is now available due to the new provisions, no rectification application is needed.

c. Deductions Limited to Section 16(4) Violations:

Deductions of non-payable amounts must be solely due to Section 16(4) violations, and the tax officer will verify this during scrutiny.

FAQs:

1. Will the benefit under Section 128A apply to taxpayers who paid the tax component in full before the section came into effect?

Yes, Any amount paid toward the demand up to the date notified under Section 128A will be considered, regardless of whether it was paid before or after the section’s effect or demand notice.

2. Will the amount recovered by tax officers from another person on behalf of the taxpayer be considered as paid for the demand under Section 128A?

Yes, Such amounts recovered by tax officers from any other person will be considered as paid towards the demand if recovered before the date notified under Section 128A.

3. Can the interest or penalty amount recovered for demands under Section 73 (Financial Years 2017-18, 2018-19, and 2019-20) be adjusted against the tax payable for the same demand?

No, There is no refund or adjustment of interest or penalty towards the tax demand. Amounts paid or recovered as interest or penalty cannot be adjusted toward tax payable

4. If the tax due is already paid and the notice under Section 73 pertains only to interest/penalty, is Section 128A applicable?

Yes, Section 128A benefits are available for such cases, except when interest is demanded for delayed filing or reporting of returns.

5. Can partial waiver of interest or penalty be availed by making part payment and litigating the remaining amount?

No, Section 128A benefits are only available when the full amount of tax demanded in the notice/order is paid.

6. If a demand notice/order includes multiple periods and some other tax periods for which such waiver is not applicable, can the benefit of waiver under Section 128A be claimed for the applicable period?

Yes, You can apply for a waiver for the period covered by Section 128A. However, the full tax amount in the notice must be paid to avail of the waiver.

7. Can a taxpayer apply for a waiver of interest/penalty under Section 128A if the demand includes erroneous refunds?

Yes, The taxpayer must pay the full amount, including erroneous refunds. However, the waiver under Section 128A applies only to tax demands not related to erroneous refunds.

8. If the department has filed an appeal and the tax liability is increased, will the waiver under Section 128A still apply?

Yes, but the taxpayer must pay the additional tax liability within three months of the appellate order. Failure to do so will void the waiver of interest or penalty.

9. If the taxpayer has already paid some tax through FORM GST DRC-03, do they need to file FORM GST DRC-03A for adjustments?

Yes, If an order has been issued and the taxpayer has paid through FORM GST DRC-03, the amount must be adjusted before filing FORM GST SPL-02.

10. Does Section 128A cover cases involving IGST and Compensation Cess?

Yes, The benefit of Section 128A also applies to IGST and Compensation cess demands, and full payment of the tax (CGST, SGST, IGST, and Compensation cess) is required.

11. Does Section 128A cover demands related to irregularly availed transitional credit?

Yes, provided the transitional credit was availed during the period covered under Section 128A, and the demand was raised under Section 73.

12. Does Section 128A cover penalties under other provisions, such as late fees or redemption fines?

Section 128A covers penalties under sections 73, 122, and 125, but not late fees or redemption fines

13. Can payment for the waiver under Section 128A be made using Input Tax Credit (ITC)?

Yes, The tax payment required to avail of the waiver can be made using ITC or electronic cash ledger, except in cases of Reverse Charge Mechanism (RCM) or erroneous refunds, where cash payment is mandatory.

14. Is the waiver under Section 128A applicable to IGST payable under the Customs Act, 1962?

No, Such cases fall under the Customs Act and are not covered under Section 128A.

15. If a demand reduces due to the retrospective insertion of Section 16(5) and (6), does the entire tax demand have to be paid to avail the waiver?

No, The amount payable to avail the waiver will be calculated after deducting the reduced amount based on Section 16(5) or (6).

Clarifications & Applicability of Amnesty Scheme:-

Is Rental Income from Property Taxed under GST?

According to the provisions of the Act, a transaction is subject to GST only if it involves a supply. The Renting of Property, whether Residential or Commercial, falls under the definition of supply of services as per Schedule II of the Central Goods and Services Tax Act,2017. Consequently, Rental income from property will be taxable under GST, and the tax implications vary for renting residential and commercial properties, as detailed below:

GST Implications for Renting Residential Property:

The following are the GST provisions applicable to rental income from residential properties:

• The rental income from residential properties used as residential dwelling was unconditionally exempt from GST until July 17, 2022.
• From July 18, 2022, rental income from residential properties used as residential dwellings is exempt only when rented to an unregistered tenant; if rented to a registered tenant, it is taxable.
• The registered tenant need to pay tax under the Reverse Charge Mechanism (RCM) as per Sr. No. 5AA.

CBIC vide Circular No. 232/26/2024GST dated 10th September 2024, addresses the issue in relation to the place of supply for data hosting services provided by service providers in India to cloud computing companies abroad. The trade industry have requested guidance on this matter to determine the correct place of supply under GST law. The following are the various issues and clarifications given by the CBIC

Issue 1: Does a data hosting service provider qualify as an ‘Intermediary’ under Section 2(13) of the IGST Act? Moreover, are the services considered intermediary services with the place of supply determined under Section 13(8)(b) of the IGST Act?

Clarification:

• A data hosting service provider generally does not qualify as an ‘Intermediary’ under Section 2(13) of the IGST Act.
• The service provider operates on a principal-to-principal basis, providing data hosting services directly to the cloud
  computing service facilitating provider, not or arranging services between the cloud computing service provider and its end customers. Hence, these services will not fall under the category of intermediary.
• Thus, the place of supply for data hosting services provided by an Indian service provider to an overseas cloud computing service provider cannot be determined under Section 13(8)(b) of the IGST Act.

Issue 2: Whether data hosting services are in relation to goods “made available” by the recipient to the service provider, with the place of supply determined under Section 13(3)(a) of the IGST Act?

Clarification:

• Data hosting services cannot be considered to be in relation to goods “made available“ by the cloud computing service providers to the data hosting service providers.
• The data hosting service providers own or operate their infrastructure, including premises, hardware, software, power
  supply, and security, and independently handle operations and maintenance.
• Thus, the place of supply for data hosting services does not fall under Section 13(3)(a) of the IGST Act.

Issue 3: Whether the data hosting services are provided in relation to immovable property, and if so, whether the place of
supply is governed by Section 13(4) of the IGST Act?

Clarification:

• The services provided by data hosting service providers are not directly related to immovable property.
• They involve a comprehensive supply of services related to data hosting, including managing data centres, ensuring
  uninterrupted power supply, providing network connectivity, and other essential services for cloud computing.
• Therefore, the place of supply for such services cannot be determined under Section 13(4) of the IGST Act.

Conclusion:

• The place of supply for data hosting services does not fit into any specific provisions under Sections 13(3) to 13(13) of the IGST Act.
• Therefore, the place of supply is determined as per the default provision under Section 13(2) of the IGST Act, which is the location of the recipient of services.
• If the recipient (cloud computing service provider) is located outside India, the place of supply will be considered
  outside India.
• The supply of data hosting services by a provider in India to an overseas cloud computing entity can be considered as an export of services, subject to fulfillment of the other conditions mentioned in Section 2(6) of the IGST Act.

SBC Comments: It is a great relief for the people who are in data hosting services sector in India. If there are any open pending cases, it is advisable to proceed further based on the circular issued regarding the data hosting services. The circular contains important clarifications and guidelines that should address many of the issues you may be facing.