2021 Budget Changes in Indirect Tax

1. R V K S and Associates
Chartered Accountants
Highlights of Union Budget
FY 2021 – 22
Indirect Taxes
Offices
Chennai | Bangalore | Devanahalli | Hyderabad | Mumbai | Vijayawada

2. Goods and Services Tax

3. STOP PRESS
• Unlike changes in Income tax Act, which are majorly effective from 1st April
2021, changes in GST law will come into effect only from the notified date.
• Previously there have been multiple occasions where CBIC has delayed
notifying certain specific changes proposed in the Finance Bill.

4. Audit under GST by a CA/CMA:
• GST Annual Audit and submission of reconciliation statement by a Chartered
Accountant or a Cost Accountant under Section 35 (1) of CGST has now been
omitted, i.e., the mandatory requirement of getting books of account audited by a
professional has been omitted.
• This requirement is substituted by Section 44 as per which Annual Return and
Reconciliation statement has to be filed on self certification basis.
• Thus, as it looks for FY 20-21 and thereafter, GST Audit by CA may not be required.
However, CA’s can support management on carrying out reconciliation so that there are
no surprises during assessments.

5. Supplies to SEZ
• Section 16 of the IGST Act, 2017 is now being amended to redefine zero rated supply
wherein supply of goods or services or both to a Special Economic Zone developer or a
Special Economic Zone unit for authorized operations will only be considered as Zero-
Rated Supply.
• Previously Rule 46 mandated a declaration that supply to SEZ developer/unit is only for
authorized operations. However, there was no such requirement as per the Act which is
now proposed.
• Thus, going forward all suppliers will be required to make sure their supplies are only for
authorized operations for which necessary declaration and confirmation may be obtained.

6. Refund to be retuned on account of non-
realization of export proceeds
• Any registered person making zero rated supply of goods shall, in case of
non-realisation of sale proceeds will be liable to deposit the refund so received
along with the applicable interest under section 50 of the Central Goods and
Services Tax Act within thirty days after the expiry of the time limit prescribed
under the Foreign Exchange Management Act, 1999 for receipt of foreign
exchange remittances, in such manner as may be prescribed.
• Note: The above timeline may also include any specific or general extension by
RBI for realisation of export proceeds

7. Conditions for Availing Credit
• Section 16(2) of the CGST Act, 2017 prescribes various conditions for availing ITC which are as
follows:
a) Possession of tax invoice or any other tax paying document
b) Receipt of goods or services
c) Tax charged is remitted to Govt.
d) Furnished returns u/s 39
• A new clause (aa) to sub-section (2) of the section 16 of the CGST Act is being inserted to provide
that input tax credit on invoice or debit note may be availed only when the details of such invoice
or debit note have been furnished by the supplier in the statement of outward supplies (GSTR 1)
and such details have been communicated to the recipient (GSTR 2B) pertaining to such invoice or
debit note.
• By this amendment, it is now mandatory for the credit to reflect in GSTR 2A of the recipient for
availing GST credit

8. Interest for delayed payment of GST
• Finance (No. 2) Act, 2019 (No. 23 of 2019) clarified that Interest on account of delayed
payment of GST will be applicable only on the cash component and not on the total tax
paid i.e., including the credit component.
• However, this amendment was notified only from 1st September 2020 due to which
department authorities took a view that for the period 1st July 2017 to 31st August 2020,
Interest had to be paid on full liability and w.e.f. 1st September 2020, interest had to be paid
only the cash component.
• CBIC vide Notification No. 63/2020, clarified that Interest on account of delayed
payment of GST will be applicable on only the cash component.
• To legalize this, Section 50(1) is now amended retrospectively.

9. Rotary Club Judgement
• In the case of Rotary Club of Mumbai Queens Necklace (GST AAAR Maharashtra), the Appellate
Authority for Advance Ruling held that the amount collected as membership subscription and admission
fees from members is not liable to GST as supply of services.
• In order to overrule this judgement, Section 7 of the CGST Act 2017 is now proposed to be amended
• A new clause (aa) in sub-section (1) of Section 7 of the CGST Act is being inserted, retrospectively with
effect from the 1st July, 2017, to ensure levy of tax on activities or transactions involving supply of goods
or services by any person, other than an individual, to its members or constituents or vice-versa, for cash,
deferred payment or other valuable consideration.
• In accordance with above amendment, para 7 of Schedule II has been omitted.
• As per the Finance Bill 2021, the new clause will override any such contrary judgement which is issued till
date.

10. Section 74 and Section 75
• Section 74 of the CGST Act is being amended so as make seizure and confiscation
of goods and conveyances in transit a separate proceeding from recovery of tax.
• Previously for the purpose of computing penalty for proceedings under Section
129 and Section 130, reference was drawn to Section 74 which is now removed
• An explanation to sub-section (12) of section 75 of the CGST Act is being
inserted to clarify that “self-assessed tax” shall include the tax payable in respect of
outward supplies, the details of which have been furnished under section 37, but
not included in the return furnished under section 39.

11. E-way bill – Penalty Provision
In case either the Supplier or Receiver come forward to take ownership of
goods
• As per Section 129(1)(a) of the CGST Act for any contravention to provisions of
CGST Act the taxpayer had to pay an amount equivalent to 100% tax and
equivalent penalty. This provision is now amended to state that penalty of 200% of
tax charged in the invoice must be paid
• Although there is no change in the penalty amount. However, while filing DRC 03,
200% of the tax needs to be paid under penalty head while making the payment.

12. E-way bill – Penalty Provision
In case neither the Supplier or Receiver come forward to take ownership of the goods
• For any contravention in e-way bill provisions where the supplier or receiver do not come
forward for payment of penalty then the transporter must pay the penalty.
• This scenario is generally applicable on account of any of his mistake of the transporter,
in such a case the penalty amount is calculated by using the below formula:
• 50% of the value of the goods or two times of the tax payable on such goods whichever is higher
• Previously, GST department used to contend that the transporter had to pay 50% of value
of goods as tax and 50% value of goods as penalty.

13. E-way Bill - Time Limit for Issuing Notice and Order
• The proper officer detaining or seizing goods or conveyance has to issue a notice
within 7 days such detention and thereafter pass an order within 7 days from the
date of such notice.
• As on date there was no time-limit for issuing notice and passing order whenever
goods were seized or conveyance as detained
• Further, amendment to Section 129 has also increased the time-limit for disposing
the goods if the owner fails to pay the amount from 15 days to 30 days.

14. Appeals to Appellate Authority:
A proviso has been inserted under Section 107 (6)
No appeal can be filed unless 25% of penalty has been paid (pre-deposit) against
an order issued under Section 129 (3) (this section pertains to e-way bill).
The order referred herein is to account of seizing of goods or conveyance.
This requirement of pre-deposit was not there earlier.

15. Provisional attachment to protect revenue in certain
cases:
Section 83 has been widened:
S. No. Existing Proposed
1
The attachment would have initiated
during pendency of proceedings
The attachment will be initiated from the
intimation of such proceedings
2
Proceedings under Section 62, 63, 64, 67,
73 and 74 were covered
Chapter XII, Chapter XIV and Chapter XV are
covered
3
Person of whom property will be attached
was only taxable person
Person of whom property will be attached will
be:
any person who retains the benefit of a
transaction covered under clauses (i),
(ii), (vii) or clause (ix) of sub-section (1) and at
whose instance such transaction is conducted

16. Customs Act

17. 1. New CESS in the form of Agriculture Infrastructure and Development Cess (AID) will be
levied on duty of customs on certain specifed goods imported into India.
2. AID Cess of Rs. 2.5/- per liter on petrol and Rs. 4/- on per liter on diesel is now proposed
3. New customs duty exemptions will be proposed by 1st October 2021 based on review of 400 old
exemptions, this will have validity up to the 31st March following two years from its issue date.
4. Anti- Dumping Duty and Counter-vailing Duty(CVD) on Steel products has been revoked
5. Following exemptions has been withdrawn:
• Exemption on Imports of certain kind of leathers
• Exemption on Parts of chargers and sub-parts of mobiles
6. Customs duty on Gold and Silver to be rationalized
Amendments in Customs:

18. S. No. Particulars
Proposed
New
Rates
1 Parts of Mobiles 2.50%
2
Semis, flat, and long products of non-alloy,
alloy, and stainless steels 7.50%
3 Steel scrap Exempted
4 Copper scrap 2.50%
5
Caprolactam, nylon chips and nylon fiber &
yarn 5%
6 Naptha 2.50%
7 Solar invertors 20%
8 Solar lanterns 15%
9 Tunnel boring machine 7.50%
10 Parts of Tunnel boring machine 2.50%
11 Auto parts 15%
12 Steel screws and plastic builder wares 15%
13 Prawn feed 15%
14 Cotton 10%
15 Raw silk and silk yarn 15%
Changes in
Basic
Customs
Duty

19. Agri Infra
Cess:
S. No. Particulars
Proposed
Rates
1 Coal, lignite and peat 1.5%
2 Gold, silver and dore bars 2.5%
3 Cotton 5.0%
4 Specified fertilizer 5.0%
5 Peas 10.0%
6 Crude palm oil 17.5%
7 Lentil (mosur) 20.0%
8 Crude soyabean, sunflower oil 20.0%
9 Kabuli chana 30.0%
10 Apples 35.0%
11 Bengal gram/chick peas 50.0%
12 Alcoholic beverages 100.0%

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