Key GST Changes: Union Budget 2023 | Finance Bill 2023 

The Union Budget 2023, presented on February 1, 2023, brought about several changes to the Goods and Services Tax (GST) regime in India. The changes, aimed at simplifying the tax system and boosting the economy, have generated much discussion and analysis in the business community.  

This article aims to provide a comprehensive overview of the important GST changes announced in the Union Budget 2023, and their implications for businesses and taxpayers. 

1. Composition Scheme and E-commerce Operators 

Composition scheme has been allowed for the taxpayers engaged in the supply of goods through an e-commerce operator (who is required to collect TDS). If someone is supplying services through E-commerce platform shall still not be able to opt for the composition scheme. Sections 10 and 122 of the CGST Act are being amended to allow composition taxpayers and unregistered suppliers to make intra-state supply of goods through E-Commerce Operators (ECOs), subject to a few restrictions. 

2. ITC on Corporate Social Responsibility (CSR) 

Input tax credit will not be available in regard of goods or services or both received by a taxpayer, which are used or aimed to be used for activities relating to obligations under corporate social responsibility (CSR) as defined in section 135 of the Companies Act of 2013, according to an amendment to section 17(5) of the CGST Act of 2017. 

• Section 17(5) of the CGST Act, 2017 lists down Block Credits on which ITC cannot be claimed. 
• New clause (fa) has been introduced under Section 17(5) which states that expenditure incurred in relation to the taxpayer’s obligations under Corporate Social Responsibility referred in the Companies Act, 2013. 
• Thus, GST paid on expenditures incurred relating to CSR will become a cost to the company. 

3. Schedule III transactions to be included in the exempt supply 

Before clearance for home consumption, the supply of warehoused commodities to any individual is considered a non-taxable supply. By including the value of such transactions in the value of exempt goods, the proposed amendment aims to restrict availing ITC on such supplies. The proposal is: 

• Schedule III transactions to be included in exempt supply  
• Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building (a) Supply of warehoused goods to any person before clearance for home consumption  
• For the purposes of paragraph 8, the expression “warehoused goods” shall have the same meaning as assigned to it in the Customs Act, 1962 (52 of 1962). 

 4. Persons not liable for GST registration

Notwithstanding anything to the contrary contained in sub-section (1) of section 22 or section 24, (a) the following persons shall not be liable to registration, namely:  

1. Any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act, 2017;
2. An agriculturist, to the extent of supply of produce out of cultivation of land;

The Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, specify the category of persons who may be exempted from obtaining registration under this Act.”

5. Alignment of Interest on payment beyond 180 days: Section 50

Where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on a reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient paid by him along with interest payable under section 50, in such manner as may be prescribed. 

 Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him to the supplier of the amount towards the value of supply of goods or services or both along with tax payable thereon.

6. GST Return Filing

After a period of three years from the deadline for filing the return for the tax period, it is proposed to restrict the filing of outward supply details in GSTR-1 returns while allowing the government to make an exemption for (class of) registered persons. 

Restrictions on changes and the filing of information about outward shipments (actual and proposed restrictions): 

• When the return for the prior period has not been filed, the ability to file GSTR-1 is prohibited. 

• Furnishing invoice details shall be restricted after 3 years from the due date of filing the return for the particular tax period. 
• GSTR1, GSTR3B, GSTR8 (TCS), GSTR 9 cannot be filed beyond 3 years from the due date. However, Government may relax this if it deems fit. 

Note: At present, there is no cut-off date for filing a GST Return. Now, it is proposed that GST-1, GSTR-3B, GSTR-9 and TCS return can be filed up to 3 Years.   

Additionally, it further seeks to empower the Government, on the recommendation of the Council, to extend by notification, the said time limit for a registered person or a class of registered persons, subject to certain conditions and restrictions. 

 7. Penal consequences to E-Commerce Operator

A new sub-section (1B) in section 122 of the CGST Act proposed to insert so as to provide for penal provisions to E-Commerce Operator (ECO) in case of contravention of provisions relating to supplies of goods or services made through them by unregistered persons or composition taxpayers. Accordingly, in order to prevent legal repercussions, ECO should be required to collect data accurately and to be cautious while handling transactions through their platform. Insertion of a new clause in Sec. 122:

(1B) Any electronic commerce operator who: 

 (i) allows a supply of goods or services or both through it by an unregistered person other than a person exempted from registration by a notification issued under this Act to make such supply;  

(ii) allows an inter-State supply of goods or services or both through it by a person who is not eligible to make such inter-State supply; or 

 (iii) fails to furnish the correct details in the statement to be furnished under sub-section (4) of section 52 of any outward supply of goods effected through it by a person exempted from obtaining registration under this Act,  

shall be liable to pay a penalty of ten thousand rupees, or an amount equivalent to the amount of tax involved had such supply been made by a registered person other than a person paying tax under section 10, whichever is higher.

8. Consent-based sharing of information

Upon consent from the supplier and recipient specified data shall be shared with other systems as may be notified by the Government. 

It is intended to facilitate the consent-based sharing of information provided by the taxpayer during registration, GSTR-1/ GSTR 3B, annual returns, as well as information provided for the preparation of IRN (e-invoices) and e-way bills. Sharing the specifics of e-invoices and e-way bills when the recipient’s identity is disclosed would also require the recipient’s consent.

9. Non-taxable online recipient & OIDAR

Definition of ‘Non-taxable online recipient’ & ‘OIDAR’ has undergone a change. 

In order to provide for the taxability of OIDAR services provided by any person located in a non-taxable territory to an unregistered person receiving the said services and located in the taxable territory, Section 2(16) of the IGST Act is being amended. The condition that receipt of online information and database access or retrieval services (OIDAR) for purposes other than commerce, industry, or any other business or profession.

10. Amendments in Schedule III

Clarification to state that GST is not applicable on Merchant Trade Transactions (Cross Country Shipments), Supply of warehoused goods before clearance and High Sea Sales from the inception of GST. 

Schedule III of the CGST Act is being amended with effect from July 1st, 2017 to give retrospective applicability to Paragraphs 7, 8(a), and 8(b) of the said Schedule, namely High Seas Sale, Supply of Warehoused Goods before clearance, and Supply by Endorsement of Documents of Title Before Clearance. Additionally, it is made clear that no reimbursement of taxes paid that have already been paid for transactions or activities that occurred between July 1, 2017, and January 31, 2019, would be granted. 

11. Decriminalization of certain offences

• It is proposed for prescribed offences to increase the monetary threshold from one crore to two crores for launching prosecution. However, it excludes the offences related to the issuance of invoices without the supply of goods or services or both. 

• Thus, prosecution for fraudulent bills will continue in its current form. Fake invoicing is currently the cause of many prosecutions, and this trend will continue. 

These were some of the important GST changes announced and proposed in the finance bill 2023. For a detailed update regarding important changes as per the union budget 2023, read Union Budget 2023.

*****