(61) “Input Service Distributor” 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 under sub-section (3) or sub-section (4) of section 9, 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

(61) “Input Service Distributor” 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 under sub-section (3) or sub-section (4) of section 9  of this Act or under sub section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017, 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

This amendment is proposed to explicitly provide for distribution of Input Tax Credit (“ITC”) by the ISD in respect of inter-state supplies on which tax has to be paid on reverse charge basis, by inserting reference to Section 5(3) and 5(4) of the IGST Act, which clarifies that ITC for such transactions can be allocated through ISDs.

Further, a corresponding amendment is also proposed under Section 20 of the CGST Act, which governs the distribution of credit by the Input Service Distributor.

(69) “local authority” means––

…………………

(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund;

(69) “local authority” means––

…………………

(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal fund or local fund;

Explanation.–– For the purposes of this sub-clause–

(a)   “local fund” means any fund under the control or management of an authority of a local self government established for discharging civic functions in relation to a Panchayat area and vested by law with the powers to levy, collect and appropriate any tax, duty, toll, cess or fee, by whatever name called;

(b)    “municipal fund” means any fund under the control or management of an authority of a local self government established for discharging civic functions in relation to a Metropolitan area or Municipal area and vested by law with the powers to levy, collect and appropriate any tax, duty, toll, cess or fee, by whatever name called.

(116A) “unique identification marking” means the unique identification marking referred to in clause (b) of sub-section (2) of section 148A and includes a digital stamp, digital mark or any other similar marking, which is unique, secure and non-removable;’

These systems ensure transparency in goods movement across the supply chain, helping to monitor and verify the origin, transit, and sale of products. The system will rely on the use of a UIM that will be affixed on the goods or the packages containing the goods. The UIM will serve as a unique identifier for each package, enabling it to be tracked from manufacturing to the final point of sale.

(4) In case of supply of vouchers by a supplier, the time of supply shall be-

(a)  the date of issue of voucher, if the supply is identifiable at that point; or

(b)  the date of redemption of voucher, in all other cases.

(4) In case of supply of vouchers by a supplier, the time of supply shall be-

(a)  the date of issue of voucher, if the supply is identifiable at that point; or

(b)  the date of redemption of voucher, in all other cases.

The GST Council in its 55^th meeting recommended that transactions involving vouchers should not be treated as a supply of goods or services, as vouchers serve as a means of exchange and are not considered taxable supplies until redeemed for goods or services. Hence, to eliminate any ambiguity regarding the taxability of vouchers, it is proposed to omit the provisions related to the time of supply of vouchers.

(4) In case of supply of vouchers by a supplier, the time of supply shall be––

(a)  the date of issue of voucher, if the supply is identifiable at that point; or

(a)  (b) the date of redemption of voucher, in all other cases.

In case of supply of vouchers by a supplier, the time of supply shall be––

(a)  the date of issue of voucher, if the supply is identifiable at that point; or

(b)  (b) the date of redemption of voucher, in all other cases.

The GST Council in its 55^th meeting recommended that transactions involving vouchers should not be treated as a supply of goods or services, as vouchers serve as a means of exchange and are not considered taxable supplies until redeemed for goods or services. Hence, to eliminate any ambiguity regarding the taxability of vouchers, it is proposed to omit the provisions related to the time of supply of vouchers.

(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:-

…………………

(d)  goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

Explanation.––For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:-

…………………

(d)   goods or services or both received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

Explanation 1.––For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

Explanation 2.––For the purposes of clause (d), it is hereby clarified that notwithstanding anything to the contrary contained in any judgment, decree or order of any court, tribunal, or other authority, any reference to “plant or machinery” shall be construed and shall always be deemed to have been construed as a reference to “plant and machinery”.

The GST Council in its 55^th meeting, identified the phrase “plant or machinery” as a drafting error and recommended its correction, with retrospective effect from 01 July 2017. The amendment aims to clarify the legislative intent behind Section 17(5)(d) of the CGST Act, which restricts Input Tax Credit (ITC) on certain items, including plant and machinery.

As a result, the impact of the judgments passed by the Hon’ble Supreme Court in the matter of Safari Retreats, which dealt with the issue related to ITC on construction on immovable property, will be nullified based on this amendment.

20. (1) Any 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 under sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct persons referred to in section 25, shall be required to be registered as Input Service Distributor under clause (viii) of section 24 and shall distribute the input tax credit in respect of such invoices.

(2) The Input Service Distributor shall distribute the credit of central tax or integrated tax charged on invoices received by him, including the credit of central or integrated tax in respect of services subject to levy of tax under sub-section (3) or sub-section (4) of section 9 paid by a distinct person registered in the same State as the said Input Service Distributor, in such manner, within such time and subject to such restrictions and conditions as may be prescribed.

20. (1) Any 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 under sub-section (3) or sub-section (4) of section 9 of this Act or under sub section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017, for or on behalf of distinct persons referred to in section 25, shall be required to be registered as Input Service Distributor under clause (viii) of section 24 and shall distribute the input tax credit in respect of such invoices.

(2) The Input Service Distributor shall distribute the credit of central tax or integrated tax charged on invoices received by him, including the credit of central or integrated tax in respect of services subject to levy of tax under sub-section (3) or sub-section (4) of section 9  of this Act or under sub section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017 paid by a distinct person registered in the same State as the said Input Service Distributor, in such manner, within such time and subject to such restrictions and conditions as may be prescribed.

This amendment is proposed to explicitly provide for distribution of ITC by the ISD in respect of inter-state supplies on which tax has to be paid on reverse charge basis, by inserting reference to Section 5(3) and 5(4) of the IGST Act, which clarifies that ITC for such transactions can be allocated through ISDs.

Further, a corresponding amendment is also proposed under Section 2(61) of the CGST Act, which defines the term “Input Service Distributor”.

(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than 5[the thirtieth day of November] following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed:

Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.

(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than 5[the thirtieth day of November] following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed:

Provided that no reduction in output tax liability of the supplier shall be permitted, if the––

(i)     input tax credit as is attributable to such a credit note, if availed, has not been reversed by the recipient, where such recipient is a registered person; or

(ii)    incidence of tax on such supply has been passed on to any other person, in other cases.”.

The proposed amendment stipulates two conditions for a supplier to benefit from reduced output tax liability when issuing a credit note. Firstly, the supplier must ensure that the registered recipient has reversed the ITC related to the credit note. Secondly, the supplier must confirm that the tax burden on the supply has not been transferred to another person.

38. (1) The details of outward supplies furnished by the registered persons under sub-section (1) of section 37 and of such other supplies as may be prescribed, and an auto-generated statement containing the details of input tax credit shall be made available electronically to the recipients of such supplies in such form and manner, within such time, and subject to such conditions and restrictions as may be prescribed.

(2) The auto-generated statement under sub-section (1) shall consist of––

(a) details of inward supplies in respect of which credit of input tax may be available to the recipient; and

(b) details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the recipient, on account of the details of the said supplies being furnished under sub-section (1) of section 37,––

(i)     by any registered person within such period of taking registration as may be prescribed; or

(ii)    by any registered person, who has defaulted in payment of tax and where such default has continued for such period as may be prescribed; or

(iii)  by any registered person, the output tax payable by whom in accordance with the statement of outward supplies furnished by him under the said sub-section during such period, as may be prescribed, exceeds the output tax paid by him during the said period by such limit as may be prescribed; or

(iv)   by any registered person who, during such period as may be prescribed, has availed credit of input tax of an amount that exceeds the credit that can be availed by him in accordance with clause (a), by such limit as may be prescribed; or

(v)    by any registered person, who has defaulted in discharging his tax liability in accordance with the provisions of sub-section (12) of section 49 subject to such conditions and restrictions as may be prescribed; or

(vi)  by such other class of persons as may be prescribed.

38. (1) The details of outward supplies furnished by the registered persons under sub-section (1) of section 37 and of such other supplies as may be prescribed, and an auto-generated statement containing the details of input tax credit shall be made available electronically to the recipients of such supplies in such form and manner, within such time, and subject to such conditions and restrictions as may be prescribed.

(2) The auto-generated statement under sub-section (1) shall consist of––

(a)details of inward supplies in respect of which credit of input tax may be available to the recipient; and

(b)details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the recipient including, on account of the details of the said supplies being furnished under sub-section (1) of section 37,––

(i)     by any registered person within such period of taking registration as may be prescribed; or

(ii)    by any registered person, who has defaulted in payment of tax and where such default has continued for such period as may be prescribed; or

(iii)  by any registered person, the output tax payable by whom in accordance with the statement of outward supplies furnished by him under the said sub-section during such period, as may be prescribed, exceeds the output tax paid by him during the said period by such limit as may be prescribed; or

(iv)   by any registered person who, during such period as may be prescribed, has availed credit of input tax of an amount that exceeds the credit that can be availed by him in accordance with clause (a), by such limit as may be prescribed; or

(v)    by any registered person, who has defaulted in discharging his tax liability in accordance with the provisions of sub-section (12) of section 49 subject to such conditions and restrictions as may be prescribed; or

(vi)   by such other class of persons as may be prescribed.

(c) such other details as may be prescribed

The GST Portal has recently introduced Invoice Management System (“IMS”), an optional facility, which enables recipients to accept, reject, or keep invoices/records pending the invoices/records saved/furnished by the supplier in GSTR-1/1A/IFF. Based on the action taken by the recipient on the IMS, system will generate the GSTR 2B of the recipient on 14th of subsequent month.

Thus, only the accepted invoices by the recipients would become part of their Form GSTR-2B as their eligible ITC. Due to such manual intervention by the taxpayer such a statement cannot be said to be auto generated statement and therefore, substitution of the word “Auto Generated Statement” has been proposed.

39. (1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time, as may be prescribed:

39. (1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, within such time, and subject to such conditions and

restrictions:

(6) No appeal shall be filed under sub-section (1), unless the appellant has paid—

(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(b) a sum equal to ten per cent of the remaining amount of tax in dispute arising from the said order, subject to a maximum of twenty crore rupees, in relation to which the appeal has been filed:

Provided that no appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to twenty-five per cent of the penalty has been paid by the appellant.

(6) No appeal shall be filed under sub-section (1), unless the appellant has paid—

(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(b) a sum equal to ten per cent of the remaining amount of tax in dispute arising from the said order, subject to a maximum of twenty crore rupees, in relation to which the appeal has been filed:

Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten per cent. of the said penalty has been paid by the appellant.

It is to be noted that as on date, there is no requirement of making any pre-deposit for filing an appeal against the demand order (without involving any demand of tax), except in case of order passed under Section 129(3) of the CGST Act i.e.  detention or seizure of goods and conveyances. However, after the said amendment is notified, the taxpayers will have to make the mandatory pre-deposit of 10% in all the cases involving only demand of penalty without any demand for tax, for filing an appeal before the Appellate Authority

(8) No appeal shall be filed under sub-section (1), unless the appellant has paid—

(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him, and

(b) a sum equal to ten per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order, subject to a maximum of twenty crore rupees, in relation to which the appeal has been filed.

(8) No appeal shall be filed under sub-section (1), unless the appellant has paid—

(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him, and

(b) a sum equal to ten per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order, subject to a maximum of twenty crore rupees, in relation to which the appeal has been filed.

Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten per cent. of the said penalty, in addition to the amount payable under the proviso to sub-section (6) of section 107 has been paid by the appellant.

It is to be noted that as on date, there is no provision under the GST laws, which mandates the requirement of making any pre-deposit for filing an appeal against the demand order (without involving any demand of tax).  However, after the said amendment is notified, the taxpayers will have to make the mandatory pre-deposit of 10% in all the cases involving only demand of penalty without any demand for tax, for filing an appeal before the Appellate Tribunal.

122B. Notwithstanding anything contained in this Act, where any person referred to in clause (b) of sub-section (1) of section 148A acts in contravention of the provisions of the said section, he shall, in addition to any penalty under Chapter XV or the provisions of this Chapter, be liable to pay a penalty equal to an amount of one lakh rupees or ten per cent. of the tax payable on such goods, whichever is higher.

Non-compliance with Section 148A of the CGST Act will attract penalties under Section 122B of the CGST Act, where the taxpayer will be liable to pay either INR 1 Lakh or 10% of the disputed tax, whichever is higher.

148A. (1) The Government may, on the recommendations of the Council, by notification, specify,–

(a)  the goods;

(b)  persons or class of persons who are in possession or deal with such goods, to which the provisions of this section shall apply.

(2) The Government may, in respect of the goods referred to in clause (a) of sub-section (1),––

(a)  provide a system for enabling affixation of unique identification marking and for electronic storage and access of information contained therein, through such persons, as may be prescribed; and

(b)  prescribe the unique identification marking for such goods, including the information to be recorded therein.

(3) The persons referred to in sub-section (1), shall, ––

(a)   affix on the said goods or packages thereof, a unique identification marking, containing such information and in such manner;

(b)   furnish such information and details within such time and maintain such records or documents, in such form and manner;

(c)    furnish details of the machinery installed in the place of business of manufacture of such goods, including the identification, capacity, duration of operation and such other details or information, within such time and in such form and manner;

(d)   pay such amount in relation to the system referred to in sub-section (2), as may be prescribed

This section has been inserted to implement ‘Track and Trace Mechanism' for specified evasion-prone commodities, such as tobacco, pan masala, scrap, plastic, and paper under which a unique mark will be affixed on such goods or packages to trace them throughout the supply chain and to help authorities monitor and trace goods throughout the supply chain, significantly reducing the possibility of tax evasion, under-invoicing, or other fraudulent activities.

8. (a) Supply of warehoused goods to any person before clearance for home consumption;

……………

Explanation 2.—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).

(aa) Supply of goods warehoused in a Special Economic Zone or in a Free Trade Warehousing Zone to any person before clearance for exports or to the Domestic Tariff Area;

……………

Explanation 2.—For the purposes of clause (a) of paragraph 8, the expression “warehoused goods” shall have the same meaning as assigned to it in the Customs Act, 1962 (52 of 1962).

Explanation 3.–– For the purposes of clause (aa) of paragraph 8, the expressions “Special Economic Zone”, “Free Trade Warehousing Zone” and “Domestic Tariff Area” shall have the same meanings respectively as assigned to them in section 2 of the Special Economic Zones Act, 2005.

This measure aligns the treatment of goods warehoused in SEZ or FTWZ with the existing GST provisions related to goods stored in customs bonded warehouses, ensuring uniformity in the tax treatment.

It also seeks to define the expressions “Special Economic Zone”, “Free Trade Warehousing Zone” and “Domestic Tariff Area”, for the purpose of the proposed clause (aa) in paragraph 8 of Schedule III.

These amendments shall take effect retrospectively with effect from 01 July 2017.