Page 112 - DHC Budget Book 2021-22 Final
P. 112
INDIA BUDGET 2021-22
10.1
Retrospective Changes proposed in the Bill [Effective from 01-07-2017]
10.1.1 Definition of supply to include transaction by a person (other than individual) to its members
The Finance Bill, 2021 proposes to expand
the scope of supply to include activities or transactions, by a person, other than an individual, to its members or constituents or vice versa, for cash, deferred payment or other valuable consideration, retrospectively w.e.f. 01- 07-2017 by inserting clause(aa) in Sec. 7(1) of CGST Act, 2017
Consequent to such amendment, Para 7 of Schedule II of the CGST Act, 2017 (which states that supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be considered
as “Supply of Goods”) is being omitted retrospectively w.e.f. 01-07-2017.
Comments
As per the amendment, any supply made by a person (other than an individual) to its members or vice versa for a consideration shall be considered as supply whether or not the same is made in the course or furtherance of business.
The proposed amendment is aimed to circumvent the Apex Court judgement in
the in the case of State Of West Bengal vs Calcutta Club Limited [[2019]70GSTR209(SC)] wherein the Hon’ble SC had held that supply
by unincorporated entities to its constituents / members would not be subjected to sales tax or service tax by applying the doctrine of mutuality.
An explanation has been inserted clarifying that clause 7 (1) (aa) will prevail over any
other law or decree or judgement or order and members club, housing society, association, trusts and their members will be treated as two separate persons. In view thereof all judicial pronouncements holding that services by members club to its members are not liable for the payment of Services Tax and VAT based on the concept of mutuality will not apply to GST legislation.
Currently, Entry 7 to Schedule II include within its ambit only supply of goods between unincorporated entities and its constituent members. The proposed amendment will
cover supply of both goods and services by an unincorporated association (other an individual) to its constituent members and vice versa.
10.1.2 Interest payable on Net Tax Liability
Sec. 50 of the CGST Act, 2017 levies interest for delay in payment of tax.
The bill proposes to substitute proviso to Sec. 50(1) to charge interest only on that portion of the tax which is paid by debiting the Electronic Cash Ledger (i.e. only on net tax liability after adjusting ITC), retrospectively w.e.f. 01-07-2017.
Comments
Earlier CBIC vide Finance Act, 2019 had prescribed similar proviso to charge interest on net tax liability. The same was made applicable w.e.f. 01-09-2020.
However, CBIC vide Press Release dated 26-08- 2020 had clarified that no recoveries for interest shall be made on that portion of tax which is paid by debiting the Electronic Credit Ledger for the period 01-07-2017 to 31-08-2020.
Through this amendment, the ambiguities created when the provision was made applicable w.e.f. 01-09-2020 is sought to be removed.
The amendment also aims to put to rest many cases pending at different forums relying upon the judgement by the Hon’ble Madras HC in the case of Refex Industries Limited v. The Assistant Commissioner of CGST & Central Excise [[2020]74GSTR274(Mad)], wherein the Hon’ble HC held that interest can be levied only on ‘cash’ component of tax and not on ‘ITC’ component.
In light of the above amendment, registered persons who have already paid tax on gross liability may claim refund of such portion of interest which is paid on tax paid by debiting Electronic Credit Ledger once the bill becomes an act.
110 Building a Resilient and Confident India
