Decoding Indirect tax proposals of Budget 2021
Decoding Indirect tax proposals of Budget 2021
Clarifying the applicability of GST on Societies/Clubs/Associations
W.r.e.f. 1st July 2017 post-enactment of Finance Bill, 2021
| Section | Proposed Change |
| Section 7(1)(aa) | With retrospective effect from the 1st July 2017, a new clause (aa) has been inserted to fall under the scope of ‘supply’ by way of deeming fiction :
‘the 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.’ It has been further clarified by inserting an Explanation that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons |
Comments
- Defying the Principle of Mutuality and further firming the Government’s stand to apply GST on transactions or activities by Clubs/Societies/Unincorporated associations to its members
- This intends to nullify the judgement of SC in the case of Calcutta Club Ltd. 2019 (29) G. S. T. L. 545 (SC) holding that club and members are one and the same person and principle of mutuality should apply and there should not be any tax on the transactions and activities carried by club to its members
New Condition to avail ITC- Furnishing details by Suppliers in GSTR-1
| Section | Proposed Change |
| Section 16(2)(aa) |
A new clause has been inserted which would be required to be fulfilled to avail Input tax credit. ITC can now be availed only if the details of the invoice or debit note have been furnished by the supplier in the statement of outward supplies and communication of such details to the recipient of such invoice or debit note for availing ITC |
- The government has inserted Rule 36(4) w.e.f. 9th October 2019 to restrict the availemt of ITC till 105% (w.e.f. 1 st January 2021, earlier 110%) of all supplies reported by the supplier in GSTR-1. However, this was not supported by any legal provision in CGST Act, 2017.
- Now, by this proposed amendment, this condition in a way provides legal sanctity to Rule 36(4) of CGST Rules, 2017. However, the fulfillment of conditions of Rule 36(4) for the period prior to the proposed change coming into effect is debatable on various grounds, and already have witnessed series of writ petitions in High Courts.
Removal of mandatory requirement of GST audit
| Section | Existing Provision | Proposed Change |
| Section 35(5) | Mandatory requirement to get books of accounts audited and furnish GSTR-9C duly certified by CA/CMA | The relevant provision of GST Audit is proposed to be omitted completely. |
| Section 44(2) | Mandatory requirement for registered persons who are required to get their accounts audited under Section 35(5) to furnish GSTR-9C duly certified by CA/CMA along with GSTR-9 | GSTR-9C – Reconciliation Statement is now not required to be certified by CA/CMA and will only require self-certification |
- Professionals act as knowledge interface between businesses and the Government and plays an active role in the payment of GST
- Removal of mandatory certification will certainly impact the revenue of the Government as GSTR-9 & 9C is prepared in consonance with each other with the help of professionals
Related Topic:
Indirect Tax Impact On Funds
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