Based on the recommendations by the GST Council, 19 amendments have been proposed in the CGST Act 2017. Of these, three are critical from the industry point of view. One provisions says, “Clause (d) of sub-section (5) of Section 17 is being amended to substitute the words “plant or machinery” with words “plant and machinery”. This amendment will be effective retrospectively from July 1, 2017.
This provision is meant to reverse the SC ruling in the matter of Safari Retreats.Experts feel this will have a bearing on a large number of sectors. Rajat Mohan, Senior Partner with AMRG & Associates, said this retrospective amendment reflects a concerning trend of overriding judicial decisions, eroding legal certainty.
Landmark ruling
“This landmark ruling (in Safari Retreats Pvt Ltd case) which gave relief to the real estate sector has now been reversed retrospectively from July 1, 2017, effectively nullifying years of litigation,” said Mohan. Further, this is not an isolated case. Insurance, online gaming, and e-commerce sectors face similar challenges, with businesses investing significant resources in legal battles, only to see outcomes undermined by retrospective law changes.
According to Harpreet Singh, Partner with Deloitte, this retrospective amendment to substitute the words “plant or machinery” with words “plant and machinery” under the input tax credit provisions of the GST laws may impact the industry specially companies in real estate leasing business, as input tax in construction is a substantial part of the overall cost.
Saurabh Agarwal, Tax Partner at EY India said that the insertion of a clarificatory explanation reinforces the retrospective nature of this restriction, despite contrary judicial pronouncements. “The move is expected to impact industries relying on ITC for infrastructure development, such as real estate, warehousing, and leasing. Given the history of legal scrutiny on retrospective amendments, this change could face constitutional challenges in the courts,” he said.
Track & Trace Mechanism
Meanwhile, a new Section 148A is being inserted in the Income Tax Act to provide for an enabling mechanism for Track and Trace Mechanism for specified commodities. Also, Section 122B is being inserted to provide penalty for contraventions of provisions related to the Track and Trace Mechanism.
The proposed system will be based on a ‘unique identification marking’ which shall be affixed on the said goods. This will provide a legal framework for developing such a system and will help in implementation of mechanism for tracing specified commodities throughout the supply chain, The proposed amendment is also prescribes a penal provision.
Accordingly, violation will lead to a penalty of ₹1 lakh or 10 per cent of tax payable on such goods, whichever is higher. Also, it may say that the cost for implementation of the track and trace system may be recovered from the person engaged in the trade through a fee or charge for the generation of unique identifier.
Custom Duty Changes
Finance Minister Nirmala Sitharaman proposed rationalising tariff structure and address duty inversion under Custom Duty. These will also support domestic manufacturing and value addition, promote exports, facilitate trade and provide relief to common people.Accordingly, seven tariff rates have been removed over and above the seven tariff rates removed in 2023-24 Budget. Also, Social Welfare Surcharge on 82 tariff lines that are subject to a cess, but there will be another cess.
