Extracts from the Finance Act, 2024, notified on 15/02/2024, relating to amendments in the GST law, as per Budget proposals on indirect tax issues presented by the Union MoF Mrs Nirmala Sitharaman on 01/02/2024 in the Loksabha.
In its ongoing efforts to promote voluntary compliance and registration, the government has mandated that input service distributors (ISD) must distribute input tax credits (ITC). It has also introduced penalties for failure to register particular machines used in the production of certain tobacco goods.
The Finance Act 2024 has made it mandatory for entities to register as an Input Service Distributor (ISD) in order to procure common input services and distribute associated Input Tax Credit (ITC) to separate entities. The definition of ISD in the CGST Act has also been amended accordingly. Previously, the Head Office had the option to distribute ITC either through the ISD mechanism or cross charge. However, this amendment now requires the distribution or allocation of central tax or integrated tax credit charged on invoices received by the ISD. The aim is to streamline the process and ensure consistency and adherence to guidelines in the distribution of credit for common input services.
Further, a new Section 122A has been inserted in the CGST Act, 2017. It states that a penalty of Rs 1 lakh per unregistered machine will be imposed for not registering certain machines used in the manufacturing of goods. The other penalties specified under Chapter XV of the CGST Act will also apply. Machines may be seized if penalties are not paid and registration is not completed within 3 days. Recent changes have canceled the previous notification and introduced new special procedures for registered manufacturers. These procedures include keeping daily records of inputs, waste, electricity, and production details for the production of specific goods.
GST Related Amendments in Finance Act 2024 dated 15/02/2024
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1. Short title and commencement:
(1) This Act may be called the Finance Act, 2024.
(2) Save as otherwise provided in this Act,–
(a) sections 2 to 10 shall come into force on the 1st day of April, 2024;
(b) sections 11 to 13 shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
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Central Goods and Services Tax (CGST)
11. Amendment of section 2
In the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the Central Goods and Services Tax Act), in section 2, for clause (61), the following clause shall be substituted, namely:–
“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;
12. Substitution of section 20
Section 20: Manner of distribution of credit by Input Service Distributor
(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.
(3) The credit of central tax shall be distributed as central tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of input tax credit, in such manner as may be prescribed.
13. Insertion of new section 122A
Section 122A: Penalty for failure to register certain machines used in manufacture of goods as per special procedure
(1) Notwithstanding anything contained in this Act, where any person, who is engaged in the manufacture of goods in respect of which any special procedure relating to registration of machines has been notified under section 148, acts in contravention of the said special procedure, he shall, in addition to any penalty that is paid or is payable by him under Chapter XV or any other provisions of this Chapter, be liable to pay a penalty equal to an amount of one lakh rupees for every machine not so registered.
(2) In addition to the penalty under sub-section (1), every machine not so registered shall be liable for seizure and confiscation:
Provided that such machine shall not be confiscated where–
(a) the penalty so imposed is paid, and
(b) the registration of such machine is made in accordance with the special procedure within three days of the receipt of communication of the order of penalty.