Clarification regarding amendment made during the 28th meeting of GST council

Clarification regarding amendment made during the 28^th meeting of GST council

We have prepared a number of updates on decisions taken in 28^th GST council meeting. Some of them are already amended by way of notification while for others, CGST (Amendment) bill, 2018, IGST (Amendment ) bill, 2018, UTGST (Amendment) bill, 2018 and GST (Compensation to States) bill, 2018 were presented before Lokh Sabha. This has been passed by both houses and president assent has been granted and it has been published in official gazette on 29/08/2018. All three CGST Act, IGST act and UGST Act has been amended. But SGST act is to be amended and it has to be passed by state assemblies. This means that amendment made for CGST and IGST act is applicable but these amendments are not applicable for SGST. It will create confusions. A clarification from the department should come in this regard.

Today’s GST update deals with the recommendation made in 28^th meeting of GST council. In this meeting many points were put forward, among those there was a point of recovery of dues by the government from the registered taxpayer. It enumerates that recovery can be made from distinct persons, even if present in different state/union territory.

Presently, Section 25(4) of CGST Act,2017 reads as follows:-
“A person who has obtained or is required to obtain more than one registration, whether in one state or union territory or more than one state or union territory shall, in respect of each such registration, be treated as distinct persons.”

Hence, a person having same PAN number but having different registration is termed as distinct person. The returns are to be filed separately. Even the transfer of goods or services from one registration to another is termed as supply and GST is to be paid on the same.

But amendment is Section 79 is done by clasue 24 of GST (Amendment) Bill, 2018 which adds a explanation which reads as follows:-

Explanation.––For the purposes of this section, the word person shall include “distinct persons” as referred to in sub-section (4) or, as the case may be, sub-section (5) of section 25.

Section 79 relates to recovery proceedings and this explanation has clearly held that person will include “distinct person”. Hence, recovery of a unit can be made from other registered unit having same PAN number. This means now at the time of recovery of tax, the authorities can collect the tax from the other entities of the registered person operating in same state or different states of India.

With this amendment though the government had tried to widen the scope of recovery of amount due but such step would also now bring in certain hurdles. One such problem faced can be recovery can now be made from refund due to distinct person. But supposing this demand has been set aside by appellate authority or Courts then the refund will be granted to registration person from whom the amount is due or it will be refunded again to the distinct person from the recovery was made.

Further, we would also like to throw some light on the fact that excess credit lying in one unit cannot be used by other unit having different registration but same PAN. But it can be done when the recovery is made by officer under Section 79 of CGST Act. Hence, the officer can do it but the person at its own cannot do it. This is very absurd position. This can be understood with the help of an example. A person having registration in one state has the liability of Rs. 1 crore and the credit lying with him is Rs. 80 lakh. But he is not able to pay the balance amount in cash. As such, he cannot file the return. The same assessee has another unit registered separately and excess credit is lying with him in this registration. He himself cannot pay the amount due in unit-I from excess credit lying in unit-II. Now if the recovery proceeding is started by officer under Section 79 for unit-I then the officer can recover the same from unit-II. This clarifies that although credit amount is lying with unit-II then also Unit-I of same person cannot adjust suo motto but it can be done by officer in recovery proceedings. But starting of recovery proceedings takes much time. This will lead to unnecessary interest liability on the person. One and same person is having balance but not able to adjust it due to lacuna created by law. Hence, the adjustment should be allowed to assessee at its own.

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Clarification regarding amendment made during the 28th meeting of GST council

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