The Finance Act, 2021 notified the various amendments in the CGST and IGST Acts 2017 which will come into effect from the upcoming month i.e. July 1, 2021.
The Finance Act, 2021 amended section 7 of the Central Goods and Services Tax Act, 2017, with retrospective effect from the 1st July, 2017, by inserting a new clause (aa) in sub-section (1) thereof, so as to ensure levy of tax on activities or transactions involving supply of goods or services by any person, other than an individual, to its members or constituents or vice versa, for cash, deferred payment or other valuable consideration.
It has also inserted an explanation stating that the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another.
The Finance Act, 2021 amended section 50 of the CSGT act to substitute proviso to sub section(1) with retrospective effect from 1st july,2017.Now, the interest has to be paid on net tax liability provided the person has not been issued any show cause notice under section 73 or section 74.
Still, there will be litigation as the tax deposited in electronic cash ledger before the due date of filing of return will still be the point of dispute .As the credit lying in electronic credit ledger and treated as an advance tax .The Cash lying in electronic cash ledger before the due date of filing of return should also be treated as an advance tax. As we all know part payment of tax in filing of return is not allowed in GST. There were many show cause notices issued asking to pay GST on gross tax liability still many disputes will be resolved and a very welcome and long awaited amendment done in this budget by the government.
The taxpayers to avoid any litigation must file the return on time and even if there is some delay they must pay tax along with interest on net tax liability so as to avoid any litigation. If there is any issue of SCN under section 73 or 74, then this proviso will not apply and the taxpayer has to pay tax on gross tax liability.
The Finance Act, 2021 omitted paragraph 7 of Schedule II to the Central Goods and Services Tax Act, with retrospective effect from the 1st day of July, 2017, consequent to the amendments made in section 7.
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