Non-Recovery of GST Based on General Practice
By: Admin
October 11, 2024
Categories: Important Pronouncements
4 Min Read
Introduction:
Since the introduction of GST seven years ago, taxpayers have faced numerous challenges due to interpretational ambiguities in the law. These issues have often resulted in non-payment or underpayment of taxes. To address such concerns, taxpayers frequently approached the GST Council, leading to the issuance of circulars to regularize these past practices.
The insertion of Section 11A in the Central Goods and Services Tax Act, 2017 (“CGST Act”) now provides a formal legal basis for addressing such historical practices. Previously, regularization was handled through circulars, which lacked explicit legal backing. Section 11A now strengthens the government’s authority to address instances where general trade practices led to unintentional non-compliance.
Key Points:
Section 11A and Regularization: Section 11A mirrors provisions in the Central Excise Act, 1944, and the Customs Act, 1962, aiming to provide relief in cases where non-levy or short-levy occurred due to common trade practices.
GST Council’s 53rd Meeting Recommendations: The Council recommended introducing Section 11A to allow the government to regularize GST issues resulting from general practices. This reform aims to ease compliance burdens and reduce litigation.
Effective Changes from Union Budget 2024: The Finance (No. 2) Bill, 2024, proposes inserting Section 11A into the CGST Act. The government, through Notification No. 17/2024, announced that these changes will take effect on November 1, 2024.
Impact of Section 11A:
Section 11A allows the government to waive the recovery of GST that was not levied or was short-levied due to commonly accepted trade practices. This provision ensures businesses will not be unduly penalized for following practices that were prevalent in their industry.
However, refunds for taxes erroneously paid on such transactions remain an unresolved issue. While refunds for taxes wrongfully deposited are allowed in some cases, they may not be available for transactions between July 1, 2017, and October 31, 2019, leading to potential litigation.
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