Finance Act 2020 provisions effective from 01-01-2021

Finance Act 2020 provisions effective from 01-01-2021

1. Composition Taxable person barred from following transactions in services in wake of composition scheme applicable to services also to a limited extent i.e. he is barred from

a) Making supply of services not leviable to tax

b) Making inter-state supply of services

c) Making supply of services through electronic commerce operator, who is required to collect tax u/s 52

2. Time limitation for taking Input tax credit on the debit note was earlier tagged with the related invoice. If an invoice is related to 19-20, the ITC could not be taken post due date of the return for September following financial year i.e. Sep 2020. Hence if a debit note is issued in December 2020, ITC could not have been taken because the related invoice pertained to 19-20. However now w.e.f. 01-01-2021, the debit note has been delinked with an invoice, and ITC for debit note issued in December 2020 can be taken.

3. Person taking voluntary registration was barred from applying cancellation for a period of one year before 23-01-2018, by virtue of proviso to Rule 20. The proviso was omitted w.e.f. 23-01-18, thereby removing the one-year restriction. However, section 29 still barred persons registered voluntarily from opt-out of registration. However now with effect from 01-01-2021, the person applying for voluntary registration can also opt-out of registration if he no longer requires the registration.

4. Revocation for cancellation of registration has to be filed within 30 days. The government has twice declared amnesty also. Recently all cancellations till 12-06-2020 were allowed to be got revoked till 30-09-2020. Now w.e.f. 01-01-2021, additional or Joint Commissioner have been empowered to extend the period by further 30 days. Commissioner has been empowered to grant 30 days beyond the period allowed by additional/Joint Commissioner. Hence the period of revocation may get extended maximum to 90 days.

5. W.e.f. 01-01-2021, the government has been empowered to specify the category of service or supplies for which tax invoice shall be issued in prescribed time and manner which may be different from the current time limit of 30 days. At present for banking services, insurance services invoices may be issued in 45 days. Further in certain supplies, the requirement to issue a tax invoice may be done away or any other document issued may be treated as a tax invoice. For example, in the case of cinemas, an electronic ticket is deemed to be an invoice.

6. Provision for Late fee of Rs. 200/- per day for the late issue of TDS certificate beyond 5 days from date of deposit of tax by the deductor subject to a maximum of Rs. 10000/- has been deleted w.e.f. 01-01-2021. The form and manner of the TDS certificate shall be as prescribed. Earlier the freedom was available only to prescribe particulars in addition to the contract value, rate of deduction, amount deducted, the amount paid to the Government

7. Beneficiaries and person abetting following transactions have been made liable to a penalty

a) Supply of goods or services without the issue of invoice or on the basis of incorrect/false invoice

b) Issue of invoice without a supply of goods or services

c) Taking or utilizing ITC without actual receipt of goods.

d) Taking or distributing ITC in contravention of section 20 or rules thereunder

8. Availment of ITC on the basis of the invoice not accompanied by supply or without basis of the invoice has been declared one of the offenses u/s 132 for prosecution, subject to monetary limits specified in the section.

9. Transfer of business assets or use of business assets by private purposes or non-business purposes, without consideration has been excluded from the purview of classification of supply of goods or services w.e.f. 01-01-2021, because such transfer or use without consideration is not a supply.