INTRODUCTION OF SECTION 122A AND AMENDMENTS TO SECTIONS 2(61) & 20 OF THE CGST ACT UNDER FINANCE ACT 2024
An Input Service Distributor (ISD) is an entity who distributes the Input Tax Credit (ITC), for a common input services received on behalf of the distinct persons, to the distinct persons registered under the same PAN.
Section 11 of the Finance Act, 2024.
Amendment to the Section 2(61) of the CGST Act, 2017: Any office of a supplier who receives tax invoice of input services including tax invoices of services under section 9(3) & 9(4) of the CGST Act,2017 shall distribute the Input Tax Credit (ITC) to the supplier having the same PAN as per the manner provided in section 20.
Section 2(61) before the amendment: Any office of a supplier who receives tax invoices of input services received, can issue a prescribed document for the purpose of distributing the credit to the supplier having the same PAN.
Section 12 of the Finance Act, 2024.
Substitution of section 20 of the CGST Act, 2017: The section clarifies that before an Input Service Distributor (ISD) can distribute Input Tax Credit (ITC), they are required to obtain compulsory registration under Section 24 of the CGST Act, 2017. Earlier an ISD wasn’t required for mandatory registration.
The credit of central tax shall be distributed as central tax or integrated tax and the credit of integrated tax shall be distributed as integrated tax or central tax as the case may be in a manner prescribed in Rule 39 of the CGST Act, 2017.
Section 13 of the Finance Act, 2024:
Notification No. 04/2024-Central Tax dated 05.01.2024: Earlier with this notification, procedures were notified to the manufacturers of the of tobacco and tobacco substitutes to upload the “Details of the machineries” used to manufacture such goods in the prescribed form.
Circular No. 208/2/2024-GST dated 26.06.2024: Further the said circular was issuedin order to clarify the processes to follow/undertake in case some details of machinery used to manufacture such goods are unavailable.
Insertion of Section 122A in the CGST Act 2017: This insertion of the section will lead to penalties for manufacturers who fail to comply with the requirements for uploading machinery details.
Penalties under section 122A:
The section stipulates that failure to upload the details of the machinery will result in penalties under ChapterXV (Demand & Recovery) or any other applicable provisions of the chapter.
He shall be liable to pay penalty of Rs.1,00,000 for every machine not registered.
Every machine not so registered shall be liable for seizure and confiscation.
SW Point of View:While the compulsory registration of ISDs ensures that only registered entities handle the distribution of ITC but it would also increase the administrative task & cost and also could lead to delays in ITC distribution if there are any inefficiencies in the registration process or any backlog of applications. The mandatory disclosure of machinery details increases transparency in the manufacturing process, making it easier for tax authorities to track such machineries and verify their compliances.
