The Finance (No. 2) Bill, 2024, introduces critical amendments to section 107, reshaping the landscape for appellants by reducing the maximum pre-deposit amount and incorporating new regulatory sections. These changes, aimed at financial alleviation and procedural simplification, mark a significant shift in tax administration.
The Notes on Clauses to the Finance (No. 2) Bill, 2024, highlight the reduction of the maximum pre-deposit for appeals before the Appellate Authority from ₹25 crores to ₹20 crores in central tax. This reduction by 20%, effective from a notified date, offers substantial monetary relief to taxpayers, easing the financial burden during the appeal process. Additionally, sub-section (11) now includes a reference to the newly inserted section 74A, which standardizes the time limits for issuing notices and orders for demands from FY 2024-25 onwards.
Refinement in Section 107(6)
The amendment to section 107(6) replaces “twenty-five” with “twenty,” lowering the maximum pre-deposit for filing appeals from ₹25 crores to ₹20 crores for central tax. This decision, endorsed by the GST Council in its 53rd meeting on June 22, 2024, aims to enhance liquidity and reduce capital blockage for taxpayers.
Under the revised framework, the maximum pre-deposit for appeals under CGST and SGST will be ₹20 crores each, down from the previous ₹25 crores. This adjustment significantly impacts the financial commitments for taxpayers challenging demands, offering a more manageable pre-deposit requirement.
Pre-Deposit Payment Structure Post-Amendment
The Finance Act, 2024, delineates the revised pre-deposit requirements as follows:
- For uncontested demands, the entire amount of tax, interest, fine, fee, and penalty must be deposited.
- For contested demands, a sum equal to 10% of the remaining disputed tax amount must be deposited, subject to a maximum of ₹20 crores.
This modification reflects a reduction from the previous cap of ₹25 crores to ₹20 crores, thereby lightening the financial load on appellants.
Amendment Impact on Tax Payments
The updated structure for pre-deposits under section 107(6) is summarized below:
| Tax | Prior to Finance Act, 2024 | Post Finance Act, 2024 |
|---|---|---|
| CGST | 10% of the disputed tax amount, capped at ₹25 crores | 10% of the disputed tax amount, capped at ₹20 crores |
| SGST | 10% of the disputed tax amount, capped at ₹25 crores | 10% of the disputed tax amount, capped at ₹20 crores |
| Total | 10% of the disputed tax amount, capped at ₹50 crores | 10% of the disputed tax amount, capped at ₹40 crores |
CBIC Clarifications and Section 107 Adjustments
The CBIC, via Circular No. 224/18/2024-GST dated July 11, 2024, provides guidelines for recovering outstanding dues during appeal processes. With GST Appellate Tribunals yet to become fully operational, these clarifications ensure proper recovery procedures, requiring pre-deposit payments for stay of recovery under section 78 of the CGST Act, 2017. These guidelines are comprehensively discussed under sub-section 11 of section 107 and in Chapter 13 of the relevant legislation.
Integrating Section 74A
The amendment to section 107(11) incorporates section 74A, consolidating the calculation of tax and penalties under a single section for both fraud and non-fraud cases starting FY 2024-25. This consolidation, replacing sections 73 and 74, simplifies the procedural framework for determining tax liabilities.
Section 74A establishes a unified time limit for issuing demand notices and orders for cases involving fraud, suppression of facts, or willful misstatement, as well as for non-fraudulent cases. Additionally, it extends the timeframe for taxpayers to benefit from reduced penalties from 30 days to 60 days. This extension, endorsed by the GST Council during its 53rd meeting, aims to provide taxpayers with a more reasonable period to comply and benefit from reduced penalties.
In summary, the Finance (No. 2) Bill, 2024, ushers in pivotal changes to the tax appeal process by reducing financial burdens and simplifying regulatory provisions. These amendments reflect a strategic move towards more taxpayer-friendly legislation, fostering a more efficient and equitable tax administration system.
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