Section 164 of GST Act : Power of Government to make rules

Explanation of CGST Section 164(1)

Section 164(1) of the Central Goods and Services Tax (CGST) Act, 2017 empowers the Central Government to make rules for implementing the provisions of the Act. However, this rule-making power is not absolute—it must be exercised on the recommendations of the GST Council.

Key Points:

1. Authority: The Central Government has the power to frame rules under the CGST Act.
2. Recommendation of GST Council: The government cannot make rules arbitrarily; it must act based on the GST Council’s recommendations.
3. Implementation of the Act: The rules created under this provision help in enforcing and operationalizing various sections of the CGST Act.
4. Notification Requirement: Any such rules must be issued through an official notification, ensuring transparency and legal validity.

Purpose of Section 164(1):

• It ensures uniformity in GST regulations across India.
• It provides flexibility to modify rules as required without amending the entire Act.
• It allows for administrative and procedural clarity in GST implementation.

Example of CGST Section 164(1) in Practice

A practical application of Section 164(1) can be seen in various GST rule amendments and notifications issued by the government. Here’s an example:

Example: E-Invoicing Rules

• The government introduced E-invoicing under GST through Rule 48(4) of the CGST Rules, 2017.
• This rule mandates that certain businesses must generate invoices on the Invoice Registration Portal (IRP) before issuing them to customers.
• The legal backing for this rule comes from Section 164(1), as the government notified it on the recommendation of the GST Council.

Relevant Notification:

• Notification No. 13/2020 – Central Tax, dated 21st March 2020 made E-invoicing mandatory for businesses with turnover exceeding ₹100 crore from 1st October 2020.
• Later, through Notification No. 05/2021 – Central Tax, dated 8th March 2021, the turnover threshold was reduced to ₹50 crore, further expanding the scope of E-invoicing.

Conclusion:

This example shows how the government exercises its rule-making power under Section 164(1) to introduce and modify GST rules through notifications, ensuring smooth tax administration while following the GST Council’s recommendations.

Explanation of CGST Section 164(2)

Section 164(2) of the Central Goods and Services Tax (CGST) Act, 2017 provides the Central Government with additional powers to make rules for specific matters mentioned in the Act.

Key Aspects of Section 164(2):

1. “Without prejudice to sub-section (1)”
   • This means that Section 164(2) does not limit or override the general rule-making power granted under Section 164(1).
   • Instead, it acts as an extension to ensure that all rule-making needs under the Act are covered.
2. Scope of Rule-Making:
   • The government can frame rules for any matter that the Act explicitly requires to be prescribed through rules.
   • It can also frame rules where the Act allows rule-making discretion (i.e., optional or enabling provisions).
3. Mandatory vs. Discretionary Rule-Making:
   • Some sections of the CGST Act require rules (e.g., procedural guidelines for tax returns, invoice formats, etc.).
   • Other sections allow the government to decide whether rules are needed, giving flexibility in implementation.

Example of Section 164(2) in Action

Example: Rules for Composition Scheme

• Section 10 of the CGST Act allows eligible taxpayers to opt for the Composition Scheme, where they pay tax at a fixed rate instead of regular GST.
• However, the detailed rules regarding:
  • Eligibility conditions,
  • Return filing process, and
  • Restrictions under the scheme
    are not mentioned in the Act itself but are prescribed through Rule 5 of the CGST Rules, 2017.
• These rules were made using Section 164(2), which allows the government to specify how the Composition Scheme operates.

Conclusion:

• Section 164(2) ensures that all rule-making powers needed for effective GST implementation are available.
• It allows for flexibility in making detailed procedural rules without frequently amending the main CGST Act.

Summary of CGST Section 164(3)

• Retrospective Rule-Making Power: The government has the authority to make rules with retrospective effect (i.e., apply them to past periods).
• Limit on Retrospective Effect: Rules cannot be made effective before the date the CGST Act came into force (1st July 2017).
• Purpose: Ensures flexibility in rule-making while preventing unfair retroactive taxation before GST implementation.

Summary of CGST Section 164(4)

• Penalty Provision: Rules made under Section 164(1) or 164(2) can specify penalties for violations.
• Maximum Penalty: The penalty for contravening such rules cannot exceed ₹10,000.
• Purpose: Ensures compliance with GST rules while capping penalties to prevent excessive fines.