HOW TO HANDLE SHOW CAUSE NOTICE UNDER SECTION 73 AND 74 OF CGST ACT, 2017 !!

Show cause notice (SCN) – is a document served by department as an opportunity to person to explain with reasons as to why particular course of action should not be taken against him. No person can be proved guilty without given an opportunity of being heard.

Show cause notice under section 73-

Section 73 talks about determination of

• tax not paid or
• short paid or
• erroneously refunded or
• input tax credit wrongly availed or utilised for any reason other than fraud or any wilful mis-statement or suppression of facts.

– the Proper Officer shall serve notice on the said person requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty Levi able as per the provisions of the Act.

• Time Limit-Section 73(2) when read with Section 73(10), spells out the time limit for passing the adjudication order along with the time limit for issuance of show cause notice.
• The adjudication order needs to be passed within three years from the due date for furnishing of annual return for the financial year to which the tax relates to or within three years from the date of erroneous refund.
• Show cause notice shall be issued at least 3 months before the due date of passing of adjudication orders i.e 2 years and 9 months from due date of Annual Return.

First Opportunity 

• The Officer will serve an intimation vide Part A of Form GST DRC – 01A asking the person to remit the tax along with interest. Details about the tax demand will be stated briefly in Part A.
• This is a mandatory facility that must be allowed before SCN so that the taxpayer who turns down this opportunity also gives up the concession that goes along with this facility, the concession being that in cases covered by section 73, if tax demanded along with interest is paid ‘before SCN’ then,penalty payable will be ‘nil’. 
• Payment is not made in full-In case, the assessee has made only partial payment and he is not accepting the remaining liability or he is disputing the entire liability, he can respond in Part B of the same form GST DRC-01A.

Second Opportunity 

• After having turned down the facility allowed under section 73(3) when the show cause notice is issued, the taxpayer is allowed a ‘second’ opportunity to pay tax demanded along with interest in Form GST DRC-03 within 30 days of issue of show cause notice and inform the proper officer in writing of such payment.
• The officer upon receipt of such information, shall give an intimation of conclusion of proceedings in Form GST DRC-05 and all the proceedings in respect of the said notice except proceedings under Section 132 shall be deemed to be concluded. Here too, penalty payable will be ‘nil.

Imposition of penalty- In case taxpayer not availed both opportunities then the proper officer will proceed to take up the adjudication process and then determine penalty equivalent to ten per cent of tax or ten thousand rupees, whichever is higher.

Show cause Notice under Section 74-

Section 74 talks about determination of

• tax not paid or short paid or
• erroneously refunded or
• input tax credit wrongly availed or utilised for any reason
• by reason of fraud or any wilful-misstatement or suppression of facts to evade tax, the Proper Officer shall serve a notice on the said person requiring him to show cause as to why he should not be asked to pay the amount specified in the notice along with interest payable thereon under section 50 and with 100% of tax as penalty leviable as per the provisions of the Act. 

Time Limit-Section 74(2) when read with Section 74(10), spells out the time limit for passing the adjudication order along with the time limit for issuance of show cause notice. It says that, the adjudication order needs to be passed within five years from the due date for furnishing of annual return for the financial year to which the tax relates to or within five years from the date of erroneous refund.

It prescribes that the show cause notice shall be issued at least 6 months before the due date of passing of adjudication orders.

First Opportunity but with 15% penalty :

• The proper officer will serve an intimation vide Part A of Form GST DRC – 01A asking the person to remit the tax along with interest and 15% penalty without serving a show cause notice.
• Upon remitting of such amounts vide Form GST DRC-03, the taxpayer shall inform the proper officer in writing of such payment. Upon receipt of such information, the proper officer shall give an acknowledgement in Form GST DRC-04 and shall not serve any notice under Section 74(1).

 Second Opportunity to get away with 25% penalty :

• After the issuance of show cause notice, if the taxpayer comes forward and pays the balance amount of tax, interest along with 25% penalty in Form GST DRC-03 within 30 days of issue of show cause notice and informs the proper officer in writing of such payment, the officer upon receipt of such information, shall inform the taxpayer that, all the proceedings in relation to the said notice deemed to have been concluded.

Third Opportunity to get away with 50% penalty:

• After issuance of order in original the tax payer can avail the third chance to get away with 50% penalty. Where the taxpayer comes forward and pays the amount demanded, applicable interest along with 50% penalty in Form GST DRC-03 within 30 days of communication of the order and informs the proper officer in writing of such payment, the officer upon receipt of such information, shall give an intimation of conclusion of all the proceedings in respect of the said notice.

Disclaimer : The entire content of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation .Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT,INDIRECT,SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

Whether an Appeal u/s 107 can be rejected on the grounds of non submission of physical copy of order.

Section -107 read with Rule 108 deals with the Appeals to the Appellate Authority where it facilitates tax payer or the department that may appeal against any decision or order passed by an adjudicating authority under the proposed Act or State Goods and Services Tax Act or the Union Territory Goods and Service Tax Act within three months or Six months respectively. The section provides for a pre-deposit of 10 percent for admittance of the appeal filed by the tax payer and grant of automatic stay on the remaining amount.

Now as per Rule 108 which can be read as under:

(1) An appeal to the Appellate Authority under sub-section (1) of secton107 shall be filed in Form GST APL-01, along with the relevant documents, either electronically or otherwise as may be notified by the Commissioner, and a provisional acknowledgement shall be issued to the appellant immediately. 

(2) The grounds of appeal and the form of verification as contained in Form GST APL-01 shall be signed in the manner specified in rule 26.

(3) A certified copy of the decision or order appealed against shall be submitted within seven days of filing the appeal under sub-rule (1) and a final acknowledgement, indicating appeal number shall be issued thereafter in  Form GST APL-02 by the Appellate Authority or an officer authorized by  him in this behalf.

Provided that where the certified copy of the decision or order is submitted within seven days from the date of filing the Form GST APL-01, the date of filing of the appeal shall be the date of the issue of the provisional acknowledgement and where the said copy is submitted after seven days, the date of filing of the appeal shall be the date of the submission of such copy.

and because of the above mentioned sub rule 3 of Rule 108 it was mandatory for the tax payer to submit the certified copy of decision or order appealed against with in seven days from the date of filing the appeal u/s 107, and thus it becomes the ground for rejection of appeals in several cases and therefore vide Notification No. 26/2022-Central Tax Dated 26.12.2022 sub rule 3 was substituted as:

(3)Where the decision or order appealed against is uploaded on the common portal, a final acknowledgment, indicating appeal number, shall be issued in Form GST APL-02 by the Appellate Authority or an officer authorised by him in this behalf and the date of issue of the provisional acknowledgment shall be considered as the date of filing of appeal:

Provided that where the decision or order appealed against is not uploaded on the common portal, the appellant shall submit a self certified copy of the said decision or order within à period of seven days from the date of filing of FORM GST APL-01 and a final acknowledgement, indicating appeal number, shall be issued in FORM GST APL-02 by the Appellate Authority or an officer authorised by him in this behalf., and the date of issue of the provisional acknowledgment shall considered as the date of filing of appeal: 

Provided further that where the said self-certified copy of the decision or order is not submitted within a period of seven days from the date of filing of FORM GST APL-01, the date of submission of such copy shall be considered as the date of filing of appeal.

Thus, in view of the substitution of sub-rule an Appeal u/s 107 can not be rejected on the grounds of mere non submission of physical copy of order.

However, in case of Rama Shanker Modi vs the Assistant Commissioner, Central Goods And Service Tax and Central Excise (WPA 15639 of 2023 July,20,2023) Hon'ble Calcutta High Court had also set aside the impugned order and held that mere non filing of order physically within the time limit cannot be a valid ground to rejection of appeal.

Disclaimer : The entire content of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation .Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT,INDIRECT,SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

GST on Supply of Goods and Services when the supply is "MIXED" and "Composite" as per CGST Act,2017.

The provision of two or more commodities or services might be classified as a ‘composite supply’ or a ‘mixed supply.’  In the GST framework, the idea of composite supply is akin to the concept of organically bundled services in the Service Tax Law. The notion of mixed supply, on the other hand, is wholly new. Every supply should include either products or services, or a combination of goods and services, or a combination of the two. In the event of all such combinations, the law states that such deliveries must be classified as either completely goods or wholly services for tax purposes.

Section 8. Tax liability on composite and mixed supplies.-

The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:-

(a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and


(b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

Section-8(a) of CGST Act,2017- Composite Supply

A composite supply is one that consists of two or more goods/services that are naturally combined and supplied together in the regular course of business, one of which is a primary supply. It signifies that the things are usually sold together. The goods are not available individually.

If a supply of commodities and/or services meets the following characteristics, it is considered a composite supply:

>The provision of two or more goods or services concurrently;

 
>It is a natural bundle, i.e., goods or services are often delivered concurrently in the normal course of business.

>They are inseparable.

Applicability of Tax Rates on composite supply

The major supplier’s tax rate will be applicable to the total supply.

A popular example of composite supply is the supply of a laptop with pre-installed software. In this case, the laptop is the principal supply and the software is the secondary supply. As per Section 8(a), the tax liability on this composite supply will be determined based on the tax rate applicable to the laptop (principal supply), regardless of the tax rate on the software.

Section-8(b) of CGST Act,2017- Mixed Supply

Under GST, a mixed supply is a combination of two or more commodities or services sold together for a single price. Each of these components may be given alone and is not reliant on the others.

A Mixed Supply will have the tax rate of the item with the highest rate of tax applied to it under GST.

For example, let’s consider the case of a gift hamper that contains chocolates, a soft toy and a perfume. These items are not naturally bundled or dependent on each other. In this case, the tax liability will be determined by the item with the highest tax rate. Suppose the tax rates are 12% for chocolates, 18% for the soft toy and 28% for the perfume. The tax rate for the entire gift hamper will be considered as 28% (the highest rate), as per Section 8(b).

Time of Supply of Composite and Mixed Supplies under GST:

The following are the Time of Supply for Mixed Supply and Composite Supply respective-

Time of Supply in case of Mixed Supply:

1) Supplies that involves the supply of a service that is subject to higher tax rates than any other constituent supply – Would be regarded a supply of services; and hence provisions pertaining to the supply of services would apply.

2)Supplies that involves supply of products subject to higher tax rates than any other constituent supply – Would be regarded a supply of goods; and hence laws relevant to a supply of goods would apply.

Time of Supply in case of Composite Supply:

1)The primary supply is a supply of services — would be deemed a supply of services; and hence provisions pertaining to the supply of services would apply.

2)The primary supply is a supply of goods — would be deemed a supply of goods; and hence provisions pertaining to the supply of goods would apply.

In conclusion, Section 8 of the CGST Act, 2017 provides guidelines for determining tax liability on composite and mixed supplies. The tax liability on composite supplies is determined based on the principal supply, while the tax liability on mixed supplies is determined based on the supply with the highest tax rate.

Disclaimer : The entire content of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation .Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT,INDIRECT,SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

Inspection of Place of Business by GST officials--Section 67(1)

 Power of Inspection, search and seizure is dealt under section 67, These powers are given to the authorized officers in every law dealing with taxation be it Income Tax Act or Any other Act.

These are very harsh measures and not to be invoked in a casual manner. Reputation of person who is subject to these action/s is at stake and sometimes it pierces the personal privacy of the said person. However, these provisions are necessary to protect the interest of revenue. Looking from another prospective these provisions are also necessary to instill the confidence in the mind of honest taxpayer and fear in the mind of persons who are engaged in the evasion of taxes. 

Section 67(1) of CGST Act,2017 deals with "Inspection of any place of business of taxable person" which can be read as under:

1. Where the proper officer, not below the rank of Joint Commissioner, has reason to believe that-

    (a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or

    (b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act,

he may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business 

Thus in order to invoke the power of inspection  i.e. section  67 (1) the proper officer of the rank of Joint Commissioner or an officer higher in rank has reason to believe that :

(1) A taxable person has:

 (a) Suppressed any transactions relating to supply of goods or services or both : 

It shall include

:)not recording the transactions in the books of account or

:) recording of transactions at value less than transactional value or 

:)recording in an incorrect manner to evade payment of taxes.

(b) Suppressed the stock of goods in hand:
It shall include that the physical stock has already been sold but the same has not been recorded in books of account.

(c) Claimed Input Tax Credit in excess of his entitlement under this Act:

It can happen in many situations to quote, 

:) claiming blocked credit under section 17(5);

:) claiming credit of tax paid on supplies exclusively used for making exempted supplies or;

:) not reversing the credit of tax paid on supplies used for making both taxable and exempted supplies.

(d) Indulged in contravention of any of the provisions of this act or the rules made thereunder to evade tax under this Act

The scope of this term is very wide as it covers any action or activity carried out which is in contradiction to the provisions of the Act. The only restriction is that such non-compliance is made to evade tax and not under Bona fide mistake.

(2) This clause is also applicable to any person engaged in business of transportation of goods or owner or operator of warehouse or godown or any other place for keeping goods which have escaped payment of tax or kept its accounts or goods in a manner to evade tax.

Thus, in such case proper officer may authorise in writing to any other officer to inspect :

:) Any place of business of the taxable person; or

:) Any places of business of the person engaged in the business of transporting goods; or

:) Any places of business of owner or the operator of warehouse or godown; or

:) Any other place.

Power of Inspection by the proper officer is a softer provision than search to enable them to access any place of business of taxable person and also any place of business of a person engaged in transporting goods or who is an owner or an operator of warehouse or godown by issuing Form GST INS-01 authorising any other officer subordinate to him (i.e. Joint commissioner) to conduct inspection as per Rule 139(1) of CGST Rules,2017.

Conclusion:

On Inspection under 67(1), assessee must make the following checks:

a) INS-01 issued by JOINT COMMISSIONER or above.

b)Reason To Believe for suppression of transaction, suppression of stock, wrong or excess claim of Input tax credit.

c)Indulgence of Taxable person in any activity in contravention of the provisions of  the Act.

Disclaimer : The entire content of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation .Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT,INDIRECT,SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

 

GST Registration Amendments vide 50th Council Meeting

With GST evasion crossing over and above 1 lakh crore in 2022-23, CBIC had initiated a two month long special drive to identify fake GST registrations. The GST policy wing highlighted that non-genuine registrations are being used to fraudulently pass on the input tax credit to unscrupulous recipients by issuing invoices without any underlying supply of goods or services.

And therefore, the Council has recommended the following amendments in CGST Rules, 2017 to strengthen the registration process and to effectively deal with the menace of fake and fraudulent registrations in GST which are as follows:

A) RULE 10A - Furnishing  of Bank Account Details

After a certificate of registration in FORM GST REG-06 has been made available on the common portal and a Goods and Services Tax Identification Number has been assigned, the registered person, except those who have been granted registration under rule 12 or, as the case may be rule 16, shall as soon as may be, but not later than forty five days from the date of grant of registration or the date on which the return required under section 39 is due to be furnished, whichever is earlier, furnish information with respect to details of bank account, or any other information, as may be required on the common portal in order to comply with any other provision.

 Amendment in rule 10A to provide that the details of bank account, in name and PAN of the registered person, to be required to be furnished within 30 days of grant of registration or before filing of statement of outwards supply under section 37 of CGST Act in FORM GSTR-1/ IFF, whichever is earlier. 

B) Rule 21A. Suspension of registration (corresponding section 29)

(2A) Where, a comparison of the returns furnished by a registered person under section-39 with

(a) the details of outward supplies furnished in Form GSTR-1; or
(b) the details of inward supplies derived based on the details of outward supplies furnished by his suppliers in their Form GSTR-1,

or such other analysis, as may be carried out on the recommendations of the Council, show that there are significant differences or anomalies indicating contravention of the provisions of the Act or the rules made thereunder, leading to cancellation of registration of the said person, his registration shall be suspended and the said person shall be intimated in Form GST REG-31, electronically, on the common portal, or by sending a communication to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said differences and anomalies and asking him to explain, within a period of thirty days, as to why his registration shall not be cancelled.

 Amendment in rule 21A(2A) to provide for system-based suspension of the registration in respect of such registered persons who do not furnish the details of valid bank account under rule 10A with the time period prescribed under the said rule. 

Insertion of 3 proviso in rule 21A(4) to provide for automatic revocation of such system-based suspension upon compliance with provisions of rule 10A. 

C)RULE 59. Form and manner of furnishing details of outward supplies.- (corresponding sections 37 to 38)

(6) Notwithstanding anything contained in this rule, -

(a) a registered person shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in Form GSTR-1 , if he has not furnished the return in Form GSTR-3B [for the preceding month] ^old[for preceding two months];

(b) a registered person, required to furnish return for every quarter under the proviso to sub-section (1) of  section 39, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in Form GSTR-1 or using the invoice furnishing facility, if he has not furnished the return in Form GSTR-3B for preceding tax period;

(d) a registered person, to whom an intimation has been issued on the common portal under the provisions of sub-rule (1) of rule 88C in respect of a tax period, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in Form GSTR-1 or using the invoice furnishing facility for a subsequent tax period, unless he has either deposited the amount specified in the said intimation or has furnished a reply explaining the reasons for any amount remaining unpaid, as required under the provisions of sub-rule (2) of rule 88C.

Amendment in rule 59(6) to provide that where a registered person has not furnished details of a valid bank account under rule 10A, the said registered person may not be allowed to furnish the details of outward supplies in FORM GSTR-1 or using IFF. 

D) Amendment in rule 9 and rule 25 to do away with the requirement that the physical verification of business premises is to be conducted in the presence of the applicant and also to provide for physical verification in high risk cases even where Aadhaar has been authenticated.

Disclaimer : The entire content of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation .Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT,INDIRECT,SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

Taxability of GST on Stock Transfer of Goods

Stock transfers to a branch or consignee agent have been the norms of trade in both pre and post VAT regime and shall continue to be there in GST regime. Further. Stock Transfer can be both inter-State and intra-State. Various businesses contemplate options of supplying the goods to another dealer or opening up a branch in another State, sending the goods on stock transfer and then selling the same to its customers from that branch.

 Under Schedule I of the CGST Act, supply of goods or services or both between related persons or between distinct persons as specified in Section 25, when made in the course or furtherance of business, even if, without consideration, is subject to GST. Accordingly. Schedule I covers the transactions of stock transfer which is without consideration. The movement of goods or services from one State to another shall be considered as supply even though such transfer is to its own branch or to its own agent and consequently, same would be leviable to IGST. Further, the branch/consignment agent can avail the credit of IGST paid on such transfer and shall be entitled to adjust the against outward tax liability which will aid overall reduction of cost.

 

However, taxation of stock transfer is in effect only a pre-payment of tax on output which will primarily impact the working capital requirements. The quantum of impact will vary depending on stock turnaround time at warehouse, credit cycle to customer, quantum of stock transfer etc. Thus. working capital requirements of a supplier of goods or services or both shall increase in GST Regime. There is another reason for increase in working capital requirement of the supplier of goods due to abolition of C, E & H forms. Under GST regime, such supplier of goods who were making purchases against the strength of these forms will have to pay tax at applicable rate on all inward supplies made by them. It is not in dispute that credit for the same shall be available against outward tax liability, but funds will be blocked in the amount of tax till adjusted against output tax liability. In other words, firstly supplier of goods has to make payment of GST at full rate to its vendor on inward supplies of goods as benefit of concessional Central Statutory Forms is not available in GST regime. 

Further, such credit can be utilized by the supplier only when output tax liability will arise in future. Investment the amount of input lax till the credit of same can be utilized shall be an additional burden on the working capital of the supplier of goods. 

Disclaimer : The entire content of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation .Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT,INDIRECT,SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

Centre plans to make geotagging, biometric authentication mandatory to curb fake assessees.

In order to make the Goods & Services Tax (GST) system tougher for unscrupulous elements, but more helpful for genuine business, the government is examining two pronged strategy related with ‘place of business. While the first part of the strategy is related with converting the pilot geo tagging for place of business to mandatory for all new registration and latter for all, the second part is about recognizing co-working place as place of business for services sector. At the same time, effort to enhance the scope of biometric authentication to curb fake assessees. Talking to media on the sidelines of an event here to mark 6th anniversary of GST, Vivek Johri, Chairman of Central Board of Indirect Taxes & Customs (CBIC) said the tax authority is trying to see how the system can be tightened further to provide a clean system. Accordingly, tax authorities are looking at whether the registration verification needs to be strengthened further. There are two parts of this process: verification of the place of business and establishing the identity of the person.

Case Study on Place of Supply

Case

(A) is registered under GST in Agra ( Uttar Pradesh) as a car dealer and service centre. (B) is a customer located in Agra(U.P.) as unregistered person. For providing the service of repair maintenance of car CGST and SGST is charged on the invoice for labour as well as spare parts both. (C) is a Un registered customer having address of its office at Delhi and he sends his car at Agra(UP) for repair. Whether IGST or CGST/SGST would be charged for the service and repair work as well as for spare parts utilized in the said repair work. (D) is a registered person Manufacturer of Car located in Andhra Pradesh. In this scenario car purchaser located in Agra(UP) gets free service on behalf of the manufacturer under warranty period for which the company (A) issues its Invoice for repair in the name of the manufacturer of car located at Andhra Pradesh for which B2B invoice is raised charging IGST. In this situation which is the place of supply, whether IGST charged on B2B Invoice is proper or not?

FACTS OF THE CASE:

Place of supply for car repair maintenance service provided by Company registered in Agra to unregistered customers located in Agra/Delhi.

LAW APPLICABLE:

SECTION 12 of IGST Act defines POS of services as follows:

(2) The place of supply of services, except the services specified in sub-sections (3) to (14),''

(a) made to a registered person shall be the location of such person;

(b) made to any person other than a registered person shall be,''

(i) the location of the recipient where the address on record exists; and

(ii) the location of the supplier of services in other cases.

INTERPRETATION:

Both supplier and recipient of service are located in India, therefore POS is to be determined as per Section 12 of IGST Act. Since service of repair and maintenance of car do not fall in any of the specified clauses, residuary clause i.e. 12(2) will apply.

CONCLUSION:

1. Service provided by A (registered in Agra) to B (unregistered person located in Agra).
As per section 12(2)(b) POS shall be the location of the B i.e. Agra [CGST & SGST will be charged] where the address on record exists; otherwise location of A i.e. Agra [CGST & SGST will be charged].

2. Service provided by A (registered in Agra) to C (unregistered person located in Delhi).
As per section 12(2)(b) POS shall be the location of the C i.e. Delhi [IGST will be charged] where the address on record exists; otherwise location of A i.e. Agra [CGST & SGST will be charged].

3. Company A (registered in Agra) provides free of cost service to customers on behalf of Company D (registered in Andhra Pradesh) and issues invoice to Company D.
As per section 12(2)(a) POS shall be the location of the D i.e. Andhra Pradesh [IGST will be charged].

Disclaimer : The entire content of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation .Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT,INDIRECT,SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

Transportation services provided by one GTA to another GTA.

CASE STUDY


Mr. A has a registered Transporter under GST who does billing in Reverse Charges Mechanism. He hires some vehicles from outside which are registered supplier in GST. when the supplier (outsiders) files his GSTR -1, the liability of RCM automatic Shown in GSTR 3B on recipient portal. In this case the online GSTR 3B portal not allowed to file the return without payment of RCM.
Will there be any liability to deposit the RCM on the hire charges if not, so please what is the process to file the GSTR 3B?

FACTS OF THE CASE:

Applicability of RCM on transportation services provided by one GTA to another GTA.

LAW APPLICABLE:

Serial number 22 of Notification No. 12/2017 exempts the following services;

Sl.No.	Chapter, Section, Heading, Group or Service Code (Tariff)	Description of Services	Rate (per cent.)	Condition
22	Heading 9966 or Heading 9973	Services by way of giving on hire (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or (aa) to a local authority, an Electrically operated vehicle meant to carry more than twelve passengers; or (b) to a goods transport agency, a means of transportation of goods. (c) motor vehicle for transport of students, faculty and staff, to a person providing services of transportation of students, faculty and staff to an Educational Institution providing services by way of pre-school education and education upto higher secondary school or equivalent.	Nil	Nil

NTERPRETATION:

The services provided by way of giving on hire to a goods transport agency, a means of transportation of goods would be exempt from GST as per serial number 22 of Notification No. 12/2017 CTR.

Since these services are specifically mentioned in the exemption notification, hence GST would not be applicable on these services. Accordingly, the question of RCM would not arise in this case.

The supplier should record these services under exempt supply while filing GST Returns, then it would not be reflected under RCM liabilty of the recipient.

CONCLUSION:

RCM would not be applicable as such services are exempt from GST as per serial no. 22 of Notification No. 12/2017- Central Tax (Rate)

Disclaimer : The entire content of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation .Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT,INDIRECT,SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

Standard Operating Procedure for Scrutiny of Returns for FY 2019-20 onwards.

Attention is invited to the Instruction No. 02/2022-GST dated March 22, 2022, wherein a Standard Operating Procedure (SOP) was provided for scrutiny of returns under section 61 of Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the CGST Act) read with rule 99 of Central Goods and Service Tax Rules, 2017 (hereinafter referred to as “the CGST Rules”) for FY 2017-18 and 2018-19. It was mentioned in the said instruction that the said SOP was issued as an interim measure till the time a Scrutiny Module for online scrutiny of returns is made available on the ACES-GST application.

In this regard, it is to inform that DG Systems has developed functionality “Scrutiny of Returns”, containing the online workflow for scrutiny of returns in the CBIC ACES-GST application. Advisory No. 22/2023- Returns dated May 16, 2023 has also been issued by DG Systems in this regard, along with a User Manual providing for the detailed workflow of the said functionality. The GSTINs selected for scrutiny for the Financial Year 2019-20 have also been made available on the scrutiny dashboard of the proper officers on ACES-GST application.

The functionality provides for the detailed workflow for communication of discrepancies noticed, in relation to the details furnished in the returns, by the proper officer in FORM GST ASMT-10 to the registered person, receipt of reply from the registered person in FORM GST ASMT-11, issuance of order in FORM GST ASMT-12 or taking further action for issuance of show cause notice under Section 73 or 74 of CGST Act, 2017 or for referring the matter for Audit or investigation, as the case may be.

In view of this, the SOP for scrutiny of returns provided in the Instruction No. 02/2022- GST dated March 22, 2022 stands modified to the following extent in respect of scrutiny of returns for financial years 2019-20 onwards:

Selection of returns for scrutiny and communication of the same to the field formations:

Selection of returns for scrutiny will be done by the Directorate General of Analytics and Risk Management (DGARM) based on various risk parameters identified by them. DGARM will select the GSTINs registered with the Central Tax authorities, whose returns are to be scrutinized for a financial year, based on identified risk parameters. The details of GSTINs selected for scrutiny for a financial year will be made available by DGARM through DG Systems on the scrutiny dashboard of the concerned proper officer of Central Tax on ACES-GST application.

The details of the risk parameters, in respect of which risk has been identified for a particular GSTIN, and the amount of tax/ discrepancy involved in respect of the concerned risk parameters (i.e. likely revenue implication), will also be shown on the scrutiny dashboard of the proper officer for their convenience. It is re-emphasized that as the data made available on the dashboard has been generated at a particular point of time for calculation of risk parameters, this data may undergo change at the time of scrutiny of returns, due to subsequent compliances carried out by the taxpayer or by the suppliers of the taxpayer. The proper officer shall, therefore, rely upon the latest available data.

Scrutiny Schedule:

Once the details of GSTINs selected for scrutiny for a financial year are made available on the scrutiny dashboard of the concerned proper officer of Central Tax on ACES-GST application, the proper officer, with the approval of the divisional Assistant/ Deputy Commissioner, shall finalize a scrutiny schedule in the format specified in Annexure A of Instruction 02/2022- GST dated March 22, 2022. Such scrutiny schedule will specify month- wise schedule for scrutiny in respect of all the GSTINs selected for scrutiny. While preparing the scrutiny schedule, the scrutiny of the GSTINs, which appear to be riskier based on the likely higher revenue implication indicated on the dashboard, may be prioritized. The Principal Commissioner/ Commissioner of the concerned Commissionerate will monitor and ensure that the schedule identified in Scrutiny Schedule is adhered to by the officers under his jurisdiction.

The proper officer shall conduct scrutiny of returns pertaining to minimum of 4 GSTINs per month. Scrutiny of returns of one GSTIN shall mean scrutiny of all returns pertaining to a financial year for which the said GSTIN has been selected for scrutiny.

Process of scrutiny by the Proper Officer:

The Proper Officer shall scrutinize the returns and related particulars furnished by the registered persons to verify the correctness of the returns. Information available with the proper officer on the system in the form of various returns and statements furnished by the registered person and the data/ details made available through various sources like DGARM, ADVAIT, GSTN, E-Way Bill Portal etc. may be relied upon for this purpose.

As mentioned in Para 3.2 above, for the convenience of proper officers, details of the risk parameters involving risk/ discrepancies in respect of the GSTIN, along with the amount of tax/ discrepancy involved in respect of the concerned risk parameters (i.e. likely revenue implication), will be made available in the scrutiny dashboard of the proper officer. Besides, DGARM will also make available to the field formations the details of all the risk parameters taken into consideration by them for the selection of GSTINs for scrutiny of returns for the particular financial year. In addition to these parameters, proper officer may also consider any other relevant parameter, as he may deem fit, for the purpose of scrutiny.

It may be noted that at this stage, the proper officer is expected to rely upon the information available with him on records. As far as possible, scrutiny of return should have minimal interface between the proper officer and the registered person and, there should normally not be any need for seeking documents/ records from the registered persons before issuance of FORM GST ASMT-10.

The proper officer shall issue a notice to the registered person in FORM GST ASMT-10 through the scrutiny functionality on ACES-GST application, informing him of the discrepancies noticed and seeking his explanation thereto. There may be cases where the registered person may already have made additional payment of tax, cess, interest, etc. after filing of the returns for the relevant tax period, through FORM DRC-03. The payments thus made through FORM DRC-03 may also be taken into consideration while communicating discrepancies to the taxpayer in FORM GST ASMT-10. The notice in FORM GST ASMT-10, issued by the proper officer through scrutiny functionality on ACES-GST application, shall be communicated by the system to the concerned registered person on the common portal and therefore, there will be no need for sending any manual communication of notice in FORM GST ASMT-10 by the proper officer to the registered person separately. While issuing such notice, the proper officer may, as far as possible, quantify the amount of tax, interest and any other amount payable in relation to such discrepancies. It may also be ensured that the discrepancies so communicated should, as far as possible, be specific in nature and not vague or general. In this regard, the user manual issued by DG Systems may be referred to regarding the detailed procedure for issuance of FORM GST ASMT-10 on scrutiny functionality on ACES-GST application. The proper officer shall mention the parameter-wise details of the discrepancies noticed by him in FORM GST ASMT-10 and shall also upload the worksheets and supporting document(s)/ annexures, if any.

For each GSTIN identified for scrutiny, the proper officer is required to scrutinize all the returns pertaining to the corresponding Financial Year under consideration and a single compiled notice in FORM GST ASMT-10 may be issued to the registered person for that financial year.

On receipt of such notice in FORM GST ASMT-10 on common portal, the registered person may accept the discrepancy mentioned in the said notice, and pay the tax, interest and any other amount arising from such discrepancy and inform the same or may furnish an explanation for the discrepancy in FORM GST ASMT-11, through the common portal, to the proper officer within the time period prescribed under rule 99 of CGST Rules.

The reply furnished by the registered person in FORM GST ASMT-11 on the common portal shall be made available to the concerned proper officer in the scrutiny dashboard on ACES-GST application. Where the explanation furnished by the registered person or the information submitted in respect of acceptance of discrepancy and payment of dues is found to be acceptable by the proper officer, he shall conclude the proceedings by informing the registered person in FORM GST ASMT-12 through the scrutiny functionality on ACES-GST application.

In case no satisfactory explanation is furnished by the registered person in FORM GST ASMT-11 within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to pay the tax, interest and any other amount arising from such discrepancies, the proper officer, may proceed to determine the tax and other dues under section 73 or section 74 of CGST Act. Needless to mention, for proceedings under section 73 or section 74 of CGST Act, monetary limits as specified in Circular No. 31/05/2018-GST dated February 09, 2018 shall be adhered to. The user manual issued by DG Systems may be referred to for the procedure for initiating proceedings under section 73 or 74 of the CGST Act on the scrutiny functionality on ACES-GST application.

However, if the proper officer is of the opinion that the matter needs to be pursued further through audit or investigation to determine the correct liability of the said registered person, then he may take the approval of the jurisdictional Principal Commissioner / Commissioner through the divisional Assistant/ Deputy Commissioner, through e-file or other suitable mode, for referring the matter to the Audit Commissionerate or anti-evasion wing of the Commissionerate, as the case may be. The copy of the said approval needs to be uploaded while referring the matter to the concerned formation through the scrutiny functionality, as per the procedure detailed in the user manual issued by DG Systems.

Timelines for scrutiny of returns:

Scrutiny of returns is to be conducted in a time bound manner, so that the cases may be taken to their logical conclusion and that too expeditiously. In this regard, the following timelines may be observed by all concerned:


S. no. Process/Event

Timeline/ Frequency


(i)

Communication of GSTINs selected for scrutiny by DGARM on ACES GST Application for a financial year From time to time.


(ii) Finalization of scrutiny schedule with the approval of the concerned Assistant/ Deputy Commissioner

Within seven working days of receipt of the details of the concerned GSTINs on ACES- GST application


(iii)

Issuance of notice by the proper officer for intimating discrepancies in FORM GST ASMT-10, where required Within the month, as mentioned in scrutiny schedule for scrutiny for the said GSTIN.


(iv) Reply by the registered person in FORM GST ASMT-11

Within a period of thirty days of being informed by the proper officer in FORM GST ASMT-10 or such further period as may be permitted by the proper officer


(v)

Issuance of order in FORM GST ASMT-12 for acceptance of reply furnished by the registered person, where applicable Within thirty days from receipt of reply from the registered person in FORM GST ASMT-11


(vi) Initiation of appropriate action for determination of the tax and other dues under section 73 or section 74, in cases where no reply is furnished by the registered person

Within a period of fifteen days after completion of the period of thirty days of issuance of notice in FORM GST ASMT-10 or such further period as permitted by the proper officer


(vii) Initiation of appropriate action for determination of the tax and other dues under section 73 or section 74, in cases where reply is furnished by the registered person, but the same is not found acceptable by the proper officer Within thirty days from receipt of reply from the registered person in FORM GST ASMT- 11


(viii) Reference, if any, to the Audit Commissionerate or the anti-evasion wing of the Commissionerate for action, under section 65 or section 66 or section 67, as the case may be.

Within thirty days from receipt of reply from the registered person in FORM GST ASMT- 11 or within a period of forty-five days of issuance of FORM GST ASMT-10, in case no explanation is furnished by the registered person.


It may also be ensured that the requisite actions must be initiated well ahead of the time limits as specified in section 73 or section 74 of the CGST Act, as the case may be, in respect of a return identified for scrutiny for a financial year.

Reporting and Monitoring:

The details of action taken by the proper officer in respect of GSTINs allocated to him for scrutiny will be available in the form of two MIS reports in the scrutiny dashboard on the ACES- GST application. MIS report ‘Monthly Scrutiny Progress Report’ (in the format specified in Annexure-D of Instruction No.02/2022 dated March 22, 2022) displays summary information of the status of scrutiny of returns for the selected month of a financial year for the selected formation. Besides, the GSTIN-wise details of action taken in respect of scrutiny of returns in respect of allotted GSTINs is made available in the MIS report ‘Scrutiny Register’ (in the format specified in Annexure-C of Instruction No.02/2022 dated March 22, 2022) on the scrutiny dashboard.

In view of this, the requirement of compiling and sending the Monthly Scrutiny Progress Report by the CGST zones to DGGST is hereby dispensed with for the Financial Year 2019-20 onwards. However, the CGST zones will continue to send Monthly Scrutiny Progress Reports to DGGST in respect of the Financial Years 2017-18 and FY 2018-19 till the completion of scrutiny of returns for these financial years, as per the timelines mentioned in Instruction No.02/2022- GST dated March 22, 2022.

It is also added that the progress of the scrutiny exercise as per the scrutiny schedule shall be monitored by the jurisdictional Principal Commissioner/ Commissioner on regular basis.

It is clarified that since the scrutiny functionality has been provided on ACES-GST application only for the Financial Year 2019-20 onwards, the procedure specified in Instruction No. 02/2022 dated March 22, 2022 shall continue to be followed for the scrutiny of returns for the financial years 2017-18 and 2018-19.

The online scrutiny functionality on ACES-GST application will further boost the efforts of the department to leverage technology and risk-based tools to encourage self-compliance and to conduct scrutiny of returns with minimal interaction with the registered person. All Principal Chief Commissioners (PCCs)/ Chief Commissioners (CCs) of CGST Zones are requested to closely monitor timely scrutiny of returns of the selected GSTINs within their jurisdictions.



The Instruction can be accessed at: https://taxinformation.cbic.gov.in/view-pdf/1000478/ENG/Instructions

GST E-invoicing Mandatory for Taxpayer Turnover Exceeding 5Crores.

The government has decided to make GST e-invoicing mandatory for firms whose turnover is exceeding Rs. 5 crores via central tax notification number 10/2023. As the GST council has recommended the GST e-invoice limit and the new rule will come effective from 1st August 2023 as per official notification.

The central government has recommended a reduction of the e-invoice threshold to more than Rs.5 crore starting on 01st August 2023.

The same action has the motive to digitize the higher volume of the transactions, effective clarity in the sales reporting, lower errors, and mismatches, automate the data entry work and rectify compliance.

GST Network (GSTN) renders the invoices, which seem to be ready for the subsequent phase in the 3 to 4 months, the council notified that.

In Oct 2020,GST E-invoicing has initiated and was made essential for companies that have a turnover of Rs 500 crores or exceeds, the same limit was drawn down lower to Rs 100 crores and then after that, it gets Rs 50 crores in 2021 for the business-to-business (B2B) transactions.

The assessee should generate the invoices on their internal system or billing software and then notify the same to the invoice registration portal (IRP) — a requirement to get an input tax credit.

An official mentioned that “Increasing portals will provide adequate IT infrastructure and an eco-system to ensure uninterrupted invoice registration services to businesses. It also provides taxpayers with an option to choose between the services of different portals. In addition, it helps the GST system to balance the load in case anyone IRP portal faces any challenge due to a long queue,”

“The GST Council had last week been apprised about the development of the empanelment to increase the portals and it has given its nod for it,” another official expressed.

As per the official data, of the 219,000 eligible, GSTIN's with a turnover lying between Rs 20 crore and Rs 50 crore; 153,000 would generate the invoices. Likewise, those who have a turnover of Rs 50-100 crore generate 48,217 invoices among the 86,963 GSTINs.

“Lowering the threshold will help in plugging revenue leakage and provide a better reconciliation of credits at the buyer’s end. Physical invoices have problems of matching data and human errors. This will be mitigated and more credit will be available all around,”

Beneath the e-invoicing, the firms that used to generate an IRP via a government portal and the same must be shown to the council at the time of goods movement.

From e-invoicing, the sectors such as transportation, insurance, banking, other financial institutions, non-banking financial companies, goods transportation agencies, and passenger transportation services are exempted.

Source: https://taxinformation.cbic.gov.in/view-pdf/1009732/ENG/Notifications

Disclaimer : The entire content of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation .Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT,INDIRECT,SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.




Abhishek Gupta

Advocate

Leviability of Service Tax on the declared service “Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act" under clause (e) of section 66E of the Finance Act, 1994.-CIRCULAR

 An issue has arisen on the levy of service tax on liquidated damages arising out of breach of contract, forfeiture of salary or payment of bond amount in the event of the employee leaving the employment before the minimum agreed period and similar other issues arising out of clause (e) of section 66E of the Finance Act, 1994. Reference has also been invited to Circular No. 178/10/2022-GST dated 3 rd August, 2022 regarding applicability of GST on liquidated damages, compensation and penalty arising out of breach of contract or other provisions of law, and its applicability to service tax related issues.

 2. It may be seen that "Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act" is a Declared Service as per clause (e) of section 66E of the Finance Act, 1994. A service conceived in an agreement where one person agrees to an obligation to refrain from an act or to tolerate an act or to do an act, would be a 'declared service' under section 66E(e) read with section 65B(44) and would be leviable to service tax. 

3. The description of the declared service in question, namely, agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act is similar in GST. “Agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act” has been specifically declared to be a supply of service in para 5 (e) of Schedule II of the CGST Act, 2017.

 4. As can be seen, the said expression has three limbs: - i) Agreeing to the obligation to refrain from an act, ii) Agreeing to the obligation to tolerate an act or a situation, iii) Agreeing to the obligation to do an act. Service of agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act is nothing but a contractual agreement. A contract to do something or to abstain from doing something cannot be said to have taken place unless there are two parties, one of which expressly or impliedly agrees to do or abstain from doing something and the other agrees to pay consideration to the first party for doing or abstaining from such an act. Such contractual arrangement must be an independent arrangement in its CBIC-110267/14/2023-CX-VIII SECTION-CBEC I/62066/2023 own right. There must be a necessary and sufficient nexus between the supply (i.e. agreement to do or to abstain from doing something) and the consideration. 

5. The issue also came up in the CESTAT in Appeal No. ST/ 50080 of 2019 in the case of M/s Dy. GM (Finance) Bharat Heavy Electricals Ltd in which the hon’ble Tribunal relied on the judgement of divisional bench in case of M/s South Eastern Coal Fields Ltd Vs. CCE Raipur {2021(55) G.S.T.L 549(Tri-Del)}. Board has decided not to file appeal against the CESTAT order ST/A/50879/2022-CU[DB] dated 20.09.2022 in this case and also against Order A/85713/2022 dated 12.8.2022 in case of M/s Western Coalfields Ltd. Further, Board has decided not to pursue the Civil Appeals filed before the Apex Court in M/s South Eastern Coalfields Ltd. supra (CA No. 2372/2021), M/s Paradip Port Trust (Dy. No. 24419/2022 dated 08-08-2022), and M/s Neyveli Lignite Corporation Ltd (CA No. 0051-0053/2022) on this ground. 

6. In view of above, it is clarified that the activities contemplated under section 66E(e), i.e. when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are the activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity. Field formations are advised that while taxability in each case shall depend on facts of the case, the guidelines discussed above and jurisprudence that has evolved over time, may be followed in determining whether service tax on an activity or transaction needs to be levied treating it as service by way of agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act. Contents of Circular No. 178/10/2022-GST dated 3rd August, 2022, may also be referred to in this regard.

Source from: https://taxinformation.cbic.gov.in/content-page/explore-circulars

No input tax credit for liquor sales: GST-AAR

Restaurants that have offset input tax credit (ITC) in respect of liquor sales will be impacted by a recent goods and services tax (GST) advance ruling given by the West Bengal bench.

In this regard, the GST-Authority for Advance Rulings has held that the applicant would have to reverse the ITC. While advance rulings do not set a judicial precedent, they do influence tax assessments.

Karnani FNB Specialities, the applicant, operated a lounge bar called 'The Grid'. It also provided catering services as well as banquet renting services. It submitted to the AAR that as sale of liquor (aka, alcohol meant for human consumption) was outside the ambit of the GST, it is not liable to reverse the ITC.

The AAR bench did not agree with this view. "The AAR bench held that section 17 (2) of the GST Act, read with rule 42, allows a GST-registered taxpayer to utilise ITC to the extent of input tax paid on inputs and input services that are used for making taxable supplies including zero-rated supplies. However, credit of input tax attributable to exempt supplies is to be reversed according to the prescribed formula.

As the AAR bench held the sale of liquor to be an exempt supply, it ruled that the applicant would have to reverse the ITC attributed to the exempt supply.




Source from: https://timesofindia.indiatimes.com/business/india-business/no-input-tax-credit-for-liquor-sales-gst-aar/articleshow/98287927.cms

Abhishek Gupta

Advocate

Taxability of Labour cess under CGST Act,2017. Whether it should be included in Taxable Value?

 Labour Cess or certainly this could be referred to Building & Other Construction Workers' Welfare Cess (BOCWW Cess).

BOCWW Cess is levied on the cost of construction incurred by the employer as per the provisions of the Building and Other Construction Workers' Welfare Cess Act,1996

In order to find the value of supply of goods or supply of services in GST, we need to examine the term Consideration which is defined under Section 2(31) of CGST Act,2017 as under:

(31) 'consideration' in relation to the supply of goods or services or both includes''

(a)   any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;

(b)   'the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:

          Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;

Thus the above definition of 'consideration' clearly includes any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government.

As per the above given explanation, consideration would include the entire payment received by the supplier of services and GST would be payable on the entire amount collected by them from the recipient of service which include labour cess.

We also need to refer Section 15 of the CGST Act,2017, which pertains to Valuation of taxable supply and reads, as under:

Section 15: Value of taxable supply.     

(1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

'(2) The value of supply shall include''

a)  any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;

b)  any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;.

c)  incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;

d)  interest or late fee or penalty for delayed payment of any consideration for any supply; and

e)  subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.

Explanation.''For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.

(3) The value of the supply shall not include any discount which is given''

a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and

b) after the supply has been effected, if'

(i)     such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii)    input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

(4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed.

(5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed.

Explanation.'For the purposes of this Act,''

'(a) persons shall be deemed to be 'related persons' if''

                (i) such persons are officers or directors of one another's businesses;

                (ii) such persons are legally recognised partners in business 2(17)

'business' includes''

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; ;

                (iii) such persons are employer and employee;

                (iv) any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them;

                (v) one of them directly or indirectly controls the other;

                (vi) both of them are directly or indirectly controlled by a third person;

                (vii) together they directly or indirectly control a third person; or they are members of the same family;

'(b) the term 'person' also includes legal persons;

(c) persons who are associated in the business 2(17)
'business' includes''
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; of one another in that one is the sole agent  'agent' means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another; or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related.

Now as per the above mentioned extract, it can be seen that Section 15(1) clearly stipulates that the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

Further ,sub section (2) of Section15 elaborates  in detail, the items that are required to be included in the value of supply, whereas sub-section (3) of section15 specifically elaborates the items that are not included in the value of supply .

As per Section 15 of the CGST Act,2017, there is intent to include all taxes ,duties, cesses, fees and all charges in the value of supply and there can be no exception for BOCWW Cess (labour cess) from the recipient of service.

Thus, from the above mentioned explanation it can be  suggested that Labour Cess will be included in the value of supply and the same is taxable under the CGST Act,2017.

Disclaimer : The entire content of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation .Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT,INDIRECT,SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

Abhishek Gupta

Advocate

Decisions taken in 49th GST Council Meeting

Key decisions w.r.t. recommendations of 49th GST Council meeting, held in New Delhi on February 18,2023 under the Chairmanship of Union Minister for Finance & Corporate affairs Smt. Nirmala Sitharaman.

The GST Council has, inter-alia, made the following recommendations relating to GST compensation, GST Appellate Tribunal, approval of the Report of Group of Ministers (GoM) on Capacity Based Taxation and Special Composition Scheme in certain Sectors on GST, recommendations relating to GST rates on Goods and Services and other measures for facilitation of trade:

GST Compensation

Government of India has decided to clear the entire pending balance GST compensation of Rs. 16,982 crore for June’2022 as shown in the table below. Since, there is no amount in the GST compensation Fund, Centre decided to release this amount from its own resources and the same will be recouped from the future compensation cess collection. With this release, Centre would clear the entire provisionally admissible compensation due for five years as envisaged in the GST (Compensation to States) Act’2017. In addition, Centre would also clear the admissible final GST compensation to those States who has provided the revenue figures as certified by the Accountant General of the States amounting to Rs. 16,524 crore.

GST Appellate Tribunal


The Council adopted the report of Group of Ministers with certain modifications. The final draft amendments to the GST laws shall be circulated to Members for their comments. The Chairperson has been authorised to finalise the same.




Approval of the Report of GoM on Capacity Based Taxation and Special Composition Scheme in certain Sectors on GST:


With a view to plug the leakages and improve the revenue collection from the commodities like pan masala, gutkha, chewing tobacco, the Council approved the recommendations of the GoM including, inter alia, that


the capacity based levy not to be prescribed;
compliance and tracking measures to be taken to plug leakages/evasions;
exports of such commodities to be allowed only against LUT with consequential refund of accumulated ITC;
compensation cess levied on such commodities to be changed from ad valorem to specific tax based levy to boost the first stage collection of the revenue.Recommendations relating to GST rates on Goods and Services


Changes in GST rates of Goods and Services


Sr. No. Description From To
1. Rab 18% 5% - If sold prepackaged and labelled


Nil- If sold Otherwise.



2. Pencil sharpener 18% 12%




Other changes relating to Goods and Services
It has been decided to regularize payment of GST on ‘rab’ during the past period on “as is basis” on account of genuine doubts over its classification and applicable GST rate.
It was decided to suitably amend notification No. 104/94-Customs dated 16.03.1994 so that if a device like tag- tracking device or data logger is already affixed on a container, no separate IGST shall be levied on such affixed device and the ‘nil’ IGST treatment available for the containers under notification No. 104/94-Customs shall also be available to the such affixed device subject to the existing conditions.
It has been decided to amend entry at Sl. No. 41A of notification No. 1/2017-Compensation Cess (Rate) so that exemption benefit covers both coal rejects supplied to and by a coal washery, arising out of coal on which compensation cess has been paid and no input tax credit thereof has been availed by any person.
It has been decided to extend the exemption available to educational institutions and Central and State educational boards for conduct of entrance examination to any authority, board or a body set up by the Central Government or State Government including National Testing Agency for conduct of entrance examination for admission to educational institutions.
It has been decided to extend the dispensation available to Central Government, State Governments, Parliament and State Legislatures with regard to payment of GST under reverse charge mechanism (RCM) to the Courts and Tribunals also in respect of taxable services supplied by them such as renting of premises to telecommunication companies for installation of towers, renting of chamber to lawyers etc.
Measures for facilitation of trade:


Extension of time limit for application for revocation of cancellation of registration and one time amnesty for past cases: The Council has recommended amendment in section 30 of CGST Act, 2017 and rule 23 of CGST Rules, 2017 so as to provide that –the time limit for making an application for revocation of cancellation of registration be increased from 30 days to 90 days;where the registered person fails to apply for such revocation within 90 days, the said time period may be extended by the Commissioner or an officer authorised by him in this behalf for a further period not exceeding 180 days.

The Council has also recommended that an amnesty may be provided in the past cases, where registration has been cancelled on account of non-filing of the returns, but application for revocation of cancellation of registration could not be filed within the time specified in section 30 of CGST Act, by allowing such persons to file such application for revocation by a specified date, subject to certain conditions.Amendment to Section 62 of CGST Act, 2017 to extend timelines under sub-section (2) thereof and one time amnesty for past cases: As per sub-section (2) of section 62 of CGST Act, 2017, the best judgment assessment order issued under sub-section (1) of the said section is deemed to be withdrawn if the relevant return is filed within 30 days of service of the said assessment order. The Council recommended to amend section 62 so as to increase the time period for filing of return for enabling deemed withdrawal of such best judgment assessment order, from the present 30 days to 60 days, extendable by another 60 days, subject to certain conditions.

The Council has also recommended to provide an amnesty scheme for conditional deemed withdrawal of assessment orders in past cases where the concerned return could not be filed within 30 days of the assessment order but has been filed along with due interest and late fee upto a specified date, irrespective of whether appeal has been filed or not against the assessment order, or whether the said appeal has been decided or not.Rationalisation of Late fee for Annual Return: Presently, late fee of Rs 200 per day (Rs 100 CGST + Rs 100 SGST), subject to a maximum of 0.5% of the turnover in the State or UT (0.25% CGST + 0.25% SGST), is payable in case of delayed filing of annual return in FORM GSTR-9. The Council recommended to rationalise this late fee for delayed filing of annual return in FORM GSTR-9 for FY 2022-23 onwards, for registered persons having aggregate turnover in a financial year upto Rs 20 crore, as below:Registered persons having an aggregate turnover of up to Rs. 5 crores in the said financial year: Rs 50 per day (Rs 25 CGST + Rs 25 SGST), subject to a maximum of an amount calculated at 0.04 per cent. of his turnover in the State or Union territory (0.02% CGST + 0.02% SGST).
Registered persons having an aggregate turnover of more than Rs. 5 crores and up to Rs. 20 crores in the said financial year: Rs 100 per day (Rs 50 CGST + Rs 50 SGST), subject to a maximum of an amount calculated at 0.04 per cent. of his turnover in the State or Union territory (0.02% CGST + 0.02% SGST).Amnesty in respect of pending returns in FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10: To provide relief to a large number of taxpayers, the Council recommended amnesty schemes in respect of pending returns in FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10 by way of conditional waiver/ reduction of late fee.Rationalization of provision of place of supply of services of transportation of goods: Council recommended to rationalize the provision of place of supply for services of transportation of goods by deletion of section 13(9) of IGST Act, 2017 so as to provide that the place of supply of services of transportation of goods, in cases where location of supplier of services or location of recipient of services is outside India, shall be the location of the recipient of services.
Note: The recommendations of the GST Council have been presented in this release containing major item of decisions in simple language for information of the stakeholders. The same would be given effect through the relevant circulars/ notifications/ law amendments which alone shall have the force of law.


The Press Release can be accessed at: https://www.pib.gov.in/PressReleasePage.aspx?PRID=1900376




Abhishek Gupta
Advocate.

Agri input makers seek tax exemption on R&D expenses; cut in GST, customs duty on agrochemicals.

 

CropLife India, an association of 16 R&D crop science companies, has suggested uniform basic customs duty of 10 per cent for both technical raw materials and formulation.

Agri input makers are looking forward to tax exemption on their R&D expenses and a cut in GST and basic customs duty for agrochemicals in the upcoming Union Budget.

“As India is likely to become the most populous country this year, and has ambitions to be a major food supplier to the world, the need of the hour is to ensure higher productivity with minimal environmental impact. The investment made in agricultural research and development (R&D) pays back many times over in the form of increased production or mitigated losses, as well as higher incomes for farmers.