Indirect Taxes: - “A Fortnightly review” by Sinewave Computer Services Private Limited
(1st Dec 2019 - 15th Dec 2019)

Content :

From the Legal Desk

(Compiled by CA Aumkar S Gadgil and Shri Surendra G Gadgil)

15 2019-TIOL-3625-CESTAT BAN- Dalmia Laminators

Q :- Whether input Tax credit would be available as input service in respect of Service Tax paid on freight from factory /depot of manufacturer upto customer’s premises where goods are sold on FOR destination basis ?

Cenvat Credit on GTA service availed for transport of goods from place of removal to buyer's premises is not admissible as input service w.e.f. 01.04.2008 even for FOR destination contracts in view of the amendment by Not 10/2008 CX-NT.

Prior to 1-4-2008 credit was allowed----- 2018-TIOL-42-SC-CX and followed in 2019-TIOL-3623-CESTAT-BAN

16 2019-TIOL – 3624 CESTAT-HYD Varun Motors

Q. Whether Input Tax Credit on health and Life Insurance policies for the employees is available as credit?

Prior to 1-4-2011 such ITC was available as there was no specific exclusion of any service which was used in the course of business.

After 1-4-2011 it is not available

17- 2019-TIOL-3625-CESTAT-ALL—(Vadera Interiors Exteriors)

Q Whether a demand of service tax as proposed in the SCN for construction of sewerage treatment plant under the category of “ Commercial or Industrial Construction and Works Contract Services “ be confirmed under a different category viz (erection commissioning and installation services) in the absence of any proposal in notice to confirm the demand under the different category

A. No

18. Hans Raj Sons vs Union of India – CWP 36393 / 2019 Punjab and Haryana HC

Q . What could the Petitioner do if even after the HC order GSTN system is not made functional to upload the TRAN-1” and carry forward the ITC ?

A. Hon High Court in its order Dated 16-12-2019 followed its own judgement in CWP 30949 of 2018 in case of Adfert Technologies Pvt Ltd and further ordered that “ it is clarified that in case the petitioner is hampered in any manner from availing the benefit of aforesaid judgement, due to non opening of the portal by the Respondents, then the petitioner shall be permitted, in the alternative to claim the benefit of unutilised credit in the GSTR-#B Forms to be filed for the month of January 2020 either electronically or manually”

Analysis of the standard operating procedure issued in respect of Non-Filers

Standard Operating Procedure to be followed in case of Non Filers of Returns
Circular No 129/48/2019 -GST DT 24-12-2019
File No :- CBEC-20/06/04/2019-GST

GUIDELINES ISSUED by CBIDT
Assumption Date of filing of Return is 21st March

DAY VIS-A-VIS DUE DATE DATE ACTION BY DEPARTMENT FORM EXPECTED ACTION BY TAX PAYER LEGAL PROVISIONS OUR COMMENTS
-3 18th March Prior intimation regarding due date Prepare data and file the return Do not ignore departmental communication
0 21st March File Return if not already filed Sr Management must be aware
1 to 4 22 to 25 March 2Intimation about non filing Immeditaely file Return Sec 39 Govt is helping you , don’t ignore
5 L 26th March onwards Issue a Notice for Non Filing GSTR-3A Return not filed Sec 46 read with Rule 68 egal proceeding start. Prior notice given will strongly go against tax payer
6th day onwards 27th March onwards Commissioner MAY attach property provisionally Return not filed Section 83 Though this is optional , it can spoil business credibility and brand
20 9th April onwards Best Judgement Assessesment of tax laibility & GST ASMT-13 Return not filed Sec 62 read with Rule 100 Best judgement by department can be worst judgement to Tax payer
Upload Tax Challan GST DRC -07
21 TO 51 8 th May onwards Self Assessed Return filed during 21st to 51st day l ast chance to comply and pay tax as per self assessment . Grab it. Take advantage and pay self assessed tax , though interest laibility remains
Deemed withdrawal of GST ASMT -13 Deemed withdrawal of GST ASMT -13 ) Sec 62 (2 Tax payers image improves
52 onwards Proceed to recover the tax dues Return still not filed after 51st day Sec 78 and 79 Tax payer has very weak case to argue and defend

* Intimation and notice though would be served electronically , they can be served by any other mode also
**Days and date indicated are for sake of understanding.

Knowledgebase

(Compiled by CA Aumkar S Gadgil)

New Year to begin with handling new challenges on Input Tax Credits

A. Further Restriction for credit utilisation due to unmatched Credit as per books of the Assessee Vs GSTR2A

Complete Trust 100% on Trade from1st July 2017 till 8th of Oct 2019 .

As per Section 16 of the CGST Act 2017, the recipient of supplies was entitled to self-assess the Input Tax Credit adhering to conditions and restrictions as laid down therein and take the credit in his electronic credit ledger. Section 49 (4) graciously permitted use of 100% self-assessed eligible credit as returned under section 41, for use/ payment of output tax liability pending clearing the mismatch in GSTR2A in due course of time .

Trust reduced in respect of mismatched credit From 9th Oct 2019 .

Considering the incidences of serious frauds detected in respect of ITC w.e.f.9th Oct 2019 , vide Not 49/2019 DT 9-10- 2019 the complete trust imposed appears to be shattered and a restriction on use of the unmatched credit was imposed @ 20% with reference to matched credit. For e.g. If the recipient had self-assessed credit of Rs 100 in Nov 19 and his GSTR2A matched only for Rs 60, then against remaining Rs 40, he was allowed to take credit of Rs 12 only and Rs 28 could not be used i.e. “locked credit”.

Trust further reduced from 1st Jan 2020

w.e.f. 1st Jan 2020 vide Not 75/2019 -CT DT 26th Dec 2019, the credit allowed to be used against mismatch will be Rs 6 and balance 34 cannot be used.

Certainly, the working capital will be stressed. It is suggested to urgently review the mismatch or unmatched credit

B. Shift from Self-policing mechanism to Physical control mechanism in respect of Input Tax Credit fraudulently availed or wrongly availed.

Over and above putting the restrictions as above against unmatched credit, any officer above the rank of Assistant Commissioner is now empowered to restrict use of the input tax credit or claim of a refund of input tax credit, where he has reasons to believe that credit is fraudulently availed or ineligible credit is availed. The criteria laid down to assume fraudulently availed credit is as under :-

a) unknown supplier: Where the credit is availed on the basis of non-existent registered person or the supplier is not conducting any business from the registered business premises. or where it is found that the credit is taken without receipt of goods or service or both. (Please ensure inventory records or service received registers are updated on real time basis and accounting entries are also passed)
b) The tax charged in the supporting credit documents has not been paid to the Government. (Is trade responsible for this and is supposed to spend time ?. Certainly not. But we suggest that the process of supplier’s payment may be designed in 2 stages. 1st on receipt of goods/services for the value of goods and 2nd after the credit is matched for tax amount)
c) Unknown recipient Where the registered person availing the credit is found to be non-existent or not conducting any business from any place for which registration is obtained. Or
d) The registered person availing credit is not in possession of tax invoice or other prescribed documents for availing the credit under Rule 36. (We suggest to handle and store the credit documents as if “ cash” )

The officer above the rank of Assistant Commissioner, under a written order will not allow to debit the amount of “locked credit” available in electronic credit ledger for payment of Tax or for sanctioning unutilised input tax credit claim. Subsequently if the recipient proves that the shortfalls existing on day on which the order denying the use of credit is passed no more exist, the officer will pass order allowing such credit or refund The “locked credit” will cease to have effect after expiry of a period of one year from date of imposing such restrictions. (we expect some correction in this provision)

What should be the tax rate in case of Goods Transport Agency Services?

Recently there has been some confusion in air in respect of determination of applicability of tax rate for GTA services, the person who is responsible to pay tax and determination of cases in which the exemption from GTA services is applicable. Owing to the same, we have tried to analyze based on the notifications published in the public domain.

1. Services of Goods Transport Agency, is one of the notified services on which the tax is liable to be collected under reverse charge mechanism basis, owing to CGST rate notification 13/2017 (Rate), dated 28/6/2017.

Where the supplier of service was Supply of Services by a goods transport agency (GTA) in respect of transportation of goods by road to Where the recipient of service was

(a) Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or
(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or
(c) any co-operative society established by or under any law; or
(d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or
(e) any body corporate established, by or under any law; or (f) any partnership firm whether registered or not under any law including association of persons; or
(g) any casual taxable person; located in the taxable territory.

2. On 22nd August 2017, Notification 20/2017 Central Tax Rate was introduced, by virtue of which, following was inserted

(iii) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use). Explanation.- “goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.

Rate of tax would be 2.5% Central tax (ie 5%), Provided that credit of input tax chargedon goods and services used in supplying the service has not been taken [Please refer to Explanation no. (iv)] or Rate of tax would be 6% Central tax (ie 12%)

Provided that the goods transport agency opting to pay central tax @ 6% under this entry shall, thenceforth, be liable to pay central tax @ 6% on all the services of GTA supplied by it.”; Also on 22nd August 2017, notification 22/2017 was introduced to make the following changes in notification 13/2017 In the said notification,- (i) in the Table, against serial number 1, in column (2), after the words and brackets “goods transport agency (GTA)” the words and figure “, who has not paid central tax at the rate of 6%,” shall be inserted;

It would be pertinent to note that where the rate of tax is 12% the words used "opting to pay tax" has been used in cases where the supplier of GTA services, avails the Input tax credit. That is to say the GTA would be liable to collect and pay the tax under forward charge mechanism, only if the same is being paid @12% as the GTA is availing ITC. Thus if the GTA does not avail ITC, GST would be liable to be paid as per notification 13/2017 as mentioned in 1 above.

Therefore after a combined reading of all the above the following conclusion can be drawn.

Specified recipient means

(a) Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or
(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or
(c) any co-operative society established by or under any law; or
(d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or
(e) any, body corporate established, by or under any law; or (f) any partnership firm whether registered or not under any law including association of persons; or
(g) any casual taxable person; located in the taxable territory

Sr No Service Provider Service Recipient GST Applicability Person liable to pay GST Conditions if any
1 GTA Specified recipient Yes GTA, under Forward charge @12% If ITC is availed by GTA
Recipient to pay at 5% under RCM If ITC is not availed by GTA
2 GTA Other than specified recipient Yes GTA, under Forward charge @5% If ITC is not availed by GTA and not specifically exempted under any exemption notification
Forward charge @12% If ITC is availed, and not specifically exempted under any exemption notificaion

Cases where exemption is applicable:

Exemption is applicable in case of following, vide Notification 32/2017, dated 13/10/2017.

Services provided by a goods transport agency to an unregistered person, including an unregistered casual taxable person, other than the following recipients, namely: -

(a) any factory registered under or governed by the Factories Act, 1948(63 of 1948); or
(b) any Society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or
(c) any Co-operative Society established by or under any law for the time being in force; or
(d) any body corporate established, by or under any law for the time being in force; or
(e) any partnership firm whether registered or not under any law including association of persons; (f) any casual taxable person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act.

Exemption is applicable in case of following, vide Notification 28/2018, dated 31/12/2018.

Services provided by a goods transport agency, by way of transport of goods in a goods carriage, to, - (a) a Department or Establishment of the Central Government or State Government or Union territory; or (b) local authority; or (c) Governmental agencies, which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for the purpose of deducting tax under Section 51 and not for making a taxable supply of goods or services.

Statutory Updates under GST Law

(Compiled by CA Aumkar S Gadgil and Shri Abhinay Soman)

Notifications

Notification No. & Date of issue Notification Type Particulars
Notification No. 89/2019-Cus (NT) dt 10-12-2019 Non-Tariff Appointing the date for enforcing section 88 (b) of the Finance (No. 2) Act, 2019 to bring out the changes in the First Schedule to the Customs Tariff Act, 1975.
Notification No. 90/2019-Cus (NT) dt 13-12-2019 Non-Tariff Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seed, Areca nut, Gold & Silver - reg.
Notification No. 91/2019-Cus (NT) dt 19-12-2019 Non-Tariff Determines the rate of exchange of conversion of each of the foreign currencies specified in column (2) of each of Schedule I and Schedule II mentioned in the attached notification into Indian currency or vice versa, shall, with effect from 20th December, 2019 be the rate mentioned against it in the corresponding entry in column (3)
Notification No. 45/2019-Cus (ADD) dt 10-12-2019 Anti Dumping Duty Seeks to impose anti-dumping duty on imports of Clear float glass originating in or exported from Pakistan, Saudi Arabia and UAE in pursuance of Final findings of Designated Authority in sunset review of notification No. 48/2014-Customs (ADD) dated 11.12.2014
Notification No. 46/2019-Cus (ADD) dt 19-12-2019 Anti Dumping Duty Seeks to further amend notification No. 35/2018-Customs(ADD) regarding levy of anti-dumping duty on High Tenacity Polyester Yarn to amend the name of exporter name from " M/s. Oriental Textile (Holding) Ltd.” to “M/s. Oriental Industries (Suzhou) Ltd”.



Disclaimer: The views provided above are on the basis of our understanding of the GST Laws, Rules and Regulations. The adjudicating or Judicial Authorities may or may not agree with the views expressed above.


CA Aumkar Surendra Prachi Gadgil