CBIC ISSUES NOTIFICATIONS AND ORDERS TO GIVE EFFECT TO THE DECISIONS TAKEN IN 31ST GST COUNCIL MEETING AND ISSUES CLARIFICATORY CIRCULARS - PWC INDIA

 
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Tax Insights

from India Tax & Regulatory Services

CBIC issues notifications and
orders to give effect to the decisions
taken in 31st GST Council meeting
and issues clarificatory circulars

January 9, 2019

In brief
The Central Board of Indirect Taxes and Customs (CBIC) has issued various notifications and orders
to give effect to the decisions taken at the 31st GST Council meeting. CBIC also issued multiple
circulars to clarify various issues.

In detail                                   provisos in section 16(4)                  (Order no. 4/2018-Central
                                     1      and section 37(3) of CGST                  Tax dated 31 December,
The gist of the developments
                                            Act, 2017.                                 2018)
are as follows –
                                            (Order no. 2/2018-Central               Amendments which do not
Amendments introduced                                                               impact rate of tax
through ‘removal of                         Tax dated 31 December,
difficulty’ orders                          2018)                                    The due date for
                                          The due date for                           submission of specified
 The due date for availing
                                           submission of annual                       details for migration of the
  input tax credit (ITC) in
                                           return and reconciliation                  assessees into GST who did
  respect of any invoice,
                                           statement along with GST                   not complete the migration
  where the supply has been
                                           audit report has been                      procedure has been
  made during financial year
                                           extended to 30 June, 2019.                 extended to 31 January,
  2017-18 and the details of
                                                                                      2019.
  which have been uploaded                  (Order no. 3/2018-Central
  by the supplier (by March,                Tax dated 31 December,                     (Notification no. 67/2018-
  2019), has been extended to               2018)                                      Central Tax dated 31
  the due date for furnishing                                                          December, 2018)
  the monthly return for the              The due date for
                                           submission of monthly                     The due date for
  month of March, 2019.
                                           statement of tax collected at              submission of Form GSTR
  Further, suppliers are also
                                           source by the electronic                   3B for the period July, 2017
  allowed to rectify any error
                                           commerce operators for the                 to February, 2019 for the
  or omission in respect of
                                           months of October,                         newly migrated assessees
  details of outward supply
                                           November and December,                     has been extended to 31
  disclosed earlier till the date
                                           2018 has been extended to                  March, 2019. Further, the
  of submission of return for
                                           31 January, 2019.                          due date for submission of
  the month of March, 2019.
                                                                                      Form GSTR 1 for
  This is sought to be
  achieved by inserting

1
  The alert does not cover the           goods and services. It only                orders, which clarify various aspects or
notifications making amendments          summarises the notifications/ circulars/   amend any procedures/ law.
relating to changes in rate of various

                                                                                                            www.pwc.in
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    the (6) quarters July, 2017 to          Information Technology            under the return is nil, the late
    December, 2018 and for the              Act, 2000.                        fee in excess of INR 10 per day
    (20) months July, 2017 to                                                 (under Central GST Act, 2017)
                                          For claiming refund of
    February, 2019 for such newly                                             has been waived. Further, in
                                           accumulated credit in case
    migrated assessees will be 31                                             cases where the returns in
                                           of inverted duty structure,
    March, 2019.                                                              Form GSTR 3B for the period
                                           the term ‘relevant period’
                                                                              July, 2017 to September, 2018
    (Notification nos. 68-72/2018-         has been defined to mean
                                                                              has not been filed and is filed
    Central Tax all dated 31               the same as for refund
                                                                              between 22 December, 2018
    December, 2018)                        claim of accumulated credit
                                                                              and 31 March, 2019 the late
                                           by exporters, i.e. the period
 The provisions for deduction                                                fee will be completely waived.
                                           for which the claim has
  of tax at source under GST
                                           been filed.                        (Notification no. 76/2018-
  would not be applicable to
                                                                              Central Tax dated 31
  supplies of goods and services          A new rule has been
                                                                              December, 2018)
  between two persons when                 inserted to bar a person
  both are required to deduct              who has not filed returns        For the persons who have not
  tax.                                     for two consecutive periods       submitted Form GSTR 4
                                           from generation of e-way          (return for composition
    (Notification no. 73/2018-
                                           bills. This rule will be          dealers) for the periods July,
    Central Tax dated 31
                                           effective from a date yet to      2017 to September, 2018 and
    December, 2018)
                                           be notified.                      submit Form GSTR 1 for these
 The GST Rules have been                                                    periods between 22 December,
                                          Forms GST RFD-01 (refund
  amended. The key                                                           2018 to 31 March, 2019 the
                                           application), GST RFD-01A
  amendments are as under:                                                   late fee payable for such delay
                                           (refund application), GSTR
                                                                             is waived.
     A person who is required to          9 (annual return) and
      collect tax in a State, where        GSTR 9A (annual return)            (Notification no. 77/2018-
      it does not have a physical          and GSTR 9C                        Central Tax dated 31
      presence, can obtain                 (reconciliation statement          December, 2018)
      registration in that State by        and GST audit report) have
                                                                            The due date for submission of
      mentioning the details of its        been substituted with
                                                                             Form ITC 04 (return for
      principal place of business          revised formats.
                                                                             movement of goods to/ from
      located in another state.
                                         (Notification no. 74/2018-          job worker) for the period
     The requirement of                 Central Tax dated 31                July, 2017 to December, 2018
      disclosure of challans in          December, 2018)                     has been extended to 31
      Form GST ITC 04, in case                                               March, 2019.
                                       For the persons who have not
      of the goods sent from one
                                        submitted Form GSTR 1                 (Notification no. 78/2018-
      job worker to another, has
                                        (return for outward supplies)         Central Tax dated 31
      been withdrawn.
                                        for the periods July, 2017 to         December, 2018)
     The requirement of affixing       September, 2018 who now
                                                                            The Integrated GST Rules,
      signature or digital              submit Form GSTR 1 for these
                                                                             2017 have been amended. The
      signature on invoice or a         periods between 22 December,
                                                                             major amendments are as
      bill of supply or                 2018 to 31 March, 2019, the
                                                                             under:
      consolidated invoice or any       late fee payable for such delay
      other document issued by          is waived.                             In case of advertisements
      an insurer or a banking                                                   over internet, the rules
                                         (Notification no. 75/2018-
      company or financial                                                      have been amended to
                                         Central Tax dated 31
      institution, including non-                                               provide a deeming fiction
                                         December, 2018)
      banking financial                                                         that such services are
      companies or ticket issued       For delayed submission of               provided all over India.
      by a passenger transport          Form GSTR 3B (periodical
                                                                               The value of supply of
      company has been done             return) from the month of
                                                                                service attributable to
      away with, if the respective      July, 2017 onwards, the late
                                                                                different States, when the
      document is issued in             fee which is in excess of INR
                                                                                services are supplied/
      accordance with the               25 per day (under CGST Act,
                                                                                performed in multiple
      provisions of the                 2017) has been waived. In
                                                                                States and a consolidated
                                        case, Central GST payable

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Tax Insights

          consideration is charged                    any break up for services                   individual State, will be as
          without                                     supplied in an                              under:

    Sr.                     Nature of supply                                      Allocation of consideration
    No.
    1       Services in relation to immovable property or stay/     Where such immovable properties etc. are located in
            organisation of function in hotels etc. or services     multiple States, the services are deemed to be provided
            ancillary to them.                                      in all the States. The values would be allocated as
                                                                    under:
            This will also be applicable in the cases, where the
            location of the service provider or the service          For stay in hotels on the basis of nights stayed.
            recipient is outside India.
                                                                       For stay in houseboat or vessel in proportion of time
                                                                       spent by the boat or vessel in each State on the basis
                                                                       of declaration made by service provider. In case of
                                                                       all other services, including the services by way of
                                                                       accommodation for organisation of function etc.
                                                                       and also, in cases, where the stay is made in a hotel
                                                                       (which is single property located in two or more
                                                                       contiguous States), in proportion of the immovable
                                                                       property lying in each State.

    2       Services in relation to organisation of event or        The value of service for each State shall be determined
            assigning of sponsorship to such events, when the       by application of the generally accepted accounting
            services are supplied to an unregistered person and     principles.
            the event is held in multiple States.
            This will also be applicable in the cases, where the
            location of the service provider or the service
            recipient is outside India.

    3       Supply of services relating to leased circuit, where    The value of services for each State would be
            the leased circuit is installed in multiple States.     determined on the basis of number of points of the
                                                                    leased circuit in each State and the consideration split
                                                                    accordingly.

    4       Supply of services for goods which need to be            If the services are provided on the same goods, the
            physically made available by the service recipient        value of services would be equally divided between
            to the provider, and the services are performed in        each of the States where the services are performed.
            multiple States and the location of the supplier or
                                                                     Where the services are provided on different goods,
            the recipient is outside India.
                                                                      the consideration would be split on the proportion
                                                                      of invoice value of goods in relation to which the
                                                                      services are performed.

    5       Services supplied to an individual, represented         The value of the services in each State would be
            either as the recipient of services or person acting    determined by applying generally accepted accounting
            on behalf of the recipient, which require the           principles.
            physical presence of the recipient or the person
            acting on his behalf, where the location of supplier
            or the location of recipient is outside India and the
            services are supplied in multiple States.
        (Notification no. 4/2018-Integrated Tax dated 31 December, 2018)

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Tax Insights

                                             (Circular no. 76/50/2018-GST         copy of the refund
Circulars issued, clarifying
                                             dated 31 December, 2018)             application and the
various issues2
                                                                                  supporting documents were
                                           A circular is issued providing
 A circular is issued, providing                                                 required to be physically
                                            clarification on export of
  various topical clarifications.                                                 submitted to the
                                            services in cases, where a
  The key clarifications are as                                                   jurisdictional tax officer.
                                            service exporter has
  under:                                                                          Now such documents can
                                            outsourced portion of the
                                                                                  be uploaded on the
     Penalty under section                 service contract to a person
                                                                                  common portal.
      73(11) of the Central GST             outside India. It has been
      Act, 2017 is not applicable           clarified that:                     In case of refund of
      in case of delayed filing of                                               accumulated credit due to
                                              In such case, two supplies
      Form GSTR 3B returns as                                                    an inverted duty structure,
                                               take place; one from Indian
      such penalty pertains to                                                   the refund would be
                                               service exporter to the end
      non-payment of tax.                                                        granted irrespective of
                                               client, and another from
      However, penalty for                                                       applicable tax rates on the
                                               outsourced service provider
      delayed payment of tax                                                     various inputs (whether
                                               to Indian service exporter.
      under section 125 of the                                                   higher or lower or equal to
      Central GST Act, 2017 is                The Indian service exporter       the rate applicable on
      applicable.                              will be required to pay GST       output supply).
                                               under reverse charge on
     In case of revision of prices,                                            The assessee would get
                                               services received from the
      after the appointed date, of                                               interest on delayed refund
                                               outsourced service
      any goods or services                                                      on the refund amount
                                               provider.
      supplied before the                                                        immediately starting from
      appointed day, which                    If the full consideration for     the date after expiry of 60
      requires issuance of any                 the services as per the           days from the date of
      supplementary invoice,                   contract is not received in       receipt of application
      debit note, credit note, the             convertible foreign               (ARN) till the refund has
      rate as per the provisions of            exchange where the end            been actually credited to
      the Central GST Act, 2017                client directly pays the          the bank account of the
      will be applicable.                      outsourced service                claimant.
                                               provider, even that portion
     The provisions of tax                                                     Where the refund
                                               of the consideration would
      deduction at source under                                                  application has been
                                               be treated as receipt for
      section 51 of the Central                                                  electronically submitted
                                               exports if Reserve Bank of
      GST Act, 2017 are                                                          and the ARN is generated
                                               India has permitted
      applicable only to such                                                    on the common portal
                                               retention of part of
      authority or board or any                                                  before the issuance of this
                                               consideration outside India
      other body set up by an Act                                                circular but the application
                                               and the Indian service
      of Parliament or a State                                                   has not been received by
                                               exporter has paid
      legislature or established by                                              the jurisdictional office
                                               Integrated GST on
      any Government in which                                                    (except refund of excess
                                               consideration paid to
      51% or more participation                                                  balance in electronic cash
                                               outsourced service provider
      by way of equity or control                                                ledger), the refund claims
                                               under reverse charge.
      is with the Government.                                                    of less than INR 1,000
                                             (Circular no. 78/52/2018-GST        should be rejected and the
     Taxable value for the
                                             dated 31 December, 2018)            amount re-credited to the
      purposes of GST shall
                                                                                 electronic credit ledger. In
      include the amount of tax            A circular is issued providing
                                                                                 case of refund claims for
      collected at source (TCS)             clarification on various issues
                                                                                 amounts more than INR
      under the provisions of the           relating to refund. The major
                                                                                 1,000 the claimant should
      Income-tax Act, 1961 since            clarifications are as under:
                                                                                 be sent an electronic mail
      the value to be paid to the
                                              While submitting the              communication to submit
      supplier by the buyer is
                                               refund application, it was        the application to the
      inclusive of the TCS.
                                               previously required that the      jurisdictional office within

2
 Only the circulars having wider impact
have been covered in this tax insight.

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       15 days of receipt of the           portion of compensation            (Circular no. 79/53/2018-GST
       mail, failing which, the            cess attributable towards          dated 31 December, 2018)
       refund application would            exports, the amount of
                                                                            A circular is issued, clarifying
       be dismissed and the                credit claimed would be
                                                                             the applicable rate of tax and
       amount debited would be             treated as total credit and
                                                                             classification of various goods.
       re-credited to the credit           the refund claim would be
                                                                             Some salient clarifications are
       ledger. In case of refund           allowed of such amount in
                                                                             as under:
       applications of excess              the proportion of exports. If
       balance in electronic cash          the assessee avails the             LPG supplied in bulk,
       ledger, the amount debited          balance credit after                 whether by refiner/
       in the electronic cash ledger       reversing the initial entry          fractionator to OMC or by
       may be re-credited if there         writing off the                      one OMC to another for
       are no liabilities in               proportionate ITC of cess, it        bottling and further supply
       electronic liability register.      can again claim the refund           for domestic use will attract
       The amount should be re-            of such credit of cess and           GST @ 5% with effect from
       credited, even though the           consequently, refund.                25 January, 2018.
       return in Form GSTR 3B              (Restricted to amount of
                                                                               Concessional rate of GST
       for the relevant period has         refund computed to be
                                                                                on goods used for setting
       not been filed.                     available, if the entire
                                                                                up of Waste to Energy
                                           credit has been claimed
     If an exporter, whose                                                     Plants is available only on
                                           initially).
      output does not attract                                                   the goods covered under
      compensation cess, has not         The credit of an invoice for          chapters 84, 85 and 94, and
      claimed credit of                   previous period, which is             other products would not
      compensation cess until             claimed in subsequent                 be eligible for the
      May, 2018 and decides to            period, should be                     concessional rate of tax.
      avail credit of such                considered for the purpose            Further, the supplier needs
      compensation cess later             of computing eligible                 to satisfy himself with
      and claims refund of such           refund for the period for             requisite document from
      compensation cess in a              which such credit has been            the buyer before claiming
      single month in which the           claimed.                              concessional rate of tax.
      credit is claimed, the
                                         The credit of any inputs             Any inter-State movement
      amount of refund would be
                                          used in the business and for          of goods for provision of
      recomputed as if the same
                                          making taxable (including             service on own account by a
      was available in the months
                                          zero rated) supplies should           service provider, where
      in which refund of
                                          be considered as net ITC              neither transfer of title in
      accumulated credits due to
                                          for refund, and ITC claimed           such goods nor transfer to a
      exports has been claimed.
                                          as inputs on items such as            distinct person is involved,
      The consignments exported
                                          stores and spares                     does not constitute a supply
      on payment of Integrated
                                          (including charged off to             of such goods and it is
      GST in the past would not
                                          revenue and not                       clarified that any
      be eligible for such refund
                                          capitalised), packing                 movement on own account
      of compensation cess.
                                          materials, material                   would not be liable to GST.
     The refund of                       purchased for machinery
                                                                              (Circular no. 80/54/2018-GST
      compensation cess paid on           repairs, printing and
                                                                              dated 31 December, 2018)
      inputs would be available,          stationery items should be
      irrespective of whether the         considered for refund if          A circular is issued clarifying
      inputs are used to make an          such credit is otherwise           that the services provided by
      intermediate product (such          eligible.                          International Finance
      as electricity), which is used                                         Corporation and Asian
                                         The refund of tax paid on
      to make the final product                                              Development Bank are exempt
                                          input services and capital
      which is exported.                                                     from GST in terms of
                                          goods would not be
                                                                             International Finance
     In case of compensation             available in case of claim of
                                                                             Corporation (Status,
      cess paid on inputs used for        refund of accumulated
                                                                             Immunities and Privileges)
      domestic supply as well as          credit due to inverted duty
                                                                             Act, 1958 and Asian
      exports, where the assessee         structure.
                                                                             Development Bank Act, 1966
      only avails the credit of the

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    respectively. The exemption       the issues arising from Central          of customs under section
    will be available only to the     GST (Amendment) Act, 2018                3(1) of the Customs Tariff
    services provided by Asian        on section 140(1) of the                 Act, 1975 will be allowed.
    Development Bank (ADB) and        Central GST Act, 2017 dealing
                                                                            (Circular no. 87/06/2019-GST
    International Finance             with carry forward of credit
                                                                            dated 2 January, 2019)
    Corporation (IFC), and not to     balances. The clarifications are
    any entity appointed by or        as under:                          The takeaways
    working on behalf of ADB or
                                       The closing balance of           The Council had issued a number
    IFC.
                                        CENVAT credit pertaining         of amendments, some of which,
    (Circular no. 83/02/2019-GST        to service tax can be carried    were not announced at the time of
    dated 1 January, 2019)              forward as the legislative       the 31st GST Council meeting. The
                                        intent was not to disallow       amendment in Integrated GST
 A circular is issued, clarifying
                                        transition CENVAT credit         Rules, determining the place of
  the issues relating to
                                        in the form of service tax.      supply where a service straddles
  transactions between the
  banking companies and                The expression “eligible         multiple States is prospective in
  banking facilitators (BF)/            duties” under section            nature and it would be interesting
  banking correspondents (BC).          140(1) of the Central GST        to see the approach adopted by
  The clarifications are as under:      Act, 2017 does not refer to      the authorities for the past
                                        the condition regarding          period. The further simplification
     Banking company provides                                           of refund procedures, doing away
                                        goods in stock or to a
      services to the customers                                          with physical submission of
                                        condition regarding inputs
      and is liable to pay GST on                                        application and various
                                        and input services in
      the entire value of service                                        supporting documents is
                                        transit. It has also been
      charge or fee charged to                                           welcome, and will lead to
                                        decided not to notify
      customers, whether or not                                          reduction in procedural aspects.
                                        clauses 28(b)(i) and
      received via BF/ BC.                                               Parties claiming refund of
                                        28(c)(i) of the Central GST
     To avail exemption on             (Amendment) Act, 2018            compensation cess as exporters
      services provided in              (dealing with linking carry      will need to review the
      relation to ‘accounts in          forward of closing balance       classifications and their impact
      rural area branch’, the           of credits as per returns        on past claims which are still
      applicable conditions in          with various conditions) to      unprocessed. Further, the
      notification, i.e., the           avoid such linkage.              clarifications regarding carry
      classification of services of                                      forward of CENVAT credit of
                                       The eligible duties which        service tax etc. clear the
      BF/ BC in their respective
                                        are allowed to be carried        apprehension of the industry
      individual capacity should
                                        forward under section            regarding potential challenge to
      be covered under the
                                        140(1) of the Central GST        carry forward of service tax
      heading 9971, and the
                                        Act, 2017 would only cover       credits etc. on the basis of
      service should be with
                                        the duties listed as eligible    language as drafted. However, the
      respect to accounts in a
                                        duties in sr. nos. 1 to 7 of     clarification prohibiting the carry
      branch located in the rural
                                        explanation 1 to section 140     forward of the credit of the cesses
      area. The classification
                                        of the Central GST Act,          may see judicial challenge from
      adopted by the bank as per
                                        2017 and eligible duties and     the industry.
      the Reserve Bank of India
                                        taxes as listed in sr. nos. 1
      guidelines in this regard                                          Let’s talk
                                        to 8 of explanation 2 to
      should be accepted.
                                        section 140 of the Central       For a deeper discussion of how
    (Circular no. 86/05/2019-GST        GST Act, 2017.                   this issue might affect your
    dated 1 January, 2019)                                               business, please contact your
                                       No transition credit of
 A circular is issued, clarifying      cesses, including cess           local PwC advisor
                                        collected as additional duty

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