GST Compendium A monthly guide - January 2021 - Grant Thornton
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GST Compendium A monthly guide January 2021
Season’s Greetings! Due to COVID-19, 2020 was challenging and difficult for the trade and industry, negatively impacting overall growth of the economy. With vaccine on the anvil, 2021 should bring back life to normal. On this positive note, we share our January edition of the GST Compendium. The GST revenue collections for December 2020 recorded an all- time high of INR 1,15,174 crore, since the implementation of GST. Considering the difficulties faced by the businesses, the due date for filing the annual return for FY 2019-20 has been extended to 28 February 2021. On the judicial front, the Delhi High Court held that in the absence of any specific provision under the erstwhile service tax law, the ex- director is not vicariously/jointly liable for the service tax dues of the company. The HC observed that the GST provisions are confined to liabilities assessed under GST law only and cannot be used to impose personal liability on directors for company’s dues determined under the service tax law. In another important ruling, the Maharashtra AAAR held that the society charges collected by the society from its members for providing various facilities and benefits, shall be construed as supply under GST. The AAAR held the judgment of the apex court in case of Calcutta Club Limited shall not apply in the present case. The authorities further observed that the ruling pronounced by the appellate authorities in case of Lions club and Rotary club shall also not apply as the activities done by the club were purely administrative in nature and no benefit/facility was being provided by the club to its members. ‘Intermediary services’ is an area prone to disputes and extensive litigation. Our experts have shared their perspective on this subject. Budget is an important annual milestone for the businesses and the government to interact and exchange notes on various policy matters. Though GST is not part of the Budget, interactions with revenue authorities can be used to convey industry issues and possible resolutions. This edition shares inputs on some of the industry issues. If you have any suggestions and recommendations to be made to the government on any tax policy matters, please write to us at contact@in.gt.com Wish you a Happy & Prosperous 2021! Vikas Vasal National Managing Partner, Tax 2 GST Compendium: A monthly guide
Table of
contents
Sr. No. Contents
01 Important amendments/updates
2a Key judicial pronouncements
2b Decoding advance rulings
Key national anti-profiteering
2c
authority orders
03 Experts' column
04 Union Budget 2021-22 – industry
expectations and wish list
05 Issues on your mind
GST Compendium: A monthly guide 3
01. Important amendments/updates
CBIC notifies certain restrictions in claiming input tax credit
The Central Board of Indirect Taxes and person shall not use the amount used electronic cash ledger to pay
Customs (CBIC) has recently notified available in electronic credit ledger to liability on outward supplies that
certain changes related to claiming input discharge his liability towards output tax cumulatively makes 1% of the total
tax credit (ITC). in excess of 99% of such tax liability, liability up to the said month
in cases where the value of taxable
Key changes notified supply other than exempt supply and Filing of details of outward supplies
zero-rated supply, in a month exceeds (Form GSTR-1) to be blocked in
Restriction on claiming ITC
INR 50 lakh. certain cases:
(amendment to Rule 36(4) effective
from 1 January 2021): A registered The above restriction shall not apply • A registered person who fails to furnish
person can claim ITC in respect of in following cases: return in Form GSTR-3B for preceding
invoices or debit notes not reflected in two months (for monthly taxpayers)/
Form GSTR-01 only to the extent of 5% • Where such registered person has preceding tax period (for quarterly
(instead of 10% earlier) of total eligible paid income tax exceeding INR 1 lakh taxpayers).
credit as per the details furnished by the in each of the last two financial years
• A registered person having value of
supplier in Form GSTR-01. • Where such registered person has
taxable supply other than exempt
received refund exceeding INR 1 lakh
Restriction on use of amount supply and zero-rated supply in a
under the GST law in the preceding
available in the electronic credit month exceeding INR 50 lakh who
financial year on account of unutilised
ledger (new Rule 86B inserted is restricted as per new Rule 86B
ITC
effective from 1 January 2021): The mentioned above.
new rule provides that the registered • Where such registered person has
4 GST Compendium: A monthly guide
CBIC notifies certain changes in GST registration process
The CBIC has notified certain authentication of Aadhaar number supplies in Form GSTR-1 for one or
changes in provisions related to GST or does not opt for authentication of more tax periods, which is in excess
registrations. Aadhaar number, a notice in Form GST of the outward supplies declared by
Key changes notified REG-03 may be issued not later than him in Form GSTR-3B for the said tax
30 days from the date of submission of periods; or
Process for obtaining GST the application to carry out physical • violates the restrictions on use of
registration verification of the places of business. amount in electronic credit ledger (as
The application shall deem to be • The application for grant of per provisions of new Rule 86B).
complete after the process laid down registration shall be deemed to have
been approved if no action is taken: Suspension of GST registration
below has been followed:
1. within a period of 7 working days • Registration shall be suspended where
• Every application shall be
from the date of submission of the a comparison of the returns furnished
followed by biometric-based
application; or by a registered person, with the details
Aadhaar authentication and
of outward and inward supplies
taking photograph, if opted for 2. within a period of 30 days from
furnished, show significant differences
authentication of Aadhaar number. the date of submission of the
or anomalies indicating contravention
• Taking biometric information, application, in cases where
of the provisions of the GST law
photograph and verification of such Aadhaar authentication fails; or
other KYC documents, if opted not to 3. within a period of seven working • The said person shall be intimated in
get Aadhaar authentication done. days from the date of the receipt Form GST REG-31, electronically on
of the required clarification, the common portal or by sending an
• Verification of the original copy of
information or documents. email communication, highlighting
the documents uploaded with the
the said differences and anomalies.
application in Form GST REG-01 at Cancellation of GST registration in
Further, the said person shall be
one of the facilitation centres. certain cases
required to explain within a period of
• The registration shall be granted The GST registration can be cancelled, 30 days, as to why his registration
within 30 days of submission of if: should not be cancelled.
application, after physical verification • the registered person avails input tax
of the place of business in the • A registered person, whose registration
credit (ITC) in violation of the relevant
presence of the said person. has been suspended shall not be
provisions under the GST law; or
granted any refund during the period
• If the person fails to undergo • furnishes the details of outward of suspension of his registration.
Due date for furnishing annual return for FY 2019-20 extended
Pursuant to the recommendations of the GST Council, the Central Board of Indirect Taxes and Customs (CBIC) has extended the
due date for furnishing the annual returns for FY 2019-20 from 31 December 2020 to 28 February 2021.
Remission of Duties and Taxes on Exported Products scheme implemented from
1 January 2021
With an aim to boost exports, be transferred to other importers. website and create RoDTEP credit
Government of India has taken a ledger account. This can be done
The RoDTEP rates would be notified
major step to extend the benefit of by IECs holder who have registered
shortly and shall be applicable with
the Remission of duties and Taxes on on ICEGATE with a Digital Signature
effect from 1 January 2021 to all eligible
Exported Products (RoDTEP) scheme to Certificate (DSC).
exports of goods (subject to specified
all export goods with effect from 1
conditions and exclusions). • Exporters shall be required to furnish a
January 2021.
declaration in the shipping bill to avail
The government has also issued an
The scheme would provide refund of the benefit of RoDTEP.
advisory providing step by step guide for
central, state and local duties/taxes
users to create a RoDTEP credit ledger • Further, effective 1 January 2021, it
to exporters that were so far not being
account, generate scrips and transfer shall be mandatory for the exporters to
rebated/refunded and were therefore,
the scrips to any other user. indicate in their shipping bill, whether
placing exports at a disadvantage. The
or not they intend to claim RoDTEP on
refund would be credited in the exporter’s Key points for consideration
the export items.
ledger account with customs and can
• To avail the benefits under the Scheme,
be used to pay basic customs duty on
user has to login at the ICEGATE
imported goods. Such credits can also
GST Compendium: A monthly guide 5
CBIC issues instructions/guidelines on key areas regarding faceless assessment
With a view to enhance the efficiency faceless assessment group (FAG). • Enhancement in the monetary limit
of the process involved in faceless Therefore, it is important that the for assessment by the appraising
assessment, the CBIC has issued importers/customs brokers are advised officers: The board has decided
the following instructions/guidelines to give complete description of the to enhance the monetary limit of
in respect of key areas that require imported goods while filing the Bill of assessment of Bills of Entry by the
immediate attention1: Entry, in the first instance. appraising officers from present INR 1
• Re-assessment in accordance with • Document codes for regular lakh to INR 5 lakh effective from 21
the principles of natural justice: documents to be uploaded in December 2020. To assess the impact
The board observed many a times the e-Sanchit: The board further observed of this change, the board also decided
importers are not given an opportunity that the importers/customs brokers that 10% of the Bills of Entry now
of being heard before re-assessment are not uploading all the required entrusted to the appraising officers
of the goods. In this regard, the CBIC supporting documents to justify their would be subjected to transactional
clarified that such practice is not claim of a duty exemption notification PCA.
in conformity with the provisions of or fulfilment of a CCR requirement • Assessments in respect of liquid
law and needs to be accordingly etc., along with the Bills of Entry. In bulk cargo: The respective co-
discontinued. It is emphasised that the this regard, the board decided that convenors of the NACs assessing
process of re-assessment must be in effective from 15 January 2021, such consignments are advised to
accordance with the customs law2. these supporting documents shall be ensure that all such consignments
• Complete description of goods: mandatorily uploaded on e-Sanchit are subjected to the second check
In many instances, the importers do by the importers/customs brokers. system of assessment, with duty
not give complete description of the The illustrative list of the required being assessed on a provisional basis.
imported goods, while filing the Bill of documents along with their document Moreover, the concerned officers in
Entry. This constrains the assessing code has been provided in the the FAGs and the respective NAC
officer and delays the process of annexure to the circular. commissioners may be suitably
verification of the assessment by the sensitised to follow board’s circulars3
while carrying out such assessments.
Special measures announced to facilitate MSMEs
In line with Prime Minister’s Aatmanirbhar three financial years preceding the has been reduced to 15 working
Abhiyan to support medium, small and date of application has been relaxed days (presently one month) and
micro enterprises (MSMEs) against the to two financial years; three months (presently six months)
challenges of the COVID-19 pandemic, • The qualifying period for legal and respectively, after the submission
the CBIC has decided to relax the financial compliance has been of complete documents for priority
current accreditation process and reduced from the last three financial processing by customs zones;
reduce the compliance burden for their years to the last two financial years; • The benefit of relaxation in furnishing
Authorised Economic Operator (AEO) bank guarantee for AEOs has been
• For AEO T1 and T2 accreditation,
Programme accreditation. further relaxed to 25% from 50% and
the present annexures have been
The procedural modifications/relaxations supplanted with two annexures viz. 10% from 25% of that required to be
for AEO accreditation of MSMEs are as MEME Annexure 1 and 2; furnished by an importer/exporter,
under4: who is not an AEO certificate holder,
• For AEO T2 certification, the present
• The eligibility requirement of handling for MSME AEO Tl and MSME AEO T2
annexures for physical verification
a minimum of 25 documents during entities respectively.
have been rationalised to a single
the last financial year has been annexure viz., MSME Annexure 3. The The aforesaid relaxations shall apply
relaxed to 10 documents, subject to rationalisation has been carried out to only to an applicant who has a valid
handling at least 5 documents in each ensure the security requirements for MSME certificate from the line-ministry.
half-year period of the preceding an MSME are objective and cover the Further, the approved MSME must ensure
financial year; minimum verifiable security criteria; their continuous MSME status during
• The requirement for the applicant to the validity of its AEO certification, if
• The time limit for processing of MSME
have business activities for at least granted.
AEO T1 and AEO T2 application
1. Circular No.55/2020-Customs dated 17 December 2020
2. Sub Sections (4) and (5) of Section 17 of Customs Act, 1962
3. Circular No. 34/2016–Cus, dated 26.07.2016 and No.38/2016- Cus, dated 22.08.2016
4. Circular No. 54/2020-Customs dated 15 December 2020
6 GST Compendium: A monthly guide
CBIC issues instructions for time bound processing of duty drawback claims
To reduce pendency and improve rate be achieved. deposited into the customer account
of disposal of duty drawback claims, The CBIC has further informed that in T+2 days. The above-cited time-
the CBIC has instructed all remaining in the 5th meeting of the National limit given by NCTF for crediting duty
drawback claims to be positively Committee on Trade Facilitation (NCTF), drawback within a period of three days
disposed of by 31 March 2021 and it has been instructed that at least 90% should be strictly complied with5.
while doing so, the target of disposing of drawback should be credited within
drawback within 7 working days should three days. Further, the refund may be
GSTN issues advisory on auto population of details in Form GSTR-3B from
GSTR-1 and GSTR-2B
The Goods and Services Tax Network computed by the system on the basis threshold. Taxpayers can change/
(GSTN) has enabled a facility of auto of details of outward supplies as filed edit auto populated values in Form
population of details in Form GSTR-3B in Form GSTR-1 for the tax period. GSTR-3B.
for taxpayers on monthly basis from
• Input Tax Credit (ITC) details and • In case taxpayer has not filed Form
tax period November 2020 onwards.
details of inward supplies liable to GSTR-1 for the period, system
This facility has been made available
reverse charge are computed as per generated summary will display
for monthly filers as of now. It would
system generated Form GSTR-2B for the respective values as ‘not filed’.
be enabled for quarterly filers also
the tax period. Similarly, if Form GSTR-2B is not
in due course. Further, the table-wise
generated for the period, system
computation of the values, auto- • These systems computed auto
generated summary will display the
populated in Form GSTR-3B has been populated values are only for assisting
respective values as ‘not generated’.
made available in PDF format. The same the taxpayers in filing their Form GSTR
can be downloaded by clicking on the 3B. Taxpayers must ensure correctness • If the taxpayer has entered and saved
‘System Generated GSTR-3B’ tab. of the values being reported and filed any values in Form GSTR-3B before
in Form GSTR-3B. auto-population by the system, the
Key features of auto population
saved values will not be changed /
system are as under: • System will prompt taxpayers with an
over-written by the system.
alert in cases where the variance of the
• Liabilities (pertaining to inward
edited values from the auto-populated
supplies liable to reverse charge), are
values is higher than a particular
GSTN enables facility to file annual return in Form GSTR-9 for FY 2019-20
The GSTN has now provided a facility is under progress and is likely to be
to file annual return in Form GSTR-9 for completed soon.
FY 2019-20. The form has been enabled
In this regard, the GSTN has advised the
for those taxpayers whose table 8A6
taxpayers to ensure that all applicable
computation has been completed.
returns of the said year have been filed
Further, the GSTN has informed that the
before attempting to file the said return.
computation of the table 8A of the said
return for auto population from returns
CBIC issues standard operating procedure for verification of taxpayers
granted deemed registration
The CBIC observed that from 21 August standard operating procedure (SOP) • The proper officer shall conduct
2020 to 16 November 2020, deemed to be followed by the proper officer for physical verification of the principal
registration has been granted in many carrying out the physical verification of place of business and wherever
cases where Aadhaar authentication the persons who have been granted a possible, additional place of business,
has not been opted for or has failed. deemed GST registration as under7: indicated in GST registration Form
In this regard, the CBIC has issued a REG-01 of the concerned registrant.
5. CBIC Drawback Division instruction no. 21/2020-Customs dated 16 December 2020
6. Table 8A contains details of the total input tax credit available during the financial year from inward supplies
7. Instruction No. 4/3/2020-GST dated 27 November 2020
GST Compendium: A monthly guide 7
• During the physical verification, the proper officer shall also verify the following details:
In case the applicant intends to carry out manufacturing Electricity connection, bills paid in the relevant period
activity, whether capital goods, if required for the said
manufacturing activity, have been installed
Size of the premises – whether it is commensurate with the Whether premises is self-owned or is rented and documents relating ownership/
activity to be carried out by the applicant registered lease of the said property. In case of doubt, enquiry may also be made
from the landlord/owner of the property in case of rented/ leased premises
No of employees already employed and record of their Aadhaar and PAN of the applicant and its proprietor, partners, Karta, Directors as
employment required and the authorised signatories
Bank’s letter for updated KYC
• In addition to the physical verification, the proper officer, in the interest of revenue, would carry out the preliminary financial
verification of the registrants by seeking the following documents and carrying out its scrutiny:
ITRs of the company/LLP from the date of incorporation or The status of activity from the date of registration of all the bank account(s) linked
for last three financial years, whichever is less to registration; the same may be taken through a letter/undertaking from the
applicant
Phone number declared/linked to each of the bank accounts Quantum of capital employed/proposed to be employed. Whether out of own
may also be obtained funds or loan funds
In case of own funds, also check the audited balance sheet In case of loan funds, check the proposal submitted to the bank/financial
for previous financial year, where available, in addition to institution (FI) for approval of the loan and the maximum permissible bank
the income tax returns mentioned in (a) above. finance as per such proposal, where the amount is proposed to be borrowed
from a Bank and/ FI.
Date of completion or compliance of action by authorities under the anti-
profiteering provisions further extended
The CBIC had earlier extended the time GST law falling between 20 March extended the said time limit falling
limit for completion of compliance of 2020 and 29 November 2020 until 30 between 20 March 2020 and 30 March
any action by authorities under the November 2020. 2021 until 31 March 20218.
anti-profiteering provisions under the In this regard, the CBIC has now further
CBIC waives recording of UINs on invoices for April 2020 to March 2021 for UIN
entities
The CBIC had earlier waived the to March 2021. Such waiver shall be by the retailers/suppliers, pertaining
recording of UIN on the invoices issued subject to the condition that the copies to the refund claims from April 2020
by retailers/other suppliers were of such invoices are attested by the to March 2021. Such waiver shall be
given to UIN entities9 till March 202010. authorised representative of the UIN subject to the condition that the copies
However, the CBIC has noticed that entity and the same is submitted to of such invoices are attested by the
the issue of non-recording of UINs has the jurisdictional officer. However, the authorised representative of the UIN
continued even after 31 March 2020. CBIC has noticed that the issue of non- entity and the same is submitted to the
The CBIC has now provided waiver from recording of UINs has continued even jurisdictional officer.
recording of UIN on the invoices issued after 31 March 2020.
by the retailers/suppliers, pertaining The CBIC has now provided waiver from
to the refund claims from April 2020 recording of UIN on the invoices issued
8. Notification No. 91/2020 - Central Tax dated 14 December 2020
9. Embassy / Mission / Consulate / United Nations Organizations / Specified International Organizations
10.Vide Circular No.63/37/2018-GST dated 14th September, 2018 & corrigendum to the said circular dated 6th September 2019,
8 GST Compendium: A monthly guide
2a. Key judicial pronouncements
Director not vicariously or jointly liable for service tax dues of company –
Delhi HC
Summary aggrieved by the attachment of his distinct juristic entity14 . The distinction
personal bank account by the service between a company and its director
In response to a writ petition filed, the
tax authorities towards recovery of cannot be jettisoned unless there is
Delhi HC has held that in the absence
dues from the assessee-company12 . a specific statutory provision to the
of a specific provision and given a
• Subsequent to petitioner’s resignation contrary or till a case for lifting of the
company’s separate legal personality,
as a director, SCNs were issued to corporate veil is made out.
the petitioner even if with knowledge of
affairs of the company, is not vicariously the assessee-company through • No provision under service tax law
or jointly liable for the service tax dues the petitioner in his capacity as its makes an ex-director liable for
of the company. Further, it held that director. Further, order was issued for company’s dues: The HC highlighted
the onus of proof shall remain on the attachment of the director’s personal that though the GST law15 saves any
department/respondents to show that a bank account for recovery of service duty or tax that is due or may become
director is personally liable for the dues tax dues of the assessee-company. due under the repealed Act, including
of the company at the stage of issuing • Aggrieved, the petitioner filed the service tax law, there is no provision
show cause notice (SCN). present writ before the Delhi HC. under the service tax law making the
directors personally liable for service
Facts of the case Delhi HC’s observations and ruling13
tax liabilities of a company.
• The petitioner11 is a former director • Company is a distinct juristic
• No liability can be fastened for
of the assessee-company and is entity: The HC stated it is a well
prior period: The relevant provision16
settled principle that a company is a
11. Sanjiv Kumar Mittal Income Tax, Bombay (AIR 1955 SC 74)
12. under the Finance Act, 1994 15. Section 174(2) of CGST Act, 2017
13. W.P. (C) 5590/2020 & CM APPL.20200/2020 dated 06 November 2020 16. Section 89 of CGST Act, 2017
14. SC decision in the case of Directors. In Bacha F. Guzdar, Bombay vs. Commissioner of
GST Compendium: A monthly guide 9
under the GST law is confined only to and given a company’s separate legal
liabilities assessed under the GST law personality, the petitioner/ex-director,
Our comments
and cannot be used to fasten personal even if having knowledge of affairs
liability on directors for company’s of the company, is not vicariously or The GST law provides that in cases
dues determined under the service tax jointly liable for the service tax dues where tax dues cannot be recovered
law. No new liability can be fastened of the company. The onus of proof from a private company, the director
under the GST law for a period prior shall remain on the department/ shall be jointly and severally liable
to its enactment as it does not have respondents to show that a director for tax dues of the company unless
retrospective operation. is personally liable for the dues of he proves that the non-recovery
the company at the stage of issuing cannot be attributed to any gross
• Service tax law does not entitle
SCN18. neglect, misfeasance, or breach of
revenue to attach personal bank
accounts of directors: The service tax • Recovery cannot be selectively duty on his part in relation to affairs
law17 provides for a Garnishee Order initiated against one of the of the company.
only, i.e., provides for attachment directors: Any SCNs issued to In the present case, the Delhi HC
of funds of an assessee lying with the assessee-company during the has held that in the absence of any
third parties. The law does not entitle adjudication proceedings does not specific provision under the erstwhile
the revenue to attach personal bank amount to notice to the petitioner in service tax law, the ex-director is
accounts of a director such as the his personal capacity. Admittedly no not vicariously/jointly liable for the
petitioner, for recovery of dues of the notice was ever issued to the petitioner service tax dues of the company.
assessee company, on the assumption personally prior to the passing of the The HC observed that the GST
that money is due or may become due impugned demand notices. Therefore, provisions are confined to liabilities
from the petitioner to the assessee the HC held that the impugned order assessed under GST law only and
company. is in violation of principles of natural cannot be used to impose personal
justice. Further, it stated recovery liability on directors for company’s
• Director is not vicariously or jointly dues determined under the service
cannot be selectively initiated against
liable for dues of the company: In tax law.
one of the directors only.
the absence of a specific provision
SCN served by email instead of uploading on website is not a valid procedure -
Madhya Pradesh HC
Summary aggrieved person to avail alternative • Petitions allowed and direction
The Madhya Pradesh HC has recently remedy before the higher forum. to follow the procedure: The HC
allowed the writ petition filed by the • The petitioner filed writ petition on allowed the writ petition and stated
petitioner19 and held that the statutory the grounds that the order was never that the impugned order deserves to
procedure prescribed for communicating communicated and hence requested be struck down. Further, directed the
the SCN was not followed by the for quashing of the impugned order. revenue that with liberty, it can follow
revenue. Such SCN were communicated the procedure prescribed under law2
HC observations and decision22
to petitioner by email and were not by communicating the SCNs to the
• Statutory procedure: The petitioner by appropriate mode.
uploaded on website of the revenue.
statutory procedure prescribed for
Consequently, the impugned demand in
communicating SCN has not been
the order was struck down as the notice
followed by the revenue. Our comments
were not communicated in appropriate
mode. • No material produced by revenue:
The revenue has not provided any In the present case, the HC allowed
Facts of the case
material to show that SCNs were the petition and quashed the
• The petitioner was communicated the uploaded on the revenue’s website. The demand on order basis that the
SCN through email. revenue has stated that SCNs were notice was served vide email and not
• The petitioner filed a writ before the communicated through email to the uploaded on website.
Madhya Pradesh HC challenging the petitioner and were not uploaded on
The decision by the HC has further
principle of natural justice under the website of the revenue.
backed the principle of natural
GST law.20 • Trite principle of law: It is trite justice and specifically clarified
• The petitioner contended that the principle of law that when a particular the meaning of serving notices
provision statutorily obliges the procedure is prescribed to perform electronically. It is interesting to
revenue department to communicate a particular act then all other note that such decisions have been
SCNs/orders21 by uploading the same procedures/modes except the one given during the pandemic when
on the website of revenue so that the prescribed are excluded. This principle many SCNs have been served
aggrieved person can have access becomes more stringent when vide email. The need to upload
to the same and be aware of reasons statutorily prescribed as is the case the notice on website provides
behind the demand to enable the herein. suitable clarification on mode of
17. Section 87(b)(i) of the Finance Act, 1994 20. Rule 142(1) of Central Goods and Services Tax Rules, 2017 communication of SCN.
18. U/s 73 of the Finance Act, 1994 21. Show-cause notice/orders No. 11 and 11a dated 10 June
19. Akash Garg 2020
22. W.P. No.16117/2020 dated 19 November 2020
10 GST Compendium: A monthly guide2b. Decoding advance ruling
Supply of services by cooperative housing society to its members constitutes
supply – Maharashtra AAAR
Summary various charges from the members of • The AAR held that the activities carried
the society on monthly or quarterly out by the appellant would amount
The Maharashtra Appellate Authority
basis for property taxes, water to supply25 and accordingly would
for Advance Ruling (AAAR) has upheld
charges, common electricity, repair attract GST26.
the Maharashtra Authority for Advance
and maintenance, car parking, sinking
Ruling (AAR) order stating that various • Aggrieved, the appellant filed the
fund, non-occupancy charges, interest
activities undertaken by the appellant present appeal.
on default, insurance charges, lease
such as management, maintenance,
charges, lease rent, etc. Maharashtra AAAR’s observations
administration of the society property,
and ruling27
amounts to supply under GST. Further, it • Post introduction of GST, the appellant
held that the provision of any facilities or obtained GST registration and is • Activities done by the appellant
benefits by a club, association or society discharging GST liability on services fall under definition of business:
to its members against a subscription provided to members. The Maharashtra AAAR observed the
or any other consideration would be activities performed by the appellant
• The appellant sought an advance
construed as business liable to GST. are entirely oriented towards providing
ruling before the Maharashtra AAR
facilities, benefits or convenience to its
Facts of the case to understand whether the activities
members whether it is obtaining the
carried out by the appellant would
• The appellant23 is a registered co- conveyance of the right, title or interest
amount to supply liable to GST.
operative housing society24. It collects from the promoter or management,
23. Apsara Co-operative Housing Society Ltd. 26. Maharashtra AAR No. GST-ARA-21/2019-20/B-34 dated 17 March 2020
24. Under the Maharashtra State Co-operative Society Act, 1960 27. Maharashtra AAAR No. MAH/AAAR/RS-SK/28/2020-21 dated 05 November 2020
25. Section 7(1)(a) of the CGST Act, 2017
GST Compendium: A monthly guide 11maintenance or administration of the GST law. Therefore, the specific clause
property of the society, which are has been categorically carved out
Our comments
shared jointly by all the members of under the GST law30.
the society, or undertaking various
• Society charges can be construed Referring to the SC’s judgement
social, cultural and recreational
as consideration: In the present in the case of M/s Calcutta Club,
activities for the members. Therefore,
case, the appellant is undertaking the Maharashtra AAAR stated that
all the activities would rightly get
various activities as against the there is difference between the
covered under the definition of the
contribution called society charges provisions governing taxability of
term business28.
that can be reasonably construed as services by clubs or associations
• Activities done by appellant fall consideration31. under the erstwhile indirect tax
under scope of services: Under the laws and GST laws. The aforesaid
GST law, the term services have been • Activities of the appellant judgement was given during the
rendered very wide connation, which constitute supply: Since the erstwhile sales tax law, which is
is evident from the presence of the appellant is providing services to its different and distinct from the GST
expression ‘anything other than goods, members against the consideration laws where the term supply has
money and securities’. In view of this, it named as society charges in the been rendered a very wide scope.
is clear the activities undertaken by the course or furtherance of business, Therefore, the decision cannot be
appellant would rightly get covered therefore, the activities would be made applicable in the present
under the scope of term service29. construed as supply32. The same case.
would be liable to GST subject to Further, the AAAR has highlighted
• Provision of any facilities or the condition that the monthly
benefits by a club, association that in the case of M/s Lions Club
subscription/contribution charged and Rotary Club, the activities
or society to its members is by the society from its members is
construed as business: On a plain done by the club were purely
more than INR 7500/- per month per administrative in nature and
reading of the definition of business, member and the annual aggregate
it is understood beyond doubt that no benefits and facility was
turnover of the society by way of being provided by the club to its
the legislature wanted to bring the supplying of services and goods is also
activities of clubs, association, society members. In the present case,
INR 20 lakh or more33. the objective of formation of the
or any such body under the ambit of
society is mutual benefits, interest,
and convenience of the member.
Therefore, the activities of the
society have been held to be
supply.
Even though advance ruling is
applicable only to the applicant,
the same acts as a guiding tool for
other taxpayers with similar issues.
28. Section 2(17)(e) of the CGST Act, 2017
29. Section 2(102) of the CGST Act, 2017
30. Section 2(17)(e) of the CGST Act, 2017
31. Section 2(31) of the CGST Act, 2017
32. Section 7(1)(a) of the CGST Act, 2017
33. Clause (c) of Sr. No. 77 of Notification No. 12/2017 CT (Rate) dated 28 June 2017 as amended by Notification No. 2/2018 CT (Rate) dated 25 January 2018
12 GST Compendium: A monthly guide2c. Key national anti-profiteering
authority orders
Benefit of tax reduction cannot be passed in non-monetary terms by
supplying additional quantities - NAA
Summary • The Directorate General of Anti- purchase made by him. Further, the
Profiteering (DGAP) had also word ‘any supply’ mentioned therein
The National Anti-Profiteering Authority
stated that the base prices of 1,383 also requires that the supplier must
(NAA) has upheld profiteering in the case
goods had been increased by the pass on the benefit of tax reduction in
of a FMCG giant and held that benefit of
respondents after the rate of tax was respect of each supply made by him.
tax reduction must be passed on by way
reduced on them and hence, it had
of commensurate reduction in monetary • Methodology adopted by DGAP is
contravened the anti-profiteering
terms and cannot be passed in non- appropriate, correct, logical and
provisions35.
monetary terms by supplying additional reasonable: The NAA further stated
quantities of the products or through • The DGAP had further reported that the methodology adopted by DGAP
sales promotion schemes. the respondents had profiteered to appears to be appropriate, correct,
the extent of INR 244 crore by denying logical, reasonable, justifiable and in
Facts of the case
benefit of tax reduction to their consonance with the anti-profiteering
• The applicant had alleged that the customers. provisions. This mathematical
respondents34 had not passed on the methodology has also been approved
NAA’s observations and ruling
benefit of reduction in rate of GST by the NAA in respect of all such cases
from 28% to 18% effective from 15 • Benefit to be passed in respect of reduction in tax rate. Therefore, the
November 2017 to the recipients by of each supply: The NAA stated same can be safely relied upon.
way of commensurate reduction in the that the anti-profiteering provisions
require each customer must pass on • Respondent cannot enrich at the
prices of the products being sold by
the benefit of tax reduction on each expense of customers: The NAA
them.
34. M/s Procter & Gamble Home Products (PGHP) Private Limited, M/s Procter & Gamble Hygiene and Healthcare (PGHH) Private Limited and M/s Gillette India Limited (GIL)
35. Section 171(1) of the CGST Act, 2017
GST Compendium: A monthly guide 13stated that the respondent has denied terms. It has also failed to produce
benefit of tax reduction to the ordinary any evidence to show that they have
Our comments
customers and forced them to pay reduced their prices post reduction or
additional price and GST between 15 through discounts and by supplying
Various writ petitions have already
November 2017 and 30 September additional quantities. Hence, all claims
been filed before the HCs against
2018, when there was no COVID-19 made by the respondent in this regard
the orders pronounced by the NAA.
impact. Therefore, the respondents are incorrect and unacceptable.
The Delhi HC recently heard a
cannot enrich themselves at the
• Respondents, engaged in supply batch of writ petitions challenging
expense of the unorganised, voiceless
at SKU level, must pass benefit the constitutional validity of
and vulnerable customers and set off
at SKU level: Since the respondents the anti-profiteering provisions
their losses against the profiteered
are making supplies at the SKU level, and directed clubbing of all the
amount illegally obtained by them.
they must pass benefit on each such questions on constitutional validity
• Benefit must be passed in supply at the SKU level. It is not making in the writ petitions. It also directed
monetary terms only: The NAA supplies and charging base prices continuation of interim orders. The
stated it is evident that the benefit and tax at the HSN code or entity level HC has postponed the hearing to
of tax must be passed on by way of hence they cannot pass the benefit at January after it found that there
commensurate reduction in price in such code or entity level. was no consensus between the tax
monetary terms and cannot be passed department and the companies that
in non-monetary terms by supplying • Profiteering upheld: The NAA stated had approached the court.
additional quantities of the products. that the respondents have denied
the benefit of rate reduction to
• Respondent failed to produce their buyers of their SKUs and thus
evidence: The NAA observed that the resorted to profiteering. Hence, it has
respondent has also not shown any committed an offence for violation of
agreement to prove that they have anti-profiteering provisions.
settled the price in non-monetary
14 GST Compendium: A monthly guide03. Experts' column
Intermediary services: A pandora’s box
the concept of intermediary services still Under GST law, ‘Intermediary’ means a
Biren Vyas prevail. The intricacies of this predate broker, an agent or any other person,
Partner the GST era and originate from the by whatever name called, who arranges
service tax regime. or facilitates the supply of goods or
services or both, or securities, between
Neil Killawala Interpretational challenges: two or more persons, but does not
Manager include a person who supplies such
As per the business dictionary, an
goods or services or both or securities
intermediary is a firm or a person (such
on his own account.
as a broker or consultant) who acts as
It has been more than three years since a mediator or a link between parties to The above definition can be analysed
the inception of Goods and Services Tax a business deal, investment decision, into three parts:
(GST) but the convolutions related to negotiation, etc.
GST Compendium: A monthly guide 15Definition Analysis
a broker, an agent or any other person, • In relation to the expression ‘any other person’, the rule of ejusdem generis should be
by whatever name called applicable, which states that where general words are used in a statute after specific words,
the general word would take the colour from the specific word preceding them.
• Although the word broker is not defined in the Act, the word agent has been defined as a
person, including a factor, broker, commission agent… who carries on the business of supply
or receipt of goods or services or both on behalf of another. Thus, prima facie, an agent does
include a broker as per the definition.
• Karnataka AAR held the fundamental difference is that a broker is middleman whose job is
only to facilitate whereas an agent acts on behalf of the principal. Further, the phrase cannot
be interpreted by applying the principle of ejusdem generis. Hence, the phrase ‘any other
person, by whatever name called’ will also include persons who are not necessarily like a
‘broker’ or an ‘agent’.
• The authority has scrutinised the literal meaning of the words, thereby highlighting the
difference between them basis functional responsibilities, ignoring the similarity based on the
function they perform. At the crux, both a broker and an agent facilitate the supply between
two or more persons.
who arranges or facilitates the supply of • The prime requirement for a supply to be classified as an intermediary is that it should assist
goods or services or both, or securities or enable another supply (principle transaction) of goods or services or even securities.
• The term arranges or facilitates has not been defined in the Act. The Karnataka AAR observed
that the terms ‘arranging’ or ‘facilitation’ would cover a wide range of activities ranging from
marketing or sales promotion of the goods or services of the client, locating prospective buyers
for the client’s products or locating sources of supply of the goods or services required by
the client, price negotiation with the prospective buyer/prospective supplier, procuring sales
orders in respect of the goods or services of the client and like activities. [M/s. Infinera India
Pvt. Ltd.]
• The definition of intermediary has been tailored to cover a variety of transactions by
specifically including supply of securities given that securities are excluded from the definition
of goods. It is noteworthy that such a specific inclusion did not exist in the definition of
intermediary that was prevailing during the service tax regime.
• The key point here is whether the principle transaction is a supply or not. For example, where
the principle transaction is supply of warehoused goods to any person before clearance for
home consumption (i.e. covered under Schedule III), any service facilitating this transaction
may not be classified as an intermediary service and will have to be independently evaluated
for taxability under GST.
• The terms of consideration may also be evaluated to gauge whether a person is facilitating
supply of goods or services. In a particular case, the Mumbai CESTAT observed that, inter
alia, the consideration received is based on cost plus mark up and nowhere connected to the
main supply of goods. Hence, the company could not be termed as an intermediary. [Lubrizol
Advanced Materials India Pvt. Ltd. vs. CCE Belapur]
between two or more persons, but does • An intermediary is a person who facilitates supply between two or more persons and excludes
not include a person who supplies such such a person who makes such supply on his own account.
goods or services or both or securities on
his own account • This part of the definition supports the explanation in the first part of the definition basis which
it may be inferred that ‘any other person’ refers to person facilitating supply between two or
more persons. This is the essence of the services provided by a broker or an agent.
• In the landmark case of GoDaddy India Web Services Private Limited, it was held that the
appellant was providing support services on principal-to-principal basis to GoDaddy US and
hence is not an intermediary service.
• The Karnataka AAR held that where the applicant provided support services to a foreign entity
and had no interaction with third persons the applicant is not involved as an intermediary.
[Fulcrum Info Services LLP.]
• The Mumbai Tribunal held that since the appellant had no role in fixation of price nor negotiate
the terms between the overseas company and its clients, they could not be regarded as
intermediary. [Chevron Phillips Chemicals India Pvt. Ltd. vs. Commissioner of CGST and
Central Excise]
Thus, the scope of the definition is wide enough to envelop a gamut of services. The classification of a service provider as an
intermediary has been a contentious issue even before the GST regime.
16 GST Compendium: A monthly guideSignificance of location of recipient such intermediary services would be out requirements. The exemption provided
of service of the purview of levy of IGST. Similar will in turn entail proportionate ITC
situation was also in existence under reversal in terms of Section 17 of the
The provision for the place of supply the service tax regime. Therefore, this CGST Act, 2017.
in relation to supply by intermediaries being a consistent stand, the service
differs depending on whether the provided by the intermediary located in IT enabled services
recipient of the service is within India or India to a person outside India cannot A specific nature of service, which
outside India. be considered as an export of service. has been the focus of intermediary
Where the recipient is in India, the [Material Recycling Association of India related discussions is – IT-enabled
place of supply shall be similar to a vs. Union of India]. services (ITeS). These services broadly
vast majority of services, be determined include back-office operations, call
Exemption to certain intermediaries
basis the location of the recipient. center services, database management
Relief has been provided to certain services, etc. In a bid to resolve the
In contrast to the above, where the
intermediary services who facilitate difficulties faced in relation to taxation
recipient is outside India, the place of
supply of goods between persons of such transactions, the CBIC
supply shall be location of supplier.
located outside India. With effect from had issued a circular36. The CBIC
Owing to this provision, intermediary
1 October 2019, the CBIC exempted enumerated three scenarios explaining
transactions where the locations of the
supply of intermediary services where the classification of a transaction basis
recipient is outside India are classified
the buyer and seller of goods is located whether or not the services are provided
as an intra-state supply.
outside India. Such an exemption is by the service provider are on his own
Such restrictive provisions originate only in relation to goods and is subject account or not. They are summarised as
back to the service tax regime whereby to fulfillment of certain documentation follows:
as per Rule 9 of the Place of
Provision of Service Rules, 2012,
Scenario Classification as per the Circular
the place of provision of service
for intermediary service shall be Where back end services are provided • The supplier will not be categorised as an
deemed to be the location of the by the supplier on his own account intermediary in such a scenario.
service provider. • Even where a supplier supplies ITeS services to
customers of his clients on clients’ behalf, but
In the GST regime, the list of supplies these services on his own account,
advance rulings in relation to the supplier will not be categorised as
conundrums of intermediaries intermediary.
generally consist of a recipient of Where back end services are provided • The supplier of such services will fall under the
service located outside India. In a by the supplier but not on his own ambit of an intermediary.
recent judgment, the Gujarat High account
Court held that, the basic logic
Where a mix of services as explained in • Whether or not the supplier of such services
or inception of section 13(8) is in the above scenarios is supplied would be categorised as an intermediary will
order to levy CGST and SGST and have to be determined basis the facts and
circumstances of each case depending on the
principal service.
The circular, undoubtedly, led to numerous apprehensions due to subjective nature of the phrase ‘on his own account’. Also, the
scenarios used to dispel ambiguity led to further dubiety due to their overlapping nature. This circular was withdrawn ab-initio on
4 December 2019. Further clarification in relation to this issue is still awaited from the CBIC.
Conclusion prove to be a labyrinth due to
application of standard provisions
The classification of a given to distinctive transactions which in
transaction as an intermediary will turn lead to diverse interpretations.
require careful evaluation of the Clarifications or circulars are
circumstances and shall depend welcome from the Department,
on the facts and intricacies of which are intended to address such
each case. The issues in relation issues.
to intermediary services may
-*Melroy Sutari also contributed to this article
36. Circular no 107/26/2019-GST dated 18 July 2019
GST Compendium: A monthly guide 1704. Union Budget 2021-22 – industry
expectations and wish list
The Ministry of Finance has already The government has announced several providing exemption/incentive to the
commenced the exercise to formulate measures on digital schemes and most affected industries.
the Union Budget 2021-22 by seeking artificial intelligence to avoid face-to-face
suggestions and proposals from the transactions during this pandemic. In this segment, we have encapsulated
trade and businesses. The upcoming various burning issues that persist even
budget holds more importance than its The Budget will play an important role, after the completion of three years
predecessors as it is expected to get the especially when the industries are slowly of GST and have suggested certain
economy back on track. The COVID-19 gearing up from the pandemic. The measures to curb the litigation and
crisis has changed the modus operandi expectation from Budget would broadly reduce the tax burden/working capital
of the legislative system in many ways be around easing of compliances, blockages of the taxpayers.
and has given rise to digital economy. reducing litigation and lowering tax
burden either by reducing tax rates or
18 GST Compendium: A monthly guideMeasures to reduce litigation and tax burden
Topic Issue Recommendation
Intermediary services It has always been a matter of extensive The government should make necessary
litigation to determine the scope of amendment in the law to determine as to what
‘intermediary service’ constitutes ‘facilitation’ for the purpose of
intermediary.
For instance, in a scenario where the goods
are moving from a country outside India to
another country outside India without entering
Indian territory and the facilitation has been
provided from India, then the same should not
be treated as ‘intermediary service’ and GST
should not be levied.
Recently, the government had issued a
clarification on the subject matter and the
same was withdrawn subsequently. The
revised clarification is still awaited that needs
to be issued to avoid future litigations
Transitional credits Due to technical glitches on the GST portal, The matter is under litigation before
the taxpayers were unable to claim transitional various HCs and currently, the same is
credits in Form TRAN-1. In addition, there is lack being challenged before the apex court. It
of clarity on the timelines provided under the is imperative to derive a consensus at the
GST law to claim these credits earliest, to avoid unwarranted litigation.
Anti-profiteering provisions The NAA was formulated under the GST regime Detailed guidelines/methodology must be
to ensure that the benefit of reduction in the prescribed for determining the profiteered
rate of tax on any supply of goods or services amount to be passed on to the consumer
or the benefit of the ITC has been passed on
to the recipient by way of a commensurate
reduction in prices. However, the mechanism/
methodology to determine the quantum
of benefits to be passed on has not been
prescribed under the law. As a result, there
has been litigation and imposition of penalty
by NAA
GST rates of software Transfer of intellectual property rights (other The software should also be included in the
than software) has been classified under the 12% tax slab instead of present 18% tax slab
tax category of 12% whereas software is taxed
at the rate of 18%
Use of logo / group name GST department, in its various investigations, Issuance of clarification from the tax authorities
has raised that use of ‘group name’ or ‘logo’ on this aspect would remove ambiguity
(owned by foreign holding/subsidiary) by
Indian company would be deemed to be
‘supply’
Year-end provisional accounting entry - In case of related party transactions, year-end Suitable amendment in the law should be
related party transactions provisional entries are made for expenses in made or due clarification should be issued
the books of accounts. However, those are only that there should not be any GST liability for
provisional entries and it should not trigger any such provisional entries made in the books of
GST liability accounts
Land value deduction The GST provisions prescribes for abatement/ The government may consider increasing the
deduction of value of land to the extent of one abatement to actual value of the land or at
third of the total amount charged for supply least one-half of the value of supply
for arriving at the final taxable value for levy
of GST
Levy of interest on ITC availed in case of Proviso to Section 16(2) of CGST Act requires GST council had proposed to not levy interest
nonpayment of consideration to vendor levy of interest on ITC availed in case of non- on such reversal of input tax credit, however
within 180 days payment of consideration to the vendor within the same was not part of the GST amendment
180 days bill passed. Therefore, it is recommended that
interest levy on such delay should be done
away with.
RCM liability on service recipient in case In case of sponsorship, the recipient of service The RCM liability should be made applicable
of sponsorship services is liable to pay GST under RCM. only incase when the service provider is not a
registered entity. In all other cases, where the
service provider is a registered entity under
GST, the same should be made applicable
under forward charge basis instead of reverse
charge
GST Compendium: A monthly guide 19Measures to reduce working capital blockages
Topic Issue Recommendation
GST payment – duty credit scrips Payment of GST through duty credit scrips To allow payment of GST through duty credit
scrips
Payment of social welfare surcharge Payment of SWS through duty credit scrip Clarification on payment of SWS when the
(SWS) import duties are paid by utilisation of duty
credit scrips
Measures in relation to input tax credit (ITC)
Topic Issue Recommendation
ITC on immovable property Section 17(5)(d) of the CGST Act specifically ITC should be granted in case of renting of
restricts ITC on construction of immovable commercial property as disallowance leads
property on its own account even if it is used to additional cost/financial burden for the
in course or furtherance of business taxpayer
Non reversal of ITC on dividend income Dividend income requires ITC reversal resulting Dividend income should be excluded from
in increase in costs for the business. Dividend exempted supplies, for alignment with
income is exempt supply under GST. As per the rules of excluding interest income for
Section 17 of the CGST Act, exempted supplies proportionate reversal for input credit since
are liable for proportionate ITC reversal interest and dividend both are financial
income
ITC admissibility in GST in case of As per Section 135 of the Companies Act, Given that CSR is mandated under Statute
expenses booked towards CSR activities 2013, a company is required to spend at least and also in order to encourage CSR spends
2% of its average net profit for the immediately in excess of mandated limits, it would
preceding 3 financial years on Corporate be appropriate if the taxpayers are not
Social Responsibility (CSR) activities subject burdened with additional cost of input taxes
to its turnover /net worth/ net profit crossing while undertaking CSR activities. A suitable
prescribed limits. clarification in this regard and /or an
Accordingly, company incurs expenses for amendment in the CGST Act, may be carried
procurement of goods and services while out as deemed fit
undertaking CSR activities. Since such supplies
are procured in course of business activities
and as mandated by Statute, availment of ITC
of GST charged on such supplies under Section
16(1) should not be in dispute
However, there is lack of clarity as to whether
company will be called upon to reverse the
ITC on the ground that the company has
provided such goods and services to the
recipient of such CSR activity without charging
any consideration and thereby, using such
goods and services in undertaking non-taxable
supplies, which will be subject to provisions
contained in Section 17(2) of CGST Act.
Availment of ITC on advance payments CGST Act, 2017 provides for liability of GST on A relaxation is sought to allow the recipient of
advance payments received by the supplier services, the input tax credit on payment of
of services under Section 13 (2). However, the advances. Alternatively, the liability of making
aforesaid legislation restricts the periodicity payment of GST on advances received for
of availment of credits to receipt of services, supply of services may be removed as in line
which would be at a later date as mandated with the exemption given from payment of GST
under Section 16(2)(b). on advance received for supply of goods.
Distribution of free samples/ free supply It is a common business practice especially in Such free samples/free supply forms part of
Pharma sector to distribute free samples as a the cost of the company and are incurred in
part of its advertising and business promotional the course and furtherance of business.
activity. Even for all the other businesses,
promotion and advertising of business by way
of free supply is a common business strategy.
Section 17(5)(h) of the CGST Act, which relates
to blocked credit provision disallows the credit
for goods disposed of by way of gift or free
samples
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