GST Compendium A monthly guide - November 2020 - Grant Thornton Bharat
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GST Compendium A monthly guide November 2020
Editor’s note Table of
The recent GST collection numbers reflect an uptick in the
contents
economy. It is, however, yet to be seen whether this is purely
due to pent up demand and festive season, or this trend
will continue in the coming months. Nevertheless, the GST
collection of INR 1.05 lakh crore in October is a positive sign, Sr. No. Contents
as for the first time in this financial year, the collections have
crossed INR 1 lakh crore mark.
The government has further extended the timeline for
submission of annual returns and GST audit report for FY 01 Important amendments/updates
2018-19 until 31 December 2020. This provides additional
time for businesses to meet their compliance requirements.
On the judicial front, the division bench of the Madras High 2a Key judicial pronouncements
Court has reversed its earlier judgment of single bench,
thereby disallowing the transitional credit of cesses, such as
Education Cess, Secondary and Higher Education Cess and
Krishi Kalyan Cess, stating it to be a dead claim and not a
2b Decoding advance rulings
vested right. This could have a major impact on the positions
taken by businesses, therefore, the matter is likely to be
litigated further.
Key national anti-profiteering
In another ruling by the Karnataka Authority of Advance 2c
authority orders
Ruling (AAR), it has been held that the services provided by
liaison office in India to its foreign head office constitute
‘supply’ as both liaison office and head office are ‘distinct
persons’ under the GST law. Interestingly, there are contrary 03 Experts’ column
rulings on this matter and clarity is required to avoid
unnecessary disputes and litigation on this subject.
This edition also covers an interesting topic of cross-charges 04 Issues on your mind
vs. input service distributor (ISD) under the GST regime, with
a focus on the taxability of services provided by head office
to branch office and also touches upon the valuation aspect
along with the requirement of ISD registration.
We hope you will find this edition informative and interesting
to read.
Vikas Vasal
National Managing Partner, Tax
2 GST Compendium: A monthly guide GST Compendium: A monthly guide 3
01 Important amendments/updates Form GSTR-3B to be extended until
31 March 2021. Further, the GST
law to be amended to make the
• Declaration of HSN/SAC code
in invoices and Form GSTR-1:
Taxpayers shall be required to declare
• Provision for furnishing nil
return in Form CMP-08 through
SMS: Amendment in the GST
return in Form GSTR-1 and Form Harmonised Commodity Description laws have been recommended to
GSTR-3B as the default return filing and Coding System (HSN) for goods include provision for furnishing nil
system. and Services Accounting Code (SAC) return in Form CMP-08 (return by
for services in invoices and in Form Composition Dealer) through short
• Small taxpayers to file quarterly
GSTR-1, from 1 April 2021, as under: messaging service (SMS).
returns: The GST Council has
recommended that, with effect from Category of Disclosure • Refund disbursal in validated
1 January 2021, small taxpayers taxpayers requirement bank account: With effect from
(having aggregate annual turnover 1 January 2021, refund to be
Aggregate annual 6-digits of HSN/
of less than INR 5 crore) should be turnover above INR SAC for all supplies disbursed in a validated bank
allowed to file returns on a quarterly 5 crore
basis with monthly tax payments. account linked with the Permanent
Aggregate annual 4-digits of HSN/ Account Number (PAN) and
Further, such taxpayers should also
turnover up to INR SAC code for B2B Aadhaar of the registrant.
be given an option to pay 35% of the 5 crore supplies
net cash tax liability of the last quarter
using an auto-generated challan for All taxpayers Government to
notify 8-digit HSN
the first two months of the quarter.
on notified class of
supplies
CBIC notifies various recommendations of 42nd GST Council meeting
Pursuant to the decisions taken by the 42nd GST council meeting, the Central Board of Indirect Taxes and Customs (CBIC) has
issued various notifications for implementation of these recommendations.
Timeline for filing return in Form GSTR-1 Declaration of HSN code in invoices and Form GSTR-1
Category of taxpayer Period Timeline Effective from 1 April 2021, taxpayers shall be required to
Person with aggregate October to December 13 January 2021 declare Harmonised System of Nomenclature (HSN) Code for
turnover of up to INR 1.5 2020 goods in invoices and in Form GSTR-1 as under:
crore*
January to March 2021 13 April 2021 Aggregate turnover in Number of digits of HSN Code
preceding FY
Person with aggregate October 2020 to For each
turnover of more than INR March 2021 month, until Up to INR 5 crore Four
1.5 crore* the 11th day No requirement to mention
of the month HSN Code in tax invoice
42nd GST council meeting: Key recommendations succeeding
such month
issued in respect of supplies to
unregistered persons
* in the preceding financial year (FY) or the current FY More than INR 5 crore Six
The GST Council, in its 42nd meeting enhance ease of doing business and supplier’s GSTR-1, through the
held virtually on 5 October 2020, improve the compliance experience, newly developed facility in Form
Timeline for filing return in Form GSTR-3B for each of the
provided various recommendations the GST Council has approved the GSTR-2B, shall be made available
months from October 2020 to March 2021
regarding trade facilitation, following roadmap for return filing: for taxpayers filing monthly returns.
simplification of return filing process, For taxpayers filing quarterly return, Category of taxpayer New due dates
− Due date for filing quarterly
reducing compliance burden, etc.1 this facility shall be available from 1
return in Form GSTR-1: Effective Aggregate turnover of up to INR 5 crore in previous 22nd of the next
April 2021.
Key recommendations from 1 January 2021, the due financial year having principal place of business month
date for furnishing quarterly return − Mandatory filing of return in Chhattisgarh, Madhya Pradesh, Gujarat,
• Extension of levy of Compensation Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu,
in Form GSTR-1 to be revised to in Form GSTR-1 before Form
Cess: The GST Council has Telangana, Andhra Pradesh, the union territories
13th of the month succeeding the GSTR-3B: To ensure auto-
recommended extending the levy of of Daman and Diu and Dadra and Nagar Haveli,
quarter. population of ITC and auto-
Compensation Cess beyond the initial Puducherry, Andaman and Nicobar Islands or
calculation of liability in GSTR-3B, Lakshadweep
transition period of five years, i.e., − Auto generation of return in
it would be mandatory, from 1 April
beyond June 2022. The extension shall Form GSTR-3B from Form Aggregate turnover of up to INR 5 crore in 24th of the next
2021, to file Form GSTR-1 before
be for such period as may be required GSTR-1: From 1 January 2021, previous FY having principal place of business in month
Form GSTR-3B.
to meet the revenue gap. facility to auto-calculate liability Himachal Pradesh, Punjab, Uttarakhand, Haryana,
from GSTR-1 shall be made − Continuation of present return Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal
• Simplification of return filing to Pradesh, Nagaland, Manipur, Mizoram, Tripura,
available. Further, facility to auto- filing system: The present return
reduce taxpayer’s compliance Meghalaya, Assam, West Bengal, Jharkhand
populate input tax credit (ITC) from filing system in Form GSTR-1 and
burden: With a view to further or Odisha, the union territories of Jammu and
Kashmir, Ladakh, Chandigarh or Delhi
1. Various recommendations have already been notified and given effect by CBIC Aggregate turnover of above INR 5 crore in 20th of the next
previous FY month
4 GST Compendium: A monthly guide GST Compendium: A monthly guide 5
Other key notifications
• Option to file annual return for • Provision for furnishing nil return in
small taxpayers: Annual return Form CMP-08 through SMS: In line
in Form GSTR-9 and reconciliation with the facility to file nil return in Form
statement in Form 9C shall be optional GSTR-1 and GSTR-3B through SMS, a
for small taxpayers whose aggregate registered person who is required to
turnover is less than INR 2 crore and furnish a nil statement in Form GST.
who have not filed the said return
before the due date for FY 2017-18, CMP-08 for a tax period can also
2018-19 and 2019-20. furnish the same through a SMS using
the registered mobile number. The
return as well as the details of outward
supplies or statement shall be verified
by a registered mobile number based
one-time password (OTP) facility.
Due date for filing Form 9 and Form 9C for FY19 extended
Pursuant to the GST Council’s The government has been receiving to comply. Accordingly, it has now
recommendations, the CBIC had earlier representations from the trade and decided to further extend the due date • Applicability of earlier reconcile the ITC availed in their furnishing of the statements in Form
extended the due date for electronically industry to extend the due date for filing for filing the annual return (in Form 9) clarifications: Clarifications issued Form GSTR-3B for the said period GSTR-1 for September 2020.
furnishing the annual return for the FY the annual return and reconciliation and reconciliation statement (in Form earlier in respect of restriction on ITC with the invoices uploaded by their
2018-19 (FY19) to 31 October 2020. statement for FY19 beyond 31 October 9C) for FY19 until 31 December 2020. shall remain applicable except for the suppliers of the said months. This • Reversal of excess ITC availed:
2020 to enable businesses and auditors cumulative application as prescribed reconciliation should be done till the The excess ITC availed arising out
for February-August 2020. due date of furnishing Form GSTR-1 of reconciliation during this period,
for September 2020. if any, is required to be reversed in
Ministry of Finance issues press release clarifying certain aspects of Annual • Reconciliation of ITC with details Table 4(B)(2) of Form GSTR-3B, for
of invoices uploaded by suppliers: • Cumulative ITC availed to not September 2020.
Return for FY19 Taxpayers should first ascertain exceed 110% of cumulative
the details of invoices uploaded by eligible credit: The cumulative • Failure to do reversals shall
Various representations were received amount to availment of ineligible
their suppliers for the periods of amount of ITC availed for the said
stating that the auto-populated Form ITC: It has been clarified that failure
February, March, April, May, June, months in Form GSTR-3B should not
GSTR-9 for FY 2018-19 also includes to reverse such excess availed ITC on
July and August 2020, until the due exceed 110% of the cumulative value
the data for FY 2017-18 (FY18). Further, account of cumulative application
date of furnishing of the statement of the eligible credit available in
there was no mechanism to split and would be treated as availment of
in Form GSTR-1 for September 2020 respect of invoices or debit notes, the
disclose values of two years separately ineligible ITC during September 2020.
(as reflected in Form GSTR-2A). details of which have been uploaded
in Form GSTR-9 to be filed for FY19, as
Thereafter, they are required to by the suppliers till the due date of
the information for FY18 has already
been furnished in the annual return
filed for FY18.
The Ministry of Finance has issued a E-way bill generation blocked from 15 October 2020 for GSTR-3B defaulters
press release clarifying the same:
• Values for only FY19 to be reported: • No adverse view in case of variations: of FY19 by including the details of Recently, the GST law was amended to Pursuant to the GST Council’s bill generation facility will be blocked on
The taxpayers are required to report In cases where there are variations supplies and ITC pertaining to FY18, provide that taxpayers will not be able recommendation, the Goods and the EWB Portal (whether as consignor
only the values pertaining to FY19. in returns for taxpayers who have no adverse views would be taken. to generate e-way bill if they did not file Services Tax Network (GSTN) has now or consignee or by transporter) after 15
Accordingly, values pertaining to already filed their annual return their Form GSTR-3B for two successive notified that if the GST identification October 2020.
FY18, which may have already been months. In this regard, the GST Council number (GSTIN) associated with the
reported or adjusted are to be ignored. recommended this provision be respective PAN having AATO of over INR
made applicable to taxpayers whose 5 crore, has failed to file their return
aggregate annual turnover (AATO) is in Form GSTR-3B for two or more tax
CBIC issues clarification on cumulative ITC restriction applicable for more than INR 5 crore. periods, up to August 2020, their e-way
February-August 2020
Considering the COVID-19 pandemic, However, such restriction shall apply The CBIC has issued certain
the CBIC had clarified that restriction cumulatively for the said period. Further, clarifications regarding cumulative
in availing ITC at the rate of 10% in Form GSTR-3B for September 2020, ITC restriction applicable for February-
(in case of certain invoices) shall cumulative adjustment of ITC for the August 2020 as under:
not apply to ITC availed in Form said months shall be required to
GSTR-3B for February-August 2020. be made.
6 GST Compendium: A monthly guide GST Compendium: A monthly guide 7
COVID-19: Date of compliance and completion of action under specified
indirect tax laws extended
To provide relief to businesses due • Completion of proceedings The revised due dates are as under: entry when such goods are returned to Procurement of goods from Free
to ongoing COVID-19 pandemic, • Issuance of any order, notice, the principal/owner. Trade and Warehousing Zones
Current Current Revised Revised Our comments
the government had earlier provided intimation, notification or sanction or (FTWZ)
period due dates period due date • In case the goods are exported after
extension of various statutory and approval by any authority It has been clarified that there are The introduction of the MOOWR
covered job work from the customs bonded
regulatory compliance deadlines. The covered no restrictions on sourcing goods by has been a welcome and
• Filing of any appeal, reply or warehouse, the import duty on the
CBIC has futher extended due dates 20 March 30 20 March to 31 December a customs bonded warehouse unit. much-appreciated move by the
application warehoused goods used for job work is
of following actions under the Central to 29 September 30 December 2020 Accordingly, such units may source government. It has helped in
• Furnishing of any report, document, September 2020 2020 not required to be paid.
Excise Act, 1944, Customs Act, 1962 and capital goods or inputs from a Special streamlining manufacturing and
return or statement 2020 September
Service Tax Act, 1994: 2020 Economic Zone or a FTWZ following the other operations within a customs
applicable procedures. bonded warehouse.
Accordingly, the due date for compliance
While the government has made
and due date for completion of action,
honest efforts to address most
falling within 20 March 2020 to 30
issues, one challenge that still
December 2020, under specified indirect
requires attention is allowing units
tax laws stands extended to
to compute and pay duty on the
31 December 2020.
depreciated value of capital goods
(cleared from the warehouse), which
were used in the manufacturing
operations.
We hope the government will
address this challenge to ensure
seamless implementation of the
scheme to achieve its full potential.
Government issues clarification on Manufacturing and Other Operations in
Warehouse Regulations, 2019
Government issues FAQs on MOOWR
The customs law provides that the owner be subject to the following conditions: full force notwithstanding the removal
of any warehoused goods may carry of goods for job work.
• Imported goods should be first
on any manufacturing process or other • In case of violation of any provisions, In MOOWR, which prescribes the • Physical control: There is no physical − Capital goods: The import duties
deposited and duly accounted for
operations, in relation to such goods, in the goods shall be deemed to be procedure, documentation and control over a licensed unit on a day- stand deferred till they are cleared
in the customs bonded warehouse
the warehouse. cleared for home consumption on compliances to be followed, the to-day basis. Such units will however from the warehouse for home
before sending for job work. Further,
In this regard, the government had the goods sent on job work should be the date of clearance of the goods government has issued frequently asked be subject to risk-based audits. consumption or are exported.
issued the Manufacturing and identifiable/correlated after sending for job work and the applicable question (FAQs). Some of the key aspects
• Validity of license: The license and − Goods other than capital goods:
Other Operations in Warehouse on job work. duties, interest and penalties shall be covered by the FAQs are as under:
permission granted is valid unless it The import duties stand deferred
Regulations, 2019 (MOOWR) computed accordingly. • Eligible persons: A person who has
• After completion of job work, the goods is cancelled or surrendered. Thus, no till they are cleared from the
prescribing the procedure, can be brought back to customs The government has also decided been granted a license for operating a renewal of the license is required. warehouse for home consumption,
documentation and compliances to be bonded warehouse or exported/ to allow moulds, jigs, tools, fixtures, warehouse in accordance with Private
• Import of goods without duty and no interest is payable on duty.
followed by the owner of warehoused cleared to Domestic Tariff Area (DTA) tackles, instruments, hangers, patterns Warehouse Licensing Regulations,
goods who carries on such process or and drawings to be sent to job worker’s 2016 shall be eligible to apply for payment: A licensed unit can import
from the job worker’s premises. In − Finished goods: In case finished
operation in the warehouse. premises for use in job work subject to manufacturing and other operations capital goods and warehouse them
case of clearance from job worker’s goods are exported, the duty on the
due accounting of such goods by the in a bonded warehouse. Such person without payment of duty.
The government has been receiving premises, the date of removal from imported inputs stands remitted i.e.
job worker’s premise shall be deemed customs bonded warehouse. should be a citizen of India or have an • Duty deferment: Manufacture they will not be payable.
several representations and
to be the date of removal from the entity incorporated or registered in and other operations in a bonded
recommendations from the trade and Job work done at the customs
warehouse. India. warehouse is a duty deferment
industry with respect to certain practical bonded warehouse unit
challenges being faced due to the • Scrap, waste or remnants generated • Eligibility of public bonded scheme. Thus, both Basic Customs
• It has been clarified that a customs Duty (BCD) and Integrated Goods and
MOOWR. To address the challenges, the during the job work shall be either warehouse: Currently,
bonded warehouse unit, being a GST Service Tax (IGST) on imports stand
government has issued clarifications. returned to the customs bonded manufacturing, and other operations
registered unit, can perform job work deferred as under:
warehouse or cleared from job worker’s in a bonded warehouse are allowed
operations and shall maintain due
Goods sent on job work from premises on payment of applicable only in a private bonded warehouse.
accounting of such job work as per the
customs bonded warehouse duties.
GST law.
It has been clarified that only ‘inputs’ • The procedure and timeline for return
of goods sent on job work will be in line • In case any imported warehoused
are allowed to be sent out for job work.
with the GST provisions. goods are consumed during the job
Capital goods can be sent on job work
work process, duty shall be paid on
for repair, with the permission of the • In such cases, bond executed by the
such goods by filing ex-bond bill of
bond officer. Further, the job work shall customs bonded warehouse stays in
8 GST Compendium: A monthly guide GST Compendium: A monthly guide 9
Government invites data from exporters for RoDTEP scheme IEC registration on newly revamped DGFT platform
The Union Cabinet had approved a Data for export items falling under following chapters of the Customs Tariff Act, 1975 With an objective to provide paperless, Among other services, the new using a digital signature certificate or
scheme for Remission of Duties and Taxes is required to be submitted: digital, efficient and transparent online system will have a two-way Aadhaar based e-sign.
on Exported Products (RoDTEP) to boost services to the exporters and importers, communication between the DGFT
exports and employment generation Chapter 86 Railway or tramway locomotives, rolling stock and parts thereof; and to further the overall goal of Trade and the exporter/importer and would • IEC auto validation process: Post
railway or tramway track fixtures and fittings and parts thereof; linking of the IEC, the IEC holders are
in various sectors in March 2020. It facilitation and Digital India, various allow the applicant to apply, monitor
mechanical (including electro-mechanical) traffic signalling requested to complete the IEC auto-
was announced that as and when the equipment of all kinds revamped Directorate General of the status of applications, reply to
rates under the RoDTEP scheme were Foreign Trade (DGFT) services are being deficiencies, raise queries, etc. validation process by using ‘Modify
announced for a tariff line/item, the Chapter 88 Aircraft, spacecraft and parts thereof planned to be introduced in to the new IEC’ process after logging in.
In this regard, the DGFT has announced
benefits under the Merchandise Export Chapter 89 Ships, boats and floating structures DGFT IT platform. The platform would be
certain action points for the trade and • Profile updation: IEC holders are
from India Scheme (MEIS) on such tariff accessible through the existing website:
industry as under: further required to update the Profile
line/item shall be discontinued. https://dgft.gov.in.
The format has been hosted on the It has been stated that in absence of details using the ‘Manage Profile’
• User ID creation: All Import Export
The Government has now formed a official website and can be accessed at such data, the rates for these items The online processes relating to entire option.
Code (IEC) holders are required to
RoDTEP Committee. The committee https://www.cbic.gov.in/htdocs-cbec/ under the RoDTEP scheme may not be lifecycle of Advance Authorisation
create login IDs in advance through • Help: For further guidance, the IEC
has been tasked to determine the rates home_links/RoDTEP-Committee. The notified. scheme, Export Promotion Capital
an online registration process using holders can refer to the Help Manuals
of refund for items covered under the filed form is required to be sent via email Goods scheme (EPCG) and Duty-Free
mobile number/email ids. The same & FAQs available under https://dgft.
scheme. at atreyee.devroy@gov.in and shakti. Import Authorisation scheme (DFIA)
will be authenticated by the process gov.in > Learn > Application Help &
singh1981@gov.in. including their paperless Exports
In this regard, the government has of OTP/email-based authentication FAQs. For any further assistance they
Obligation Discharge (EODC) to be
requested members of trade, Export process. can raise a ticket for complaints,
rolled out soon. In addition to these
Promotion Councils (EPCs) and industry suggestions or feedback using the
processes, Norms Fixation, Free Sale • Linking of login IDs to IEC: Users
associations, which are involved in export feature under https://dgft.gov.in >
& Commerce Certificate, Steel Import would be required to link their login
of certain items to submit data for their Services or call the toll-free Helpline
Monitoring System (SIMS), Import Ids to their specific IEC. The process of
respective export items. This will enable number 1800-111-550 or email to
Licensing and some other processes have linking would be available post login
the RoDTEP Committee to work out dgftedi@nic.in.
also been proposed to be rolled out soon. through an authentication process
suitable rates for these export items.
Extension of validity of Rebate of State and Central Taxes and Levies Scheme Duty drawback or other benefits available for supplies from Domestic Tariff
(RoSCTL) Area (DTA) to foreign suppliers in Free Trade and Warehousing Zone (FTWZ)
The goods imported into India against The CBIC recently amended the Special As per the amended rules in case of drawback or any other similar benefit
a duty credit scrip issued under the Economic Zones Rules, 2006 effective supplies from Domestic Tariff Area Scheme shall be available where the
Scheme for Rebate of State and Central from 23 October 2020. (DTA) to foreign suppliers in Free Trade payments are made in foreign currency
Taxes and Levies (RoSCTL scheme) have and Warehousing Zone (FTWZ), the by the foreign supplier to DTA.
been granted exemption from Basic
Customs Duty (BCD) and additional
duty2 leviable under the Customs Tariff
Act, 1975 where the order permitting
clearance and loading of goods for MP Amnesty Scheme: Settlement of arrears under indirect tax legislation
exportation3 has been made until 31
March 2020.
Government of Madhya Pradesh has Key features
In this regard, the CBIC has notified that promulgated an ordinance called
such exemption shall be available until Enactments covered
the Madhya Pradesh Karadhan
31 March 2021 or until such date Adhiniyamon Ki Puranee Bakaya The scheme applies to orders passed under following acts:
the RoSCTL scheme is merged with Rashi ka Samadhan Adhyadesh,
the Remission of Duties and Taxes on 2020 for settling outstanding tax dues
Exported Products Scheme (RoDTEP The Madhya Pradesh General The Madhya Pradesh Vanijiyik Kar Adhiniyam, 1994
pertaining to the period prior to the Sales Tax Act, 1958
scheme), whichever is earlier. introduction of the GST. The scheme
is intended to clear backlog of arrear The Madhya Pradesh Vat Act, The Central Sales Tax Act, 1956
2002
demands. It came into force from 26
September 2020. The Madhya Pradesh Hotel The Madhya Pradesh Vilasita Manoranjan, Amod
Tatha Vas Me Vilas Vastuon Par Evam Vigyapan Kar Adhiniyam, 2011
Kar Adhiniyam, 1988
2. Sub-sections (1), (3) and (5) of Section 3 of Customs Tariff Act
3. Section 51 of the Act
10 GST Compendium: A monthly guide GST Compendium: A monthly guide 11
Eligibility Other key aspects Various timelines under the scheme
Under the scheme, an application • The applicant desiring settlement Milestone Timeline
can be made: of old arrears shall apply to the
competent authority within 120 Incomplete or incorrect Notice shall be issued within 30 days of filing of the application
• in respect of arrear tax, penalty, days from 26 September 2020, application to rectify the same. Rectification to be made within a period of
interest or fine in dispute, which has in the prescribed form along with
seven days from the date of service of such notice
been determined as payable under proof of payment of requisite Settlement order Order shall be passed within 75 days of filing the
any proceeding in respect of any settlement amount. application
statutory order for which settlement is
desired; Application remanded Order to be passed within 30 days of passing of order of
• The applicant shall produce
for reconsideration appeal.
application regarding withdrawal
• pertaining to any order of assessment of any pending relevant appeal,
or reassessment relating to any period revision or any petition and shall Appeal by applicant Within 30 days of date of service of order
ending on or before 31 March 2016; produce appropriate evidence of against settlement
and doing so before the competent order
• which is due for payment as on the authority within seven days of Disposal of appeal Within 60 days from date of filing appeal
date of filling application. receiving the settlement order.
Revocation of order** Within five calendar years of passing of settlement order
• No amount shall be refunded
** If the applicant has obtained the benefit of settlement, by suppressing
from the amount deposited by the
any material information or particulars or by furnishing any incorrect or
applicant as settlement amount
false information or, if any suppression of material facts, concealment of any
or additional settlement amount.
particulars are found in any other proceedings under the relevant acts.
Benefits
• In case an application is rejected,
the amount/additional amount
Arrears Settlement of arrears of settlement deposited by the
applicant shall be adjusted Our comments
Amount related to Higher of: 10% of interest demanded to be paid
statutory certificates /
against the old arrears of the
• 100% of balance arrears of tax after applicant and shall not be Introduction of amnesty schemes take maximum advantage of such
declarations
adjusting certificates/declarations in refunded. to fast-track clearance of pending one-time opportunity to settle their
possession, or litigations is a welcome move that past disputes and reduce pending
• arrears already paid benefits both, the taxpayers and litigation.
Undisputed amount Balance amount reduced by amount • 10% to be paid - if payment made within 60 days* the government. Accordingly, it
already paid is imperative for businesses to Recently, Government of Bihar had
• 20% to be paid - if payment made after 60 days but within
90 days* undertake due evaluation and also introduced an amnesty scheme
in line with many other states.
• 30% to be paid - if payment made after 90 days but within
120 days*
Disputed amount 50% of tax demanded • 5% to be paid - if payment made within 60 days*
• 10% to be paid - if payment made after 60 days*
*of coming into force of this Ordinance i.e., 26 September 2020
12 GST Compendium: A monthly guide GST Compendium: A monthly guide 13
2a Key judicial pronouncements will be eligible to be carried forward
and adjusted against GST output
tax liability. Apparently, EC, SHEC
the petitioner to claim such transition
and set off against such output GST
liability.
• Revenue’s appeal allowed: The HC
allowed revenues appeal and held that
the petitioner was not entitled to carry
and KKC are absent from the seven forward and set off unutilised EC,
• Claim of unutilised cesses became
categories specified under the GST SHEC and KKC against GST output
dead claim: The unutilised EC, SHEC
law. liability.
and KKC in the hands of the petitioner
• Court cannot include cesses in had become dead CENVAT Credit
eligible duties or taxes: The court, by claim in the year 2015 itself with
any intendment or implication, cannot these levies being dropped by the Our comments
include the aforesaid three types of Finance Act 2015. Therefore, there is
Availability of transitional credits
cesses under eligible duties and taxes no question of it being claimed as a
in respect of unutilised cesses
or eligible duties to be carried forward right to be carried forward and set off
pertaining to the erstwhile indirect
and transitioned. after 1 July 2017 against output GST
tax regime has been a matter of
liability.
• Mere accounting does not confer extensive litigation since beginning.
right to claim credits: The taking • Cesses were not subsumed under
The single judge bench of the
of the input credit in respect of such GST: The three types of cesses were
Madras HC had earlier allowed such
cesses in the electronic ledger after not subsumed in the new GST laws,
transitional credits of cesses stating
2015, after the levy of cess itself either by the parliament or by the
that CENVAT Credit/ITC is a “vested
ceased and stopped, does not even states. Therefore, the question of
right” accruing to the taxpayers.
permit it to be called an input CENVAT transitioning them into the GST Regime
However, the division bench has now
Credit. Therefore, mere accounting and giving them credit under GST
reversed this view stating it to be a
entry will not give any vested right to cannot arise.
concession and not a vested right.
In the case of M/s Bharat Heavy
Electricals Ltd, Delhi CESTAT had
held that there is no provision in the
GST law that such credits would
lapse and therefore the assessee
is eligible for the cash refund of
the cesses lying as CENVAT credit
balance.
Transition of Cesses into GST disallowed – Madras HC
Summary Facts of the case Madras HC observations and
ruling7
The Madras High Court has held that • The respondent is engaged in
4
the petitioner is not entitled to carry provision of technical and call centre • Cess is different from tax or duty:
forward and set off the transitional services. Cess being specially collected or
credit of unutilised Education Cess (EC), • The single judge bench of the Madras enforced imposition or impost is
Secondary and Higher Education Cess HC had earlier allowed the respondent slightly different from tax or duty, even
(SHE Cess) and Krishi Kalyan Cess (KKC) to utilize and set off the accumulated though it may be collected in the form
against the output liability under the GST unutilised amount of EC, SHEC and of taxes or duty under the parent law.
law. The HC stated the object of GST KKC, all jointly referred to as the cess
law cannot be defeated or interjected • Only specified duties are allowed
against the output GST liability5 by to be carried forward: Only the
by allowing such input credits in respect
allowing the writ petition filed by the seven specified duties as eligible
of cess, whether collected as tax or
respondent. duties in respect of inputs held in stock
duty under the then existing laws and
therefore, such set off cannot be allowed. • The revenue filed present appeal6 and inputs contained in semifinished
against the said single judge bench or finished goods held in stock on
decision. the appointed date, i.e. 1 July 2017
4. M/s Sutherland Global Services Private Limited
5. Section 140 of the CGST Act, 2017
6. Writ appeal no. 53 of 2020
7. Dated 16 October 2020
14 GST Compendium: A monthly guide GST Compendium: A monthly guide 15
2b Decoding advance rulings India and they act on behalf of the
HO for its customers in India. Thus,
the applicant (LO) and their HO are
of distinct persons15. Therefore, the
applicant (LO) and their HO are
distinct persons and the activities
Our comments
deemed to be related persons11. performed by them cannot be called The Karnataka AAR has held
export of services16. that the activities carried by LO
• Activities performed by applicant
constitute supply: The activities • Applicant is an intermediary: amounts to supply. Contrary to this
performed by the applicant falls under The applicant is facilitating supply the Tamil Nadu AAR18 had earlier
the scope of supply12 as it is in relation between the HO and its customers in held that LO is nothing more than
to furtherance of business even in India. Further they have a mandate an extended arm of the HO and
absence of consideration. Such supply from the RBI for this purpose and are performs no separate functions
of services amounts to inter-state restricted to not make any supply other than those specified and
supply13. Therefore, the applicant shall on their own. Thus, the applicant is approved by RBI. Similar ruling was
be liable to obtain GST registration14. a distinct legal entity aptly covered pronounced by the Rajasthan AAR19
under the definition of intermediary17. and the Maharashtra AAR20.
• Activity not an export of service:
The HO is outside India and hence
the HO has an establishment in India.
Thus, the applicant (LO) and their HO
shall be treated as establishments
Services provided by liaison office to its foreign head office constitutes supply
– Karnataka AAR
Summary Facts of the case certain duties along with placing
certain restrictions. Therefore, the
The Karnataka Authority for Advance The applicant8 situated in Karnataka is a
applicant falls under the definition
Ruling (AAR) has held that the activities LO of its Head Office (HO) incorporated
of person9, which also covers every
carried out by a liaison office (LO) in in Germany engaged in promotion of
artificial juridical person.
India such as business and promotion applied research.
of head office (HO) incorporated in • Activities done by applicant
The applicant sought an advance ruling
Germany amounts to supply. The covered under definition of
before the Karnataka AAR to understand
applicant and their HO are deemed to business: The AAR stated that the
whether the activities carried out by a LO
be related persons. Therefore, activities impugned liaison activity of the
for the foreign HO amounts to supply of
performed by the applicant falls under applicant falls under the definition of
services and whether such LO is required
the scope of supply even in the absence business as it is ancillary to the main
to obtain GST registration and is liable to
of consideration, as it is in relation to business activity of the HO. Therefore,
pay GST. 11. Section 15 of the CGST Act, 2017
furtherance of business. Further held that the applicant is involved in business10. 12. Section 7 read with Schedule I of the
the applicant and HO shall be treated as Telangana AAR observations and ruling 13. CGST Act, 2017
14. Section 7(5) of the CGST Act, 2017
establishments of distinct persons and • LO and HO are deemed to be 15. Section 24 of the CGST Act, 2017
• Applicant covered under definition
the activities performed by them cannot related persons: The applicant has 16. Section 2(6) of the IGST Act, 2017
of person: The RBI has recognized 17. Section 2(13) of the IGST Act, 2017
be export of services. admitted that they are involved in 18. Takko Holding Gmbh
the applicant and conferred on them
promoting the business of the HO in 19. Habufa Meubelen B. V.
20.M/ Hitachi Power Europe Gmbh
8. Fraunhofer-Gessellschaft Zur Forderung (Liaison Office in India)
9. Section 2(84) of the CGST Act, 2017
10. Section 2(17) of the CGST Act, 2017
16 GST Compendium: A monthly guide GST Compendium: A monthly guide 17
Key national anti-profiteering
GST not payable under RCM on intermediary services being out of ambit of
import – Uttarakhand AAR
2c authority orders
Summary − Whether overseas commission prescribed under the GST law in respect
agent is covered within of import of services are satisfied.
The Uttarakhand AAR has held that as a
the definition of the term
commission agent arranges or facilitates • However, as the agent falls within the
‘intermediary’22
the supply of goods of the applicant to definition of the term intermediary the
international market and in return he − Whether services of overseas place of supply in the present case
gets the commission on agreed terms, commission agent fall within the shall be the location of the agent,
the overseas commission agent fall term ‘import of services’23. i.e. outside India26. Thus, the third
within the definition of ‘intermediary’. condition is not satisfied.
Further the services received by the − Whether the applicant is required
• Therefore, the AAR held that the
applicant is out of the ambit of import of to pay GST under reverse charge
services received by the applicant is
services as place of supply of service of mechanism (RCM) on commission
out of the ambit of import of services.
‘intermediary’ is out of India. Thus, held paid to the overseas commission
that since the transaction is related to agent24? Whether the applicant is required to pay
an intermediary service which is out of GST under RCM on commission paid to
the ambit of import of services no GST is Uttarakhand AAR observations and the overseas commission agent:
required to be paid under reverse charge. ruling25
Since the transaction is related to an
Facts of the case Whether overseas commission agent is intermediary service which is out of
covered within the definition of the term the ambit of ‘import of services’ the
• The applicant21 is engaged in supply ‘intermediary’: AAR stated that GST under RCM is not
of seasoning, spices, premixes, and
• The AAR observed that as per the payable on commission paid to the
similar food products to its customers
agreement the agent shall arrange or agent.
located within and outside India.
facilitate the supply of goods of the
• The applicant has entered into an applicant to international market and
agreement with an agent in the UAE in return he shall get the commission Our comments
to supply said goods outside India. on agreed terms.
The agent shall solicit with customers
Taxability of intermediary services
who are located outside India, to • Therefore, the agent falls within the
has been a matter of extensive
arrange supply of applicant’s goods definition of ‘intermediary’.
litigation under the GST regime.
outside India. For such facilitation,
Whether services of overseas commission Divergent rulings have been
the applicant shall pay commission
agent fall within the term ‘import of pronounced by various advance
to such agent, ranging from 10-
services’: rulings authorities.
15% based on FOB value of the
consignment exported outside India. The AAR observed that as per the In the present case, the agent is
located outside India as well the
• The applicant sought an advance agreement the supplier of services i.e.
the agent is located outside India and as the facilitation of goods and or NAA upholds profiteering against the builder however drops penalty
ruling before the Uttarakhand AAR in
the recipient, i.e. the applicant is in India. services is also happening outside
respect of following issues:
Accordingly, the first two conditions India. Accordingly, the Uttarakhand
Summary available to him during post-GST period • The DGAP stated that the ITC as a
AAR has rightly held that the
amounts to additional benefit which he is percentage of total turnover that was
intermediary service is out of the The National Anti-Profiteering Authority
liable to pass on to the buyers. available to the respondent during
ambit of import and therefore, GST (NAA), in a recent case has, upheld
the pre-GST period (April 2016 to July
is not payable thereon under RCM. profiteering against the respondent Facts of the case
2017) was nil and during the post GST
Thus, this is a welcome ruling and builder to the tune of INR 6.24 crore for
• An application against the period (July 2017 to December 2018)
will provide the required clarity on not passing on additional ITC benefit
Respondent 27 was received by the it was 10.25% - this clearly confirmed
this aspect. to buyers by way of commensurate
Directorate General of Anti-Profiteering that post GST the respondent had
reduction in prices of flats. However,
Even though advance ruling is (DGAP) alleging that it had not benefitted from additional ITC to the
the NAA did not impose penalty as
applicable only to the applicant, passed on the benefit of ITC to the tune of 10.25% of the taxable turnover.
the relevant penalty provision came
the same acts as a guiding tool for applicant in respect of purchase
into force on 1 January 2020. Further, • Therefore, the additional ITC of 10.25%
other taxpayers with similar issues. of flats in respondent’s project by
held that since the respondent was not of the turnover should have resulted in
way commensurate reduction in
eligible to claim CENVAT credit on the commensurate reduction in flat prices.
price. Thus, the applicant alleged
service tax and ITC on the VAT during
that the respondent had indulged in • Therefore, benefit of additional ITC
the pre-GST era, entire amount of ITC
profiteering. accrued to the respondent was
21. M/s Midas Foods (P) Limited
22. Section 2(13) of the IGST Act, 2017
23. Section 2(11) of the IGST Act, 2017
24. U/s 5(3) of the IGST Act, 2017
25. Uttarakhand AAR No. 10/2020-21 dated 15 October 2020
26. Section 13(8)(b) of IGST Act, 2017
27. M/s Alton Buildtech India Pvt. Ltd.
18 GST Compendium: A monthly guide GST Compendium: A monthly guide 19required to be passed on to the
buyers. Accordingly, the DGAP
confirmed profiteering to the extent of
3 Experts’ column
INR 6.25 crore.
NAA’s observations and ruling27
• Extra tax charged needs to be
returned: The NAA observed that
the respondent had an option to
return the extra tax amount charged
to buyers due to non-reduction
of prices by way of issuing credit
notes and adjusting his tax liability
for the subsequent period to that
extent. Therefore, it was clear that
the profiteered amount would also
include the excess GST paid by the
customers/recipients and hence the
profiteering amount arrived by DGAP
was correct.
• Respondent required to pass on
• Additional ITC accrued: The NAA benefit even if eligible to avail
Our comments
observed that the respondent has it during post GST period: The
benefitted from additional ITC to tune NAA stated that the respondent is
of 10.25% of total turnover in respect The Anti-Profiteering provisions
required to pass on the benefit even
of this project during July 2017 to under the GST law provide that the
if he has become eligible to avail it
December 2018. benefit arising due to reduction
during the post GST period as it is a
in tax rate/additional ITC is to
• DGAP’s methodology is logical, concession granted to him from the
be passed on to the ultimate
reasonable, appropriate and in public exchequer. Payment of service
consumers. However, the law does
consonance with the GST law: The tax alone during the pre-GST period
not prescribe any mechanism /
NAA observed that no benefit was cannot determine the benefit of ITC.
methodology to determine the
computed by the DGAP on the unsold • Profiteering upheld: The NAA thus quantum of benefits to be passed
area so that in case it remains unsold upheld profiteering against the on to the consumers.
till the Commencement Certificate respondent and ordered that the
(CC)/Occupancy Certificate (OC) same shall be paid to buyers along Due to absence of a prescribed
is received the ITC could be reversed with 18% interest from the date of methodology various taxpayers
on it. Therefore, the mathematical amount collected from them till the including real estate, pharma and
methodology employed by DGAP to date of making payment within a FMCG companies have come under
compute the profiteering amount is period of three months from the date
logical, reasonable, appropriate and in of the order28. Further, ordered that the
the scanner of NAA. Accordingly, it Cross charge vs. ISD
is imperative that the Government
consonance with the anti-profiteering respondent shall reduce the prices to may consider prescribing a suitable
provisions under the GST law. be realised from the buyers of the generally with pan-India presence. The taxation and management services,
mechanism to compute profiteering Manoj Mishra management, ownership and control are usually performed at HO for all its
flats of the above projects amount under the anti-profiteering
commensurate with the benefit Associate Partner are spread in more than one country other location too. The strategy making,
provisions under the GST law. and further states. It operates and advertisement, communications and
of ITC received by him29. Further, the relevant penal Dipti Nayak does business from multiple countries/ business goals are generally conducted
provisions for imposing penalty Associate Director states. Such companies produce and at HO and then applied for its branch
in case of violation of the anti- distributes goods and services from offices which functions across the
profiteering provisions were inserted Sonal Kawdia
wherever they operate. states. Under the GST regime, each such
effective from 1 January 2020 Manager
respective office/branch of the same
under the GST law. Accordingly, the In common parlance, businesses with organisation is regarded as “distinct
NAA has rightly dropped the penalty Globalisation is often associated pan-India presence, typically functions persons” and are required to obtain GST
as such provisions were introduced with worldwide economic integration under model of corporate office/HO registration separately for each state
after the review period. and the emergence of a borderless and BO. HO has not been defined either and also to comply with procedural
global market. The consequence of under the GST law or the allied laws, requirements for each respective state.
such globalisation involves sweeping however as per the Oxford Dictionary it
changes on the social, cultural and means the principal office of a business In the erstwhile service tax regime,
political terrains. It has boosted organisation, constituting the centre entities operating from various states
economic freedom and opportunities for administration and policymaking. was required to operate centralised
by disintegrating traditional beliefs Thus, the decision-making and primary registration. However, due to the
of operating only from one office and functions, such as accounting, human introduction of the concept of distinct
28. U/s 171(1) of the CGST Act, 2017 read with Rule 133(3)(c) of the CGST Rules, 2017 emergence of multinational companies resource, information technology, person, the entity is required to obtain
29. Rule 133(3)(a) of the CGST Rules, 2017
20 GST Compendium: A monthly guide GST Compendium: A monthly guide 21where the applicant sought advance training. The applicant sought ruling vendor or consultants, how the cost respective invoice would be deemed to
ruling to understand whether the to understand the applicability of would have been determined. In the be the open market value in respect of
activities performed by the employees GST on such support services. The similar way, in order to render a service, each such invoice raised on the units.
at the corporate office in the course authorities passed adverse ruling and the associated costs involved is to be
of or in relation to employment such concluded that GST is chargeable on kept in mind. Although, the ruling also provides the
as accounting, other administrative services supplied by HO to its other due clarity where the recipient is eligible
and IT system maintenance for the units/offices by way of performing In case of M/s Tupperware India Private for full ITC, the value declared in the
units located in the other states as activities as it benefits another Limited, the applicant also sought invoice shall be deemed to be the open
well shall be treated as supply or not. distinct person. Accordingly, the AAR clarification on valuation methodology market value of the goods or services.
held that the HO would be required to to be adopted if it is established that However, the valuation mechanism
The applicant claimed that the cross charge the other units, the cost such services provided are chargeable in other cases where full ITC is not
activities performed by HO for its of rendering its services which benefit to GST. The authorities referred to available still remains unanswered
branch office is in the course of its other units, by raising a tax invoice proviso 2 of Rule 28 of the CGST and is open to litigation. In case of
or in relation to his employment. and charging applicable GST. The Rules, 2017 held that where recipient cross-charge of expenses is undertaken
It was also stated that when an ruling also clarified applicants query is eligible for full input tax credit, the between distinct entity, it would result
employee renders any services to on availment of ITC and stated that value declared in the invoice shall be in adding cost to the receiving entity
other registered persons i.e. distinct the HO would be able to avail ITC of deemed to be the open market value to the extent of exempted turnover. The
persons of the same legal entity, the goods/services procured from such of the goods or services. In case of the valuation methodology may differ in
nature of activities still assumes the third-party vendors. Applicant, since all the locations were such cases and may have to be suitable
character of services by an employee effecting taxable supplies and eligible worked upon to avoid litigation.
to the employer in the course of or in • Valuation of supply of services
relation to his employment as he is
an employee for the legal entity as a The valuation of service has always
whole and not for any one registered been a matter of question as there
person. The applicant contended that cannot be one specific method
the GST is not to be levied on such for determining value of services
services on taking aid of Entry 1 of as it would differ for different
Schedule III, wherein services provided circumstances and different person.
multiple registration. Additionally, as distinct persons for other GST by an employee to the employer However, the value of supply of goods
separate accounts and records are to registration. in the course of or in relation to and services between distinct persons
be maintained and the GST audit is his employment is not a supply of is obtained from Rule 28 of the
also required to be performed based To determine whether the activity CGST Rules, 2017 which provides for
service.
on GST registration. Earlier during the performed by HO is supply, it needs valuation method in following order:
centralised registration, the revenue to qualify as Supply under Section However, the ruling was passed on
was collected at the central level and 7 of the CGST Act, 2017, which is the finding that employees employed − Open Market Value (OMV)
there was no question of collection of an inclusive definition (including at HO are providing services at HO.
taxes by the state. However, due to the activities such as transfer and − Value of supply of goods or services
Thus, there is employer-employee
play of distinct persons, if the place of barter) for a consideration when of like kind and quality;
relationship only at HO and not
supply falls in the same state as place made for furtherance of business. branch office. Based on Schedule I of
The definition of supply alludes to − Based on Rule 30 (110% cost of
of supplier, it would result in collection of the CGST Act 2017, it was determined
Schedule I of the CGST Act, 2017 provision of services) and rule 31
taxes by the state government. that such transaction is chargeable to
wherein activities are to be treated as (reasonable means consistent
GST even if there is no consideration with the principles and the general
The key aspects in case of supply supply even if they are made without involved. While, the Karnataka High
between “distinct persons” is provided consideration. One of such activity is provisions of Section 15) of the
Court has granted a stay on the CGST Rules, 2017.
below: supply of goods or services or both AAAR’s order and the decision is
between distinct persons even if made awaited, suitable clarity could beat
• Functions performed by HO for its The determination of value of service
without consideration. the heat.
branch offices is supply under GST: based on open market value/like kind
It is very clear that stock transfer and quality could be difficult as it is
Recently, the Haryana Advance non-tangible and value of service would
The moot question is that whether of goods between distinct person is Ruling Authority also in case of M/s differ based on person to person and
services, such as accounting, chargeable to tax. However, the issue Tupperware India Private Limited nature of service provided. The various
management, HR and IT, rendered by lies is whether activities carried out by (hereinafter referred as ‘applicant’) factors such as human attributes, • Whether requirement of ISD
HO to its branch offices/other units HO for other units would be construed for full input tax credit, therefore the
has dealt with similar issue in detail. reputation, brand value, skills, quality registration is compulsory
can be regarded as ‘supply’ under as supply and leviable to GST or not. value declared by HO based on the
In case of applicant, the HO provides of service etc. amongst the person sets
the GST. reasonable basis determined by the
various business support services to the selling price of service, which would If the distinct person is cross charging
The AAAR of Karnataka in case of M/s company (e.g. sales turnover, number of
The respective offices/branch of its other units like marketing support, differ and cannot be compared. the expenses, would ISD registration
Columbia Asia Hospitals Private employees etc.) was treated as deemed
the same organization is regarded administrative support, accounting, still be required? The Tupperware
Ltd shed some light on similar issue open market value. The value arrived
auditing, tax compliance and sales The cross-charge of expenses is based ruling also shed some light on the
at by the Applicant with respect to
on the principle that if such like services requirement of ISD registration being
provision of such services by the HO on
were procured from the third- party mandatory and not optional based
a reasonable basis and declared in the
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