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DGFT vide Policy Circular No. 1/2023-24 dated 17 April 2023, has prescribed the online procedure to apply for amnesty scheme for One-Time Settlement of Default in Export Obligation by Advance and EPCG authorization holder as follows:

• Log onto the DGFT Website;
  • For AA: - Services - Advance Authorization/DFIA - Closure of Advance Authorization;
  • For EPCG: - Services - EPCG - Closure of EPCG;
• The Applicant shall tick the checkbox for 'Amnesty scheme for one-time settlement of default in export obligation' and proceed to file application for closure against the concerned EPCG or AA authorization;
• Insert the duty and interest values to be paid under the 'Redemption Matrix' tab and submit the application online;
• Once the online application is submitted, the concerned RA shall examine and confirm the shortfall through an online letter;
• In response to the said letter, the Applicant shall discharge the required liability along with the interest to the Jurisdictional Customs Authority and provide the proof of payment;
• Based on the evidence of payments and other relevant documents prescribed, concerned RA may examine and consider granting Export Obligation Discharge Certificate (EODC) online.

The DGFT has directed the RAs to process the application within the 3 working days.

The Government has proposed to impose a time limit on reporting old invoices on the e-invoice IRP portals. In order to ensure timely compliance, taxpayers with AATO greater than or equal to 100 crores, will not be allowed to report invoices older than 7 days on the date of reporting. The restriction will also apply to debit/credit notes.

For example, if an invoice has a date of April 1, 2023, it cannot be reported after April 8, 2023. The validation system built into the invoice registration portal will disallow the user from reporting the invoice after the 7-day window. Hence, it is essential for taxpayers to ensure that they report the invoice within the 7-day window provided by the new time limit.

It has been further clarified that there will be no such reporting restriction on taxpayers with AATO less than 100 crores, as of now. In order to provide sufficient time for taxpayers to comply with this requirement, the Government has proposed to implement the time-limit restriction w.e.f. May 1, 2023 onwards.

Authors’ Notes:

It shall be noted that in terms of Section 122 of the CGST Act, penalty for contravention of the e-invoice provisions is as follows:

• Penalty for non-issuance of e-invoice- 100% of the tax due or Rs.10,000/- whichever is higher.
• Penalty for incorrect or erroneous e-invoice is Rs.25,000/-.

As evident, any non-compliance with the e-invoice provisions can result in heavy penalties to the taxpayers. Moreover, the instant advisory does not differentiate between taxpayers who bona fide contravened the time-limit provisions and vice versa. The non-compliance of the above advisory could also occur on account of bona fide reasons such as system limitations, changes in the taxpayer’s systems, amendments under the GST law, changes in Invoice format, etc. 

To subject such taxpayers to the above penal provisions, may not be the intention of the Legislature. However, as the Department would issue notices for imposition of such penal provisions, the bona fide taxpayers will have no other option but to litigate such matters. In order to avoid such punitive actions, it is important that taxpayers gear-up and bring about necessary changes in their systems in order to comply with the provisions and ensure timely reporting of the e-invoices on the IRP Portal.

The Applicant had entered into a business transfer agreement to transfer its independent running business divisions as a whole, along with all its assets and liabilities. The Applicant sought advance ruling on whether the transfer of an independent running business division, including all its assets and liabilities, as a going concern, constituted a 'supply' u/s. 7 of the CGST Act. The Applicant contented that the agreement was considered as a slump sale and, therefore no GST was applicable.

The AAR observed that for any activity to qualify as a supply under the CGST Act, it should satisfy three limbs: (i) the activity must be a form of supply of goods or services or both, made or agreed to be made; (ii) for a consideration by a person; (iii) and in the course or furtherance of business. Accordingly, the AAR held that the transfer activity in the instant case satisfied all three limbs and hence, the business transfer agreement amounts to supply of services u/s. 7 CGST Act 2017. The AAR also held that the benefit of a notification prescribing a NIL rate would be available to the Applicant subject to the fulfilment of the conditions of a going concern. 

M/s Pico2femto Semiconductor Services Private Limited [2023-VIL-47-AAR]

The CBIC vide Instruction No. 13/2023- Customs dated March 31, 2023 has issued instructions on acceptance of an Electronic Certificate of Origin (‘e-CoO’) issued under the India-Japan Comprehensive Economic Partnership Agreement (‘IJCEPA’).

It has been clarified that an e-CoO, issued electronically by the Issuing Authority of the Japan shall be a valid document for claiming the preferential benefit under the IJCEPA, provided it meets the prescribed format and fulfills all other requirements mentioned in notification No. 55/2011-Customs (N.T.) dated July 01, 2011, as amended.

The authenticity of the e-COO can be verified through the "CO Reference System" of the Ministry of Economy, Trade and Industry (METI) of Japan. The specimen seals and signatures will continue to be used to verify the genuineness and authenticity of e-CoO. To receive preferential treatment, the importer/customs broker must upload the e-CoO to e-Sanchit, and the e-CoO particulars, such as unique reference number and date, originating criteria, and so on, must be carefully entered while filing the bill of entry. A printed copy of the e-CoO shall be presented to the Customs officer for defacement purpose.

Instruction No. 13/2023- Customs dated March 31, 2023 

With a slew of Notifications issued on 31 March 2023, the CBIC has notified various decision in relation to GST taken at the 49^th GST Council Meeting. Following are the key highlights of the Notification:

Dear Reader,  

Greetings from GLS!

Shri. Piyush Goyal today launched the Foreign Trade Policy 2023 in one-of-a-kind avatar that expelled sunset clause and brought policy level stability whilst enabling time-to-time amendment to ensure its relevance. The Key Approach to the policy is based on these 4 pillars: (i) Incentive to emission, (ii) Export promotion through collaboration - Exporters, States, Districts, Indian Missions, (iii) Ease of doing business, reduction in transaction cost and e-initiatives and (iv) Emerging Areas – E-Commerce Developing Districts as Export Hubs and streamlining SCOMET policy.

We have briefly summarised salient features of this Policy below and have also enclosed copy of policy, Press Note and Summary issued by the DGFT.

STREAMLINING SCOMET POLICY

India is placing more emphasis on the "export control" regime as its integration with export control regime countries strengthens. There is a wider outreach and understanding of SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) among stakeholders, and the policy regime is being made more robust to implement international treaties and agreements entered into by India. A robust export control system in India would provide access of dual-use High end goods and technologies to Indian exporters while facilitating exports of controlled items/technologies under SCOMET from India.

AMNESTY SCHEME

A special one-time Amnesty Scheme under the FTP 2023 to address default on Export Obligations is introduced. This scheme is intended to provide relief to exporters who have been unable to meet their obligations under EPCG and Advance Authorizations, and who are burdened by high duty and interest costs associated with pending cases.

All pending cases of the default in meeting Export Obligation (EO) of authorizations mentioned can be regularized on payment of all customs duties that were exempted in proportion to unfulfilled Export Obligation. The interest payable is capped at 100% of these exempted duties under this scheme. However, no interest is payable on the portion of Additional Customs Duty and Special Additional Customs Duty and this is likely to provide relief to exporters as interest burden will come down substantially.

FACILITATION UNDER EXPORT PROMOTION OF CAPITAL GOODS (EPCG) SCHEME

Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme has been added as an additional scheme eligible to claim benefits under CSP (Common Service Provider) Scheme of Export Promotion capital Goods Scheme (EPCG).

Dairy sector to be exempted from maintaining Average Export Obligation. Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment, Wastewater Treatment and Recycling, Rainwater harvesting system and Rainwater Filters, and Green Hydrogen are added to Green Technology products – will now be eligible for reduced Export Obligation requirement under EPCG Scheme.

FACILITATION UNDER ADVANCE AUTHORIZATION SCHEME

Special Advance Authorisation Scheme extended to export of Apparel and Clothing sector under para 4.07 of HBP on self-declaration basis to facilitate prompt execution of export orders – Norms would be fixed within fixed timeframe.

Benefits of Self-Ratification Scheme for fixation of Input-Output Norms extended to 2 star and above status holders in addition to Authorised Economic Operators at present.

TOWNS OF EXPORT EXCELLENCE

Four new towns, namely Faridabad, Mirzapur, Moradabad, and Varanasi, have been designated as Towns of Export Excellence (TEE) in addition to the existing 39 towns. The TEEs will have priority access to export promotion funds under the MAI scheme and will be able to avail Common Service Provider (CSP) benefits for export fulfillment under the EPCG Scheme. This addition is expected to boost the exports of handlooms, handicrafts, and carpets.

PROMOTING EXPORT FROM THE DISTRICTS

The FTP aims at building partnerships with State governments and taking forward the Districts as Export Hubs (DEH) initiative to promote exports at the district level and accelerate the development of grassroots trade ecosystem. Efforts to identify export worthy products & services and resolve concerns at the district level will be made through an institutional mechanism – State Export Promotion Committee and District Export Promotion Committee at the State and District level, respectively. District specific export action plans to be prepared for each district outlining the district specific strategy to promote export of identified products and services.

FACILITATING E-COMMERCE EXPORTS

E-commerce exports are a promising category that requires distinct policy interventions from traditional offline trade. Various estimates suggest e-commerce export potential is in the range of $200 to $300 billion by 2030. FTP 2023 outlines the intent and roadmap for establishing e-commerce hubs and related elements such as payment reconciliation, book-keeping, returns policy, and export entitlements.

MERCHANTING TRADE

To develop India into a merchanting trade hub, the FTP 2023 has introduced provisions for merchanting trade. Merchanting trade of restricted and prohibited items under export policy would now be possible. Merchanting trade involves shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary. This will be subject to compliance with RBI guidelines, and won’t be applicable for goods/items classified in the CITES and SCOMET list.

PROCESS RE-ENGINEERING AND AUTOMATION

Considering the effectiveness of some of the ongoing schemes like Advance Authorisation, EPCG etc. under [ftp://FTP 2015-20]FTP 2015-20, they will be continued along with substantial process re-engineering and technology enablement for facilitating the exporters. FTP 2023 codifies implementation mechanisms in a paperless, online environment, building on earlier 'ease of doing business' initiatives. Reduction in fee structures and IT-based schemes will make it easier for MSMEs and others to access export benefits.

Presently, issuance of the Hand-Book Procedure is awaited, and we shall update soon as the same is issued. In order to unearth the nuances of this new [ftp://FTP 2023]FTP 2023, we shall share chapter-wise snippets along-with practical anecdotes over the coming week, followed by a detailed document and an interactive webinar to address queries/issues of our esteemed readers.

We believe you find this endeavour informative and welcome your suggestions/feedback.

Best Regards,

Team GLS

The Petitioner had exported customized and unique products and filed a refund application for the unutilized ITC in respect of zero-rated supplies made. Thereafter, the Department rejected the refund claim under the amended Rule 89(4)(C) for not providing proof of "like goods" domestically supplied. Aggrieved the Petitioner filed a Writ before the Karnataka HC.

The HC observed that the amended rule is arbitrary and ultra vires as it contradicts the section 16 of the IGST Act and section 54 of the CGST Act, as the intention of zero-rating is to make the entire supply chain of exports tax-free. The court also observed that the amended rule whittling down such refunds is ultra vires in view of settled principles of law that rules cannot override the parent legislation. The HC noted that the amended rule suffers from vagueness as the phrases 'like goods' and 'similarly placed supplier' were not defined, and in cases of unique and customized products, there cannot be the availability of like goods. The HC emphasized that the amendment also lacks clarity, as it creates uncertainties where there are no local supplies of like goods. Accordingly, the HC quashed the amended Rule 89(4)(C) which restricts the refund of unutilized ITC on zero-rated supplies.

Tonbo Imaging India Pvt Ltd Vs UOI & Ors [TS-108-HC(KAR)-2023-GST]

The Petitioner, entered into an agreement with its parent company for providing various professional consultancy services like business advisory services, technical assistance etc. to its overseas entities. Thereafter, the Petitioner had applied for the ITC refund availed for providing its professional consultancy services. However, the refund was rejected on the ground that the Petitioner was an ‘intermediary’ and the place of services was the Petitioner’s place of business in India and not where the recipient of services was located. The Adjudicating Authority and Appellate Authority both upheld this decision. Aggrieved the Petitioner filed a Writ before the Delhi HC.

The court observed that on a plain reading of the definition of the term ‘intermediary’ makes it clear that an intermediary merely “arranges or facilitates” the supply of goods or services or both between two or more persons, however in the instant case the Petitioner was the actual supplier of the professional services and not merely the facilitatory. Accordingly, the Appellate Authority’s interpretation of 'intermediary' u/s. 2(13) of the IGST Act was deemed fundamentally flawed since the Petitioner did not arrange or facilitate services from any third parties. The HC also relied upon that Circular No. 159/15/2021-GST dated 20.09.2021 issued by the CBIC clarifies the requisites for qualifying as an intermediary. Hence as the Petitioner was not fulfilling any of the requisites as per the circular, the Petitioner's services did not fall within the definition of an 'intermediary'. The HC also determined that the circular reaffirms that the scope of intermediary services in the GST regime vis-à-vis the service tax regime is the same. Further as in the erstwhile regime the services rendered by the Petitioner were considered as 'export of services', the same interpretation should continue under the GST regime.

Subsequently, the HC held that since the services provided by the Petitioner were not as an intermediary, the place of supply should be determined based on the location of the recipient of services. And as the Department did not dispute that the recipient was outside India, the services correctly fall under the definition of 'export of service' under Section 2(6) of the IGST Act. Accordingly, the impugned orders were set aside, and the writ petition was allowed.

M/s Ernst and Young Limited [2023-VIL-190-DEL]

GLS Comments:

It would be pertinent to note that this Delhi HC ruling on the scope of intermediary services is likely to provide much-needed certainty for taxpayers engaged in similar businesses, amidst the divergent advance rulings on this issue. However, it is worth noting that the interpretation of the constitutional validity of the provisions relating to intermediary services under the IGST Act remains uncertain and  dicey, with some dissenting judgments from the Bombay High Court Dharmendra M.Jani [2021-TIOL-1326-HC-MUM-GST] to the unfavorable orders from the Gujarat High Court in Material Recycling Association of India [R/Special Civil Application No. 13238 of 2018] and other notable AAR’s.

The Government of Maharashtra has notified the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Act, 2023 (‘the Act’). The Government has introduced the Act for settlement of dues under the MVAT Act, CST Act and nine other relevant acts, in respect of period prior to 30 June 2017. This Act shall come into force from 01 May 2023.

Following are the key highlights of the Act:

• The Applicants can make the payment of arrears between 01 May 2023, to 31 October 2023;
• The Arrears determined by statutory order for a specified period as on 30 April 2023, which are Rs. 2 lakhs or less per F.Y. shall be written off;
• The Act also provides for partial waiver of disputed tax, interest, penalty and late fee on payment of requisite amount and filing of the Application within prescribed period subject to compliance of prescribed conditions;
• Arrears of Rs. 50 lakhs and less availing relief under the Act shall have an option to pay the requisite amount either as one-time payment or in instalments.
• The Applicants are required to make payment of prescribed requisite amount within specified time and they shall be eligible for partial waiver of arrears as per Annexure A or Annexure B appended to the Act, as below:

• 
• Every Application must be accompanied by a payment challan evidencing the requisite amount determined and paid under the Act and shall be submitted during the time prescribed in the Act;
• Special optional scheme is also provided for settlement of arrears by making lump sum payment of 20% of arrears under one-time payment option, where arrears per statutory order is Rs. 50 lakhs or less;
• After examining the Application if the designated authority is satisfied that the Applicant has paid the requisite amount, the designated authority shall pass an appropriate order and thereafter such Applicant shall be discharged of his liability to the extent of the amount of waiver specified in the order of settlement;
• Erroneous order passed can be rectified within a period of 6 months from the date of receipt of order. The Application for rectification shall be made within 60 days from the date of receipt;
• An Appeal against the order passed under Act can be filed before Deputy Commissioner, Joint Commissioner, Additional Commissioner, as the case may be. The Appeal must be filed within 60 days from the date of passing an order;
• Any order passed under the Act can be reviewed by Commissioner, on his own notion within 12 months from the date of service of the order;
• No adverse order shall be passed without giving a reasonable opportunity of being heard;
• The Applicant shall not be entitled to get the refund of any amount paid under this Act.

The GSTN has issued an advisory for taxpayers wishing to register as a One Person Company (‘OPC’) under the GST regime. Earlier, the taxpayers registering as an OPC raised concerns about the GST registration process as the option to select OPC was not available on the GST portal.

To address this issue, the Applicants are now advised to select "Others" under the "Constitution of Business" dropdown list in Part B of the GST Registration Form "REG-01" if they wish to register as an OPC. After selecting "Others," Applicants should mention OPC in the text field and complete the registration application process as usual. In case of any further issues, it is advised to raise a ticket at the self-help portal.