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Riding on the success of Sabka Vishwas Legacy Dispute Resolutions Scheme 2019 and the Vivad Se Vishwas Scheme, the Government is now considering a one-time amnesty scheme for resolution of legacy disputes pertaining to Customs. The Trade and Industry had represented for a chance to resolve past disputes related to Customs in line with other two schemes.
It would be interesting to see whether the Finance Ministry will announce any such scheme in the upcoming budget.
The Applicant had sought a ruling before the Gujarat AAR to ascertain whether availing exemption under Customs notification in respect of additional duty of customs, but opting to pay IGST on the import of goods under Advance Authorization, would tantamount to availing the benefits of exemption under Notification No.79/2017-Cus, as contemplated under Rule 96(10) of CGST Rules.
The Applicant stated that in terms of Circular No. 59/33/2018-GST dated 04 September 2018, the importers who are directly importing supplies on which benefit of reduced tax incidence or no tax incidence under certain specified notifications has been availed, shall not be eligible for refund of integrated tax paid on export.
The Applicant further stated that Notification No. 79/2017-Cus is specified in Rule 96(10), which exempts certain specified duties of Customs and IGST. The Applicant further argued that the restriction under Rule 96(10) seeks to prevent the exporter from claiming refund of IGST paid on the exports, if he has received the goods which are exempted or nil rated.
It was put forth by the Applicant that the term ‘tax’ referred to in the circular is the GST. In case of imports, the GST payable is IGST under the IGST Act. The applicant had been opting to pay IGST on their imports, but availing exemption on other applicable customs duties in terms of the Notification No.79/2017-Cus.
Basis the above, it was argued that the Applicant has received imported goods on which the IGST had been paid and, therefore, they cannot be held to have availed the ‘benefits of the Notification No.79/2017-Cus as contemplated in Rule 96(10). The Applicant further stated that the exemption on additional duties of Customs and ADD are governed by the Customs Act, and Customs Tariff Act, therefore, the benefit cannot be denied by the GST Act and Rules.
It was observed by the AAR that Rule 96(10) was amended with retrospective effect from and a new sub-rule (10) was inserted which provided that an exporter who is inter alia availing the benefit of Notification No. 79/2017-Cus, will not be entitled to claim refund of IGST paid on export of goods. The said provision was further clarified vide Circular No. 59/33/2018-GST.
Basis the above observations, it was held by the AAR that the importers, directly importing supplies on which benefit of reduced tax or no tax under certain notifications specified under rule 96(10) had been availed, shall not be eligible for refund of integrated tax paid on export.
Therefore, as to answer the question raised by the Applicant, it was ruled that availing exemption under Customs notification in respect of additional duty of customs, but opting to pay IGST on the import of goods under Advance Authorization, would tantamount to availing the benefits of exemption under Notification No.79/2017-Cus.
The DGFT vide Trade Notice No. 38/2021 dated 15 January 2021 has introduced online e-PRC System for application seeking Policy / Procedure relaxation. Presently, the applications for seeking policy / procedure relaxation are being filed in manual form. As a consequence, rest of the process also happens in manual mode and takes time.
In respect thereto, the DGFT, a part of IT Revamp, has decided to introduce a new module (online e-PRC System) for seeking policy / procedure relaxation. Accordingly, it has been provided that all exporters / importers seeking relaxation of FTP provisions are required to submit their application electronically only. It has been further provided that physical copies of the applications seeking policy / procedure relaxation received after 25 January 2021 would not be acted upon by the Directorate. The DGFT has further informed that physical copies of applications seeking policy / procedure relaxations submitted after 25 January 2021 will not be acted upon.
The DGFT has also provided the path for the entire process on the DGFT portal which has been designed to be paperless and contactless.
Earlier this week, the CBDT had issued an order u/s. 119 of the Income Tax Act, rejecting the representation for further extension of due date for filing Audit Report filed by The All India Gujarat Federation of Tax Consultants [SCA 13653 of 2020] before the Gujarat HC. The said matter was further heard by the HC on 13 January.
Pursuant to the said hearing, the HC observed that the Court can very easily issue a writ of mandamus extending the said due date till 31 March 2021. However, such a line of reasoning or approach may upset the entire functioning of the Government and may lead to undesirable results.
Accordingly, the HC has refused to interfere in the matter and held that the Revenue may consider issuing an appropriate circular taking a lenient view as regards the consequences of late filing of the TAR and left it to the discretion of the Revenue.
The Commissioner of State Tax, Maharashtra vide Trade Circular No. JC (HQ)-1/GST/2021/ADM-8 dated 12 January 2021 has withdrew an earlier circular which provided for deemed adoption of GST Circulars issued by the CBIC. This departure from deemed adoption of CBIC circulars by the Maharashtra Government is made in order to maintain the integrity of communication and so also to avoid confusion caused as to which instructions are to be followed in case where there are circulars issued by the CBIC as well as the Maharashtra Government.
Henceforth, whenever CBIC issues any circular, the Maharashtra Government on its examination would issue a separate circular regarding its applicability for the implementation of the MGST Act. It has been further clarified that circulars issued by CBIC till 12 January 2021 are deemed to have been adopted for the implementation of MGST Act, unless the Maharashtra Govt. has issued a separate circular on the same subject. It has been further provided that the actions taken on the basis of circulars adopted by the Maharashtra Government would remain valid.
The Parliamentary Consultative Committee of the Ministry of Commerce and Industry had held a meeting on ‘New Foreign Trade Policy 2021-26' on 12 January 2021. The Ministry of Commerce and Industry vide Press Release dated 12 January 2021 has provided that the new FTP will come into effect on 01 April 2021 and will strive to make India a leader in the area of international trade and channelize the synergies gained through merchandise and services exports for growth and employment with a goal to make India a USD 5 Trillion economy.
It has been further provided that a key driver to reach the above-mentioned goal would be:
It has been further provided that the Department of Commerce has engaged with State / UT Governments to take forward the initiative for District Export Hubs, in the districts and enable its implementation in a phased manner, with the objective of mobilizing the potential of each district of the country to achieve its potential as an export hub.
As the taxpayers with aggregate turnover above Rs. 100 Cr. had also started reporting e-invoices, the GSTN observed that while pulling the data for December 2020 into GSTR-1, some of the details of the invoice was not populated into GSTR-1.
In respect thereto, the GSTN advised the taxpayers to proceed with the filling of GSTR-1 for the month of December 2020, based on actual data. It was further provided that the taxpayer can modify / delete only those documents where there is a mismatch between auto-populated details from e-invoices and actual data. Otherwise, the details of e-invoices auto-populated in GSTR-1 can be edited / deleted by the taxpayer.
It was further provided that in such cases, the ‘Source’, ’IRN’ and ‘IRN date’ fields would be reset to blank in respective tables of GSTR-1 and accordingly will note get reflected in GSTR-2A/2B/4A/6A also. Such edited documents would be treated as if they were not auto-populated but uploaded separately by taxpayer.
Additionally, it has been provided that the taxpayer can download the consolidated excel file of all the documents auto-populated from e-invoice from the GSTR-1 dashboard, which is inclusive of cancelled documents also. However, the modifications made to the auto-populated documents would not be reflected in the excel file.
With the beginning of the New Year, we are hopeful that the normalcy would resume and the effects of COVID-19 would take a back-seat. With the announcement of vaccine distribution, the Government has surely started the year on a positive note. However, there have been a few stumbles in the year already with the hotch-potch introduction of the RoDTEP Scheme and the GST and Income Tax due date extensions fiasco.
Taking into account all the positive and not so positive developments in the tax front in the month of December 2020, we are glad to present to you the 5th edition of our Vision 360 Newsletter in association with TIOL. We have penned down articles on a restrictive GST provision and the analyzed the taxability of corporate gift of shares, among other updates.
The Gujarat HC vide its judgement in the case of The All India Gujarat Federation of Tax Consultants vs. Union of India [SCA 13653 of 2020], had directed the Ministry of Finance to look into the issue of extension of due dates for filing of Audit Report u/s. 44AB of the Income tax Act. Pursuant thereto, the CBDT has issued an Order u/s. 119 of the Income Tax Act, rejecting the representation for further extension of due date for filing Audit Report.
The CBDT reasoned that in the wake of the COVID-19 pandemic, they had proactively extended the due dates for various Income Tax Returns and Audit Report several times. The CBDT further compared the COVID-19 situation globally while stating that they had extended the due dates more empathetically vis-à-vis other economies, which were worse hit by the pandemic.
The CBDT further reasoned that any further extension would cause injustice to those who have taken pains to file the return before the due date. It would also postpone the collection of revenue thereby hampering the efforts of the Government to provide relief to the poor during these COVID times.
The CBDT further relied upon various judgements of the SC to provide that when there is no mathematical or logical way of fixing the due date precisely, the decision of the legislature or its delegated must be accepted unless it can be said that it is very wide off the reasonable mark.
After a rather long wait, the CBDT has finally responded to the Representations and put all the speculations to rest once and for all in respect of due date extensions. Albeit the decision of the CBDT is backed by various SC judgements, the timely filing of Returns and audit reports can be ensured only if the law does not change frequently and if the utilities for filing of the returns and reports function correctly. Accordingly, the CBDT ought to ensure that the grievances of the taxpayers are correctly addressed on a timely basis.
Pursuant to the enquiry initiated by the tax authorities on the one of the vendor supplying goods to the Petitioner, the electronic credit ledger of the Petitioner was blocked by the GST authorities by exercising powers under Rule 86A of the CGST Rules, 2017. The Petitioner submitted that the credit ledger was blocked without issuing any Notice citing reason for blocking of such credit. Further, it was submitted that in absence of any reason been recorded as required under Rule 86A, the impugned order blocking credit ledger cannot be sustained.
The HC disposed off the writ the petition calling upon the assistant commissioner to pass a detailed reasoned order as required under Rule 86A(3).
M/s. Aryan Tradelink vs. Union of India and others [WP No. 11581/2020(T/RES)]
It would be pertinent to note that recently a similar matter was placed before Hon’ble Gujarat HC in case of S.S. Industries vs. Union of India [C/SCA/8841/2020] wherein it was observed that the investigation by department relating to availing ITC basis the fake invoices was considered a prima facie case for the tax department to exercise the power under Rule 86A of the Rules. Further, it would be pertinent to note that the constitutional validity of the Rule 86A has also been challenged in the various jurisdictional HCs. The power granted under the provision of Rule 86A is immense and may result in the harassment of the taxpayers if not used judicially by the tax department.
The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.
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