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The Government of India vide Press Release dated 23 July 2021 have taken various steps in order to improve the quality standards of products manufactured under the Aatma Nirbhar Bharat Campaign and other benefits for startups. The details have been mentioned hereunder:

1. Quality Control Orders (QCOs): Through various Ministries/Departments 156 products are notified by Central Government under compulsory BIS certification through issuance of QCOs. Products should meet the requirements of relevant Indian Standards and bear a Standard Mark under a license from Bureau of Indian Standards.
2. Production-Linked Incentive (PLI) Scheme: In order to boost manufacturing PLI was launched for 13 sectors over the period of five years.

Steps to uplift the startups and to promote ‘vocal for local’ campaign:

1. To ease procurement from startups, relaxations has been extended on prior experience, turnover and earnest money deposit as per the applicable provisions.
2. Fund of Funds for Startups (FFS) and Startup India Seed Fund (SISFS) Schemes has been taken up to uplift the startups in the country.

Steps for startups and local manufacturers to use e- Commerce

1. Government e-Marketplace (GeM) has been set-up for providing online Platform for procurement of goods and services from Government entities and also to sell their products and services directly to government entities.

The Applicant is an authorized distributor of M/s. Castrol India Limited (‘Castrol’) for the supply of Industrial and automotive lubricants. The Applicant had been paying tax dues as per the value of the invoices issued and availed ITC of GST shown in the inward invoice received by them from Castrol or their stockiest.

AAR Ruling

In view of the above, the Applicant had filed an application before the Kerala AAR to ascertain:

• The tax liability on the above-mentioned transaction;
• Whether the discount provided by Castrol to their dealers through the Applicant attracts any tax under the GST laws;
• Whether the amount shown In the Commercial Credit note issued to the Applicant attracts proportionate reversal of ITC;
• Any tax liability under GST laws on the Applicant for the amount received as reimbursement of discount or rebate provided by Castrol as per the agreement between Castrol and their dealers and also an agreement between Castrol and distributors.

The Kerala AAR ruled that the Applicant is eligible to avail ITC shown in the inward invoice received from the supplier of goods. As for the GST liability on the discounts provided by Castrol, the AAR had observed that the additional discount given by Castrol through the Applicant which is reimbursed to the Applicant, is to offer a special reduced price by the Applicant to the customers. Accordingly, it was observed that the amount represent consideration paid by Castrol to the distributors Applicant for supply of goods by the distributor / Applicant to the customer. 

Accordingly, it had been ruled that the such additional discount reimbursed by Castrol to the Applicant is liable to be added to the consideration payable by the customer to the Applicant arrive at the value of supply at the hands of the Applicant. The AAR had further ruled that the Applicant is liable to pay GST on the amount received as reimbursement of discount from Castrol. Aggrieved, the Applicant had preferred an Appeal before the Kerala AAAR.

AAAR Observations

The AAAR observed that Section 15 of the CGST Act inter alia states that the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable. The said provision further states that the value of supply shall not include any discount which is giver in ways as under:

• Any discount which is given before or at the time of supply if such discount has been duly recorded in the Invoice Issued in respect of such supply.
• After the supply has been affected if:
  • Such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and
  • ITC as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

In view of the above, it was observed that in the instant case, two types of discounts are being offered by Castrol:

• First scheme of the discount is the one that is known at or prior the point of time of supply, where the quantum of discount is indicated in the Invoices and the GST is paid and the discounted amount of transaction value; and
• Another scheme of discount offered is on post sale basis, wherein the amount of discount may be known at the point of supply but may not be quantified or some discounts may not even be known at the time of supply of goods. In both these cases, discounts are extended through credit notes. Accordingly, it had been held that such post sale discounts are subjected to GST at the time of supply.

The AAAR further observed that Section 15 (3)(b) very clearly states that if the quantum of discount is given after the supply of goods has taken place, it has to be given as per the terms of such agreement i.e., it cannot be open ended. Thus, this quantum of discount cannot be arrived at without any basis, only at the discretion of the supplier. The supplier has to dearly mention the quantum of discount or percentage of discount which is to be worked out on the basis of certain parameters or certain criteria which may be agreed to between the supplier and the recipient and which are predetermined and mentioned in agreement in respect of supply of the goods.

Thus, it had been observed that the discount mentioned In such an agreement without there being any parameters or criteria mentioned with it would not fulfill the requirement of Section 15(3)(b)(i) of the CGST Act, as the word ‘discount’ if left open ended or without any qualifications or criteria attached can mean there can be any percentage of discount ranging from bare minimum to even 100% as per discretion of the supplier and certainly such abnormal discounts without any criteria or basis can In no way be considered as fair and no taxation statute can be construed to be having open ended discount.

It had been further observed by the AAAR that the additional discount given by Castrol to the Appellant is a consideration to offer the reduced price in order to augment the sales. This additional discount squarely falls under the definition of ‘consideration’.

AAAR Ruling

In light of the above observations, the AAAR ruled that the additional discount reimbursed by Castrol is liable to be added to the consideration payable by the customers or dealers to the Applicant. Accordingly, the Applicant is liable to pay GST. Therefore, the AAR order has been affirmed by the AAAR.

Santosh Distributors [Order No. AAR/10/20 dated 01 March 2021]

The Petitioner had sought an Advance Ruling to ascertain whether GST is liable only on the amount in excess of Rs.7,500/- collected as monthly maintenance charges from the Resident Welfare Associations ('RWAs') or on the entire amount in light of Notification No. 12/2017- Central Tax Rate dated 28 June 2017. The AAR observed that when the charges or share of contribution goes above Rs. 7,500/- per month, such service will not fit the description of Notification No. 12/2017 Central Tax Rate and hence such service will not be exempt and GST at appropriate rates are to be charged on the full amount of reimbursement of charges or share of contribution. Aggrieved by the said order the Petitioner filed the current Writ Petition.

In regards to above, referring to Entry No. 77 of the aforementioned Notification the HC noted that the term "upto" employed therein is heavily relied upon by the petitioner to contend that only the exceeded amount is liable for the tax and not the whole amount collected. The term 'upto' hardly needs to be defined and connotes an upper limit. It is interchangeable with the term 'till' and means that any amount till the ceiling of Rs. 7,500/- would exempt for the purposes of GST. Further, the HC further quashed the ruling of the AAR and the Circular stating that the matter thereto is contrary to the express language of the Entry in question and allowed the writ wherein only contributions to RWA in excess of Rs.7,500/- that would be taxable under GST Act.

Greenwood Owners Association vs. UOI

Taking cognizance of the COVID-19 pandemic and difficulties faced thereof, the SC vide its suo moto order had provided that the period from 15 March 2020 till 14 March 2021 shall stand excluded while computing the period of limitation for any suit, appeal, application or proceeding. This matter of limitation extension had been deliberated in the 43rd GST Council Meeting.

Pursuant to the deliberations, the CBIC vide Circular No. Circular No. 157/13/2021-GST dated 20 July 2021 has clarified that such extension of timelines is only in respect of any appeal which is required to be filed before Joint/Additional Commissioner (Appeals), Commissioner (Appeals), Appellate Authority for Advance Ruling, Tribunal and various courts against any quasi-judicial order or where proceeding for revision or rectification of any order is required to be undertaken, and is not applicable to any other proceedings under GST Laws.

It has been further clarified that the SC order may not cover cases relating to issuance of show cause notices, granting time for replies and passing orders, even though they are quasi-judicial proceedings as the same has only been made applicable to matters relating to petitions/applications/suits, etc. The CBIC further clarified that, actions such as scrutiny of returns, issuance of summons, search, enquiry or investigations and even consequential arrest in accordance with GST law would not be covered by the SC order.

In view of the difficulties faced by the taxpayers in electronic filing of Income Tax Forms 15CA/15CB on the portal, the CBDT vide Press Release dated 20 July 2021 has further extended the date of manual filing of such forms till 15 August 2021. A facility will be provided on the new e-filing portal to upload the forms for the purpose of generation of the Document Identification Number.

The Risk Management System ('RMS') in export was introduced in the year 2013. The phase one was effective from 15 July 2013 wherein RMS processed the data and provided output to ICES up to goods examination stage. Now, the CBIC vide Circular No. 15/2021-Customs dated 15 July 2021 has clarified that the second phase of the RMS will be implemented w.e.f. 26 July 2021, wherein RMS will process the shipping bill data after the Export General Manifest ('EGM') is filed electronically and will provide required output to ICES for selection of shipping bills for risk-based processing of duty drawback claims.

In connection thereto, all requisite system based changes have been implemented. In RMS, shipping bills with claim for duty drawback will be routed on the basis of risk evaluation through appropriate selection criteria. All the requisite documents in terms of Rule 14 of the Customs and Central Excise Duties Drawback Rules, 2017 for drawback claims can be attached along with the shipping bill electronically on e-Sanchit with the required e-Sanchit document codes.

The second phase of export RMS also envisages Post Clearance Audit ('PCA') of the duty drawback shipping bills. The development of an electronic module for PCA of such shipping bills is under process and will be implemented in due course. With implementation of second phase, it is expected that there will be reduction in the processing time for drawback claims and also it will enable quick disbursal to exporters and rationalise the Customs' workload.

The DGFT vide Trade Notice No. 09/2021-22 dated 16 July 2021 has invited suggestions/inputs from various stakeholders for formulating the New Foreign Trade Policy 2021-26. The DGFT has required the stakeholders to send their suggestions in a prescribed google form, on or before 31 July 2021.

GLS Comments:

It is good to see that the Government has been actively involving the stakeholders in the policy formulation. Even in the case of Customs Exemption Review, the Government has invited suggestions from the Trade and Industry. Such involvment of the stakeholders will not only address their concerns but also ensure that a more assessee-friendly Policy is put in place.

The Hon’ble Finance Minister, Ms. Nirmala Sitharaman, in her Budget Speech had announced that a review of existing Customs exemption notifications would be undertaken through extensive consultations. In respect thereto, certain Customs exemptions have been identified for purpose of further review. Some key products covered under the list include fabrics, games/sports requisites, rubber items, magnetron for microwave manufacturing, specified parts for PCB, set-up box, routers, broadband modem, artificial kidneys, etc. In total, the Government has determined 97 exemptions under various notifications as of now. 

The Government has further invited suggestions from the trade and industry in respect of their review, which may include the need for amendment in wording of the notification for bringing clarity, consolidation, other relevant factors such as extent of use, etc. The Government has required the trade to suggest the suitable actions in the Notifications and the justification for such actions by 10 August 2021.

The Union Cabinet Ministry vide Press Release dated 14 July 2021, has approved the continuation of Rebate of State and Central taxes and Levies ('RoSCTL') Scheme till 31 March 2021 on Export of Apparel/ Garments (Chapters-61 and 62) and Made-ups (Chapter-63) in order to help and generate additional investment and give direct/indirect employment opportunities. Further, the other Textiles products (excluding Chapters-61, 62 & 63) which are not covered under the RoSCTL shall be eligible to avail the benefits, under RoDTEP along with other products as finalised by Department of Commerce from the dates which shall be further notified.

Continuation of RoSCTL for Apparel/Garments and Made-ups is expected to make these products globally competitive by rebating all embedded taxes/levies which are currently not being rebated under any other mechanism. This will also ensure a stable and predictable policy regime and provide a level playing field to Indian textiles exporters.

The Applicant, a subsidiary of Airbus Invest SAS (the Holding Company) had entered into a global regional agreement in order to provide primarily assistance to carry out the activities globally. Under the said agreement, the activities to be performed by the Applicant included:

• Procurement Operations; and
• Procurement Transformation & Central Services (which essentially means to procure raw materials from Indian vendors and facilitating supply abroad) for its holding company

In respect thereto, the Applicant had sought an advance ruing before the Karnataka AAR to ascertain whether the activities proposed to be carried out in India by the Applicant would constitute as supply of ’Other professional, technical and business services‘ falling under SAC 9983 or as ’Intermediary service‘ classifiable under SAC 9961/9962 or any other classification of services and also whether the services rendered by the Applicant being an export service in terms of Section 2(6) of the IGST Act would not be liable to GST considering it zero rated supply.

The Karnataka AAR observed that the Applicant plays an important role in identifying the local capabilities in India i.e. identifying the vendors and making them understand the product requirement, advising and guiding them on technical aspect of the product along with the ethical aspect in relation to such activities. 

It was further observed by the AAR that without the assistance of the Applicant, the holding Company would not be able to procure the goods from the vendors. Final approval even if taken by the Holding Company does not make a difference to the role of facilitation undertaken by the Applicant.

The AAR also observed that the work of facilitation undertaken by the Applicant as technical advisory, guidance and business support assistance concerning quality control standards, performance and safety standards of the suppliers, merely facilitate the supplies to their holding company as all these activities are directed at the vendors which in a way forms part of intermediary services. 

It was also observed that the nature of the payment does not form part of the definition of Intermediary. Basis which the cost-plus mark-up method of payment can also be one of the ways for payment in such cases.

Basis the above observations and referring to the definition of the term intermediary services as per section 2(13) of IGST Act, the AAR held that the instant activity of the Applicant being an intermediary service, classifiable under SAC 998599 and applicable rate of GST @ 18% in terms of entry No. 23(ii) of Notification No. 11/2017 – CT (Rate) dated 28 June 2017.

The AAR further ruled that since the Applicant is covered under Intermediary Services classifiable under SAC 998599, the place of supply would be in India in terms of Section 13(8) of the IGST Act shall be considered and the services rendered by the applicant shall not qualify as ‘export of services' in terms of section 2(6) of the IGST Act.

Airbus Group India Private Limited [Advance Ruling No. 31/2021 dated 01 July 2021]

GLS Comments:

Recently, a division bench of the Bombay HC in the case of Dharmendra M Jani [2021-TIOL-1326-HC-MUM-GST] created a lot of stir by pronouncing a dissenting judgement. In this case, while Justice Bhuyan held the Intermediary Service provision to be ultra vires to the scheme of GST law and the Constitution, Justice Ahuja, upheld the constitutional validity of the said provision.

Given the contradictory views of both the judges, the matter has now been referred to the Chief Justice of the Bombay HC on the administrative side for his verdict. Until then, a clarification by the CBIC will go a long way in easing out difficulties of the trade and industry.