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During the filing of Form GSTR-1 for the month of June 2019, the Petitioner had inadvertently missed out to tick mark on the column of 'Deemed Export' in respect of 9 invoices. Upon realization, the Petitioner had sought permission for rectification of Form GSTR-1, which had been granted to them. However, the Petitioner successfully amended only 4 out of the 9 invoices. Thereafter, the Respondent refused to grant another permission to rectify the balance 5 invoices. Aggrieved, the Petitioner preferred a Writ before the Gujarat HC.
The HC observed that Section 37(3) of the CGST allows rectification of returns for unmatched invoices. However, without going into the merits, the HC allowed the Writ, directing the Respondents to process the request of the Petitioner for carrying out amendment in its GSTR -1 returns pertaining to June 2019 with respect to ticking of the 'Deemed Export' column in regard to the balance 5 invoices, which the writ applicant did not amend in the first request.
Screenotex Engineers Private Limited [2022-TIOL-452-HC-AHM-GST]
It would be pertinent to note that the Apex Court in RE: Bharti Airtel Limited [2021-TIOL-251-SC-GST], had denied rectification in Form GSTR-3B, stating the same to be impermissible under the law. However, the Gujarat HC in the instant case has exercised its discretionary power to allow rectification. Such liberal approach of the Courts are welcome.
During the course of audit of accounts conducted by CERA Audit party for the erstwhile regime, it was observed by the Revenue authorities that the petitioner is liable to pay service tax under reverse charge on services rendered at two quarries, for which, royalty had been paid by the petitioner to the Government of Tamil Nadu for mining stones since such royalty payments are liable to service tax consequent to the issuance of Notification No.22/2016 ST dated 13 April 2016. The Petitioner duly paid the ST, however, the same had been paid post the transitional date.
Accordingly, as the Petitioner could not avail the transitional credit of service tax paid, post the transitional date, the same had been claimed as refund. The refund application came to be rejected by the Revenue authorities mainly on the ground that there is no provision in the new regime to allow such refund. Aggrieved, the Petitioner preferred a Writ before the Madras HC.
The HC observed that the Petitioner should be allowed benefit of service tax paid under RCM post implementation of GST. The Court noted that neither refund under Section 142(3) of the CGST Act can be allowed being not eligible under erstwhile laws nor credit under Section 140(1) of the CGST Act can be allowed when time limit to transition such credit has lapsed. The Court invoked ‘Doctrine of Necessity’ and remanded matter back to department for reconsidering the Petitioner’s application for allowing GST credit under Section 142(3).
Ganges International Private Limited [2022-TIOL-325-HC-MADGST]
The Court exercised its discretionary powers to remand matter back for reconsideration under Section 142(3) for allowing credit. ‘Doctrine of Necessity’ is however misplaced in this case in the absence of statutory provisions to this effect. In past, the CESTAT has consistently allowed refund under Section 142(3) on similar facts.
The Applicant had sought an advance ruling before the Haryana AAR to ascertain whether the ITC can be availed on third party canteen services and gift distribution. The Applicant further sought clarification in regarding GST liability on coupons distributed to employees.
The AAR held that the Applicant was neither eligible to avail ITC in respect of canteen services availed by it for its employees nor on business promotion activities. The AAR further held that the distribution of coupons among employees will attract GST. Aggrieved, the Applicant had preferred an appeal before the Haryana AAAR.
The Applicant argued that the restriction of ITC in respect of canteen services is not applicable when the said services are mandatory by law and not optional on the Applicant to its employees. It was argued that since the provision of canteen facility is mandatory to be provided under the Factories Act, such provision is covered under the exception of Section 17(5) of the CGST Act. The Applicant further argued that ITC in respect of promotional schemes shall be allowed to avoid the cascading effect.
The AAAR observed that Section 17(5)(b)(i) sub-clause ending with a colon and followed by a proviso which ends with a semi colon is to be read as independent sub-clause, independent of sub clause Section 17(5)(b)(iii) and its proviso [of sub-clause iii]. Thereby, the proviso to section 17(5)(b)(iii) is not connected to the sub-clause of Section 17(5)(b)(i) and cannot be read into it. Accordingly, it was ruled that ITC on GST paid on canteen facility is blocked credit u/s. 17(5) of the CGST Act and therefore would not be admissible.
As regards the second issue in relation to distribution of coupons among employees attracts GST liability, the AAAR ruled that distribution of coupons among employees does not attract GST.
As regards the issues relation to ITC on promotional schemes, the AAAR observed that sub section 17(5), clause (g) clearly forbids ITC admissibility on the items of personal consumption. Thus the items mentioned by the Applicant viz. sweets; dry fruits; electronic items and Gold and Silver Coins etc. are essentially being given to the relevant persons as items of personal use/ consumption. Thus, it was ruled that the Applicant was not eligible to take ITC on such business promotion expenses.
Muasashi Auto Parts India Private Limited [HAAAR/2020-21/06 dated 25 September 2020]
As the saying goes “The law is what is read, not what is written.” It seems that the Haryana AAR in the instant matter has followed the footsteps of Gujarat AAR in RE: Tata Motors [TS-437-AAR(GUJ)-2021-GST], who had interpreted Section 17(5) of the CGST Act in a similar fashion. In this regard, it shall be noted that Delhi HC in RE: Rodhee vs. Govt. of Delhi and Ors. [(2003) IILLJ 5 Del] had held that the intention of a semi-colon is to segregate two substantially similar topics from each other. If the said punctuation mark is not employed, a part of the foregoing words would have to be repeated once again or in the same context would have to be reiterated. It was further observed that if the proviso was not to operate on the first sub-section it should have ended with a full stop and not a semi-colon. Basis the same it was concluded that a statutory provision should not be interpreted only on the basis of the punctuation marks found therein.
The CBIC has enabled a new feature whereby Special Economic Zone ('SEZ') units can check the status of integration of their Bills of Entry (DTA Sale) with GSTN, on ICEGATE
The CBIC has enabled the functionality for amendments of Shipping Bills on ICEGATE. Following are the key guidelines issued in this regard:
The detailed guideline issued in relation to the amendment of SBs on ICEGATE has been attached herewith.
The Applicant had sought an advance ruling before the Haryana AAR to ascertain the availability of ITC of GST paid on construction of immovable property and further leasing out the premises. The AAR had held that the Applicant was not eligible to avail ITC in respect of inputs / capital goods used for creating warehouse for renting purpose. Aggrieved, the Applicant had preferred an Appeal before the Haryana AAAR.
The Appellant argued that Section 17(5)(d) of the CGST Act disallows ITC on construction of immovable property by a taxpayer on his own account. However, in the instant case as the construction of the immovable property is being done for further letting-out of the property, the said provision would not be applicable. The Appellant further relied upon the judgement of the Orissa HC in RE: Safari Retreats Private Limited [2019 (025) GSTL 0341], wherein the Court had allowed ITC on construction of immovable property for letting it out.
The AAAR observed that the construction of the immovable property had been done by the Appellant for itself i.e., with all the intentions to retain the ownership rights. Thus, the construction of the immovable property was construed to be done by the Appellant on his own account. The AAAR further observed that in terms of CBIC instruction vide F. No. 276/114/2015-CX.8A dated 09.02.2019, the judgement of the Orissa HC had not attained finality as it is pending before the Apex Court. Accordingly, the AAAR upheld the AAR order holding that the Appellant was not eligible to avail ITC as the construction of the immovable property was for his own account.
Dhingra Trucking Private Limited [HAAAR/2020-21/03 dated 30 September 2020]
The entire issue in the instant matter can be filtered down to the interpretation of the phrase ‘on his own account.’ The GST law nowhere defines the phrase. Accordingly, such situation calls for reference to the general rules of interpretation, which provides that there should be no additional inclusion of words and the provision must be construed strictly as per the plain language used by the Legislature. It is opined that the said term seeks to block ITC when the construction is being done for one’s own purpose. It cannot be said to block ITC in respect of immovable property intended for the purpose of leasing out. Such a situation blocking ITC for the purpose of re-sale, leasing-out, etc. would defeat the very objective of seamless flow of credit, especially for taxpayers engaged in real estate transaction.
However, the entire issue is very much interpretative in nature. Accordingly, it is contemplated that the issue of correct interpretation of Section 17(5)(d) of the CGST Act will have to be resolved by the Apex Court. It would be interesting to see the result in RE: Safari Retreats (supra), which would provide more perspective into the issue.
The GSTN has made available new functions for taxpayers on GST Portal in March 2022. Following are the highlights of the said new functions:
Even in the face of multiple adversities in the last couple of years, the Indian economy has sailed through the hardships like a seasoned sailor! Add to the this, the global geo-political tensions in the Eurasia region has only added the difficulties in the global trade. Thus, it was now, more than ever, imperative to rationalize the International Trade Agreements with other countries. In line with such requirement, we have analyzed the existing trade agreements, in which India is a signatory and the proposed agreements, which may prove out to be beneficial.
Moreover, the on-going Russia-Ukraine conflict, has impacted the global trade in ways which were not contemplated. Analyzing the ramifications, we have penned down a piece in this Edition of the Newsletter. Apart from this, following are the key developments covered in this Newsletter:
Compiling all such developments, we are glad to bring to you in new Avatar, the 20th Edition of our ‘Vision 360’ Newsletter in association with TIOL. We have covered the key judicial and legislative developments in Direct, Indirect Tax other regulatory areas. We hope that reading of the newsletter would bring an enriching experience to you! Your valuable feedback is always welcome at firstname.lastname@example.org or email@example.com
The Applicant, engaged in the business of manufacturing cement had hired service provider for bus transportation facilities to their employees in non-conditioned buses having seating capacity of more than 13 persons charged GST for the services rendered. The Applicant had sought an advance ruling before the Kerala AAR to ascertain whether ITC admissible on GST charged by service provider.
The AAR observed that in terms of 16 to 18 of the CGST Act and particularly u/s. 17(5), the Applicant would not be eligible to avail ITC. Further observed that as the Applicant recovers a part of the cost incurred for transportation from the employees, the Applicant would be eligible to avail ITC to the extent of the cost of transportation borne by himself.
Malabar Cement Limited
It would be pertinent to note that the Maharashtra AAR in RE: Tata Motors Limited [2020 (41) GSTL 35], had held that hiring of bus / motor vehicle for the transportation of employees to and from work place is clearly in furtherance of business. Further, in view of amendment in Section 17(5) of the CGST Act, ITC available to applicant if bus hired for transportation of persons is having approved seating capacity of more than thirteen persons including driver.
The CBIC vide Notification No. 20/2022-Customs (N.T.) dated 30 March 2022 has notified the Customs (Electronic Cash Ledger) Regulations, 2022. Following are the key highlights of the said Regulations:
Manner of maintaining the Electronic Cash Ledger (‘ECL’)
ECL will be maintained in FORM ECL-1 on the common portal for each person in regard to every deposit made towards duty, interest, penalty, fee or any other sum payable by the person. Any deposit into the ECL will be made by a person by generating a deposit challan in FORM-ECL-2 which will be valid for a period of 15 days.
Manner of making payment from ECL
A person may use the amount available in the electronic cash ledger for making payment duty, interest, penalty, fee, or any other sum payable through challan in FORM ECL-3. The successful debit will be visible on ECL and the credit will be shown in the Electronic Duty Payment Ledger (Cash) maintained in FORM ECL-4.
The balance in the ECL, after payment of duty, interest, penalty, fee or any other amount payable, may be applied for refund by the person on the common portal in FORM ECL-5. The balance will not be available and the refund will be decided in 30 days.
Intimation of discrepancy in electronic cash ledger
Upon noticing any discrepancy in his electronic cash ledger, the registered person shall communicate the same on the common portal.
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