Newsletter

The Ministry of Finance vide Press Release dated 28 February 2021 has decided to extend the due date for filing Annual Return in Form GSTR-9 and Reconciliation Statement in Form GSTR-9C for the F.Y. 2019-20 till 31 March 2021 with the approval of Election Commission of India

The CBIC vide Notification No. 14/2020 – CT dated 21 March 2020 had notified that Dynamic QR Code would be required on B2C invoice issued by taxpayers having aggregate turnover of more than Rs. 500 crore, w.e.f. 01 December 2020. Further, the penalty had been waived for non-compliance of the provisions of the said notification till 31 March 2021, subject to certain conditions.

In respect of the said notification, the CBIC vide Circular No. 146/02/2021-GST dated 23 February 2021 has issued further clarifications:

The Ministry of Finance vide Press Release dated 22 February 2021 has clarified that the time limit for sanction of pending IGST refunds stands extended till 31 March 2021, in such cases where records have not been transmitted to ICEGATE due to GSTR1 and GSTR3B mismatch. The Ministry of Finance further provided that such facilitation overcomes the problem of refund blockage by allowing refunds subject to post refund audit scrutiny and undertakings of CA certificates by the exporters.

It has been further provided that the CBIC has also extended the facility for resolving invoice mismatch errors through customs officer interface on permanent basis. Earlier this facility was provided for a limited period i.e. in respect of shipping bills filed up to 31.12.2019. The exporter may now avail the facility of correction of Invoice mis-match errors in respect of all past shipping bills, irrespective of its date of filing subject to payment of prescribed fees.

The DGFT vide Trade Notice No. 42/2020-21 dated 19.02.2021 has proposed to issue online Certificate of Origin (Non-Preferential) tentatively w.e.f. 01 April 2021. The online applications for CoO would be processed in terms of the provisions of Rules of Origin as prescribed under the Handbook of Procedures, based on the declaration of exporter to the issuing agency without any scrutiny of documents.

However, the documents such as invoices, etc. would be available for scrutiny, where cross verification would be required. Further, the online CoO has been proposed to be issued at a uniform fee of Rs. 100/-. It has been further provided that the applicants will be able to avail CoO (non-preferential) in either online or manual till 30 March 2021. Thereafter, w.e.f. 01 April 2021, the applications would be accepted only in online mode.

The CBIC vide Notification No. 17/2021 – Customs (N.T.) dated 17 February 2021, has prescribed a fee of Rs. 1,000/- for amendment in Customs Automated System for handling a mis-match between Shipping Bill and GST Returns

The Applicant, situated in Pathderi, Haryana, had been supplying un-assembled sub-assembles of railway components, to its additional place of business located in Chennai. The sub-assemblies were then being assembled completely and finally supplied to the Integral Coach Factory, Chennai (‘ICF Chennai’). Accordingly, the Chennai unit of the Applicant, would bill to its parent unit in Pathderi and ship the assemblies directly to ICF Chennai.

In view of the afore-stated background, the Applicant sought an Advance Ruling before the Haryana AAR to ascertain the tariff classification of sub-assemblies supplied from Pathredi unit to Chennai unit as well as the IGST rate applicable.

Upon perusal of the invoice, the AAR observed by the AAR that the items supplied by Pathredi unit to the Chennai unit were in fact parts and sub-parts of sub-assemblies. It was further observed that fabrication of sub-parts was to be done at the Chennai unit. The AAR remarked that fabrication is generally defined as the process of making something from semi-finished or raw materials rather than from ready-made components, hence, the process done at Chennai unit amounted to work process or manufacturing.

The AAR further referred to the Explanatory Notes and the General Rules of interpretation, which provides that incomplete or unfinished articles presented unassembled or disassembled are to be treated as finished goods. However, it had been observed that in the instant case, parts which will are to be assembled in Chennai, are being assembled by adding some other components procured from other suppliers.

It was further observed that the Applicant would be undertaking the process involving in-house inspection, fabrication, welding, painting, leakage testing and final inspection. Accordingly, it can be said that assembly operation as well as addition of components was being undertaken to prepare the parent assembly in Chennai unit.

The AAR further referred to Para 4 of Circular No. 30/4/2018-GST dated 25 January 2018, wherein it has been clarified that only the goods classified under chapter 86 supplied to the railways would attract GST at 5% with no refund of unutilized ITC and other goods would attract the general rates even if supplied to railways.

Basis the above observations, the AAR held that the goods supplied from Pathredi unit of the Applicant to Chennai unit cannot be classified under chapter 86 and would therefore attract the general rate applicable as per the classification of each item in their respective chapters.

JSL India Private Limited [Advance Ruling No. HAR/HAAR/R/2018-19/51]

GLS Comments:

Even after more than 45 years of the introduction of Tariff in India, the classification of parts of railway goods is still a major subject of dispute. Although the Haryana AAR has not touched upon the Section Notes to the Tariff, it would be pertinent to note that the instant dispute is majorly on account of two rather contradictory Notes. While Note 2 to Section XVII of the Tariff Act (which covers railway goods) provides that parts of general use, even if being used in railways, shall be classified in respective chapters other than 86, Note 3 provides that parts, being used solely and principally with Railways shall be remain classifiable under Chapter 86.

It would be pertinent to note that the matter relating to classification of goods, where assembly occurs at the site of supply, has been majorly litigated in the excise regime as well. In the case of Bharat Heavy Electricals Limited [2018 (14) G.S.T.L. J74], it had been held that boiler parts cleared in unassembled form as incomplete boiler and assembled at site, are classifiable under sub-heading 8402 as boiler and not the sub-heading as parts. Taking note of the SC judgement, it seems that the instant AAR seems to have taken a different approach in this case.

The CBIC has recently released FAQs on services by way of transport and logistics to clarify various issues under GST. Following are the key highlights of the FAQs:

GTA Services

Airline Services

While all eyes were on the Budget 2021-22 announced by the Finance Minister on 01 February 2021, there have also been substantial developments in the tax front in the month of January 2021 as well. Notably, the CBDT has already notified the Faceless Penalty Scheme, 2021 and the CBIC has notified the Custom Authority for Advance Ruling Regulations, 2021.

Bringing you all the relevant judicial, legislative and regulatory developments in Direct and Indirect Tax, we are glad to present you the 6th Edition of our ‘Vision 360’ Newsletter in association with TIOL.

We hope that reading of the newsletter would bring an enriching experience to you! Your valuable feedback is always welcome at consult@gstlegal.co.in or updates@gstlegal.co.in. 

The CBIC vide Circular No. 145/01/2021-GST dated 11 February 2021 has issued a Standard Operating Procedure (‘SOP’) for implementation of the provision for suspension of registrations. As per Section 21(2A) of the CGST Act, registration shall be suspended, where upon comparison of the returns, it is indicated that there are significant differences or anomalies indicating contravention of the provisions of the Act or the Rules.

The said Rule specifies that the registration of taxpayers shall be suspended and system generated intimation of suspension and notice of cancellation of registration shall be intimated vide Form GST REG-31. However, as the functionality of GST REG-31 has not been made operational yet, the CBIC has provided the following guidelines for implementation of the provision of suspension of registrations:

• The notice / intimation of suspension of registration shall be made available to the taxpayer on their dashboard on common portal in Form GST REG-17;
• The taxpayers, whose registrations are suspended would be required to furnish reply in Form GST REG-18 to the jurisdictional tax officer within 30 from the receipt of such notice, and shall furnish the details of compliances and the reasons as to why their registration should not be cancelled;
• Post examination of the response, the Officer may pass an order either for dropping the proceedings for suspension/ cancellation of registration in Form GST REG-20 or for cancellation of registration in Form GST REG-19. Based on the action taken by the proper officer, the GSTIN status would be changed to ‘Active’ or ‘Cancelled Suo-moto’ as the case maybe.

The Applicant, having multiple locations throughout India, had been engaged in the business of passenger and cargo transport and services by air. The Applicant, having its Corporate Office in Haryana (‘HO’), had been procuring various goods / services under their GSTIN, while the same were being directly supplied at its Branch Offices (‘BO’)’.

In order to ensure up and running condition of the aircrafts, the Applicant maintained various spare parts at its HO itself. In reference thereto, the Applicant had taken aircraft under lease model. Accordingly, the Applicant had entered into various contracts, (contractual location being Haryana) with different vendors on which the IGST was being paid under RCM on the lease rentals in the State of Haryana. 

Further, the spares were ordered by the HO and the bill of entry was also filed with their GSTIN, however, the goods were being dispatched at the respective locations as per the requirement. The Applicant further procured assurance services (for repair of aircraft) from vendors located outside India in the State of Haryana and paid the GST under RCM. Further, the HO had entered into an agreement with its BO's for supply of maintenance services including assurance. The cost of such supply shall be equal to the cost of assurance services plus the cost of spares plus any other costs incurred plus mark-up thereon.

In view of the above, the Applicant had sought a ruling before the Haryana AAR to ascertain whether:

• The charges in lieu of maintenance services recovered by the HO from the BO shall qualify as supply of service?
• The ITC for procurements is required to be claimed by the Applicant under the normal GSTIN or the Applicant needs to take a separate GSTIN as an ISD to distribute the GST credits from HO to BO.

Referring to Section 7 of the CGST Act, the AAR observed that the term ‘supply’ includes all forms of supply including licence, rental, lease or disposal for a consideration in the course or furtherance of business. It was further observed that the HO had been charging a mark-up over and above the cost of assurance services, cost of spare parts and any other cost in relation to upkeep and maintain the aircrafts, thereby adding value to the cost and hence, incurring a taxable supply of service.

The AAR further noted that the HO and BO being separate GST registrants, qualify as ‘distinct persons’ and therefore any supply between the two parties would be chargeable to GST. Accordingly, it was ruled that the charges in lieu of maintenance services recovered by the HO from the BO shall qualify as supply of service.

Further, referring to Section 2(93) of the CGST Act, it was observed by the AAR that ISD is the 'recipient' as it is the person making payment of consideration for the supply of goods or services. It was further observed that the very basis of the ISD related provisions under the CGST Act is that the ISD is not a supplier of goods or services and does not make any 'outward supply' but is entitled to distribute credit.

The AAR further noted that ISD mechanism is meant only for distributing the credit on common invoices pertaining to input services only and not goods inputs or capital goods. Accordingly, it was ruled that the ITC pertaining to services only on the procurement made by HO towards maintenance of aircraft shall be distributed by way of ISD mechanism and the credit pertaining to goods, including capital goods, shall be distributed by normal mechanism.

GLS Comments:

The issue of treatment of common services has always been a contentious issue in the GST regime. This instant AAR has correctly ruled that a corporate office and a branch office are two distinct persons and therefore the transactions between the two would qualify as 'supply'. The Haryana AAR in the instant case has followed the ruling of Karnataka AAR in the case of Columbia Asia Hospitals Private Limited [Advance Ruling No. KAR ADRG 15/2018 dated July 27, 2018], wherein it had been ruled that activities performed by the employees at the corporate office in the course of or in relation to employment such as accounting, other administrative services for the units located in the other states shall be treated as supply as per Entry 2 of Schedule I of the CGST Act. The instant ruling of Haryana AAR has re-affirmed this position of law under GST.