Newsletter

The 49th GST Council meeting has concluded on 18 February 2023 under the chairmanship of the Smt. Nirmala Sitharaman. Following are key highlights of the recommendations made in the Meeting:

GST Compensation:

Ø  Government of India will clear pending balance of GST compensation amounting to Rs. 16,982 crores for June’2022, which shall be released from the Centre's own resources but same will be recouped from the future compensation cess collection.

GST Appellate Tribunal:

Ø  The Council has approved the report of Group of Ministers (‘GoM’) for an establishment of the GSTAT with certain modifications.

Capacity Based Taxation and Special Composition Scheme:

Ø  The Council has approved the recommendations of the GoM on Capacity Based Taxation and Special Composition Scheme to plug the leakages and improve the revenue collection from the commodities like pan masala, gutkha, chewing tobacco

GST Rate Rationalization:

 Exemption Provided/Extended:

Ø  Notification No. 1/2017-Compensation Cess (Rate) dated 28.06.2017 has been suitably amended to extend the exemption benefit on coal rejects supplied by and to the washeries on which compensation cess has been paid but no input tax credit thereof has been availed by any person.

Ø  The council extended the exemptions to any authority, board, or body set up by the Central or State Government including National Testing Agency for the conduct of entrance examination for admission to educational institutions.

Other Recommendations/Clarification relating to GST rates on Goods and Services:

Ø  GST payment on ‘rab’ during the past period on “as is basis” owing to doubts over its classification and GST rate is now been regularized.

Ø  Notification No. 104/94-Customs dated 16.03.1994 is amended, to clarify that a device like tag- tracking device or data logger is already affixed on a container, no separate IGST shall be levied on such affixed device and the ‘nil’ IGST treatment available for the containers shall also be available to the such affixed device subject to the existing conditions.

Ø  The Council extended the dispensation available to Central Government, State Governments, Parliament and State Legislatures in connection to payment of GST under reverse charge mechanism to the Courts and Tribunals in respect of taxable services supplied by them.

Amendment in Section 30 and 62 of CGST Act, 2017

Ø  The time limit for making an application for revocation of cancellation of registration has been increased from 30 days to 90 days (extendable for another a period of days not exceeding 180 days’ subject to conditions) vide amendment to Section 30 of CGST Act and Rule 23 of CGST Rules. Further, this arrangement has been extended to the past cases, where registration has been cancelled on account of non-filing of the returns.

Ø  The time limit for filing of return for enabling deemed withdrawal of best judgment assessment order from 30 days to 60 days (extendable for another 60 days’ subject to conditions) vide amendment to Section 62 of the CGST Act. Further, such extension is also being applied to past cases where the concerned return could not be filed within 30 days of the assessment order but has been filed along with due interest and late fee up to a specified date, irrespective of whether appeal has been filed or decided against the assessment order.

Rationalization of late fee for delayed filing of annual return from FY 2022-2023

Ø  Registered persons having an aggregate turnover of up to Rs. 5 crores in a financial year, late fee of Rs 50 per day (Rs 25 CGST + Rs 25 SGST) shall be applied subject to a maximum of an amount calculated at 0.04 per cent. of his turnover in the State or Union territory.

Ø  Registered persons having an aggregate turnover of more than Rs. 5 crores and up to Rs. 20 crores in the said financial year, late fee of Rs 100 per day (Rs 50 CGST + Rs 50 SGST) shall be applied subject to a maximum of an amount calculated at 0.04 per cent. of his turnover in the State or Union territory.

Place of supply for services of transportation of goods:

Ø  The Council has recommended to rationalize the provision of place of supply for services of transportation of goods by deletion of section 13(9) of IGST Act, 2017, in cases where location of supplier of services or location of recipient of services is outside India, shall be the location of the recipient of services.

GST Amnesty Scheme:

Ø  Amnesty schemes in respect of pending returns in FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10 by way of conditional waiver/ reduction of late fee will be announced soon.

The aforesaid would be given effect through the relevant circulars/ notifications/ law amendments.

The Finance Minister Smt. Nirmala Sitharaman commenced the Budget ’23 speech by highlighting that in the 75th year of Independence, the world has recognized India as a ‘Bright Star’. This astronomical recognition is now proposed to be maintained / boosted by ‘Saptarishi’ i.e., seven priorities set by the Finance Ministry to realize the vision of ‘Amrit Kaal.’ 

In one of its kind, the priorities ranging from traditional goals of agricultural and financial development, to contemporary goals of Artificial Intelligence development and setting-up of labs for 5G services, seems to cover every aspect of the economy. In a bid to achieve the said targets, the Government has allocated a record INR 10 lakh crore budget for infrastructure development, which constitutes 3.3% of GDP.

On the direct tax front, the proposal to introduce Vivad Se Vishwas II for easier and standardized settlement scheme and the launch of Phase 3 of E-Courts. These initiatives would certainly help in reducing considerable litigation burden on the judicial and quasi-judicial authorities.

In Indirect Tax, the proposed amendments majorly seem to be Customs-centric with the goal of rate rationalization for promoting exports and Indian manufacturing. In GST, the proposals to disallow ITC on CSR expenditure, definitely has left the Trade and Industry disappointed. Add to this, the silence of the FM on the formation and launch of GST Appellate Tribunal, is rather unfortunate. Nonetheless, it is expected that this matter may be taken-up at the GST Council Meeting.

All in all, the Budget seems to be well formulated, with long-term objectives focusing on macro-economic growth, with a clear road-map. It now remains to be seen how well the Government executes this plan to achieve the desired targets. Attached is the detailed analysis of the Union Budget 2023-24, covering key areas of Policy Initiatives, proposals in Direct Tax, Indirect Tax, excerpts from the Industry leaders and much more…..

The Appellant was engaged in the business of manufacturing of sugar and molasses. During the process of manufacturing some byproducts like bagasse, press mud, boiler ash was generated which, were sold by the Appellant has by-products/waste in market. The Department issued SCN for violating the provisions of Rule 6(2) & 6(3) of the CCR, 2004. The Adjudicating Authority confirmed the demand along with interest and penalty which was upheld by the first Appellate Authority. Aggrieved the, Appellant filed an appeal before the CESTAT.

The CESTAT observed that provisions of Rule 6(3) of CCR, 2004 was only applicable to the manufacturer who is engaged in manufacture of the final product which is chargeable to duty as well as any other final product which is exempted from whole of duty. Further, it noted that due the amendment in Rule 6, the by-product can be treated as exempted goods however, it cannot be treated as manufactured goods, as the nature remains that of a waste/residue and is not as ‘a final product’. However, in the instant matter as the Appellant was not the manufacturer of bagasse or pressmud or boiler ash rather they were merely the by-products emerging as waste or residue while manufacturing of the primary goods. Further as none of the by-products falls under the purview of manufacture, demand cannot be raised. Accordingly, the CESTAT quashed the demand as the provisions of Rule 6(3) or Rule 6(2) had no applicability in the instant matter. 

Purna Sahakari Sakhar Karkhana Limited. Vs. The Commissioner of CGST & C.Excise [Excise Misc. Appln No. 86112 of 2022]

The Applicant is engaged in the business of manufacturing and supplying all kinds of stationery items. The Applicant sold ten pencils in sets with the sharpener and eraser in the pack as accessories.  Furthermore, the Applicant used to sell the pack under the HSN code of the item with the highest value inside the pack, which also had the highest GST rate, however with the change in the GST rate of the pencil sharpener to 18%, the sharpener now carries the highest tax rate among all products bundled. Hence, the Applicant sought an advance ruling to ascertain whether the supply of pencil sharpeners along with pencils, which, as per the Applicant, is the principal supply, will be considered as ‘composite supply’ or ‘mixed supply.’

The Applicant had argued that sale of such stationary items is naturally bundled, with pencils being the principal sully and therefore, classifiable as composite supply. It had been further argued that in terms of the Rule 3 of General Interpretation Rules for classification of goods, issued by the World Customs Organization, when goods are capable of being classified as under two or more headings, the classification of goods, which are put up in sets for retail sale is to be undertaken basis the product giving providing essential character to the complete set.

Basis the above contentions, the Applicant had argued that stationary sets supplied by them are classifiable as composite supply, with pencils being the principal supply, chargeable to 12% GST.

The AAR noted that, the pack supplied by Applicant satisfies all the conditions of ‘Mixed Supply’ u/s 2(74) of the CGST Act and as per the provision of mixed supply, the supply that attracts the higher rate of tax shall be the applicable rate for the supply. Accordingly, the AAR ruled that the supply of sharpeners along with pencils falls under the category of ‘mixed supply’ and therefore, the Applicant is required to use the HSN code of the product, which attracts a higher rate of tax among all the taxable supplies contained in a pack or box. 

Doms Industries Private Limited [Advance Ruling No. GUJ/GAAR/R/2022/52] 

GLS Comments:

Interestingly, in the instant case, the Applicant had placed reliance on the General Rule of the General Interpretation Rules of Customs to argue that in case of goods sold in sets, the product giving the essential character is to be used for classification. In this regard, it shall be noted that the purpose of classification of goods under the Customs law vis-à-vis the GST law is different. The Rules meant for classification for the purpose of Customs, although having persuasive value for GST classification, cannot be applied mutatis mutandis.

In RE: Texel Industries Limited [2022 (61) GSTL 217 (AAR-GST-Guj.], it had been held that GST Scheme of law shall be given precedence and compliance for Classification. Further, the explanatory notes issued by the WCO have a persuasive value for determining classification.

The Petitioner had inadvertently furnished incorrect GSTIN in its outward supplies. Aggrieved, the Petitioner, relying upon the Circular No. 183/15/2022-GST dated December 27, 2022 preferred a writ before the Karnataka HC seeking relief by way of rectification in Form GSTR-1 uploaded between FY 2017-18 and 2018-19 so that their recipient can claim the ITC.

The HC observed that the Circular allows rectification of the bona fide and inadvertent mistakes committed by the assessee at the time of filing of forms and submitting returns is applicable in peculiar and special facts and circumstances. Further, it was also noted that the Petitioner's error in the invoices, which was carried through in the relevant forms, had occurred as a genuine error that arose owing to bonafide causes, and hence the circular was squarely applicable. Accordingly, the rectification was allowed and the Revenue was directed to follow the procedure in accordance with the Circular. 

Wipro Limited India [2023-VIL-22-KAR]

As we usher into 2023, there is a lot of hope for the economic development of the Nation. With the record collections in GST and the strides towards being an export-centric country, the foreseeable future certainly looks good. Most importantly, with the recent Foreign Trade Agreement entered with the Government of Australia, the exporters of various goods especially that of consumer goods, will enjoy many benefits.

Further, with the Budget 2023 just around the corner, the corporate sector anticipates that uniformity in tax rates should be implemented for India to stand as a center for both the manufacturing and services industries. Furthermore, there have also been ample judicial and legislative growth in the past month. The CBDT has issued Circular for TDS on Salary for FY 2022-23. Furthermore, the CBIC has issued numerous circular/clarifications in line with the recommendation from the 48th GST Council meeting. The CBIC has clarified the much debated issue of ITC difference in GSTR-3B vis-à-vis GSTR-2A for F.Y. 2017-18 and F.Y. 2018-19.

In addition, thereto, true to our view of bringing news which are beyond facts, we have covered all the judicial and regulatory developments in direct and indirect taxes with interesting insights. We have also covered developments of the erstwhile indirect tax laws, which can be helpful precedents for disposing the pending litigations. 

Compiling all such developments, we are glad to bring to you, the 28th 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 in the month of December 2022. 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 Petitioner had filed a refund application of the unutilized ITC in respect of zero-rated supplies made by all its units together. The said refund was allowed by the Department, however the Petitioner on computing the unit-wise quantum of refund, it was observed that the amount of refund granted by combining all of the units together was considerably less. Therefore, the Petitioner manually applied for a supplementary refund by computing the claim on the basis of supplies made unit-wise, however, the department rejected the supplementary refund. Aggrieved the Petitioner preferred a Writ before the Orissa HC. 

The HC emphasised that all units of the company having same GSTIN has to be treated as one individual for the purpose of making claims under the GST Act.  Further as the Petitioner had availed the benefits of refund by combining the three units, subsequent thereto, it could not turn around and ask for more refund by filing further application for supplementary refund by computing amount of refund taking into account transactication based on a fresh calculation mions of individual unit.  Accordingly, the HC held that, there is no scope for consideration of a supplementary refund applade by taking individual unit-wise transactions into account. The bench also declined to read down Rule 89(4) of the CGST Rules, 2017 as it was framed in conformity with the powers conferred on the government u/s 164 of the CGST Act and thus held it as “intra vires”.

Vedanta Limited vs. UOI [TS-01-HC(ORI)-2023-GST]

The Applicant had sought an advance ruling to ascertain whether lease charged for the supply of equipment to its other branches across India will be considered as supply u/s 7 of the CGST Act. 

The AAR observed that as per the entry in Schedule I of the CGST Act, there can be supply of goods or services between distinct entities even in case no consideration is involved. Accordingly, it was held that the transaction made by the Applicant would be taxable. It was further held the normal value which would be derived after taking into consideration the lease rate would be the value on which GST has to be charged in terms of Section 15 of the CGST Act.

Chep India Private Limited [NO.GST-ARA-82/2020-21/B-111]

With a slew of Circulars issued on 27 December 2022, the CBIC has clarified various issues in relation to GST. Following are the key highlights of the Circulars:

CBIC vide Notification No. 26/2022 dated 26 December 2022, has notified various provisions under the CGST Rules, which had been proposed in the 48th GST Council Meeting: