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Andhra Pradesh AAR rules that the activity of transfer of going concern is a supply of services. The AAR observed that said transaction is an activity of 'transfer' made for consideration, but it is neither in the course of the business nor for the furtherance of the business. Even though the transaction does not amount to a ‘supply’ as per definition, but qualifies to be one under scope of supply as it is backed by the term ‘includes’ used in the definition of supply. 

The AAR further observed that the definition of services under Section 2(102) of the CGST Act includes anything other than goods. Accordingly, 'going concern' which is excluded form list of supply of goods would automatically fall under ‘supply of services’ attracting Nil rate as per Sl. No. 2 of Chapter 99 of Notification No.12/2017. Consequently, the AAR allows transferring of the unutilized ITC to the transferee by filing return GST ITC-02. 

Andhra Pradesh AAR holds that the marketing consultancy services provided by the Applicant to overseas client constitutes an ‘intermediary service’ and not an ‘export of service’. The AAR observed that though the Applicant receives the consideration for its services in foreign convertible exchange, the same cannot be classified as ‘export of service’ as the place of supply is in India. In terms of the relevant provisions of the IGST Act, the Andhra Pradesh AAR observes that the place of supply of intermediary services shall be the location of supplier i.e. location of the Applicant and concludes that said services provided to recipient located outside India shall attract IGST.

GLS Comments:

Whether a service provided to a foreign Company would be considered as an export of service or intermediary service, has been a matter of litigation for some time now. Under GST, the advance ruling authorities have attempted to answer the question. In NES Global Specialist Engineering Services Private Limited [2019 (22) GSTL 541], the Maharashtra AAR had ruled that as no principal agent relationship was established between the Applicant Indian Company and the Foreign Company, they Applicant did not qualify as an intermediary and the services provided would be covered as 'export'. However, the said ruling was overruled by the Maharashtra AAAR stating that the said application for ruling involved the question of 'place of supply' which was beyond the jurisdiction of the AAR / AAAR.

In the case of VServGlobal Private Limited [GST ARA Application No. 03 dated 07 April 2018], the Maharashtra AAR had held that as the Indian Application Company was merely providing services on behalf of the client to facilitate supply of goods and services between the client and their customers, the same was considered as 'intermediary service' and not as export of service'.

As the Government of India has continued the FTP 2015-20 for another year until 31 March 2021, the Merchandise Export from India Scheme (‘MEIS’) has also survived the wrath of the WTO Ruling of November 2019 which had ruled for discontinuance of the MEIS as it distorted trade by providing direct subsidies. 

As the MEIS is active as on date, the DGFT has issued Public Notice No. 12/2015-20 dated 10 July 2020 for addition of certain products and revision in the rate of certain products. Notably, the MEIS has been discontinued for certain products such as vegetables, chemical acids, etc. as prescribed in the Notification.

Earlier this year, the Delhi HC, in the case of Bharti Airtel Limited vs. Union of India [W.P.(C) 6345/2018], had read down Circular No. 26/2017 – GST dated 29 December 2020 to the extent that it restricted the rectification of GSTR 3B in respect of the period in which the error has occurred. It had been observed by the HC that circular issued by the Board cannot be contrary to the Act and the Government cannot impose conditions that go against the scheme of the statutory provisions contained in the principal Act.

Aggrieved by the judgment, the Revenue authorities have preferred a Special Leave Petition before the SC inter alia on the following grounds:

• Section 39(9) of the CGST Act expressly provides for rectification of return, subject to the provisions of interest. Accordingly, the observation of the HC that there is no statutory provision permitting rectification of errors only in the return with respect to the month in which such error is noticed and not in the return with respect to the month in which the error relates, is unsustainable;
• The Delhi HC did not take cognizance of the Revenue’s submissions with respect to the rationale behind not permitting rectification of the Return for the period to which an error relates.

Dear Patrons,

In this 7th volume of our Fortnightly Newsletter, we bring you the key developments in the world of direct and indirect tax laws in India, along with incisive analysis from the GLS team. In this volume, we have covered the recent Notifications, Circulars and Judicial Precedents along with its impact in relation to Direct Tax and Indirect Tax. Further, taking cognizance of the difficulties faced by the taxpayers in respect of the ambiguity u/s. 16(2) of the CGST Act, 2017 regarding reversal of credit, we have penned down an article on the same analyzing the issue and exploring the judicial stance and way-forward.

We hope that reading of the newsletter would bring an enriching experience to you! Your valuable feedback is always welcome.

Under the flagship ‘Turant Customs’ programme of the Customs Authorities aimed at providing a ‘Faceless, Contactless and Paperless’ Customs administration, the CBIC has recently introduced a number of initiatives that leverage technology in order to enhance the efficiency in the Customs clearance processes. These initiatives lead to speedy clearances, transparency in decision making, ease of doing business and very importantly, reduce physical contact in the prevailing pandemic situation. 

In line with the objective of the Faceless Customs and the already set-up Turant Seva Kendras (‘TSK’) at Bengaluru and Chennai Customs, the CBIC had decided to extend TSKs to all the Customs stations. Accordingly, the proper officers have been directed to set-up TSKs in all Customs stations by 15 July 2020. In order to facilitate the paperless and contactless customs, the CBIC has enabled, certain functionalities in ICEGATE, with effect from 06 July 2020, to reduce the physical interaction between Customs and trade and also speed up the Customs clearance process. The said functionalities have been detailed hereunder:

Registration of AD Code, Brank Account through ICEGATE

Currently, the exporters are required to register their Authorised Dealer (‘AD’) Code and Bank Accounts for purposes of remittances and availing export benefits respectively at every Customs station. This process involves physical interaction in form of submission of documents. In order to do away with the same, the CBIC has now enabled a functionality in the ICEGATE system which allows the exporters to make an online request for registration/modification of their AD Code / Bank Accounts and also electronically submit the various documents through e-Sanchit. 

The exporters would also have access to a Dashboard to view the status of approval and acceptance at PFMS, for quick rectification at their end. The detailed step-by-step guide is available on the ICEGATE portal. The proper officers have been advised to ensure that the approval process for registration / updation of the AD Code and Bank Accounts details in ICES within the same working day of receiving the applications. In case of deficiencies, the same shall be communicated to the exporter via the Customs Automated System.

Automated debit of bond after Assessment

Currently, importers are required to physically visit Customs House for physical debit of Bonds after the Bill of Entry is returned for the payment of duty. In order to do away with the current system, the CBIC has implemented a system in ICES, which would automatically debit the Bond and reflect the same in the first copy of the Bill of Entry, provided the details of the Bond are provided during submission of the Bill of Entry.

Simplified Registration of Importers/Exporters in ICEGATE

As many importers / exporters have not availed the simplified mode of registration, various functionalities available in the ICEGATE portal cannot be accessed by them. Therefore, importers / exporters are advised to register on ICEGATE and conduct their Customs clearances through electronic interface and avail the benefit of various functionalities such as Management of Bank Accounts, Ledger View, IGST Refund status, Query Reply etc.

Sahara Hospitality Limited vs. The State of Maharashtra and Ors. [AD HOC WP LD-VC No. 112/2020]

The Petitioner had preferred an ad-hoc Writ Petition before the Bombay HC challenging the vires of Section 50 of the CGST Act which prescribes payment of interest upon delayed payment of tax. It was submitted by the Petitioner that Section 50 of the CGST Act is unenforceable and even otherwise the order of recovery cannot be passed without notice, hearing and any sort of adjudication.

The Petitioner inter alia challenged the demand on interest on two grounds;

• Section 50(1) of the CGST Act which prescribes payment of interest @ 18% upon late payment of tax is unreasonable;
• Section 50(2) of the CGST Act which prescribes the method for calculation of interest, lacks rule making authority

The Petitioner argued that as no such rule has been prescribed till date, the interest cannot be levied.

It was further argued that the Department had neither issued any notice nor any working was given about how the demand was calculated. Furthermore, the Petitioner had no opportunity of being heard. Accordingly, it was argued that direct recovery was initiated, violating the principles of natural justice and without any adjudication of liability.

In order to respond to the Writ Petition filed by the Petitioner, the Revenue authorities pleaded for extension of time for filing of affidavit in reply. Taking cognizance of the averments, put forth by the Petitioner and the request made by the Revenue Authorities, the Bombay HC granted unconditional ad-interim stay on recovery of interest. The HC further directed the Revenue Authorities to file affidavit in reply before 18 July 2020. The HC further restrained the Revenue Authorities from taking any coercive action against the Petitioner on the basis of impugned orders.

The matter has been listed for hearing on 24 July 2020

Scandia Motorcars Private Limited vs. Union of India and Ors. [W.P.(C) 3658/2020]

The Petitioner had preferred a Writ Petition before the Delhi HC seeking a direction for the Revenue Authorities to open the GST portal to enable uploading of Form TRAN-1. The Petitioner had stated that they had missed out to avail transitional credit of a substantial amount due to an inadvertent error. The Petitioner had further stated that the work of filing TRAN-1 had been outsourced by them to an accountant, and on account of multiple columns and lack of knowledge, mistakes occurred which were unintentional. The errors were detected by the Chartered Accountant while conducting the audit.

Taking cognizance of the above contentions, the Delhi HC directed the Respondent to file counter-affidavits within four weeks and rejoinder-affidavits within four weeks thereafter. Lastly, the Delhi HC issued a notice directing to await the decision of SC in the case of Union of India vs. Brand Equity Treaties and Ors. [SLP(C) 7425-7428/2020]. The matter has been scheduled for hearing on 16 September 2020.

Rehau Polymers Private Limited vs. Union of India [WP(C) 3824/2020]

The Petitioner had preferred a Writ Petition before the Delhi HC seeking a direction for the Revenue Authorities to open the GST portal to enable uploading of Form TRAN-1. The Petitioner placed reliance on the judgment of Delhi HC in the case of Brand Equity Treaties Limited vs. The Union of India and Ors. [W.P.(C) 11040/2018 and C.M. No. 42982/2018], against which an SLP is pending before the SC. 

The Petitioner argued that the Delhi HC shall allow provisional filing of form TRAN-1 even though the SLP is pending before the SC in case of Brand Equity. The Petitioner further submitted that in case the SC upheld the decision, the Revenue authorities shall not be permitted to present a fait accompli by pleading that 30 June 2020 had already passed.

The Delhi HC observed that the Petitioner had preferred the Writ before 30 June 2020, which had been listed on the same date. The HC further remarked that in case the SLP before the SC against the decision in Brand Equity Treaties Limited (supra) is rejected and the decision of Delhi HC is upheld, it goes without saying that the HC would not be powerless to direct the Revenue authorities to accept the Form TRAN-I of the Petitioner at a later point of time. The matter has been scheduled for hearing on 16 September 2020.

CBIC vide Notification No. 57/2020 – Central Tax dated 30 June 2020 prescribes maximum amount of late fee of Rs. 500/- (CGST + SGST) upon late filing of GSTR-3B for the months of February 2020 to July 2020 if the said return is filed on or before 30 September 2020 for taxpayers having aggregate turnover upto Rs. 5 crores in the preceding financial year. It has further been provided that late for taxpayers filing NIL Returns shall be fully waived.

Similarly, in case of taxpayers having aggregate turnover of more than Rs. 5 crores in the preceding financial year, the maximum amount of late fee is prescribed as Rs. 500/- (CGST + SGST) upon late filing of GSTR-3B for the months of May 2020 to July 2020 if the said return is filed on or before 30 September 2020.

This notification has been brought into effect retrospectively from 25 June 2020.