Newsletter

The Remission of Duties and Taxes on Exported Products (‘RoDTEP’) scheme had been introduced w.e.f. 01 January 2021. However, the scheme had been a pandora’s box of difficulties and uncertainties, especially as the rates under the scheme had not been notified. In order to close such pandora’s box, the Ministry of Commerce and Industry vide Notification No. 19/2015-2020 dated 17 August 2021 has issued guidelines to the RoDTEP Scheme and the applicable rates thereof. A summary of the notification is provided hereunder:

Objectives

• To refund, currently unrefunded duties/ taxes/ levies at the Central, State and local level, borne on the exported product, including prior stage cumulative indirect taxes on goods and services used in the production of the exported product;
• To rebate indirect duties/ taxes/ levies in respect of distribution of exported product;
• Rebate shall not be available in respect of duties and taxes already exempted/ remitted or credited;
• Rebate would be granted to eligible exporters at notified rates as percentage of FOB value with a value cap per unit of the exported product;
• The Scheme would be implemented through end-to-end digitization of issuance of rebate amount in the form of a transferable duty credit scrip, which will be maintained in an electronic ledger by the CBIC;
• The scheme is effective from 01 January 2021; and
• The e-scrips would be used only for payment of Basic Customs Duty.

Ineligible Categories

• It has been provided that the following categories of exports/ exporters shall not be eligible for rebate under the RoDTEP Scheme:
• Export of imported goods;
• Exports through trans-shipment;
• Deemed Exports;
• Special Chemicals, Organisms, Materials, Equipment and Technologies (‘SCOMET’) items;
• Supplies of products manufactured by DTA units to SEZ/FTWZ units;
• Products manufactured in EHTP and BTP;
• Products manufactured partly or wholly in a warehouse;
• Products manufactured or exported in discharge of export obligation against an Advance Authorization or Duty-Free Import Authorization or Special Advance Authorization issued under a duty exemption scheme;
• Products manufactured or exported by any of the units situated in Free Trade Zones or Export Processing Zones or Special Economic Zones;
• Exported products availing the benefit of the Jobbing Notification No. 32/1997- Customs dated 01 April 1997; and
• Exports from non-EDI ports.

Rates

As for the quantum under the RoDTEP Scheme, beneficial rate ranging from 0.01% to 4.3% has been notified for varying products. Notably, the highest rate of 4.3% has been notified for exports of woven fabrics of cotton. On the contrary, Chapters 61, 62 and 63 which inter alia cover articles of apparel, are kept outside the purview of the RoDTEP Scheme. Similarly, the benefit of the Scheme has also not been extended to chemicals classifiable under Chapters 24-30. 

As for railway products classifiable under Chapter 8607, RoDTEP rate of 1.8% has been notified. However, for automobiles classifiable under Chapter 8708, a substantially lower rate of 0.5% to 1% has been notified. A detailed list of the rates under the RoDTEP Scheme has been attached to this e-mail update.

The Petitioner challenged the order dated 27.07.2021 wherein interest was levied u/s 50 of the CGST Act relating to interest on cash remittances as well as remittances by way of adjustment of Electronic Credit Register. 

In connection thereof, Madras HC referring to the provisions of sec 42 of the CGST Act observed that the provisions are not applicable in the instant case wherein the Petitioner has revered the ITC and voluntary paid the tax in Form DRC-03 upon receipt of the of intimation of the wrongful availment. The provisions of Section 42 can only be invoked in a situation where the mismatch is on account of the error in the database of the revenue or a mistake that has been occasioned at the end of the revenue. In a case where the claim of ITC by an assessee is erroneous, as in the instant case, then the question of Section 42 does not arise at all, since it is not the case of mismatch, one of wrongful claim of ITC. Reliance was also placed upon the case of Maansarovar Motors Private Limited v/s The Assistant Commissioner, Poonamallee Division, Chennai (W.P.Nos.28437 of 20190). 

Accordingly, it was held that levy of interest u/s 50 of the CGST Act will be there on cash remittances of tax being compensatory and mandatory and no interest shall be levied on remittances by way of adjustment of Electronic Credit Register.

F1 Auto Components P ltd [W.P. No. 6631 of 2021 and WMP No. 7188 of 2021]

The Applicant inter-alia engaged in the business of leasing of Diesel Generator (‘DG’) set. The Applicant entered into an agreement with one of the recipient of service to install DG set on rental along with reimbursement of the cost on diesel incurred on usage of DG. However, the recipient alleged that tax collected by the Applicant pertaining to the reimbursement of diesel charges for usage of DG set was erroneous being diesel a non GST goods as per section 9 of the CGST Act. In connection thereto, the Applicant sought an Advance Ruling before Karnataka AAR on applicability of GST on cost of the diesel incurred in the form of reimbursements for running DG set in the course of providing DG Rental Service.

In regards to above, referring to sec 2(31) of the CGST Act, the AAR observed that the reimbursement of the diesel cost incurred for running DG set are incidental expenses and are part of the consideration. Since, there is no separate contract for supply of diesel, both the services form part of the same contract i.e. supplying DG Set on hire. Accordingly, it was held by AAR that reimbursement charges for running DG Set being an additional consideration for the supply of DG Set on rent as per sec 15 of the CGST Act, it will attract GST @ 18%.

Goodwill Auto’s [Advance Ruling No. KARADRG 44/2021]

With a great end to our Olympic ambitions, winning a historic total of 7 medals, India has certainly marked its name at the world stage! Similar to our athletes, the Government has been making strides to make India globally competitive. With the announcements and advancements of various PLI Schemes and the decision to re-vamp the Customs Duty schemes, the future of the Indian in the global market seems bright. The Government has also invited suggestions from the Trade and Industry for the formulation of the new FTP, which depicts the intent of the Government to make formulate an assessee-friendly policy. Compiling all such developments, we are glad to bring you the 12th Edition of our ‘Vision 360’ Newsletter in association with TIOL.

We have covered all the 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 consult@gstlegal.co.in or updates@gstlegal.co.in.

DGFT vide Notification No. 16/2015-2020 dated 09 August 2021 has further extended the period of modification i.e. updating/confirming the details in IEC, from 31 July 2021 to 31 August 2021. Further, the late fee has also been waived off. In cases where there are no changes in IEC details, the same is required to be confirmed online.

The Petitioner inter-alia engaged in dealing in the business of goods and services relating to Ferrous waste and scrap, re-melting scrap ingots of iron or steel, flat-rolled products of iron or non-alloy steel etc. In connection thereof, basis the investigation carried on by the Revenue authorities the petitioner received a letter dated 25 April 2019 wherein it was requested to reverse the input tax credit availed on invoices from suppliers which were considered as fake invoices. Further in respect thereto, the Revenue authorities sent an intimation of tax dated 22 January 2021 wherein payment was advised to be paid failing which a show cause would be issued u/s 74(1) of the Act.

In regards to above, the HC observed that section 74(5) does not provide any right to the Revenue to raise a tax demand when an investigation is still in process. Further, it was also held that the Revenue cannot coerced the Petitioner to make any payment without issuing notice u/s 74(1) of the Act and following the procedure therein. In the instant case, the action of the Revenue was wholly arbitrary and without jurisdiction. Thus, the petition was allowed and also HC directed to refund the duty paid by the Petitioner along with interest.

Deem Distributors Private Limited [Writ Petition No. 7063 of 2021]

DGFT vide Trade Notice No. 13/2021-22 dated 04 August 2021 has allowed uploading of E-BRCs latest by 15 September 2021 for all the Shipping Bills upto 31 March 2020 on which RoSCTL scrip has been claimed. This has come to effect, upon DGFT noticing that in significant cases E-BRCs have not been uploaded for RoSCTL Shipping Bills with LEO upto 31 March 2020. It has been further provided that upon failure to comply with aforementioned due date, action will be initiated by the jurisdictional RAs as per the recovery mechanism provisions of the Hand Book of Procedure.

Earlier, the MCA vide Circular No. 10/2020 dated 23.03.2020 had clarified that spending of CSR funds for COVID-19 was an eligible CSR activity. In furtherance thereto, the MCA vide General Circular No. 13/2021 dated 30 July 2021 has further clarified that spending of CSR funds for COVID-19 vaccination for persons other than employees and their family shall be eligible as a CSR activity. The above-mentioned activities shall be classifiable as CSR expenditure under the following heads:

• Item no (i) of schedule 7 of the Companies Act, 2013 – Relating to promotion of Health care; and
• Item no (xii) of schedule 7 of the Companies Act, 2013 – Relating to Disaster management.

The Companies can undertake aforesaid activity subject to fulfilment of the Companies (CSR Policy) Rules, 2004 along with the CSR Circulars issued by MCA from time to time. 

CBIC vide Notification No. 30/2021 – Central Tax, dated 30 July 2021 amends the Central Goods and Services Tax (CGST) Rules 2017 which has come into force from 01 August 2021. Following rules are duly inserted in the CGST Rules:

• Every registered person, other than an Input Service Distributor, a casual taxable person, a non-resident taxable person and any person paying TSD/TCS under CGST Act, shall furnish an annual return electronically for every financial year in FORM GSTR-9 on or before 31 December following the end of such financial year through the common portal;
• Taxable person registered under composition levy scheme needs furnish the annual return in FORM GSTR-9A;
• An electronic commerce operator collecting tax at source shall furnish annual statement in Form GSTR-9B;
• In form GSTR-9C the need of CA Certification has been amended with the self-certified reconciliation statement by the registered person, other than an Input Service Distributor, a casual taxable person, a non-resident taxable person and any person paying TSD/TCS under CGST Act, whose aggregate turnover during a financial year exceeds five crore rupees.

As a part of IT Revamp, DGFT vide Trade Notice No. 12/2021-22 dated 28 July 2021, has introduced a new online module on the website for deemed export applications under Chapter 7 of FTP 2015-20. Following applications can be submitted online by importer/exporter:

• Refund or Terminal Excise Duty;
• Grant of Duty Drawback as per AIR;
• Fixation of Brand Rate for Duty Drawback

It has been further provided that all trade members shall submit online applications at the website and also replies to the deficiency letter. However, the Applicants shall be required to submit all supporting documents as prescribed in ANF-7A in physical copy within 7 days of online submission for further processing. The new online module serves only to new applications. All old physical applications submitted manually shall continue to be processed manually.