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The GSTN has issued an advisory for taxpayers wishing to register as a One Person Company (‘OPC’) under the GST regime. Earlier, the taxpayers registering as an OPC raised concerns about the GST registration process as the option to select OPC was not available on the GST portal.
To address this issue, the Applicants are now advised to select "Others" under the "Constitution of Business" dropdown list in Part B of the GST Registration Form "REG-01" if they wish to register as an OPC. After selecting "Others," Applicants should mention OPC in the text field and complete the registration application process as usual. In case of any further issues, it is advised to raise a ticket at the self-help portal.
The Delhi High Court recently heard a batch of petitions challenging the validity of Section 16(2)(c) and Section 16(4) of the CGST Act, 2017. During the hearing, the Court observed that the restrainment placed on the availment of ITC u/s. 16(2)(c) is similar to the condition placed under Section 9(2)(g) of the Delhi VAT Act, 2004 that was read down by the SC in the case of Quest Merchandising India Private Limited [W.P.(C)--6093/2017].
The Court determined that the outcome of this petition will have a bearing on other petitions challenging the provisions related to the availment of ITC, including Rule 36(4) of the CGST Rules (unamended). Therefore, the Court has decided to first hear related matters in the case of Bharti Telemedia and Bharti Airtel, before deciding on the remaining matters. The Court has listed the matter along with the other pending batch of petitions for hearing on April 19, 2023.
The Delhi High Court's forthcoming decision is highly anticipated and critical for taxpayers as far-reaching implications on the availment of ITC for the taxpayers. The Constitutional validity of Section 16(2)(c) of the CGST Act has always been in questioned, primarily on the grounds of potential violations of Articles 14 of the Constitution of India. These challenges arise from the fact that the bonafide buyer is denied ITC for the supplier defaults. However, various High Courts have consistently upheld the proposition that ITC cannot be denied to recipients due to the defaults of their suppliers . This position of law also flows from the erstwhile indirect tax regime like in case of RE: Arise India Limited [2018-TIOL-11-SC-VAT], wherein the Apex Court had affirmed the Hon’ble Delhi HC’s view that ITC cannot be restricted to bonafide recipients.
The past month has seen several significant developments in the world of taxation, both in India and internationally. From the Union Budget 2023 to the discussions on tax reforms in other countries such as Qatar and Hungary.
In this edition, we delve into recent judicial and legislative developments in the tax sphere, such as the 49th GST Council Meeting and major MCA and SEBI decisions. Further, 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 30th 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 February 2023. We hope that reading of the newsletter would bring an enriching experience to you! Your valuable feedback is always welcome at email@example.com or firstname.lastname@example.org
The Applicant was running a furnace and for the purpose of the same, they procured ferrous alloys, scrap, gas, and other materials from within the State of Punjab. The Applicant had sought advance ruling as to whether the Applicant is entitled to claim ITC on the purchases made by it from the seller who had discharged its GST liability but preceding seller has not discharged its liability.
The AAR referring to Section 16(2)(c) of the CGST Act emphasised that no person shall be entitled to claim ITC unless the tax has been paid to the Revenue. Based on this provision, the AAR held that the Applicant was not eligible to claim ITC on the purchases made from a seller who had paid their tax liability but the preceding seller had not paid their liability under the Act.
M/s Vimal Alloys Private Limited [ORDER NO. AAR/GST/PB/31]
In order to comply with Notification No. 78/2020 dated October 15, 2020, the GST e-Invoice Portal requires taxpayers with an Aggregate Annual Turnover of more than Rs. 5 crores to report 6-digit HSN codes for their outward supplies. The portal will soon block the 4-digit HSN codes, and therefore, taxpayers will be required to make the necessary changes in their systems to ensure compliance. Further, to verify that all HSN codes are 6 digit codes, taxpayers have been advised to access the HSN Codes section on the e-Invoice Portal and raise a ticket at the Helpdesk if the 6-digit code is not available.
The Maharashtra Deputy Chief Minister Devendra Fadnavis, commenced the Maharashtra Budget ’23 speech based on the principle of ‘Panchamrut’. In the Indirect tax, the Amnesty Scheme, ‘Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Act, 2023 was announced.
Following are the key highlights of the proposed scheme: -
The Appellant, an e-commerce retailer had sought an advance ruling before the Karnataka AAR to ascertain whether ITC would be available on vouchers and subscription packages procured from third party vendors that are made available to the eligible customers, participating in the loyalty program against the loyalty points earned by such customers. The AAR had held that the Appellant was not eligible to avail the ITC on the vouchers in terms of section 17(5)(h) of the CGST Act, as the same are considered as 'gifts'. Aggrieved, the Appellant had preferred an Appeal before the AAAR.
Relying on the Karnataka HC judgment in RE: Premier Sales Promotions Private Limited [2023-VIL-67-KAR], the AAAR held that vouchers are neither goods nor services and cannot be taxable. The AAAR further held that the primary condition for the claiming ITC is that there should be an inward supply of either goods or services or both on which tax is charged by the supplier. Therefore, in the instant case, as vouchers are neither goods nor services, the AAAR concluded that the question of eligibility of ITC does not arise. Accordingly, the AAAR upheld the AAR ruling and held that the Appellant is not eligible to avail the ITC on the vouchers in terms of section 17(5)(h) of the CGST Act.
Myntra Designs Private Limited [KAR/AAAR/03/2023 dated 24 February 2023]
CBIC vide Circular No. 214/1/2023 – Service Tax dated February 28, 2023 relying upon Circular No. 178/10/2022-GST dated August 03, 2022 has inter alia clarified that the Service Tax is not chargeable on liquidated damages, which was a ‘declared service’ under the erstwhile Service Tax regime. It has been further clarified that the activities falling under section 66E(e) are those where a party agrees to refrain from an act, tolerate an act or situation, or do an act, but only if the agreement specifically mentions such activity and there is a flow of consideration for it. The contractual arrangement must have a sufficient nexus between the supply and the consideration. The taxability of such activities will depend on the facts of each case.
The scope of ‘agreeing to the obligation to refrain from an act, or to tolerate an act or situation, or to do an act’ under the Service Tax law as well as GST law has been a contentious issue. The Revenue Department generally hold transactions like notice pay recovery and liquidated damages to be a service and impose Service Tax. However, with the advent of the instant Circular relying on the GST Circular, a number of pending litigations before the erstwhile Appellate authorities can be disposed off.
In lines with the recommendations made during the 49th GST Council Meeting held on February 18, 2023, the CBIC vide a series of notifications dated February 28, 2023, has rationalized the GST rates of various goods and services effective from March 01, 2023 in the manner as tabulated hereunder:
Notification No. 01/2023 - Central Tax (Rate) dated February 28, 2023
Exemption to National Testing Agency for conducting Entrance Exams
The CBIC has amended Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017 in order to clarify that conducting of entrance examination for admission to educational institutions by any authority, board or body set up by the Central Government or State Government including National Testing Agency, shall be treated as educational institution.
The notification clarifies that any entity set up by the Central or State Government(s) for conducting entrance exams will be treated as an educational institution for the purpose of providing services related to the conduct of entrance exams.
Notification No. 02/2023 - Central Tax (Rate) dated February 28, 2023
Expanding the definition of 'State Legislatures' to include Courts and Tribunals
Notification No. 13/2017 dated June 28, 2017 has been amended to include services provided by Courts and Tribunals under the category of RCM.
Notification No. 03/2023 - Central Tax (Rate) dated February 28, 2023
GST Rates on Jaggery and Pencil Sharpeners
Notification No. 1/2017 – Central Tax (Rate) dated June 28, 2017 has been amended notifying 5% GST rate for Jaggery of all types, including Cane Jaggery, Palmyra Jaggery, Khandsari Sugar, and Rab, pre-packaged and labelled;
Further, 12% GST rate has been prescribed for Pencil sharpeners.
Notification No. 04/2023 - Central Tax (Rate) dated February 28, 2023
Exemption to Rab, from pre-packaged and labelled goods
Notification No. 2/2017 – Central Tax (Rate) dated the June 28, 2017 has been amended to exempt Rab, other than pre-packaged and labelled
Notification No. 1/2023 - Compensation Cess (Rate) dated February 28, 2023
Compensation Cess on coal rejects
Notification No. 1/2017 – Compensation Cess (Rate) dated June 28, 2017 has been amended so that exemption benefit covers both coal rejects supplied to and by a coal washery, arising out of coal on which compensation cess has been paid and no input tax credit thereof has been availed by any person
The GSTN has issued an Advisory dated February 25, 2023 for the payment of tax under the forward charge mechanism by Goods Transport Agencies ('GTA'). The Advisory is in accordance with the NN. 03/2022 dated July 13, 2022, which shall give the existing providers of GTA services the option to pay tax under the forward charge mechanism, which can be exercised by submitting Annexure V FORM. Follwoing are the steps for the payment by GTA after login, to submit their option on the portal;
Services > User Services > Opting Forward Charge Payment by GTA (Annexure V).
The option cannot be withdrawn during the year. The option of Annexure V is available on the portal for the Financial Year 2023-24 until March 15th 2023.
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