Newsletter

DGFT vide Public Notice No. 10/2015-20 dated 08 June 2020 has amended the Handbook of Procedures to allow revalidation of the Export Authorization / License for Non-SCOMET and SCOMET items. 

Subsequent to allowing the revalidation of licenses, for Non-SCOMET and SCOMET items, the DGFT has issued Notification No. 10/2015-20 dated 11 June 2020 for annual SCOMET Updates with respect to amendments in Appendix 3 (SCOMET items) to Schedule 2 of ITC HS Classification of Export and Import Items, 2018.

The DGFT has further notified that the said Notification shall come into force after 30 days of the issue so as to provide a transition time to the industry. However, certain changes in the Notification with respect to scheduled chemicals have been brought into effect immediately.

The 40th GST Council Meeting held through video conferencing under the Chairmanship of Finance Minister, Ms. Nirmala Sitharaman concluded today. Following are the key recommendations made by the Council in respect of Law and Procedure:

• Late fee for non-furnishing of GSTR-3B for the tax period from July 2017 to January 2020 to be reduced / waived as under if filed between the period 01 July 2020 to 30 September 2020:
  • Nil late fee if there is no tax liability;
  • Maximum late fee of Rs. 500/- per return if there is tax liability.
• The rate of interest for late furnishing of return for the months of February, March and April 2020 beyond the specified dates (staggered upto 06 July 2020), for small taxpayers having aggregate turnover upto Rs. 5 crores, shall be reduced from 18% p.a. to 9% p.a. till 30 September 2020. In simple words, interest would not be charged for small taxpayers till the specified due dates for the said months, thereafter, reduced rate of interest of 9% p.a. would be charged;
• Late fees and Interest in respect of filing GSTR-3B to be waived for small taxpayers for the months of May, June and July 2020 if the said return is filed by 30 September 2020 (staggered dates to be notified);
• Taxpayers whose GST registrations had been cancelled till 12.06.2020 and not restored within time, shall be given an opportunity for filing an application for revocation of cancellation of registration up to 30 September 2020;
• Certain amendments of Finance Act, 2020 to be brought into effect in CGST Act, 2017 and IGST Act, 2017 from 30 June 2020.

In 2019, the Punjab and Haryana HC in the case of Adfert Technologies Private Limited vs. Union of India [CWP No. 30949 of 2018] had allowed a group of Petitioners to carry forward their CENVAT Credit accrued under the erstwhile indirect tax regime, by filing their TRAN-1 even after the expiry of due date provided in the CGST Rules, 2017. However, the Revenue, being aggrieved by the said judgment, had filed a Special Leave Petition (‘SLP’) against the judgment of the Punjab and Haryana HC before the SC. The SC in the said case had dismissed the SLP holding that carry forward of unutilized pre-GST credit, being a ‘vested right’ cannot be denied on the ground of time-limit.

Similarly, the Delhi HC in the case of Chogori India Limited vs. Union of India [WP(C) No. 762/2019] had directed the Revenue to either re-open the Portal to enable the Petitioner to file its TRAN-1 Form electronically or permit it to file manually. Once again, the Revenue had preferred an SLP before the SC against the Delhi HC judgment.

The SC yet again dismissed the SLP filed by the Revenue. However, the question of law has been kept open.

GLS Comments:

In recent past, it has been seen that the Revenue authorities have not allowed the applicants to avail transitional credit where the due date to avail such credit has been expired except in cases where technical difficulties were involved. The assessees who were not able to carry forward transitional credit have knocked the doors of various jurisdictional HCs, wherein the courts have taken divergent views. It has been observed that some HC has allowed the filing of the TRAN-1 after the lapse of time limit provision and some have upheld the applicability of time limit Rule.

Now in the recent ruling by SC wherein they have dismissed the review petition filed by Revenue against the order HCs allowing transitional credit, the CBIC shall provide a clarity and relief to the aggrieved assessees. 

Pursuant to representations received, CBIC has provided further clarification in relation to the treatment of refund of ITC relating to imports, ISD invoices and the inward supplies liable to Reverse Charge in light of the of Circular No. 135/05/2020 – GST dated 31 March 2020, In the said circular, it had been clarified that the refund of accumulated ITC shall be restricted to the ITC as per those invoices, which are reflected in the GSTR-2A of the applicants. 

In some cases, the refund sanctioning authorities had been rejecting the refund of accumulated ITC relating to imports, ISD invoices, etc. In respect thereto, the CBIC vide Circular No. 139/09/2020 – GST dated 10 June 2020, has clarified that the treatment of refund of such ITC relating to imports, ISD invoices and the inward supplies liable to Reverse Charge will continue to be same as it was before the issuance of Circular No. 135/05/2020. 

In other words, it has been clarified that the restriction on availement of refund of credit as provided under Circular No. 135/05/2020-GST in relation to those invoices, the details of which are uploaded by the supplier in GSTR-1 and are reflected in the GSTR-2A of the applicant, is not applicable in case of refund of accumulated ITC relating to imports, ISD invoices and the inward supplies liable to Reverse Charge etc.

Various queries regarding applicability of GST on Directors’ Remuneration were raised by the Trade and Industry. More specifically, there had been confusion as to whether the remuneration paid to a Director would be covered Notification 13/2017 – Central Tax (Rate) dated 28 June 2017 and therefore be taxable under GST or whether the same would be covered under the relevant entry under Schedule III of the CGST Act ‘services by an employee to the employer in the course of or in relation to his employment’ and thus, not be liable to GST.

CBIC vide Circular No. 140/10/2020 – GST dated 10 June 2020 finally put the ambiguity at rest by clarifying the same under the following two categories:

• Remuneration paid to Independent Directors and those directors who are not employee of the Company
  • The definition of a whole time-director under the Companies Act, 2013 is an inclusive definition, and thus he may be a person who is not an employee of the Company;
  • The definition of independent directors under the Companies Act, 2013 makes it amply clear that such director should not have been an employee or proprietor or a partner of the said Company, in any of the three F.Y. immediately preceding the F.Y. in which he is proposed to be appointed in the said Company;
  • It has been therefore clarified that any such directors who are not the employees of the said Company, the services provided by them to the Company, in lieu of remuneration as the consideration for the said services, are clearly outside the scope of Schedule III of the CGST Act. Further in terms of Notification No. 13/2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis. 
  • It has been further clarified that remuneration paid to independent directors, who are not employees of the said company, is taxable in hands of the Company, under RCM basis.
•  Remuneration paid to directors who are employees of the Company
  • In order to determine the taxability of consideration paid to the directors for the services rendered by them, it must be examined whether all the activities performed by the director are in the course of employer-employee relation (i.e. a 'contract of service') or is there any element of 'contract for service.'
  • It has been remarked in the circular that the courts has time and again held that a director who has also taken an employment in the Company may be functioning in dual capacities, one as a director of the Company and the other on the basis of the contractual relationship of master and servant with the Company;
  • It has been clarified that where Director’s remuneration is declared as ‘Salaries’ in the books of a Company and which is subjected to TDS under Section 192 of the IT Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017; 
  • It has been further clarified that where Directors remuneration is declared separately other than ‘salaries’ and subjected to TDS under Section 194J of the IT Act as Fees for professional or Technical Services the same shall be treated as consideration for providing services outside the scope of Schedule III of the CGST Act, and is therefore, taxable. Accordingly, in terms of notification No. 13/2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it under RCM basis.

GLS Comments:

Recently, Rajasthan AAR in the case of Clay Crafts India Private Limited [Advance Ruling No. RAJ/AAR/2019-20/33 dated 20 February 2020] had created great confusion in the Trade and Industry by ruling that GST is payable under RCM on salary paid to Directors. Similarly, Karnataka AAR in the case of Alcon Consulting Engineers Private Limited [2019 (30) GSTL 678] had held that remuneration given by a Company to its directors is not covered under Schedule III of the CGST and therefore, is liable to GST under RCM as per Notification No. 13/2017. However, in light of various Supreme and High Courts Judgments wherein it has been held that for the purpose of Income Tax Act, 1961, a director can be an employee of the Company and the remuneration received by him is salary, various representations were filed seeking clarification in this regard. Therefore, the CBIC has issued Circular No. 140/10/2020 – GST dated 10 June 2020 to finally put the confusion at rest. This circular would be welcome by the Trade and Industry.

Delhi CESTAT remands back an SVB matter for fresh consideration by holding that loading of 77% on the value declared by the Appellant, in absence of any justifiable reasons in unreasonable. It was observed by the CESTAT that higher discounts enjoyed by the receiver of goods in India was on the basis of substantial commercial levels of the imports. Accordingly, it was held that an importer in India importing goods at higher quantity cannot be compared with an importer importing at a lower quantity.

Accordingly, the CESTAT provided an interim arrangement of levying 15% loading charges until a fresh order is issued.

The Karnataka HC dismissed an Appeal filed by the Revenue Authorities against an order allowing interest on delayed refund from the date of application. It was observed by the HC that if application is adjudicated by authorities upon compliance of deficiencies pointed, it cannot be said to be a defective application disentitling the applicant to claim interest from the date of application. The HC held that if at all the application is defective, it would only be an irregularity not illegality. The HC further dismissed the Appeal as there was no substantial question of law.

In February 2019, the CBIC had communicated its decision to implement the next generation reforms in the Customs clearance process under the umbrella of Turant Customs with the objectives of speedy clearance, transparency in decision making, and ease of doing business. Subsequently, various changes were made in the Customs procedure in this regard in the form of self-registration of goods by importers, automated clearances of bills of entry, digitisation of customs documents, paperless clearance, etc.

Noting that Faceless Assessment is a complete departure from the existing manner of Customs assessment, the CBIC has decided to introduce the changes in phases which would give the trade and other stakeholders (including the Customs officers) time to adapt to the changed scenario without any disruption of work. The first phase of the Faceless Assessment shall begin from 08 June 2020 at Bengaluru and Chennai for items of imports primarily covered by Chapters 84 and 85 of the Customs Tariff Act, 1975. The phased rollout plan envisages that Faceless Assessment shall be the norm pan India by 31 December 2020. In respect thereto, the CBIC has released the following notifications:

• Notification No. 50/2020 – Customs (N.T.) dated 05 June 2020
  • Assessing Officer, who is physically located in a particular jurisdiction shall assess a Bill of Entry pertaining to imports made at a different Customs station, whenever such a Bill of Entry has been assigned to him in the Customs Automated system;
  • In the first phase of the roll-out, this notification will be applied only for inter-linking of Bengaluru and Chennai Customs zones for the purpose of Faceless Assessment;
• Notification No. 51/2020 – Customs (N.T.) dated 05 June 2020
  • The jurisdictional Commissioners of Customs (Appeals) at Bengaluru and Chennai shall take up appeals filed in respect of Faceless Assessments pertaining to imports made in their jurisdictions even though the assessing officer may be located at the other Customs station;
  • This shall ensure the that trade is not put to any hardship and can get their appeals heard locally, as at present.

It has been further clarified that the prescribed officers shall set up dedicated cells called Turant Suvidha Kendras, in every Customs station manned by custom officers to cater to varied functions and roles. The Turant Suvidha Kendra shall facilitate the trade in completing various formalities relating to the Customs procedures in the new regime of Faceless Assessment. The details of functions, roles, location and timing of the Turant Suvidha Kendras shall be intimated by the local Customs administration to all stakeholders. The said Turant Suvidha Kendras shall perform the following functions:

• Accept Bond or Bank Guarantee;
• Carry out any other verifications that may be referred by Faceless Assessment Groups;
• Defacing of documents / permits licences, wherever required;
• Debit of documents / permits / licences, wherever required; and
• Other functions determined by Commissioner to facilitate trade.

The Ministry of Commerce and Industry vide various Public Notices and Notifications dated 01 June 2020, has provided certain relaxations in MEIS / SEIS and made certain amendments in the Export Policy which are as follows:

Public Notice No. 08/2015-20 dated 01 June 2020

• The validity of those MEIS scrips which were expiring between 01 March 2020 and 30 June 2020 have been extended upto 30 September 2020;
• SEIS Applications for services rendered in the F.Y. 2016-17 can be filed upto 30 June 2020 with a late cut fee of 10%. Thereafter, the applications will be time barred;
• The current 5% late cut fee shall be continued for SEIS Applications for the services rendered in F.Y. 2017-18 till 30 June 2020. Thereafter, 10% late fee would be applicable till 31 March 2021.

Notification No. 08/2015-20 dated 01 June 2020

The export of Alcohol based hand sanitizers exported in containers with Dispenser Pump, falling under any ITC HS Code including those mentioned in the notification, are prohibited for export.  Alcohol based hand sanitizers exported in any other form / packaging are ‘free’ for export.

Trade Notice No. 13/2020-21 dated 01 June 2020

In light of Memorandum of Understanding between the Government of India has and the Government of Mozambique, it has been agreed to import 2,00,000 MT of pulses from Mozambique during the Fiscal Year 2020-21 subject to the following conditions:

• Import to be allowed only through Mumbai, Tuticorin, Chennai, Kolkata and Hazira ports;
• Imports to be subjected to the condition of production of Certificate of Origin certified by the authorized signatories;
• While providing the Certificates of Origin, the designated authorities shall send scanned copies of the certificates to the prescribed e-mail ids of the Indian authorities;
• Indian importer shall send scanned copies of the Certificates of Origin to the prescribed e-mail ids of the DGFT. The authorities shall compare both the documents and allow NOC to the importer, basis which, the Customs authorities shall clear the consignments.

Public Notice No. 09/2015-20 dated 01 June 2020

The ITC HSN Codes applicable for availment of MEIS benefit have been corrected in the following manner in order to align them with the ITC HS 2017 and Tariff Schedule of Customs:

Madras HC allows Writ Petition against an order rejecting the refund of accumulated ITC under the VAT Act. The HC observed that as per the Rules prescribed, excess ITC has to be refunded back to dealer after adjustment against outstanding dues of the dealer for the previous Assessment Year. It was also observed by the HC that merely because an Assessee is a going concern by itself and continued running its business from the transition from VAT to GST, did not mean that such assessee is not entitled to refund of the excess ITC which was accumulated over a period of time.

GLS Comments:

The question relating to refund of excess ITC has been age old under various tax laws, especially Excise and VAT. Although, the higher judicial authorities have time and again held that the refund of excess ITC is available to an assessee, the Revenue authorities seldom allow such refund. This judgment comes as a great relief to various taxpayers who have accumulated ITC under the VAT regime but were unable to avail the refund of the same. The taxpayers registered in the state of Tamil Nadu would directly benefit from this judgment. However, for taxpayers registered in other states, they would be required to file a similar Writ Petition in their jurisdictional HC seeking allowance of refund of excess ITC.