Newsletter

Even in the face of multiple adversities in the last couple of years, the Indian economy has sailed through the hardships like a seasoned sailor! Add to the this, the global geo-political tensions in the Eurasia region has only added the difficulties in the global trade. Thus, it was now, more than ever, imperative to rationalize the International Trade Agreements with other countries. In line with such requirement, we have analyzed the existing trade agreements, in which India is a signatory and the proposed agreements, which may prove out to be beneficial.

Moreover, the on-going Russia-Ukraine conflict, has impacted the global trade in ways which were not contemplated. Analyzing the ramifications, we have penned down a piece in this Edition of the Newsletter. Apart from this, following are the key developments covered in this Newsletter:

• CBDT’s notifications in relation to Faceless Jurisdiction of Income-tax Authorities Scheme, 2022, e-Assessment of Income Escaping Assessment Scheme, 2022 and the Faceless Inquiry or Valuation Scheme, 2022;
• A detailed article on the taxability of Crypto Currencies in India;
• Gujarat HC’s decision on the statutory backing of Rule 86A of the CGST Rules;
• Maharashtra Government’s SOP in relation to GST scrutiny and assessments;
• OECD’s third batch of updated TP country profiles including the US, the UK, Canada, China etc. & 6 new Inclusive Framework members;
• Judicial and Regulatory updates in the Direct Tax, Indirect Tax and Regulatory fronts!

Compiling all such developments, we are glad to bring to you in new Avatar, the 20th 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. 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 Applicant, engaged in the business of manufacturing cement had hired service provider for bus transportation facilities to their employees in non-conditioned buses having seating capacity of more than 13 persons charged GST for the services rendered. The Applicant had sought an advance ruling before the Kerala AAR to ascertain whether ITC admissible on GST charged by service provider.

The AAR observed that in terms of 16 to 18 of the CGST Act and particularly u/s. 17(5), the Applicant would not be eligible to avail ITC. Further observed that as the Applicant recovers a part of the cost incurred for transportation from the employees, the Applicant would be eligible to avail ITC to the extent of the cost of transportation borne by himself.

Malabar Cement Limited

Authors’ Notes:

It would be pertinent to note that the Maharashtra AAR in RE: Tata Motors Limited [2020 (41) GSTL 35], had held that hiring of bus / motor vehicle for the transportation of employees to and from work place is clearly in furtherance of business. Further, in view of amendment in Section 17(5) of the CGST Act, ITC available to applicant if bus hired for transportation of persons is having approved seating capacity of more than thirteen persons including driver.

The CBIC vide Notification No. 20/2022-Customs (N.T.) dated 30 March 2022 has notified the Customs (Electronic Cash Ledger) Regulations, 2022. Following are the key highlights of the said Regulations:

Manner of maintaining the Electronic Cash Ledger (‘ECL’)

ECL will be maintained in FORM ECL-1 on the common portal for each person in regard to every deposit made towards duty, interest, penalty, fee or any other sum payable by the person. Any deposit into the ECL will be made by a person by generating a deposit challan in FORM-ECL-2 which will be valid for a period of 15 days.

Manner of making payment from ECL

A person may use the amount available in the electronic cash ledger for making payment duty, interest, penalty, fee, or any other sum payable through challan in FORM ECL-3. The successful debit will be visible on ECL and the credit will be shown in the Electronic Duty Payment Ledger (Cash) maintained in FORM ECL-4.

Refund

The balance in the ECL, after payment of duty, interest, penalty, fee or any other amount payable, may be applied for refund by the person on the common portal in FORM ECL-5. The balance will not be available and the refund will be decided in 30 days.

Intimation of discrepancy in electronic cash ledger

Upon noticing any discrepancy in his electronic cash ledger, the registered person shall communicate the same on the common portal.

The DGFT vide Notification No. 64/2015-2020 and Public Notice No. 53/2015-2020 both dated 31 March 2022, has extended the existing Foreign Trade Policy ('FTP') 2015-2020 and Handbook of Procedures ('HBP') 2015-2020 till 30 September 2022. 

The Applicant, inter alia engaged in business of manufacturing, marketing and distribution of cigarettes had sought advance ruling before the UP AAR to ascertain inter alia whether the extra packs of cigarettes given free of cost for purchase of certain packs, would be leviable to GST and whether the extra packs of cigarettes would be considered as exempted supplies or free samples.

The AAR observed that the additional packs were supplied for certain payment of packs. Accordingly, the Applicant was supplying two products at the price of one as ‘buy one get one free offer’. It was observed that the CBIC vide Circular No. 92/11/2019-GST dated 07 March 2019 had clarified that such additional supplies would not be liable to GST.

Golden Tobie Private Limited [TS-763-AAR(UP)-2021-GST]

The Applicant had sought an advance ruling before the UP AAR to ascertain the tariff classification of Driver Cab Air Conditioner Unit for railways. It had been submitted that such goods were not viable for use elsewhere other than the Railways.

Accordingly, the Applicant opined that the goods were appropriately classifiable under HSN 8607. The AAR observed that the goods under dispute would be manufactured by the Applicant strictly as per the specification and designs provided by the Indian Railways and meant to be solely used in railway rolling stock and nowhere else. Accordingly, it was held that Driver Cab Air Conditioner Unit for railways are correctly classifiable under HSN 8607 as parts of railways.

Prag Polymers [Advance Ruling No. UP ADRG 86/2021 dated 08 November 2021]

AUTHORS’ NOTES :

The classification of railway goods/ parts has been a bone of contention between authorities and taxpayers for donkey’s years. The issue which incepted under the Excise Regime has been very well carried forward into the GST regime. While certain judicial authorities have held that articles even though principally used for the Railways would merit classification under respective headings, certain judicial authorities have held otherwise. Recently, the Apex Court in RE: Westinghouse Saxby Farmer Limited [2021-TIOL-121-SC-CX-LB], has held that goods manufactured specifically for the Railways as per the designs and layouts provided by them, are rightly classifiable under CTH 8607. However, it shall be noted that a review application has been filed against the SC judgement in Westinghouse (supra).

The Appellant had obtained an advance authorization license, while exporting certain paints vide two shipping bills. However, the Appellant did not enter correct scheme code in the shipping bills i.e., mentioning ‘00’ instead of mentioning the scheme code as ‘01’. To correct this mistake, the Appellant had filed an application u/s. 149 of the Customs Act for conversion of free shipping bills to advance authorization shipping bills. However, the request was rejected on the basis of the time limit of 3 months prescribed in Board Circular No. 36/2010 and that goods exported were not subjected to physical examination. Aggrieved, the Appellant preferred and Appeal before the Chennai CESTAT.

As regards the limitation, the Tribunal observed that when the statute does not prescribe any time limit for filing an application for conversion of a shipping bill, the department cannot rely upon a circular to frustrate the provisions contained in the statute. When there is a conflict, the statute will definitely prevail over the Board circular.

In respect of rejection of rectification application on the ground of no physical verification, the Tribunal observed that, there is no requirement u/s. 149 that the amendment can be allowed only if the goods have been subjected to physical examination before export. In view of the above observations, the Tribunal held that the rejection of request for conversion of free shipping bills to advance authorization scheme shipping bills is not justified.

Carboline India Private Limited [2022-TIOL-168-CESTAT-MAD]

AUTHORS’ NOTES :

It is trite law that Circulars, being a subordinate law, cannot override the statutory provisions under law. The Madras HC in RE: Precot Meridian Limited [2019 ACR 813] had held that Circulars are issued only to clarify the statutory provision and it cannot alter or prevail over the statutory provision. It shall be further noted that the Courts have time and again allowed rectification of Shipping Bills where the assesses have inadvertently entered the incorrect scheme code. In RE: Visoka Engineering Private Limited [TS-61-CESTAT-2022-CUST] had held that rejection of request for conversion of free shipping bills to Advance Authorization Shipping Bills are not justified.

The Applicant had sought an advance ruling before the UP AAR to ascertain whether to charge GST for availing reimbursement of expenses i.e., Basic Salary, ESIC, EPF, Bonus with service charge and further to ascertain whether the said service for deployed manpower was NIL rated supply in GST. The UP AAR observed that the Applicant was deploying manpower to MPPKVVCL and MPMKVVCL to distribute electricity in rural area, clamming them to Government entities. However, there was nothing on record to prove that said are Government entities. The invoices issued to MPPKVVCL and MPMKVVCL by the Applicant with description of supply of manpower was not a sufficient document.

It was further observed that in terms of section 15(1), as the supplier and recipient of the supply was not related then the price would be sole consideration of supply. Accordingly, it was held that GST @18% was chargeable on reimbursement of expenses.

Broadcast engineering Consultants India Ltd [TS-768-AAR(UP)-2021-GST]

In the last couple of years, we have witnessed and faced one major global threat after another. The Russia-Ukraine war is no exception. While the war is between the two countries at the moment, it has certainly affected the Global trade as well. The increase in oil prices, and the refusal of airlines to fly over the war-hit territories, has made the trade all the more difficult. Nonetheless, the last couple of years has taught us well how to deal with such international disruptions. 

Thus, despite all that is going on in the Eurasia, the Indian Legislature and Judiciary has maintained its pace to ensure economic development. Notably, the Comprehensive Economic Partnership Agreement between India and the UAE signed recently, provides zero-duty access to 90% of Indian products in the UAE. Coming to the domestic updates, the Apex Court in its recent judgement, upheld People’s priority over Government’s priority by giving precedence to Bank’s charge under SARFAESI Act over tax dues. On the Indirect Tax front, the CBIC has reduced the threshold for the E-Invoicing applicability, covering more taxpayers under its fold. Following are the key developments covered in this Newsletter:

• An analysis of the amendments in the Customs Act to overturn the judgement of the Apex Court in Canon India by designating the DRI as proper officers;
• A Deep dive into the issues relating to taxation on crypt-currencies, NFTs and other Virtual Digital Assets;
• HC’s decision to set aside SCN issued on the allegation of fraud by others in supply chain;
• The strategic India-UAE CEPA targeting to boost the merchandise trade between the two countries to US$ 100 billion over the next five years;
• Judicial and Regulatory updates in the Direct Tax, Indirect Tax and Regulatory fronts!

Compiling all such developments, we are glad to bring to you in new Avatar, the 18th 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. 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 DGFT vide Notification No. 58/2015-2020 dated 7 March 2022 has extended the due date for submitting applications for scrip-based schemes in the manner as tabulated hereunder: