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The GST Registration Certificate of the Petitioner had been cancelled primarily on the ground that the monthly returns for six months had not been filed. Aggrieved, the Petitioner challenged the GST Registration Cancellation order before the Madras HC inter alia on the ground that the Show Cause Notice issued by the Revenue in Form REG-17 was not in proper format as prescribed u/r 22(1) of the CGST Rules, in as much as the details pertaining to grant personal hearing had not been mentioned, thus, violating the principles of natural justice.

Taking cognizance of the submissions put forth by the Petitioner, the HC set aside the GST registration cancellation on the ground that the Show Cause Notice preceding the Order was issued in violation of Rule 22 of the CGST Rules. The HC further directed the Respondent to issue a fresh Show Cause Notice in the prescribed format as per Rules.

Suresh Trading Corporation Vs The Asst. Commissioner (Circle) of SGST [W.P.No. 21109 of 2021]

GLS Comments:

The Madras HC has correctly set-aside the GST Registration cancellation order in as much as the principles of natural justice had been violated. Similarly, in a recent judgement by the Gujarat HC in RE: Mahadev Trading Company vs. Union of India [R/Special Civil Application No. 11262 of 2020 dated 28.09.2020] had quashed a Show Cause Notice and the order of cancellation wherein the Notice was not in proper format and opportunity of hearing was not provided.

The Applicant had incurred various expenses on CSR activities such as donations to Government organizations, civil works, distribution of stationary, medicine etc. Such expenses are mandatory under the Companies Act. In view of the above facts, the Applicant had sought an advance ruling before the Gujarat AAR to ascertain whether the ITC would be eligible on the said CSR activities.

Referring to Rule 2(d) of the Companies (CSR Policy) Rules, the AAR observed that it excludes activities undertaken in pursuance of normal course of business from the purview of CSR. The AAR further observed that Section 16 of the CGST Act allows ITC only on goods or services which are received in course or furtherance of business. In view of the above observations, the AAR held that expenses incurred on CSR activities cannot be said to be received in normal course of business and accordingly, ITC on such CSR expenses shall not be available.

Adama India Private Limited [Advance Ruling No. GUJ/GAAR/R/44/2021]

Authors’ Notes:

There are various contradictory rulings in respect of ITC eligibility on CSR expenses. Notably, the UP AAR in the case of Dwarikesh Sugar Industries Limited [2020-TIOL-305-AAR-GST] had held that ITC shall be available on expenses incurred to comply with the requirements of CSR under Companies Act. In the instant Ruling, the Gujarat AAR has narrowly interpreted the provisions of CSR Rules. Accordingly, it is likely that the Applicant would prefer an Appeal before the AAAR.

The Petitioner had filed a manual application for refund of IGST on export of services for the month of July 2019 which was duly passed by the Revenue. However, the Petitioner had not received the refund amount so sanctioned. The Revenue insisted the Petitioner to re-file online refund application on account of change in process on GSTN portal w.e.f. 26 September 26 2019 in terms of Circular No.125/44/2019-GST dated 18 November 2019. It was argued by the Revenue that due to this change in the system, the refund claimed by the Petitioner could not be processed. Aggrieved by the direction to file online refund application, the Petitioner preferred a Writ before the Allahabad HC seeking refund of IGST refund along with interest.

The HC observed that the provision for manual filing of the refund application, had been introduced vide Rule 97A of the CGST Rules. It was further observed that Circular dated 18 November 2019, which prescribed for online filing of refund application did not and could not override or negate the effect of law arising out of Rule 97A. In this regard, it was observed that as a settled principle in law, the delegated legislation would stand on a higher pedestal over a pure administrative instruction. It was further observed that since the application had been processed and order was passed which had already attained finality, the Revenue cannot escape the plain effect of the same. Similarly, the liability of interest also cannot be escaped from by the Revenue authorities.

In light of the above observations, the HC allowed the writ petition and directed the Respondent to refund the entire refund amount along with interest @ 6% from the date 27 November 2019 till the date of issuance of the demand draft.

Savita Global Solutions Private Limited [Writ Tax No. 113 of 2021]

GLS Comments:

The Allahabad HC has rightly allowed the refund along with the applicable interest in the instant case. The Circular which prescribed online filing of the refund applications is merely clarificatory in nature and cannot veil the substantive rights of the assesses. The Hon’ble Madras HC in the case of Precot Meridian Limited [2019 ACR 813], had held that Circular cannot be cited by Revenue Authorities to deny refund of IGST paid on export and such circular cannot override statutory provisions.

It would further be pertinent to note that in RE: Bolpur Ratan Melting and Wire Industries [2008(12) S.T.R. 416 (S.C.)], the Apex Court had held that so far as the clarifications/circulars issued by the Government authorities are concerned, they represent merely their understanding of the statutory provisions. They are not binding upon the court. It was further held that the Court must declare what the particular provision of statute says and it is not for the Executive. Thus, it can be said that the law is pretty clear in this regard.

Basis the recommendations of the GST Council in its 45th meeting, the CBIC vide Circular No. 163/19/2021-GST and 164/19/2021-GST both dated 06 October 2021 has clarified the applicability of GST levy on various goods. The key clarifications of the above-mentioned CIrculars have been summarized hereunder:

• Services by cloud kitchens/central kitchens - It has been clarified that service provided by way of cooking and supply of food, by cloud kitchens/central kitchens would be classifiable as ‘restaurant service’ chargeable at 5% GST (without ITC);
• Supply of ice-cream by ice-cream parlors - It has been clarified that where ice cream parlors sell already manufactured ice-cream and do not cook/prepare ice-cream for consumption, it is a supply of ice cream as goods and not as a service, even though it has certain ingredients of service. Accordingly, such supply of ice-cream shall be chargeable to 18% GST;
• Coaching services - It has been clarified that services provided by any institutions/ NGOs under the central scheme of ‘Scholarships for students with Disabilities’ wherein total expenditure is borne by the Government shall be exempt from GST;
• Satellite launch services - It has been clarified that the satellite launch services supplied by NSIL shall be export of services and Circular No. 2/1/2017-IGST dated 27 September 2017 shall be applicable. It has been clarified that if the place of supply of satellite launch services supplied to customers is located outside India and it meets the requirements of export, then such supply constitutes export of service and shall be zero rated. If the service recipient is located in India, the satellite launch services would be taxable;
• Over loading charges – It has been clarified that overloading charges at toll plazas shall be exempted;
• Renting of vehicles – It has been clarified that renting of vehicles or giving on hire to State Transport Undertakings or Local Authorities are eligible for the exemption;
• Grant of mineral exploration and mining rights – It has been clarified that service by way of grant of mineral exploration and mining rights most appropriately fall under SAC 997337 chargeable to 18% GST during the period 1 July 2017 to 31 December 2018, in view of principle laid down in the 14th meeting of the Council for residuary GST rate;
• Admission to indoor amusement parks having rides – It has been clarified that admission to amusement parks, or theme park etc. or any place having joy rides, merry- go rounds, go- carting etc, whether indoor or outdoor, so long as no access is provided to a casino or race club will be chargeable GST @ 18%.
• Services supplied by contract manufacturers -  It is clarified that services by way of job work in relation to manufacture of alcoholic liquor for human consumption shall attract GST @ 18% and not 5%.
• Pharmaceutical goods falling under heading 3006 – It is clarified that the goods falling under heading 3006 shall be chargeable to 12% GST.
• All laboratory reagents - It has been clarified that Diagnostic or Laboratory Reagents, Certified Reference Materials etc. shall be chargeable at concessional GST @ 12%;
• Import Essentiality Certificate for stock transfer – It is clarified that the original/ import Essentiality certificate, issued by the DGH shall suffice and no fresh certificate is required on stock transfer so long as the goods doesn’t change it form i.e., same as imported at concessional rate. Further, the importer is required to maintain records and should be able to establish nexus between the stock transfer of goods and the description in the essentiality certificate;
• External batteries along with UPS Systems/ Inverter – It is clarified that external batteries and UPS systems are separately known and are two separately identifiable items. Accordingly, supply of UPS/ inverter would be chargeable to GST @ 18% under heading 8504, while external batteries would be chargeable to GST @ 28% under heading 8507;
• Solar PV Power Projects – It has been clarified that GST on Renewable Energy Projects can be paid in terms of the 70:30 ratio for goods and services, respectively, for the period of 01 July 2017 to 31 December 2018. Further, no refunds shall be granted if excess GST has been paid using the mechanism mentioned above;
• Fibre Drums (corrugated/non-corrugated) – It has been clarified that GST paid on Fibre Drums (partially corrugated) for period prior to 01 October 2021 shall be treated as fully paid even if it paid at 12% GST (during the period from 1 July 2017 to 30 September 2021). It has been further clarified that no action on recovery of differential tax shall be taken if GST paid @ 12% and similarly no refund shall be granted for GST paid @ 18%.

The month of September 2021 witnessed one of the most important GST Council Meetings in history! From recommending suitable amendment to impose interest only on the net tax liability instead of gross liability, to extending the concessional GST rates on certain COVID-19 treatment drugs! Also, the CBIC has issued various circulars clarifying issues relating to intermediary service.

On the Direct Tax front, the Supreme Court has held that there is no legal obligation of banks to maintain separate investment funds for earning different kinds of investment incomes. Compiling all such developments, we are glad to bring you the 14th 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. 

The CBIC has developed an Escrip module to provide a digital service to exporters for availing benefits under various incentive schemes like RoDTEP and RoSCTL. In respect thereto, vide Advisory No. 06/2021 dated 01 October 2021, it has been clarified that the above-mentioned schemes provide rebate of Central, State and Local duties/taxes/ levies which are not refunded under any other duty remission schemes. The procedure prescribed for availing the Escrips has been provided hereunder:

• Exporter shall make a claim for RoSCTL/RoDTEP in the shipping bill by making a declaration;
• Once EGM is filed, claim will be processed by Customs;
• Once processed, a scroll with all individual Shipping Bills for admissible amount would be generated and made available in the users account at ICEGATE;
• Accordingly, user can create an e-scrip account under E-scrip tab;
• The IECs who are registered on ICEGATE with a DSC, can duly generate the E-scrip for relevant shipping bills.

The CBIC has further made certain clarifications relating to the Export Schemes, as provided hereunder:

RoSCTL Scheme

It has been clarified that certain textiles and apparel articles classifiable under Chapters 61, 62 and 63, RoSCTL would continue to be given beyond 31 December 2020 and till 31 December 2024 instead of RoDTEP. Accordingly, to enable the RoSCTL scheme, the claim shall be made by the exporter in the EDI shipping bill by using specific scheme codes for drawback exports as mentioned hereunder:

It has been further clarified that the calculation for RoSCTL for prospective cases shall be based on value equal to declared export FOB value of the said goods or up to 1.5 times the market price of the said goods, whichever is less. Further, since RoSCTL scheme was not applicable w.e.f. 01 January 2021 there was no provision in System to avail RoSCTL, instead RoDTEP claims were captured at the item level. Therefore, for retrospective cases, the RoSCTL amount would be calculated on the basis of relevant tariff items (as per RoSCTL schedules) under Chapters 61, 62 and 63 for cases only where both RoDTEP and Drawback were claimed at item level. In cases where RoDTEP and Drawback had not been claimed, normal calculation for RoSCTL shall be followed.

The CBIC further clarified that RoSCTL claims would be applicable to shipping bills filed on or after 01 January 2021. If a shipping bill has been filed prior to 01 January 2021 but processed after 01 January 2021, it will not be eligible for RoSCTL benefit (as per new scheme). Hence, the date of filing of Shipping Bill and not date of LEO is relevant. For the residual RoSCTL claims of the period prior to 01 January 2021, these would continue be transmitted for issuance of scrips, as done till now.

RoDTEP Scheme

Implementation of RoDTEP scheme in Custom Automated System has been developed. However, till date, only capturing of RoDTEP claims in the shipping bill was enabled whereas the rates and codes were not notified even if the scheme was operationalized w.e.f. 01 January 2021.

Accordingly, it has been clarified that for shipping bills filed between 01 January 2021 to 01 October 2021, the benefits will be calculated on value equal to declared export FOB value of the said goods or up to 1.5 times the market price of the said goods, whichever is less. Further, for the shipping bills filed on or after 01 October 2021, the benefit will be calculated in the shipping bill with the actual ad valorem rates but not exceeding per unit value caps if any, on value equal to declared export FOB value of the said goods or up to 1.5 times the market price of the said goods, whichever is less.

CBIC vide Notification No. 45/2021-Customs dated 29 September 2021 has further extended exemption from the whole of the duty of customs leviable on COVID-19 vaccine till 31 December 2021. This notification shall come into force w.e.f. 01 October 2021.

Dear Reader,

Inverted Duty Structure under GST is a situation where the GST rate on Inputs is more than the GST rate applicable on the finished goods, consequently resulting in accumulation of ITC to the manufacturers. A rule has been prescribed for refund of ITC in such situations, however, it was categorically amended so as to exclude the portion of ‘input services’ from the definition of ‘Net ITC’.

Given the retrospective amendment and other anomalies in the Rule, the matter was taken right up to the Supreme Court in the case of VKC Footsteps India Private Limited. In its 140-pager judgement, the SC has upheld the Rule excluding input services from the definition of Net ITC.

Dissecting the controversy surrounding the issue and the earlier decisions of High Court on the subject, we have penned down an article which has in turn been published by the Taxmann. The article decodes the rationale of the judgement and explores the nitty-gritties of the law and the approach taken by the SC. The Article titled “Inverted duty refund for input services under GST…end of uncertainty” has been attached herewith for your kind perusal.

On account of extraordinary disruption caused due to pandemic and representation received from various stakeholders, MCA vide General Circular No. 15/2021 dated 27 September 2021 extended the last date of filing of Cost Audit Report to the Board of Directors u/r 6(5) of the Companies Rule 2014. 

In connection thereto, if the Cost Audit Report is submitted by 31 October 2021 for F.Y. 2020-21 then same shall not be viewed as violation to aforementioned Rule. Further, the Cost Audit Report in e-form CRA-4 shall be filed within 30 days from the date of receipt of copy of Cost Audit Report by the Company. Furthermore, if the Company has taken extension for conducting its AGM u/s 96(1) of the Act then the e-form CRA-4 should be filed as per the proviso of Rule 6(6).

CBIC vide Circular No. 162/18/2021-GST dated 25 September 2021 issued clarification in respect of refund of tax wrongfully paid as specified in section 77(1) of the CGST Act and section 19(1) of the IGST Act, which inter alia relates to tax wrongfully collected and paid to Government. The detailed clarification issued vide the above-mentioned Circular has been tabulated hereunder:

Further, for the exports made before the insertion of Rule 89(1A) vide Notification No. 355/2021- Central Tax dated 24 September 2021, refund can be filed before the expiry of 2 years from the date of issuance of the said notification.

It has been further clarified that refund will not be allowed under aforementioned sections where tax adjustment has been made through issuance of credit note u/s 34 of the CGST Act.