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The CBIC vide Circular No. 145/01/2021-GST dated 11 February 2021 has issued a Standard Operating Procedure (‘SOP’) for implementation of the provision for suspension of registrations. As per Section 21(2A) of the CGST Act, registration shall be suspended, where upon comparison of the returns, it is indicated that there are significant differences or anomalies indicating contravention of the provisions of the Act or the Rules.

The said Rule specifies that the registration of taxpayers shall be suspended and system generated intimation of suspension and notice of cancellation of registration shall be intimated vide Form GST REG-31. However, as the functionality of GST REG-31 has not been made operational yet, the CBIC has provided the following guidelines for implementation of the provision of suspension of registrations:

• The notice / intimation of suspension of registration shall be made available to the taxpayer on their dashboard on common portal in Form GST REG-17;
• The taxpayers, whose registrations are suspended would be required to furnish reply in Form GST REG-18 to the jurisdictional tax officer within 30 from the receipt of such notice, and shall furnish the details of compliances and the reasons as to why their registration should not be cancelled;
• Post examination of the response, the Officer may pass an order either for dropping the proceedings for suspension/ cancellation of registration in Form GST REG-20 or for cancellation of registration in Form GST REG-19. Based on the action taken by the proper officer, the GSTIN status would be changed to ‘Active’ or ‘Cancelled Suo-moto’ as the case maybe.

The Applicant, having multiple locations throughout India, had been engaged in the business of passenger and cargo transport and services by air. The Applicant, having its Corporate Office in Haryana (‘HO’), had been procuring various goods / services under their GSTIN, while the same were being directly supplied at its Branch Offices (‘BO’)’.

In order to ensure up and running condition of the aircrafts, the Applicant maintained various spare parts at its HO itself. In reference thereto, the Applicant had taken aircraft under lease model. Accordingly, the Applicant had entered into various contracts, (contractual location being Haryana) with different vendors on which the IGST was being paid under RCM on the lease rentals in the State of Haryana. 

Further, the spares were ordered by the HO and the bill of entry was also filed with their GSTIN, however, the goods were being dispatched at the respective locations as per the requirement. The Applicant further procured assurance services (for repair of aircraft) from vendors located outside India in the State of Haryana and paid the GST under RCM. Further, the HO had entered into an agreement with its BO's for supply of maintenance services including assurance. The cost of such supply shall be equal to the cost of assurance services plus the cost of spares plus any other costs incurred plus mark-up thereon.

In view of the above, the Applicant had sought a ruling before the Haryana AAR to ascertain whether:

• The charges in lieu of maintenance services recovered by the HO from the BO shall qualify as supply of service?
• The ITC for procurements is required to be claimed by the Applicant under the normal GSTIN or the Applicant needs to take a separate GSTIN as an ISD to distribute the GST credits from HO to BO.

Referring to Section 7 of the CGST Act, the AAR observed that the term ‘supply’ includes all forms of supply including licence, rental, lease or disposal for a consideration in the course or furtherance of business. It was further observed that the HO had been charging a mark-up over and above the cost of assurance services, cost of spare parts and any other cost in relation to upkeep and maintain the aircrafts, thereby adding value to the cost and hence, incurring a taxable supply of service.

The AAR further noted that the HO and BO being separate GST registrants, qualify as ‘distinct persons’ and therefore any supply between the two parties would be chargeable to GST. Accordingly, it was ruled that the charges in lieu of maintenance services recovered by the HO from the BO shall qualify as supply of service.

Further, referring to Section 2(93) of the CGST Act, it was observed by the AAR that ISD is the 'recipient' as it is the person making payment of consideration for the supply of goods or services. It was further observed that the very basis of the ISD related provisions under the CGST Act is that the ISD is not a supplier of goods or services and does not make any 'outward supply' but is entitled to distribute credit.

The AAR further noted that ISD mechanism is meant only for distributing the credit on common invoices pertaining to input services only and not goods inputs or capital goods. Accordingly, it was ruled that the ITC pertaining to services only on the procurement made by HO towards maintenance of aircraft shall be distributed by way of ISD mechanism and the credit pertaining to goods, including capital goods, shall be distributed by normal mechanism.

GLS Comments:

The issue of treatment of common services has always been a contentious issue in the GST regime. This instant AAR has correctly ruled that a corporate office and a branch office are two distinct persons and therefore the transactions between the two would qualify as 'supply'. The Haryana AAR in the instant case has followed the ruling of Karnataka AAR in the case of Columbia Asia Hospitals Private Limited [Advance Ruling No. KAR ADRG 15/2018 dated July 27, 2018], wherein it had been ruled that activities performed by the employees at the corporate office in the course of or in relation to employment such as accounting, other administrative services for the units located in the other states shall be treated as supply as per Entry 2 of Schedule I of the CGST Act. The instant ruling of Haryana AAR has re-affirmed this position of law under GST.

The Petitioner had inadvertently declared incorrect HSN Code while filing Bills of Entry resulting into excess payment of BCD. Upon detecting such error, the Petitioner submitted a letter requesting correction in the Bills of Entry. The Petitioner had received a communication from the Revenue declining the request as the petitioner had not obtained an order of re-assessment or appealed against the self-assessment done on the Bills of Entry.

Aggrieved, the Petitioner filed a Writ before the Bombay HC seeking direction to the Revenue to reassess the custom duty. The Revenue argued that the Petitioner was required to file an appeal before the Commissioner (Appeals).

The Bombay HC observed that the Customs Act empowers the Proper officer to go for reassessment if he finds on verification etc. that self-assessment was not done correctly. It was further observed that in a case where re-assessment is contrary to self-assessment and where the importer does not confirm his acceptance of such re-assessment, the proper officer shall pass a speaking order on the re-assessment.

Basis the above observations, it was held by the HC that a discretion is vested on the proper officer to authorise amendment of any document after being presented in the Customs House.

Referring to the Madras HC in the case of Hewlett Packard Enterprises vs. Jt. Commissioner of Customs [2020(10) TMI 970], the Bombay HC observed that correctly held that in a case of correction of inadvertent error, the appropriate remedy would be seeking an amendment to the Bills of Entry and not fling of appeal because there is no legal flaw in the order of self-assessment amenable to appeal but only a factual mistake which can be rectified by way of amendment or correction. Accordingly, The HC directed the Respondents to amend the Bills of Entry u/s. 149 of Customs Act.

Dimension Data India Private Limited vs. Commissioner of Customs and Ors. [WRIT PETITION (L) NO. 249 OF 2020]

A Budget with a Vision of Atmanirbhar Bharat !!

Standing true to its larger vision of ‘Atmanirbhar Bharat’, Hon’ble Finance Minister, Smt. Nirmala Sitharaman presented the Union Budget 2021 with an endeavor to promote the growth and domestic manufacturing.  The instant Budget 2021-22 is premised on six pillars, namely, Health and Well-Being, Physical and Financial, Capital and Infrastructure, Inclusive Development for aspirational India, reinvigorating human capital, innovation and Research and Development, and Minimum Government and Maximum Governance.

The budget, promising heavy investments in the health and infrastructure sector, clearly intends to bring the much-needed spike in the economy, which is largely doomed in the shadow of COVID-19. Further, the Government has made some commendable efforts in restraining itself from imposing any new taxes or levy and simultaneously introducing some radical changes in faceless assessment as well as expeditious resolution of pending re-assessment proceedings. 

On the Indirect Tax front, the Government has proposed an overhaul change in the Basic Customs Duty structure effective from October 2021. Further, BCD has been proposed to be increased on a number of products, which is likely to be in turn encourage the domestic manufacturing of various medical and technological equipment. 

In the present Special Edition of Exclusive Analysis of Budget proposals, we have tried to analyze the genesis and consequential impact of various amendments. Further, a gist of budget analysis / views from the industry leaders provides a compelling insight of the Budget. 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 Petitioner had challenged the orders passed by the GST Department u/s. 83 of the GST Act for attachment of the Cash Credit bank accounts of the Company. The Gujarat HC observed that Cash Credit Account is an account, which enables the Petitioner to borrow the money from the bank for the purpose of its business. Any money, therefore, which the bank may make available to the assessee is necessarily in the nature of a loan or cash credit facility.

Basis the above observations, the Gujarat HC directed the Respondents to lift the provisional bank account attachment order.

Vinodkumar Murlidhar Chechani vs. State of Gujarat and Ors. [C/SCA/12498/2020]

GLS Comments:

In recent times, it has been increasingly seen that the GST Departments and other tax departments, have been attaching the bank accounts of the taxpayers for trivial reasons. In this regard, it would be pertinent to note that such orders flow from the GST Act itself, therefore, such acts cannot be called arbitrary per se. Albeit, it is wise to keep a check on the taxpayers and punish them wherever due, care must be taken by the Revenue not to hassle the honest taxpayers.

Riding on the success of Sabka Vishwas Legacy Dispute Resolutions Scheme 2019 and the Vivad Se Vishwas Scheme, the Government is now considering a one-time amnesty scheme for resolution of legacy disputes pertaining to Customs. The Trade and Industry had represented for a chance to resolve past disputes related to Customs in line with other two schemes.

It would be interesting to see whether the Finance Ministry will announce any such scheme in the upcoming budget.

The Applicant had sought a ruling before the Gujarat AAR to ascertain whether availing exemption under Customs notification in respect of additional duty of customs, but opting to pay IGST on the import of goods under Advance Authorization, would tantamount to availing the benefits of exemption under Notification No.79/2017-Cus, as contemplated under Rule 96(10) of CGST Rules.

The Applicant stated that in terms of Circular No. 59/33/2018-GST dated 04 September 2018, the importers who are directly importing supplies on which benefit of reduced tax incidence or no tax incidence under certain specified notifications has been availed, shall not be eligible for refund of integrated tax paid on export. 

The Applicant further stated that Notification No. 79/2017-Cus is specified in Rule 96(10), which exempts certain specified duties of Customs and IGST. The Applicant further argued that the restriction under Rule 96(10) seeks to prevent the exporter from claiming refund of IGST paid on the exports, if he has received the goods which are exempted or nil rated.

It was put forth by the Applicant that the term ‘tax’ referred to in the circular is the GST. In case of imports, the GST payable is IGST under the IGST Act. The applicant had been opting to pay IGST on their imports, but availing exemption on other applicable customs duties in terms of the Notification No.79/2017-Cus.

Basis the above, it was argued that the Applicant has received imported goods on which the IGST had been paid and, therefore, they cannot be held to have availed the ‘benefits of the Notification No.79/2017-Cus as contemplated in Rule 96(10). The Applicant further stated that the exemption on additional duties of Customs and ADD are governed by the Customs Act, and Customs Tariff Act, therefore, the benefit cannot be denied by the GST Act and Rules.

It was observed by the AAR that Rule 96(10) was amended with retrospective effect from and a new sub-rule (10) was inserted which provided that an exporter who is inter alia availing the benefit of Notification No. 79/2017-Cus, will not be entitled to claim refund of IGST paid on export of goods. The said provision was further clarified vide Circular No. 59/33/2018-GST.

Basis the above observations, it was held by the AAR that the importers, directly importing supplies on which benefit of reduced tax or no tax under certain notifications specified under rule 96(10) had been availed, shall not be eligible for refund of integrated tax paid on export. 

Therefore, as to answer the question raised by the Applicant, it was ruled that availing exemption under Customs notification in respect of additional duty of customs, but opting to pay IGST on the import of goods under Advance Authorization, would tantamount to availing the benefits of exemption under Notification No.79/2017-Cus.

The DGFT vide Trade Notice No. 38/2021 dated 15 January 2021 has introduced online e-PRC System for application seeking Policy / Procedure relaxation. Presently, the applications for seeking policy / procedure relaxation are being filed in manual form. As a consequence, rest of the process also happens in manual mode and takes time.

In respect thereto, the DGFT, a part of IT Revamp, has decided to introduce a new module (online e-PRC System) for seeking policy / procedure relaxation. Accordingly, it has been provided that all exporters / importers seeking relaxation of FTP provisions are required to submit their application electronically only. It has been further provided that physical copies of the applications seeking policy / procedure relaxation received after 25 January 2021 would not be acted upon by the Directorate. The DGFT has further informed that physical copies of applications seeking policy / procedure relaxations submitted after 25 January 2021 will not be acted upon.

The DGFT has also provided the path for the entire process on the DGFT portal which has been designed to be paperless and contactless.

Earlier this week, the CBDT had issued an order u/s. 119 of the Income Tax Act, rejecting the representation for further extension of due date for filing Audit Report filed by The All India Gujarat Federation of Tax Consultants [SCA 13653 of 2020] before the Gujarat HC. The said matter was further heard by the HC on 13 January.

Pursuant to the said hearing, the HC observed that the Court can very easily issue a writ of mandamus extending the said due date till 31 March 2021. However, such a line of reasoning or approach may upset the entire functioning of the Government and may lead to undesirable results.

Accordingly, the HC has refused to interfere in the matter and held that the Revenue may consider issuing an appropriate circular taking a lenient view as regards the consequences of late filing of the TAR and left it to the discretion of the Revenue.

The Commissioner of State Tax, Maharashtra vide Trade Circular No. JC (HQ)-1/GST/2021/ADM-8 dated 12 January 2021 has withdrew an earlier circular which provided for deemed adoption of GST Circulars issued by the CBIC. This departure from deemed adoption of CBIC circulars by the Maharashtra Government is made in order to maintain the integrity of communication and so also to avoid confusion caused as to which instructions are to be followed in case where there are circulars issued by the CBIC as well as the Maharashtra Government.

Henceforth, whenever CBIC issues any circular, the Maharashtra Government on its examination would issue a separate circular regarding its applicability for the implementation of the MGST Act. It has been further clarified that circulars issued by CBIC till 12 January 2021 are deemed to have been adopted for the implementation of MGST Act, unless the Maharashtra Govt. has issued a separate circular on the same subject. It has been further provided that the actions taken on the basis of circulars adopted by the Maharashtra Government would remain valid.