With a slew of critical Notifications and Circulars issued in the month of July 2022, the CBIC has indeed regularized and clarified many burning issues in GST. Further, with the judgement of the Apex Court, directing the Revenue to reopen the GSTN portal for availing transitional credit, the spirits are high among the taxpayers. Add to this, the JNCH has also issued a Standing Order, allowing re-assessment of Bills of Entry without an appealable order. These moves by the Board, Courts and Departments, will collectively go a long way in easing the tax compliances and procedures. Apart from this, following are the key developments covered in this Newsletter:
Compiling all such developments, we are glad to bring to you the 23rd 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 June 2022. 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. 26/2015-2020 dated 10 August 2022 has done away with the requirement of advance registration of minimum 5 days from the expected date of arrival of import consignment under NFMIMS ('Non-Ferrous Metal Import Monitoring System') under the Foreign Trade Policy 2015-2020
The DGFT, vide Public Notice No. 21/2015-2020 dated 05.08.2022, has extended the validity of Status Certificates granted in the FY 2015-16 and 2016-17 under the current Foreign Trade Policy 2015-2020 till 30 September 2022.
The CBIC vide Circular No. 178/10/2022 dated 03.08.2022 has clarified issued relating to GST applicability on payments in the nature of liquidated damages, compensation, penalty, cancellation charges, late payment surcharge etc. arising out of breach of contract. Following are the key highlights of the Circular:
Sr. No |
GST Applicability on |
Clarification |
1. |
Liquidated Damages |
Liquidated damages are not a compensation for contract breach or non-performance. They are payments for not tolerating contract breaches. Such payments are essentially a movement of money and not taxed. However, amounts paid for acceptance of late payment, early lease termination, pre-payment of loan, or amounts forfeited on cancellation of service by the customer as contemplated by the contract as part of commercial terms agreed to by the parties, constitute consideration for the supply of a facility, namely acceptance of late payment, early lease termination, pre-payment of loan, and making arrangements for the intended supply by the supplier. Such payments, even if called a fine or penalty, are essentially consideration for a supply and are liable to GST if the supply is taxable. |
2. |
Compensation for cancellation of coal blocks |
There was no agreement between previous coal block allotees and the Government that they would consent to or permit cancellation if they were compensated. No such promise or offer was made by the prior allottees to the Government. Therefore, compensation paid for cancellation of coal blocks is not taxable |
3. |
Cheque dishonour fine/ penalty |
The fee or penalty that a supplier or banker levies for dishonouring a check is a penalty imposed not for tolerating the behaviour or situation, and thereby discouraging such an act or situation. Therefore, a check dishonour fine or penalty is also not taxable. |
4. |
Penalty imposed for violation of laws |
Penalties for violation of laws cannot be considered as the Government or local authority's compensation for tolerating violation. They stipulate penalties for not tolerating, penalising, and discouraging violations. Hence these amounts are not leviable to GST. |
5. |
Forfeiture of salary or payment of bond amount in the event of the employee leaving the employment before the minimum agreed period |
These amounts are recovered by the employer not as a consideration for perpetuating early resignation, but as penalty to prevent and deter non-serious employees from taking up employment. Therefore, employer-recovered funds are not taxable. |
6. |
Late payment surcharge or fee |
The supplier's facility of accepting late payments with interest, or a fine is merged with the main supply. Since it is ancillary to and bundled with the principal supply, it should be assessed at the same rate as the principal supply. |
7.
|
Fixed Capacity charges for Power |
Electricity is excluded from GST therefore; both the minimum fixed/capacity costs and the variable/energy charges are not taxable. |
8. |
Cancellation charges |
Facilitating cancellation of an anticipated supply for a charge or retention or forfeiture of the consideration or security deposit is the principle supply. Forfeiture of earnest money by a seller in case of breach of 'an agreement to sell' an immovable property by the buyer or by Government or local authority in case of a successful bidder failing to act after winning the bid for allotment of natural resources is a mere flow of money, as the buyer or successful bidder gets nothing in return for such forfeiture. Such payments are essentially a cash flow and are not taxable. |
In line with the recommendations of the GST Council, the CBIC, vide Notification No. 17/2022–Central Tax dated 01 August 2022, has reduced the threshold for e-Invoicing applicability from 20 Crore to 10 Crore. Thus, taxpayers having an aggregate turnover of more than Rs. 10 Crores, would be subjected to e-invoicing provisions w.e.f 01 October 2022.
CBIC vide Circular No. 171/03/2022-GST dated 6.07.2022 clarified on issues relating to applicability of demand and penalty provisions under the CGST Act in relation to transaction involving fake invoices as tabulated hereunder:
Sr.No. |
Issues |
Clarification |
1 |
In case where a registered person has issued tax invoice to another registered person without any underlying supply of goods or services or both.
|
However penal action can be taken u/s. 122(1)(ii) of the CGST Act for issuing tax invoices without actual supply of goods or services.
|
2 |
In case when a registered person(‘A’) has issued tax invoice to another registered person (‘B’) without any underlying supply of goods or services or both. And the ‘B’ avails ITC on the basis of the said tax invoice. ‘B’ further issues invoice along with underlying supply of goods or services or both to his buyers and utilizes ITC availed on the basis of the above mentioned invoices issued by ‘A’, for payment of his tax liability in respect of his said outward supplies.
|
|
3 |
In a case when a registered person (‘A’) has issued tax invoice to another registered person (‘B’) without any underlying supply of goods or services or both. ‘B’ avails ITC on the basis of the said tax invoice and further passes on the said ITC to another registered person (‘C’) by issuing invoices without underlying supply of goods or services or both.
|
In this case, the ITC availed by ‘B’ in his ECL on the basis of tax invoice issued by ‘A’, without actual receipt of goods or services or both, has been utilized by ‘B’ for passing on of ITC by issuing tax invoice to ‘C’ without any underlying supply of goods or services or both.
However, in such cases, ‘B’ shall be liable for penal action both u/s. 122(1)((ii) and section 122(1)(vii) of the CGST Act, for issuing invoices without any actual supply of goods or services and for taking/ utilizing ITC without actual receipt of goods or services. |
4 |
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Post the judgement of the Apex Court in RE: ITC Limited vs. CCE, Kolkata [2019 (368) ELT 216], there had been a lot of confusions regarding the re-assessment of Bills of Entry. The JNCH itself, vide Standing Order No. 27/2019 dated 24.12.2019 had clarified that refund applications would not be entertained unless the relevant BOE are re-assessed as an outcome of an Appellate order. Thus, in each case, where the importers required re-assessment of BOE for claiming refund u/s. 27 of the Customs, they were required to first prefer an Appeal before the Commissioner (A) to meet the requirement of an Appellate order.
However, pursuant to various litigations, the judgement of the Apex Court in RE: ITC Limited (supra) has been correctly interpreted, in a way beneficial to the assessees. Vide the instant Standing Order No. 06/2022 dated 04.07.2022, JNCH has clarified the correct principle laid down by the Hon’ble SC. It has been clarified that in the said judgement, the Hon’ble Court had ruled that a refund claim cannot be entertained unless the order of self-assessment is modified in accordance with law. If a person is aggrieved with an order (including a self-assessment), he must seek a modification under Section 128 or other relevant provisions of the Customs Act, 1962.
The Standing Order further provides that the decision of Bombay HC in the case of Dimension Data India Private Limited [2021-TIOL-224-HC-MUM-CUS], as upheld by the SC, clarifies that apart from section 128 of the Customs Act, the BOE [or Shipping Bill] can also be amended or modified under the provisions of Section 149 or Section 154 of the Customs Act, 1962. In cases where amendments are sought after Out of Charge (OOC), the approval of concerned ADC/JC for cancellation is required. In the case of a BOE where OOC was granted by the RMSFC and amendment is sought u/s. 149 or 154 of the Customs Act, cancellation of OOC for consequential amendment would be made by the Group to which the BOE would otherwise pertain. It has also been provided that all Cases in progress where the amendment under section 149 or 154 of Customs Act, has already been allowed or where refund has been filed after such amendment, will be processed on merits by the Refund section.
The Petitioner had obtained deferral of custom duty and IGST by operating under MOOWR Scheme. The CBIC vide Instruction No. 13/2022-Customs dated 09 July 2022 directed the concerned authority to revoke the two licenses issued by Revenue under MOOWR Scheme to the Petitioner. Further, the Instruction denied the benefit on the basis that the resultant goods, i.e. electricity, cannot be stored in a warehouse and cannot be affixed with a one-time lock to the load compartment.
Aggrieved, the Petitioner preferred a Writ challenging the aforesaid Instruction. The Petitioner argued that the Instruction is in the teeth of proviso (a) to section 151 A of the Customs Act as it directs the Custom Officer to review the licenses already granted and to not grant any further licenses in such cases. It was further argued that if the instruction is allowed to operate, Petitioner’s consignment for import of solar modules would be subjected to custom duty and IGST, contrary to the provisions of the MOOWR Scheme. The Petitioner further averred that electricity is neither subject to duty under the Customs Act, nor under the CGST Act.
In view of the above, the Delhi HC observed that the Petitioner has set up a prima facie case and the balance of convenience appears to be in favour of the Petitioner. Accordingly, the HC restrained the Revenue from taking any coercive measures against the Petitioner till the next hearing.
ACME Heergarh Powertech Private Limited v/s. CBIC [W.P (C) 10537/2022 dated 13 July 2022]
The Apex Court, in a landmark judgment has ruled that the GSTIN portal shall reopen for all the taxpayers for a period of 2 months i.e. from 01 September 2022 to 31 October 2022. As per the judgement, all the taxpayer can claim the transitional credit, irrespective of whether or not they had filed writ petition or their claim had been rejected on the ground that there were no technical glitches.
The Hon’ble SC has further directed that the GSTN shall take strict measures so that the taxpayers do not face any technical glitch during the said period. Furthermore, once the filing is completed, the field officer shall be given 90 days’ time to verify the claim of credit on merits and pass an appropriate order with an opportunity of being heard given to the tax payer before passing any adverse order. Thereafter credit to be reflected in Electronic Credit Ledger. The Hon’ble SC further directed the CBIC to make further directions.
The judgement copy is awaited to analyze the complete scope of the relief granted.
The CBIC vide various Notification dated 19 July 2022 amended various existing notifications, and thereby reduces the Special Additional Excise Duty (SAED) on export of petrol, diesel and aviation turbine fuel in the manner tabulated hereunder:
Sr. No. |
Notification |
Summary |
1 |
Notification No. 17/2022-Central Excise dated 19 July 2022
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2 |
Notification No. 18/2022-Central Excise dated 19 July 2022
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3 |
Notification No. 19/2022-Central Excise dated 19 July 2022 |
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4 |
Notification No. 20/2022-Central Excise dated 19 July 2022 |
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This notifications shall come into force w.e.f. 20 July 2022
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