Goods and Services Tax (GST)

Highlights of the 26th GST Council Meeting held on 10 March 2018

The GST Council met on 10 March 2018 to discuss and deliberate on the issues faced by the trade and industry. The recommendations made by the GST Council are discussed below:

  • Relaxation for exporters

Integrated tax (IGST) exemptions were granted to exporters on procurements made against Advance Authorisation / EPCG licenses, which were to lapse on 31 March 2018.  It has been decided that these exemptions would continue till 1 October 2018.  The implementation of the e-wallet scheme (to be used for availing the export benefits to be rolled out by DGFT) would be deferred till 1 October 2018.

  • E-way bill to be implemented from 1 April 2018

The requirement of e-way bill for inter-state movement would be effective from 1 April 2018.  In the case of intra-state movement of goods, the provision must be implemented by States in a phased manner not later than 1 June 2018.

  • Existing set of returns to be continued till June 2018

The present set of returns that are being filed i.e. GSTR 3B and GSTR 1 extended for next three months i.e., April to June 2018.

  • Reverse charge on procurement from unregistered dealer deferred till 30 June 2018

The liability to pay tax on reverse charge basis on procurement from unregistered dealers has been deferred till 30 June 2018.

  • TDS/TCS provisions deferred till 30 June 2018

The provisions for deduction of tax at source (TDS) under Section 51 of the Central Goods and Services Tax Act, 2017 (CGST Act) and collection of tax at source (TCS) under Section 52 of the CGST Act have been further deferred till 30 June 2018.  It has been decided that the integration of the Central Government and State Government accounts with the GSTN shall be done to ensure seamless credit flow when the TDS ad TCS provisions are made effective.

  • Grievance Redressal Mechanism

GST Implementation Committee to redress grievances caused to taxpayers arising out of IT glitches

Clarifications/Public notices under GST:

  • Clarification on levy of GST in respect of certain services
  • Retreading of tyres is a composite supply wherein the pre-dominant element is the process of retreading, being a supply of services. Supply of retreaded tyres where old tyres belong to supplier is a supply of goods.
  • Priority Sector Lending Certificates (PSLC) are tradeable certificates issued against priority sector loans of banks to enable them to achieve their priority sector lending targets. It has been clarified that PSLCs are akin to freely transferable duty-free credit scrip, renewable energy certificates, etc. and trading in PSLC would attract GST @ 18% as supply of goods under the residuary entry.

[Circular No. 34/8/2018-GST dated 1 March 2018]

  • Clarification on levy of GST on cash calls by Joint Venture
  • Cash calls are raised by an operating member of the joint venture on other members in proportion to their participating interest in the unincorporated joint venture (JV).  Applicability of GST on such calls would depend on facts and circumstances of each case.
  • In case, the operating member uses its own machinery to perform activities on behalf of the JV, the same would be categorised as ‘supply of service’ attracting GST. This is because in such a scenario, the operating member is recovering the cost appropriated towards machinery from other members.

[Circular No. 35/9/2018-GST dated 5 March 2018]

  • Non-utilization of disputed/ blocked transition credit
  • Disputed CENVAT credit availed by an assessee (u/s 140 of the CGST Act) cannot be utilized for discharging GST liability. In case, such disputed credit is utilized by the assessee, the same shall be recovered along with interest and penalty.
  • Blocked credits (u/s 17(5) of CGST Act) such as telecommunication towers and pipelines laid outside the factory premises cannot be carried forward in accordance with Section 140(1)(i) of the CGST Act. If such blocked credit has been availed and utilised by an assessee, the same shall be recovered along with interest and penalty.
  • In case, the value of disputed / blocked credit exceeds INR 1 million, the assessee shall be required to submit an undertaking to the jurisdictional officer that such credit shall not be utilised or has not been availed as transition credit.

[Circular No. 33/9/2018-GST dated 23 February 2018]

Customs Act

  • Departmental Circulars

Alternative Mechanism for refund of IGST in case of invoice mismatch: A mechanism for refund of IGST paid has been prescribed where there is a mismatch in the invoice used when filling GSTR-1 / Table 6A and the one used for customs purposes. The process involves confirmation by a Customs officer on Customs EDI system and GSTN where the details filled in GSTR-1 are accurate and the corresponding shipping bill may have varying information and shows an error of ‘SB005’. Post such confirmation, the refund amount shall be credited electronically.

[Circular No.5/2018- Customs dated 23 February 2018]

  • Anti-Dumping Duty

Anti-Dumping Investigation: The recent developments in the ongoing Anti-Dumping Investigation are hereunder:

SR. NO.

INVESTIGATION DETAILS

RECENT DEVELOPMENTS

1. 

Import of “Dimethyl Acetamide” originating in or exported from China PR and Turkey.

Case No. OI-15/2017

The Authority has recommended imposition of Anti- Dumping duty for a period of 5 years.

2.

import of “Phosphorus Pentoxide” originating in or exported from China PR, Japan and Korea RP.

Case No. Ol-17/2017

The Authority has recommended imposition of Anti- Dumping duty at the rate of US 1685.42 / MT for a period of 5 years.

 

SEZ Policy

Process for clearance of unclaimed goods:  The Central Government has instructed that the process under Section 48 of Customs Act 1965 (used for sale of abandoned / unclaimed goods) and the accompanying procedure given in Customs Manual shall be adopted when clearing the abandoned goods kept in Free Trade and Warehousing Zones (FTWZ).

[Ref: Instruction No D. 6/5/2017-SEZ dated 21 February 2018]

Recent judgments - Service tax

  • Supreme Court (SC): No service tax on reimbursement of expenses prior to May 2015

The question before the Supreme Court was whether reimbursable expenses charged by service provider to the service recipient can be subject to service tax.

The Supreme Court remarked that service tax can only be levied on the gross amount charged ‘for such service provided’. Any other amount which is used not for providing such taxable service cannot be a part of that valuation.

It was held that Rule 5 of Service Tax (Determination of Valuation Rules) 2006 which provides that value shall include expenses incurred while rendering the service and reimbursed by recipients goes much beyond the mandate of Section 67 of the Finance Act, 1994.

It should be noted that by virtue of amendment made in Section 67, such reimbursement would be taxable only with effect from 14 May 2015.

[Union of India Vs Intercontinental Consultants and Technocrats Private Limited (TS-72-SC-2018-ST)]

  • SC: Free of cost (‘FOC’) supplies by service recipient not subject to service tax

The question before the Supreme Court was whether FOC supplies provided by service recipient to service provider for execution of construction contract can be subject to service tax.

The Supreme Court has held that as per Section 67 of the Finance Act, 1994, value of material supplied or provided 'free of cost' by service recipient (FOC supplies) for use in construction services cannot be included in computation of gross amount charged by service provider. The Court has held that FOC supplies is neither an amount charged by the service provider nor can it be treated as consideration charged by the service provider.

[Bhayana Builders (P) Limited Vs Commissioner of Service tax, Delhi (TS-47-SC-2018-ST)]

Comment: In our view, the principles laid down by the Supreme Court in this judgment would have relevance even under the GST regime

Recent judgments - GST

  • Various High Courts direct reopening of TRAN -1 on case to case basis
  • The petitioner was unable to claim transitional credit due to technical glitches in the GST portal. The Allahabad High Court has directed the government to reopen the portal within two weeks from the date of the order and in the event it is not done, the application of the petitioner for claiming transitional credit would have to be processed manually.

[Continental India Private Limited & Anr. Vs Union of India [TS-14-HC-2018 (ALL)—NT]

  • The Chattisgarh High Court has directed the Department to either reopen the GSTN portal to allow refiling of TRAN-1, or treat the manual copy of revised Form TRAN-1 filed by petitioner as compliance with relevant provisions under CGST Act and allow transitional credit availed therein
  • The Mumbai High Court has directed the Commissioner to meet the representatives of the GST Practitioners Association in order to sort out the problems particularly relating to accessing of GST website/ portal.