Indirect Tax News

Custom and GST Updates

Supreme Court decision on inclusion of actionable claim in the definition of ‘Goods’ in CGST Act:

Taxation of lottery has always been a controversial issue under the Indirect Tax Regime and the recent bench of SC ruling in case of Skill Lotto Solutions Private Ltd [2020(43)G.S.T.L.289(S.C.)] has brought this topic in limelight again.

The apex court in this case has held that inclusion of actionable claim in definition “goods” as given in Section 2(52) of CGST Act, 2017 is “not contrary to the legal meaning of goods and is neither illegal nor unconstitutional” and thereby the levy of GST on sale of Lottery has been upheld.

2. Gujarat High Court upholds constitutional validity of Rule 96(10) of CGST Rules:

In case of Cosmo Films Ltd. reported at [TS-925-HC-2020(GUJ)-NT], the Hon’ble Gujarat HC has upheld the constitutional validity of Rule 96(10) as amended by Notification No. 54/2018. It was held that Advance Authorization holders are not treated unequally by denying refund of tax paid on exports, therefore the Rule does not suffer from the vice of discrimination.

3. Delhi Appellate Tribunal drops the demand of Service Tax on Liquidated Damages:

In case of South Eastern Coalfields Ltd. [TS-1120-CESTAT-2020-ST], the Principal Bench of Hon’ble CESTAT set aside the Service Tax demand applicable interest and penalty on the amount of Liquidated Damages / Forfeiture of EMD / Penalty recovered from the various contractors & suppliers. The said demand was raised by invoking the provisions contained in Section 66E(e) as ‘Declared Service’ which reads as “agreeing to an obligation or to refrain from an act or to tolerate an act or a situation or an act”.

It was held that the penalty amount, forfeiture of earnest money deposit and liquidated damages received cannot be considered as “consideration” towards “tolerating an act” leviable to service tax under section 66E(e) of the Finance Act. Similar view was also upheld by Kolkata Bench of CESTAT in case of Amit Metaliks. The said judgment would also have a persuasive effect on the similar controversy ongoing under the GST regulations.

Important Notifications issued during the quarter

Annual Return and Reconciliation Statement

Date Extension- Vide Notification No. 95/2020-Central Tax dated 30 December 2020, the Government has extended the due date for filing annual return and GST audit report in Form GSTR 9 and Form GSTR 9C respectively for FY 2019-2020 till 28 February 2021.

Exemption-Vide Notification No. 77/2020-Central Tax dated 15 October 2020, annual return under Section 44(1) of CGST Act, 2017 for F.Y. 2019-20 has been made optional for small taxpayers whose aggregate turnover is less than INR 20 Million.

2. QRMP Scheme

Vide Notification No 84/2020-Central Tax dated 10 November 2020, a registered person who furnishes returns in FORM GSTR-3B having an aggregate turnover of up to INR 50 Million in the preceding financial year shall be eligible for Quarterly Return Monthly Payment Scheme (‘QRMP’) from 1 January 2021. However, in case the aggregate turnover exceeds the prescribed limit of INR 50 million during any quarter in the current financial year, then the registered person would not be eligible for the QRMP scheme from the next quarter.

Further, the option to avail the QRMP Scheme is GSTIN wise and therefore, distinct persons as defined in Section 25 of the CGST Act i.e. different GSTINs on the same PAN have the option to avail the QRMP Scheme for one or more GSTINs.

The registered person who has opted for the QRMP Scheme would be required to pay the tax due in each of the first two months of a quarter by depositing the payable tax amount in FORM GST PMT-06 by the 25th day of the month succeeding such month. For the purpose of making the payment, the taxpayer can opt for Fixed Sum Method or Self-Assessment method. The assesse would also have the option of uploading the details of supply invoices via Invoice Furnishing Facility (‘IFF’) in order to enable to the customer to view the said supply invoices in their GSTR 2A for taking ITC.

3. Amendments in CGST Rules

Vide Notification No. 94/2020-Central Tax (Rate) dated 22 December 2020, the Government has amended the CGST Rules, 2017 as follows:

Rule 36(4): Restriction to claim ITC on account of unmatched invoices has been further reduced from 10 per cent to 5 per cent w.e.f. 1 January 2021.

Restriction on filing of GSTR-01: In case a registered person has failed to furnish GSTR-3B for two preceding months/tax period, he shall not be allowed to file GSTR-01 w.e.f. 22 December 2020.

Restriction to utilize ITC available in electronic credit ledger: As per new Rule 86B, the claim of credit has been restricted to 99 percent of the output tax liability where the value of taxable supplies other than exempt supply and zero rated supply in a month exceeds INR 5 Million. However, the same does not apply specified assesses such as persons paying Income Tax/ claiming GST refund exceeding specified limits.

Suspension of Registration: Where a Proper Officer has reasons to believe that the registration of a person is liable to be cancelled or returns furnished by the taxpayer show significant difference or anomalies resulting into contravention of GST Act or Rules, the GST registration of such taxpayer shall be suspended. The intimation of such suspension and notice of cancellation shall be intimated in Form GST-REG-31. Further, during the period of such suspension, no GST Refund shall be granted to such registered person. This amendment shall come into effect from 22 December 2020.
Cancellation of Registration: In following cases, the registration of the taxpayer shall be cancelled:

a.Where the taxpayer has availed ITC in violation of the provisions of Section 16 or rules made thereunder;
b.Where the outward supplies declared in GSTR-01 for one or more tax period exceeds outward supplies declared in GSTR-3B.
c.Where the taxpayer violates the provision newly inserted in Rule 86B (restriction to utilize ITC available in electronic credit ledger as discussed above).

This amendment shall come into effect from 22 December 2020.

E-way Bill Provisions: Validity period of e-way bill has been amended. The details are given in the table below:

4. Certain amendments of CGST Act shall come into force from 1 January 2020 | Finance Act, 2020:

Vide Notification 92/2020- Central Tax dated 22 December 2020, the CBIC notified 1 January 2020 as the date from which certain amendments in the CGST Act, 2017 shall come into force. These amendments include:

a.Section 16(4) – Time limit to claim ITC on invoices/debit notes raised during the year was prescribed under this section. This provision has been amended to delink the date of issuance of debit note from the date of issuance of related invoice.

b.Scope of criminal offences prescribed under Section 132 expanded to include not only those who have committed the offence but also those who cause to commit and retains the benefit arising out of such offense.

5. Notifications related to E-Invoicing

Vide Notification 88/2020- Central Tax dated 10 November 2020, the liability to mandatorily generate E-Invoice would be applicable to taxpayers having turnover above INR 1 Billion in the last financial year. Earlier, Vide 61/2020–Central Tax dated 30 July 2020, generation of E-Invoice was made mandatory from 1 October 2020 for taxpayers having turnover above INR 5 Billion in the last financial year.

6. Notifications related to monthly/ quarterly compliances under GST

Vide Notification 83/2020-Central Tax dated 10 November 2020, for registered persons required to file monthly return, the outward supply details are to be furnished in Form GSTR-1 for further periods from October 2020 to March 2021 by 11th Day of subsequent month.

Further, for registered persons required to furnish return every quarter, the date has been extended till 13th Day of month succeeding the tax period.

7. HSN digit on Tax Invoice:

Vide Notification 78/2020-Central Tax dated 15 October 2020, w.e.f. 1 April 2021, taxpayers having aggregate turnover up to INR 50 Million in the preceding Financial Year will be required.

Customs and Foreign Trade Policy related developments

1. Special measures to facilitate MSME for AEO T1 & T2

In line with Prime Minister’s Aatma Nirbhar Bharat Abhiyan to support MSMEs in covid-19 pandemic, the Central Board of Indirect Taxes and Customs (CBIC) has decided to facilitate MSMEs while applying for AEO accreditation by further relaxing the current accreditation process. The detailed process can be referred to in Circular 54/2020-Customs dated 15 December 2020.

The relaxations shall be applicable to only those applicants who have a valid MSME Certificate from the line- Ministry.

2. Faceless Assessment- Further clarifications on the issues raised by stakeholders

Vide Circular No 55/2020- Customs dated 17 December 2020, CBIC has provided further clarification with respect to various subjects in order to enhance the efficiency of the Faceless Assessment Process. The circular provides further clarifications on the below mentioned subjects:

Re-assessment in accordance with the Principles of Natural Justice;
Complete description of imported goods;
Document codes for regular documents to be uploaded in e-Sanchit;
Enhancement in the monetary limit for assessment by the Appraising Officers;
Assessments in respect of Liquid Bulk Cargo.

3. Linking/Registration of IECs in the new revamped DGFT Online environment

Directorate General of Foreign Trade (‘DGFT’) is planning to introduce various revamped DGFT services with the objective of providing paperless, digital, efficient and transparent services to the exporters and importers, and to further the overall goal of Trade Facilitation and Digital India. The platform would be accessible through the existing website: https://dgft.gov.in

The online processes relating to entire lifecycle of Advance Authorisation, EPCG & DFIA including their paperless Exports Obligation Discharge (EODC) shall be rolled out soon. In addition to these processes, Norms Fixation, Free Sale & Commerce Certificate, Steel Import Monitoring System (SIMS), Import Licencing and some other processes shall also be rolled out soon. In relation to this proposed roll-out, the DGFT, vide Trade Notice 33/2020-21 dated 28 October 2020 has prescribed the process of registering on the new revamped DGFT portal.

4. Clarification regarding job-work process under customs bonded warehouse

In Circular No. 48/2020-Cus dated 27 October 2020, it was clarified that a unit operating under Section 65 of the Customs Act, 1962 (a customs bonded warehouse carrying out manufacturing and other operations) would be allowed to send the goods for undertaking the job-work process outside the unit subject to conditions notified therein. Further, it was also clarified that said unit can also undertake the job-work activity for other units.

5. Press Release on RoDTEP

The Government of India has issued a press release dated 31 December 2020 to roll out the scheme of Remission of Duties and Taxes on Exported Products (‘RoDTEP’) for export of goods w.e.f. 1 January 2020. The rates of duty remission would be notified shortly by the Department of Commerce. These rates shall also be applicable w.e.f. 1 January 2020 irrespective of the date of the Notification on the eligible goods provided that at the time of export, the exporter shall declare the intention to avail such benefit in the shipping bill or bill of export.

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