Indirect Tax News

published on 31 January 2024 I reading time approx. 8 minutes

IDT Developments and Associated Procedures

1. Highlights in 52nd GST Council Meeting

The 52nd GST council meeting was held on 7 October 2023 in New Delhi. The major recommendations/clarifications/amendments discussed in the said meeting are, as follows: 
  • Changes in the GST rates of millets, yarn, Extra Neutral Alcohol, pure and composite services provided to Central/State/UT governments and local authorities in relation to any function entrusted to Panchayat/Municipality under Article 243G and 243W of the Constitution of India, services of water supply, public health, sanitation conservancy, solid waste management and slum improvement and upgradation supplied to Governmental Authorities, etc.
  • Amnesty Scheme for filing of appeals against demand orders in cases where appeal could not be filed within the allowable time period.
  • Taxability of corporate guarantee provided for related persons including corporate guarantee provided by holding company to its subsidiary company,
  • Taxability of personal guarantee offered by directors to the bank against the credit limits/loans being sanctioned to the company,
  • Alignment of provisions of the CGST Act, 2017 with the provisions of the Tribunal Reforms Act, 2021 in respect of Appointment of President and Member of the proposed GST Appellate Tribunals;
  • Place of supply for transportation of goods, advertising services, co-location services
  • Admissibility of export remittances received in Special INR Vostro account, as permitted by RBI.

2. Refund under Inverted Duty Structure is available even if the input and output rates are same

In the case Indian Oil Corporation Limited [2023 (12) TMI 361 - DELHI HIGH COURT], the Hon’ble Delhi High Court has held that refund under inverted duty structure can be applied even if the rate of tax on input supply and output supply are the same. Clause (ii) of proviso to sub-section (3) of Section 54 of the CGST Act does not contemplate comparing rate of tax on the principal input with the rate of tax chargeable on the principal output supply.

Important GST Notifications and Circulars issued during the quarter

1. Applicability of GST on Corporate Guarantee

Vide Notification No. 52/2023- Central tax dated 26 October 2023, a new Rule 28(2) was inserted in the Central Goods and Services Rules, 2017 which provides for applicability of GST @18 per cent on corporate guarantees provided by parent/subsidiaries and other related parties to banking companies/financial institution on behalf of each other. The valuation for such services would either the financial consideration charged by the guarantor for that service, or 1 per cent of the value of the guarantee, whichever is higher.

Further, vide Circular No. 204/16/2023 – GST dated 27 October 2023, the CBIC has clarified that the activity of providing personal guarantee by the director of a company to the bank/ financial institutions for sanctioning of credit facilities to the said company without any consideration is treated as supply of services and GST shall be payable on the same. Since the director is a related party of the company, the value of supply shall be open market value. However, as per the RBI mandate, a director is not entitled to any remuneration or fee, in lieu of providing personal guarantee. Therefore, the open market value shall be considered as nil, and no GST is payable. Conversely, if the director is no longer is associated with company or if the director is being paid for his corporate guarantee, then the value of supply shall be open market value and GST shall be paid on the same.

2. Condonation of delay in filing appeals

As per Section 107(1) of the CGST Act, 2017 any person aggrieved by the order passed by an adjudicating authority may file an appeal before appellate authority within 3 months from the date of communication of order. Notification No. 53/2023 – Central Tax dated 2 November 2023 notified a special procedure to be followed by a taxpayer for condonation of delay in filing of appeals against demand orders passed until 
31 March 2023. The said taxpayer can file appeal against the said order in FORM GST APL-01 in accordance with Section 107(1) of the said Act, on or before 31 January 2024.

3. Extension of time limit to issue notice under Section 73

As per Section 73(9) read with Section 73(10) of the CGST Act, 2017 the officer shall issue demand order for determining tax /interest/penalty within three years from the due date of furnishing the annual return of the relevant financial year. Vide Notification No. 56/2023 - Central Tax dated 28 December 2023, the time limit for issuance of order under Section 73(9) read with Section 73(10) for the FY 2018-19 and 2019-20 has been extended till 30 April 2024 and 31 August 2024 respectively.

4. Clarifications issued by way of Circulars/Instructions

  • Vide Circular 202/14/2023 – GST dated 27 October 2023, the CBIC has clarified that when the Indian exporters, undertaking export of services, are paid the export proceeds in INR from the Special Rupee Vostro Accounts of correspondent bank(s) of the partner trading country, opened by AD banks, the same shall be considered to be fulfilling the conditions prescribed for export of services.
  • Vide Circular 203/15/2023 – GST dated 27 October 2023, the CBIC has provided clarification with respect to place of supply in case of transportation of goods, advertising services and co-location services.
  • Vide Circular 206/18/2023 – GST dated 31 October 2023, the CBIC has provided clarifications with respect to applicability of GST on certain supplies like reimbursement of electricity charges by real-estate companies, job work for processing of Barley into Malted Barley, supply of pure services and composite supplies by way of horticulture/horticulture works et.

Customs and Foreign Trade Policy Related Developments

1. Revision in All India Rates of Duty Drawback
The CBIC vide Notification No. 77/2023 – Customs (NT) dated 20 October 2023 has revised the rates of duty drawback with respect to the goods specified in Schedule-I, subject to the conditions as specified in the said notification. Vide Circular No. 26/2023 – Customs dated 26 October 2023, the CBIC has clarified certain matters with respect to the aforesaid notification.

2. Extension of the benefit of exemption granted on deposits in Electronic Cash Ledger under Section 51A

CBIC had earlier exempted the deposits w.r.t goods imported or exported in customs stations where customs automated system is not in place or w.r.t accompanied baggage, from all the provisions of Section 51A of the Customs Act till 01 October 2023. The said exemption got extended till 20 January 2024 vide Notification No. 88/2023-Customs (NT) dated 29 November 2023. 

Further, Notification No. 87/2023 – Customs (NT) dated 29 November 2023 exempts deposits with respect to goods imported or exported in customs stations where customs automated system is not in place, goods imported or exported in International Courier Terminals, accompanied baggage, from all the provisions of Section 51A till 19 January 2023.

3. Imposing of Anti-Dumping Duty

  • Vide Notification No. 10/2023 – Customs (ADD), dated 12 October 2023, CBIC has imposed antidumping duty on flax yarn of below 70 lea count classifiable under HSN 530610 or 530620, imported or originating from China PR (subject to conditions as prescribed in the aforesaid notification). This antidumping duty will be effective for 5 years, unless revoked.
  • Vide Notification No. 11/2023 – Customs (ADD), dated 17 November 2023, the CBIC has imposed antidumping duty on Toughened Glass for Home Appliances classifiable under Chapter 70, imported or originating from China PR (subject to conditions as prescribed in the aforesaid notification). This antidumping duty will be effective for 5 years, unless revoked.
  • Vide Notification No. 15/2023 – Customs (ADD), dated 22 December 2023, the CBIC has imposed antidumping duty on Industrial Laser Machines classifiable under 84561100, 84569090, 84798199, 85152190, 85158090 and 90132000, imported or originating from China PR (subject to conditions as prescribed in the aforesaid notification). This antidumping duty will be effective for 5 years, unless revoked.

4. Other Miscellaneous Updates in Customs, FTP and SEZ

  • Vide Trade Notice No. 33/2023-24 dated 10 November 2023, the DGFT has implemented an enhanced electronic Bank Realisation Certificate (e-BRC) system. This more streamlined process is based on electronic Inward Remittance Messages (IRMs) to be transmitted directly by banks to DGFT. Based on the IRMs received, the exporters shall self-certify their e-BRCs.
  • The Ministry of Commerce and Industry, Department of Commerce, issued a Notification vide G.S.R. 881(E) dated 6 December 2023, amending the Special Economic Zones Rules, 2006, and notifying the Special Economic Zones (Fifth Amendment) Rules, 2023. These changes/amendments to the regulations governing SEZ allow denotification of an SEZ area on a floor-wise basis. The government's decision to amend the SEZ rules and allow floor-wise denotification has brought in much needed relief to commercial space and office owners, who expect occupancy levels to rise.
  • Vide Circular No. 27/2023 – Customs dated 1 November 2023, the CBIC has clarified that the Department of Post vide Office Memorandum has authorized 170 more booking post offices to accept consignments for export.
  • Vide Circular No. 28/2023 – Customs dated 8 November 2023, the CBIC has decided to provide for advance assessment of Courier Shipping Bills on the Express Cargo Clearance System (ECCS). An Advisory No. 11/SYS/WZU/2023 dated 19.10.2023 has also been issued by Directorate General of Systems.
  • Vide Notification No. 34/2023 – FTP dated 4 October 2023, the DGFT has amended policy condition with respect to time period for applying registration under Coal Import Monitoring System (CIMS). Earlier, the imported could apply for registration not earlier than 60th day and not later than 5 days before the expected date of arrival of import consignment. After amendment, the importer can apply for registration till the arrival date of consignment at port.
  • The restrictions imposed vide Notification No. 23/2023 – FTP dated 3 August 2023 on import of certain IT hardware and the import would be allowed against a valid licence. However, such restrictions are relaxed vide Notification No. 38/2023 – FTP dated 19 October 2023, wherein the IT hardware manufactured in Special Economic Zones (SEZ) can be imported into Domestic Tariff Area (DTA) without an Import Authorization, on payment of applicable duties. Furthermore, the private entities importing the said IT hardware for supply to Central Government/State Government for security/defence purposes, are exempted from requiring an import authorization.
  • Vide Public Notice No. 32/2023 dated 9 October 2023, the DGFT has enabled system-generated electronic Status Holder Certification, based on merchandise export data available with DGCI&S without the need for filing any application by the exporter. If the exporter wants to upgrade the status, he can do so by filing an application in ANF-IB along with CA Certificate. Trade Notice No. 28/2023-24 dated 9 October 2023, explained the process of issuance of Status Holder Certificate (e-SHC) with no requirement of filing any application.
  • Vide Public Notice No. 34/2023 dated 13 October 2023, the DGFT has amended Paragraph 4.10(i) of the Handbook of Procedures 2023, to permit availment of Input Tax Credit on GST paid material, in respect of Advance Authorization Scheme, for ease of doing business and reduction of transaction cost.
  • Vide Circular No. 08/2023-24 dated 27 December 2023, the DGFT has clarified that valid ad-hoc norms ratified on or after 1 April 2015 will also be applicable to pending cases/applications filed under self-declaration scheme on or after 1 April 2015 which were filed prior to the application against which ratification of such ad-hoc norms was done.
  • Vide Trade Notice No. 29/2023-24 dated 13 October 2023, the DGFT has proposed to set up Export Obligation Discharge Certificate (EODC) Camp with effect from 13 November 2023 to 24 November 2023, to facilitate the expedited disposal of pending applications for EODC for Advance Authorisations and EPCG.
  • Vide Trade Notice No. 31/2023-24 dated 19 October 2023, the DGFT has discontinued the issuance of physical copy of Authorisation for Restricted Imports for EDI ports with effect from 19 October 2023. All such authorizations shall be issued electronically with effect from the aforesaid date. However, authorizations for non-EDI port shall continue to be issued on paper.

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