Indirect Tax Updates sep 2019
- GST Compliance Calendar – Returns for the M/O Aug. 2019 to be
GST Compliance Calendar – Returns for the M/O Aug. 2019 to be filed in Sept. 2019
|GSTR-1||Outward supply for the month of August 2019||11th September 2019|
|GSTR-5||Non-resident foreign taxpayers return for the month of August 2019||20th September 2019|
|GSTR-6||Input service distributor for the month of August 2019||13th September 2019|
|GSTR-7||Tax Deducted at Source for August 2019||10th September 2019|
|GSTR-8||Tax Collected at Source by e-commerce operator for August 2019||10th September 2019|
|GSTR-3B||Summary return tax payment for the month of August 2019||20th September 2019|
Recent Notifications and Circulars
- Due date for filing GST annual return for 2017-18 postponed to 30-11-2019: Due date for filing GST annual return for the period from 1-7-2017 to 31-3-2018 has been extended to 30th November, 2019 instead of the earlier extended date of 31st August, 2019. (Order No. 7/2019-Central Tax, dated 26-8-2019).
- Requirement to furnish declaration in FORM ITC-04 for the period July, 2017-March 2018 and FY 2018-19 waived off. (Refer Notification No. 38/2019-CT dated 31.08.2019).
- State and Area Benches of Goods and Services Tax Appellate Tribunal in specified States and Union Territories notified: Central Government has, on 21st August 2019, notified the creation of State & Area Benches of the Goods and Services Tax Appellate Tribunal (GSTAT). The notification also provides for GSTAT Benches for Union Territories of Andaman & Nicobar, Dadra & Nagar Haveli, Daman & Diu, Lakshadweep, and Chandigarh.
- GST rate reduced on electrically operated vehicles from 1-8-2019: Electrically operated vehicles, including two and three wheeled electric vehicles and charger or charging station for such vehicles are liable to GST @ 5% from 1-8-19. Further, exemption provided for hiring electric operated vehicle meant to carry more than twelve passengers by local authorities. (Not Nos. 1/2017-CT (Rate) & 12/2017-CT (Rate) amended by not issued on 31-7-19).
- Composition scheme – Due date for Form CMP-08 extended till 31-8-2019: Due date for furnishing the statement containing details of payment of self-assessed tax in Form GST CMP-08, for the quarter April, 2019 to June, 2019, has been extended till 31-8-2019. (Notification No. 35/2019-Central Tax, dated 29-7-2019).
- Blocking of e-way bill generation for non-filers of returns, postponed: Rule 138E of CGST Rules relating to restriction on furnishing of information in Part A of Form GST EWB-01 will now be effective from 21-11-2019 instead of 21-8-2019. Hence, no person (including a consignor, consignee and transporter) will be allowed to furnish information in Part A of Form GST EWB-01 and generate e-way bill if he has not furnished the returns for two consecutive tax periods. (Not. No. 22/2019-Central Tax, 23-4-2019 amended by Not. No. 36/2019-CT, 20-8-2019.
- GST on monthly subscription charged by RWAs, clarified: Ceiling of Rs. 7500 per month per member for GST exemption is to be applied per residential apartment and not per person. If such ceiling is crossed and RWA’s annual aggregate turnover exceeds Rs. 20 lakh, GST is payable on full amount and not on amount exceeding Rs. 7500. (Circular No. 109/28/2019-GST, dated 22-7-2019).
Important Cases decided
- Classification of printing service by the assesse – The applicant was engaged in providing printing services and used to print photographs in various sizes as per requirements of photographers or retail customers who shoot images using digital cameras and provide contents to applicant in Pen Drive, CD, memory card, or in any other storage media. The editing or processing is done by professionals or retail customers themselves. Issue involved was – whether activity of merely printing or reproducing content given by photographers/retail customers on pen drive, CD, memory card or any other storage media would be classifiable under Service Code 998912 or 998386? It is held that the activity of merely printing or reproducing the content given by the photographers / retail customers on pen drive, CD, memory card or any other storage media will be classifiable under Service Code 998386 and liable to tax @18%. (Case Reference – Colo Color  107 taxmann.com 383 (AAR – MAHARASHTRA).
- GST applicability on membership fees of co-operative housing society – Applicant is a co-operative housing society who is providing services to their members in form of facilities or benefits to members (for which they receive consideration). Applicant provides both, taxable as well as exempted services. Issue involved – Individuals who own flat/s in society but have opted not to become a member of the society, whether such members of society will be at par with the other individual flat owners who are not members? Observation/Ruling – AAR held that above issue does not fall within purview of Sec 97 of the CGST Act and therefore application for advance ruling rejected. (Refer case of Kabra Galaxy Star 3 Co-op Housing Society  107 taxmann.com 336 (AAR – MAHARASHTRA).
- ITC availability on motor vehicles used for demonstration purpose: The applicant is a an authorised dealer for Maruti Suzuki India limited for sale of motor vehicles and spares and for servicing as also for some other commercial vehicle manufacturers. Applicant show purchased vehicles as capital assets in his books and vehicles are used as demo cars for providing trial run to customers to understand features of vehicle and applicant held those vehicles for 2 years or 40000km whichever is earlier then sold. Issue involve was – whether ITC available on the motor vehicle purchased for demonstration purpose? It has been observed that Section 16(1) of the GST Act provides that every person shall be entitled to take input tax credit on every supply of goods or services or both which are used for intended to be used in course or furtherance of business. Section 17(5) of the Act states that no Input tax credit would be available in respect of motor vehicle except when they are used for making the taxable supply including the further supply of such vehicle. GST law does not prescribe any time frame within which such further supply shall be effected hence AAR held that ITC on the motor vehicle purchased for demonstration purpose can be availed as ITC on capital goods as per section 16(1) of the GST Act. [Chowgule Industries (P.) Ltd.  107taxmann.com 293 (AAR – GOA)].
- Lapsing of ITC accumulated due to inverted rate structure on fabrics – Proviso in notification and circular quashed: Gujarat High Court has quashed the relevant proviso (ii) in Notification No. 5/2017-Central Tax (Rate) as inserted by Not. No. 20/2018-Central Tax (Rate) and Cir. No. 56/30/2018-GST by which ITC accumulated due to inverted tax structure as on 31-7-2018 was to be lapsed for manufacturers of fabrics. It observed that Section 54(3)(ii) of Central GST Act, 2017 does not empower the department to frame rules for lapsing of ITC. [Shabnam Petrofils v. UoI – R/Special Civil Application No. 16213 of 2018, decided on 17-7-2019, Gujarat High Court]
- Show cause notice is sine qua non to proceed with recovery under GST: Karnataka High Court has reiterated that issuance of show cause notice is sine qua non to proceed with the recovery of interest payable under Section 50 of Central GST Act, 2017 and penalty imposable under CGST Act or the Rules. It observed that notion of the authority that Section 75(12) of CGST Act empowers them to proceed with recovery without issuing SCN is misconceived, as said section is only applicable to self-assessment and not to quantification or determination made by the authorities. [LC Infra Projects (P) Ltd. v. UoI – 2019 VIL 365 KAR]
- Summons – High Court rejects plea that summons can only be issued after decision under CGST Section 73: Madhya Pradesh High Court has rejected the plea that proceedings under Section 70 of the CGST Act, 2017, relating to summons, can only be taken recourse to after decision under Section 73, relating to demand of tax. The High Court in this regard declined to quash the notice for personal hearing. [Om Shiv Associates v. UoI – Order dated 26-6-2019 in WP-11822-2019, Madhya Pradesh High Court]
- Power of arrest to be exercised with lot of care and circumspection: Gujarat High Court has reiterated that the power to arrest under Section 69 of the Central GST Act is to be exercised with lot of care and circumspection and that prosecution should normally be launched only after completion of adjudication. The Court directed that no coercive steps of arrest against the writ petitioner should be taken. [Vimal Yashwantigiri Goswami v. State of Gujarat – 2019 VIL 391 GUJ]
- ITC on vehicle for carrying cash – AAAR Order declining ITC set aside: Bombay High Court has set aside AAAR Maharashtra Order holding that ITC is not available on purchase of motor vehicles to carry cash by assessee engaged in cash management service. The Court was of the view that GST Council recommending ITC on vehicles used for transportation of money, would not by itself conclude that prior thereto, money was not included within definition of goods. The Court restored the question before the AAAR for fresh disposal. [CMS Systems Info. v. Commissioner – Order dated 9-7-2019 in Writ Petition No. 5801 of 2019, Bombay High Court]
- ITC – Mere reflection of transitional credit in ledger is not an act of availment: Patna High Court has held that mere reflection of transitional credit in the electronic credit ledger cannot be treated as an act of availment or utilisation, for drawing a proceeding under Section 73(1) of the Bihar GST Act. The Court noted that legislative intent reflected from reading of Section 140 alongside Section 73 and Rules 117 and 121 is that even a wrongly reflected transitional credit in the electronic ledger on its own is not sufficient to draw penal proceedings until the same is put to use. Supreme Court’s judgement in Ind. Swift Laboratories was distinguished. [Commercial Steel Engineering Corporation v. State of Bihar – 2019 VIL 348 PAT]
- Interest on delayed payment of GST & filing of returns – Larger Bench to consider scope of CGST Section 50: Madras High Court has referred to Larger Bench the dispute as to whether interest under Section 50 of the CGST Act, for delayed filing of returns, arises automatically or on assessment and after considering the explanation offered by the assessee. The Court also put the question, as to whether at all the explanation by the assessee must be considered by the assessing officer and then pass further orders. While one Judge dismissed the departmental appeal, other Judge was of the view that the point requires deeper consideration of the scope of Section 50. [Asstt. Commissioner v. Daejung Moparts – 2019 VIL 387 MAD]
- Seizure – Unaccounted goods at disclosed place of business are ‘secreted’: Allahabad High Court held that once it was admitted that assessee had not recorded goods found stored at his disclosed place of business, in his books of account, a presumption of goods having been ‘secreted’ as per CGST Section 67 did arise. Upholding seizure of undisclosed goods found at disclosed place, it is observed that there was nothing to restrict meaning of words ‘in any place’ in Section 67 to only undisclosed place of business. Assessee had contended that goods found at disclosed place of business were not ‘secreted’. [Rajeev Traders v. State of UP – 2019 VIL 356 ALH]
- Anti-profiteering – Stay on suo motu notice seeking information on all products: Delhi High Court has stayed the suo motu notice issued by the Director General of Anti-Profiteering (DGAP), seeking information on all products of the petitioner. The petitioner had pleaded that without a report of DGAP on the complained product followed by an order of National Anti-Profiteering Authority (NAPA) under CGST Rule 133(5)(a), DGAP cannot suo motuissue a notice requiring submission of information on all its products which were approximately 3500 in number. The Court held that the petitioner had made out a prima facie case for grant of limited interim relief. [Reckitt Benckiser India Pvt. Ltd. v. UoI – Order dated 19-7-2019 in W.P.(C) 7743/2019, Delhi High Court]
- ITC need not be reversed in case of post purchase discount: Appellate AAR of Tamil Nadu has held that ITC of full GST charged on undiscounted supply invoice is available to buyer and that proportionate reversal is not required to be done in case of post purchase discount given by supplier. Case involved issuance of commercial credit note subsequently through automated arrangement using software. Overruling the AAR ruling, Appellate AAR observed that the discount was not recorded in invoice or agreement, and hence value would continue to be the value as determined under CGST Section 15(1). It held that if GST charged and paid is not reversed, ITC need not be reversed. CGST Section 16(2) was held as not applicable. [In RE: MRF Ltd. – 2019-VIL-62-AAAR]
- Valuation – Supply to distinct person – Applying 2nd proviso to Rule 28 directly not sustainable: Tamil Nadu AAR has referred to Rule 28 of CGST Rules, 2017 and held that in case where ‘open market value’ as per Rule 28(a) was available in respect of supplies made to distinct person (branches), there is no necessity to go further down to Rule 28(b) or (c). Further, it was held that if the applicant does not use option provided under 1st proviso to Rule 28, he has to supply at ‘open market value’ as per Rule 28(a). The AAR held that both provisos were to be read together and not independently, and that the applicant cannot choose whichever proviso was favorable to it. [In RE: Specsmakers Opticians Private Limited – 2019 VIL 233 AAR]
- Hotel accommodation booking service – GST payable @ 5% without ITC: Observing that applicant is covered under the definition of agent, supplier and taxable person, AAR Delhi has held that the applicant, booking hotel accommodation in foreign countries for its Indian clients, is required to pay GST on value of hotel accommodation service. Option to pay GST @ 18% (with ITC) was held as not available. The AAR held that value of ‘hotel accommodation’ paid by client to them, which is remitted to foreign hotel / hotel aggregator, cannot be included in taxable value, provided conditions of pure agent are satisfied. [In RE: Tui India (P) Ltd. – 2019 VIL 230 AAR]
- No composite supply if all ingredients are equally important: Maharashtra AAAR has held that supply of electro ink along with other consumables is not a composite supply. It observed that printing cannot take place with ink (contended to be principal supply) alone and products like developer or plate are equally important. The Appellate Authority in this regard observed that products may be supplied together initially but not subsequently and that providing customer an option of a tier programme is not an industry practice. It also noted that supply involved compulsion which should not be there in a composite supply. [In RE: HP India Sales – 2019 VIL 53 AAAR]
- Supply of food at occasional events taxable @ 18% GST: West Bengal Appellate AAR held that supply of food at events which are occasional in nature like social get-togethers in the premises of club is taxable under Serial No. 7(v) of Notification No. 11/2017-Cental Tax (Rate) @ 18% GST. Upholding AAR ruling, AAAR observed that social get-togethers & parties are occasional in nature & that services provided by the club at such get-togethers are not regular restaurant services. AAAR observed that provisions of Sl. No.7(v) are not restricted to exhibition or marriage halls and include all indoor and outdoor functions. [In Re Bengal Rowing Club – 2019 TIOL 59 AAAR GST]
- No ban on separate GST registration to multiple firms in a co-working space: Kerala AAR has held that separate GST registration can be allowed to multiple companies providing services only and operating from a ‘co-working space’. It noted that there is no prohibition for registration to a shared office space or virtual office and that since GST registration is PAN based, identification of taxpayer is not difficult. The Authority observed that such companies need to upload rental agreement or sub-lease as proof of address of principal place of business showing respective suite or desk number. It also stated that in addition, the applicants can upload a copy of ‘monthly utility bill’ in connection with payment towards electricity charges, water charges or other common services availed by the respective suite or desk number. [In RE: Spacelance Office Solutions – 2019 TIOL 255 AAR GST]
- GST liability on residential flats constructed partially before and partially after introduction of GST – Time of supply: Karnataka AAR while referring to time of supply of service under Section 13 of CGST Act, 2017 on applicability of GST on works contract service pertaining to partially completed flats, has held that GST is not applicable if customers are identified post completion of flats and post issuance of completion certificate. AAR observed that in case customers were identified prior to implementation of GST, applicant would be liable to pay service tax proportionate to services provided prior to GST regime and GST proportionate to services provided under GST regime. In case customers are identified after introduction of GST regime, the applicant was held liable to GST. AAR, for this situation, also rejected the plea that the value of supply under GST shall be only the value of the work carried out after the appointed date. [In RE: Durga Projects & Infrastructure Pvt. Ltd. – 2019 VIL 236 AAR]
- Valuation – Amortization cost not includable in transaction cost if tools on FOC supplied under contract: On the question of applicability of GST on tools amortization cost where tools were received for free on returnable basis from the customer under contract, Karnataka AAR referring to Circular No. 47/21/2018-GST, has held that tools amortization cost need not be included in the value of supply of parts. It noted that as per contract/purchase order, the applicant was not under any obligation to use its own tools/moulds for manufacture of components supplied. The applicant was engaged in manufacture, sale and design of plastic moulds as per customers. The AAR also held that the ruling will apply to other contracts if the terms and conditions contained therein are the same. [In RE: Toolcomp Systems Private Limited – 2019 VIL 235 AAR]