Indirect Tax News

published on 28 April 2023 I reading time approx. 8 minutes

IDT Developments, Judicial Pronouncements and Associated Procedures

1. Finance Bill, 2023 receives Presidential Assent on 31 March 2023

The Finance Bill 2023 presented by Hon'ble Finance Minister in Lok Sabha on 1 February 2023, has received Presidential Assent on 31 March 2023. It may be noted that the changes which were introduced under the Customs and GST laws are now a part of the respective legislations and the same would be effective from a date to be notified in the official gazette.  It is pertinent to note certain additional amendment were introduced to Finance Bill, 2023 in the Parliament and which are assented in Finance Act, 2023.  The key amendments are as under:

• The exemption from payment of GST and Compensation Cess would not be available under Customs Bonded Warehouse scheme for manufacturing and other operations.
• The amendments are introduced as per recommendation of the GST Council for constitution and functioning of a GST Appellate Tribunal.

2. The Hon'ble Karnataka High Court quashes amendment to Rule 89(4)(c) of the CGST Rules, 2017 in case of Tonbo Imaging India Private Limited [2023-TIOL-380-HC-KAR-GST]

Rule 89(4) of the CGST Rules prescribes a formula for calculation of refund in case of zero rated supply of goods and services without payment of tax. The term 'turnover of zero rated supply of goods' for the purpose of refund formula has been defined in rule 89(4)(c). This term was substituted vide Notification 16/2020- Central Tax dated 23 March 2020 to restrict the value of "Zero Rated Supply of Goods" to 1.5 times the value of like goods domestically supplied by the same or similarly places supplier. Petitioner had challenged the constitutional validity of the said amendment before the Hon'ble High Court. In this regard, the Hon'ble Karnataka High Court has held that amended Rule 89(4)(c) of the CGST Rules, 2017 is ultra vires the provision of the IGST Act and CGST Act, including being violative of Articles 14 and 19 of the Constitution of India as it is restricting the quantum of refund of unutilized Input Tax Credit in case of export made under LUT. 

Important GST Notifications and Circulars issued during the Quarter

1. Extension of time limit for application for revocation of cancellation of registration

In case the registration is cancelled by the officer on his own motion, the registered person can apply for revocation of registration cancelled within 30 days from the date of cancellation order. Notification No. 03/2023 – Central Tax dated 31 March 2023 has prescribed a special procedure in respect of revocation of registration cancelled on or before 31 December 2022 but the application for revocation is not filed within the due date. The procedure prescribed is as follows:

• The registered person can apply for revocation up to 30 June 2023
• The application shall be filed only after filing returns till the effective date of cancellation of registration and after paying the applicable taxes along with interest, penalty and applicable late fee.

2. Change in Date of Submission of Registration Application

Rule 8(4A) is substituted vide Notification No. 04/2023 – Central Tax dated  31 March 2023, to amend the date of submission of application. As per the updated rule, the date of submission of registration application, where the registered person has opted for Aadhar Authentication, is earlier of date of authentication of the Aadhaar number, or fifteen days from the submission of the application in Part B of FORM GST REG-01.

3. Amnesty scheme for deemed withdrawal of Assessment Orders

The proper officer shall serve an assessment order under Section 62, in case if the registered person has not filed GSTR-3B or final return, even after serving a notice under Section 46. If the registered person furnishes a valid return within thirty days of the service of the assessment order, the order shall be deemed to be withdrawn. Notification No. 06/2023 – Central Tax has granted a relaxation with respect to the same. As per the said notification, if any person has received an order under Section 62 on or before 28 February 2023 and failed to furnish valid return within 30 days, he shall follow the special procedure prescribed below:

• The registered person shall furnish the return on or before 30 June 2023
• The return shall accompany interest under Section 50(1) and late fee under Section 47

4. Waiver of Late Fee

CBIC vide Notification No. 02/2023–Central Tax, Notification No. 07/2023–Central Tax and Notification No. 08/2023–Central Tax each dated 31 March 2023 has reduced the amount of late fee payable in case of delayed filing of Annual Return (Form GSTR-9 and Form GSTR-4) and Final Return (Form GSTR-10) subject to condition that such forms for the past period are filed between 1 April 2023 to 30 June 2023. 

5. 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. 09/2023-Central Tax dated 31 March 2023, the time limit for issuance of order under Section 73(9) read with Section 73(10) for the financial years 2017-18, 2018-19 and 2019-20 has been extended till 31 December 2023, 31 March 2024 and 30 June 2024 respectively. 

Customs and Foreign trade policy related developments

1. New Foreign Trade Policy ("FTP") 2023 released by the Government

The new FTP 2023 was announced on 31 March 2023 by Minister of Commerce and Industry, Mr. Piyush Goyal. The erstwhile FTP 2015-20, which had expired on 31 March 2020,was extended from time to time due to COVID pandemic and volatile geo-political scenario till 31 March 2023. The new FTP 2023 has been announced to provide the policy continuity and a responsive framework and hence there is no expiry date is provided.

The Key Highlights of the new FTP 2023 are, as follows:

• There is expiry end date to the FTP 2023. Subsequent revision(s) shall be done as and when required
  
• Online approvals for various permissions under FTP 2023 without any physical interface
  
• Reduction in user charges for Micro, Small and Medium Enterprises (MSME) under the Advance Authorization (AA) and the Export Promotion Capital Goods  (EPCG) schemes
  
• Revamp of e-Certificate of Origin ("CoO") platform for self-certification of CoOs  as well as automatic approval of the same is proposed, where feasible
  
• Paperless filing of export obligation discharge applications for greater use of  technology
  
• FTP 2023 extends the benefits for export realizations in INR through special Vostro  accounts setup as per RBI Circular
  
• Introduction of special one-time amnesty scheme for one-time settlement of default in export obligations under AA and EPCG for the past period
  
• Facilitation of e-commerce export by extending all FTP benefits to such exports
  

2. Customs (Assistance in Value Declaration of Identified Imported Goods) Rules, 2023

The CBIC vide Notification No. 03/2023–Customs(NT) dated 11 January 2023 has introduced the Customs (Assistance in Value Declaration of Identified Imported Goods) Rules, 2023. The rationale behind the introduction of these rules is to prevent the undervaluation of notified class of the imported goods. As per the said rules, there will be two committees viz., Screening Committee and Evaluation Committee. Screening committee will do preliminary examination of class of goods and the Evaluation committee will do the detailed examination. The procedure is explained in detail under Circular No. 01/2023–Customs dated 11 January 2023.

3. Exemption on deposits made to Electronic Cash Ledger under Section 51A

The Government of India will be implementing deposits of Customs Duty payment through Electronic Cash Ledger ('ECL') in a phased manner w.e.f. 1 April 2023 vide Notification No. 18/2023-Customs(NT) dated 30 March 2023. Further, a detailed clarificatory Circular No. 09/2023-Customs dated 30 March 2023 has also been issued in this regard  which prescribes clarifications w.r.t. applicability of the phases to different taxpayers, procedure to be followed registration for availing ECL, payment of liabilities through ECL, deposits and mode of deposits enabled for ECL, refund of balance into ECL, etc.

4. Amendments in Courier Imports and Exports (Clearance) Regulations, 1998 and Courier Imports and Exports (Electronic Declaration and Processing) Regulations 2010

Earlier, the said Regulations were not applicable to the export goods where the value of the consignment is above rupees five lakh and transaction in foreign exchange is involved. The said limit got increased to ten lakhs vide Notification No. 22/2023–Customs(NT) and 23/2023–Customs(NT) each dated 31 March 2023 respectively with effect from 1 April 2023.

5. Amendment in Form-A prescribed under Circular No. 25/2016

Regulation 11 of the Warehouse (Custody and Handling of Goods) Regulations, 2016 requires the licensee to maintain detailed records of the receipt, handling, storage and removal of goods into and from the warehouse and file monthly returns regarding the same. Circular No. 25/2016 dated 8 June 2016 prescribed Form-A in this regard. However, the said form would not capture the details of ex-bond bill of entry or shipping bill for the cases where the goods are removed from the warehouse for home consumption or export. In this regard, Circular No. 04/2023–Customs dated 21 February 2023 amended the said form to include the above details.

6. Updates and changes related to RoDTEP scheme

• Revised Appendix-4R :  Vide Notification No. 53/2015-2020 dated 9 January 2023, the DGFT has notified revised Appendix-4R after incorporating changes recommended by the RoDTEP Committee in relation to apparent errors and anomalies in 432 HS Codes in the earlier notified RoDTEP rates/cap. The revised Appendix 4R will be applicable for exports made from 16 January 2023 to 30 September 2023. 

• Alignment of Appendix 4R with Customs Tariff Act : Vide Notification No.  55/2015-2020 dated 7 February 2023 the DGFT has notified the alignment of the RoDTEP Schedule under Appendix 4R with First Schedule of the Customs Tariff Act, 1975 for the export items from Chapter 28, 29, 30 and 73.  The revised Appendix 4R will be applicable for the exports made from 15 February 2023 to 30 September 2023. 

• Inclusion of Fabrics in RoDTEP : DGFT, on recommendation of RoDTEP Committee, vide Notification No. 63/2015-20 dated 25 March 2023 has included certain textiles and fabrics falling under HSN 5208, in Appendix 4R. 18 HSNs were added in Appendix 4R under RoDTEP for exports made from 28 March 2023.
  

7. Additions in Export Promotion Councils

Export Promotion Councils are the organizations set up by the Government of India to help Indian exporters in accessing the international markets and to promote Indian products. The Appendix-4T provides the list of Export Promotion Councils notified by the Government of India.  Vide Public Notice No. 49/2015-20 dated 9 January 2023 Mobile and Electronic Devices Export Promotion Council (MEDEPC) and vide Public Notice No. 55/2015-20 dated 2 February 2023 has Shellac and Forest Products Export Promotion Council (SHEFEXIL) have been added in Appendix-4T for issuing RCMC.

8. Stock and Sale of SCOMET Items

DGFT vide Public Notice No. 51/2015-20 has amended the existing "Stock and Sale" policy under Paragraph 2.79A of the Handbook of Procedures, to revise the applicability of the policy for export from the Indian Subsidiary of foreign company to its foreign parent/another subsidiary of foreign parent company.

9. Clarifications w.r.t Paper Import Monitoring Systems ("PIMS")

DGFT has introduced Paper Import Monitoring Systems (PIMS) by amending the import policy of major paper products from 'Free' to 'Free subject to compulsory registration under PIMS' vide Notification No. 11/2015-20 dated 25 May 2022. On 23 January 2023, vide Policy Circular No. 45/2015-20, DGFT has clarified certain queries with respect to applicability of this Notification.

10. Other Miscellaneous Updates in Customs and FTP

• Vide Instruction No. 10/2023–Customs dated 10 March 2023 and Instruction No. 13/2023–Customs dated 31 March 2023, it is clarified that the electronic Certificate of Origin issued by the Issuing bodies of Australia and Japan are considered as valid documents for  the purpose  of claiming preferential benefit under India-Australia ECTA and India-Japan CEPA respectively, provided that the certificate is issued in prescribed format, bears seals and signatures of Issuing Authority and fulfils other requirements.
• Vide Public Notice No. 48/2015-20 dated 5 January 2023 and Public Notice No. 56/2015-20 dated 14 February 2023, DGFT has amended the format of Pre-Shipment Inspection Certificate given under Appendix-2H and included certain agencies in Appendix 2G of 'Appendices and Aayat Niryat Forms' of Foreign Trade Policy.
  

•  Vide Public Notice No. 52/2015-20 dated 18 January 2023, DGFT has amended the process of levying composition fee in case of extension of Export Obligation Period ("EOP") under Advance Authorization Scheme and for higher IT enablement of DGFT. 
• Vide Public Notice No. 53/2015-20 dated 20 January 2023, DGFT has provided one time relaxation from maintaining Average Export Obligation and option to avail extension in Export Obligation Period for specified EPCG Authorizations, on account of COVID-19 pandemic.