Indirect Tax News

published on 30 October 2023 I reading time approx. 11 minutes

IDT Developments and Associated Procedures

1. Highlights in the 51st GST Council Meeting:

The 51st Meeting of the GST Council was held on 2 August 2023 via virtual mode and during the meeting certain amendments were recommended in the CGST Act 2017 and IGST Act 2017, including amendment in Schedule III of CGST Act, 2017, to provide clarity on the taxation of supplies in casinos, horse racing and online gaming. In this regard, the CGST (Amendment) Act, 2023 and the IGST (Amendment), 2023 are passed in Parliament and corresponding notifications providing for valuation mechanism with respect to online gaming and casino are issued. The same changes/amendments are discussed in detail below.

2. Patna High Court upholds Constitutional validity of Section 16(4) of the Central Goods and Services Tax ('CGST') Act, 2017:

Constitutional validity of Section 16(4) of the CGST Act, 2017 has been challenged in various High Courts of India. In the case of Thirumalakonda Plywoods [ 2023-VIL-472-AP] , the hon’ble Andhra Pradesh High Court has ruled out that ITC being a benefit and not a statutory right, the legislature has the right to impose certain conditions including time prescription for availing such benefit and the same cannot be challenged on the grounds of violation of constitutional provisions. The similar view has been taken by the Hon’ble Patna HC in case of Gobinda Construction [2023 (9) TMI 902]. If form GSTR-3B return is not filed within the time specified in Section 16(4) of the CGST Act benefit of ITC shall not be allowed to the taxpayer and that the time limit to avail ITC is not ultra vires Articles 14, 19(1)(g) and 300A of the Constitution of India.

3. Kerala High Court held that ITC cannot be denied merely on the ground that the invoices are not reflecting in Form GSTR-2A:

In the case of Diya Agencies [2023 (9) TMI 955], the Hon’ble Kerala High Court held that if the supplier has not remitted the amount to the Government, the Petitioner cannot be held responsible and that the Petitioner is required to discharge the burden of genuineness of the transaction and proof of remittance of tax to the selling dealer. Accordingly, the Court remanded the matter to the assessing officer with the direction to pass a fresh order based on the examination of evidence as submitted by the Petitioner.

Important GST Notifications and Circulars issued during the quarter

1. GST Amendments/changes introduced by the Finance Act 2023:

Extension of composition levy to suppliers of goods under the e-Commerce model;
Clarificatory amendment w.r.t. payment to supplier within 180 days as per proviso to Section 16(2) of the CGST Act, 2017;
Sale of warehoused goods before filing of bill of entry includible in value of exempt supply for reversal of common ITC under Section 17(2) and (3) of the CGST Act, 2017 read with Rule 42 and 43 of the CGST Rules, 2017;
Reversal of ITC claimed on goods and services used or intended to be used for fulfilling CSR obligation;
Limitation of 3 years on filing of GST returns such as GSTR-3B, GSTR-01, GSTR-9 and GSTR-9C;
The provisions related to online information database access and retrieval (OIDAR) rules were amended which includes amendment in various definitions, introduction of penalties, etc.;
Decriminalization of certain offenses, no compounding of certain offenses, etc

2. Amendment in Section 16 of the IGST Act, 2017

The Government had introduced restriction vide Finance Act, 2021 on the export of zero-rated supplies of goods or services on payment of taxes to a limited category of persons or limited category of goods or services, as may be notified by the Government. This provision is made effective from 1 October 2023 vide Notification No. 27/2023–Central Tax dated 31 July 2023. In this regard, the CBIC has notified that all the goods or services except pan-masala, certain tobacco products and certain essential oils, as the class of goods or services which may be exported on payment of integrated tax. Vide Circular No. 24/2023–Customs dated 30 September 2023, the CBIC has also provided guidelines to the customs department with respect to granting refunds on payment of IGST.

3. Exemption from filing GST Annual Return

The Government had introduced restriction vide Finance Act, 2021 on the export of zero-rated supplies of goods or services on payment of taxes to a limited category of persons or limited category of goods or services, as may be notified by the Government. This provision is made effective from 1 October 2023 vide Notification No. 27/2023–Central Tax dated 31 July 2023. In this regard, the CBIC has notified that all the goods or services except pan-masala, certain tobacco products and certain essential oils, as the class of goods or services which may be exported on payment of integrated tax. Vide Circular No. 24/2023–Customs dated 30 September 2023, the CBIC has also provided guidelines to the customs department with respect to granting refunds on payment of IGST.

4. GSTIN to share information with Accounts Aggregator

Section 158A of the CGST Act, 2017 allows the Government to share certain information e.g. data of GSTR-1, GSTR-3B, details furnished by person in registration application etc., with other systems as may be notified. However, before sharing such information, consent shall be obtained from the registered person. In this regard, the CBIC vide Notification No. 33/2023–Central Tax dated 31 July 2023, has notified “accounts aggregator” as the systems with which GSTIN can share information.

“Account Aggregator” is defined as a non-financial banking company which undertakes the business of an Account Aggregator in accordance with the policy directions issued by the RBI under section 45JA of the Reserve Bank of India Act, 1934. Generally, these accounts aggregator enables sharing of data between individuals and financial institutions.

5. Updates regarding E- Commerce Operators (ECO)

Waiving off compulsory registration requirement for persons supplying goods through ECOs

A person supplying goods through E-Commerce Operator (ECO) who is required to collect tax at source, was required to obtain GST registration compulsorily irrespective of the aggregate turnover. However, vide Notification No. 34/2023–Central Tax dated 31 July 2023, the CBIC has waived off the requirement of compulsory registration subject to prescribed conditions.

Special Procedures to be followed by ECOs

Vide Notification No. 36/2023-Central Tax and Notification No. 37/2023-Central Tax each dated 4 August 2023, the CBIC has notified special procedure to be followed by the ECOs in respect of supplies of goods through them by composition taxpayers and unregistered persons respectively.

6. Ocean Freight under CIF contracts is not taxable under reverse charge

The Notification No. 13/2023–Integrated Tax (Rate) dated 26 September 2023 omits Entry 10 of Notification No. 10/2017–Integrated Tax (Rate) with effect from 1 October 2023 levying GST under reverse charge mechanism on ocean freight by following the decision of Hon’ble Supreme Court in case of Mohit Minerals Private Limited which held the levy of GST on ocean freight under reverse charge mechanism as unconstitutional.

7. Updates w.r.t. the GST on Online Gaming and Casino

The legislative changes in the Central Goods and Services Tax (Amendment) Act, 2023 relating to online gaming industry and casinos has been notified w.e.f. 1 October 2023. Prior to this Act, only lottery, betting and gambling were treated as supplies. However, the said Act changed Paragraph 6 of Schedule III by substituting the entry as “Actionable claims, other than specified actionable claims.” Specified actionable claims include betting, casinos, gambling, horse racing, lottery and online money gaming. These actionable claims are considered to be supplies with effect from 1 October 2023.

Further, Notification No. 45/2023–Central Tax dated 6 September 2023 has been introduced to provide for valuation mechanism for online gaming including online money gaming and casino. Vide Notification No 11/2023-Central tax (Rate), applicable GST rate on these specified actionable claims has been notified.

8. Introduction of new ledger for reporting of ITC reversal and reclaim

In line with changes notified last year towards the manner of reporting the ITC availed, reversed, re-claimed, and ineligible ITC in Form GSTR-3B, the Goods and Services Tax Network has enabled a new functionality on 31 August 2023, to monitor the ITC reversed and re-claimed by a taxpayer.

9. Certain important amendments/updates in CGST Rules, 2017

Vide Notification No. 38/2023–Central Tax dated 4 August 2023, Notification No. 45/2023-Central Tax dated 6 September 2023 and Notification No. 51/2023-Central Tax dated 29 September 2023 certain amendments were introduced and important amendments are as under:

Rule 10A: Furnishing of Bank Account Details – The registered person is required to update the details of bank account on the common portal within 30 days from date of grant of registration or before filing GSTR-1, whichever is earlier. The registered person is not allowed to file GSTR-1 without furnishing the details of bank account.
Rule 21A: Suspension of Registration – If the registered person contravenes the provisions of Rule 10A, the registration of such person shall be suspended, and it will be communicated to him highlighting the non-compliances and asking him to explain, within a period of thirty days, as to why his registration shall not be cancelled.

10. Clarifications issued by way of Circulars/Instructions

Vide Circular 192/04/2023-GST dated 17 July 2023, the CBIC has clarified that in case of wrong availment of IGST credit and reversal thereof, for the calculation of interest, the balance of input tax credit available in electronic credit ledger of IGST, CGST & SGST shall be taken together. However, the balance available in compensation cess shall not be taken into account.
Vide Circular 193/05/2023-GST 17 July 2023, a clarification with respect to dealing with difference in ITC availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for the period 01 April 2019 to 31 December 2021 is provided.
Vide Circular 194/06/2023-GST dated 17 July 2023, the CBIC has clarified on TCS liability under Section 52 of the CGST Act, 2017 in case of multiple E-commerce Operators in one transaction.
Vide Circular 195/07/2023-GST dated 17 July 2023, the CBIC has clarified certain issues on availability of ITC in respect of warranty replacement of parts and repair services during warranty period.
Vide Circular 196/08/2023-GST dated 17 July 2023, the CBIC has clarified that the activity of holding of shares of subsidiary company by the holding company per se cannot be treated as a supply of services by a holding company to the said subsidiary company and cannot be taxed under GST.
Vide Circular 197/09/2023-GST dated 17 July 2023, the CBIC has provided various clarifications w.r.t. claim of refunds under the GST regulations.
Vide Circular 198/10/2023-GST dated 17 July 2023 provided clarification w.r.t. issuance of e-invoice to Government Departments or establishments/ Government agencies/ local authorities/ PSU.
Vide Circular 199/11/2023-GST dated 17 July 2023, the CBIC has provided various clarifications regarding the taxability of services provided by an office of an organization in one State to the office of that organization in another State, both being distinct persons.
Vide Circular 200/12/2023-GST dated 1 August 2023, the CBIC has provided various clarifications regarding the GST rates and classification of certain goods based on the recommendations of the GST Council in its 50th meeting held on 11 July 2023.
Vide Circular 201/13/2023-GST dated 1 August 2023, the CBIC has clarified that services supplied by a director of a company or body corporate to the company or body corporate in his private or personal capacity such as services supplied by way of renting of immovable property to the company or body corporate are not taxable under RCM. Only those services supplied by director of company or body corporate, which are supplied by him as or in the capacity of director of that company or body corporate shall be taxable under RCM.

Customs and Foreign Trade Policy related developments

1. Amendment in the Deferred Payment of Import Duty Rules, 2016

Section 47 of the Customs Act, 1962 provides that the Central Government may permit a class of importers to make deferred payment of the import duty. In this regard, CBIC has issued the Deferred Payment of Import Duty Rules, 2016. Rule 4 ibid provides the due dates for deferred payments. Vide Notification No. 58/2023–Customs (NT) dated 3 August 2023, the CBIC granted power to the Central Government allow payment to be made on a different due date, in exceptional circumstances.

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

CBIC has 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 further extended till 01 December 2023 vide Notification No. 70/2023-Customs (NT) dated 27 September 2023.

Further, Notification No. 69/2023-Customs (NT) dated 27 September 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 30 November 2023.

3. Exemption of BCD on textile machineries

Vide Notification No. 52/2023–Customs (T) dated 5 September 2023, the CBIC has exempted the following goods classifiable under HSN 8446, 8448 (other than old and used) for use in the textile industry, namely:

Shuttle-less Rapier Looms [above 650 meters per minute];
Shuttle-less Waterjet Looms [above 800 meters per minute];
Shuttle-less Air jet Looms [above 1000 meters per minute];
Parts and components for use in manufacturing of shuttle-less looms

The above exemption is applicable till 31 March 2025. To claim this exemption, the importer shall follow the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022.

4. Imposing of Anti-Dumping Duty

Vide Notification No. 07/2023–Customs (ADD), dated 3 August 2023, CBIC has imposed antidumping duty on Dispersion Unshifted Single –Mode Optical Fiber classifiable under HSN 90011000, imported or originating from China PR, Indonesia, and Korea RP (subject to conditions as prescribed in the aforesaid notification). This antidumping duty will be effective for 5 years, unless revoked.

Vide Notification No. 09/2023–Customs (ADD), dated 11 September 2023, the CBIC has imposed antidumping duty on Flat Base Steel Wheels classifiable under Sub-Heading 8708 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.

5. Other clarifications and guidelines issued by way of Circulars under Customs

Vide Circular No. 23/2023- Customs dated 30 September 2023, the CBIC has amended Circular No. 15/2023 – Customs dated 7 June 2023 where the circular has prescribed certain additional qualifiers for purposes of import or export declarations in respect of certain products. As per this newly issued circular, chemical products imported under Chapter 28,29,32 and heading 3808 have been added to such list of products. These additional qualifiers shall be mandatory for import of goods under the these specific CTHs of the said chapters for all the bills of entry filed on or after 15 October 2023.

Vide Circular No. 22/2023- Customs dated 19 September 2023, the CBIC has implemented the Ex-Bond Shipping Bill in ICES. Earlier, in absence of such format, the ledger of warehoused goods was not complete as all transactions of removal of cargo were not captured in ICES system.

Vide Instruction No. 25/2023 - Customs, dated 28 July 2023, CBIC has revised guidelines for standardizing documentary & information requirements for AD Code Registration/ modification in relation to exports.

6. Other Miscellaneous Updates in FTP

Vide Notification No. 33/2023 dated 26 September 2023, the RoDTEP scheme has been extended for exports made from 1 October 2023 and shall be applicable till 30 June 2024 at the existing rates subject to budgetary framework.
Under the EPCG Scheme, the authorization holders are required to submit the installation certificate confirming installation of the capital goods to the Regional Authority (RA) within the prescribed time period. However, the DGFT has received many requests for condonation of delay in submission of installation certificates. In this regard, vide Public Notice No. 22/2023 dated 13 July 2023, for authorizations issued under FTP 2009-14 and FTP 2015-20, the time limit for submission of installation certificate is extended till 31 December 2023 on payment of late fee of INR 10,000 per authorization.
Vide Public Notice No. 23/2023 dated 31 July 2023, AYUSH Export Promotion Council (AYUSHEXCIL) has been included in the Appendix 2T of FTP, 2023 for issuing RCMC for specified items. Accordingly, the products falling under jurisdiction of CHEMEXCIL & PHARMEXCIL have been revised and their contact details have been updated.
Vide Trade Notice No. 27/2023-24 dated 25 September 2023, the DGFT has addressed certain issues faced in determining the treatment to be given for certain export-import scenarios in respect of Advance Authorisations issued in the period between 13 October 2017 to 9 January 2019.

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