Indirect Tax News

IDT Developments and Associated Procedures

1. Important decisions taken in 43rd and 44th GST council meeting

a. Important decisions taken in 43rd and 44th GST council meeting:

The main focus of the 43rd GST Council Meeting was to provide import duty exemption and/or reduction on Covid-19 relief items, introduce ‘Amnesty Scheme’ to provide relief to taxpayers regarding late fee for pending returns and other Covid-19 related compliances relaxations.

It was also decided to simplify the Annual Return for FY 2020-2021 by notifying Section 35 and 44 of CGST Act, 2017 made vide Finance Act, 2021. Further, it was decided that the filing of Annual Return in FORM GSTR-9/9A for FY 2020-21 to be made optional for taxpayers having aggregate annual turnover upto INR 20 Million and the reconciliation statement in FORM GSTR-9C for the FY 2020-21 will be required to be filed by taxpayers with annual aggregate turnover above INR 50 Million.

b. 44th GST Council Meeting (12 June 2021):

In the 44th GST Council meeting, GST Council decided to reduce the GST rates on the specified items being used in Covid-19 relief and management like ventilators, medical grade oxygen, Covid-19 testing kits, oxygen concentrators BiPAP machine, hand sanitisers, face masks, gloves, PPE Kits, temperature scanners and others till 30 September 2021 which can be extended further.

2. Hon’ble Bombay High Court on the constitutional validity of Section 13(8)(b) of IGST Act, 2017 – Intermediary Services

Division Bench of Bombay HC in the matter of Dharmendra M. Jani [TS-272-HC(BOM)-2021-GST] has given judgement on the constitutional validity of Section 13(8)(b) of the IGST Act i.e. determination of Place of Supply of Intermediary Services and consequently taxability thereof.

The Division Bench of Hon’ble High Court was having the divided opinion wherein Hon’ble Justice Ujjal Bhuyan was in favour allowing the petition and hold that Section 13(8)(b) of the IGST Act, 2017 is  ultra vires  the Constitution of India whereas Hon’ble Justice Abhay Ahuja has differed with this view held that Section 13(8)(b) of the IGST Act, 2017 is not ultra vires the Constitution of India.

Thus, the Registry is directed to place the matter before the Hon’ble Chief Justice of Bombay High Court for nominating the third judge to hear the case concerning the constitutional validity of GST provisions relating to intermediary services has been issued.

3. Hon’ble Madras High Court allows ITC on goods lost in the inherent process of manufacturing

While dealing with the question of whether the taxpayer is required to reverse proportionate Input Tax Credit (‘ITC’) on loss arising out of its manufacturing process, the Hon’ble Madras High Court, in case of ARS Steels And Alloy International Pvt Ltd [2021-TIOL-1393-HC-MAD-GST] held that the loss that is occasioned by consumption in the process of manufacture is one which is inherent to the process of manufacture itself.

Thus, such losses are not contemplated by Section 17(5)(h) of the CGST Act. Thus, reversal of ITC is not required.

Important Notifications and Circulars issued during the quarter

Interest applicability on Net Tax Liability

Vide Notification No. 16/2021 – Central Tax dated 1 June 2021, Section 112 of the Finance Act 2021 was made effective from 1 June 2021 i.e. amendment in Section 50 of the CGST Act.

As per the amended Section 50, the interest on delayed payment of tax shall be applicable only on the net liability of GST which is paid by debiting the electronic cash ledger.

However, the same shall not be applicable where such return is furnished after commencement of any proceedings under Section 73 or Section 74 of the CGST Act, 2017.

This amendment has been brought into effect from 1 July 2017 (i.e. a retrospective amendment).

Compliance Updates

1. Interest rate reduction and waiver of late fees-Vide Notification 08/2021 and 09/2021- Central tax dated 1 May 2021

Aggregate T/O above INR 50 Million

Aggregate T/O up to INR 50 Million

2. Extension of due date of specified compliances vide Notification no 24/2021- Central Tax dated 1 June 2021

The CBIC has also extended various due dates for completion of proceedings, notices, intimation, filing of ay appeal, reply or application by the authority or any person falling due between 15 April 2021 to 29 June 2021 till 30 June 2021.

Similar extension has also given in cases of notice issued for rejection of refund claims.

a. Duty exemption and/or reduction on Covid-19 relief materials:

As per the recommendation given in the 44th GST Council Meeting, GST rates on various Covid-19 relief materials were either exempted fully of the rates have been reduced on goods and/or services such as Medical Grade Oxygen, Covid-19 test kits, Ventilators, Oxygen Concentrators, Ambulance services, etc.

Such exemption/reduction shall be in force up to 30 September 2021.

b. Dynamic QR Code on B2C invoices:

• Extension of Late Fees waiver: 
  Vide Notification No. 28/2021-Central Tax dated 30 June 2021, the waiver of late fee for non-compliance with the provision to mention mentioning Dynamic QR Code in case of E-Invoice issued for B2C supply was extended and no penalty would be applicable for the period from 01 December 2020 to 30 September 2021.
• Clarifications w.r.t. applicability of Dynamic QR code on B2C:
  Vide Circular No 156/12/2021-GST dated 21 June 2021, CBIC has issued various clarifications w.r.t. applicability of Dynamic QR Code on B2C invoices and compliance with Notification 14/2020-Cetral Tax dated 21 March 2020.
   
  The Circular clarifies various queries raised by the trade and industry w.r.t. linking of bank accounts, payments, location of the recipient of supply, over the counter sales, etc.
• Amendments in CGST Rules:
  1. Refund related amendments:
  Vide Notification No. 15/2021-Central Tax  dated 18 May 2021, the Government has amended the CGST Rules, 2017. The gist of these amendments is, as follows:
   
  a. Limitation for fresh application filed after issuance of the deficiency memo:
  As per Rule 90(3) registered person shall file fresh application after the deficiency memo was issued. New proviso inserted in this rule provides that that there is a two-year limitations period, measured from the date of communication of the deficiency memo to the date of the filing of the refund claim.
   
  b. Withdrawal of the application:
  A new sub rule inserted in Rule 90 allows taxpayer to withdraw a filed refund application subject to a condition that the refund application is withdrawn before certain refund orders are issued. An application to withdraw a refund application is to be filed on Form GST RFD-01W.
   
  2. E-Way Bill related amendment:
  Vide Notification No. 15/2021-Central Tax  dated 18 May 2021, the restriction made in Rule 138E has been amended. Earlier, the GST rules restricted a taxpayer to generate an e-way bill that has failed to furnish a return for two consecutive months/quarter for both inward and outward movements of goods. This restriction has been amended, so that the rule only applies with regard to the generation of e-way bill for the outward movement of goods.
   
  3. Cumulative consideration of Input Tax Credit for Rule 36(4):
  Rule 36(4) restricting provisional ITC claims to 5 per cent of GSTR-2B in GSTR-3B has been made cumulatively applicable for April, May and June 2021 vide Notification No. 27/2021 – Central Tax dated 1 June 2021 and the return in FORM GS.

Customs and Foreign Trade Policy Related Developments

1.  Introduction of Customs (Verification of Identity and Compliance) Regulations, 2021

Vide Notification 41/2021 – Customs (N.T.) dated 5 April 2021, Customs (Verification of Identity and Compliance) Regulations, 2021 have been introduced.

There rules are applicable to new importer/exporter/customs broker who are newly engaging in import or export activity after the commencement of these regulations. The Authority can also select any person, who may have engaged in import or export activity or availed or claimed the benefits prior to introduction of these rules.

The person shall be required to update the prescribed KYC documents not later than thirty days of engaging in import or export activity.

These rules also specify the various provisions w.r.t. verification of the compliance by the authorities, time period for such verification, suspension, restoration and denial of the benefits.

2. Duty exemption and/or reduction  on Covid-19 relief material

In view of the Covid-19 pandemic, the Central Government has issued notifications exempting Basic Customs Duty and/or Health cess on imports of a number of Covid-19 related relief materials, for a limited period.

These include:

Further, Central Government has vide Ad hoc exemption Order number 4/2021 dated 3 May 2021 has granted exemption from IGST on import of such goods received free of cost for free distribution for Covid-19 relief. This exemption shall apply till 31 August 2021. It would also cover goods already imported but lying uncleared on the date of its issuance of exemption.

3. Special Refund and Drawback Disposal Drive

Vide Instruction No 10/2021- Customs dated 15 May 2021, the CBIC had arranged a special drive from 15 May 2021 to 31 May 2021  for quick disposal of all pending refunds and drawbacks as a trade facilitation measure during the pandemic period.

4. Introduction of an online e-EPCG Committee Module

Vide Trade Notice 05/2021-22 dated 19 May 2021, DGFT has introduced an online e-EPCG module for accepting applications seeking relaxation under Para 2.58 of FTP 2015-2020.

The application can be fled through the following navigation: https://dgft.gov.in > Login > Services > EPCG > Apply for EPCG Committee

5. Extension of RCMC beyond 31 March 2021

Vide Trade Notice 04/2021-2022 dated 10 May 2021, it was directed to Regional Authorities of DGFT not to demand valid RCMC from applicants for incentives/authorisations in case the same has been expired on or before 31 March 2021 till 30 September 2021.

6. Extension for filing MEIS applications for exports made during FY 2019-20

Vide Public Notice 53/2015-20 dated 9 April 2021, a relaxation in the late cut provisions has been provided for shipping bills filed during the FY 2019-20 if the application for claiming the benefit of MEIS is submitted on or before 30 September 2021.

7. Operationalisation of DGFT ‘Covid-19 Helpdesk' for International Trade related Issues

In order to monitor the status of export and imports and difficulties being faced by trade stakeholders in view of the surge of Covid-19 case, vide Trade Notice No. 02/2021-2022, dated 26 April 2021, the Department of Commerce (GOI) and DGFT has operationalised a ‘Covid-19 Helpdesk' to support and seek suitable resolutions to issues arising in respect of International Trade.

'Covid-19 Helpdesk' would look into issues relating to Department of Commerce/DGFT, Import and Export Licensing Issues, Customs clearance delays and complexities arising thereon, Import/Export documentation issues, Banking matters etc. Helpdesk would also collect and collate trade related issues concerning other Ministries/Departments/Agencies of Central Government and State Governments and will co-ordinate to seek their support and provide possible resolution(s).

This facility is available on the DGFT website [https://dgft.gov.in > Services > DGFT Helpdesk Service]

8. Amendment in the Import Policy of Integrated Circuits

Vide Notification 05/2015-2020 dated 10 May 2021, the import policy condition of Integrated Circuits classified under HS Code 8542 of ITC(HS),2017 has been revised from ‘Free’ to ‘Subject to Policy Condition 6 of Chapter 85 of ITC(HS), 2017, Schedule I.

The importer shall be required to apply for registration under the ‘Chip Imports Monitoring System (CHIMS)’ not earlier than 60 days prior to the import  and up to the date of arrival of imports consignment.

A registration fee of INR 1 per thousand subject to minimum of INR 100 and maximum of INR 500 on CIF value of import is required to be paid. Such registration shall mandatory for Bills of Entry filed on or after 1 August 2021.

SEZ/EOU Related Updates

Extension of last date of filing QPRs/APRs by SEZ/EOU/Developer

In order to ease the hardships faced by the business units in the current Covid-19 pandemic situation, the Department of Commerce (SEZ Section) vide F. No. K-43022/7/2020-SEZ, has extended the due date of filing QPRs/APRs by SEZ/EOU/Developers is extended till 31 December 2021.

Maharashtra VAT Scheme

Under Maharashtra VAT Act, 2002, a scheme has been introduced for withdrawal of all pending VAT assessment where ‘probable revenue collection’ based on AI is less than 1 Million. Therefore, all cases where notice for assessment has been issued shall be withdrawn where probable revenue is less than INR 1 Million. In most cases, this will be determined based on list of pending forms, J1-J2 mismatch, etc. Further, no assessment shall be initiated for any period where probable revenue is less than INR 1 Million.