Indirect Tax News

1. Important decisions taken in 45th GST council meeting:

The 45th Goods and Services Tax ("GST") council meeting was held in Lucknow under the chairmanship of the Union Finance & Corporate Affairs Minister, Smt. Nirmala Sitharaman on 17 September 2021. Major issues discussed and deliberated upon include, inclusion of petroleum products within the ambit of GST, extension of compensation cess, Covid-19 related relief measures change in rate of tax on multiple goods and services, non-applicability of interest on ineligible Input Tax Credit claimed but not utilised, transfer of unutilised balances in CGST and IGST electronic cash ledger amongst distinct GSTINs of same entity across states and rationalization of items suffering inverted duty structure..

Further, the Council also recommended amendment to Rule 36(4) of CGST Rules upon notification of Section 16(2)(aa) that was inserted vide Finance Bill, 2021. Essentially, ITC would be available only when corresponding details are furnished by a supplier in outward supplies and such details have been communicated to the recipient through GSTR 2B.

The Council has also recommended to form a Group of Ministers (‘GoM’) to address the pressing issues like correction in inverted duty structure for  footwear, textiles, and other sectors, improvement in technological infrastructure for e-way bill systems, e-invoices and FASTag data utility among others.

2. The Hon’ble Supreme Court settles the issue of inverted duty structure issue in favor of Revenue  Authorities with recommendation to GST council to consider issues faced by industry on account of formula for calculating the refund: 

The Hon’ble Supreme Court of India has upheld the validity of Rule 89(5) of the CGST Rules read with Section 54(3)(ii) of the CGST Act, 2017 in case of VKC Footsteps India Pvt. Ltd. [TS-472-SC-2021-GST]. The Hon’ble Supreme Court upheld that the refund is a statutory right and the extension of the benefit of refund only to the unutilised credit that accumulates on account of the rate of tax on input goods being higher than the rate of tax on output supplies by excluding unutilised input tax credit which is accumulated on account of input services is within the legislative power of the Government.

However, appreciating the anomaly caused by the formula prescribed under Rule 89(5) of the CGST Rules, 2017, the Hon’ble Supreme Court has recommended the GST Council to remove this anomaly by amending the formula suitably.

3. Hon’ble Madras High Court on the jurisdiction of DGGI to issue summons where the State  revenue authorities have started the proceedings: 

In case of Kuppan Gounder [2021-TIOL-1624-HC-MAD-GST], the petitioner has challenged the summons issued by the Senior Intelligence officer/respondent u/s 70 of the TGST Act, 2017 and submitted that the notice was already issued regarding the discrepancies in the return by the State authorities to the petitioner on 17 December 2020 and prayed that the parallel proceedings by Central authorities may be stayed until ongoing proceedings initiated by the State authorities are concluded.

However, while dismissing the writ petition, the Hon’ble Madras High Court held that the petitioner has not established that subject matter is one and the same in both the investigations.  It is further held that mere pendency of proceedings before the State authorities is not a ground to restrain the Central authorities from issuing summons and conducting investigation regarding the other allegations. Therefore, all these factors require an adjudication before the competent authority and if the summons cannot be kept in abeyance at this stage, it would cause prejudice to the interest of the Revenue.

Important Notifications and Circulars issued during the quarter

1. Clarification on scope of ‘Intermediary services: 

In order to clear the ambiguity caused in the interpretation of scope of ‘Intermediary Services’, CBIC has issued a Circular 159/15/2021-GST dated 20 September 2021. The circular provides certain parameters to define scope of intermediary services such as:

• Involvement of three parties
• Mandatory existence of two distinct supplies
• Non-existence of sub-contracting service
• Acting capacity of the person to qualify as an intermediary
• Non-inclusion of services provided on ‘own account’. 

In light of the above guidelines/parameters, the circular also provides with various illustrations to clear the ambiguity around the scope of services.
 

2. Clarification on availment of Input Tax Credit on debit notes: 

Vide Circular No. 160/16/2021-GST dated 20 September 2021, CBIC has decided to delink the date of issuance of debit note from the date of issuance of the underlying invoice for the purposes of availing input tax credit w.e.f. 1 January 2021. In case of debit notes, the date of issuance of debit note (not the date of underlying invoice) shall determine the relevant financial year for the purpose of Section 16(4) of the CGST Act. It is explained by way of an example, as follows:

3. Clarification relating to export of services condition:  

Vide Circular No 161/16/2021-GST dated 20 September 2021, CBIC has provided further clarification w.r.t. export of services-condition (v) of Section 2(6) of the IGST Act 2017, as follows:

The said clarification has been introduced to put to rest the controversies surrounding the GST refund claims of services rendered between a holding and its subsidiaries being a separate legal entity.

4. Clarification w.r.t. refund of tax wrongly paid: 

Vide Circular No.162/17/2021-GST dated 25 September 2021, CBIC has clarified that the relevant date for filing application of refund  under Section 77 of CGST Act / Section 19 of IGST Act 2017 will be the date of payment of tax . Thus, the refund can be claimed before the expiry of two years from the date of payment of tax under the correct head.

5. Changes in filing of Annual Return and Reconciliation Statement by the taxpayer: 

A Reconciliation Statement in Form GSTR-9C certified by an independent Chartered Accountant was required to be filed by the companies as per Section 35(5) of the CGST Act, 2017.  However, recently vide Finance Act, 2021, the provisions of Section 35(5) are omitted and the corresponding changes under Section 44 of the CGST Act, 2017 are made effective from 1 August 2021 by the Government vide Notification No. 29/2021- Central Tax.

Accordingly, Notification No 30/2021-Central Tax dated 30 July 2021 has been issued to notify that Form GSTR-9C is required to be filed on self-certification basis by the taxpayer crossing the threshold of INR 50 million during the financial year 2020-21. The notification has also notified the revised Form GSTR-9C.

Further, vide Notification No 31/2021- Central Tax dated 30 July 2021, the registered person whose aggregate turnover during the financial year 2020-21 is up to INR 20 Million is exempted  from filing annual return for the said financial year.

6. Updates in GST Rules: 

Vide Notification No 32/2021-Central Tax dated 29 August 2021 and Notification No 35/2021-Central Tax dated 24 September 2021, following changes are notified:

• For the purpose of filing the GST returns, the method of Electronic Verification Code in place of digital signature is further extended upto 31 October 2021.
• For the purpose of filing refund applications, Aadhar authentication of the authorised signatory will be required from an effective date yet to be notified.
• A registered person shall be required to file GSTR-3B mandatorily before filing GSTR-01 for the subsequent period from 1 January 2022.

7. Changes in GST Rates of various goods and/or services as per the recommendations of GST Council: 

Vide Notification No 12/2021-Central Tax(Rate), the GST exemption on 2 key drugs namely Amphotericin B and  Tocilizumab is extended  till December 2021. Further, GST rate on other key drugs namely Remdesivir Itolizumab, Posaconazole, Infliximab, Favipiravir, Casirivimab & Imdevimab, 2-Deoxy-D-Glucose, and Bamlanivimab & Etesevimab is slashed to 5 per cent till December 2021.

Further, various other Notifications have been issued [e.g. 8/2021-Central Tax(Rate), 9/2021-Central Tax(Rate), 10/2021-Central Tax(Rate), 11/2021-Central Tax(Rate)] to rationalize GST rates on various goods and services such as rail locomotives, renewable energy devices and parts for their manufacture such as bio-gas plant, solar power based devices, wind mills, etc.
 

Customs and Foreign trade policy related developments

1. Amendments in AEO programme:

A. Online filing of AEO T2 and T3 applications:

After making AEO T1 programme web based since December 2018, vide Circular 13/2021-Cutoms dated 1 July 2021 the CBIC has launched new version of web based portal www.aeoindia.gov.in for AEO T2 and AEO T3 for online filing, real time monitoring and digital certification.  Further, it is clarified that any application for AEO T2 and T3 filed on or after 1 August 2021 shall be mandatorily filed via such portal only.

B. Auto Renewal of AEO T1 validity:

In the current scenario, AEO T1 certificate is valid for three years and the applicants are required to apply for the renewal 30 days prior to the expiry date. In order to remove such compliance burden, vide Circular 18/2021-Cutoms dated 31 July 2021 ,the auto renewal AEO certification is introduced.  Further, this benefit will be available subject to the condition that the applicant submits self-certification and review thereof. Such annual declaration would be required to be filed between 1 October to 31 December each year.

Entities who are certified on or after 1 April 2019 shall be migrated to the auto renewal process w.e.f. 1 August 2021.  However, such auto renewal would be granted only for two annual self-declaration and detailed review would be required to be completed before commencement of due date for submission of third annual self-declaration i.e. before 31 October.

Further, it is clarified that entities which are certified between 1 January to 31 December each year shall be exempted from filing the annual declaration for that particular year.

2. Clarification regarding applicability of IGST on repair cost, insurance and freight, on goods re-imported after being exported for repairs

Vide Circular No 16/2021-Customs dated 19 July 2021, it has been clarified that at the time of calculation of all the duties of customs including BCD, IGST and Compensation Cess, the duty shall be payable on the value of repairs, insurance and freight instead of the value of the goods itself.

In order to bring such amendment, the board has already amended the original exemption Notification No 45/2017–Customs and Notification No 46/2017-Customs both dated 30 June 2017 vide Notification 36/2021-Customs and 37/2021- Customs both dated 19 July 2021.

3. Extension of FTP 2015-2020 till 31 March 2022:

Vide Notification No. 33/2015-2020 dated 28 September 2021, the existing FTP 2015-2020 which was valid up to 30 September 2021 has been further extended till 31 March 2022.

4. Scheme guidelines for Remission of Duties and Taxes on Exported Products (RoDTEP):

Vide Notification No. 19/2015-2020 dated 19 August 2021, scheme guidelines for RoDTEP have been inserted as para 4.01 of the Foreign Trade Policy 2015-20 with immediate effect.

Further, vide Notification No. 76/2021-Customs(N.T.) dated 23 September 2021, CBIC has notified the manner to issue duty credit for goods exported under the RoDTEP Scheme.

5. Introduction of an independent Rebate of State and Central Taxes and Levies (RoSCTL) Scheme on export of apparel/garments/made-ups w.e.f. 1 January 2021:

Earlier it was intended to subsume the RoSCTL scheme w.e.f. 1 January 2021 in the RoDTEP scheme which was also being introduced w.e.f. 1 January 2021. Accordingly, facility to file shipping bill with claim for RoSCTL was discontinued. However, subsequently it was decided to have independent RoSCTL scheme w.e.f. 1 January 2021 to 31 March 2024.

Vide Notification No. 77/2021-Customs (N.T.) dated 24 September 2021 issue of scrips, its use, transfer and the conditions and restrictions governing them have been notified.

6. Introduction of Electronic Duty Credit Ledger Regulations, 2021

Vide  Notification No 75/2021-Customs (N.T.) dated 23 September 2021, regulations for use, transfer, maintenance, etc. of Electronic Duty Credit scrips issued under various schemes such as RoDTEP, RoSCTL, etc. has been notified which provides for procedure for issuance, creation, registration, use and validity, transfer and cancellation of electronic duty credit scrips.

7. Applications of scrip based FTP schemes and validity period of Duty Credit Scrips:

Vide Notification No. 26/2015-2020 dated 16 September 2021, DGFT has notified 31 December 2021 as last date for submitting applications for Scrip based schemes:

• MEIS for exports made from 1 July 2018 to 31 March 2019, 01 April 2019 to 31 March 2020 and 01 April 2020 to 31 December 2020;
• SEIS for services rendered in FY  18-19 and 19-20;
• 2 per cent additional ad hoc incentive (para 3.25 of FTP) for exports made in period 1 January 2020 to 31 March 2020;
• ROSCTL for exports made from 7 March 2019 to 31 December 2020; and
• ROSL for exports made up to 6 March 2019 for which claims have not yet been disbursed.

Further, after 31 December 2021, no further applications would be allowed to be submitted and late cut provisions under FTP shall also not be available.

8. Amendments in SEIS scheme for services rendered in FY 2019-20: 

Vide Notification No. 29/2015-2020 dated 23 September 2021, the DGFT has amended the SEIS scheme for services rendered in FY 2019-20 wherein the list of eligible services has been notified and entitlement under SEIS has been capped at INR 50 million per Import Export Certificate (IEC). Further the scheme benefit shall not be available in case the payments are made in Indian Rupees for the services rendered in the FY 2019-20.

9. Extension in the export obligation period of specified Advance and EPCG Authorisations till 31 December 2021:

Vide Notification No. 28/2015-2020 dated 23 September 2021, another option to avail extension in Export Obligation period till 31 December 2021 in case of specified Advance and EPCG Authorisations is provided without any compensation fees subject to 5 per cent additional export obligation on balance exports to be fulfilled.

10. Relaxation in Average Export Obligation under EPCG Scheme

Vide Policy Circular No 37/2015-20 dated 10 September 2021, the exporters were provided relief where the list of sector/product group in which the exports have declined by more than 5 per cent for FY 2019-20 as compared to FY 2018-19 and for FY 2020-21 as compared to FY 2019-20 are notified. Accordingly, all the regional offices are expected to re-fix the average export obligation for FY 2019-20 and FY 2020-21 accordingly and the export obligation shall be endorsed in the license file of the office of regional office and the amendment sheet to be issued to the license holder.