Indirect Tax News

published on 31 October 2022

IDT Developments and Associated Procedures

1. AGENDA FOR THE 48TH GST COUNCIL MEETING

While the official date of upcoming 48^th GST council meeting is yet to be decided, the major issues likely to be decided are issuance of circular for not levying the IGST on ocean freight, verifying the suggestions of the Group of Ministers ('GoM') on Goods and Services Tax Appellate Tribunal (GSTAT) and acknowledging second report of the GoM on the rate rationalization.

2. The Hon’ble Supreme Court extends time limit for opening of the GST common portal to allow assess to file or revise Form GST- TRAN-01/02 [2022 VIL-63-SC]

In case of Filco Trade Centre Private Limited, the Hon'ble Supreme Court directed the Goods and Service Tax Network (GSTN) to open GST Common portal for filing or revising Form GST- TRAN-01/02 for availing transitional credit as a one-time measure for all assesses.

The Revenue Department had filed a miscellaneous application before the Apex Court seeking an extension of the above referred timelines. Thus, the Apex Court has extended the time for opening the GST common portal for a further period of four weeks from 2 September 2022.

3. The Hon’ble Bombay High Court allows utilization of balance in Electronic Credit Ledger towards payment of pre-deposit for filing the appeal

The Hon’ble Bombay High Court in case of Oasis Reality held that the pre-deposit payable for filing the appeal before the appellate authority can be paid by the appellant by utilizing the balance in Electronic Credit Ledger.

Important GST Notifications and Circulars issued during the quarter

1. Interest on wrong availment and utilization of ITC

Vide Notification No. 09/2022 - Central Tax dated 5 July 2022, the Government has inserted subsection 3 to Section 50 of the CGST Act which enables a levy of interest up to 24 per cent on the amount of ITC wrongly availed and utilised during a tax period. Further, such amendment has been brought into effect from 1 July 2017 i.e. retrospectively.

2. Aggregate turnover for Annual Return Filing

Vide Notification No. 10/2022-Central Tax dated 5 July 2022, it was notified that registered person having aggregate turnover in the financial year 2021-22 up to INR 20 million, is exempted from filing annual return for the said financial year.

3. Various amendments in GST Rules

Vide Notification 14/2022- Central Tax dated 5 July 2022, various GST rules were amended, as follows:

Rule 21A: Where the registration has been suspended under Section 29(2)(b) or (c) of CGST Act, 2017 and the registration has not already been cancelled under Rule 22, the suspension of registration shall be deemed to be revoked upon furnishing of all the pending returns.

Rule 86(4A): In case any erroneous refund is sanctioned to a registered person, such amount can be repaid along with applicable interest and penalty through FORM GST DRC-03 and proper officer shall issue an order in FORM GST PMT-03A to recredit the amount paid to the electronic credit ledger.
Rule 43: An explanation has been added to the effect that the value of supply of Duty Credit Scrips shall be excluded from the amount of aggregate value of exempt supplies for the purpose of calculating reversal of ITC under of Rule 42 and 43.
Rule 88B: As per the amended rule, where return is filed after due date, the interest is required to be paid on the portion of tax which is paid through electronic cash ledger for the delayed period. In all other cases, interest is required to be calculated on unpaid amount of tax for the period from due date to actual payment. Further, interest is also payable on the amount of input tax credit wrongly availed, but only to the extent the balance in the credit ledger falls below the amount of input tax credit wrongly availed.

4. Applicability of e-invoicing:

Vide Notification 17/2022-Central Tax dated 1 August 2022, with effect from 1 October 2022, every registered taxable person whose aggregate annual turnover exceeds INR 100 million (earlier INR 200 million) in any of the financial year since FY 2017-18 shall be liable to issue e-invoice as per prescribed rules.

5. Important changes made effective from 1 October 2022:

Vide Notification No. 18/2022, 19/2022 and 20/2022–Central Tax each dated 28 September 2022, various provisions of the Finance Act, 2022 amending provisions of the CGST Act, 2017 have been operationalized as such:

Amendment to Section 16: A new sub-section has been inserted i.e., Section 16(2) (ba) to restrict the ITC to the extent available in lines with Section 38 (i.e., auto generated statement or GSTR 2B). Further, last date to claim ITC has been extended till 30 November following the end of the FY to which such ITC pertains, and such extended time limit will be applicable even for FY 2021-22 (press release dated 4 October 2022).

Amendment to Section 29: The section has been amended to bring into effect the cancellation of registration for non-filing of GST return for specified taxpayers.
Amendment to Section 34: Last date to report & avail tax adjustment of credit note has been extended till 30^th day of November following the end of the financial year to which such credit note pertains, and such extended time limit will be applicable even for FY 2021-22 (press release dated 4 October 2022).
Amendment to Section 37: Last date for rectification or error in respect of outward supplies can be made till 30^th day of November following the end of the financial year to which such invoice pertains, and such extended time limit will be applicable even for FY 2021-22 (press release dated 4 October 2022).
Substitution of new section for Section 38: Only the eligible ITC which is available in the GSTR-2B (an auto generated statement) can be availed by the recipient.
Amendment to Section 39: Rectification in respect of particulars can be made till 30 days of November following the end of the financial year to which such particulars pertain.
Substitution of new section for section 41:The amendment has put concept of availing input tax credit on a "provisional" basis" to an end. Going forward, ITC availment shall be restricted to the conditions provided under Section 16 of the CGST Act read with Section 38 i.e., ITC reconciled with GSTR-2B.
Omission of sections 42, 43 and 43A: Provisional claim of ITC has been done away and therefore, the provisional ITC claim process, matching and reversal concepts becomes redundant leading to elimination of the relevant Sections.

Amendment to section 47: Section 47 is amended to provide for a late fee levy for delayed filing of return under Section 52 (TCS return GSTR-8) and Section 38 reference has been removed.

Amendment of Section 49: The Government is empowered to restrict on usage of the balance in the electronic credit ledger apart from the conditions which are mentioned in Section 16 of the CGST Act including the amended provision of Section 38 of the CGST Act.

6. Rate changes made effective from 18 July 2022

The Government had issued various notifications on 13 July 2022 (Notification 03/2022- to 11/2022-Cental tax) to bring changes in the existing GST Rates and exemptions effective from 18 July 2022.

The GST Rates of various machinery used in agricultural sector, lights and fittings have been increased from 12 per cent to 18 per cent, solar water heater and systems have been increased from 5 per cent to 12 per cent whereas various exemptions given to services under sectors such as Railways, Warehousing Business Hospitals, etc. have been withdrawn.

7. Clarifications issued by way of Circulars/Instructions

Vide Circular 180/12/2022-GST dated 9 September 2022, the CBIC has issued guidelines for filing and/or revising Form GST-TRAN-1/TRAN-2 in terms of order dated 22 July 2022 and 2 September 2022 of Hon'ble Supreme Court in the case of Filco Trade Centre Private Limited.

Vide Circular 178/12/2022-GST 3 August 2022, a clarification with respect to applicability of GST on liquidated damages, compensation and penalty arising out of breach of contract or other provisions of law has been issued. This circular analyses GST applicability on all the transactions in nature of the penalties, late payment charges, compensation for breach of contract, forfeiture of the amounts from the salary of the employees, etc. in detail.
Vide Circular 177/09/2022-GST dated 3 August 2022, clarification regarding applicable GST rates & exemptions on certain services such as supply of ice-cream by ice cream parlours, applicability of GST on application fee charged for entrance or the fee charged for issuance of eligibility certificate for admission or for issuance of migration certificate by educational institutions, etc. have been provided in detail.

Circular 173/05/2022-GST dated 6 July 2022, clarifies the issues on claiming refund under inverted duty structure where the supplier is supplying goods under some concessional notification.

Vide Circular 172/04/2022-GST dated 6 July 2022, various clarifications have been issued on issues such as refund claimed by the recipients of supplies regarded as deemed export, interpretation of Section 17(5) of the CGST Act, applicability of GST on perquisites provided by employer to the employees as per contractual agreement, utilization of the amounts available in the electronic credit ledger and the electronic cash ledger for payment of tax and other liabilities.

Vide Circular 171/03/2022-GST dated 6 July 2022, clarification on various issues relating to applicability of demand and penalty provisions under the CGST Act, 2017 in respect of transactions involving fake invoices has been issued.

Vide Circular 170/02/2022-GST dated 6 July 2022, clarification has been issued for mandatory furnishing of correct and proper information of inter-state supplies and amount of ineligible/blocked Input Tax Credit and reversal thereof in return in FORM GSTR-3B and statement in FORM GSTR-1.

Vide Instruction No 04/2022-23-GST dated 1 September 2022, CBIC has issued guidelines for launching prosecution for offenses under Section 132 of the CGST Act. The instruction provides detailed clarification with respect to the authority to sanction prosecution, monetary limit, procedures, appeal against court order in case of inadequate punishment/acquittal, withdrawal of sanction order of prosecution and compounding of offence.

Customs and Foreign trade policy related developments

1. Updates related to IGCR Rules, 2022

Prescribing a procedure for immediate re-credit of Bonds by Jurisdictional customs officer, rather than waiting till the time of filing of the monthly statement.
Expanding the scope of the IGCR procedure applicable to Specified End Use mentioned in Customs Notifications. In case of end use, supply to the end use recipient and the nature of the supply is to be captured in the IGCR automated module.
Changes in the forms to capture the details where intended purpose is the export of goods using the goods imported.

2. Amendments in schemes for Remission of Duties and Taxes on Exported Products (RoDTEP) and Rebate of State and Central Taxes and Levies (RoSCTL)

Vide Notification No. 75/2022-Customs (N.T.) and 76/2022-Customs(N.T.) each dated 14 September 2022, the amendment to RoDTEP and RoSCTL Scheme has been notified to delete certain conditions related to transferee-holder of the scrip. Further, the time limit for utilization / transfer of scrips generated was extended from 1 year to 2 year by amending Electronic Duty Credit Ledger ('ECL') Regulations, 2021 vide Notification No. 79/2022-Customs (N.T.) dated 15 September 2022.

3. Amendment to extend the benefit of exemption for Import of Specified Goods for Defense

Vide Notification No. 41/2022-Customs dated 13 July 2022, the benefit of exemption from payment of customs duty has been extended to the Defense Public Sector Units or other Public Sector Units or any other entity for import of specified goods for defense.

4. Other clarifications and guidelines issued by way of Circulars

Vide Circular No. 11/2022- Customs, dated 29 July 2022, CBIC has issued guidelines for extension of customs clearances beyond normal working hours in Inland Container Depots.

Vide Circular No. 12/2022- Customs, dated 16 August 2022, guidelines have been issued for launching of Prosecution in relation to offences punishable under the Customs Act related to baggage and outright smuggling cases and appraising cases/ commercial frauds.
Vide Circular No. 13/2022- Customs, dated 16 August 2022, CBIC has revised guidelines for arrest and bail in relation to offences punishable under Customs Act,

5. Extension of Foreign Trade Policy 2015-20

Vide Notification No. 37/2015-20 dated 29 September 2022, the Foreign Trade Policy, 2015-20 which was expiring on 30 September 2022 has been extended further until March 2023. Consequently, Public Notice 26/2015-20 dated 29 September 2022 was issued to extend the Handbook of Procedure until March 2023.

6. Extending the benefit of realization of export proceeds from Rupee Vostro Account

Vide Notification No. 33/2015-20 dated 16 September 2022, the exporters are allowed to realize the export proceeds in INR from the balances in designated Special Vostro account of the correspondent bank of the partner country. The amendment is made to align the Foreign Trade Policy in line with RBI Circular No. 10 dated 11 July 2022.

7. Amendment to Steel Import Monitoring System (SIMS) and Non-Ferrous Metal Import Monitoring System (NFMIMS) Registration process

Vide Notification No. 19/2015-20 dated 7 July 2022 and Notification No. 26/2015-20 dated 10 August 2022, the time limit for registration with SIMS and NFMIMS has been relaxed respectively to not earlier than 60 days before the expected date of arrival of import consignment. Further corresponding clarification for NFMIMS is issued by Policy Circular No. 42/2015-2000 dated 27 July 2022.

8. Clarifications regarding EPCG authorizations

Vide Policy Circular dated 43/2015-20 dated 27 July 2022, DGFT has relaxed the provision of submitting Bill of Export as an evidence of export obligation discharge for supplies made to SEZ units in case of EPCG authorization. It was provided that in lieu of 'Bill of Export', exporters can submit corroborative evidence for the purpose of discharging export obligation under EPCG Authorizations as follows:

ARE-I Form (duly attested by jurisdictional Central Excise authorities of EPCG holder);
Evidence of receipt of supplies by recipient in SEZ.
Evidence of payment made by SEZ unit to EPCG holder.

9. Draft policy for export of Drones/UAVs under SCOMET

DGFT has invited comments on the draft Policy amendment of Category 5B of SCOMET List and the General Authorization for Export of Drones/UAVs (Excluding Software and Technology) for specific types of drones/UAVs, for simplifying the policy for export of Drones/UAVs under SCOMET list.

10. Extension of validity of Status Certificate:

The DGFT vide Public Notice No. 21/2015-2020 dated 5 August 2022 has issued the extension of validity of Status Certificates issued in the Financial Year 2015-16 and 2016-17 under the current Foreign Trade Policy 2015-2020 till 30 September 2022.

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