Indirect Tax News

published on 31 January 2023 I reading time approx. 8 minutes

IDT Developments, Judicial Pronouncements and Associated Procedures

1. Highlights of the 48th GST Council Meeting

While The 48th GST Council meeting was virtually held on 17 December 2022. The key highlights of the meeting were as follows:

• Decriminalization of certain offences under GST;
• Procedure to be prescribed for Unregistered persons to claim refund;
• High Sea Sales and certain other transaction covered under Schedule III of CGST Act, 2017 are given retrospective effect from July 2017;
• Procedure for reversal and re-availment of input tax credit is prescribed by way of inserting Rule 37A;

2. The Hon'ble Gujarat High Court held that non-compliance of procedure prescribed by Circular will not disentitle the refund claim: Balkrishna Industries [2022-TIOL-1556-HC-AHM-GST]

As per Circular No. 59/33/2018–GST dated 4 September 2018, the refund applicant shall debit the maximum refund amount from IGST first and then from CGST & SGST equally to the extent of balance available. However, in this case, the petitioner has debited the refund amount from CGST & SGST, though there is a credit balance in IGST. On this ground, the refund application got rejected. In this regard, the Hon’ble Gujarat High Court has held that non-compliance of the procedure prescribed in the circular will not dis-entitle from claiming the refund amount.

3. The Hon'ble Punjab and Haryana Hight Court held BPO Services provided on own account doesn't amount to Intermediary Services: Genpact India Pvt Ltd [2022-TIOL-1413-HC-P&H-GST]

Petitioner has entered into a Master Services Sub-Contracting Agreement (MSA) with an overseas group entity to provide BPO services, on principal-to-principal basis, directly to the clients of overseas group entity located outside India. Petitioner declared these services under zero-rated supplies and applied for refund of accumulated ITC. Refund application got rejected on the ground that the said services are intermediary services and cannot be treated as zero-rated. However, the Hon'ble Punjab & Haryana High Court has held that the above services cannot qualify as intermediary services.

4. The Hon'ble Jharkhand High Court held that depositing money into the e-cash ledger doesn't mean the tax liability is discharged: RSB Transmissions India Ltd [2022-TIOL-1426-HC-JHARKHAND-GST]

Petitioner has filed GSTR-3B after the expiry of due date. However, he denied the liability to pay interest on this delayed filing GSTR-3B on the ground that the amount of tax is already deposited in the electronic cash ledger maintained on the portal. In this regard, it was held that any deposit made in the modes prescribed under Section 49 (1) are mere deposits towards tax, interest, penalty, fee or any other amount credited into e-cash ledger and the same does not mean it is appropriated to the government account. It was further held that payment into the cash ledger does not amount to payment of tax liability.

Important GST Notifications and Circulars Issued during the Quarter

1. Important amendments in GST Rules

Vide Notification 26/2022- Central Tax dated 26 December 2022, the Fifth Amendment Rules, 2022 are introduced. The summary of important changes is given, as follows:

• Rule 37: In case the recipient fails to make the payment to the supplier, wholly or partly, within 180 days from invoice date, the recipient shall pay or reverse the taxes proportionate to the amount not paid to the supplier. Such amendment was made effective from 1 October 2022. Prior to this amendment, the recipient had to reverse the entire credit even if the part payment is not made.

• Rule 37A: In case where the supplier has declared an invoice in his GSTR-1, but not paid the taxes through GSTR-3B till the 30 September following the end of financial year, the ITC availed by recipient on such invoice shall be reversed through GSTR-3B on or before 30 November following the end of financial year without interest. The interest shall be calculated from 1 December till the date of reversal. Once the supplier subsequently furnished GSTR-3B, the recipient can re-avail such credit.
• Rule 46: In case of supplies made to unregistered person, where the taxable value is less than INR 50,000, the supplier is required to mention name and address of recipient (along with State code) only if the recipient requests that such details be recorded in the tax invoice. However, such exemption is not applicable to the e-commerce operator or OIDAR service provider. 
• Rule 46A: Rule 46A provides an option to the supplier to issue a single "invoice-cum-bill of supply" if he supplies taxable as well as exempted goods to an unregistered person. Further, "invoice-cum-bill of supply" should contain the particulars specified in Rule 46, 49 or 54 as the case may be. 
• Rule 88C: If in case, the tax payable in Form GSTR-1 exceeds the tax payable in Form GSTR-3B, by such amount and such percentage as prescribed by the Council, the difference shall be highlighted to the registered person on the common portal directing him either to pay the taxes or explain the reasons for such difference within seven days. Upon receiving the intimation, if the registered person doesn't take any action or the reply furnished by him is unsatisfactory, the officer can recover the amount in accordance with Section 79. The registered person cannot file GSTR-1 of subsequent periods unless he either deposits the taxes or furnishes the reply. 
• Rule 89(2): Two new documentary evidence are added in Rule 89(2) in a case where the refund application is filed by the unregistered person where the agreement or contract for supply of service is cancelled.

2. Renting of Residential Dwelling in personal capacity is exempt

The 48th GST Council Meeting clarified that renting of residential dwelling in personal capacity not under the tax net. To give effect to the same, Notification No. 15/2022–Central Tax (Rate) dated 30 December 2022 is issued.

3. Clarifications issued by way of Circulars/Instructions:

• Circular No. 181/13/2022-GST dated 10 November 2022 clarifies that the revised formula for calculation of refund under inverted duty structure is applicable prospectively i.e., refund applications filed before 5 July 2022 shall be dealt using existing formula. 
• Vide Circular No. 182/14/2022-GST dated 10 November 2022, certain guidelines are issued for verifying the transitional credit in light of the order of the Hon'ble Supreme Court in case of Filco Trade Centre Pvt. Ltd. to ensure the uniformity of above judgement. 
• Circular No. 183/15/2022-GST dated 27 December 2022 clarifies the procedure to deal with difference in Input Tax Credit availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for FY 2017-18 and 2018-19. 
• Circular No. 184/16/2022-GST dated 27 December 2022 clarifies on the entitlement of input tax credit where the place of supply is determined in relation to transportation of goods in terms of the proviso to sub-section (8) of section 12 of the IGST Act 2017. 
• Circular No. 186/18/2022-GST dated 27 December 2022 clarifies taxability of no claim bonus offered by insurance companies and applicability of e-invoicing for an entity. 
• Circular No. 187/19/2022-GST dated 27 December 2022 clarifies the treatment of statutory dues under GST law in respect of the taxpayers for whom the proceedings have been finalised under Insolvency and Bankruptcy Code, 2016. 
• Circular No. 188/20/2022-GST dated 27 December 2022 prescribes the procedure of filing the refund application for unregistered person under GST Regulations. 
• Instruction No. 04/2022-GST dated 28 November 2022 prescribes the manner of processing IGST refunds which are withheld in terms of Rule 96 (4 )(c) of CGST Rules, 2017.

Customs and Foreign trade policy related developments

1. Amendments in Project Import Regulations, 1986

Project Imports scheme enables the assessee to import the machinery, apparatus etc., for initial setup of a unit or subsequential expansion of a unit. These goods are subjected to a single rate of duty. To claim this benefit, the project should have been listed under Project Import Regulations, 1986. Vide Notification No. 54/2022–Customs dated 19 October 2022; the following projects were added/substituted in the list: 

• All Power Plants and Transmission Projects, other than solar power plants or solar power projects. 
• Power Plants and Transmission Projects, other than solar power plants or solar power projects and other than those mentioned at Sr. No. 2 above. 
• Bhopal Metro Rail Project. 
• Indore Metro Rail Project.

2. Australia-India Economic Cooperation and Trade Agreement (ECTA)

• India has entered into ECTA with Australia, which came into force on 29 December 2022. Vide Notification No. 62/2022-Customs dated 26 December 2022, the CBIC has issued the list of goods and their applicable concessional rates of duty.  To claim the concessional rate benefit, the importer shall prove that the goods are Australian origin as per Customs Tariff (Determination of Origin of Goods under the India-Australia Economic Cooperation and Trade Agreement) Rules, 2022 which were introduced vide Notification 112/2022- Customs (NT). 
• Vide Trade Notice No. 23/2022-23 dated 22 December 2022 the DGFT has extended the benefit of the electronic platform for Certificates of Origin (eCoO) to facilitate issuance of Preferential Certificates of Origin for exports to Australia under India-Australia ECTA. 
• Vide Public Notice No. 44/2015-20 dated 22 December 2022, DGFT has amended Appendix-2B for including list of agencies authorised to issue Preferential Certificate of Origin for India's exports under India Australia ECTA.

3. Postal Export (Electronic Declaration and Processing) Regulations, 2022

The Government has introduced Postal Export (Electronic Declaration and Processing) Regulations, 2022 vide Notification No. 104/2022-Customs (NT) dated 9 December 2022 for export of goods through a foreign post office appointed by the Board under Section 7 (1) (e) of the Customs Act, 1962. These regulations are meant to facilitate the processing of commercial postal exports by automating the entire procedure and seamlessly connecting the postal network to the notified Foreign Post Offices (FPO).

Currently, for exporting the parcel the through postal route, the exporter needs to visit FPO to file export declaration and handover his consignment. However, these regulations enable exporter to file Postal Bill of Entry online and deposit the parcel in nearby post office. An overview of these regulations is provided in Circular No. 25/2022 – Customs dated 9 December 2022.

4. Decision to facilitate international trade transactions in Indian Rupees

• DGFT had earlier introduced Para 2.52 (d) vide Notification No. 33/2015-20 dated 16 September 2022 to permit invoicing, payment and settlements exports and imports in INR. 
• In continuation to that, Para 2.46 got amended vide Notification No. 43/2015-20 dated 9 November 2022. As per the said amendment, the goods may be imported for export provided export is against freely convertible currency or as per para 2.52 (d) (ii) of FTP.  
• Export proceeds realised in INR against exports to Iran and export proceeds realised in INR as per Para 2.52 (d) (ii) are permitted to avail export benefits under FTP. 
• Para 5.11 is also amended to permit the payment and settlement of exports and imports in INR for export proceeds under EPCG scheme.

5. Additional export items are included in Appendix 4R for RoDTEP incentive

The DGFT vide Notification No. 47/2015-2020 dated 7 December 2022 has included the additional export items of Chapter 28, 29, 30 & 73 in Appendix 4R under RoDTEP for exports made with effect from 15 December 2022 and shall be applicable till 30 September 2023.

6. General Authorization for Export after Repair in India (GAER)

Export of imported SCOMET items to the same entity abroad after repair in India will be allowed on the basis of a one-time General authorization for Export after Repair in India (GAER) subject to the conditions give under Public Notice No. 31/2015-20 dated 14 October 2022.

7. Work from home for SEZ Unit:

The Department of Commerce had further amended SEZ rules to liberalize Work From Home (WFH) for SEZ units. Vide Notification No. G.S.R. 868 (E) dated 8 December 2022, Rule 43A has been substituted with a new rule.

• Erstwhile regime based on permissions has been converted into an intimation-based regime. 
• WFH can be provided to up to 100 per cent of all employees of the SEZ unit. 
• WFH permitted up to 31 December 2023. 
• For units already availing WFH under the earlier regime, intimation could be sent by email till 31 January 2023. 

Units seeking WFH in the future can email an intimation on or before the date of commencement of WFH.

8. Other Miscellaneous Updates in FTP

• Vide Trade Notice No. 20/2022-23 dated 31 October 2022, ICEGATE Helpdesk is made functional for resolving the grievances related to scroll of shipping bills, generation of e-scrips and transfer of e-scrips under RoDTEP scheme. 
• Vide Policy Circular No. 44/2015-20 dated 17 November 2022, DGFT has requested the Regional Offices to refix the annual average export obligation for EPCG authorizations for the year 2021-22 to provide relief to the exporters of those sectors where total exports in that sector has declined by more than 5 per cent compared to previous year.