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Indirect Tax News

published on 30 July 2024 I reading time approx. 12 minutes

IDT Developments and Associated Procedures

1.Highlights of the 53rd Goods and Services Tax ('GST’) Council Meeting

The 53rd Meeting of the GST Council was held on 22 June 2024 in New Delhi and during the meeting the following key amendments were recommended in the Central Goods and Services Tax Act, 2017 (CGST Act, 2017):

Waiving interest and penalties for demand notices issued under Section 73 of the CGST Act, 2017 (i.e. the cases not involving fraud, suppression or willful misstatement, etc.) for the Financial Year (‘FY’) 2017-18, 2018-19 and 2019-20, if the full tax demanded is paid upto 31 March 2025.
Time limit to avail Input Tax Credit (‘ITC’) with respect to any invoice or debit note under Section 16(4) of CGST Act, 2017 through any GSTR 3B return filed upto 30 November 2021 for FY 2017-18, 2018-19, 2019-20 and 2020-21, may be deemed to be 30 November 2021.
Monetary limits would be introduced for filing of appeals by the Department, to reduce pending litigation in the respective courts. GST Council also recommended reduction of the quantum of pre-deposit required to be paid for filing of appeals under GST Regulations.
No levy of interest under Section 50 of CGST Act, 2017 in case of delayed filing of return, on the amount which is available in Electronic Cash Ledger (‘ECL’) on the due date of filing of the said return.
A mechanism for claiming refund of additional IGST paid on account of upward revision in price of the goods subsequent to their export is recommended to be prescribed.
A new optional facility would be provided by way of FORM GSTR-1A to facilitate the taxpayers to amend the details in FORM GSTR-1 for a tax period and/ or to declare additional details, if any, before filing of return in FORM GSTR-3B for the said tax period.

2. ITC is in the nature of concession and not an absolute right

In the case of M. Trade Links [2024 (6) TMI 288], the Hon’ble Kerala High Court held that claiming ITC is in the nature of a concession/entitlement, which is not an absolute right and is subject to the conditions and restrictions as provided under Section 16(2) and Section 16(4) of the CGST Act, 2017. Therefore, the condition that the supplier is required to pay tax to enable the recipient to claim ITC is constitutionally valid. Further, it was also held that the amendment extending time limit to claim ITC to 30 November of the subsequent FY is procedural in nature and should be given a retrospective effect from 1 July 2017.

Important GST Notifications and Circulars Issued during the quarter

1. Amendments issued by way of Notifications

Vide Notification No. 08/2024 dated 10 April 2024, the date of applicability of Notification No. 04/2024 – Central Tax (Rate) dated 5 January 2024, which prescribes special procedures for the notified goods, has been postponed from 1 April 2024 to 15 May 2024.

2. Clarifications issued by way of Circulars/Instructions

Vide Circular No. 207/1/2024-GST dated 26 June 2024, the Central Board of Indirect Taxes and Customs (‘CBIC’) has fixed the following monetary limits below which appeal or application or Special Leave Petition, shall not be filed by the revenue before the GST Appellate Tribunal (‘GSTAT’), High Court or Supreme Court:

Appellate Forum	Monetary Limit
GSTAT	INR 2 Million
High Court	INR 10 Million
Supreme Court	INR 20 Million

The aforesaid circular also provides the principles to be considered while determining the monetary limit and the cases where the monetary limit need not be considered for filing an appeal by the revenue. These monetary limits are prescribed in order to reduce the unnecessary litigations for the minimal amounts. It is to be noted that the aforesaid monetary limits are applicable only in case of appeals to be filed by the Revenue and not by the taxpayer.

Vide Circular No. 208/2/2024-GST dated 26 June 2024, the CBIC has clarified certain issues pertaining to special procedure to be followed by the registered persons engaged in manufacturing of goods prescribed through Notification No. 04/2024 – Central Tax (Rate) dated 5 January 2024.
Vide Circular No. 209/3/2024-GST dated 26 June 2024, the CBIC has clarified the place of supply under Section 10(1)(ca) of the Integrated Goods and Services Tax Act, 2017 (‘IGST Act, 2017’) in case of supply of goods made to an unregistered person where billing address is different from the address of delivery of goods shall be the address of delivery, and not the billing address.
Vide Circular No. 210/4/2024-GST dated 26 June 2024, the CBIC has clarified on valuation of supply of services by a related person where recipient is eligible to full ITC. In case of import of services received from a related person located outside India where the recipient is eligible to claim full ITC, the value declared on the self-invoice raised by the recipient shall be considered as open market value in terms of second proviso to Rule 28(1) of the CGST Rules, 2017. Further, in cases where the recipient does not raise any self-invoice, the value of import of service shall be considered as Nil.
Vide Circular No. 211/5/2024-GST dated 26 June 2024, the CBIC has provided a major relief to the taxpayers in relation to time limit under Section 16(4) in respect of Reverse Charge Mechanism (‘RCM’) supplies received from unregistered persons where the liability to raise invoice is on the taxpayer. In such cases, the time limit shall be counted from the FY in which the self-invoice is raised, rather than from the FY in which the supply is received. However, the circular mentions that the recipient is required to pay interest on such delayed payment of taxes and penalty due to non-issuance of self-invoice within time limit.
Vide Circular No. 212/6/2024-GST dated 26 June 2024, the CBIC has provided a mechanism for providing evidence in relation to reversal of ITC by the recipient, where the supplier issues credit notes for post-sale discount. In cases where the tax amount involved in such discount is less than INR 0.5 Million, an undertaking from the recipient that he had reversed the ITC attributable to such discount would be sufficient. However, if the tax amount is more than INR 0.5 Million, the supplier would be required to obtain a certificate from the recipient which is issued by CA/CMA certifying that the recipient has reversed the ITC attributable to such discount.
Vide Circular No. 213/7/2024-GST dated 26 June 2024, the CBIC has provided a clarification on the taxability of ESOP/ESPP/RSU provided by a company to its employees through its overseas holding company. It is clarified that, in case the cost is reimbursed by the domestic subsidiary company of such securities/shares to the foreign holding company on a cost to cost basis, no GST would be applicable. However, in cases where an additional amount over and above the cost of securities/shares is charged by the foreign holding company from the domestic subsidiary company, GST would be leviable under RCM on such additional amount charged.
Vide Circular No. 214/8/2024-GST dated 26 June 2024, the CBIC has provided a clarification on the requirement of reversal of ITC in respect of the portion of premium for life insurance policies which is not included in the taxable value. The circular clarifies that the amount of the premium for taxable life insurance policies, which is not included in the taxable value as determined under Rule 32(4) of CGST Rules, 2017 cannot be considered as non-taxable or exempt supply and therefore, reversal of ITC as per Rule 42 or rule 43 of CGST Rules, 2017 is not required.
Vide Circular No. 215/9/2024-GST dated 26 June 2024, the CBIC has provided a clarification on the taxability of salvage/wreck value earmarked in the claim assessment of damage caused to the motor vehicle.
Vide Circular No. 216/10/2024-GST dated 26 June 2024, the CBIC has clarified the following issues with respect to warranty claims:

a. When goods supplied under warranty are replenished by the manufacturer without any consideration, no GST is payable on such replenishment of goods. Further, no reversal of ITC is required to be made by the manufacturer in respect of such goods.

b. Where supply of extended warranty is made subsequent to the original supply of goods, the said supply shall be treated as a supply of services distinct from the original supply of goods, and the supplier of the said extended warranty shall be liable to discharge GST liability applicable on such supply of services.

Vide Circular No. 217/11/2024-GST dated 26 June 2024, the CBIC has clarified that the insurance companies are entitled to avail ITC of expenses incurred for repair of motor vehicles in case of reimbursement mode of insurance claim settlement, to the extent of reimbursement of the approved claim cost to the insured.
Vide Circular No. 218/12/2024-GST dated 26 June 2024, the CBIC had provided a clarification regarding taxability of the transaction of providing loan by an overseas affiliate to its Indian affiliate or by a person to its related person. The consideration represented by way of interest is exempt vide Entry 27(a) of Notification No. 12/2017 – Central Tax (Rate). Further, if no charges other than interest are charged, it cannot be said that any other service in the form of processing/ facilitating/ administering the loan is supplied. Consequently, GST cannot be levied on the open market value of the same.
Vide Circular No. 219/13/2024-GST dated 26 June 2024, it was clarified that the telecom operators are eligible to avail the ITC on ducts or manholes used in network of optical fiber cables for providing telecommunication services. The said inputs are not blocked under Section 17(5)(c) and 17(5)(d) since these ducts and manholes are covered under the ambit of plant and machinery.
Vide Circular No. 220/14/2024-GST dated 26 June 2024, the CBIC has provided a clarification that the place of supply for custodial services provided by banks to Foreign Portfolio Investors is not required to be determined under Section 13(8)(a) of the IGST Act. However, the place of supply is required to be determined under the default provision of Section 13(2) of the IGST Act, 2017.
Vide Circular No. 221/15/2024-GST dated 26 June 2024, the CBIC has provided a clarification on time of supply in respect of supply of services of construction of road and maintenance thereof of National Highway Projects of National Highways Authority of India (NHAI) in Hybrid Annuity Mode (HAM) model.
Vide Circular No. 222/16/2024-GST dated 26 June 2024, the CBIC clarified that in case where full upfront payment is made by the telecom operator, GST would be payable when the payment of the said upfront amount is made or is due, whichever is earlier, whereas in case where deferred payment is made by the telecom operator in specified installments, GST would be payable as and when the payments are due or made, whichever is earlier.
Vide Instruction No. 01/2024-GST dated 30 May 2024, the CBIC has provided guidelines for initiation of recovery proceedings under Section 79 of the CGST Act, 2017 before three months from the date of service of demand order. Section 78 provides the taxpayer a time limit of three months to make payment of taxes along with interest as per demand order from date of service of order. If not paid, recovery proceedings shall be initiated under Section 79. If the officer considers it necessary in the interest of revenue to initiate recovery proceedings even before expiry of three months, he may do so by recording the reasons. This instruction provides guidelines to initiate recovery proceedings before three months from the date of service of demand order.

Customs and Foreign Trade Policy Related Developments

1.Clarifications issued by way of Circulars/Instructions under Customs Regulations

Vide Circular No. 04/2024 – Customs dated 7 May 2024, the CBIC has announced an enhancement in certain All Industry Rates (AIRs) of Duty Drawback for list of following items:

a. Certain marine products

b. Goods bags, handbags, trunks, suit-cases and other articles under Chapter 42

c. Articles of bed linen, table linen, kitchen linen under Chapter 63

d. Radar apparatus, radio navigational aid apparatus and radio remote control apparatus under

Chapter 85 and;

e. Unmanned aircraft under Chapter 88.

Vide Circular No. 06/2024 – Customs dated 7 June 2024, the CBIC provided clarification on the applicability of concessional rate of Basic Customs Duty (‘BCD’) on the Display Assembly of a cellular mobile phone.

Vide Circular No. 07/2024 – Customs dated 25 June 2024, clarification is provided launch of Exchange Rate Automation Module (‘ERAM’). This module is to automate the aforesaid process of issuing exchange rates, beginning with forwarding of exchange rate data by SBI to ICEGATE through message exchange. The exchange rates received from SBI shall be adjusted to the nearest five paise. These exchange rates shall be published on ICEGATE website at 6:00 p.m. as per the existing frequency and shall be accessible for public viewing on ICEGATE website. These rates, so published online, shall come into effect from midnight of the following day.

Vide Notification No. 47/2024-Customs (NT) dated 30 June 2024 and Circular No. 08/2024 – Customs dated 30 June 2024, provides clarification on implementation of the Sea Cargo Manifest and Transshipment Regulations (‘SCMTR’). The SCMTR seeks to bring about transparency, predictability of movement, advance collection of information for expeditious Customs clearance and were supposed to be effective from 1 July 2024. However, an extension for filing under the old format is provided till 31 August 2024 vide Notification No. 47/2024-Customs (NT) dated 30 June 2024. Despite the extension, the stakeholders are advised to start filing in the new format on a parallel basis to get equipped with the new system.

Vide Instruction No. 08/2024 – Customs dated 5 April 2024, the Ministry of Environment, Forest and Climate Change (‘MOEFCC’) through Official Memorandum dated 15 December 2023, notified that the high end and high values used medical equipment other than used critical care medical equipment would be included in Part B of Schedule III of Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016.

In this regard, a list of 50 high end and high value used or refurbished medical equipment other than critical care medical equipment was issued via MoEFCC’s Official Memorandum which includes equipment pertaining to MRI, CT scan, Ultrasound, Radiotherapy devices, etc. All the items included in the list are only allowed for reuse by the actual user or by the original equipment manufacturers (‘OEM’), the OEM’s Indian subsidiary or trader on behalf of the actual user subject to specific conditions.

Vide Instruction No. 15/2024 – Customs dated 29 May 2024, the Customs Department introduced a new mechanism of disbursal of duty drawbacks directly into the account of exporters. Presently, the duty drawbacks are processed thorough the Customs Automated System (‘CAS’) wherein the amount of drawback is enumerated in a scroll/ Computerized Customs Drawback Advice (‘CCDA’) and sent to authorized bank along with supporting single cheque of consolidated amount as per scroll for the payment of duty drawbacks into the exporters accounts.

However, from 5 June 2024, the present process of processing the payments of drawback amount would be replaced with new payment mechanism wherein the duty drawbacks would be facilitated through Public Finance Management System (PFMS). The following procedure would be adopted:

a. Authorized officer at each Customs location shall process the duty drawback scroll queue.

b. The scrolls generated at different location will be automatically processed by the CAS for onward transmission to the Central Nodal eDDO.

c. The nominated central nodal eDDO shall forward the consolidated All India duty drawback scroll to the nodal ePAO.

d. After approval of nodal ePAO, duty drawback amounts shall be credited into the exporters bank accounts linked with PFMS.

Vide Instruction No. 16/2024 – Customs dated 25 June 2024, provides clarifications on transfer of goods from a Customs Bonded Warehouse to another. The instruction provides that Regulation 11 of the Manufacture and Other Operations in Warehouse (no.2) Regulations, 2019 (‘MOOWR’) envisages receipt of goods in a Section 65 unit from another warehouse, which could also be a warehouse operating under Section 65. In this regard, Regulation 11(3)(a) provides that goods may be received from another Section 65 unit, subject to the licensee verifying the intactness of the one-time-lock, reconciling the quantity of such received goods from the Form consisting of Part A and Part B appended to the MOOW Regulations, and complying with other requirements of the regulation.

2. Imposing of Anti-Dumping Duty and Countervailing Duty

Vide Notification No. 8/2024 – Customs (ADD), dated 16 May 2024, CBIC has imposed antidumping duty on Pentaerythritol classifiable under Harmonized System of Nomenclature (‘HSN') 29054290, imported or originating from China PR, Saudi Arabia and Taiwan (subject to conditions as prescribed in the aforesaid notification). This antidumping duty will be effective for 5 years, unless revoked.

Vide Notification No. 9/2024 – Customs (ADD), dated 13 June 2024, the CBIC has imposed antidumping duty on Poly Vinyl Chloride Paste Resin classifiable under HSN 3904, imported or originating from China PR, Korea RP, Malaysia, Taiwan and Thailand (subject to conditions as prescribed in the aforesaid notification). This antidumping duty will be effective for 5 years, unless revoked.

Vide Notification No. 10/2024 – Customs (ADD), dated 27 June 2024, the CBIC has imposed antidumping duty on Sodium Cyanide classifiable under HSN 2837, imported or originating from China PR, European Union, Japan and Korea PR (subject to conditions as prescribed in the aforesaid notification). This antidumping duty will be effective for 5 years, unless revoked.

Vide Notification No. 11/2024 – Customs (ADD), dated 27 June 2024, the CBIC has imposed antidumping duty on Alloy steel chisel/ tool and hydraulic rock breaker in fully assembled condition classifiable under HSN 84314930 and 84314990 imported or originating from China PR 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. 12/2024 – Customs (ADD), dated 27 June 2024, the CBIC has imposed antidumping duty on Easy open ends of tin plate, including electrolytic tin plate (‘ETP’) classifiable under HSN 83099090, 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.

Vide Notification No. 13/2024 – Customs (ADD), dated 27 June 2024, the CBIC has imposed antidumping duty on Telescopic Channel Drawer Slider classifiable under HSN 8302, imported from China PR or imported from other countries to be exported to China PR (subject to conditions as prescribed in the aforesaid notification). This antidumping duty will be effective for 6 months, unless revoked.

Vide Notification No. 02/2024-Customs (CVD), dated 28 May 2024, the levy of Countervailing Duty on Saccharin in all its forms classifiable under HSN 2925, imported from China as per Notification No. 2/2019-Customs (CVD) dated 30 August 2019 (which was valid for 5 years) is further extended till 28 February 2025.

3. Other Miscellaneous Updates under Foreign Trade Policy

Vide Policy Circular No. 02/2024 - DGFT dated 3 May 2024, The DGFT has clarified that the provision requiring payment of penalties equivalent to 10 per cent of the cost, insurance, and freight value and 3 per cent of the shortfall in the free on board (FOB) value in case of a shortfall of export obligation—as notified under the Advance Authorization Scheme (AAS) in the Foreign Trade Policy, 2023 will apply to authorizations issued on or after 1 April 2023.

Further, it is also clarified that this does not import any legal basis for refunding fees to the authorization holder in the instances where the payments have already been made to the department.

Vide Trade Notice No. 7/2024-25 – DGFT dated 28 June 2024, the DGFT has extended the Interest Equalisation Scheme for Pre and Post Shipment Rupee Export Credit up to 31 August 2024. However, this extension is applicable only for MSME exporters and for such extended period the total outlay of the scheme is capped at INR 7.50 Billion.