March 2020

Tax Amicus: January 2020


Intermediary services - Taxability of cross-border services after withdrawal of circular
By Satya Sai and Ranadeep Voriganti

Cross-border supplies (import and export) of goods and services generally entail the presence of an intermediary. It involves provision of two independent supplies, i.e., one from the principal to the ultimate customer and another from the agent to the principal. The concept was introduced in 2012 under service tax and it may be noted that the definition of intermediary under GST law and under erstwhile Service Tax law is identical. Considering two decisions of the Advance Ruling Authority, the authors highlight that there was confusion prevalent in the industry which led the CBIC to issue Circular No. 107/26/2019-GST in July 2019. Elaborating on the points covered in the circular, the authors feel that the circular however kept the situation unsettled rather than settling it, and hence was withdrawn in December 2019. According to the authors, though it is imperative for the Government to ensure that companies providing back office support services remain globally competitive, it is essential for all members of the industry who are providing services to its parent companies or to foreign clients, to ensure that the agreements or contracts entered with the foreign clients clearly describe the nature and scope of service...

Goods & Services Tax (GST)

Notifications and Circulars

  • Central Goods and Services Tax Rules, 2017 – First amendment of 2020
  • Central GST Act, 2017 - Amendments by Finance (No.2) Act, 2019 effective from 1-1-2020
  • Exemption to upfront amount for long-term lease – Conditions imposed
  • Refund of IGST on exports – Standard Operating Procedure for verification specified
  • RCM for renting of motor vehicle
  • GST rates revised on woven and non-woven bags
  • Revisional authorities under CGST Section 108 notified

Ratio decidendi

  • No IGST on ocean freight for import of goods – Sl. No. 9(ii) of Notification Nos. 8/2017-Integrated Tax (Rate) and Sl. No. 10 in 10/2017-Integrated Tax (Rate) held ultra vires IGST Act – Gujarat High Court
  • Composite supply – Independent supplies by two different taxable persons cannot be clubbed – Kerala High Court
  • Refund of IGST when higher drawback claimed wrongly refunded with interest – Madras High Court
  • Tran-1 – Proof of not being able to upload form due to technical glitches, not mandatory – Delhi High Court
  • Tran-1 – Software systems must be in tune with law and not vice versa – Delhi High Court
  • Tran-1 – Karnataka High Court allows filing of revised Tran-1 till 31-12-2019 – Karnataka High Court
  • Confiscation notice under Section 130 when can be issued – Gujarat High Court
  • Attachment of current account having debit balance merely ruins business – Punjab & Haryana High Court
  • No interest liability when IGST amount wrongly deposited as CGST – Jharkhand High Court
  • Anti-profiteering – Price reduction before roll out of GST is not passing of ITC benefit received after GST – National Anti-profiteering Authority
  • Anti-profiteering - Rebate and discounts cannot be treated as passing on benefit of ITC – National Anti-profiteering Authority
  • ITC not available on material used for construction of property for renting out – AAR Tamil Nadu
  • Valuation in case of supply to distinct person – Rules not to be applied sequentially – Appellate AAR Tamil Nadu
  • ITC available on supply received from HO for further sub-lease, even when consideration paid by netting off of payable and receivable – Appellate AAR Tamil Nadu
  • Mobilisation amount remaining unadjusted on 1-7-2017 is liable to GST – Appellate AAR West Bengal
  • Printing of banners using content provided by customer when a composite supply with predominance of service – Appellate AAR West Bengal


Notifications and Circulars

  • AIR drawback schedule revised – New rates to come into effect from 4th of February 2020
  • Social Welfare Surcharge payable in cash on imports under MEIS/SEIS – No recoveries for past cases where SWS paid through scrips
  • DTA supplies by SEZ - Registration under Steel Import Monitoring System when not required
  • Gifts – Import prohibition clarified
  • SCOMET – Procedure for export for demo/display, etc., revised
  • Import of refined bleached deodorized palm oil and palmolein made restricted
  • Gold and Jewellery exports – Revision in documents to be submitted as proof of exports
  • Export to Nepal – Mandatory online application for SAFTA and SAPTA Certificate of Origin
  • DIN mandatory in respect of all communications including e-mails

Ratio decidendi

  • Social Welfare Surcharge payable in cash for imports under MEIS – Madras High Court
  • Exemption – Rules for import of goods at concessional rate of duty for manufacture of excisable goods, not procedural – Madras High Court
  • Advance authorization – Para 4.28(f) of FTP-HoP not applicable to cases where export obligation fulfilled – CESTAT Ahmedabad
  • Valuation – Service charge paid for import, when not includible – CESTAT Hyderabad
  • DGFT and not Customs empowered to take action for alleged wrongful availment of TED – Gujarat High Court
  • Refund – Unjust enrichment – Incidence of duty not passed merely because duty booked as expenditure in P&L account – CESTAT Delhi

Central Excise, Service Tax & VAT

Ratio decidendi

  • Waiver of redemption fine under Sabka Vishwas (Legacy Dispute Resolution) Scheme – Gujarat High Court grants interim relief
  • Cenvat credit – Scope of definition of ‘exempted goods’ – Bombay High Court
  • Stock transfer – Sale immediately by agent in another State – CST not imposable merely on presumption of pre-existing contract – Madras High Court
  • Demand – Section 11A not invokable once refund order passed under Section 11B attains finality – Allahabad High Court
  • No service if commission paid to MD considered as salary by Income Tax Authorities – CESTAT Allahabad
  • Ex-gratia charges for making good damages under a contract for unintended event not liable to service tax – CESTAT Allahabad
  • Rail transport - Spices covered under ‘food stuff’ for exemption on transport by rail – CESTAT Mumbai
  • Refund of Cenvat credit – Debiting credit a/c. after filing of claim only a procedural violation – CESTAT Bangalore
  • Cenvat credit availed wrongly before ‘use’, regularized by payment of interest – CESTAT Kolkata
  • No franchise service when right of representation absent – CESTAT Delhi

January, 2020/Issue-99 January, 2020/Issue-103

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