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April 2019

Tax Amicus: March 2019


Breaking the credit chain – An avenue to boost revenue?
by Brajesh Kothary


The conditions, as recommended by the GST Council in its meeting held on 19-3-2019, bar builders from taking ITC on goods and services procured by them. It appears that government is targeting to make up for the revenue shortfall on account of reduction in the rate of tax on outward supplies by collecting non-creditable tax from the recipient, thereby breaking the chain of ITC. Another decision to restrict ITC was with the supplies made by restaurants chargeable to GST @ 5% without benefit of ITC. Principal reason was that the benefit of ITC was not being passed by restaurateurs to consumers. This concept of restricting ITC is not new in India. Several States had imposed restrictions on ITC in inter-State stock transfers and inter-State sale of goods to unregistered dealers under VAT regime. The concept of breaking the chain of input tax credit is also prevalent in the tax laws of other countries. Granting higher exemption threshold limit for supplier of goods is aimed at reducing the compliance burden of small taxpayers at the cost of loss of ITC for registered persons. This may help Government meet its revenue targets, but the practice should be implemented selectively and not as a rule.


Burden of unified registrations for EOUs and DTA units
by Anupama Ravindran


The second article in this issue of Tax Amicus intends to highlight issues about restrictions on refund of integrated tax paid on exports, for multiple business units in a State, having a single GST registration. Consider a scenario where a registered person has multiple units within the same State; one unit being a DTA and another being EOU or an Advance Authorization holder, wherein the DTA unit brings 90% of total revenue. In this case, registered person is not eligible to claim refund under Rule 96(10) on exports even for the DTA unit, which may prefer to pay IGST on exports to utilize large chunk of unutilized credit. GST provisions allow for multiple units, including DTA and EOU, within the same state to be registered under one GST registration therefore DTA also bears the brunt of the credit lying in the books, when actually DTA unit has not received goods under the exemption notification. The alternative is rather simple. If the person who has claimed deemed export benefit or exemption as claimed above also maintains separate books of accounts, he can very well split the registration to separate the DTA unit from the unit which claims the exemption.

Goods & Services Tax (GST)
Notifications and Circulars

  • 34th Meeting of GST Council – New regime for residential realty sector
  • Special tax rate of 6% on intra-State supply, on annual turnover of INR 50 lakh
  • Registration exemption to supplier of goods if turnover does not exceed INR 40 lakh
  • TCS collected by supplier not includible in value for GST
  • Sales promotion schemes – GST liability and ITC availability clarified
  • Valuation - Discounts when not includible in value of supply
  • Last dates for filing GSTR-1 and GSTR-3B for April-June 2019, notified
  • New return formats placed on GST portal
  • National Bench of GST Appellate Tribunal notified
  • GST incentives - Punjab to allow option

Ratio decidendi

  • Provisional attachment – Section 83 not invokable against Directors - Gujarat High Court
  • Detention of goods not sustainable when dispute is bona fide - Madras High Court
  • Anti-profiteering – Passing of benefit by retailer not dependent on manufacturer passing the benefit - NAA
  • Anti-profiteering – Comparison can be made with pre-GST tax rates - NAA
  • Profiteering to be calculated as per period owing to change in GST rates - NAA
  • Valuation - Cost of tools billed to customer, not includible - AAAR Karnataka
  • Lodging and food provided by private boarding house is a mixed supply - AAR West Bengal
  • ITC on ambulance purchased prior to 1-2-2019 not available - AAR West Bengal
  • ITC on inward supplies for construction of pre-fabricated warehouse, not available - AAR West Bengal
  • ITC on services of horticulture within plant area available - AAAR Odisha
  • Liaison office not acting as distinct person – GST registration not required - AAR Tamil Nadu
  • No exemption under Notification No. 51/96-Cus. to OEM suppliers supplying to specified institutions - AAR Odisha
  • Payback points not redeemed by customers are not actionable claim - AAAR Haryana
  • EU VAT - Motor vehicle driving tuition is not school or university education - CJEU

Customs
Notification and Public Notice

  • MEIS benefit on exports directly from EOU/SEZ on behalf of DTA unit
  • Printing of Advance/EPCG Authorisation on security paper to be discontinued
  • SEZ – Value of indigenous inputs not includible in net forex earning
  • Trust can also establish SEZ – SEZ (Amendment) Ordinance promulgated
  • Transport and Marketing Assistance scheme for agriculture produce approved

Ratio decidendi

  • Valuation – Demurrage not includible – Explanation to Valuation Rule 10(2) is bad - Orissa High Court
  • Advance Authorisation – ‘Prior import condition’ quashed - Gujarat High Court
  • Green pepper as raw produce to be classified as vegetable and not as pepper - CESTAT Bangalore
  • No penalty on CHA for exports without Let Export Order - CESTAT Mumbai
  • Anti-dumping duty not to be imposed on second hand machinery - CESTAT Chennai

Central Excise and Service Tax

Ratio decidendi

  • Job work of textile goods – Liability under Excise Rule 12B explained - Supreme Court
  • Refund claim by buyer and manufacturer to be treated differently - Supreme Court
  • In-house corporate guarantee not liable to service tax - CESTAT Chennai
  • Service tax exemption to transport from factory to gateway port – Conditions - CESTAT Delhi
  • Cenvat credit reversal - Exempted value cannot be used in formula - CESTAT Chennai
  • Commission paid by exporter to foreign subsidiary – Exemption - CESTAT Allahabad
  • Cenvat credit on GTA services when goods cleared on FOR basis - CESTAT Ahmedabad
  • Appeal – Filing of appeal for different units at principal place of business - CESTAT Ahmedabad

Value Added Tax (VAT)

  • State enactment for saving VAT recovery post GST, valid - Kerala High Court
  • Levy of advertisement tax by State govt is ultra vires post 101st amendment - Allahabad High Court

March, 2019/Issue-93 March, 2019/Issue-93

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