Indirect Tax Alert October 2023

GST Calendar –Compliances for the month of October’2023

Nature of Compliances	Due Date
GSTR-7 (Tax Deducted at Source ‘TDS’)	November 10, 2023
GSTR-8 (Tax Collected at Source ‘TCS’)	November 10, 2023
GSTR-1	November 11, 2023
IFF- Invoice furnishing facility (Availing QRMP)	November 13, 2023
GSTR-6 Input Service Distributor	November 13, 2023
GSTR-2B (Auto-Generated Statement)	November 14, 2023
GSTR-3B	November 20, 2023
GSTR-5 (Non-Resident Taxable Person)	November 20, 2023
GSTR-5A (OIDAR Service Provider)	November 20, 2023
PMT-06 (who have opted for the QRMP scheme)	November 25, 2023

 

Patna HC Upholds Validity of CGST Act Section 16(4)

Gobinda Construction v. Union of India (Patna High Court)

Facts

In a series of writ applications filed under Article 226 of the Constitution of India, a common challenge was posed against the constitutionality of Section 16(4) of the CGST Act. The grounds for challenge were that this section is in violation of Articles 14 and 300A of the Indian Constitution. Section 16(4) of the CGST Act imposes limitations on the utilization of Input Tax Credit (ITC) and, among other things, restricts the utilization of ITC with respect to an invoice or debit note after the 30th of November following the conclusion of the financial year in which such document was issued.

Rulings:

The Patna High Court has determined that Section 16(4) of the CGST Act is expressed in clear and unambiguous language. The doctrine of “reading down” is only applicable when general terms in a statute or regulation need to be interpreted in a specific manner to preserve its constitutionality. Input Tax Credit (ITC) is not an unconditional benefit; a registered individual becomes eligible for ITC only if they meet the conditions specified under Section 16 of the CGST Act Additionally, the appellant obtained an eligibility certificate from the Sales Tax department which remained valid for seven years starting from the date of the initial sale of their manufactured product.

The Court has expressed the view that in order to invoke the protections of Article 300-A of the Constitution, two conditions must simultaneously exist: (i) The deprivation of an individual’s property, and (ii) Such deprivation must occur without legal authorization. Section 16(4) is one of the conditions that enables a registered person to claim ITC, and it cannot be considered as violation of Article 300-A of the Constitution of India.

Consequently, the Court has affirmed that Section 16(4) of the CGST Act is constitutionally valid and does not infringe upon the rights enshrined in Articles 19(1)(g) and Article 300-A of the Constitution of India.

Show cause notice issued by the respondents on 23.09.2022 was deemed to lack legal standing, appear arbitrary, and exceed jurisdiction.

No Basic Custom Duty (BCD), No Surcharge on Income Tax (SWS).

Tata Motors Limited v. Commissioner of   Customs.

Facts

The appellant claimed an exemption from Customs duty, but even though they were exempt from the Basic Customs Duty (BCD),a Social Welfare Surcharge (SWS) was assessed at 10% on the notional BCD amount, leading to an appeal arguing that SWS should not apply since BCD was exempt, and SWS was calculated at 10% of the non-existent BCD liability as per Section 110 of the Finance Act, 2018.

Rulings

Social Welfare Surcharge (SWS) was assessed at 10% on the notional BCD amount, leading to an appeal arguing that SWS should not apply since BCD was exempt, and SWS was calculated at 10% of the non-existent BCD liability as per Section 110 of the Finance Act, 2018.

The Appellate Authority for Advance Ruling (AAAR) has affirmed the ruling of the Authority for Advance Ruling (AAR) that a service recipient is not eligible to seek an Advance Ruling.

Uttar Pradesh Metro Rail Corporation Ltd

Facts

The appellant had requested a ruling from the Authority for Advance Ruling (AAR) regarding the services provided by Kanpur Electricity Supply Company Limited (KESCO). However, the AAR declined to consider the request, citing that the recipient of services is not eligible to seek an advance ruling according to Section 95(a) of the CGST Act. Dissatisfied with this decision, the appellant filed an appeal with the Appellate Authority for Advance Ruling (AAAR).

According to Section 95(a) of the CGST Act, “Advance Ruling” refers to a decision provided by the Authority, Appellate Authority, or National Appellate Authority to an Applicant. This decision pertains to matters or questions specified in sub-section (2) of Section 97 or sub-section (1) of Section 100 and relates to the supply of goods or services, or both, being carried out or planned by the Applicant.

As per Section 95(c), an “Applicant” is defined as any person who is registered under the act or someone who intends to obtain registration under the same act. In this context, the AAR determined that a service recipient does not meet the criteria of an “Applicant” and is therefore ineligible to seek an advance ruling.

Ruling

The Appellate Authority for Advance Ruling (AAAR), while affirming the decision of the Authority for Advance Ruling (AAR), emphasized that the definition of the term “Applicant,” as outlined in Section 95(c) of the CGST Act, must be construed in accordance with Section 95(a) of the CGST Act. This linkage under Section 95(a) establishes that an Advance Ruling is related to a decision concerning the supply of goods or services by the Applicant.

The AAAR further noted that the language in Section 95(c) references the “supply of goods or services or both,” not the “receipt of goods or services or both.” This implies that Applicants seeking an advance ruling should be providers or suppliers of goods or services, not recipients of goods or services. Therefore, service recipients are not eligible to seek an advance ruling under the provisions of the CGST Act. 

The National Informatics Centre (NIC) has issued an advisory regarding the new time limit for reporting invoices on the Invoice Registration Portal (IRP).

Effect from 1 November 2023

In a recent advisory issued by the National Informatics Centre (NIC), a new time limit for reporting invoices on the Invoice Registration Portal (IRP) has been introduced.

According to the advisory, taxpayers with an aggregate annual turnover (AATO) of INR 100 crores or more must report their invoices on the e-invoice portal within 30 days from the invoice date. These taxpayers are not permitted to report invoices that are older than 30 days from the reporting date.

This time restriction applies to all document types for which invoice reference numbers (IRNs) are required, including credit and debit notes, which must also be reported within 30 days from the date of issue.

The Directorate General of Foreign Trade (DGFT) has issued a clarification regarding the applicability of the pre-import condition under the Advance Authorization scheme.

In a recent Trade Notice issued by the Directorate General of Foreign Trade (DGFT), clarification has been provided regarding the fulfillment of the pre-import condition under Advance Authorizations (AA) issued between October 13, 2017, and January 9, 2019.

Previously, the Supreme Court (SC) ruled that the pre-import condition must be met to claim exemption from integrated tax (IGST) and compensation cess on goods imported under AA.

Subsequently, the Central Board of Indirect Taxes and Customs (CBIC) and DGFT issued a Circular and Trade Notice, respectively. These documents clarified that IGST and compensation cess applied to imports made under AA between October 13, 2017, and January 9, 2019, in cases where the pre-import condition was not satisfied.