Indirect Tax – December 2022

GST Calendar –Compliances for the month of December’2022.

Nature of Compliances	Due Date
GSTR-7 (Tax Deducted at Source ‘TDS’)	January 10, 2022
GSTR-8 (Tax Collected at Source ‘TCS’)	January 10, 2022
GSTR-1	January 11, 2022
IFF- Invoice furnishing facility (Availing QRMP)	January 13, 2022
GSTR-6 Input Service Distributor	January 13, 2022
GSTR-2B (Auto Generated Statement)	January 14, 2022
GSTR-3B	January 20, 2022
GSTR-5 (Non-Resident Taxable Person)	January 20, 2022
GSTR-5A (OIDAR Service Provider)	January 20, 2022
PMT-06 (who have opted for QRMP scheme)	January 25, 2022

Highlights of 48th  GST Council meeting

• Rule 37 of the CGST Act

The council has recommended to amend sub-rule (1) of rule 37 of CGST rule, 2017 retrospectively with effect from 01.10.2022 to provide for reversal of input tax credit, in term of the second proviso to section 16 of CGST Act, only proportionate to the amount not paid to the supplier vis a vis the value of the supply, including tax payable.

 RNM Comments: The proportionate Credit of payment to the supplier within 180   would continue. However, the reversal would be only to an extent of proportion of non-payment in 180 days.

The Council recommended to insert Rule 37 A in CGST Rules, 2017 to prescribe the mechanism for reversal of input tax credit by a registered person in the event of non-payment of tax by the supplier by a specified date and mechanism for re-availing of such credit, if the supplier pays tax subsequently. This would ease the process of complying with the condition for availing of input tax credit under section 16(2) (c) of the CGST Act, 2017.

RNM Comments: The proportionate reversal of ITC, on payment of taxes by the supplier, may be reclaimed by the recipients without any substantial credit loss.

• Measures for streamlining compliances

1. To prevent a person’s PAN from being misused by dishonest individuals without the consent of the said PAN-holder, a PAN-linked mobile number and email address (fetched from the CBDT database) must be captured and recorded in FORM GST REG-01.OTP-based verification must also be carried out at the time of registration on such PAN-linked mobile numbers and email addresses.
2. Proposal to conduct a pilot in State of Gujarat for Biometric-based Aadhaar authentication and risk-based physical verification of registration applicants. Amendment in rule 8 and rule 9 of CGST Rules, 2017 to be made to facilitate the same. This will help in tackling the menace of fake and fraudulent registrations.
3. Section 37, 39, 44, and 52 of CGST Act, 2017 to be amended to restrict the filing of returns/ statements to a maximum period of 3 years from the due date of filing of the relevant return/statement.
4. FORM GSTR-1 to be amended to provide for reporting of details of supplies made through ECOs, covered under section 52 and section 9 (5) of CGST Act, 2017, by the supplier and reporting by the ECO in respect of supplies made under section 9(5) of CGST Act,2017.
5. Amendment in the definition of“ non-taxable online recipient” under section 2 (16) of IGST Act, 2017 and definition of “Online Information and Database Accessor Retrieval Services (OIDAR)” under section 2 (17) of IGST Act, 2017 so as to reduce interpretation issues and litigation on taxation of OIDAR Services.

• De-criminalization under GST

1. Section 132-The GST Council suggests decriminalizing several offenses under Section 132, raising the threshold for tax prosecution, and lowering the amount of compounding in GST.
2. Kinds of offenses: Three kinds of offenses have been recommended to be decriminalized. They pertain to obstruction or preventing any officer in the discharge of his duties, deliberate tampering of material evidence & failure to supply the information.
3. The threshold limit of tax amount for all criminal offenses: The GST laws raised the minimum tax amount from Rs 1 Crore to Rs 2 Crore for all criminal offences, with the exception of fraudulent invoices.
4. Refund to unregistered persons-There is no procedure for claim of refund of tax borne by the unregistered buyers in cases where the contract /agreement for the supply of services, like construction of flat/house and long-term insurance policy, is canceled and the time period of issuance of credit note by the concerned supplier is over. The Council recommended an amendment in CGST Rules, 2017, along with the issuance of a circular, to prescribe the procedure for filing an application for refund by the unregistered buyers in such cases.

 RNM Comments: In similar cases, consumers shall unswervingly get there funding from the exchequer. The process and procedure shall be aligned in due course by the council.

• Issuance of the Circulars:

1. Procedure for verification of input tax credit in cases involving a difference in input tax credit availed in FORM GSTR-3 B vis a vis that available as per FORM GSTR-2A during FY 2017-18 and 2018-19.
2. Clarifying the manner of re-determination of demand in terms of sub-section (2) of section 75 of CGST Act,2017.
3. Clarification in respect of the applicability of e-invoicing with respect to an entity.
4. To emphasize the fact that the No Claim Bonus provided by the insurance companies to the insured is an acceptable deduction for the valuation of insurance services, a circular will also be issued.
5. n accordance with the proviso to sub-section (8) of section 12 of the IGST Act, 2017, a circular is to be issued to explain the matters related to the location of the provision of services and the transportation of products.

RNM Comments: State of Maharashtra through a circular have provided for that differences of the tax being paid may be clarified through a declaration from the supplier or a Chartered Accountant under similar notices.

• Tax Rates

The GST Council has, among other considerations, recommended the following changes to the GST rates:

Sr. No	Description	From	To
Goods
1	Husk of pulses including chilkaand concentrates including chuni/churi, khanda	5%	Nil
2	Ethyl alcohol supplied to refineries for blending with motor spirit (petrol)	18%	5%

• No GST is applicable if a registered person rents a residential dwelling in his/her personal capacity for use as his/her own residence and on his/her own account, rather than on behalf of his business.

RNM Comments: The Proprietor shall have the same PAN No as the Proprietorship business. The Proprietor on paying GST on a reverse charge basis shall not be eligible for credit owing to personal usage of accommodation. The aforesaid transaction has been clarified as not being subject to Goods and Services Tax.

• A decision made to support micro-business e-commerce: The council has resolved to permit unregistered sellers and composition tax payers to make inter-day supply of goods through e-commerce.

RNM Comments: The time required for functionality on the portal along- with preparedness by the ECOs, the scheme may be implemented w.e.f. 01.10.2023.

1. Mentha arvens is supply included in the reverse charging system, just like Mentha Oil.
2. The CTH 1702 classification for rab (Rab-Salawat) entails GST at a rate of 18%.
3. Fryums produced using the extrusion technique are expressly covered by CTH 19059030 and subject to GST at a rate of 18%.
4. The higher rate of compensation cess of 22% is applicable to motor vehicles meeting all four requirements, which are that they are commonly referred to as SUVs, have engines with capacities greater than 1500 cc, have lengths greater than 4000 mm, and have a ground clearanceof170 mm or above.
5. Goods falling under the lower rate category of 5% under Schedule I of notification No. 1/2017-CTR will attract a lower rate of 5%, and the rate of 12% would only be applicable if the general rate is higher than 12%.

• High Seas Sale and Bond Sale to be non taxable

• Paras 7, 8 (a) and 8 (b) were inserted in ScheduleI II of CGST Act, 2017 with effect from 01.02.2019 to keep certain transactions / activities, such as supplies of goods from a place outside the taxable territory to another place outside the taxable territory, high sea sales and supply of warehoused goods before their home clearance, outside the pur view of GST. In order to remove the doubts and ambiguities regarding taxability of such transactions/ activities during the period 01.07.2017 to 31.01.2019, the Council has recommended to make the said paras effective from 01.07.2017. However, no refund of tax paid shall be available in cases where any tax has already been paid in respect of such transactions /activities during the period 01.07.2017 to 31.01.2019.

RNM Comments: High Seas Sale, Third Country Exports and Bond Sale shall be non-taxable w.e.f. 1.7.2017. No ITC reversal shall also be required as per Section 17 (3) of the Act.

• Sub-rule (3) of rule 108 and rule 109 of the CGST Rules, 2017 to be amended to provide clarity on the requirement of submission of a certified copy of the of the order appealed against and the issuance of final acknowledgment by the appellate authority. This would facilitate the timely processing of appeals and ease the compliance burden for the appellants.

• Rule 88 C and FORM GST DRC-01 B to be inserted in CGST Rules, 2017 for intimation to the taxpayer, by the common portal, about the difference between liability reported by the taxpayer in FORM GSTR-1 and in FORM GSTR-3 B for a tax period. Where such difference exceeds a specified amount and/ or percentage, for enabling the taxpayer to either pay the differential liability or explain the difference. Further, clause (d) to be inserted in sub-rule (6) of rule 59 of CGST Rules, 2017 to restrict the furnishing of FORM GSTR-1 for a subsequent tax period if the taxpayer has neither deposited the amount specified in the intimation nor has furnished a reply explaining the reasons for the amount remaining unpaid. This would facilitate taxpayers to pay/explain the reason for the difference in such liabilities reported by them, without the intervention of the tax officers.

RNM Comments: High Seas Sale, Third Country Exports and Bond Sales hall be non-taxable w.e.f. 1.7.2017. No ITC reversal shall also be required as per Section17 (3) of the Act.

• CESTAT sets aside an order blocking of CENVAT refund under Rule 5 of CCR

 M/s Sequoia Capital India Advisors Pvt Ltd vs. Commissioner of CGST and Central Excise| CESTAT, Mumbai

         FACTS

1. The issue involved is about the denial of refund of accumulated/unutilized Cenvat Credit of Service Tax under Rule 5 of CCR, 2004 r/w Notification No. 27/2012-C.E. (N.T.)
2. The appellants herein are provider of Financial Investment Advisory Services to their overseas clients and the entire output services of the appellants were provided to their overseas clients and no part of the output services was provided to any client in India.
3. The two refunds claims were filed by the appellants for the period October 2016 to December 2016 and January 2017 to March 2017. However, the refund claim has been rejected on the grounds that the premises are not registered and also had failed to establish any nexus of the input services in issue with the export of service.
4. Thereafter, an order was issued by the Authorities disallowing the refund claim of the Petitioner.

         ISSUE

1. Whether the authorities below have rightly rejected the refund claims in respect of the services exported out of India on the ground of being ineligible input services being no nexus with the output services.

        HELD

1. The Hon’ble Tribunal observed the amended Rule 5 w.e.f. 1-4-2012 does not provide for establishment of nexus between the input and the output services and the benefit of refund is to be extended only on compliance of the formula.
2. The new scheme does not require the kind of correlation that is needed at present between exports and input services used in such exports. Duties or taxes paid on any goods or services that qualify as inputs or input services will be entitled to be refunded in the ratio of the export turnover to total turnover.”
3. Further, the department has not specifically objected to the fact of computation of export turnover to the total turnover
4. The Hon’ble Tribunal set aside the impugned order and have found erred in the appeal of the authorities for rejecting the refund claim filed by the appellant. It further directed the refund is allowed with consequential relief, in accordance with law.