Indirect Tax News Letter
GST Calendar –Compliances for the month of May’2022
| Nature of Compliances | Due Date |
| GSTR-7 (Tax Deducted at Source ‘TDS’) | June 10,2022 |
| GSTR-8 (Tax Collected at Source ‘TCS’) | June 10,2022 |
| GSTR-1 | June 11,2022 |
| IFF- Invoice furnishing facility (Availing QRMP) | June 13,2022 |
| GSTR-6 Input Service Distributor | June 13,2022 |
| GSTR-2B (Auto Generated Statement) | June 14,2022 |
| GSTR-3B | June 20,2022 |
| GSTR-5 (Non-Resident Taxable Person) | June 20,2022 |
| GSTR-5A (OIDAR Service Provider) | June 20,2022 |
| PMT-06 (who have opted for QRMP scheme) | June 25,2022 |
ITC refund of unutilized credits is allowed irrespective of duty drawback claim
M/s Numinous Impex (I) Pvt. Ltd. | Madras High Court
Facts:-Petitioner export’s goods as classified under Customs HeadingNo.8483-40-00 of CT Act,1975 and such exports effected by the Petitioner are” zero rated supply” within the meaning of Section 16 of the IGST Act, 2017, accordingly, Petitioner had claimed refund of unutilized input tax. Revenue had denied there fund of such unutilized input tax credit under IGSTAct,2017 stating that the Petitioner has claimed duty draw back on the same exports under the provisions of Customs and Central Excise Duties and Service Tax Drawback Rules,2017 read along with relevant Notification as issued under Section 75 of the Customs Act,1962.
Issue:- Whether exports made without payment of IGST under bond on which, duty drawback is claimed under the provisions of the Customs and Central Excise Duties and Service Tax Drawback Rules, 2017, (formerly 1995) would entitle such an exporter, the benefit of refund of input tax credit under sub-Section (3) of Rule 16 of the IGST Act 2017 r/w 54 of the CGST Act, 2017 read with the Rules made there under.
Held:- Hon’ble High Court noted that, the rate of duty drawback for afore-said entry as prescribed vide Notification No.13/2016-Customs under Column No.4 (where the CENVAT facility has not been availed)is same as that of Column No.5 (where the CENVAT facility has been availed), i.e., 2%. Hon’ble High Court stated that the expression ‘Cenvat Credit’ in column 4 and 5 of aforesaid notification is to be read as‘ Input Tax Facility’ under the respective enactments and that the Petitioner is entitled to duty drawback at 2% irrespective of the fact that whether the petitioner has claimed ITC under the GST Act. Further Hon’ble High Court held that Para No.2.5 of Circular No.37/2018-Customs, dated Oct 9, 2018 cannot be pressed to deny legitimate export incentive as same is not sanctioned under law. Accordingly, directed the authorities to scrutinize there fund claims filed by the Petitioner and refund the same together with applicable interest.
One-third standard deduction as value of land is only optional and not mandatory
M/s Munjaal Manishbhai Bhutt| Gujarat High Court
Facts:- Petitioner had entered into an agreement with Developer for the purchase of a plot of land along and construction of bungalow on the plot. Further, separate and distinct consideration was agreed between the parties to the agreement for construction of bungalow and sale of land; Petitioner bonafidely believed that by virtue of GST laws, he would be liable to pay GST only towards the consideration payable for construction of bungalow in as much as it would constitute supply of construction service under the GST Act; Developer however, informed the Petitioner that he would be liable to pay tax at the rate of 18% under the GST Act on the total consideration i.e., for land as well as construction of bungalow and that he would be eligible for one-third deduction as value of land in terms of Notification No.11/2017 CT(Rate) dated June 28,2017 as amended from time to time.
Issue:- Whether the impugned notification providing for one-third deduction with respect to land or undivided share of land in cases of construction contracts involving element of land is ultra-vires the provisions of the GST Acts and/or violative Article 14 of the Constitution of India.
Held: – Hon’ble High Court noted there’s no dispute that sale of land and building are not liable to GST as per the provisions of GST law. Further, that the transaction with respect to the sale of building is taxable qua the construction services unless the entire consideration is received by the supplier after the receipt of completion certificate or first occupation, whichever is earlier. Further, that in the instant case the booking agreement is a part of the record, which specifically provides separate consideration agreed for sale of land and for construction of bungalow.
No GST under reverse charge mechanism by ‘importer’ under CIF contracts
Union of India vs. M/s Mohit Minerals Pvt. Ltd.| Supreme Court
Facts:- M/s Mohit Mineral’s (Respondent) are importers of coal from various countries and pay customs duties on CIF contract; Respondent aggrieved by Notification No.8/2017 IT(R) read with Entry No.10 of Notification No.10/2017 IT(R), which provides for levy of IGST on ocean freight under reverse charge mechanism in the hands of the ‘importer’ had filed a writ petition before Gujarat High Court;
Respondent’s main contentions are enlisted as below:-That the said notifications are ultra vires the GST Acts as taxing importers with GST on CIF contracts shall lead to double taxation on ocean freight; That by virtue of Entry No.10 of the Notification No.10/2017 IT(Rate) the liability of paying IGST has been shifted on importer and not on the ‘recipient’, thereby creating a deeming fiction vis-à-visa taxable event; Hon’ble Gujarat High Court held that the charge on importer in case of CIF value shall not qualify as the ‘recipient’ of services and that imposing tax on importer importing goods under CIF shall lead to double taxation, thereby held Entry No.10 of Notification No.10/2017 IT(R) as ultra-vires the provisions of GST Act.
Issue:- Hon’ble Apex Court relied upon Constitution Amendment Act 2016, where in Article 279B was deleted and Article279(1) was included in the Constitution of India, clearly reflecting intention of Parliament that there commendations of GST Council shall have only a persuasive value. Further it noted that Article279A does not begin with non-obstante clause and Article246A does not state that it is subject to the provisions of Article 279A. It stated that to regard there commendations of GST Council as binding edicts would disrupt fiscal federalism, where both the Union and the States are conferred equal power to legislate on GST.
Held:- Hon’ble Supreme Court noted that in a CIF transaction, the foreign exporter contracts with a foreign shipping line. The service of shipping is rendered by the foreign shipping line to the foreign exporter and the consideration is accordingly payable by the latter to the former. However, the cost of such shipping may form a component of the price that is eventually charged to the importer, based on the negotiated terms. Whereas, in case of an FOB contract negotiation, the importer would independently avail of the service of shipping and pay for the consideration. Further, Hon’ble Court noted that Section 13(9) of the IGST Act read with Section 2(93)(c) of the CGST Act inherently create a deeming fiction of the ‘importer’ of goods to be the ‘recipient’ of shipping service; Hon’ble Court also stated that it is a settled position that the legislature cannot delegate its‘ essential legislative functions’ and that the functions like levy of tax, subject matter of tax, taxable person, rate of taxation and value for the purpose of taxation are essential legislative functions. Further, that the said levy shall form an extra-territorial levy of tax as the supply of service of shipping in a CIF contract is from the foreign shipping line to the foreign exporter and has no territorial nexus to India and does not constitute ‘supply’ that can be taxed within the provisions of GST Act; Hon’ble Court while dismissing Department’s Special Leave Petition, affirmed the decision of Gujarat High Court and held that the levy of IGST upon ‘importer’ under CIF contract is ultra-vires the GST statue and lacks legislative competence;
Recovery of tax in case of search, inspection or investigation to follow the proper legal process
As a fallout of various writ petition’s being filed before various High Courts, where taxpayers have complained about voluntary deposit of tax in form DRC-03 by way of force or coercion, CBIC vide Instruction No.1/2022-23 GST Investigation dated May 25, 2022, has issued a clarification that recovery of taxes not paid/short paid can be made under the provisions of Section 79 of the CGST, Act, 2017 only after following due legal process of issuance of notice and subsequent conformation of demand by the issuance of adjudication order; Thus, there may not arise any situation where recovery of the tax dues has been made by the tax officer from the taxpayer during the search, inspection and investigation on account of any issues detected during search proceedings. However, the taxpayer is free to deposit any self-assessed tax on a voluntary basis; Pr. Chief Commissioner’s / Chief Commissioner’s CGST Zones and Pr. Director-General DGGI has been advised that in case of any complaint is received by a taxpayer regarding the use of force or coercion for getting an amount deposited during search, inspection or investigation proceedings, the complaint is to be enquired at the earliest and in case of any wrong doing on the part of the tax officer disciplinary action be taken against the defaulting officer’s.