Indirect Tax, pretty much Indirect

GST Calendar – July 2021

Nature of Compliances	Due Date
GSTR-7 June 2021 tax deducted at source	July 10, 2021
GSTR-1 June 2021	July 11, 2021
GSTR-6 June 2021 Input Service Distributor	July 13, 2021
GSTR-3B June 2021	July 20, 2021
GSTR-5 June 2021 Non-Resident Taxable Person	July 20, 2021
GSTR-5A June 2021 OIDAR Service Provider	July 20, 2021
ITC-04 (Quarter Jan’21 – Mar’21)	July 25, 2021
IFF- Invoice furnishing facility (Availing QRMP)	July 28, 2021
GSTR-4 Composition Levy for the period FY 2020-2021	July 31, 2021
GSTR-9 & GSTR-9C FY 2020-2021	Dec 31, 2021

Key Highlights of 44^th GST council meet:

1. GST to be levied at the rate of 5% on Covid-19 vaccines.
2. Reduction in GST rate’s:

• 0% from 5%: Tocilizumab, Amphotericin B salt drugs.
• 5% from 18%: Hand sanitizers, temperature testing equipment, gas/electric/other furnaces for cremation, their installation, etc.
• 5% from 12%: Anticoagulants like Ventilators, Medical Grade Oxygen, COVID-19 Testing Kits, Oxygen Concentrators, and BiPAP Machines, Heparin, High Flow Nasal Cannula (HFNC) Devices, Ventilator Masks/Canula/Helmets, Specified Inflammatory Diagnostic Kits, and Pulse Oximeters.
• 12% from 28% : Ambulances 

Clarification regarding applicability of Dynamic Quick Response (‘QR’) Code on B2C invoices

1. An invoice, issued to a person having UIN, shall be considered as invoice issued for a B2C supply and shall be required to comply with the requirement of Dynamic QR Code.
2. Separate details of bank account and IFSC may not be provided in the Dynamic QR Code, where the UPI ID is linked to a specific bank account of the payee/ person collecting money.
3. Where the payment is collected by some another authorized person on behalf of the supplier, UPI ID of such person may be provided in the Dynamic QR Code, instead of UPI ID of the supplier.
4. Dynamic QR code is not required, where an invoice is issued to a recipient located outside India, for supply of services, for which the place of supply is in India and the payment is received by the supplier in foreign currency, through RBI approved mediums.
5. Details of Unique order ID/unique sales reference number which is linked with invoice issued for transactions in case of over-the-counter sales (invoice number and invoices are generated after receipt of payment) would be provided in dynamic QR Code for digital display as long as such details are available on processing system of the merchant/supplier and the cross reference of such payments are also provided on the invoice.
6. Where part payment has already been received from the customer/recipient either in form of advance / adjustment by way of voucher, discount coupons, etc, dynamic QR code to provide for remaining amount payable by customer/recipient against an invoice value. Dynamic QR code shall also provide details of total invoice value including details and cross reference of the part payment/advance/adjustment and any remaining amount payable by the customer.

Important Judgements

A. Method adopted for best judgment assessment cannot be arbitrary

Golden Mesh Industries vs. Asst Commissioner. ST | Telangana High Court

Facts:

• Petitioner had failed to file GSTR-3B return for the month of Nov’2018.
• Respondent issued notice and directed Petitioner to file the said return within 15 days, otherwise tax liability shall be determined basis best judgment assessment u/s 62 of the CGST Act along with corresponding interest and penalty.
• Petitioner was unable to file GSTR-3B within the prescribed time limit.
• Subsequently, Respondent issued best judgment assessment order and tax liability was determined as 3 times of the monthly average SGST tax of ₹ 1,50,000/-. Penalty was levied at 100%. Further, consequential attachment orders/garnishee orders were also issued by the Respondent and its office.

Issue:

• Whether the method adopted by the Respondent by multiplying by 3 times the monthly average SGST tax to determine the tax liability is reasonable?
• Whether levy of 100% penalty levied is according to provisions of the CGST Act or not?

Held:

• Hon’ble High Court observed that no principle was adopted by the assessing officer while computing the tax liability as 3 times of the monthly average SGST Tax. It further, observed that 100% penalty was levied on Petitioner without indicating any provision of law.
• Hon’ble High Court held that prima facie, order passed by Respondent appears to be arbitrary and contrary to the provisions of CGST Act and hence quashed the said order along with consequential attachments and garnishee orders.
• Hon’ble High Court remanded back the matter to the Respondent with a direction to indicate the method of assessment under the best judgment assessment u/s 62 and thereafter pass a reasoned order both with regard to levy of tax but also with regard to interest and penalty within 8 weeks.

B. Limitation u/s 54 not applicable upon refund of IGST paid on ocean freight under RCM

M/s Comsol Energy Private Limited vs. State of Gujarat. | Gujarat High Court

Facts:

• Entry No. 10 of Notification 10/2017 – IT (Rate) dated 28th June 2017, provides levy of IGST under RCM in the hands of Importer located in taxable territory on transactions wherein a person located in non-taxable territory provides services by way of transportation of goods through vessel from a place outside India to customs frontier of India.
• Hon’ble Gujarat High Court in the decision of Mohit Minerals (Pvt.) Ltd. vs Union of India & Ors., held that Entry No. 10 of the Notification No.10/2017 – IT (Rate) dated 28th June, 2017 is ultra vires Constitution of India, as it lacked legislative competency.
• Petitioner, relying upon the aforesaid decision filed refund claims of IGST paid on ocean freight under the RCM with the Respondent. However, Respondent denied the refund and issued a Deficiency Memo stating that the refund cannot be claimed for not being filed within the statutory time limit as prescribed u/s 54 of the CGST Act.

Issue:

• Whether Respondent are right in denying refund of IGST paid on ocean freight under RCM in terms of time limit prescribed u/s 54 of the CGST Act.

Held:

• Hon’ble High Court observed that Article 265 of the Constitution of India provides that no tax shall be levied or collected except by authority of law and that Section 54 of the CGST Act is applicable only for claiming refund of any tax paid under the provisions of the CGST Act. Since, the amount collected by the Respondent was without authority of law the Respondent is obliged to refund the amount erroneously collected.
• Hon’ble High Court noted that in the instant transaction, Section 17(1) of the Limitation Act is the appropriate provision for claiming the refund of the amount paid to the Respondent under the mistake of law.
• Hon’ble High Court quashed and set aside the Deficiency Memo issued by the Respondents. It further directed Respondents to process the refund claim along with simple interest at the rate of 6% per annum at the earliest.

C. POS for intermediary services as location of supplier is ultra vires

Dharmendra M Jani vs. Union of India & Ors. | Bombay High Court

Facts:

• Petitioner is engaged in providing marketing and promotional services to its customers located outside India.
• Indian purchaser (Importer) directly places an order upon the overseas customer for supply of goods. The goods are shipped by the overseas customer to the Indian purchaser, who gets the goods cleared from the port/customs. The overseas customer raises sale invoice in the name of the Indian purchaser, who directly remits the sale proceeds to the overseas customer. Upon receipt of the payment from the Indian purchaser the overseas customer pays commission to the Petitioner. There is no privity of contract between the Petitioner and Indian purchaser. Petitioner receives consideration in convertible foreign currency in lieu of said services.
• Petitioner qualifies the definition of ‘intermediary’ u/s 2(13) of the IGST Act.
• Place of supply (POS) in the instant transaction is location of supplier, (i.e., within India) in terms of Section 13(8) of IGST Act, thereby disqualifying Petitioner from the definition of ‘Export of service’ and making the transaction leviable to payment of CGST & SGST in terms of Section 13(8) read with Section 8(2) of the IGST Act.
• Petitioner paid CGST & SGST (under protest) to the Revenue, on its own i.e., did not charge and collect from its foreign customers.

Issue:

• Petitioner sought a declaration that Section 13(8)(b) read with Section 8(2) of the IGST Act, 2017 is ultra vires Constitution of India, CGST Act, 2017, IGST Act, 2017 and Maharashtra GST Act, 2017.

Held:

Matter was heard by the Divisional Bench of Hon’ble Bombay High Court. While Justice Ahuja is yet to pronounce his view (on June 16th 2021), Justice Ujjal Bhuyan held that Section 13(8)(b) of the IGST Act is ultra vires the GST Statue and is unconstitutional. He further observed that Sec 13(8) creates an artificial deeming fiction to make intermediary services a local supply. Main contentions of the Petitioner are:

• Levy of GST on an intermediary is violative of Article 14 of the Constitution of India, as there is denial of a level playing field vis-a-vis other exporters of services.
• Levy of CGST and SGST in the instant transaction constitute an unreasonable restriction upon the right of the petitioner to carry on trade and business under Article 19(1)(g) of the Constitution of India and may result in closure of Petitioner’s business
• Levy of tax on export of service is ultra vires Article 246A and 269A of the Constitution of India as Constitution grants power only to the Parliament to frame laws for interstate trade and commerce i.e., for determining inter-state trade or commerce.
• Levy of tax by State Government is ultra vires Article 286, as no state has authority to levy local tax on export of services.
• Section 8(2) and Section 13(8)(b) of the IGST Act are ultra vires the charging section i.e., Section 9 of the CGST Act.
• GST being a destination based tax on consumption, for taxing a service it is not the place of performance but the place of consumption which is relevant. Once the services are consumed outside India, Parliament has no jurisdiction to levy tax on such services consumed outside India.
• The cardinal rule of indirect taxation is that it must be capable of being passed on to the end receiver of the service, therefore, it is trite that an agent cannot be burdened with GST.
• Levy of GST on an intermediary like the petitioner providing services to an overseas customer would lead to double taxation on the same service.

D. Property of a person other than ‘taxable person’ cannot be attached u/s 83 of CGST Act.

Roshni Sana Jaiswal vs CCT, Delhi. | Delhi High Court

Facts

• Petitioner was director of Milk food Ltd. for the period 2006 to 2008, thereafter started rendering services as mentor/advisor and recvied salary in concerned FY (2019-20) for giving “strategic guidance” to company. Petitioner also holds 14.33% equity shares of the said company.
• Respondent initiated investigation u/s 67 of the CGST Act upon Milk food Ltd. and contends that ITC to the extent of Rs. 85 cr has been used through fake invoices. Further, statements of persons who were controlling the entity were recorded.
• Consequently, bank accounts of the Petitioner were provisionally attached u/s 83 of the CGST Act.

Issues:

Whether provisional attachment of bank account of a person not regarded as a “taxable person” can be done under section 83 of CGST Act, 2017 ?

Held:

• Honorable court held that the provisional attachment of Petitioner’s property including bank account u/s 83 of CGST Act, 2017 was without jurisdiction, as the said section provides provisional attachment of property only of a “taxable person”. However, in the instant case Petitioner is not the ‘taxable person’.
• Hon’ble Court also observed that the Respondent had failed to show any link between the Petitioner and purported fake invoices and that Respondents did not had any material, which would show that the concerned officer had to be recourse to Sec 83 of CGST Act, to protect the interest of the revenue.