Indirect Tax Updates August 2024

GST Calendar –Compliances for the month of September’2024

Nature of Compliances	Due Date
GSTR-7 (Tax Deducted at Source ‘TDS’)	September 10,2024
GSTR-8 (Tax Collected at Source ‘TCS’)	September 10,2024
GSTR-1	September 11,2024
IFF- Invoice furnishing facility (Availing QRMP)	September 13,2024
GSTR-6 Input Service Distributor	September 13,2024
GSTR-2B (Auto Generated Statement)	September 14,2024
GSTR-3B	September 20,2024
GSTR-5 (Non-Resident Taxable Person)	September 20,2024
GSTR-5A (OIDAR Service Provider)	September 20,2024
PMT-06 (who have opted for QRMP scheme)	September 25,2024

Entitlement to IGST Refund for Exported Goods despite Higher Drawback Claims.

Facts

The petitioner, sought a refund of Integrated Goods and Services Tax (IGST) paid on exported goods under Section 16(3)(b) of the IGST Act, 2017. The refund claim was initially rejected by the authorities on the grounds that the petitioner had claimed a higher duty drawback rate. The Bombay High Court ruled that while the petitioner is entitled to an IGST refund, the refund amount should be reduced by the differential amount of the higher duty drawback claimed.

Issue

The Petitioner, exported goods in July, August, and September 2017, paying IGST and claiming a higher drawback rate by selecting Column “A” on the relevant shipping bills. The petitioner claimed that under Section 16 of the IGST Act, exporters of zero-rated supplies are eligible for a refund of the IGST paid, despite the selection of a higher drawback rate. The refund was denied by the customs authorities, citing that claiming a higher drawback rate precludes eligibility for an IGST refund due to the risk of double benefits.

Rulings

The Bombay High Court held that Even if an exporter claims a higher drawback rate, they are entitled to an IGST refund under Section 16(3)(b) of the IGST Act. The refund amount should be reduced by the differential amount between the higher and standard duty drawback rates to prevent double benefits. The petitioner is entitled to the reduced refund of IGST along with applicable interest, and the petition was partly allowed.

Quashing of State GST Notices When Central GST Actions Are Already Initiated

Issue

The main issue in this case was whether the State GST authorities could issue a show cause notice, adjudication order, and demand for the same tax period and subject matter for which the Central GST authorities had already initiated proceedings. The petitioner challenged the jurisdiction of the State authorities to issue a subsequent notice and demand when proceedings had already been initiated by the Central authorities.

Facts

1. Parties Involved: The petitioner, was issued a show cause notice by the Central GST authorities on September 30, 2022, covering the tax period from April 2018 to March 2019. The petitioner had already participated in this proceeding.
2. State Authorities’ Action: Despite the ongoing proceedings initiated by the Central authorities, the State GST authorities issued another show cause notice (in Form GST DRC-01) on December 27, 2023, covering the same tax period and partially the same subject matter. Following this, the State authorities issued an adjudication order and demand in Form GST DRC-07 on April 27, 2024.
3. Legal Challenge: The petitioner challenged the show cause notice, adjudication order, and demand issued by the State authorities, arguing that they were without jurisdiction under Section 6(2)(b) of the CGST/SGST Act, 2017, since the Central authorities had already initiated proceedings for the same period and subject matter.

Ruling

The Calcutta High Court, quashed the show cause notice, adjudication order, and demand issued by the State authorities on the following grounds:

1. Application of Section 6(2)(b): The court held that under Section 6(2)(b) of the CGST/SGST Act, 2017, once the Central authorities have issued a show cause-cum-demand notice for a specific tax period and subject matter, the State authorities do not have the jurisdiction to issue a subsequent show cause notice and demand for the same period and subject matter.
2. Quashing of Orders: Since the Central authorities had already issued a show cause notice on September 30, 2022, for the period from April 2018 to March 2019, and since the State authorities’ notice dated December 27, 2023, covered the same tax period and subject matter, the subsequent actions by the State authorities were deemed without jurisdiction. Therefore, the court quashed the show cause notice, adjudication order, and demand issued by the State authorities.
3. Limitation on State Authorities: The court clarified that this ruling does not prevent the State authorities from proceeding against the petitioner for any period not covered by the show cause notice issued by the Central authorities, provided that the subject matter is different from that covered by the Central authorities’ notice.

Key Amendments in GST Law:

Merging Liability Provisions, Reducing Pre-Deposit Requirements, and Addressing Anti-Profiteering Disputes

1. Merging of GST Liability Determination Provisions:
   • A new Section 74A has been introduced, merging Sections 73 and 74 of the CGST Act to standardize the time limits for adjudication of GST liabilities starting from FY 2024-25.
   • This change introduces a uniform limitation period of 42 months from the due date of filing the annual return, irrespective of whether there are allegations of fraud or not.
   • The amended law extends the period for issuing a Show Cause Notice (SCN) by providing a total of 51 months from the due date of filing the annual return.
2. Uniform Limitation Period:
   • Unlike previous laws under Central Excise and Service Tax, which had different time limits for fraud cases, the new GST provision applies a uniform limitation period for all cases, potentially reducing the tendency of tax authorities to allege suppression to extend the time limit for issuing notices.
3. Reduction in Pre-Deposit Amounts:
   • The maximum pre-deposit required for filing an appeal before the First Appellate Authority has been reduced from Rs. 25 crores to Rs. 20 crores for CGST and SGST cases.
   • For appeals to the GST Appellate Tribunal (GSTAT), the pre-deposit requirement has been reduced from 20% to 10% of the disputed tax, with a maximum of Rs. 20 crores.
4. Changes to Appellate Tribunal Procedures:
   • Amendments empower the government to designate certain cases, such as anti-profiteering disputes, to be heard exclusively by the Principal Bench of the GSTAT in Delhi, which may necessitate travel for taxpayers.
5. Anti-Profiteering Provisions:
   • Anti-profiteering cases have been shifted to the jurisdiction of the GSTAT, with the government authorized to set a cut-off date for filing new applications. The Delhi High Court upheld the validity of anti-profiteering provisions.
6. Conditional Waiver of Interest and Penalties:
   • Section 128A provides for conditional waivers of interest and penalties for cases involving issues other than fraud for the period from July 1, 2017, to March 31, 2020, provided the tax is paid within a specified time. This aims to reduce litigation by offering relief to taxpayers with bona fide disputes.
7. General Implications:
   • These amendments are aimed at refining the GST system, reducing litigation, and providing clarity and uniformity in the application of GST laws.

Rejecting Refund by Relying on Section 34 – High Court Quashes Order

The Bombay High Court quashed an SGST authority’s order rejecting a refund claim by incorrectly applying Section 34 of the CGST Act. The case involved an MNC seeking a refund because an invoice was raised but not paid due to non-compliance with the agreement terms, and the buyer did not claim input tax credit. The court clarified that Section 34, which deals with credit notes, was not relevant as the refund was sought under Section 54. The court ordered the authority to reconsider the refund claim with interest, highlighting frequent misapplications of legal provisions by SGST authorities.

No Double Taxation Under Section 129 Prior to 1-1-2022

The High Court dismissed a challenge against a CBIC circular alleging double taxation under Section 129 of the CGST Act for periods before January 1, 2022. The court clarified that the provision’s intent was to recover tax for goods in transit that failed to meet statutory compliance and did not imply double taxation. After January 1, 2022, amendments to Section 129 focus solely on penalties rather than tax recovery, addressing concerns of double taxation.

Delay in Filing Appeal – No Condonation Beyond One Month

The Andhra Pradesh High Court ruled that delays in filing appeals before the first appellate authority under Section 107 of the CGST Act cannot be condoned beyond the one-month period stipulated. The court reaffirmed that the CGST Act, being a special statute, can exclude the application of the Limitation Act, 1963, emphasizing the strict timelines for appeal processes within the GST framework.