Capital Gain Computations Imp Judgement

_*Interesting judgement:

*Income Tax Act, 1961, Section 48(ii)*

Capital gains--Cost of acquisition--Interest paid on housing loan allowed as deduction under section 24(b)

Conclusion: Deduction under section 24(b) and computation of capital gains under section 48 being altogether different provisions, interest paid to bank for acquiring capital asset would be eligible as part of cost of acquisition, even if same had been claimed under section 24(b) while computing income from housing property.

Assessee earned capital gain on sale of certain property. Investment in that property was made  partly out of borrowed funds. AO disallowed interest included in cost of acquisition as the same had been claimed as deduction under the head "Income from house property". Under section 24(b). Held: Deduction under section 24(b) and computation of capital gains under section 48 were altogether covered by different heads of income, i.e., income from ‘house property’ and ‘capital gains. None of them excludes operation of the other. The interest in question was indeed expenditure in acquiring asset. Since both provisions were altogether different, assessee was entitled to include interest paid on housing loan for computation of capital gains under section 48, despite the fact that same had been claimed under section 24(b) while computing income from house property.

Decision: In assessee’s favour.

IN THE ITAT, DELHI BENCH

N.K.SAINI, A.M. & BEENA PILLAI, J.M.

Subhash Bana v. ACIT

ITA No.147/Del/2015

19 February, 2018

Appellant by: MK Juneja, CA

Respondent by: SS Rana, CIT, DR

CAN'T SEIZE FOR NOT FILLING OF PART B OF E WAY BILL(Hight Court Order)

Goods transported within a distance of 50 km cannot be seized for non filling of Part B of E-Way Bill

FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT

Heard Sri Nishant Mishra, learned counsel for the petitioner, Sri A.C. Tripathi representing the respondent nos.1, 2 and 3 and Sri B.K.Singh Raghuvanshi, learned counsel appearing on behalf of the respondent nos.4 and 5.

Learned counsel for the petitioner, at the outset, has contended that he is not pressing the alternative prayer made in prayer no.A.

The petitioner is aggrieved by the seizure of his goods seized vide impugned order dated 24.04.2018 passed by the Assistant Commissioner, State Tax, Mobile Squad, Unit VIIth, Ghaziabad (respondent no.3) as well as consequential notice dated 24.04.2018 issued under Section 129 (3) of the GST Act, 2017(hereinafter referred as ‘the Act’) .

The contention of the counsel for the petitioner is that the petitioner is a transporter and is engaged in business of transporting goods from one place to another having its head office at Delhi and godown at U.P. Boarder, Ghaziabad as also branches in various cities.

On 18.04.2018 and 20.04.2018 four registered persons/dealers of New Delhi booked their goods for transportation to four registered persons/dealer of Assam and Nagaland. The submission of counsel for the petitioner is that the consignors and the consignees are registered with their respective GST authorities.

Consignors prepared the invoices and charged the IGST at appropriate rate and downloaded the e-way bill from the common portal electronically in which the transporter’s details and details of invoices are duly mentioned.

The contention of the counsel for the petitioner is that though the e-way bill has been downloaded from common portal while providing all details as necessary to be mentioned in ‘Part A’, since the dealers/consignors were not aware about the details of vehicle by which the goods were supposed to be transported from the godown of the transporter situated at U.P. Boarder, Ghaziabad to its ultimate destination the vehicle details could not be furnished in ‘Part B’ at that time.

According to the counsel for the petitioner, the goods proceeded from the place of business of the consignors from New Delhi and required to be brought to the U.P. Boarder godwon at Ghaziabad and thereafter the same were required to be reloaded in bigger trolly/vehicle for the purpose of transportation from Ghaziabad to Assam and Nagaland respectively and when the aforesaid goods proceeded from Delhi and entered into the State of U.P., the same were detained by the respondent no.3 at 3.15 P.M. on 21.04.2018, solely on the ground the goods are not accompanied with filled ‘Part B’ of form GST e-way bill-01.

The person in-charged, though has explained that the goods are required to be reloaded at the U.P. Boarder godown for the purpose of transportation from there hence filling the e-way bill-01 of ‘Part B’ could not be done, for the reason that the details of vehicle, which was supposed to proceed for transportation from U.P. Boarder godown to its ultimate destination, were not known.

Sole ground for seizure of goods and vehicle and issuance of notice for penalty is that ‘Part B’ of e-way bill was not filled up.

The respondent no.3 after passing the seizure order dated 24.04.2018 has directed the petitioner to deposit an amount of Rs.67,323/- and equivalent amount of penalty.

In paragraph 25 of the writ petition, the petitioner has contended that goods were being transported from the place of business of registered persons to the godown of the transporter to be reloaded in big Trolly and thereafter further transportation, and this distance from Bawana, New Delhi to U.P. Boarder godown is less than 50 km.

Counsel for the petitioner has further submitted that in view of the decision taken by the Government that if the goods are transported within a distance of 50 km in the case of intra-state transaction, there is no requirement to fill up ‘Part B’. Notification no.12 of 2018 dated 07.03.2018 craves out an exception and provides that registered person of transporter may not furnish details of conveyance in ‘part B’ and further where the goods are transporter for a distance of upto 50 km within the State or Union Territory from the place of business of consignor to the place of business of transporter for further transportation.

Learned counsel for the petitioner has submitted that the Central Government, for similar cases, clarified vide clarification dated 31.03.2018 that in such cases, as like the present petitioner, only ‘Part A’ of Form GST e-way bill-01 to be filled up and not ‘Part B’.

In support of his claim, learned counsel for the petitioner has also relied on a recent decision of this Court in Writ Tax No.689 of 2018 (Rivigo Services Pvt. Ltd. vs. State of U.P. and others) decided on 24.04.2018 in which this Court has set aside the seizure order as well as consequential proceedings initiated under Section 129(3) of the Act on the similar grounds.

Since the facts of the present case are identical as of Rivigo Services Pvt. Ltd. (supra) and in view of the above Notification and decision of the Central Government, we are disposing of the present petition on similar terms by directing the respondent no.3 to release the seized goods and vehicle forthwith. We further hold that, in the present case, the seizure proceedings are carried out illegally and the same are wholly without jurisdiction as also against the Government Notification and Central Government decision, hence both the seizure order and consequential penalty proceedings under Section 129 (3) of the Act are hereby set aside.

The writ petition standsallowed .

Important Notifications for GST

Two notifications viz. Notification No. 26/2018 – Central Tax & Notification No.27/2018 – Central Tax dated 13.06.2018 have been issued to amend the CGST Rules. Amendments in brief are as under: 

DISPOSAL OF SEIZED GOODS 

Vide Notification No.27/2018 – Central Tax, Government has notified the list of goods which shall, as soon as may be after its seizure under sub-section (2) of section 67 of the CGST Act, can be disposed of by the proper officer, having regard to the perishable or hazardous nature, depreciation in value with the passage of time, constraints of storage space or any other relevant considerations of the said goods. Readers may refer the attached Notification for the list.

FAILURE TO PAY WITHIN 180 DAYS 

Second proviso to Sec. 16(2) of the CGST Act, 2017 provides that the ITC availed shall be added to the output tax liability to the extent where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of 180 days from the date of issue of invoice. Sec. 15(2)(b) of the said Act which deals with the determination of the value of supply provides that any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient and not included in the price actually paid or payable, shall be added to the transaction value. Hence an issue was whether such amount which is notionally added but not received by the supplier can be said to have been paid by the recipient and hence recipient can avail the ITC thereof ?? Thus an amendment has been made by adding a second proviso to Rule 37(1) to provide that such value notionally added shall be deemed to have been paid. 

SALES TAX PRACTITIONER OR TAX RETURN PREPARER 

A person enrolled as a sales tax practitioner or tax return preparer for a period of not less than five years in the previous regime can be enrolled as a goods and services tax practitioner if such person passes the examination within a period of one year from 01.07.2017. Said period has been modified to 18 months. Hence such persons are required to pass the examination by December, 2018. 

REFUND FORMULA – INVERTED RATE STRUCTURE 

Sub-rule 89(5) has been substituted with effect from 01.07.2017 to provide for a revised formula to calculate the maximum refund amount which can be claimed in cases where ITC has been accumulated on account of inverted duty structure. Revised formula is as under: 

Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} - tax payable on such inverted rated supply of goods and services 

It will be very interesting to observe that the above change has been given a retrospective effect.

REFUND IN CASE OF UNO, CONSULATE, EMBASSY, ETC. 

Sec. 55 of the CGST Act, 2017 permits that any specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries and any other person or class of persons as may be specified in this behalf shall be entitled to claim a refund of taxes paid on the notified supplies of goods or services or both received by them. Rule 95(3) further provided that the refund shall be granted in case of the inward supplies of goods or services or both were received from a registered person against a tax invoice and the price of the supply covered under a single tax invoice exceeds five thousand rupees, excluding tax paid, if any. Said limit of INR 5000/- has been has been removed. 

CONSUMER WELFARE FUND 

Provision has been inserted in Rule 97(1) to provide for the deposit of the amount of cess to the Consumer welfare fund. 

SHARING OF FUNDS ORDERED TO BE PAID BY THE ANTI-PROFITEERING AUTHORITY 

Sub-rule (3) to Rule 133 has been amended to provide that the funds ordered to be paid by such authority shall be shared equally by Center & the concerned State. 

E-WAY BILL - EMPTY CYLINDERS FOR PACKING OF LIQUEFIED PETROLEUM GAS 

Clause (o) has been inserted to Rule 138(14) to provide that E-way bill shall not be required in case of movement of empty cylinders for packing of liquefied petroleum gas for reasons other than supply. Hence on return of such cylinders from the place of customer, E-way bill will not be now required irrespective of the value. 

CHANGES IN THE FORMS 

GSTR – 4: Serial 4A of Table 4 of the said form is not required to be furnished for the tax periods July, 2017 to September, 2017, October, 2017 to December, 2017, January, 2018 to March, 2018 and April, 2018 to June, 2018. GSTR -4 is a quarterly return to be filed by the composition suppliers. Serial 4A of the said form asks for the details of inward supplies from registered suppliers. Said details are not required to be furnished for the stated periods. 

PCT-01: Registration form for enrolment as GST practitioner has been amended to provide for a declaration. 

RFD – 01: Changes have been made in the said form in the Statement related to the refund of accumulated ITC due to inverted tax structure. This is to make the form in line with the above referred change in the formula. Similar change has been made in RFD – 01A for online filing. 

GST COLLOCTIONS MAY 2018

India's GST collection in May 2018 croses Rs 94000 Crores

India collected a Rs 94,016 crore in the form of goods and services tax (GST) in May 2018, up from the average collection of nearly Rs 90,000 crore per month in financial year of 2017-18. 

NEW DELHI: India collected a Rs 94,016 crore in the form of goods and services tax (GST) in May 2018, up from the average collection of nearly Rs 90,000 crore per month in financial year of 2017-18. 

“Gross revenue collection in may is much higher than the monthly average of GST collection in the last financial year,” said the Ministry of Finance. 

Ministry of Finance

✔@FinMinIndia

Total Gross GST revenue collected in May 2018 is Rs. 94,016 crore of which CGST is Rs.15,866crore, SGST is Rs.21,691 crore, IGST is Rs. 49,120crore (including Rs. 24,447 crore collected on imports) and Cess is Rs. 7,339 crore (including Rs.854 crore collected on imports).

12:22 PM - Jun 1, 2018

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Giving a breakup of the collection, the Finance Ministry said that CGST collection is Rs 15,866 crore, SGST is Rs 21,691 crore, IGST is Rs 49,120 crore (including Rs 24,447 crore collected on imports) and Cess is Rs 7,339 crore (including Rs 854 crore collected on imports). “The total number of GSTR 3B Returns filed for the month of April up to 31st May, 2018 is 62.47 lakh,” said the ministry.  

“The total revenue earned by Central Government and the State Governments after settlement in the month of May, 2018 is Rs 28,797crore for CGST and Rs 34,020crore for the SGST,” add the Ministry.

“Though current month’s revenue collection is less compared to last month’s revenue, still the gross revenue collection in the month of May (Rs 94,016 crore) is much higher than the monthly average of GST collection in the last Financial Year (Rs 89,885 crore). The April revenue figure was higher because of year end effect.

Dr Hasmukh Adhia

✔@adhia03

The total GST collection for May 2018 is Rs 94,016 crores, which is higher compared to average monthly collection of Rs 89,885 crores of 2017-18. This reflects better compliance after introduction of e-way bills.

11:54 AM - Jun 1, 2018

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Twitter Ads info and privacy

"The total GST collection for May 2018 is Rs 94,016 crores, which is higher compared to average monthly collection of Rs 89,885 crores of 2017-18. This reflects better compliance after introduction of e-way bills," tweeted Dr Hasmukh Adhia, Finance Secretary, Government of India.

"The number Returns filed for the month of April upto 31st May is 62.46 lakhs as against 60.47 lakhs filed for March till 30th April," he added.

“On 29.05.2018, Rs 6696 crore has been released to the states as GST compensation for the month of March, 2018. Therefore, the total GST compensation released to the states for the FY 2017-18 (Jul,2017 to Mar, 2018) has been Rs 47844 crore,” said the Finance Ministry in a release.

DRAFT REPLY NOTICE FOR DIFFERENCES

Draft Reply - Notice for difference in GST Input Credit
The spate of notices on difference between GSTR 3B and 2B some of them allowing only 3 days time to reply mainly by the State GST officers in some States of India has led to fear of return of the Inspector Raj and 100% scrutiny for all. GST was to be a SELF ASSESSMENT REGIME. Hopefully, unlike VAT which was also self-assessment but converted into assessment for ALL, in GST it would not happen.

Polite reply in writing is the best defense for such frivolous letters/ notices.

Draft Reply after confirmation of applicability/suitability could include the following points provided:

Date ---------- RPAD/ Speed Post

To:
GST Officer ( issuing notice)

DS,
Sub: Reply to ASMT 1 difference in credit notice dt….. in addition to reply submitted online.
Ref: Our GSTR no……….

We are in receipt of the online mail from mail ID…..Please confirm whether this would be the official ID for further mails and we can reply to this ID.

The period provided of …days is less than the 30 days provided in general for any replies.

The lumpsum figure does not provide the period and the list of credits which have been compared with our figures in 3B. ( We provide our list of credits in Annexure-1 for your information)

GST was supposed to be based on voluntary compliance and non-invasive. This communication is difficult to reply due to various reasons which have ben further elaborated later.

As we understand GSTR 2A is not available or mandatory and therefore comparison with that document may not be fair and in line with GST Act. Many suppliers have not complied as it is not mandatory.

It would have been proper to compare the GSTR1 of the supplier and our 3B which could be confirmed.

The reasons for differences could be as under:

1. Delay in availing the credit of earlier months availed in the month under question. [ If list provided then we can identify such credits]

2. Ineligible credits not claimed by us.

3. Reverse charge payments and consequent credits not considered. [indicated in list submitted by us]

4. Import IGST credits similarly not considered. [indicated in list submitted by us]

5. The non-compliance from the suppliers side could be due to the following reasons:

due to non-payment,
incorrect uploading,
data entry mistake in figures or GST numbers,
classifying at B2C instead of B2B and
maybe many more which we are still to see
None of these are in our control.

We understand that only in exceptional cases like missing dealer etc, we would be questioned about non-compliance by supplier and have to prove our compliance as per the March GST Council meeting.

We have a system of verification of the credits once in a quarter and would be availing the missed credits and reverse the excess credit availed in the subsequent GSTR3B.

Considering all of the above it appears that the notice is too early [system itself not stable or set] and as we understand may not be legally valid.

Please provide us the list of credits as per your record and also confirm that this reconciliation is required in law.

We as law abiding assessees would like to be on the right side of law but do not wish to be burdened with additional costs of preparation of statements, getting them verified by our Consultants if there is no requirement under law.

Kindly acknowledge the receipt of this letter and advise on the questions raised especially in regard to the legal validity and the request for information from your side.

For Assessee
Authorised Signatory.
CC to Commissioner SGST

Sec 234F - late Filing Penalty

Section 234F – Income Tax – Late Filing Penalty
The penalty for late filing of income tax return is set to be increased from 1st April 2018 onward as per Section 234F of the Income Tax Act. In this article, we look at Section 234F of the Income Tax Act in detail.

Section 234F
The newly inserted Section 234F is reproduced below for reference:

76. After section 234E of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2018, namely:—

“234F. Fees for default in furnishing return of income.—(1) Without prejudice to the provisions of this Act, where a person required to furnish a return of income under section 139, fails to do so within the time prescribed in sub-section (1) of said section, he shall pay, by way of fee, a sum of,—

(a)
five thousand rupees, if the return is furnished on or before the 31st day of December of the assessment year;
(b)
ten thousand rupees in any other case:
Provided that if the total income of the person does not exceed five lakh rupees, the fee payable under this section shall not exceed one thousand rupees.

(2) The provisions of this section shall apply in respect of return of income required to be furnished for the assessment year commencing on or after the 1st day of April, 2018.”.

Penalty for Late Filing Income Tax Return – From 1st April 2018
As per Section 234F of the Income Tax Act, from 1st April 208, the penalty for late filing income tax return would be as follows:

Late Filing Between 1st August to 31st December
A penalty of Rs.5000 will be applicable if an income tax return due on 31st July is filed late between the due date and 31st December of the assessment year.

Late Filing After 31st December
A penalty of Rs.10,000 will be applicable if an income tax return due on 31st July is filed late after 31st December of the assessment year.

Reduction in Penalty
If a taxpayer has total income of Rs.5 lakh rupees or below, the maximum penalty for late filing of income tax return has been capped at Rs.1000 under Section 234F.

Penalty for Late Filing Income Tax Return – Before 1st April 2018
Under the old provisions applicable for income tax returns filed up to FY 2016-17, taxpayers who late file their income tax return could be subject to a penalty of Rs.5000. However, the penalty of Rs.5000 for late filing of income tax return is not automatically levied. In case an Income Tax Officer issues a notice for late filing of income tax return, the taxpayer would have to pay the penalty of Rs.5000. Hence, the penalty for late filing of income tax return is solely based on the decision of the assessing officer.

Know more about consequences and penalty for late filing income tax return.

Cancellation of GST Registration

Cancellation of registration under GST cannot takes place without issuing any notice or providing an opportunity of being heard as the GST law provides for the procedure to be followed for cancellation of registration – (Allahabad High Court)

1. Background: The Petitioner-Assessee preferred this petition before the Honourable High Court of Allahabad on the grounds that the website depicts the registration as cancelled whereas cancellation order has not been issued and an opportunity of being heard was not provided.

2. Disputes involved / Points of dispute: The registration of the Petitioner-Assessee is depicted as cancelled on the GST portal without having received the order of cancellation and without providing an opportunity of being heard.

3. Arguments

On behalf of the Assesse: The Petitioner-Assessee contends that their registration was cancelled without providing a copy of the order cancelling the registration and without providing an opportunity of being heard.

4. Scope of decision: The Honourable High Court directed the Counsel representing the Respondent-Department to seek instructions whether the Petitioner-Assessee’s registration has been cancelled. If yes, then it was also directed to the furnish the details of the Authority and the reasons for cancellation. The matter was posted for hearing on 05.10.2017. However, the status of the case, presently, is not known.

5. Conclusion: The GST law provides for the procedure to be followed for cancellation of registration. It is specified that, before cancellation of the registration an opportunity of being heard should be provided and thereafter, an order cancelling the registration should be issued to the assessee.

[Annapurna International vs. State of U.P. & 5 Others [2017 (11) TMI 1021 –Allahabad High Court]

GSTR 2 Filling process

1. Log in to the GST portal with valid credentials (User Id, Password).
2. Navigate to the GSTR 2 home page through >Return Dashboard> Select Financial Year(2017-18) and Return Filing Period and click on Search button> Click on PREPARE ONLINE option on GSTR 2 tab.
3. You will find 12 tiles on GSTR 2 page for entering data for different sections of GSTR 2.
Click on ‘GENERATE GSTR 2 SUMMARY’ to ensure that auto-populated details become available in your GSTR 2.
4. Click on each tiles and enter the required details and save to prepare the return.
5. Accept, Modify, Reject and Keep Pending auto-populated invoices /credit /debit notes
with ‘submitted’ status uploaded by the registered suppliers in their submitted GSTR 1 on the basis of records available with you and declare the Eligibility of ITC and ITC availed/reduced in section tile 3.4A or 6C.
6. One of the above four actions is mandatory on all auto-populated invoices with ‘submitted’ status available in your GSTR 2.
7. The GSTIN of the supplier, invoice number, invoice date, invoice type, reverse charge flag & POS cannot be modified. If one wants to change these fields one has to reject such auto-populated details and add them as missing invoice details.
8. Missing invoices/debit/credit notes details (not uploaded by suppliers but you have these  documents) can be added through the ‘Add Missing Invoices’ tab in sections 3.4A or 6C.
The invoices of same supplier with same number but different date cannot be added as missing invoice if these are available as auto-populated invoice with ‘submitted’ status in
the recipients GSTR 2.
9. Invoice details which are saved by the supplier and not submitted are also available in GSTR 2 with ‘saved’ status. The details of such invoices can be added though missing invoice tab. This has been done to facilitate quick updation of invoices.
10. Furnish the invoice/credit debit note details of supplies of goods and services received from unregistered supplier and the Eligibility of credit and credit availed/reduced on them.
11. Furnish the invoice/credit debit note details of import of services and the Eligibility of credit and credit availed/reduced on them.
12. Provide the Bill of entry wise details of goods imported from outside of India or received from SEZ units and the Eligibility of credit and credit availed on them.
13. Provide summary details of
a. Advances received and liability on them
b. Adjustment of advance tax paid earlier for supplies made in the tax period
c. Consolidate values of inward supplies from composition taxpayers, nil rated, other exempt and non GST
d. Reversals and Reclaim of ITC under different provisions of GST law.
e. HSN summary of inward supply
14. After providing the above details in applicable tiles click on ‘GENERATE GSTR 2 SUMMARY’ to update the tiles summary. Remember that initially the tile summary is zero even though there are auto-populated invoices available in your GSTR 2. The summary on the tiles is summary of invoices/debit/credit notes accepted/modified and added by you and other details. The System takes around 10 minutes to create a Generate GSTR 2 summary report.
15. GSTR 2 can be prepared online if the invoice numbers are few, around 100. If the auto-populated invoices are large, it is advisable to use offline tool for preparing GSTR 2. The offline tool can be downloaded from https://www.gst.gov.in/download/returns
16. After you have prepared GSTR 2 using Offline Tool, generate JSON file using offline tool. The key steps for preparing GSTR 2 through offline tool are as follows
a. Download the version 2.0 of Return Offline tool.
b. Extract and Install it on your Computer. An icon will be created on the Desktop of your computer
c. Download the auto-populated file of GSTR 2 by clicking on prepare offline tab on GSTR 2 tiles on Return home page and generating the download file by clicking on
“Download data for GSTR 2” and clicking on the file/s generated after some time.
d. Open the downloaded file in the offline tool and prepare your GSTR 2 by taking action on the auto-populated invoices with submitted status and furnishing other
required details. A JSON file can be generated by clicking on Generate JSON tab.
e. Log in the portal and upload the generated JSON file.
f. The downloaded file opened in the offline tool can also be exported as an excel file and the actions of Accept /Reject /Modify/Keep Pending can be stated in the action taken column of the excel file and other details furnished in the different worksheets to prepare the excel file of GSTR 2. This excel file can then be imported in the offline tool and a JSON file prepared which can then be uploaded to the portal to prepare your GSTR 2.
17. Click on ‘preview’ and download the draft preview report as pdf document and verify the entered data with your accounting records. In case of any discrepancy correct the furnished data.
18. Ensure, there is no error in the furnished data. Remember, once you submit your GSTR 2, you cannot make any changes in the GSTR 2. Any changes can then be made only in next tax period GSTR 2 through amendment tables.
19. Click on Submit button to submit the GSTR 2.
20. Click on File Return button, and file the return with applicable mode of electronic signature (DSC/EVC) after selecting the authorized signatory

From
GST TALKS

GST ON RENEWABLE ENERGY CERTIFICATES

*Govt: 12 per cent GST on renewable energy certificates*

REC is a market-based instrument that is equivalent to 1 megawatt-hour (MWh) of electricity generated from a renewable source.

Written by Deepak Patel | New Delhi |Published: June 8, 2018 1:14:04 am

The centre has clarified that 12 per cent GST (goods and services tax) is applicable on renewable energy certificates (RECs). Consequently, this will make renewable power more expensive.

“It is hereby clarified that Renewable Energy Certificates (RECs) and Priority Sector Lending Certificates (PSLCs) and other similar documents are classifiable under heading 4907 and attract 12 per cent GST,” stated a finance ministry notification Wednesday. This notification was issued as there was no clarity on the applicable GST on various scrips/certificates like RECs, PSLCs, etc.

REC is a market-based instrument that is equivalent to 1 megawatt-hour (MWh) of electricity generated from a renewable source. Most of the renewable energy is sold via power purchase agreements (PPAs) signed between renewable energy firms and state power discoms.

However, the remaining amount of renewable energy is largely sold through RECs. RECs are put up for sale at an energy exchange by the generation company.

Discoms generally purchase RECs to fulfill their renewable power obligations, which is mandated under national tariff policy. Some private firms — which have made assurances that they will buy a specific amount of green energy annually — also use RECs to fulfill their assurances.

GOODS SOLD BEYOND CUSTOM TERRITORY

GOODS SOLD BEYOND CUSTOM TERRITORY - GST IMPLICATION 

ON high seas /in customs bonded warehouses/by duty free shops/by SEZ units:

1. Issues that are creating headache are with regard to applicability / levy of GST on supplies made beyond the customs territory i.e., a. goods purchased from a foreign country by an Indian Entity and directly sold to another foreign country, without physical importation into India (mercantile trade);

b. goods supplied on high sea sales basis;

c. goods supplied from a customs bonded warehouse;

d. goods supplied by duty-free shops located at the airport in the arrival and departure hall;

e. goods supplied by an SEZ unit in the DTA.

2. It was totally unclear to the trade and industry, to consultants/advocates practising in this field and even to the law makers as to the correct legal position with regard to applicability of GST in the above enumerated situations. Towards this, on applications being made to the Advance Ruling Authority certain clarifications were made available. Clarifications in respect of some of the above situations were also issued by the CBIC. This article attempts to discuss the GST implications on supplies beyond customs territory and analyse the various advance ruling and CBIC circulars issued in this regard.

MERCANTILE TRADE

3. It was correctly clarified by the Kerala Advance Ruling authority vide its order CT/2275/18-C3 dated 26.03.2018 - 2018-TIOL-02-AAR-GST that in case of goods purchased by an Indian entity from abroad and sold directly to another country without bringing them in India, no GST will be payable.

HIGH SEA SALE

4. It was clarified vide CBIC Circular No. 33/2017-Cus dated 01.08.2017 that goods imported by an Indian entity and sold on high seas sales basis will also not attract GST on its sale by the original importer to the high seas sales buyer. It was clarified that IGST will be payable only once, when the high sea buyer files bill of entry for home consumption with the customs authorities, as a part of customs duty.

SALE FOR CUSTOMS BONDED WAREHOUSE

5. Thus, these doubts pertaining to the supply taking place beyond customs territory in case of mercantile trade and high sea sales were clarified as not being subject to payment of applicable GST. However, in respect of the goods imported and deposited in a customs bonded warehouse by one person and sold from the said warehouse to another person, utter confusion prevailed. Initially, it was clarified vide CBIC Circular No. 46/2017-Cus dated 24.11.2017 that such goods when sold from a customs bonded warehouse would attract applicable GST, on the ground that these goods are supplied in India.

6. In my humbly understanding that the position in the above circular was totally incorrect and illegal,because in such a situation the person who eventually files the bill of entry for home consumption would have to pay the GST twice. Once at the time of purchasing the goods from the person who had deposited them in the warehouse and secondly at the time of clearance from the customs bonded warehouse by way of IGST under Section 3(7) of the Customs Tariff Act (as a part of customs duty). This sort of understanding issued by CBIC was in fact also contrary to the commitment in Kyoto Convention to which India is a signatory.

7. Eventually,better judgement prevailed. CBIC now has issued a revised Circular No. 3/1/2018-IGST dated 25.05.2018 whereby it has been clarified that the goods sold in customs bonded warehouse will be considered as sold prior to their clearance from the customs area/territory and will not attract GST. In other words, now after this clarification, the anomalous situation has been removed. IGST now will be payable only once by the person who files the Bill of Entry for home consumption,and the same would be paid as a part of customs duty under Section 3 (7) of the Customs Tariff Act. This understanding is perfectly correct and accordance with the spirit of customs law and the GST law.

SALE IN DUTY FREE SHOPS

8. Despite the above clear understanding of dealing with goods sold from a customs bonded warehouse and its tax treatment, there are still certain identical areas wherein there remains utter confusion. For the sake of clarity, the said confusion needs to be removed on urgent basis. Such is the case with sale of the goods at the airport by the duty-free shops. Recently,the Advance Ruling Authority at New Delhi vide its Advance Ruling No. 01/DAAR/2018 dated 27.03.2018 - 2018-TIOL-08-AAR-GST has held that the sale made by the duty-free shops would be considered as supply within India and would attract the applicable GST. This in my understanding is totally incorrect and illegal.

9. I would like to clarify that the duty-free shops which are located either in the departure hall or in the arrival hall of an international airport are licensed as private customs bonded warehouse' under Section 59 of Customs Act. Once the CBIC has taken a position and clarified that there would be no GST in respect of the goods sold from the warehouse prior to the customs clearance then the same would squarely apply to the goods sold by duty free shops.

10. It has to be borne in mind that in case a person buys certain goods from a duty free shop in the departure hall,which it is invariably located after the customs clearance location at the airport, the passenger invariably is duty bound to take the said goods outside India and therefore,in essence it becomes a transaction akin to goods deposited in customs bonded warehouse and thereafter exported outside India under Section 68 of the Customs Act without crossing the customs frontier of India. Likewise, in case the goods are purchased by a passenger in the arrival hall then such passenger becomes liable to pay the customs duties (including the IGST on such goods incase the value of the goods exceeds the duty-free allowance limit). In this situation, the clearance from the duty-free shops is as good as clearance from a private customs bonded warehouse into India and should therefore be deal on same platform under the GST laws.

11. In nutshell, in both the situations there is no logic or legal basis to say that goods are subject to GST. The advance ruling given by the Advance Ruling Authority is contrary to the legal positon and the above circular issued by the CBIC for sale from customs bonded warehouse. Therefore, in the interest of the trade and industry and passenger sit is of utmost importance that a suitable clarification is issued by the CBIC in this matter so that all the doubts are clarified.

SUPPLIES BY SEZ UNIT IN THE DTA

12. Another unique situation is with regard to the units located in an SEZ and selling their goods in the DTA. Since as per the GST law, all SEZ units are also registered under the GST law and are liable to discharge the GST like any other DTA units barring few minor deviations. Simultaneously, SEZ units are liable to discharge the customs duties liability on the goods sold in the DTA in accordance with the provisions of the SEZ Act, rules and the Customs law.

13. Technically speaking, as of now in case any goods are sold by an SEZ unit in the DTA then it becomes liable to pay GST twice. Once under the GST law in respect of the goods sold in DTA as per the GST provisions. Secondly, by way of part of customs duty under Section 30 of the SEZ Act, 2005. It may be noted that when a bill of entry is filed for clearance of goods from an SEZ in the DTA then the buyer is required to pay IGST as part of the customs duty under Section 3 (7) of the Customs Tariff Act. In other words, here also the same anomalous position is there which was applicable to the goods sold from customs bonded warehouse.

14. It is pertinent to note that Section 53 of the SEZ Act provides that an SEZ area would be considered as an area beyond the customs territory of India. This provision further provides that all the SEZ will be considered as a port defined under Section 7 of the Customs Act. Thus, all units in the SEZ can be considered at par with a customs bonded warehouse.

15. In view of the provisions contained in the SEZ Act, it needs to be clarified immediately that no GST is payable under the GST law in respect of the goods sold by an SEZ unit in DTA. It is the customs duty and IGST under Section 3 (7) of the Customs Tariff Act,which are required to be paid and no separate tax is payable under the GST law.

16. In the like manner, it may be concluded that the goods sold by one SEZ unit to another SEZ unit whether in the same SEZ or in another SEZ are not chargeable to GST because such sales have to be construed as made before clearance of the goods from the customs territory of India. The sooner these points are clarified in the spirit of the GST law, Customs Act/SEZ Act, the better it would be for the department, trade and industry and other stakeholders.

17. Let us hope that the above anomalies on the supply of goods by duty free shops and by SEZ units will be clarified by CBIC by taking the clue and correct legal position taken in recently issued CBIC Circular No 3/1/2018-IGST dated 25.05.2018 in respect of sale of goods while those are deposited in a customs warehouse.

By Mr SC Jain, Managing Partner, RSA Legal Solutions

GSTR 3B Notice Case

GSTR-3A Notice to return defaulter U/s. 46 r/w Rule 68: An Analysis
The fever for GST-ASMT 10 was not yet over and today got another notice called GSTR-3A for non filling of GSTR 3B. Unlike last time this notice was an attachment in prescribed format however without authorized signature but yet again from GMAIL ID.
The fever for GST-ASMT 10 was not yet over and today got another notice called GSTR-3A for non filling of GSTR 3B. Unlike last time this notice was an attachment in prescribed format however without authorized signature but yet again from “GMAIL ID”. I feel that the higher ups in the department should give proper instructions to the jurisdictional officers regarding this, as it may raise issues of authenticity of such notices received through a public domain. Through this write up, I putting an effort to analyze few anomalies in the GST provisions.

Updates

Today's Update

GST: A transaction once reported as B2C cannot be amended later to add GSTIN & convert transaction as B2B. CBIC FAQ 7 (Jun 2018) on Financial Services.

GST: The location of a supplier will be the state in which the person holds a bank account even if bank branches of other locations are used for rendering services to customers under the GST the government clarified. 

CBIC has launched a tax refund drive in the first fortnight of June and issued instructions to swiftly settle refund claims of exporters that are held up because of mismatches in the returns filed by them.

NBFC Companies are planning to meet the RBI on the issue of implementation of Ind AS. RBI has deferred the implementation of Ind AS for banks by a year, while it is applicable for NBFCs from April 1, 2018.

SEBI has issued Master Circular for Stock Brokers which is a compilation of relevant circulars issued by SEBI which are operational as on date of this circular.