Intermediary – own account exclusion

 

 

The intermediary service has been a controversial subject in cross border trade, since the days of Service Tax. The foremost controversy is on the outbound leg, as in if the services qualify as ‘intermediary services’, the place of supply becomes ‘the location of supplier of services’, and therefore ousting the services from the purview of export of services [Section 2 (6) of the IGST Act].

While the entire definition is ambiguous and pending constitutional litmus, the definition contains an inter alia exclusion of ‘own account’, which if applied correctly could provide a window of opportunity to various players to preserve the export status. The CBIC vide Circular No. 159/15/2021-GST dated September 20, 2021 (‘the Circular’) tried to provide certain clarity, but there are still gaps that need to be covered. In this backdrop, this article examines the ‘own account exclusion’.

Interest for default in payment of Advance Tax [Section 234B]

 

·      Section 234B provides for levy of interest for default in payment of advance tax. Interest under section 234B is levied in the following two cases:

SC holds that gains arising on transfer of depreciable asset will be qualified as short-term capital gains

 This Tax Alert summarizes a ruling of the Supreme Court (SC) dated 7 July 2021 in the case of Sakthi Metal Depot (Taxpayer), wherein the issue before the SC was whether on transfer of a capital asset on which depreciation was claimed and allowed to the Taxpayer for a long period but not used in business subsequently, would qualify as long-term or short-term capital gains under the provisions of the Indian Tax Laws (ITL).

GST credit not allowed if supplier furnishes GSTR-1 belatedly - WB AAR

 

It is to apprise you about a very critical decision by West Bengal Authority for Advance Ruling (‘AAR’) in the case of Eastern Coalfields Limited, 2021-VIL-345-AAR.

 

The AAR was dealing with the question as to whether the recipient is entitled to claim Input Tax Credit (‘ITC’) for invoices pertaining to FY 2019-20 where the supplier has furnished its Form GSTR-1, GSTR-3B and paid tax in November 2020 i.e. belatedly.

New Functionality on GSTN portal

 

On demand fetching of Bill of Entry details from ICEGATE Portal

We wish to update that the GSTN portal has been enabled with the functionality of fetching the bill of entry details from the ICEGATE portal which didn’t auto-populate in GSTR-2A. As per advisory on the GSTN portal, self-service functionality has been made available on the GST Portal to help importers of goods and recipients of supplies from SEZ that can be used to search such records in the GST system and fetch the missing records from ICEGATE. Taxpayers can navigate the functionality from the Services > User Services > Search BoE.

Risk and losses due to Employee reimbursement.

In any organization, Employee reimbursement is very common and the process is also user friendly. The employee first spent from his pocket based on company policies and his manager consent and then claims the same from the company by submitting the invoices. In the beginning, the purpose was limited only to food and conveyance but later on, the scope extended like training fees, online courses and online purchases of small items etc. The managers find the process of Employee reimbursement very smart & effective as it reduces the time of making purchases and payments which generally will take more time when it routes through normal vendor process.

Recommendations of 45th GST Council Meeting

 ·         Extension of existing concessional GST rates (currently valid till 30th September 2021) on Covid-19 treatment drugs, up to 31st December 2021.

·         GST rate has been amended for a number of items. Rate for Metals ores and energy renewable parts, Plastic waste etc  has been increased from 5%  to 18%.

·         Mentha oil supply bought under reverse charge

·         No  decision on bringing Petroleum under GST.

·         E Commerce Operator (CAB & Food) to pay 5% GST from January 1, 2022.

·         Carbonated Cold drinks will have GST @ 28% and Cess @ 12%.

·         UPS attract GST @ 18% and batteries @ 28%.

·         Services by cloud kitchen attract GST @ 5%.

·         Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons (entities having same PAN but registered in different states), without going through the refund procedure, subject to certain safeguards

·         Aadhaar authentication of registration to be made mandatory for being eligible for filing refund claim and application for revocation of cancellation of registration

·         Late fee for delayed filing of FORM GSTR-1 to be auto-populated and collected in next open return in FORM GSTR-3B.

·         Rule 59(6) of the CGST Rules to be amended with effect from 01.01.2022 to provide that a registered person shall not be allowed to furnish FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for the preceding month 

·         Rule 36(4) of CGST Rules, 2017 to be amended, once the proposed clause (aa) of section 16(2) of CGST Act, 2017 is notified, to restrict availment of ITC in respect of invoices/ debit notes, to the extent the details of such invoices/ debit notes are furnished by the supplier in FORM GSTR-1/ IFF and are communicated to the registered person in FORM GSTR-2B.  

Tax Planning on Capital gain on Land .

 

Action / Transaction	Tax Incidence.
Mr. R hold a plot of Land. He will divide the same into plot A and plot B and transfer the Plot B to his son Mr. S by way of gift	1.    Mr S requires to pay stamp duty to get the gift of land in his name from his father. 2.    The gift is between father and son and hence Mr. S not require to include the gift in his taxable income u/s 56(2)(vii)/(x) of Income tax act.
Mr R and  Mr S both sold the Plot A and Plot B.	1.    For Mr. R there is Long term capital gain as he is holding the land for more than 2 years. 2.    For Mr. S, even though  his holding is less than 2 years, since he had obtained land by way of gift , the period of holding of previous holder will be also counted. It will be more than 2 years and hence Long term capital gain. 3.    For computation of capital gain refer the table A given below.
Mr. R and Mr S purchase a new residential property within 2 years from the date of sale of land. (refer section 54F all conditions)	1.    Both are entitled for exemption under section 54F. 2.    For computation of Exemption u/s 54F refer the table B given below.

 

Government announces disbursement of the benefits under various export promotion schemes

This  Alert summarizes a recent Press Release  issued by the Ministry of Commerce & Industry announcing allocation of funds by Central Government for various export promotion schemes.

The key announcements are:

• INR 56,027 crores is allotted in the current financial year for disbursement of pending export incentives under various schemes viz., Merchandise Exports from India Scheme (MEIS), Service Exports from India Scheme (SEIS), Rebate of State Levies (RoSL), Rebate of State and Central Taxes and Levies (RoSCTL), Remission of Duties and Taxes on Exported Products (RoDTEP)[2] and other legacy schemes like Target Plus etc.
• The above stated amount is over and above the budgeted outlay of INR 12,454 crores for RoDTEP and INR 6,946 crores for RoSCTL scheme already announced for exports made in FY 2021-22.
• The amount would be disbursed to more than 45,000 exporters, out of which, 98% are small exporters in the Micro, Small & Medium Enterprises (MSME) category.
• Service sector exporters will be able to claim SEIS benefits for FY 2019-20. Revisions in service categories and rates are being notified.

Eligible exporters are required to file export claims relating to earlier years by 31 December 2021. The online portal will be enabled shortly to accept scrip-based applications and would be integrated with a mechanism to monitor provisioning and disbursement of export incentive

SC holds Section 14A of the IT Act not applicable where own funds are more than borrowed funds

 

BACKGROUND

While section 14A of the Income-tax Act, 1961 (IT Act) provides for disallowance of expenditure incurred to earn exempt income, Rule 8D of the Income-tax Rules, 1962 (IT Rules) contains methodology for computing the disallowance under section 14A.

High court allowed Additional Interest.

"It is not my interest to pay the principal, nor my principle to pay the interest".

Tone of order is set by mentioning the above sentence in opening para of order delivered by Single judge of Karnataka High Court

Compulsory GST Compliances before Sep 30, 2021.

Compliances under various rules and regulations under the GST Act in regard to FY 2020-21 before 30th Sep-21.

Input Tax Credit (ITC) Related-
1. Availment of Input Tax Credit for F.Y 2020-21: As per Section 16(4), a registered person shall not be entitled to take ITC in respect of any invoice or debit note for the supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier. Therefore, if any ITC in relation to any invoice/debit note pertaining to F.Y 2020-21 has not been claimed by the taxpayer then the same should be claimed in the month of Sept-2021.

CBDT provides broad contours for handling proceedings by Jurisdictional AO if transferred from faceless regime and also prescribes rule for authentication of records under faceless assessment proceedings

 This Tax Alert summarizes a circular issued by the Central Board of Direct Taxes (CBDT) on 6 September 2021 (Circular) prescribing the procedure for handling assessment or penalty proceedings by Jurisdictional Tax Authority (JTA) once it is transferred from the faceless regime to the traditional regime by the National Faceless Assessment Centre (NFAC) or the National Faceless Penalty Centre (NFPC), respectively.

The Circular lays down broad contours to be followed by the Jurisdictional Assessing Officer (JAO), like conducting the proceedings electronically, allowing personal hearing via video conference, use of faceless process such as verification unit for online verification or technical unit for technical inputs etc., to the extent technically feasible.

This Tax Alert also summarizes a Notification issued on 6 September 2021 and a Press Release issued on 7 September 2021by the CBDT, notifying new rule for verification of electronic records submitted under Faceless Assessment under the provisions of the Income Tax Laws (ITL). The new rule simplifies the authentication process to provide that the electronic record submitted through the registered account by a taxpayer will be deemed to be authenticated using Electronic Verification Code (EVC).

Income-tax return and Audit report deadlines for FY 2020-21 - Further extended

 The Central Board of Direct Taxes (“CBDT”) has issued a press release dated 9 September 2021, wherein various compliance due dates applicable for Financial Year 2020-21 have been further extended to provide relief to taxpayers in view of the difficulties being faced. 

 

We have outlined below the extended due dates for your easy reference:

 

Sl. No	Particulars	Original due date	Extended due date vide circular dated 20 May 2021	Extended due date vide press release dated 9 Sep 2021
1	Return of Income (ROI) for individuals, etc	31 Jul 2021	30 Sep 2021	31 Dec 2021
2	Tax audit report in Form 3CD for FY 2020-21 (for taxpayers who have not entered into international transactions, i.e. non-TP cases)*	30 Sep 2021	31 Oct 2021	15 Jan 2022
3	Form 3CEB for FY 2020-21	31 Oct 2021	30 Nov 2021	31 Jan 2022
4	ROI of taxpayers (other than covered in points 1 and 5)	31 Oct 2021	30 Nov 2021	15 Feb 2022
5	ROI for persons who have entered into international transactions (TP cases)	30 Nov 2021	31 Dec 2021	28 Feb 2022
6	Belated or revised ROI for FY 2020-21	31 Dec 2021	31 Jan 2022	31 Mar 2022

 

Further, it has been clarified that the above extension of time for return of income will not be factored for calculation of interest under section 234A of the Income-tax Act, 1961 (where the net tax liability after reduction of advance tax, TDS, etc exceeds INR 1 lac).

Form notified for declaration by senior citizens

 1. CBDT has notified new Rule 26D in respect of furnishing of declaration and evidence of claims by specified senior citizen under section 194P of the Income Tax Act. 

GST Open Issues.

  

1.       GST on the common cost of different branches/ units

·         Decision of AAAR is binding only to Columbia Asia.

Extension of Income Tax Due date

 

Particulars of Compliance under Income Tax Act, 1961	Due date (Including earlier extended date)	Extended Due date	Previous Circular of deadline Extension
Application in form 10A under Section 10(23C), 12AB, 35(1)(ii)/(iia)/(iii) and 80G of the Act for registration / provisional registration / intimation / approval / provisional approval of Trusts/ Institutions/ Research Associations etc.	31 August 2021	31 March 2022	Cir. No. 12/2021
Application in form 10AB for registration or approval under Section 10(23C), 12A and 80G of the Act.	28 February 2022	31 March 2022	-
Equalization Levy
Equalization Levy Statement in Form No. 1 for FY 2020-21	31 August 2021	31 December 2021	Cir. No. 12/2021 and Cir. No. 15/2021
Other Compliances
Uploading of declarations received from recipients in Form No. 15G/15H during quarter ending 30 June 2021	31 August 2021	30 November 2021	Cir. No. 12/2021
Uploading of declarations received from recipients in Form No. 15G/15H during quarter ending 30 September 2021	15 October 2021	31 December 2021	-
Quarterly Statement in Form No. 15CC to be furnished by authorized dealer in respect of remittances made for the quarter ending on 30 June 2021	31 August 2021	30 November 2021	Cir. No. 12/2021 and Cir. No. 15/2021
Quarterly Statement in Form No. 15CC to be furnished by authorized dealer in respect of remittances made for the quarter ending on 30 September 2021	15 October 2021	31 December 2021	-