Special Learning on GST

Ø  No Change in Annual Return Possible

Ø  No GST on gift to employees value less than 50,000

Ø  No Input credit on any tax demand paid u/s 73 , 74, 129 & 130

Ø  Only  E Notices being served and reply require to make within 15 days. 

Ø  In case of related party transactions, where the price made to next party is known, the valuation between related party is 90% value of known price

Ø  Reimbursement of expenses subject to GST

Ø  Disallow portion of input credit in case same being used for exempt items, nil rated, liquor & petroleum, securities& interest, land & sale of building

Ø  For banks , 50% of the input being disallowed.

Ø  No input on construction or extension of immovable property.

Ø  No input credit on goods lost, destroyed, gift, free sample, write off

Ø  For Donation -  reduce the cost by 5% per quarter of capital goods. 

CBDT clarifies financial transaction (SFT) registration not necessary absent ‘reportable transactions’

CBDT issues clarification with respect to filing of Statement of Financial Transaction (‘SFT’) & SFT Preliminary Response; CBDT states that the reporting person/entity is required to register with the Income-tax Department and generate Income Tax Department Reporting Entity Identification Number (‘ITDREIN’) in case there are reportable transactions for the year; Clarifies that ITDREIN registration is mandatory only when at least one of the Transaction Type is reportable; Highlights that a functionality ‘SFT Preliminary Response’ has been provided on the e-Filing portal for the reporting persons to indicate that a specified transaction type is not reportable for the year. 

HC Explains Imp Law On S. 153A Search Assmnts

Balgopal Trust vs. ACIT (ITAT Mumbai)

S. 54F: U/s 161, a trust which is for the sole benefit of an individual, has to be assessed as an “individual” and not as an “AOP”. Consequently, a trust is eligible for s. 54F deduction  

HC : Quashes order denying SSI exemption absent thorough examination of issues; SCN without jurisdiction

HC allows assessee’s appeal, sets aside CESTAT order which denied SSI exemption on ground that turnover of manufactured electric furnace and heating elements exceeded turnover limit prescribed under Notification No. 1/93; Accepts assessee’s plea that aggregate value of clearance of manufactured products was not correctly computed and that Revenue failed to discuss vital issues such as whether bought out items were subjected to processes, and whether furnaces transported to customers’ sites in CKD condition were goods or not; Also finds that show cause notice invoking extended limitation period alleging fraud / suppression by Jt. Commissioner was without authority absent approval from Commissioner u/s 11A(1) of Central Excise Act; Remarks, despite ground of jurisdiction being specifically raised by assessee, lower authorities including CESTAT failed to discuss the same, which in fact goes to root of matter; Finds no mention in CESTAT order as to how conclusion of suppression of material facts had been arrived at, and in this context, states that a charge of suppression is required to be levelled with specificity and conclusion of suppression can be reached only when assessee is unable to rebut same  : Madras HC

FAQ on GST

The FAQ is based on Draft GST law, and could change after the implementation of Final GST Act.

1.             What is Goods and Service Tax (GST)?

It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.   

HC : 'Settlement Commission' not an 'adjudicating authority', Writ jurisdiction cannot set-aside conditions imposed thereto

HC dismisses assessee’s writ, refuses to set aside order passed by Settlement Commission’s u/s 32E of Central Excise Act, 1944, which recorded certain findings about clandestine removal of goods, and accepted settlement application by imposing certain conditions; Rejected assessee’s submission that, Commission’s order was passed based on report of Jurisdictional

Search - Whether additions can be made in relation to a particular AY without having any incriminating materials qua that AY - NO: HC

THE issue before the court is - Whether additions can be made in relation to a particular AY without having any incriminating materials qua that AY. NO is the answer.

Facts of the case

Exemption u/s 54 cannot be denied on ground that residential property was purchased outside India when requirement of making investment in property only in India was subsequently added - ITAT

THE ISSUE BEFORE THE TRIBUNAL IS - Whether assessee's claim for exemption u/s 54 can be denied on the ground that residential property was purchased outside India, when there was no scope u/s 54 existing at that time for importing the requirement of making such investment in a residential property located in India. NO is the answer.

New Pincode for CPC Bengaluru is 560500; Unique Pincode allotted

Income Tax Deptt. has informed that a unique and new PINCODE Number ‘560500’ has been allotted by the Postal Deptt. to the Centralized Processing Centre (CPC) of Income Tax Department located in Bengaluru.

Therefore, the Taxpayers can henceforth address their mails, using the unique/ new Pincode, to “Centralized Processing Center, Income Tax Department, Bengaluru 560500” for the purpose of submission of ITR-V forms and other documents which require physical mode of transmission.

Centre releases GST Rate Schedule of 'Goods', Compensation Cess rates for different supplies

Centre releases GST Rate Schedule of Goods as well as GST Compensation Cess Rates for different supplies, pursuant to GST Council meeting today; “Rate Schedule” contains 98 chapters categorized into Nil, 5%, 12%, 18% and 28% tax slabs; Rate structure for following items yet to be decided - Biri wrapper leaves (Chapter 14), Biscuits (Chapter 19), Biris (Chapter 24), Textiles (Chapters 50 to 63), Footwear (Chapter 64), Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal, and articles thereof; imitation jewellery, coin (Chapter 71), and Power driven Agricultural, horticultural, forestry, poultry keeping or bee-keeping machinery, Harvesting or threshing machinery, machines for cleaning, sorting or grading, machinery used in milling industry and parts thereof (8432, 8433, 8436 and 8437); “Compensation Cess Schedule” provides rates of Cess leviable on various products; Aerated waters, Lemonade to attract 12% Cess, Pan Masala – 60%, Coal – Rs. 400 per tonne, while Small Cars of sub 4 meter length will attract 1% and 3% for petrol < 1200 cc and diesel < 1500 cc respectively; Motorcycles with engine capacity more than 350 cc to attract 3% Cess, while 15% Cess shall apply to large cars, mid segment cars, SUVs; States that information will be subject to further vetting during which the list may undergo some changes

Sec.80HHD not analogous with Sec.80HHC, allows deduction without reducing ineligible hotel’s losses

Madras HC upholds ITAT order for AY 1998-99, holds that while computing 'eligible profit' for allowing deduction u/s 80HHD(1) (available to companies running hotels) loss from ineligible units/hotels cannot be deducted; Rejects Revenue’s stand that the expressions ‘business profits’ and ‘total receipts’ used in Sec. 80HHD(3) [prescribing formula for computing ‘eligible profits’], should take into account the gains/losses of ineligible entities as well;  Noting that Sec. 80HHD is a ‘beneficial provision’, HC opines that “full benefit of the provision should be extended to an eligible assessee without there being an attempt to whittle down the same.”; HC rules that “sub-section (3) has to be read along with sub-section (1) by statutory prescription and in such an event, all parameters of the formula should relate solely to the receipts/profits/income of the eligible unit alone and none other.”; Cites Karnataka HC ruling in ITC Hotels Ltd., holds that the deduction should be granted qua eligible unit/units only, clarifies that Revenue cannot draw support from Sec. 80HHC provisions and the two provisions (i.e Sections 80HHC and 80HHD) are not analogous:HC 

Important Tax Verdicts.

DCIT vs. Ateev V. Gala (ITAT Mumbai)

S. 56(2)(vi): A HUF is a "group of relatives". Consequently, a gift received from a HUF by a member of the HUF is exempt from tax as provided in the Explanation to s. 56(2)(vi)

GST Council - Majority services taxable at 12% & 18%; Most exemptions to be grandfathered

GST Council announces 4 rates for services - 5%, 12%, 18% and 28%; 5% rate mostly for transportation services; Most of current service tax exemptions grandfathered and may continue under GST; Healthcare & Education shall continue to be exempt; Rates for Restaurant services will vary as per tariffs charged and facilities provided, ranging from 12-18%; Gambling and Cinema services to fall under 28% slab, as entertainment tax merged with service tax under GST; ​Works contract taxable at 12% with full Input Tax Credit; Council to meet next on June 3rd to deliberate on rates for gold & precious metals : GST Council Press Conference  

ITAT : Internal cost' of employing individual constitutes FTS, excludes deputation cost towards travel/insurance

Mumbai ITAT rules that amount received by assessee ( a US company engaged in grading and certification of diamonds) on account of reimbursement of travel expenses, group health insurance and other incidental expenses in connection with the assignment under training and technical service Agreement (‘TTA’), not FTS for AYs 2009-10 and 2011-12; Assessee had entered into TTA for training the employees of the Indian group company and providing technical services for the implementation of grading policies, procedures and processes, further separate debit notes were raised for training & technical services and reimbursement;  Rejects Revenue’s stand that the total amount received by assessee including reimbursement would constitute FTS;   Referring to the TTA, ITAT notes that assessee was entitled to receive by way of fee only the amount incurred by towards cost to ‘employ’ individuals plus mark-up of 6.5%, remarks that “the expression cost to ‘employ’ individuals is different from the expression cost incurred to ‘depute’ a person”; Rules that the cost of employment would include only internal costs incurred by organisation to employ individual, whereas any cost incurred over and above that to depute the individual for a particular assignment (i.e. travel, insurance etc.), would be external cost, not includible as FTS, relies on SC ruling in A.P. Moller Maersk A/S:ITAT

Few Points on GST Return.

Ø  For ordinary dealer in case return not filed for 6 months then registration going to be cancelled and for composite dealer  in case they three quarter return not filed, then registration going to be cancelled 

 

Ø  No output return for ISD & Composite dealer.   

Important Verdict.

CST vs. Sunil Haribhau Pote (Bombay High Court)

Valid service of notice: Law explained on whether sending a notice by RPAD and its return by the postal authorities with the remark "addressee refused to accept" amounts to a valid service or not
When it was sent by R.P.A.D. to the address, it was returned by the postal authorities with the remark, that the addressee refused to accept the packet. That is why it is returned. Thus, the presumption that when the addressee whose address is set out on the envelope had an occasion to notice and peruse the packet, meant for him, but he refuses to accept it, then, that is deemed to be served. The addressee in this case is correctly described. There is no dispute about his identity. Even his address is correct. It is at that address the packet is carried and by the concerned postal authority. The duly authorised person carrying the packet reached the address. On noticing the addressee, he serves it, but the addressee after having perused the packet refused to accept it. It is in these circumstances, the postal remark that the concerned person has refused to accept; hence, returned to the sender denotes good and valid service

Analysis of SGST Bill as passed by Goa Assembly

Goa GST Bill provides for levy of Goa GST on all intra-State supplies of goods and / or services except supply of alcoholic liquor for human consumption; Bill seeks to broadbase ITC by making it available in respect of taxes paid on any supply of goods and / or services used or intended to be used in course or furtherance of business; Bill further imposes obligation on e-commerce operators to collect tax at source at 1% of net value of taxable supplies, out of payments to suppliers supplying goods / services through their portals; Also provides for self-assessment of taxes payable by registered person, conduct of audit to verify compliance with provisions, and recovery of arrears of tax using modes including detaining and sale of goods, movable and immovable property of defaulting taxable person; Anti-profiteering clause ensures that business passes on benefit of reduced tax incidence on goods / services to consumers : Goa GST Bill 2017 

ITAT : Forfeited media rights advance not capital loss; Grants deduction to Zee Entertainment

Mumbai ITAT allows deduction u/s. 37 to Zee Entertainment (‘assessee’) with respect to write off of advance given to BCCI, rejects Revenue's stand that it represents a capital loss as it is in relation to acquisition of media rights (which is a capital asset); Assessee acquired media rights from BCCI on payment of US $ 17.5 million, out of which US$ 10 million was adjusted against two matches played and the balance was kept as deposit (to be adjusted against last series), however, owing to dispute, the contract was terminated and the deposit was forfeited by BCCI during relevant AY 2008-09; ITAT holds that the agreement with BCCI for acquiring the media rights was pursuant to assessee’s normal business activity (of broadcasting and distribution of TV programmes) and US$ 10 million which was adjusted in earlier year was offered to tax by assessee; Further rejects Revenue’s stand that since the assessee filed a legal case for recovery and also initiated arbitration proceedings, it could not be said that the loss had actually crystallized during relevant AY, similarly, rejects Revenue’s submission that write-off was premature as assessee did not fully explore the possibility of its recovery; ITAT remarks that “it is the judgement of the assessee as a businessman.”, notes that despite arbitration proceedings, as assessee did not visualize any sign of recovery, it wrote-off the forfeited amount and claimed deduction:ITAT 

SC : 'Appy Fizz' not "aerated soft drink", upholds classification basis scientific & technical meaning

SC rules that ‘Appy Fizz’ is classifiable as “fruit juice based drink” under Entry 71 of Notification issued u/s 6(1)(d) of Kerala VAT Act, liable to VAT at 12.5% (now 14.5%); Rejects Revenue’s reliance on Kerala HC order in case of Trade Lines which applied the common parlance test to classify said product as “aerated branded soft drink” taxable at 20% u/s 6(1)(a); Perusing legislative

New ITAT rules propose ‘digitisation’ in appeal-filing / hearing, prescribe 90-days for order passing

Draft new ITAT rules propose that no orders shall be passed by ITAT after expiry of 90 days from the date of conclusion of hearing, further state that every  endeavour  shall  be  made  by  the  Bench  to pronounce the order within 60 days; Draft rules propose e-filing of appeals, provide option to assessee of hearing the appeal through video conference; Also propose mandatory listing of stay applications on Fridays, as long as they are filed on or before Wednesdays; Draft rules empower ITAT to award costs for adjournments, also provide that the hearing shall not ordinarily be adjourned beyond 5 occasions, except in cases where ITAT deems it appropriate to grant adjournment thereafter; New rules also permit ITAT to admit Expert’s depositions as additional evidence 

Note on Section 50CA

There are few anti-abuse measures already in place with respect to curbing the practise of avoiding tax through transfer of shares. The Budget has unveiled additional anti-abuse measures in the Income-tax Act, 1961 (Act), as regards the taxability on transfer of unquoted shares below the fair market value (FMV). The amendments proposed in the Budget seek to tax the transactions on account of transfer of unquoted shares, which mitigated tax liability (if transferred below FMV). However, the proposed amendments provide for taxation of the same amount in the hands of two tax payers. This article elaborates the amendments proposed in the Budget and their tax impact with regard to transfer of unquoted shares.

High court allows import of UK treaty into France treaty: Invokes MFN clause

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• Protocols under a treaty form a part of it and do not need to be notified separately unless the treaty/protocol itself suggests otherwise.
• The Most Favoured Nation (MFN) clause in the India- France DTAA ensures that a lower rate or a restrictive scope in another convention with an OECD member and India can be imported into the India- France DTAA.
• Payments made for management services by the Indian company to the French company does not constitute FTS under the Indo France DTAA by virtue of the MFN clause.

Recently the Delhi High Court (“Court”) in the case of Steria India Ltd. v. Commissioner of Income Tax and Anr¹ relying on the most favored nation clause under the India - France Double Taxation Avoidance Agreement (“India – France DTAA”) held that payments made by an Indian company to a French company for management services does not constitute Fees for Technical Services (“FTS”).