GST on Restaurant.

Issue: If we ask a general question, “Whether the GST rates are compulsory?” the categorical answer would be “Yes”. A supplier does not have any option as regards the rate at which he can discharge his tax liability on his supplies. Supplier must pay GST only at the rate applicable to his supplies. He has absolutely NO OPTION at all.

How to Read DTAA

What is a Treaty?

Vienna Convention on law of treaties is known as the Bible of Tax Treaties. “Treaty” has been defined by Article 2 of Vienna Convention to mean an international agreement concluded between States in written form and governed by international law, whether embodied in a single instrument or in two or more related instruments and whatever its particular designation. Tax Treaty is also known as Double Taxation Avoidance Agreement (DTAA), or Agreement for Avoidance of Double Taxation (AADT) or as Double Tax Conventions (DTCs). These terms can be used interchangeably.

Delhi Tribunal admits taxpayer’s additional ground on applying treaty rate to dividend distribution tax

Background

Indian Companies are required to pay Dividend Distribution Tax (DDT), currently at an effective rate of 21.71%, under section 115-O of the Income-tax Act, 1961 (the
IT Act) in respect of dividend declared, distributed or paid by them. Under most of the Tax Treaties, taxation of dividends [Article 10(2) of OECD model treaty] is
restricted to 5%/10%/15% of the gross amount of dividend. In light of this, the Indian Companies are exploring arguments to cap the rate of DDT, in respect of
dividends paid to their overseas investor(s), at the Tax Treaty rate (i.e. 5%/10%/15% as the case may be). In this regard, recently, Delhi Tribunal had an occasion to
consider whether an additional ground raised for applying treaty rate to dividend distribution tax rate should be admitted or not. We, at BDO, have summarized
this ruling and provided our comments on the impact of this decision.

Fact of the case

Taxpayer, an Indian automobile company, had distributed dividend to its investors (including non-resident investors) and paid DDT at the rate prescribed under
section 115-O of the IT Act. Certain adjustments were made by the Tax Officer to the reported income of the taxpayer during the tax audit which were contested
in appeal by the taxpayer. The matter reached to Delhi Tribunal. While the hearings and arguments of the taxpayer as well as Revenue Authorities were
completed, the case was marked as partly heard. Subsequently, the appeal was released from ‘part-heard’ stage and it was slated for fresh hearing. Before the
fresh date of the hearing, the taxpayer filed an application before the Delhi Tribunal to admit an additional ground of appeal. By this additional ground of appeal,
the taxpayer pleaded that the lower rate prescribed in the Article 10 of the Tax Treaty for taxation of dividend should be applied to dividend distribution by the
Indian company instead of rate of DDT prescribed under Section 115-O of the Act . For the purpose of raising the additional ground of appeal, the taxpayer
contended that the additional ground of appeal is a legal issue. The Revenue raised following objections with respect to taxpayer’s request for raising additional
ground of appeal:
On admissibility of additional ground, the Revenue Authorities contended that the hearings and arguments were complete and therefore additional ground
of appeal cannot be raised before the Delhi Tribunal.
With respect to substituting the Tax Treaty rate for DDT, the Revenue Authorities contended that the additional ground does not relate to assessing the tax
liability of the taxpayer nor facts relating to the issue were part of the record of the tax audit proceedings.

Tribunal ruling

The Delhi Tribunal stated that a legal plea can be raised at any point of time. It also observed that since the matter was subsequently released from ‘part
heard’, it meant that the appeal was never adjudicated by the Tribunal. It further observed that mere procedural lapse, or omission on the part of the
taxpayer cannot lead to denial of substantive benefit / eligible claim in the hands of the taxpayer.
Relying on Apex Court’s Ruling in the case of Tata Tea Co. Ltd , the Delhi tribunal observed that the additional tax levied under section 115-O of the IT Act
could be treated as is tax on income and is a part of tax as defined under section 2(43) of the IT Act.
It also observed that the details regarding admission of DDT have to be provided in the income tax return form and also disclosed in the Tax Audit Report
in Form 3CD. The income tax assessment order read with the computation form quantifies the DDT liability and the IT Act does not provide for separate
adjudication / passing of separate order with regard to adjudication of liability of DDT.
The Delhi tribunal placing reliance on the ratio laid down by the Apex Court Ruling in the case of NTPC stated that since liability of tax under section 115-
O of the IT Act is part of tax liability of taxpayer, the additional ground raised by taxpayer should be admitted for adjudication.
Further, while admitting the admission of additional ground of appeal, it made a noting that all the apprehensions of the Revenue Authorities on the
additional ground will be heard on merits.

TBM  Comments

This is a welcome ruling as it makes an important observation that the additional ground of appeal can be raised at any point of time during the pendency of
appeal as long as the issue raised involves a question of law arising from the facts available on record. Furthermore, while admitting the additional ground of
appeal, the Delhi Tribunal has made preliminary observation that the additional tax levied under section 115-O of the IT Act is a tax on income as held by the
Hon'ble Supreme Court in the case of Union of India vs. Tata Tea Co Ltd. 85. This will give a boost to the taxpayer’s contention that the Tax Treaty rate should be
considered for the purpose of DDT rate. This Ruling will also be helpful for taxpayers whose matter is pending before the higher authorities and they had not
taken an argument to cap the DDT rate at the lower rate prescribed under the tax treaty, before the lower forum.

GST Annual return

 GSTR-9 : Annual return for the regular tax payer
 GSTR-9A: If you have opted for the GST composition scheme, you become
liable for filing the annual return form GSTR-9A, instead of GSTR-9.
 GSTR-9B: Similarly, if you are an e-commerce operator who had filed GSTR-
8during the FY, you need to file GSTR-9B as your annual return.
 GSTR-9C: If your annual turnover exceeds Rs 2 crores, you should file GSTR-
9C along with your annual return. In this case, you also need to get your
accounts audited.

Deemed Income on RIght & Bonus shares.

Allotment of shares to existing shareholder at less than market value not taxable under section 56(2)(vii) where allotment not disproportionately higher than existing shareholding proportion, and part of genuine business transaction

---

·         Following the ruling in Sudhir Menon HUF, allotment of shares to the taxpayer (an existing shareholder of a company) at less than FMV should not be taxable under section 56(2)(vii)(c) where the allotment is not disproportionately higher than proportion of shareholding offered to the taxpayer.  

The Union Cabinet approves introduction of Amendment Bill to replace Ordinance

As per a Press release dated 20 November 2019, the Union Cabinet has approved the introduction of the Taxation Laws (Amendment) Bill, 2019 (Amendment Bill) in order to replace the Taxation Laws (Amendment) Ordinance, 2019 (2019 Ordinance) earlier promulgated on 20 September 2019⁽¹⁾.  

FAQ on Blocking/Unblocking of E-way Bills Generation

1. What is Blocking and Unblocking of E-waybill generation?
Ans:
Blocking of e-waybill generation means not allowing the taxpayer to generate e-waybills if he /she has not filed GST Return for latest two successive months or quarters. The blocked GSTIN cannot be used to generate the e-way bills either as Consignor or Consignee. Unblocking means allowing the generation of e-way bills for the GSTIN (if blocked) after the filing of the Return.
2. How does blocking take place in the e-waybill system?

Special Issue of Global Trade and Customs Journal Launched

A special issue of the Global Trade and Customs Journal was launched at a function held in the India Islamic
Cultural Centre, New Delhi on 15 November, 2019.The special issue was edited by Dr. James J. Nedumpara,
Head and Professor of the Centre for Trade and Investment Law, Indian Institute of Foreign Trade and
published by Wolters Kluwer, Netherlands. The Journal launch was followed by panel discussions on the
theme “India in the International Economic Order: Issues and Perspectives”.
Additional Secretary, Sudhanshu Pandey, Department of Commerce in his inaugural address said thattrade
agreements are important as investors tend to look not just at the foreign markets, but how investments could
be harnessed to achieve greater access and integration in goods and services. He further stated that trade and
investment policies need to be examined holistically and an integrated manner rather than within interministerial
silos.
The Special Issue of Global Trade and Customs Journal has compiled articles pertaining to India and its
involvement in the international trading system. The Journal has focused on topical issues such as India’s
engagement with regional trade agreements, India’s position on electronic commerce and the need for
flexibilities for developing countries such as the Generalized System of Preferences (GSP) and the availability
of import restrictive measures in agriculture, especially when there is a domestic glut.
The panel discussions were chaired by Dr. Ram Upendra Das, Professor and Head, Centre for Regional
Trade.Presentations were made by Ambassador V S Seshadri, India’s former Ambassador to Myanmar, Dr.
Veena Jha, former India Co-ordinator of UNCTAD and Partner,Ikdhwaj Advisors, Prof. Abhijit Das,
Professor and Head, Centre for WTO Studies, Ms. R V Anuradha, Partner, Clarus Law, Mr. Parthasarathy
Jha,Economic Laws Practice, Dr.PrabhashRanjan, South Asian University, and Ms. Rohini Sisodia, Of
Counsel. Theparticipants noted that the decision of a country to adopt a defensive or offensive trade policy
may be done only after analysing the country’s trade and export promotion profile and domestic sensibilities.

GST Master Refund Circular issued

• Fully electronic refund process through FORM GST RFD-01 and single disbursement- super ceding earlier refund circulars
• Filing of refund applications in FORM GST RFD-01   
• Deficiency Memos     
• Provisional Refund     
• Scrutiny of Application           
• Re-crediting of electronic credit ledger on account of rejection of refund claim    
• Application for refund of integrated tax paid on export of services and supplies made to a Special Economic Zone developer or a Special Economic Zone unit
• Disbursal of refunds   
• Guidelines for refunds of unutilized Input Tax Credit           
• Guidelines for refund of tax paid on deemed exports          
• Guidelines for claims of refund of Compensation Cess        
• Clarifications on issues related to making zero-rated supplies         
• Refund of transitional credit 
• Restrictions imposed by sub-rule (10) of rule 96 of the CGST Rules 
• Clarification on calculation of refund amount for claims of refund of accumulated ITC on account of inverted tax structure      
• Refund of TDS/TCS deposited in excess        
• Debit of electronic credit ledger using FORM GST DRC-03   
• Refund of Integrated Tax paid on Exports     
• Clarifications on other issues 
• Annexure-A List of all statements/declarations/undertakings/certificates and other supporting documents to be provided along with the refund application         
• Annexure-B : Statement of invoices to be submitted with application for refund of unutilized ITC      
• Clarification regarding optional filing of annual return under notification No. 47/2019- Central Tax dated 9th October, 2019 - regarding

HC sets aside NAA's order for violation of principles of natural justice

This Tax Alert summarizes a recent ruling of the Bombay High Court (HC)¹. The issue relates to validity of an order passed by National Anti-profiteering Authority.

The petitioner contended that the matter was heard by only three members whereas the impugned order was signed by four members, resulting in a breach of the principles of natural justice.

Revenue argued that as per Central Goods and Services Tax Rules 2019, no act or proceedings of the Authority shall be invalid merely on the ground of any irregularity in the procedure followed by the Authority not affecting the merits.

HC observed that the Authority is bound by the principles of natural justice. Further, the rule that one who hears must pass the order remains the basic proposition and this is a settled position of law.

HC concluded that when three members of the Authority had heard the petitioner, signing of the order by a fourth member results in violation of the principles of natural justice and thus, the order is liable to be set aside.

The ruling may have bearing on all such cases where the Authority has not followed the proper procedure.

Entitlement for CERTIFIED COPY OF ASSESSMENT RECORD

The circular of the Board dt. 28.06.1965 No. 17 (XL-36), provides for inspection fees and fees for certified copies of assessment and other records. This circular clears that the assessee or his A/R are entitled to inspect as well as obtain certified copies of assessment and other records.

Section 35 of the Indian Evidence Act, 1872. Relevancy of entry in public record, made in performance of duty - An entry in any public or other official book, register or record, stating a fact in issue or relevant fact, and made by a public servant in the discharge of his official duty, or by any other person in performance of a duty specially enjoined by the law of the country in which such book, register or record is kept, is itself a relevant fact   .

Why Section 167A not applicable to Joint Venture.

The Order of the ITAT (Chennai) in the case of – ‘CCCL’, the Consortium- ( CCCL for short), recently reported makes for a curiously interesting reading. That is seen to have unwittingly brought to surface certain not–so- obvious aspects; and not readily perceptible angles. These call for an independent reading and insightful understanding. That is why it has been chosen to be worth a critical and analytical study.

Madras HC allows transitional credit of EC, SHEC and KKC under GST

This Tax Alert summarizes a recent ruling of Madras High Court (HC)¹. The issue relates to transition of accumulated credit of Education Cess (EC), Secondary and Higher Education Cess (SHEC) and Krishi Kalyan Cess (KKC) into Goods and Services Tax (GST). 

GSTR-9 & GSTR -9C more simplified & last dates of submission extended

The Government has decided today to extend the due dates of filing of Form GSTR-9 (Annual Return) and Form GSTR-9C (Reconciliation Statement) for

Financial Year 2017-18 to 31 st December 2019 and for Financial Year 2018-19 to 31 st March 2020.

The Government has also decided to simplify these forms by making various fields of these forms as optional.

Central Board of Indirect Taxes & Customs (CBIC) today notified the amendments regarding the simplification of GSTR-9 (Annual Return) and GSTR-9C (Reconciliation Statement) which inter-alia allow the taxpayers to not to provide split of input tax credit availed on inputs, input services and capital goods and to not to provide HSN level information of outputs or inputs, etc. for the financial year 2017-18 and 2018-19.

CBIC expects that with these changes and the extension of deadlines, all the GST taxpayers would be able to file their Annual Returns along with Reconciliation Statement for the financial years 2017-18 and 2018-19 in time. Various representations regarding challenges faced by taxpayers in filing of GSTR-9 and GSTR-9C were received on which by the Government has acted in a very responsive manner.

It may be noted that earlier the last date for filing of GSTR-9 and GSTR-9C for Financial Year 2017-18 was 30 th November 2019 while that for Financial Year 2018-19 was 31 st December 2019. Notifications implementing the decisions as above have been issued today

Make Inter unit bank payment to claim ITC.

Make  Inter unit bank payment to claim ITC.

Following had been ruled recently by the Tamil Nadu Authority for Advance Ruling ("AAR") for the applicant, M/s. Sanghvi Movers Limited.

The issue for consideration before AAR was to examine the admissibility of Input Tax Credit ("ITC") wherein the underlying supply was between distinct persons. Despite the fact that GST law acknowledges such supplies to be without consideration, AAR held that branch office will not be eligible for the ITC on services provided by head office as it was not paying full consideration for the services provided by the head office.  

Incorrect collection of GST: Way out

Given the federal structure, India has adopted a dual model of GST with simultaneous levy of GST by the Central and the State. For intra-state transactions, CGST & SGST shall be levied by the Centre and the state respectively; and for inter-state transaction, IGST shall be levied by the Centre and it shall be adjusted among the States internally.   

Whether a fresh claim can be made in return filed under section 153 A , which was not claimed in original return ?

Hon'ble Bombay High Court in the case of CIT vs B.G Shirke Construction Technology Pvt Ltd [2017] 79 taxmann.com 306 (BOM) held that:

"A return filed u/s 153A is a return furnished u/s 139 and therefore, provisions of the Act which apply to return filed in regular course u/s 139(1), would also continue to apply in case of return filed u/s 153A."  

Tax Alert: Delhi Tribunal admits taxpayer’s additional ground on applying treaty rate to dividend distribution tax

Background

Indian Companies are required to pay Dividend Distribution Tax (DDT), currently at an effective rate of 21.71%, under section 115-O of the Income-tax Act, 1961 (the IT Act) in respect of dividend declared, distributed or paid by them. Under most of the Tax Treaties, taxation of dividends [Article 10(2) of OECD model treaty] is restricted to 5%/10%/15% of the gross amount of dividend. In light of this, the Indian Companies are exploring arguments to cap the rate of DDT, in respect of dividends paid to their overseas investor(s), at the Tax Treaty rate (i.e. 5%/10%/15% as the case may be). In this regard, recently, Delhi Tribunal had an occasion to consider whether an additional ground raised for applying treaty rate to dividend distribution tax rate should be admitted or not. We, at BDO, have summarized this ruling and provided our comments on the impact of this decision.  

ITAT power to increase demand.

Introduction

 1.    A controversy has cropped up due to conflicting decisions of the Hon'ble Karnataka High Court in Karnataka  Instrade  Corporation Ltd.

v. Asstt. CIT [2015]  62  taxmann.com  239/235  Taxman  374, wherein it was  held  that  where  a  claim  of  assessee  is  allowed  by  the  AO,  the Tribunal    does    not    have    power    to    withdraw    such    claim    and, consequently,  enhance  assessed  income.  But  in  the  other  decision  in Fidelity   Business   Services   India   (P.)   Ltd.   v.   Asstt.   CIT   [2018]   95 taxmann.com 253/257 Taxman 266 (Kar.), it was held that "The higher

and final appellate authority under the Act cannot be intended by the

Madras High Court allows accumulated credit of cesses from CENVAT regime to be transitioned to GST

Facts The issue involved whether unutilised and accumulated CENVAT credit of the cesses (namely Education Cess, Senior and Higher Education Cess and Krishi Kalyan Cess collectively referred to as “cesses”) can be transitioned and subsequently utilised for paying GST. The claim for transition was rejected on the ground that the Explanations to section 140 of the CGST Act, 2017 (CGST Act) do not include cesses as “duties and taxes” eligible to be carried forward to GST. The taxpayer approached the Madras High Court via a writ with a prayer to quash the order of rejection and for direction towards carry forward of cesses.1 High Court’s decision The Madras High Court upon examining a plethora of judgements and while referring mainly to the Supreme Court and Delhi High Court’s decisions in Eicher Motors2 and Cellular Operators Association of India3 respectively, held that the credit of the cesses could be transitioned and utilised for payment under the GST. The High Court decided in favour of the taxpayer, challenging the denial of carry forward of credit of cesses for the following reasons: The intention of the Government, while introducing GST, was to provide a seamless model for transitioning all CENVAT credits hitherto availed by taxpayer under the erstwhile law by subsummation of historical taxes. Credits continue to be available till such time that they are expressly stated to have lapsed by the statute. Additionally, the Revenue was not able to provide any mention of a policy document by Central Board of Indirect Taxes and Customs indicating complete lapse of such cess credit. Availment of credit and the utilisation thereof is a substantive right of the taxpayer and should be denied only in the event of an express legal prohibition to this effect. Sections 140(1) and 140(8) of the CGST Act allow transition of credit carried forward in a return furnished under the erstwhile law, subject to fulfilment of certain conditions. The credit of cesses reflected in the return cannot be denied in the event all such conditions are satisfied by the taxpayer. TBM   comments This decision of the Madras High Court is based on the principles of vested rights accruing to a taxpayer to avail credit and the seamless flow of credit as envisaged under GST, in the absence of specific provisions providing for lapse of credit. However, the judgment does not clearly examine the implication of Explanation 3 to section 140 of the CGST Act that came into force from 1 February 2019 with retrospective effect from 1 July 2017. Explanation 3 categorically states that the credit of cesses would not be allowed as transitional credit under GST. Accordingly, the Revenue could still continue to deny transition of credit of the cesses and further litigate this issue.

1 Writ Petition No.4773 of 2018 & WMP Nos.5916 & 13148 of 2018 2  Eicher Motors Limited & Anr. v. Union of India [1999] (106) E.L.T. 3 (SC) 3  Cellular Operators Association of India & Others v. Union of India [W.P (Civil) No. 7837 of 2016]

G ST MONTHLY UPDATE :

1.  . Brief of Recent Circulars Under GST:-

(A)   A) Clarification on GST rates & classification of goods:

Ind AS Technical Facilitation Group Clarification Bulletin 22

Ind AS Technical Facilitation Group (ITFG) of Ind AS Implementation Committee has been constituted for providing clarifications on timely basis on various issues related to the applicability and /or implementation of Ind AS under the Companies (Indian Accounting Standards) Rules, 2015, and other amendments finalised and notified till March 2019, raised by preparers, users and other stakeholders. Ind AS Technical Facilitation Group (ITFG) considered some issues received from members and decided to issue following clarifications¹ on October 14, 2019:

Changes in Job Work rates – Differently Decoded

Effective from 1st October 2019 vide Notification no.20/2019-Central Tax (rate) dated 30th September 2019, a few entries have been inserted/amended with regard to job work rates in the primary rate Notification no. 11/2017-Central tax (rate) dated 28th June 2017. The extract of all the entries within Heading 9988 as amended are given below:  

RECENT IN TAX JUDICIARY

1.             Can an assessee who has set up a new industrial undertaking and availed deduction@100% of profits under section 80-IC for the five years, once again claim deduction@100% of profits on the basis of having undertaken substantial expansion thereafter?

CLASSIC BINDING INDUSTRIES [2018] (SUPREME COURT)

GST Best Judgement

Why best judgement assessment on failure to file return under GST is more dangerous?

It has been two years since the inception of GST and there has been a steady decline in compliance of GSTR-3B return filing from 92.6% in August 2017 to just 71.25% in November 2018.  This article analyses  the legal consequences of non filing of returns.    

Managing GST for cross- border transactions

Cross-border transactions are intricate and complex in terms of indirect tax conse- quences in India. It is important to under- stand and analyse the applicability of goods and services tax (GST) on cross-border transactions. This is an analysis of the GST implications of some pertinent situations and advance rulings.   

High Court provide relief for pending tax refund

Background

Over the past few years, taxpayers have faced multiple challenges in obtaining income-tax refunds, in part due to tight fiscal situation of the Government treasury. In the recent past, there have been several High Court orders1 (especially the Bombay High Court) pursuant to writ petitions filed by taxpayers across the country for grant of tax refund claimed in the Return of Income (‘ROI’).  

Digital Service Tax: Overview of the progress of implementation by EU Member States

For several years there have been efforts at international, EU and national levels to reform taxation to ensure that profits are taxed where economic value is created. Most recently this work has centred on the digital economy but it has its roots in the scrutiny of tax planning strategies used by multinationals that operate across multiple jurisdictions.

Are you ready for E Assessment.

Landscape of tax assessment / scrutiny is going to change dramatically, as age-old assessment procedure is all set to transform with introduction of 'E-assessment Scheme, 2019'. Faceless assessment was announced by Hon'ble Finance Minister in her Budget speech on 5th July 2019 and based thereon E-assessment scheme was notified on 12th September 2019. India Government is trying its best to infuse greater efficiency and transparency in the assessment process by introducing e-assessment procedure in phased manner with objective to reduce the interface between the tax department and the taxpayers.   

Decriminalise the Offences under Income tax.

Apart from levy of interest & penalty for various defaults by the taxpayer, the Income-tax Law also contains provisions for launching prosecution for offences committed by the taxpayer.  The idea of undergoing imprisonment if convicted of offences can be a strong deterrent from brazen tax evasion and non- compliance, but sometimes the tax department use this to harass citizen and government should make sure that bureaucrats should not misuse this special power of law on citizen.