Changes in GST with effect from January 1, 2022.

Given below  summarizes recent Notifications issued by the Central Board of Indirect Taxes and Customs (CBIC).

Vide Finance Act, 2021, Government had proposed various amendments in the Central Goods and Services Tax Act, 2017 (CGST Act). The amendments relating to following shall be made effective from 1 January 2022:

2B become mandatory.

 

The Govt. decides to give an unwelcome surprise to the industry in terms of increasing the compliance for availing of Credit. With the introduction of Rule 36(4), Govt. restricted availment of credit to the extent of 20% of the Credit reflecting in 2A.

From 01st Jan 2020- 20 became 10
From 01st Jan 2021 - 10 became 5
From 01st Jan 2022 - 5 becomes 0 ?

The amendment proposed vide Section 16(2)(aa) is now being notified w.e.f 01 Jan 2022. The principle of matching will now become a part of the Act itself and there may be changes/amendment in a Rules to bring it on par with the Act. From such time, credit may be restricted only to the extent of what is reflected in GSTR 2A/2B

OECD releases Model Rules on the Pillar Two Global Minimum Tax: First impressions

 The Organisation for Economic Co-operation and Development (OECD) released the Model Rules on the Pillar Two Global Minimum Tax, as approved by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS). The Model Rules cover the scope and mechanics of the Income Inclusion Rule and the Undertaxed Payments Rule, collectively referred to as the Global Anti-Base Erosion (GloBE) rules.

Together with the Model Rules, the OECD also released a summary of the rules, an overview of the key operating provisions of the GloBE rules and a Frequently Asked Questions document.

The OECD press release indicates that it expects to release the Commentary relating to the Model Rules and to address the interaction with the United States (US) Global Intangible Low-Taxed Income (GILTI) rules in early 2022. In addition, the Inclusive Framework is developing the model treaty provision for the Subject to Tax Rule, which is the third element of the Pillar Two global minimum tax framework, and a multilateral instrument for its implementation, which the OECD expects to release in the early part of 2022 with a public consultation event on it to be held in March 2022. Finally, the OECD notes the work to be done on development of an implementation framework addressing administration, compliance and coordination matters related to Pillar Two and announces that a public consultation event on the implementation framework will be held in February 2022.

New Labour law

 

The highlights look like this :

1) Minimum Floor Wage is being relooked at. Every State as of now has its own figure but nothing across the country. The MFW was not a mandate earlier which is why it was left to State and Employer to settle but under the new law will be prescribed.

CBIC clarifies on supply of restaurant services through e-commerce operators under GST

 

This Tax Alert summarizes a recent Circular ^[1] issued by the Central Board of Indirect Taxes and Customs (CBIC). The Circular addresses various issues relating to the liability of E-commerce operator (ECO) to pay GST on supply of restaurant services made through it w.e.f. 1 January 2022.

The key clarifications are:

• As ECOs are already registered as supplier of goods or services, there is no requirement to obtain separate registration for payment of tax on restaurant service.
• ECO will be liable to issue invoice and pay GST on any restaurant service supplied through it including by an unregistered person.
• Aggregate turnover of restaurant will include value of supply made through ECO for threshold consideration or any other purpose.
• ECO is not required to reverse input tax credit on account of restaurant services on which it pays tax. Further, the tax liability needs to be discharged in cash only.
• On any supply other than restaurant service, the liability to pay GST continues on the supplier and ECO shall continue to collect tax at source on such supplies.
• ECO may also furnish the details of restaurant supplies in Table 4A (registered customers) or Table 7A(1) (unregistered customers) of GSTR-1.

On the other hand, restaurant will report such supplies in Table 8 of GSTR-1 and Table 3.1(c) of GSTR-3B, for the time being. The said tables deal with nil rated and exempt supply.

^[1] Circular No. 167/23/2021-GST dated 17 December 2021

Delhi HC quashes reassessment notices issued between April to June 2021 following old regime of reassessment

 

This Tax Alert summarizes a recent decision of the Division Bench of Delhi High Court (HC) in the case of Mon Mohan Kohli v. ACIT and Others dated 15 December 2021  wherein the HC, while dealing with a bunch of writ petitions, has quashed reassessment notices issued between April to June 2021 following the old regime of reassessment because the said regime is being substituted vide Finance Act (FA) 2021 with effect from (w.e.f.) 1 April 2021. The HC, inter alia, held that Central Government (CG) had no power to extend the validity of the old regime of reassessment beyond 31 March 2021 as the same is being substituted vide FA 2021 and the power conferred with CG under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020 (Relaxation Act) are limited to extend only the compliance date

Imp Case Laws.

 

BEEREDDY DASARATHARAMI REDDY Vs V. MANJUNATH AND ANOTHER (Supreme Court)

Sub-Whether Karta of a HUF has the power to sell immovable property belonging to the family without consent of all the coparceners of the family. The Supreme Court while dealing with the law on the subject held that Right of the Karta to execute agreement to sell or sale deed of a joint Hindu family property is settled and is beyond cavil vide several judgments of this Court including Sri Narayan Bal and Others v. Sridhar Sutar and Others(1996) 8 SCC 54(SC) wherein it has been held that a joint Hindu family is capable of acting through its Karta or adult member of the family in management of the joint Hindu family property.

CBDT notifies e-Verification Scheme

The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 inserted Section 135À in the Income-tax Act, 1961 (IT Act) w.e.f. 1 November 2020 to provide for faceless collection of information. As per this section, the Central Government is empowered to make a Scheme for the purpose of collecting information of taxpayers by the Tax officer. In line with faceless assessment, the purpose of the scheme will be to impart greater efficiency, transparency and accountability by

• Eliminating the interface between the tax authorities and the taxpayer or any other person through technologically feasible modes;
• Utilising resources optimally through economies of scale and functional specialisation;
• Introducing a team-based exercise of powers, including to call for, or collect, or process, or utilize the information with dynamic jurisdiction.

GSTR-3B is a return under GST Laws - Supreme Court

 

In an important decision, the Hon’ble Supreme Court (‘SC’) has held that GSTR-3B is a return under Goods and Services Tax (‘GST’) laws. The Apex Court overrules the decision of Gujarat High Court (‘HC’) which held that GSTR-3B is not a return under Section 39 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’).

Tax paid under protest can be set-off against pre-deposit - Supreme Court

 In an important decision in VVF India Limited v. The State of Maharashtra, 2021-VIL-92-SC, the Hon’ble Supreme Court has held that amount paid under protest before assessment order can be adjusted again payment of pre-deposit under Maharashtra VAT Laws.

 

Brief of the case

 

·                The taxpayer filed the SLP against the HC decision wherein the Court ruled that 10 percent of pre-deposit is to computed on demand after deducting any amount paid under protest i.e. 10% x (Demand-Protest payment)

 

·                The Apex Court observed that the provision provides for 10 percent pre-deposit on the 'amount disputed by the taxpayer' and not 10 percent on the 'amount in arrear'.

 

·                The Apex Court held that any amount deposited by the taxpayer anterior to assessment is eligible to be set-off from the amount of pre-deposit.

 

 | Remarks

 

·                In our view, the decision can be applied to GST laws as well since the pre-deposit provisions under GST also provides for pre-deposit as a percentage of 'disputed amount' and not 'amount in arrear'.

Annual Self-declaration for Auto Renewal of AEO-T1 Status

 

The Authorised Economic Operator (‘AEO’) is a prestigious accreditation for organizations involved in Export-Import of goods. To ease the compliance burden of seeking renewal by AEO-T1 entities, the CBIC vide Circular No. 18/2021 dated July 31, 2021, has allowed the facility of auto renewal for AEO-T1 certificates. The auto-renewal is subject to submission of annual self-declaration to be filed between 1^st October to 31^st December every year.

GST - ITC not available on transfer of leasehold rights in land

 Recently, Authority for Advance Ruling, Gujarat (‘AAR’) in the case of GACL NALCO Alkalies & Chemical Private Limited, 2021 (12) TMI 36, has held that Input Tax Credit (‘ITC’) is not available on input service of ‘transfer of leasehold rights in the land’ to be used for construction of admin building / factory.

 

HC holds SC order on extension of limitation period applies to refund claims under GST

 This Tax Alert summarizes a recent ruling of the Madras High Court (HC) The issue involved was whether extended period of limitation as per Supreme Court (SC) order is applicable to refund claim filed under Goods and Services Tax (GST).

Earlier, taking suo moto cognizance of the situation arising due to COVID-19 pandemic, SC had extended the limitation period (prescribed under general or special law) in respect of judicial and quasi-judicial proceedings w.e.f. 15 March 2020 until 2 October 2021.

Central Board of Indirect Taxes and Customs (CBIC) vide Circular no. 157/13/2021-GST dated 20 July 2021 clarified that:

• Proceedings that need to be initiated or compliances that need to be done by the taxpayers; and
• Quasi-judicial proceedings by tax authorities which include disposal of application for refund, adjudication proceedings of demand notice,

would continue to be governed by the time limit provided/extensions granted under the statute itself and the SC order would not apply to the said proceedings.

In the present case, the petitioner filed refund application after expiry of two years from the relevant date and the same was rejected by the Revenue. Aggrieved, the petitioner filed a writ petition before HC.

HC held that the SC order clearly enures to the benefit of the petitioner and therefore, refund application needs to be entertained. Accordingly, HC set aside the rejection order and directed Revenue to examine the refund application de novo and pass fresh order.

The ruling is likely to help businesses in cases where the limitation period as per GST law has expired.

Imp Judgements.

 

Bpip Infra Pvt. Ltd. and Ors. vs. ACIT and Ors (Rajasthan High Court)

S. 148 : Reassessment-Notice-Constitutional validity-The delegation authorized being only for the purpose of enlarging limitation under a valid law, such delegation could not be exercised to resurrect the provision of law that stood omitted from the statute book by virtue of its substitution made by the Finance Act, 2021, w.e.f. 01.04.2021-Reassessment notices issued under section 148 of the Act are quashed-It is left open to the assessing authority to initiate-re-assessment proceedings in accordance with the provisions of the Act, as amended by the Finance Act, 2021 after making due compliance as required under the law. [S. 147, 148A, 149, 151, 151A, 153, 292 Relaxation of Certain Provisions) Act, 2020, S. 3(1) of the Act 38 of 2020, Art. 226]

Reassessment dropped.

 Rajasthan HC follows Allahabad HC’s decision to quash reassessment notices issued from April to June 2021 following the provisions of old regime of reassessment

This Tax Alert summarizes a recent development where a single-judge bench of the Rajasthan High Court (HC), in the case of Bpip Infra Pvt. Ltd. v. ITO & Others vide its order dated 25 November 2021, while dealing with a bunch of writ petitions, quashed reassessment notices issued from April to June 2021 following the provisions of old regime of reassessment. In doing so, the Rajasthan HC relied substantially on the ratio laid down by the Allahabad HC in the case of Ashok Kumar Agarwal v. Union of India (UOI) & Others

GST Portal - Important New Functionalities in November 2021

 

In November 2021, GST portal has made available some vital new functionalities being awaited by the taxpayers for very long. Please find our update on the same as below.

A.            REGISTRATION

S. No.	Form/Functionality	Functionality made available	Remarks
1	Withdrawal of application for cancellation of registration in FORM REG-16 by taxpayers	Taxpayers can now withdraw their application for cancellation of registration provided no action has been initiated against their application	It helps the taxpayers in two scenarios: -             Cancellation filed but now wishes to keep the registration -             Cancellation filed with wrong details

 

Changes in GSTR-1 Interface and Generate Summary

 This is to bring to your kind attention on the changes introduced by GSTN in the process of filing of GSTR-1 and improvements in GSTR-1. Below are key changes in the GSTR-1 as per the GSTN advisory:

 

Supplier identification and their review are 'Intermediary Services' - AAAR

 

Appellate Authority for Advance Ruling, Karnataka (‘AAAR’) in the case of Airbus Group India Private Limited, 2021-VIL-63-AAAR, dealt with the scope of ‘intermediary services’ under Goods and Services Tax (‘GST’) after the issuance of a Circular by the CBIC.

 

Facts of the Case

 

·                The Appellant, a subsidiary of a foreign company, entered into an agreement with its Parent company to provide certain services including supplier identification and performance review, technical advisory to suppliers for meeting quality standards, etc.

 

·                The agreement stipulated that all operative decisions were handled by the Parent company such as selection of suppliers, negotiation, and further communications with them, etc.

 

·                The Authority for Advance Ruling (‘AAR’) held that such an arrangement falls under ‘intermediary services’.

 

AAAR Ruling

 

·                Appellant is neither a broker nor an agent. The expression ‘any other person’ in the definition of ‘intermediary’ also include a person who is not similar to a ‘broker’ or ‘an agent’. The Doctrine of Ejusdem Generis cannot be applied.

 

·                Since the Appellant’s role, inter alia, was to continuously assess the supplier performance, it constitutes ‘facilitation/arrangement’. Thus, the Appellant is providing ‘intermediary services to its Parent company.

 

·                That the recent Circular No. 159/15/2021-GST dated September 20, 2021, issued by CBIC goes against the Appellant.

  | Remarks

 

·                While we agree with the AAAR that the Doctrine of Ejusdem Generis is not applicable (on a different reasoning), the decision by the AAAR may be incorrect under GST laws.

 

·                The AAAR has wrongly interpreted the recent clarification issued by CBIC in concluding that the Appellant is providing the ancillary services and not the main services.

 

·                Now, assuming that the Circular favours the Appellant and since AAAR decision is binding on the Appellant under GST laws, the moot question is ‘which will prevail, the circular or AAAR’?

Tax Due Date - December 2021.

 

S No	Due Date	Related to	Compliance to be made
1	11.12.2021	GSTR – 1	Filing of GSTR – 1 for the month of November 2021
2	20.12.2021	GST	Payment of GST for the month of November 2021 Filing of GSTR 3B for the month of November 2021
3	07.12.2021	TDS/TCS (Income Tax)	· Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fees, payment to Contractors, etc. during the month of November 2021. · Deposit TDS from Salaries deducted during the month of November 2021 • Deposit TCS for collections made under section 206C including the sale of scrap during the month of November 2021, if any • Deliver a copy of Form 15G/15H, if any to CCIT or CIT for declarations received in the month of November 2021, if any
4	15.12.2021	Income tax	Payment of Advance Tax for the Corporate and Non Corporate assesses –Amount not less than 75% and 60% of advance tax respectively.
5.	31.12.2021	Income Tax	Filing of Tax Audit & other report and filing of ITR for non audit cases.

India and the US agree on transitional approach for India’s 2% Equalisation Levy pursuant to Pillar One solution

 

This Tax Alert discusses the recent Press Release dated 24 November 2021 issued by Government of India on the compromise reached between India and the United States of America (US) on a transitional approach to the treatment of existing e-commerce Equalisation Levy (EL) during the interim period before new Pillar One rules come into effect.

CBDT issues further guidelines on withholding of taxes for sale and purchase of goods and e-commerce platforms

Circular No. 20/2021 dated 25 November 2021 (Circular) issued by the Central Board of Direct Taxes (CBDT), provides guidelines for removing certain difficulties in the application of provisions regarding withholding tax @ 0.1% on purchase of goods [Section (S.) 194Q of the Income Tax Laws (ITL)] (tax deducted at source (TDS) on purchases), collection of tax at source at 0.1% on the sale of goods (S. 206C(1H) of the ITL) (tax collected at source (TCS) on sales) and withholding tax @ 0.1% on transactions carried out by e-commerce operators (S. 194-O of the ITL) [TDS on e-commerce operators (EOP)].

Forfeiture of deposit is not leviable to service tax as toleration of an act

 Tribunal in the case of Tirupati Balaji Furnaces Pvt Ltd., 2021 (11) TMI 600, held that Service Tax (‘ST’) would not be levied on forfeiture of earnest money and retention of compensation / liquidation damage for non-delivery of purchased goods by the supplier.    

Important clarification by CBIC on refunds related issues

 

Circular No. 166/22/2021-GST dated November 17, 2021 issued by the Central Board of Indirect Taxes (‘CBIC’) providing clarification on certain refund related issues.  Given below the summary of circular with our comments.

S. No.	Issue	Clarification	Comments
1	Whether limitation period of 2 years applicable for filing refund application of excess balance in e-cash ledger?	Limitation period is not applicable	Balance in e-cash ledger is as good as cash for a taxpayer and does not partake form of a ‘tax’
2	Whether declaration/certification of unjust enrichment required in case of refund of excess balance in e-cash ledger?	Not required, as unjust enrichment clause is not applicable in such cases	Balance in e-cash ledger is taxpayer’s own money and hence, no point of unjust enrichment
3	Whether refund of TDS/TCS deposited in e-cash ledger under GST can be refunded as excess balance in cash ledger?	TDS/ TCS credited to e-cash ledger is equivalent to cash deposited in the ledger. Therefore, said amount can be refunded as excess balance in e-cash ledger	Practically, once a taxpayer files a refund application, Department is denying the same on the ground either of difference in GSTR-2A v. GSTR-3B or some other ground which has no relation with the e-cash refund. Realising this especially from TCS/TDS perspective, recently, GST Council has decided to allow taxpayers to transfer such balance from one GSTIN to another. Portal functionality is yet to come.
4	What is the ‘relevant date’ for filing refund claim under Deemed Exports by the recipient?	The date of filing of return (covering the deemed exports supplies) by the supplier	It is, therefore, important for the recipient not to delay in claiming the ITC because the limitation period of 2 years shall start from the date of supplier’s return.

Directors can’t be booked just because the firm violated the law: SC

 

The Supreme Court has asked investigating and prosecuting agencies not to proceed mechanically against directors of errant companies merely because of the post held and said such avoidable prosecution leads to humiliation and loss of reputation in society.

Understand Proposed Digital tax.

All through the past few months, the finance dailies have been talking about the introduction of a new regime of taxing digital transactions and the abolition of the Equalization Levy. The article is an attempt to simplify digital taxation and address some of the key points of the proposal. What is the whole discussion about?

What is the difference between FDI and FPI?

 

Each Country needs money for its profitable widening also the funds can’t be elevated from just its domestic sources only. In this fast-developing world, The two main and well-needed kinds of foreign capital are Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI).

FDI relates to the foreign investment where the investor gets a lasting interest in an enterprise in another country. It involves establishing a direct business interest in a foreign country, such as buying or establishing a manufacturing business, building warehouses, or buying buildings. Also, it tends to involve creating more of a substantial, long-term interest in the economy of a foreign country. FDI can also be made through different methods like creating a joint venture, through merger and acquisition, etc.
Foreign Portfolio Investments (FPI) refers to investing in the financial assets of a foreign country, such as stocks or bonds available on an exchange. It includes the buying of securities that can be easily bought or marketed. Hoping to generate a fast return the main motive of FPI is to invest money into a foreign country’s stock market.

Revolutionary Changes are made in GST for the Real Estate Sector.

 ITC has been abolished for the residential segment with no option to pay GST at a higher rate and claim ITC. The revised scheme applies to residential and commercial apartments which are covered under RERA. The provisions do not apply to the construction of single houses or works contracts not covered under RERA. 

 

Understand best judgment assessment under section 144.

§  This is an assessment carried out as per the best judgment of the Assessing Officer on the basis of all relevant material he has gathered. This assessment is carried out in cases where the taxpayer fails to comply with the requirements specified in section 144.

Whether intimation U/S 143(1) can be revised U/S 264 by the commissioner?

 Ø  

·         From the various judicial pronouncements, it is settled that the powers conferred under section 264 of the Act are very wide. 

·         Under this section, the Principal Commissioner is mandated not to revise any order in two situations: first where an appeal that lies to the Commissioner (Appeals) but has not been made and the time within which such appeal may be made has not expired or second, where the assessee has not waived his right of appeal.

·         Bombay HC in the case of Aafreen Fatima Fazal Abbas Sayed v. ACIT AND PCIT (WRIT PETITION (L) NO. 6096 OF 2021) has held that since section 264 uses the expression “any order”, it would imply that the section does not limit the power to correct errors committed by the subordinate authorities but could even be exercised where errors are committed by assessees.

·         Article 265 of the Constitution of India imposes an embargo on imposition and collection of tax if the same is without authority of law.

·         Thus, The powers given to Commissioner of Income Tax under section 264 are very wide and he can revise any order including intimation under section 143(1)

CBDT notifies e-settlement scheme, 2021- Overview

The Board of Direct Taxes (Income Tax Department) vide Notification No. 129/2021/ F.No. 370142/52/2021-TPL (Part IV) dated 01.11.2021, in exercise of its power under section 245D (11) & 245D (12) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) has issued a Scheme may be called the e-Settlement Scheme, 2021 to settle pending income-tax settlement applications transferred to a settlement commission.

TYPES OF AUDIT AND THEIR LEGAL REQUIREMENT

 

 

 

 

PARTICULARS	LEGAL REQUIREMENT
FORENSIC AUDIT
By banks on loans and advances	1)     The RBI has mandated forensic audits for loan accounts above a particular exposure which have turned non- performing by issuing Master Directions on Frauds – Classification and Reporting by commercial banks and select FIs via Circular No. DBS.CO.CFMC.BC.No.1/23.04.001/2016-17 Dated July 01, 2016.   2)     SEBI in Schedule III, in Part A, under the Clause A, sub- clause 17 of SEBI LODR Regulations] has now mandated the following disclosures shall be made to the stock exchanges by listed entities: a)     The fact of initiation of forensic audit along-with name of entity initiating the audit and reasons for the same, if available; b)     Final forensic audit report (other than for forensic audit initiated by regulatory / enforcement agencies) on receipt by the listed entity along with comments of the management, if any.”
STATUTARY AUDIT/ EXTERNAL  AUDIT
For Private/Public Company	Section 139 to 147 of Companies Act, 2013 along with Companies (Audit & Auditors) Rules, 2014.   Mandatory: Irrespective of Turnover, profits etc., even in case of losses.
For LLP	Section 34(4) of LLP Act, 2008 and Rule 24(8) of LLP Rules, 2009.   LLP audit is mandatory where the turnover exceeds ₹40 lakhs in a F.Y. OR where the contribution exceeds ₹25 lakhs in a F.Y.

INTERNAL AUDIT
For listed company	Section 138 of Companies Act, 2013 and Rule 13 of Companies (Accounts) Rules, 2014: Mandatory
For Unlisted public company	Section 138 of Companies Act, 2013 and Rule 13 of Companies (Accounts) Rules, 2014.   If during the preceding F.Y. : (i)    paid up share capital – Rs. 50 crore or more, OR (ii)    turnover – Rs. 200 crore or more, OR (iii)    O/s loans or borrowings from banks or public financial institutions exceeding Rs. 100 crore or more at any point of time; OR (iv)     O/s deposits – Rs. 25 crore or more at any point of time.
For Every Private company	If during the preceding F.Y.: (i)    Turnover – Rs. 200 crore or more OR (ii)    O/s loans or borrowings from banks or public financial institutions exceeding Rs. 100 crore or more at any point of time.
TAX AUDIT
For Individual, HUF, Firm, Company, AOP & BOI, Local authority etc.	Section 44 AB of Income Tax Act, 1961.   Tax audit is mandatory where the turnover or gross receipts exceeds ₹1 crore (10 crores) in a P.Y. in case of business OR where the Gross receipts exceeds ₹50 lakhs in the P.Y. in case of profession.
COST AUDIT
For Companies	Section 148 of Companies Act, 2013 and Rule 3 & Rule 4 of Companies (Cost Records and Audit) Rules, 2014   Every company whose turnover exceeds 50 crores for regulated Sectors & 100 crores for Non-regulated sector during immediately preceding financial year.