Do not claim less GST input for the month of April 2022

•  The GST taxpayer is advised to restrict their claim  of input credit based on the entries available in GSTR 2B for the particular month.  
• GSTR 2B is a register with a cut off date of 12th of every month and the same includes GST input of previous months and the current month.
• For April 22, we can see GSTR 2B which contains details of previous months and not current months.
• GSTR 2A for April 22 is available with input credit of the current month.
• The GSTN had issued an advisory for the present technical glitch and advised to claim input credit based on the credit available in GSTR-2A.
• by doing this, GST taxpayers can claim only input entries available for the current month and are not able to claim input credit of the previous month for which entries are available in GSTR 3B.
• it is advisable to add GSTR 2A & 2B and then claim the consolidated amount.      

CBDT notifies tax return form (Form ITR-U) and the manner to furnish updated return

 This Tax Alert summarizes the key highlights of Notification No.48/2022 dated 30 April 2022 issued by the Central Board of Direct Taxes (CBDT) which amends the Income Tax Rules, 1962 by inserting Rule 12AC which provides for tax return form (Form ITR-U) and the manner for furnishing updated return.

GST Implications on Merger of Two GSTINs Having Same PAN

 In the case of Crystal Crop Protection Limited [GST-ARA-31/2021-22/B-50]. The AAR held that the transfer of business by way of merger of two GSTINs having same PAN would not qualify as ‘transfer of business as going concern’ and hence would constitute as supply of Goods and not supply of Services.

 

No ITC available of GST paid on procurement of goods/services for promotional scheme– Tamil Nadu AAAR

 The Tamil Nadu Appellate Authority for Advance Ruling (AAAR) has affirmed the observations of Tamil Nadu AAR and held that ITC of GST paid on procurement of goods/services for the promotional scheme is not available as per Section 17(5) of the CGST Act. The AAAR elucidated that since the retailers ultimately consumed the goods/services provided under the reward scheme, such personal consumption by appellant or by its retailers would disentitle them to avail ITC. Hence, the contention regarding applicability of clause to the stage of procurement use and not on the last use would be of no avail to the appellant. The AAAR has emphasised upon the non-obstante clauses of Section 17(5) and remarked that these clauses put embargo on availability of ITC itself.  The AAAR concluded that giving away of goods/services under the scheme is not a supply. Therefore, ITC of the GST paid on the goods/services procured for the scheme is not available to the appellant.

Tax paid under erstwhile regime is permissible to carry forward under GST regime as credit in the electronic credit ledger - Madras High Court

 The Madras High Court (HC) allowed credit of service tax paid under RCM [after the introduction of the Goods and Services Tax (GST)], which could not be availed as transitional credit. The HC ruled that the chance of seeking a refund or credit cannot be denied merely because the transitional provision has come into effect and credit could not be claimed under Section 140(1). The HC observed that taxpayers should not be rendered remediless and, hence, invoked the doctrine of necessity as the HC felt it a dire necessity for the legislation to address such situations. The HC noted that if the GST regime had not come into effect, the petitioner would have been eligible to claim the Central Value Added Tax (CENVAT) credit of all the amounts paid. Thus, the HC suggested the Revenue to carry forward the credit in the electronic credit ledger of the petitioner.

Supreme Court upholds validity of assessment in the name of amalgamating company post amalgamation on factual grounds

 This Tax Alert summarizes a recent Supreme Court (SC) ruling in the case of Mahagun Realtors (P) Ltd. (Taxpayer), wherein the issue before the SC was whether an issue of notice, in the name of amalgamating company post the Appointed Date and passing of assessment order in the name of amalgamating company as represented by amalgamated company, would invalidate the assessment since amalgamating company ceases to exist in law post the Appointed Date.

CBDT exempts non-resident individuals visiting India from tax collection on LRS remittance and overseas tour program package

 This Tax Alert explains Notification dated 30 March 2022  issued by the CBDT which exempts individuals, not resident in India (NR) as per the provisions of Income Tax Laws and visiting India, from tax collection at source (TCS) on foreign remittances made under Liberalized Remittance Scheme (LRS) and for purchase of overseas tour program package (OTPP).

CBDT notifies fees payable in case of delay in linking Aadhaar with PAN and defers other consequences of non-linking till 31 March 2023

 This Tax Alert explains Notification No. 17/2022 dated 29 March 2022, Press Release dated 30 March 2022 and Circular No. 7/2022 dated 30 March 2022 issued by the Central Board of Direct Taxes (CBDT), providing quantum of fees to be levied on the taxpayer who fails to link their Aadhaar with their Permanent Account Number (PAN), as mandated by the Income Tax Laws , on or before 31 March 2022, as well as the last operative date for PAN which is not linked with Aadhaar.

Government extends tenure of Foreign Trade Policy and the benefit of exemption to EOUs and others

 This Tax Alert summarizes a recent Notification and Public Notice ^[1] issued by the Directorate General of Foreign Trade (DGFT) extending Foreign Trade Policy 2015-2020 (FTP) by further six months.

SOP for GST scrutiny

 The CBIC issued the GST Instruction No. 02/2022-GST dated 22.03.2022. The said instruction is issued to provide the Standard Operating Procedure (SOP) for scrutiny of returns for FY 2017-18 and 2018-19. Given  below the key highlights of the instruction for the  ready reference:

 

How to Register a Startup in India ?

 India's unicorns are currently worth more than $170 billion, and counting. The startups from India are attracting great investments because they are the breeding ground of new-age innovations focused on empowering the people in emerging markets with the right digital solutions, impacting the lives of millions. The government’s priority is to give as many youth as possible the opportunity for innovation.

Indirect Tax case laws update.

 ·         The Karnataka High Court has held that the exemption on residential dwelling under the Goods and Services Tax (GST) will be applicable even if the lessee does not use the premises. The HC observed that a hostel falls within the purview of residential dwelling as the same is used for the purpose of residence. Thus, leasing of residential premises as hostel to students and working professionals will not attract GST.   

 

·         The  Bombay High Court has held that as per the Goods and Services Tax (GST) rules, any reference to electronic filing of refund application would include manual filing of refund

 

·         The Madras High Court has allowed the Credit of Service Tax Paid under RCM which could not be availed as Transitional Credit under the Goods and Services Tax ( GST ) regime 

 

·         Gujarat high court held that Negative blocking of Electronic Credit Ledger not allowed under Rule 86A of the Act.

 

·         Allahabad High Court has held that the refund application under the Goods and Service Tax (GST) cannot be rejected merely on the ground of delay.

Direct Tax case laws update.

 

·         The Bombay High Court has heavily criticized the Income Tax Department for not being transparent with taxpayers in sharing the requested information basis of reopening action 

 

·         The Cochin bench of the ITAT has held that the carry forward of business loss cannot be denied to the assessee merely on the ground that the statutory audit/tax audit was not completed within the prescribed period

 

·         ITAT Bangalore bench has held that the expenditure allowed for corporate social responsibility (CSR) of the assessee shall be allowed as business expenditure under section 37(1) of the Income Tax Act, 1961.

 

·         The Mumbai bench of the ITAT has held that the interest received on loan given to the related party for business purpose cannot be subjected to provisions of section 40A(2)(b) of the Income tax Act, 1961.

 

·         The Supreme Court (SC) has held that for granting the exemption based on the nature of the agreement, the said agreement should be read as a composite whole. The SC viewed that just because the agreement contained a provision for payment on rate basis, it would not make it a job work agreement and mentioned that crucial elements of a job work agreement were missing in the said agreement. Accordingly, it was opined that the contract is a pure and simple contract for the provision of contract labour and an attempt has been made to camouflage it as a contract for job work.

Important Year End To-do's under Indirect Tax Laws

 

We have put together few important year-end compliance tasks in relation to Indirect Taxes, for your perusal:

 

Tasks before March 31, 2022

Section 194R - Provide your input.

 

The TDS under section 194R is applicable from July 1, 2022, and companies require to deduct TDS @ 10% in case they provide any benefit to persons other than their own employees.   In this regard, please refer to the below table with different scenarios and provide your input on the comment section. we will share the final outcome of the same with everyone. 

CBDT issued circular w.r.t income tax deduction from salaries during FY 2021-22 u/s 192 of the IT Act, 1961

 The CBDT issued Circular No. 04/2022 dated March 15, 2022 regarding income tax deduction from salaries during the Financial Year 2021-22 under section 192 of the Income-tax Act, 1961 (“the IT Act”).

CBIC notifies the Shipping Bill (Post export conversion in relation to instrument based scheme) Regulations, 2022

 This Tax Alert summarizes a recent Notification¹  issued by Central Board of Indirect Taxes and Customs (CBIC) notifying the Shipping Bill (Post export conversion in relation to instrument based scheme) Regulations, 2022.

Taxation of Virtual digital assets.

Finance Act 2022 introduced a tax on virtual digital assets (VDA).

Ø Section 2(47A) provided a definition of VDA.

A. An Asset satisfying all the below conditions

Key-highlights of GST Proposals in Finance Bill 2022

 1.    Time-limit to avail ITC u/s 16(4) extended till 30th November of next year from 30th September.

2.    Additional Condition for availment of ITC u/s 16(2)- ITC can be availed only if the same is not restricted in GSTR-2B.

3.    Composition Tax Payer’s Registration can be cancelled suo-moto if they have not filed their GSTR-4 return beyond 3 months from the due date.

4.    Credit Notes in respect of supply made in a financial year can be issued by 30th November of next financial year (currently allowed till 30th September)

5.    Any rectification of error in GSTR-1/ GSTR-3B is now permitted till 30th November of next financial year (currently allowed till 30th September).

6.    The two-way communication process in filing GST returns is scrapped.

7.    The due date for filing return by non-resident taxable person is prescribed as 13th day of next month

8.    Section 41 of the CGST Act is being substituted so as to do away with the concept of “claim” of ITC on a “provisional” basis.

9.    Section 47 of the CGST Act is being amended so as to provide for levy of late fee for delayed filing of TCS returns.

10.  Section 49 of the CGST Act is being amended so as to provide for restrictions for utilizing the amount available in the electronic credit ledger.

11.  Section 49 of the CGST Act is being amended so as to allow transfer of amount available in E- cash ledger of a registered person to the E- cash ledger of a distinct person;

12.  Section 49 of the CGST Act is being amended so as to provide for prescribing the maximum proportion of output tax liability which may be discharged through the electronic credit ledger

13.  Section 50(3) of the CGST Act is being substituted retrospectively, with effect from the 1st July, 2017, so as to provide for levy of interest on input tax credit wrongly availed and utilized. (Meaning  thereby Interest will not be levied if ITC is not utilized)

14.  Refund claim of any balance in the electronic cash ledger shall be made available.

15.  Rate of Interest u/s 50(3) prescribed as 18% in all cases. 

Budget 2022 - Tax Impact First Cut.

 01.   There is no change in the tax rates.

02.   In order to report any income which has not been offered to tax, a new updated tax return has been introduced which can be filed within 2 years from the end of the relevant assessment year subject to payment of an additional 25% of the total tax & interest liability.   

03.   When for a particular matter, which has been decided in favour of the assessee by the Tribunal or Jurisdictional high court and revenue has challenged the same in case of the same assessee or another assessee before the High Court or Supreme court, then revenue can defer filing of appeal before ITAT and High court in case of other taxpayers for same question of law subject to prior approval of PCIT.  (w.e.f. 1.4.22)  

04.   In order to remove doubts, it has been expressly stated that Cess is not allowable as business expenditure with retrospective effect from 2005.

05.   Rule 8D is applicable even in case when no exempt income is earned & hence disallowance u/s 14A is mandatory.

06.   Penalty for offences under foreign law is not allowable as deduction u/s 37(1).

07.   Conversion of interest liability into debenture is not an allowable expenditure u/s 43B.

08.   Extension of following dates. 

(i)                  Section 115BAB - New manufacturing unit - Date of commencement of operation extended from March 2023 to March 2024.

(ii)                Section 80-IAC - Registered start up unit - Date of Incorporation extended from March 2022 to March 2023.

09.   AMT on co-operative society reduced to 15% from 18.5%.

10.   Amount received from employer towards Covid treatment during FY 2020-21 & FY 2021-22 is not taxable as gift or perquisite.

11.   The definition of specified person has been amended to reduce the period of non-filing from 2 years to 1 year. Thus if vendor has not filed return for 1 year then TDS is to be deducted at double rate.

12.   Introduction of section 194R where TDS required to be deducted @ 10% on benefit or perquisite of a business or profession.

13.   Removal of concessional rate of tax on foreign dividend. It is taxable at normal rate now.

14.   Introduction of maintenance of books of accounts by Charitable Institution. Further, Penalty for passing on unreasonable benefit to Trustee or specified person.

15.   Introduction of process of converting charitable institution to non-charitable.

Reduction of goodwill from books of accounts is deemed transfer