Notifications issued pursuant to the decisions taken at the 47th Council Meeting

 We wish to update that various notifications have been issued by Ministry of Finance to give effect to the recommendations made by the GST Council in the 47^th meeting.

 

The summary of the same is captured below for your ready reference:

Central Government notifies inclusion of NFTs and exclusion of certain items from the scope of virtual digital asset

 Central Government notifies inclusion of NFTs and exclusion of certain items from the scope of virtual digital asset

This Tax Alert explains Notification Nos. 74 and 75 of 2022 dated 30 June 2022 issued by the Central Government (CG). Notification No. 74 excludes certain items like gift cards, mileage points, web subscriptions etc. from the scope of definition of “virtual digital assets” (VDA). Notification No. 75 notifies “token” which meets the definition of VDA as non-fungible token (NFT) but excludes NFTs representing ownership of underlying tangible assets from the scope of definition of VDA.

GST Council recommends rate rationalization and changes in GST law and procedure

This Tax Alert summarizes a recent press release issued by the Ministry of Finance. The 47th meeting of Goods and Services Tax (GST) Council was held on 28 and 29 June 2022 in Chandigarh.

The key decisions are as follows:

Press Release for recommendations of GST Council in its 47th Council Meeting held on 28th and 29th June 2022

  

 

This is to update you on the recent Press Release issued in respect of 47^th GST Council Meeting held on 28^th June and 29^th June 2022. The recommendations of the GST Council would be given effect through relevant Circulars/ Notifications/ Law amendments which shall have the force of law. The current press release only for the purpose of information.

ITC mismatch can be communicated by way of a SCN

 This is to apprise you about an important decision by Hon'ble Madras High Court ('HC') in the case of Mahendra Feeds and Foods, 2022 (5) TMI 1237. The HC was dealing with the question as to whether a Show Cause Notice ('SCN') can be the first intimation of Input Tax credit (‘ITC’) mismatch.

 

Facts

 

·                The Petitioner availed ITC for the FY 2017-18 and 2018-19. The GST Department issued a SCN requiring the Petitioner to explain the ITC mismatch.

 

·                The Petitioner contended that before issuance of a SCN, Department was obliged to first communicate the mismatch to both the supplier and recipient as per Section 42(3). Thus, SCN cannot be issued as a very first communication.

 

·                The Department submitted that SCN issued to the recipient was itself a communication as per Section 42(3).

 

HC Judgement

 

·                After receipt of SCN, if at all the petitioner wanted to rectify the ITC mismatch, he would have submitted the supporting documents to substantiate that output tax had been paid by the supplier, which he failed to do.

 

·                Therefore, SCN can be treated as communication as per Section 42(3), intimating the ITC mismatch.

 

 | Remarks

 

·                Apparently, the HC made it clear that merely on such small technical ground, an adjudication proceeding cannot be diluted, especially when the Petitioner did not even care to explain the mismatch or put forth a reply.

 

·                This decision will surely encourage GST authorities to issue a SCN directly for ITC mismatches which will definitely create a problematic situation for taxpayers.

CBDT issues guidelines for applying new withholding provisions on transfer of virtual digital assets

 This Tax Alert explains Circular No. 13 dated 22 June 2022 (Circular) issued by the Central Board of Direct Taxes (CBDT) with a view to remove difficulties and provide guidance for giving effect to the newly inserted provision for tax deduction at source (TDS) on consideration arising from transfer of virtual digital asset (VDA) under the Income Tax Law (ITL).

With effect from 1 July 2022, a person responsible for paying any sum as consideration to a resident in India for transfer of VDA, is required to undertake TDS @ 1%, subject to certain conditions. The ITL also contains a specific provision enabling the CBDT to issue guidelines for the purposes of removal of any difficulty in giving effect to the TDS provisions on transfer of VDA (TDS on VDA).

Pursuant to representations made by the stakeholders and in exercise of the power to issue guidelines to remove difficulties, the CBDT has issued the Circular to clarify certain issues on the interpretation/application of TDS on VDA.

Key clarifications provided in the Circular broadly include (i) determining the person responsible for withholding tax where the transfer of VDA is routed through an “Exchange” (thereby involving multiple parties in a transaction); (ii) TDS mechanism where transfer of VDA is for consideration paid in kind or in exchange for another VDA; (iii) TDS when consideration is paid through a payment gateway; (iv) clarification on overlap between TDS on VDA and TDS on purchase of goods; (v) TDS on net value of consideration and (vi) computation of annual thresholds to trigger TDS on VDA.

CBDT has also, vide a separate Notification, amended the procedural rules and prescribed forms to enable various compliances and furnish information, inter alia, in relation to TDS on VDA.

Taxation of NRI in India.

 

An NRI's income taxes in India will depend upon his residential status for the year as per the income tax rules mentioned above. If your status is resident your global income is taxable in India. If your status is 'NRI,' your income earned or accrued in India is taxable in India.

CBIC issues guidelines for review, post-audit and sanction of refund claims under GST

This Tax Alert summarizes a recent Instruction issued by the Central Board of Indirect Taxes and Customs (CBIC) relating to sanction, post audit and review of refund claims under Goods and Services Tax (GST).

Restrictions on cash transactions in Income Tax Act:

 1. As per Sec 13A, if donation is received by political parties in cash exceeding Rs 2000, exemption shall not be available to them. 

 2. Deduction U/S 35AD shall not be allowed if cash payment exceeds Rs 10,000. 

Comparison between Section 112 & 112A

 The similarity between Section 112 and Section 112A of Income Tax Act, 1961.

Both sections covers following

1.    Long Term Capital Asset:- Equity share in a company Unit of Equity Oriented Fund Unit of a business trust

2.    Both sections determine tax on long term capital gains and falls under chapter XII of the Income Tax Act, 1961.

3.    First proviso in both the sections is same which is related to benefit of slab rate in case of Individual and HUF,  being a resident.

4.    Deductions under Chapter-VIA are not available in both sections.

5.    Both sections have one common tax rate @ 10% subject to fulfilment of conditions specified therein

Difference between Section 112 and Section 112A of Income Tax Act, 1961

SN	Particulars	Section 112A	Section 112A
1	Type	Cover all securities	Cover only equity shares, Mutual Fund & business trust
2	STT Payment	Not required	Mandatory
3	Tax Rate	10% without indexation or 20% with indexation  -  whichever is beneficial.	10% in excess of onel lakh capital gain.

Taxation of MLD

 

TDS on payment to Non Resident

 TDS on non-resident payment has always been a complex area of Income Tax Compliances. Detailed analysis is required to be performed to each transaction to understand TDS on foreign payment before you can initiate a payment. Wrong TDS on foreign party may put your company at greater risk in later years when the assessment is done.

IMPORTANT TAX CHANGES FOR FY 2022-23.

As the new financial year (FY) 2022-23 begins from April 1, several income tax and financial changes will come into effect. We provide a list of few such changes applicable from April 1, 2022.

Higher TDS from April 1 if ITR for FY 2020-21 not filed

As per the announcement made in the Union Budget 2022, if ITR for one year is not filed, then higher TDS, TCS will be applicable in the next financial year. It must be noted that this higher TDS will not be applicable if the source of income is salary or provident fund. However, higher TDS will be deducted from interest income, dividend income, etc. as specified under the Income-tax Act.

Service tax applicability on secondment of employees

 The Hon’ble Supreme Court of India in the matter of M/s Northern Operating Systems Pvt. Ltd. (“NOS”) in relation to taxability of the arrangement of secondment of expat employees to Indian entity under reverse charge mechanism.

 

SC rules IGST is not leviable on inbound ocean freight in case of CIF contracts

 The issue involved was whether Integrated Goods and Services Tax (IGST) can be separately levied and collected from the Indian importer on ocean freight paid by the foreign exporter to a foreign shipping line, where Customs duty together with IGST has been already discharged on the value of imported goods.

Recent Income Tax Court decesions.

 

·         Mumbai ITAT held that no disallowance of reinsurance payments to foreign re-insurers under section 37(1) and/ or 40(a)(ia) of the Income-tax Act, 1961.

 

Understand section 80JJAA: Deduction wrt employment of new employees

 

A. Criteria
1. Any assessee who has business income and is subject to audit u/s 44AB
2. Business must not be formed by splitting up or reconstructing of an existing business
3. Business must not be transferred from any other person or as a result of any business re-organization.
4. Filing of Form No 10DA.

Understand Treaty impact on Adani-Holcim deal.

 

The Adani recently announced aquisation of Cement companies ACC & Ambuja cement from Holcim group based in Switzerland. Currently, the equity (covered by the deal) is held by the Holcim group as under:

 

Ambuja Cements Limited – 63.55% stake is held by Holderind Investments Limited, a Mauritius entity ('Holding entity'). In turn, the Holding entity is owned by Holderfin B.V, a Netherlands entity ('Intermediate Holding entity') which is ultimately owned by Holcim Limited, Switzerland ('Ultimate Holding entity').

ACC Limited - 50.05% stake is held by Ambuja Cements Limited, whereas the Holding entity owns a 4.48% stake.

 

Tax on Super Anuation fund

 

Payment from Super Anuation fund

Electricity Charges are Includible in Rent for Charging GST - AAAR

 

This is to apprise you about a recent decision by Appellate Authority for Advance Ruling (‘AAAR’) in the case of Harish Chand Modi, RAJ/AAAR/05/2021-22, wherein it was held that reimbursement of electricity expenses by the lessee to lessor would form part of taxable value and not to be treated as ‘Pure Agency Services’.