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JSA Prism | Indirect Tax | September 2024

Please click here to download the Prism as a PDF.

Key Highlights of the 54^th Goods and Services Tax Council Meeting

The 54^th GST[1] Council meeting, chaired by the Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman was held at New Delhi, on September 9, 2024. The GST Council recommended certain changes in the GST rates, along with various measures towards trade facilitation and streamlining compliances.

The key recommendations of the meeting are summarised below.

Recommended changes and clarifications with respect to supply of goods and services

Changes in rate of GST for goods
- Namkeens and extruded/expanded savory food products: Rate of GST on extruded or expanded products, falling under Tariff Heading 19059030 proposed to be reduced from 18% to 12%. This is to bring taxability of extruded or expanded savory food products at par with namkeens, bhujia, mixture, chabena (pre-packaged and labelled) classifiable under Tariff Heading 210690. The said reduction in GST rate will be applicable prospectively.

Further, un-fired or un-cooked snack pellets, manufactured through process of extrusion, to continue to attract GST at the rate of 5% in terms of Entry No. 99B of Schedule I of the Rate Notification[2].

- Cancer drugs: GST rate on cancer drugs namely, Trastuzumab Deruxtecan, Osimertinib and Durvalumab to be reduced from 12% to 5%.
- Roof Mounted Package Unit (“RMPU”) air conditioning machines for railway: RMPU proposed to be classified under Tariff Heading 8415 and to attract GST at the rate of 28%.
- Car and motorcycle seats: It is recommended to issue a clarification that car seats are to be classified under Tariff Heading 9401, currently attracting GST at the rate of 18%. The said rate of GST is recommended to be increased to 28%, so as to bring parity between rate of GST applicable on car seats of motor cars and motorcycles.
- Metal scrap: GST under RCM[3] will be applicable on supply of metal scrap by unregistered person to registered person, provided that the supplier obtains registration as and when it crosses threshold limit. The recipient will be liable to pay GST under RCM even if supplier’s turnover is below threshold limit. TDS[4] at the rate of 2% will be applicable on supply of metal scrap by registered person for business to business (B2B) transactions.
Changes in rate of tax and taxability for services
- Import of service by branch office: Import of services by an establishment of a foreign airlines company from a related person or any of its establishment outside India, when made without consideration, proposed to be exempt from GST. Taxability for past period to be regularised on ‘as is where is’
- Affiliation services: It is recommended that a clarification stating that affiliation services provided by educational boards like CBSE are taxable and State/Central educational boards, educational councils and other similarly placed bodies to Government Schools are exempt, prospectively. The levy for the past period, i.e. between July 1, 2017 to June 17, 2021 is recommended to be regularised on ‘as is where is’ basis.

It is also proposed to clarify that affiliation services provided by universities to their constituent colleges are not eligible for exemption[5] and GST at the rate of 18% will be applicable thereon.

- Research and development services: Research and development services provided by a government entity, or a research association, university, college or other institution notified under the Income Tax Act, 1961, which are using Government or private grants, are proposed to be exempt from GST. Taxability for past period will be regularised on ‘as is where is’
- Ancillary/intermediate services provided by GTA: It has been clarified that ancillary/intermediate services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc. provided by GTA[6] in the course of transportation of goods will be treated as part of composite supply.
- Preferential Location Charges (“PLC”): PLC paid along with the consideration of construction services before issuance of completion certificate, will form part of a composite supply, where supply of construction services will be the main service.
- Renting of commercial property: Provision of rental services for commercial property by unregistered person to a registered person will be brought under RCM[7], so as to prevent any revenue leakage.
- Services ancillary to supply of electricity: It has been recommended to exempt application fees for providing electricity connection, rental charges against electricity meter, testing fees for meters/transformers/capacitors, labor charges from customers for shifting of meters, charges for duplicate bills etc. as these services are ancillary to supply of transmission of and distribution of electricity, when provided as a composite supply.
- Life and health insurance: The Council has recommended the constitution of a Group of Ministers (“GoM”) to look into the issues pertaining to GST on life and health insurance services. GoM will submit a report by end of October 2024.

Measures for trade facilitation

Section 128A[8] of the CGST Act[9] provides for waiver of interest and/or penalty relating to tax demands under Section 73 of CGST Act, for FY[10] 2017-18 to 2019-20. In this regard, the Council has recommended the following:

insertion of Rule 164 to the CGST Rules[11] to prescribe procedure and conditions for availing the said benefit;
a notification prescribing March 31, 2025, as the last date for payment of tax in order to avail the benefit of Section 128A of the CGST Act;
Section 128A to the CGST Act will be made effective from November 11, 2024;
Sub section (5) and (6) of Section 16 of the CGST Act had been inserted to allow ITC[12] for FY 2017-18 to 2020-21 which was earlier disallowed on account of contravention of Section 16(4) of the CGST Act. The Council has recommended that a special procedure be notified for rectification of orders passed under Sections 73, 74, 107 or 108 of the CGST Act where such ITC has been disallowed on account of non-compliance of Section 16(4) of the CGST Act, and where appeal against the said order has not been filed;
a clarification that where inputs were initially imported without payment of IGST[13] and compensation cess by availing benefits under various notifications (such as advance authorisation, export oriented units, deemed exports, etc.) and subsequently such IGST and compensation cess are paid along with interest and bills of entry are reassessed, any refund granted of IGST paid on exports will be considered to be in accordance with the provisions of the CGST Act. Further, considering the complexity of this compliance procedure, it is proposed that Rules 96(10), 89(4A) and 89(4B) of the CGST Rules be omitted with prospective effect;
a clarification that where input were initially imported without payment of IGST and compensation cess by availing benefit of the aforesaid notifications. However, IGST and compensation cess were subsequently paid along with interest and bills of entry in respect of the import are reassessed to this effect, then refund of IGST paid on export will not be considered to be in contravention of Rules 96(10) of the CGST Rules.
The Council has recommended roll out of a pilot for business to customer (B2C) e-invoicing.

This Prism has been prepared by:

Manish Mishra
Partner

Shareen Gupta
Partner

Ruchita Modi
Principal Consultant

Joybrata Misra
Senior Associate

Dhwani Vyas
Associate

[1] Goods and Services Tax

[2] Notification No. 1/2017 Central Tax (Rate) dated June 28, 2017

[3] Reverse Charge Mechanism

[4] Tax Deduction at Source

[5] In terms of Notification No. 12/2017 – Central Tax (Rate)

[6] Goods Transport Agent

[7] Reverse charge mechanism

[8] Inserted vide the Finance (No. 2) Act, 2024

[9] Central Goods and Services Tax Act, 2017

[10] Financial Year

[11] Central Goods and Services Tax Rules, 2017

[12] Input Tax Credit

[13] Integrated Goods and Service Tax

Tags GST, Indirect Tax, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Tax

Indirect Tax Newsletter – September 2024 Edition

Please click here to download the Newsletter as a PDF.

Recent Rulings by Courts and Authorities

Supreme Court

Royalty not in nature of tax but consideration for enjoyment of mineral rights

A 9 (nine) judges Constitution Bench of the Hon’ble Supreme Court of India (“Supreme Court”) in the case of Mineral Area Development Authority and Anr. vs. Steel Authority of India and Anr.[1] held that royalty is not in the nature of tax and therefore, States have the authority to impose taxes on mineral rights. The dispute stems from the fact that several States sought to impose taxes on mineral bearing land in pursuance of Entry 49 of List II of the Constitution of India by applying mineral value or royalty as the measure of tax. The SLP[2] was filed in the Supreme Court on the primary ground that levy of royalty on mineral rights was beyond legislative competence of State Legislatures.

The Supreme Court observed that royalty cannot be equated to a tax, as royalty is consideration paid by a mining lessee to the lessor for enjoyment of mineral rights and to compensate for the loss of value of minerals suffered by the owner of the minerals. The liability to pay royalty arises out of the contractual conditions of the mining lease. The failure of the lessee to pay royalty is considered to be a breach of the terms of the contract, allowing the lessor to determine the lease and initiate proceedings for recovery against the lessee. Further, Section 9 of MMDR Act[3] statutorily regulates the right of a lessor to receive consideration in the form of royalty from the lessee for removing or carrying away minerals from the leased area. Further, while royalty is a consideration towards value of minerals, tax is an imposition of a sovereign. It was also observed that royalty is paid in consideration of doing a particular action, that is, extracting minerals from the soil, while tax is generally levied with respect to a taxable event determined by law.

The Supreme Court also emphasised on the fact that the levy of royalty is contractual in nature and flows from the agreement executed between the parties for extraction of minerals whereas tax is imposed by the Government on an event determined by law. Accordingly, royalty would not be comprehended within the meaning of the expression ‘taxes on mineral rights’.

The Supreme Court concluded that the States have the legislative power to tax mineral rights and therefore, upheld the levy of tax on royalty paid for enjoying mineral rights.

HDPE poly packs sold to distributors are wholesale packages, not subject to Section 4A of the Central Excise Act[4]

In the case of Commissioner of Central Excise vs. Miraj Products Pvt. Ltd.[5], an appeal was filed by the Commissioner of Central Excise (“Commissioner”), contesting the CESTAT[6]’s decision on whether the goods sold by Miraj Products Pvt. Ltd. (“Respondent”) in HDPE poly packs to distributors should be classified under Section 4 or Section 4A of the Central Excise Act. The dispute originated from SCNs[7] issued to the Respondent for the period April 2003 to December 2003. These SCNs alleged that the Respondent was not complying with the valuation norms required under the Central Excise Act and was accused of improperly packaging 33 (thirty-three) pouches of chewing tobacco (of 6 (six) grams each) and one pouch of 15 (fifteen) grams into larger HDPE poly packs, with the allegation that these larger packs were intended for retail sale.

The Commissioner, in an order dated July 19, 2005, upheld the SCNs and concluded that the larger poly packs were group packages intended for retail sale. The Respondent’s argument that these were wholesale packages, was disregarded and the Commissioner determined that the inclusion of MRP[8] on the poly packs indicated an intent for retail sale, thereby, necessitating compliance with Section 4A of the Central Excise Act. The CESTAT, however, reversed this decision, ruling that the poly packs, which were packed in HDPE bags and sold to distributors qualified as wholesale packages.

The Supreme Court upheld the decision of the CESTAT and noted that the smaller packs were indeed bundled into HDPE bags and sold to intermediaries and not directly to consumers. Relying on the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, the CESTAT held that HDPE bags qualify as wholesale packages, which are exempt from the retail price declaration requirements of Section 4A of the Central Excise Act.

High Courts

ITC[9] denied for breakwater construction

The Bombay High Court (“Bombay HC”) in the case of Konkan LNG Limited vs. The Commissioner of State Tax and Ors., evaluated the availability of ITC with respect to construction of breakwater by Konkan LNG Limited (“Petitioner”).

The Petitioner imports LNG[10] from various countries using vessels equipped with large cryogenic tanks, for its regassification facility. Tugs tow the carriers to the captive jetty, from where the LNG is transferred to cryogenic storage tanks in the regassification plant through insulated pipelines. Due to the rough weather during monsoons, the Petitioner reconstructed an existing breakwater (a protective wall) near the jetty. The Petitioner filed a writ petition before the Bombay High Court challenging the denial of ITC for the construction of breakwater adjacent to the jetty near the LNG regasification facility.

The Bombay HC dismissed the writ and upheld the rulings of the lower authorities, concluding that the breakwater does not qualify as ‘plant and machinery’ under Section 17(5)(d) of the CGST Act[11]. The decision of the Bombay HC was based on the following:

the breakwater, while essential for protecting vessels during LNG unloading, is not directly used for making outward supplies of goods or services. The breakwater’s primary function is to protect ships and enable safe berthing, rather than participating in the actual regasification process or supply of services; and
the breakwater is a civil structure and not an apparatus or equipment.

JSA Comment: The ruling emphasises that term ‘plant and machinery’ for ITC purposes, should only include structures which are directly involved in the production or supply process, even if such structures are crucial for the overall operations. The ruling has significant implications for businesses in the infrastructure and energy sectors, particularly those with auxiliary structures that support their main operations.

ITC cannot be denied to bona fide recipients

The Hon’ble High Court of Gauhati (“Gauhati HC”) in the case of National Plasto Moulding vs. State of Assam[12] ruled upon the requirement of reversal of ITC availed by bona fide recipient, in case of default by the supplier. As per Section 16(2)(c) of the CGST Act, tax in respect of which ITC is availed, is required to be paid to the Government of India by the supplier of goods/services. The GST[13] authorities issued a SCN to National Plasto Moulding (“Petitioner”), seeking to reverse ITC on account of violation of conditions prescribed under Section 16(2)(c) of the CGST Act. The Petitioner filed a writ petition before the Gauhati HC challenging the SCN on the ground that he was a bona fide purchaser, who had fulfilled all the conditions for availment of ITC which were in his reasonable control.

The Petitioner relied on the judgement of the Hon’ble High Court of Delhi[14], wherein it was observed that purchasing dealer cannot be punished for the act of the selling dealer, in case the selling dealer had failed to deposit the tax collected by it (under the erstwhile value added tax law). Given that the provisions of the Delhi Value Added Tax Act, 2004 are analogous to the provisions of Sections 16(2)(c) of CGST Act, the Guahati HC relied on the judgement and set aside the SCN issued to the Petitioner.

Principles of natural justice must be followed when blocking ITC under Rule 86A of the CGST Rules[15]

The High Court of Telangana (“Telangana HC”), in the case of Bhavani Oxides and others vs. The State of Telangana and Ors.[16], clarified the applicability of principles of natural justice vis-à-vis Rule 86A of the CGST Rules, which allows tax authorities to block ITC in a taxpayer’s ECL[17]. The Telangana HC held that while Rule 86A of the CGST Rules neither expressly nor by necessary implication excludes the principles of natural justice, the principles of natural justice should be read into the provision.

The court’s reasoning hinged on the need for consistency within the GST framework. It pointed out that Section 74 of the CGST Act, which deals with similar circumstances of tax recovery and ITC denial, explicitly mandates following principles of natural justice. The Telangana HC argued that interpreting Rule 86A to allow ITC blocking without these safeguards would create an inconsistency with the parent statute. Furthermore, Telangana HC emphasised that this interpretation is crucial to prevent hardship, injustice, and friction in the GST system’s operation.

JSA Comment: The ruling is a sign of relief for taxpayers as, it deters the GST authorities from invoking Rule 86A (i.e., blocking ITC in the ECL) of the CGST Rules without providing the taxpayers an opportunity to be heard. This decision strikes a balance between the need for effective tax administration and the protection of taxpayers’ rights, ensuring that the principles of natural justice are upheld in the application of CGST Rules.

No GST leviable on personal guarantees extended by managing director

In the case of Manappuram Finance Ltd vs. Union of India and Ors.[18] SCN was issued to Manappuram Finance Ltd (“Petitioner”) seeking to demand (a) GST under reverse charge mechanism on supply of services by the managing director (MD) of the Petitioner by way of providing personal guarantee on loans taken by the Petitioner and (b) GST on supply of services of extending loans by the Petitioner to its subsidiary company. Aggrieved by the issuance of SCN, the Petitioner filed a writ petition before the Hon’ble High Court of Kerala (“Kerala HC”).

The Petitioner contended that the matter was squarely covered by the clarifications issued by the CBIC[19] vide Circular No.204/16/2023-GST dated October 27, 2023, and Circular No.218/12/2024-GST dated June 26, 2024. The Petitioner placed reliance on the said circulars, to argue the following:

GST cannot be demanded on personal guarantee provided by the director; and
in absence of a procedural requirement for processing the loan, the loan provided by the Petitioner to its subsidiary cannot be equated to loans provide by banks or independent lenders.

Considering the aforesaid arguments, the Kerala HC allowed writ petition by setting aside the SCN.

Payment during search considered involuntary payment, due to lack of Form GST DRC-04 issued by the authorities

In the case of ATR Malleable Casting Private Limited vs. The Inspector of Central Taxes[20], ATR Malleable Casting Private Limited (“Petitioner”) paid a sum of INR 30,00,000 (Indian Rupees thirty lakh) during a search by tax authorities and consequently sought a refund thereof, claiming that such payment was made under the threat of arrest, coercion, and undue influence. The GST authorities denied the claims on the grounds that the payment was voluntary.

However, the Madras High Court (“Madras HC”) noted the absence of Form GST DRC-04 which is a receipt confirming payment of GST under Form GST DRC-03, which is mandatory for voluntary payments under Rule 142(2) of the CGST Rules (this observation has been observed under several judicial precedents). Further, Madras HC observed the discrepancy between the timing of conclusion of the search and the actual payment indicating that the payment could not have been voluntary. The facts suggested that the payment was made under coercion and not voluntarily, as it was recorded after the search concluded. Basis the above, the Madras HC directed the GST authorities to refund the said sum.

JSA Comment: Previously the Hon’ble Delhi High Court in the case of Vallabh Textiles vs. Senior Intelligence Officer[21] had held where payment was made during a search proceeding for which acknowledgment was not issued in Form GST DRC-04, the same was not voluntary and had directed the Department to refund such payment along with interest. The High Court had heavily relied on CBIC Instruction No. 01/2022-23 [GST – Investigation] dated May 25, 2022, which clarified the position of making payment during a search, seizure and investigation proceeding.

Issuance of Form ASMT-10 not a pre-requisite for adjudication

In the case of Mandarina Apartment Owners Welfare Association and Gani Fashion vs. State Tax Authorities[22], the Madras HC ruled on the validity of the GST adjudication proceedings where scrutiny proceedings were issued under Section 61 of the CGST Act read with Rule 99 of the CGST Rules, without issuance of notice in Form GST ASMT-10.

The Madras HC observed that Section 61 of the CGST Act indicates clearly that the obligation to issue notice arises upon fulfilment of following 2 (two) conditions:

selection of returns for scrutiny; and
discovery of discrepancies on such scrutiny.

Based on the above, it was concluded that issuance of Form ASMT-10 is mandatory only if the aforesaid conditions are satisfied.

The Madras HC further observed that as per Sections 61 and 73 of the CGST Act, there is no indication that scrutiny of returns and issuance of notice in Form ASMT-10 constitute a mandatory pre-requisite for adjudication even in cases where returns were scrutinised.

In the present facts, given that the petitioner was not provided the opportunity to be heard, the petitioner was given an opportunity to file a reply to SCN only on the grounds of principles of natural justice.

Notifications and Circulars

Constitution of Principal and State benches of GSTAT[23]

Notification No. S.O. 3048(E) – Central GST dated July 31, 2024

The GSTAT is notified to be established with effect from September 1, 2024. The Principal bench is constituted at New Delhi and State benches are constituted at different designated locations in the respective states.

CGST Rules amended to give effect to the recommendations of the 53rd GST Council meeting held on June 22, 2024

Notification No. 12/2024[24] dated July 10, 2024 – Central Tax (CGST Amendment Rules[25])

The following amendments are introduced to the CGST Rules:

Rule 39 of CGST Rules is amended with effect from the date to be notified, whereby the mechanism for distribution of ITC through ISD is prescribed. It may be noted that this mechanism is similar to the mechanism earlier prescribed under Section 20 of the CGST Act (which was omitted vide Finance Act, 2024). The following conditions and procedure have been prescribed:
- ITC available for distribution in a particular month should be distributed in the same month;
- the amount of ITC distributed should not exceed the amount of ITC available for distribution;
- an ISD is required to distribute ITC attributable to relevant recipient in the ratio of its respective turnover (including taxable and non-taxable) pertaining to the preceding financial year;
- ITC of IGST to be distributed as ITC of IGST;
- ITC of CGST[26] and SGST[27] to be distributed:
  - If recipient located in same State as that of ISD, be distributed as ITC of CGST and SGST respectively; and
  - If the recipient is located in a State other than that of ISD, be distributed as IGST;
- ISD will issue an ISD invoice for the above distribution.

Sections 2(61) and 20 of the CGST Act were amended vide the Finance Act, 2024 (No. 8 of 2024) dated February 15, 2024 (“Finance Act”) whereby ISD mechanism was made mandatory. The said date has been notified to be April 01, 2025, by the CBIC[28] vide Notification No. 16/2024-Central Tax dated August 6, 2024.

Rule 28(2) of the CGST Rules is amended (effective October 26, 2023) to clarify that the value of supply of services to a related person by way of corporate guarantee on behalf of the recipient, which is deemed to be 1% of the amount of such guarantee or actual consideration, whichever higher, is to be computed per annum. The provision is further amended to state that the invoice value of the aforesaid supply will be deemed to be accepted, if the recipient is entitled to full ITC. Various issues pertaining to taxability and valuation of supply of such services have been clarified vide Circular No. 225/19/2024-GST dated July 11, 2024;
an optional facility in Form GSTR-1A is prescribed (by amending Rule 59(1) of the CGST Rules) whereby, a taxpayer can amend or furnish additional details of supplies in Form GSTR–1A. The said form can be filed any time between the date of filing Form GSTR–1 and the date of filing Form GSTR–3B, for the relevant tax period;
Rule 88B of the CGST Rules is amended to exclude the amount of GST debited from the electronic cash ledger (as available on the due date) while filing the return in Form GSTR–3B, for computation of interest under Section 50 of the CGST Act;
Rule 89(1B) of the CGST Rules is inserted to allow exporters to claim a refund of additional IGST paid due to upward revision in price pursuant to export of goods. The said rule also provides for the time limit and mechanism of filing such a claim vide Circular No. 226/20/2024-GST dated July 11, 2024;
Rule 95B of the CGST Rules is inserted to allow refund of tax paid on inward supplies of goods received by Canteen Stores Department;
Rule 96A(1)(b) of the CGST Rules is amended to include the time period allowed under FEMA[29] (including any extension of such period as permitted by the RBI[30]) while computing the timelines for receipt of export proceeds in case of export of goods or services without payment of tax under bond or letter of undertaking; and
Rule 142B of the CGST Rules is inserted to provide the manner of recovery of tax and/or interest which is recoverable under the provision of GST Law and the same has remained unpaid by the registered person.

Threshold for filing annual return for FY 2023-24

Notification No. 14/2024 – Central Tax dated July 10, 2024

Every registered person with aggregate turnover upto INR 2,00,00,000 (Indian Rupees two crore) is exempted from filing the annual return in Form GSTR-9 for FY 2023-24.

Reduction in rate of GST collected by the e-commerce operators

Notification Nos. 15/2024 – Central Tax and 01/2024 – Integrated Tax dated July 10, 2024

The Central Government in exercise of the powers conferred under Section 52(1) of the CGST Act has reduced the rate of GST to be collected by e-commerce operators from 0.5% to 0.25% (CGST and SGST) and from 1% to 0.5% (IGST).

Guidelines for handling recovery of outstanding dues in cases where taxpayers could not file an appeal due to non-constitution of GSTAT

Circular No. 224/18/2024-GST dated July 11, 2024

Where taxpayer intends to file an appeal before the GSTAT and is unable to do so due to non-operationalisation of the GSTAT, the recovery of outstanding dues can be stayed if the taxpayer:

makes the necessary pre-deposit on the GST portal; and
submits an undertaking with the jurisdictional officer, affirming the intent to file an appeal once the GSTAT is operational.

This Newsletter has been prepared by:

Manish Mishra
Partner & Head of Practice – Indirect Tax

Shareen Gupta
Partner

Ruchita Modi
Principal Consultant

Joybrata Misra
Senior Associate

Tanay Vyas
Associate

Shubh Dixit
Associate

For more details, please contact [email protected]

[1] 2024 (8) TMI 956

[2] Special leave petition

[3] Mines and Minerals (Development and Regulation) Act, 1957

[4] Central Excise Act, 1944

[5] 2024 (7) TMI 476 – Supreme Court

[6] Customs Excise and Service Tax Appellate Tribunal

[7] Show Cause Notice

[8] Maximum Retail Price

[9] Input Tax Credit

[10] Liquified natural gas

[11] Central Goods and Services Tax Act, 2017

[12] TS-469-HC(GAUH)-2024-GST

[13] Goods and Services Tax

[14] Quest Merchandising India Private Limited -Vs- Government of NCT of Delhi & Ors [2017 SCC OnLine Del 11286]

[15] Central Goods and Services Tax Rules, 2017

[16] WP Nos.10390, 10425, 10459 AND 12733 of 2024

[17] Electronic credit ledger

[18] TS-451-HC(KER)-2024-GST

[19] Central Board of Indirect Tax and Customs

[20] 2024 (6) TMI 1258 – Calcutta High Court

[21] 2023 (70) G. S. T. L. 3 (Del.)

[22] 2024 (7) TMI 1158 – Madras High Court

[23] Goods and services tax appellate tribunal

[24] The amendments are effective July 10, 2024, unless otherwise specified

[25] The Central Goods and Services Tax (Amendment) Rules, 2024

[26] Central Goods and Services Tax

[27] State Goods and Services Tax

[28] Central Board of Indirect Taxes and Customs

[29] Foreign Exchange Management Act, 1999

[30] Reserve Bank of India

Tags GST Council, High Court, Indirect Tax, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Supreme Court

Indexation benefit – the devil is in the details

The finance bill presented in July 2024 has proposed doing away with the indexation benefit for properties purchased after 2001, while reducing the long-term capital gains tax from 20% to 12.5%. This has stirred quite a bit of anxiety and debate.

Indexation benefit provided a sort of revaluation of the property to account for inflation between the date of purchase and the date of sale.

Please click here to read the full article by Raj Ramachandran, published in ET Edge – Insight.

Tags JSA, Leading Law Firm, Leading Lawyers, long-term capital gains tax

Explaining Budget 2024 announcements on GST and custom duty

While the indirect tax proposals aim at creating a taxpayer friendly environment, it appears that the Government has stopped short on taking affirmative measures which could have provided impetus to investments in key sectors and eased the burden of GST on the end consumers.

Please click here to read the full article by Manish Mishra and Tanay Vyas published in Financial Express.

Tags Budget 2024, Custom Duty, GST, JSA, Leading Law Firm, Leading Lawyers, Tax

Indirect Tax Case Law Compendium 2024

This compendium consolidates all the relevant notifications and circulars pertaining to Indirect Tax Case Law, which has been circulated during the calendar period from January 2024 till June 2024.

To read further details, click here or refer to the below document.

For more details, please contact [email protected]

*In case the document is not visible on the device you are using, please click the link above.

Tags Indirect Tax, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, Newsletters

Union Budget Proposals, 2024

Modi Government, in its third term at the Centre, presented its first full budget on July 23, 2024. The Government announced various schemes such as launching of a comprehensive scheme for providing internship opportunities in top 500 (five hundred) companies to 1,00,00,000 (one crore) youth in 5 (five) years, facilitating development of investment-ready “plug and play” industrial parks with complete infrastructure in or near 100 (one hundred) cities.

Additionally, the Government has also identified 9 (nine) priorities for generating ample opportunities (a) Productivity and Resilience in Agriculture; (b) Employment and Skilling; (c) Inclusive Human Resource Development and Social Justice; (d) Manufacturing and Service; (e) Urban Development; (f) Energy Security; (g) Infrastructure; (h) Innovation, Research and Development; and (i) Next Generation Reforms.

From an income tax standpoint, the Government seemed focussed on simplifying the taxation structure. To this end, there has been a major rejig in capital gains taxation scheme, buyback taxation, search and seizure assessments, reassessment schemes etc. Additionally, many procedural aspects with respect to withholding taxes, collection of tax at source have also been revised. Tax framework governing exemption for charitable institutions have sought to be streamlined. A plethora of changes have also been proposed on the indirect tax front including changes in the adjudication process under goods and services tax and appeals thereunder.

To read further details, click here or refer to the below document.

For more details, please contact [email protected]

*In case the document is not visible on the device you are using, please click the link above.

Tags Capital Gains, Corporate, Direct Tax, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, Tax, Union Budget

JSA Newsletter | Indirect Tax | July 2024

Please click here to download the Newsletter as a PDF.

Recent Rulings by Courts and Authorities

High Courts

No illegal exercise of power in issuance of notifications extending the timelines for passing of assessment orders for recovery of tax

In the case of Graziano Trasmissioni vs. Goods And Services Tax & 5 Ors[1], the Allahabad HC[2] dismissed a batch of petitions challenging the validity of the Notifications[3] wherein the statutory timelines for issuance of assessment orders and issuance of show cause notices were extended. The petitioners contested the Notifications primarily on the grounds that the provisions of Section 168A of the CGST Act[4] were wrongly invoked and there was no prevailing force majeure event occasioning the extension of time limit as stipulated by the Notifications. The Allahabad HC dismissed the petitions and made the following observations: the powers under Section 168A of the CGST Act (which enables the Central Government to extend statutory timelines due to force majeure) is a legislative power and not an administrative power, thereby the extension of limitation prescribed was a legislative function.

Upon examining the minutes of the 47th and 49th GST Council meetings and the Supreme Court’s directions, wherein the intervening period, from March 2020 to February 2022, which was affected by COVID19, was excluded for computing limitation period[5], the legislative function was exercised by the delegatee, i.e., the Central/State Governments. Accordingly, there existed circumstances for exercise of the power of conditional legislation. Further, the Allahabad HC also noted that the principal legislature has laid down strict conditions for exercise of special powers to extend the limitation.

Regarding the interpretation of a force majeure event and whether its active occurrence triggered the provisions of Section 168A of the CGST Act, it was observed that such an exercise was not within the ambit of judicial review/query.

Certain provisions of CGST Act held constitutionally valid

In the case of M. Trade Links vs. Union of India[6], the petitioner filed a writ petition before the Kerala HC[7] challenging the constitutional validity of Sections 16(2)(c) and 16(4) of the CGST Act. Section 16(2) of the CGST Act prescribes conditions to avail ITC[8]. As per Section 16(2)(c), ITC is not available if the tax charged in respect of a supply has not been paid to the government by the supplier. This provision places the onus on the recipient to ensure that the supplier has complied with their tax obligations. Expecting recipients to ensure that suppliers have paid the tax is unreasonable and imposes an undue burden, violating the principles of natural justice.

Further, Section 16(4) prescribes time limit for claiming ITC. As per unamended Section 16(4) (i.e., prior to October 01, 2022), the last date for claiming credit on invoices pertaining to a FY[9] was the due date for filing return for the month of September following the end of the said FY or filing of the relevant annual return, whichever is earlier. Section 16(4) vide the Finance Act 2022, was amended to extend the time limit to November 30^th of the following FY, or filing of the relevant annual return, whichever is earlier. It was contended that timeframe to claim ITC was arbitrary and burdensome, particularly for businesses that might face delays due to genuine reasons.

Based on the above facts, the Kerala HC observed as follows:

ITC is a statutory benefit for a taxpayer, contingent upon meeting specific conditions and restrictions outlined in Sections 16(2) to 16(4) and Section 43 read with relevant CGST Rules[10]. Various courts have determined that nature of a claim for credit is a concession or entitlement, which is not an absolute right and is subject to the conditions and restrictions as per the scheme of the legislation;
when ITC is not an absolute right but is an entitlement subject to the conditions and restrictions prescribed under the specified laws, the conditions, restrictions and time limit specified by law, forms the fulcrum on which the grant of ITC and tax collection for each FY are balanced. Hence, the conditions and restrictions under Section 16 are not excessively burdensome or unconstitutional but are necessary for the functioning of the GST framework;
Section 16(2)(c) of the CGST Act is aimed to ensure that there is no loss of tax in inter-state transactions, where the originating State Government will have to transfer the amount, it never received in the tax period in a FY to the destination States, causing loss to the tune of several crores in each tax period. Thus, the Kerala HC held that Section 16(2)(c) of the CGST Act is constitutionally valid;
the time limit prescribed under Section 16(4) of the CGST Act is not a new phenomenon, as it was prevalent in the earlier regime also and is as such a reasonable mechanism for availing ITC;
Section 16(2) restricts the eligibility under Section 16(1) of the CGST Act for entitlement to claim ITC. Whereas Section 16(4) is the restriction on the time for availing ITC. These provisions cannot be read to restrict other restrictive provisions, implying that when one provision is complied with, it cannot be said that the other provision falls redundant. Both Sections 16(2) and 16(4) are 2 (two) different restricting provisions which have no inconsistency and can exist mutually. Accordingly, it is not accepted to contend that one of the restricting provisions overrides other restrictions; and
on a separate note, the Kerala HC observed that the amendment in Section 16(4) for extending the time limit from September 30^th to November 30^th was aimed to ease taxpayer difficulties. Accordingly, it was also held that such amendment being procedural in nature, must be given retrospective effect with effect from July 1, 2017.

Mere bifurcation of consideration cannot change a slump sale transaction to an itemised sale

In the case of Piramal Enterprises Limited vs. The State of Maharashtra[11], the petitioner entered into a BTA[12] with Abbott Healthcare Private Limited to sell its ‘Base Domestic Formulations’ business on a ‘going concern’ basis. The BTA was subsequently amended to include other tangible and intangible assets such as trade name, logo, goodwill to ensure genuineness of the products sold even after the transfer. As per Section 25 of the MVAT Act[13] transaction effected under a BTA as a going concern, is not subject to VAT[14], which was also confirmed by the assessment order for FY 2010-11.

An SCN[15] was issued to review the assessment order for levy of VAT, premised on the fact that the itemised breakdown of consideration for tangible, intangible, movable and immovable property in the BTA for stamp duty purposes was erroneously treated as a transfer of business on a ‘slump sale’ basis. Consequently, the demand was confirmed on the ground that while there was a transfer of business, there was also a transfer of ‘right to use’ of IPR[16] namely trade name, logo, goodwill etc. for the fixed period under the BTA, which falls under the ambit of ‘sale’, thereby being taxable under the MVAT Act.

Aggrieved by the above, the petitioner approached the Bombay HC[17] under a writ petition. The Bombay HC observed the following:

the commercial scheme of the BTA along with lump sum consideration categorically indicated that the underlying intention was to transfer the business as going concern on a slump sale basis;
the values of intangible assets were provided merely for the purpose of determining stamp duty which is also recognised as per the provisions of the Income Tax Act, 1961;
as per the provisions of MVAT Act, the term ‘business’ would not qualify as ‘goods’, and accordingly, sale of business cannot be categorised as sale of goods;
it is not permissible for the authorities to dissect the BTA when the intention of the parties is clear on reading the entire agreement. It was highlighted that the commercial efficacy as well as the underlying intention would not change merely by assigning values to tangible and intangible assets; and
the approach of the authority is against the established principles of natural justice, as the SCN, on one hand recognised the sale under BTA as ‘slump sale’ and on the other hand, held that the itemised sale amounts to ‘sale of goods’ liable to VAT, thereby vitiating the order.

Accordingly, the Bombay HC held that the order was issued beyond jurisdiction and not sustainable.

Notifications, Circulars and Instructions

Based on the recommendations made during 53^rd GST Council meeting held on June 22, 2024, CBIC has clarified the following on some of the key aspects:

Circular No. and subject	Clarification
207/1/2024-GST *Monetary limits for filing appeal/application/SLP[18] by Central Tax officers*	1. Section 120(1) of the CGST Act empowers CBIC[19] to fix monetary limits for filing of appeal by tax authorities. In exercise of the same and with an aim to reduce litigation, the following monetary limits have been prescribed for filing of appeal/application/SLP by the Central Tax officers subject to certain exclusions: a) Goods and Services Tax Appellate Tribunal (INR 20,00,000 (Indian Rupees twenty lakh)) b) High Court (INR 1,00,00,000(Indian Rupees one crore)) c) Supreme Court (INR 2,00,00,000 (Indian Rupees two crore)) 2. Principles prescribed for determining whether a case falls within monetary limit: a) only the aggregate amount of tax in dispute to be considered to calculate the above monetary limit; b) where dispute pertains to imposition of interest/penalty/late fees only, such amount of interest/penalty/late fees to be considered for calculating the monetary limit; c) in disputes involving refund, the amount of refund to be considered; and d) in a composite order disposing more than one appeal/demand notice, monetary limit to be applicable on total amount of tax/interest/penalty/late fees involved and not the amount involved in individual matter. 3. No monetary limit to apply where the dispute pertains to issues around interpretation, valuation, classification, refunds, place of supply, any other recurring issues. 4. Filing of appeal to be decided on merits of the case and not merely because the disputed tax amount exceeds the monetary limit. 5. Where no appeal is filed, such cases will not have any precedent value.
209/3/2024-GST *Place of supply for goods supplied to unregistered persons where billing address is different from delivery address*	1. Section 10(1)(ca) of the IGST Act^[20] provides that in case of supply of goods made to an unregistered person, place of supply will be the address of the said person recorded in the invoice. 2. Ambiguity prevailed in determination of place of supply under the said Section in the context of supplies made through e-commerce platforms where the billing address is different from the delivery address. 3. It has thus been clarified that for supply of goods made to unregistered persons where the State of billing address is different from the State of delivery (particularly being supplied through e-commerce platforms), place of supply will be the State of delivery. 4. In such cases, the supplier may record the delivery address as the address of the recipient on the invoice for determining place of supply.
210/4/2024-GST *Open market value for supply of services by a foreign affiliate to related domestic entity*	1. For determining value of supply of services by a foreign affiliate entity to a related domestic entity located in India, CBIC clarified that Circular No. 199/11/2023-GST dated July 17, 2023, will be applicable. 2. Accordingly, as prescribed under second proviso to Rule 28(1) of CGST Rules^[21], where full ITC is available to the related domestic entity, value of supply of services declared in the invoice issued by the said related domestic entity may be deemed as open market value. 3. Where invoice is not issued by the related domestic entity, the value of such services may be deemed to be declared as Nil and may be deemed as open market value.
211/5/2024-GST *Time limit for availment of ITC u/s. 16(4) of CGST Act[22]* for supplies subject to GST under RCM[23]**	1. Discrepancies prevailed with respect to time limit to avail ITC under Section 16(4) of the CGST Act in respect of tax paid under RCM on the premise that the relevant FY for determination of time limit would be the FY in the year in which services are received. 2. CBIC has clarified in this regard that the time limit to avail ITC for supplies received from unregistered supplier, where tax is to be paid under RCM, the relevant FY for calculation of time limit for availment of ITC under Section 16(4) of the CGST Act will be the FY in which the self-invoice has been issued by the recipient of supply under Section 31(3)(f) of CGST Act. 3. The above will be subject to payment of tax along with applicable interest on the said supply by the recipient and fulfilment of other prescribed conditions. 4. However, where self-invoice is issued and tax paid after the time of supply of said supply, the recipient may be prone to penal action.
212/6/2024-GST **Mechanism to ensure reversal of ITC[24] by recipient for discounts offered through credit notes**	1. Section 15(3)(b)(ii) of the CGST Act provides that reduction in value of supply where credit notes have been issued for a post-sale discount will be allowed only if the concerned recipient has reversed proportionate ITC. However, no mechanism is operational to enable the supplier to establish that the concerned recipients have reversed ITC. 2. Accordingly, it has been clarified that till the time a mechanism is provided to enable supplier/tax officer to verify whether the recipient has reversed ITC, supplier may procure the following: a) Where the amount of tax involved in the discount given to a recipient during a FY does not exceed INR 5,00,000 (Indian Rupees five lakh): Undertaking/certificate from recipient that ITC confirming the amount of ITC reversed for credit notes along with details of credit note number, original invoice number, the amount of ITC reversed for credit notes along with details of Form GST DRC-03/return/other relevant document; and b) Where amount of tax involved in the discount given to a recipient during a FY exceeds INR 5,00,000 (Indian Rupees five lakh): Certificate from the recipient, issued by a CA/CMA[25] certifying that the recipient has reversed ITC for the credit notes. The said certificate must contain UDIN[26] along with other details mentioned at (a) above.
213/07/2024-GST **Taxability of ESOP[27]/ESPP[28]/RSU[29] provided by a company to its employees through its overseas holding company**	1. Generally, companies provide their employees with an option of allotment of securities/shares of their foreign holding companies in the form of ESOP/ESPP/RSU as part of their employment compensation package. 2. Where the employee exercises such an option, the foreign holding company directly allots securities/shares to the employees of the domestic subsidiary company, for which the domestic subsidiary makes reimbursement to the foreign holding company. 3. Clarity on whether this transaction between the foreign holding company and domestic subsidiary can be treated as an import of financial services has been provided. 4. It is clarified that ESOP/ESPP/RSU are in the nature of securities/shares, which are neither ‘goods’ nor ‘services’ under GST laws, and hence, outside the purview of GST. 5. ESOP/ESPP/RSU are provided to employees as remuneration in the course of employment to motivate them to perform better and retain them. The activity is neither supply of ‘goods’ nor ‘services’ in terms of Entry 1 of Schedule III of the CGST Act. 6. Domestic subsidiary company reimburses the foreign holding company for these securities/shares on cost-to-cost basis, i.e., market value of securities/shares without any additional fee, mark-up or commission. As the reimbursement is for transfer of securities/shares, which are neither ‘goods’ nor ‘services’, the same cannot be treated as import of services by the domestic subsidiary company from the foreign holding company and hence, is not liable to GST under CGST Act. 7. Any additional fee/mark-up/commission charged by the foreign holding company from the domestic subsidiary company will be towards provision of service of facilitating/arranging transactions in securities, which will be subject to GST under RCM for the said additional fee/mark-up/commission.
215/9/2024-GST *Taxability of Salvage/Wreck Value in Insurance Claims*	1. In case of motor vehicle insurance, the insurance company may either include the value of wreck/salvage in the insurance claim settlement and take over the possession of the wreck/salvage or the insurance company may deduct the value of wreck/salvage from the insurance claim and the insured keeps the ownership of wreck/salvage. 2. Ambiguity persisted with respect to the taxability of such deduction/inclusion of wreck/salvage value in the insurance claim. 3. In this regard, it has been clarified that where the deduction of the salvage/wreck amount from the insurance settlement amount is as per the terms of the insurance contract, ownership in salvage rests with the insured only. Therefore, since no supply can be said to be made by the insurance company, no GST is liable to be paid by the insurance company. 4. Where an insurance claim is settled for the full claim amount without deducting salvage or wreckage value, the property in wreck/salvage rests with the insurance company, which is obligated to deal/dispose the same. Therefore, the insurance company will be liable to pay the applicable GST on disposal/sale of the same.
216/10/2024-GST *Taxability of warranty/extended warranties*	1. Circular No. 195/07/2023-GST dated July 17, 2023 (“Circular”) provided clarification that the cost for replacement of parts of goods provided by the manufacturer or dealer under a warranty is included in the cost of goods. Hence, ITC with respect to such free of cost replacement is not required. Further clarification was sought for cases where not just a part but the product itself is replaced by the manufacturer or dealer. 2. The captioned circular was issued to widen the scope of the Circular to include replacement of goods as well as any parts thereof. The revised circular provides as under: a) Replacement of goods or parts thereof by manufacturer during the warranty period: The cost of said replacement included in the value of original supply of goods. Therefore, these supplies are not exempt supplies and hence, do not require reversal of ITC. b) Replacement of goods or parts thereof by distributor during the warranty period: Where the manufacturer provides goods or parts to the distributor for replacement to the customer during warranty period, without separate consideration, no GST is payable by the manufacturer. Further, no reversal of ITC is required to be made by the manufacturer. c) Replacement of goods or parts thereof by a person different from the supplier of goods during the extended warranty period: The Circular provided that when a customer opts for an extended warranty with the manufacturer at the time of purchase of goods, extended warranty will form part of the composite supply of goods. However, the captioned circular has provided that where agreement for extended warranty is made at the time of original supply of goods, and the supplier of extended warranty is different from the supplier of goods, supply of extended warranty will be treated as a separate supply from the original supply of goods (and not composite supply). d) Supply of extended warranty after original supply of goods: Extended warranty is conveying of an “assurance” and not an actual replacement of parts or repairs. Accordingly, supply of extended warranty will be treated as a supply of services distinct from the original supply of goods, and the supplier of the said extended warranty will be liable to discharge the applicable GST on the said supply of services.
218/12/2024-GST *Taxability of loan provided by an overseas affiliate to its Indian affiliate*	1. It is a common practice that various overseas affiliates of domestic entities provide loans to such domestic entities where the consideration is only in the form of interest or discount. Whether provision of such a loan would be treated as a taxable supply or not was clarified vide the captioned circular. 2. The CBIC has clarified that extending of loans/advances, the consideration of which is in the form of interest or discount, including those from overseas affiliates to Indian affiliates, are exempt from GST under entry 27(a) of the Service Exemption Notification.^[30] 3. For loans provided between related parties, no ‘processing’ of loan or ‘administrative cost’ may be involved as the related lender may not need to gather information about the related borrower’s business, financial standing and credibility, etc. Accordingly, where no consideration is charged by an overseas affiliate from its Indian party, for extending loan or credit, other than by way of interest or discount, it cannot be said that any supply of service is being provided between the said related persons in the form of processing/facilitating/administering the loan under Schedule III of the CGST Act. Therefore, there is no question of levy of GST on the same by resorting to open market value for valuation of the same as per Rule 28 of CGST Rules. 4. For loans provided between related parties, where any processing fee/administrative charges/service fee/loan granting charges, etc. is charged, over and above the interest or discount, the same may be treated as consideration for the supply of services of processing/facilitating/administering of the loan, subject to GST.
219/13/2024-GST **ITC eligibility for ducts and manholes in OFC[31] networks for telecommunication services**	1. Eligibility of ITC on procurement of ducts/manholes was being denied under Section 17(5) of the CGST Act treating it as blocked credit being immovable property. 2. Clarification on availability of ITC on procurement of ducts and manholes has been provided to state that ducts and manholes are basic components for OFC network used in providing telecommunication services, where Polyvinyl Chloride (PVC) ducts/sheaths are components in which OFCs are housed and manholes serve as nodes of the network and are necessary for not only laying of OFC but also their upkeep and maintenance. 3. Accordingly, ducts and manholes qualify as “plant and machinery” under GST laws. As such, they are not subject to ITC restrictions under Section 17(5)(c) and (d) of the CGST Act.
221/15/2024-GST *Time of supply for HAM[32] Highway Projects*	1. HAM contracts are typically spread over a period of 15 (fifteen) to 17 (seventeen) years, wherein the contractor undertakes construction, operation and maintenance of roads. Generally, payments are also spread over the term of the contract either on specified dates or on milestones basis. Clarification on determination of time of supply of service under such HAM contracts has been clarified. 2. HAM contracts fall under ‘continuous supply of services’ as defined under Section 2(33) of the CGST Act. In terms of Section 13(2) read with Section 31(5) of the CGST Act, the time of supply for such contract (for both construction and O&M[33] portion) will be: a) if the invoice is issued on or before the specified date or the date of completion of the event specified in the contract: the date of issuance of such invoice, or date of receipt of payment, whichever is earlier; and b) if the invoice is not issued on or before the specified date or date of completion of the event specified in the contract: the date of provision of service (i.e., due date of payment as per the contract), or date of receipt of payment, whichever is earlier. 3. Tax will be payable on the amount of instalments/annuity payable by National Highways Authority of India to the concessionaire including interest.

Circular No. and subject

Clarification

207/1/2024-GST

Monetary limits for filing appeal/application/SLP[18] by Central Tax officers

1. Section 120(1) of the CGST Act empowers CBIC[19] to fix monetary limits for filing of appeal by tax authorities. In exercise of the same and with an aim to reduce litigation, the following monetary limits have been prescribed for filing of appeal/application/SLP by the Central Tax officers subject to certain exclusions:

a) Goods and Services Tax Appellate Tribunal (INR 20,00,000 (Indian Rupees twenty lakh))

b) High Court (INR 1,00,00,000(Indian Rupees one crore))

c) Supreme Court (INR 2,00,00,000 (Indian Rupees two crore))

2. Principles prescribed for determining whether a case falls within monetary limit:

a) only the aggregate amount of tax in dispute to be considered to calculate the above monetary limit;

b) where dispute pertains to imposition of interest/penalty/late fees only, such amount of interest/penalty/late fees to be considered for calculating the monetary limit;

c) in disputes involving refund, the amount of refund to be considered; and

d) in a composite order disposing more than one appeal/demand notice, monetary limit to be applicable on total amount of tax/interest/penalty/late fees involved and not the amount involved in individual matter.

3. No monetary limit to apply where the dispute pertains to issues around interpretation, valuation, classification, refunds, place of supply, any other recurring issues.

4. Filing of appeal to be decided on merits of the case and not merely because the disputed tax amount exceeds the monetary limit.

5. Where no appeal is filed, such cases will not have any precedent value.

209/3/2024-GST

Place of supply for goods supplied to unregistered persons where billing address is different from delivery address

1. Section 10(1)(ca) of the IGST Act^[20] provides that in case of supply of goods made to an unregistered person, place of supply will be the address of the said person recorded in the invoice.

2. Ambiguity prevailed in determination of place of supply under the said Section in the context of supplies made through e-commerce platforms where the billing address is different from the delivery address.

3. It has thus been clarified that for supply of goods made to unregistered persons where the State of billing address is different from the State of delivery (particularly being supplied through e-commerce platforms), place of supply will be the State of delivery.

4. In such cases, the supplier may record the delivery address as the address of the recipient on the invoice for determining place of supply.

210/4/2024-GST

Open market value for supply of services by a foreign affiliate to related domestic entity

1. For determining value of supply of services by a foreign affiliate entity to a related domestic entity located in India, CBIC clarified that Circular No. 199/11/2023-GST dated July 17, 2023, will be applicable.

2. Accordingly, as prescribed under second proviso to Rule 28(1) of CGST Rules^[21], where full ITC is available to the related domestic entity, value of supply of services declared in the invoice issued by the said related domestic entity may be deemed as open market value.

3. Where invoice is not issued by the related domestic entity, the value of such services may be deemed to be declared as Nil and may be deemed as open market value.

211/5/2024-GST

Time limit for availment of ITC u/s. 16(4) of CGST Act[22] for supplies subject to GST under RCM[23]

1. Discrepancies prevailed with respect to time limit to avail ITC under Section 16(4) of the CGST Act in respect of tax paid under RCM on the premise that the relevant FY for determination of time limit would be the FY in the year in which services are received.

2. CBIC has clarified in this regard that the time limit to avail ITC for supplies received from unregistered supplier, where tax is to be paid under RCM, the relevant FY for calculation of time limit for availment of ITC under Section 16(4) of the CGST Act will be the FY in which the self-invoice has been issued by the recipient of supply under Section 31(3)(f) of CGST Act.

3. The above will be subject to payment of tax along with applicable interest on the said supply by the recipient and fulfilment of other prescribed conditions.

4. However, where self-invoice is issued and tax paid after the time of supply of said supply, the recipient may be prone to penal action.

212/6/2024-GST

Mechanism to ensure reversal of ITC[24] by recipient for discounts offered through credit notes

1. Section 15(3)(b)(ii) of the CGST Act provides that reduction in value of supply where credit notes have been issued for a post-sale discount will be allowed only if the concerned recipient has reversed proportionate ITC. However, no mechanism is operational to enable the supplier to establish that the concerned recipients have reversed ITC.

2. Accordingly, it has been clarified that till the time a mechanism is provided to enable supplier/tax officer to verify whether the recipient has reversed ITC, supplier may procure the following:

a) Where the amount of tax involved in the discount given to a recipient during a FY does not exceed INR 5,00,000 (Indian Rupees five lakh): Undertaking/certificate from recipient that ITC confirming the amount of ITC reversed for credit notes along with details of credit note number, original invoice number, the amount of ITC reversed for credit notes along with details of Form GST DRC-03/return/other relevant document; and

b) Where amount of tax involved in the discount given to a recipient during a FY exceeds INR 5,00,000 (Indian Rupees five lakh): Certificate from the recipient, issued by a CA/CMA[25] certifying that the recipient has reversed ITC for the credit notes. The said certificate must contain UDIN[26] along with other details mentioned at (a) above.

213/07/2024-GST

Taxability of ESOP[27]/ESPP[28]/RSU[29] provided by a company to its employees through its overseas holding company

1. Generally, companies provide their employees with an option of allotment of securities/shares of their foreign holding companies in the form of ESOP/ESPP/RSU as part of their employment compensation package.

2. Where the employee exercises such an option, the foreign holding company directly allots securities/shares to the employees of the domestic subsidiary company, for which the domestic subsidiary makes reimbursement to the foreign holding company.

3. Clarity on whether this transaction between the foreign holding company and domestic subsidiary can be treated as an import of financial services has been provided.

4. It is clarified that ESOP/ESPP/RSU are in the nature of securities/shares, which are neither ‘goods’ nor ‘services’ under GST laws, and hence, outside the purview of GST.

5. ESOP/ESPP/RSU are provided to employees as remuneration in the course of employment to motivate them to perform better and retain them. The activity is neither supply of ‘goods’ nor ‘services’ in terms of Entry 1 of Schedule III of the CGST Act.

6. Domestic subsidiary company reimburses the foreign holding company for these securities/shares on cost-to-cost basis, i.e., market value of securities/shares without any additional fee, mark-up or commission. As the reimbursement is for transfer of securities/shares, which are neither ‘goods’ nor ‘services’, the same cannot be treated as import of services by the domestic subsidiary company from the foreign holding company and hence, is not liable to GST under CGST Act.

7. Any additional fee/mark-up/commission charged by the foreign holding company from the domestic subsidiary company will be towards provision of service of facilitating/arranging transactions in securities, which will be subject to GST under RCM for the said additional fee/mark-up/commission.

215/9/2024-GST

Taxability of Salvage/Wreck Value in Insurance Claims

1. In case of motor vehicle insurance, the insurance company may either include the value of wreck/salvage in the insurance claim settlement and take over the possession of the wreck/salvage or the insurance company may deduct the value of wreck/salvage from the insurance claim and the insured keeps the ownership of wreck/salvage.

2. Ambiguity persisted with respect to the taxability of such deduction/inclusion of wreck/salvage value in the insurance claim.

3. In this regard, it has been clarified that where the deduction of the salvage/wreck amount from the insurance settlement amount is as per the terms of the insurance contract, ownership in salvage rests with the insured only. Therefore, since no supply can be said to be made by the insurance company, no GST is liable to be paid by the insurance company.

4. Where an insurance claim is settled for the full claim amount without deducting salvage or wreckage value, the property in wreck/salvage rests with the insurance company, which is obligated to deal/dispose the same. Therefore, the insurance company will be liable to pay the applicable GST on disposal/sale of the same.

216/10/2024-GST

Taxability of warranty/extended warranties

1. Circular No. 195/07/2023-GST dated July 17, 2023 (“Circular”) provided clarification that the cost for replacement of parts of goods provided by the manufacturer or dealer under a warranty is included in the cost of goods. Hence, ITC with respect to such free of cost replacement is not required. Further clarification was sought for cases where not just a part but the product itself is replaced by the manufacturer or dealer.

2. The captioned circular was issued to widen the scope of the Circular to include replacement of goods as well as any parts thereof. The revised circular provides as under:

a) Replacement of goods or parts thereof by manufacturer during the warranty period: The cost of said replacement included in the value of original supply of goods. Therefore, these supplies are not exempt supplies and hence, do not require reversal of ITC.

b) Replacement of goods or parts thereof by distributor during the warranty period: Where the manufacturer provides goods or parts to the distributor for replacement to the customer during warranty period, without separate consideration, no GST is payable by the manufacturer. Further, no reversal of ITC is required to be made by the manufacturer.

c) Replacement of goods or parts thereof by a person different from the supplier of goods during the extended warranty period: The Circular provided that when a customer opts for an extended warranty with the manufacturer at the time of purchase of goods, extended warranty will form part of the composite supply of goods. However, the captioned circular has provided that where agreement for extended warranty is made at the time of original supply of goods, and the supplier of extended warranty is different from the supplier of goods, supply of extended warranty will be treated as a separate supply from the original supply of goods (and not composite supply).

d) Supply of extended warranty after original supply of goods: Extended warranty is conveying of an “assurance” and not an actual replacement of parts or repairs. Accordingly, supply of extended warranty will be treated as a supply of services distinct from the original supply of goods, and the supplier of the said extended warranty will be liable to discharge the applicable GST on the said supply of services.

218/12/2024-GST

Taxability of loan provided by an overseas affiliate to its Indian affiliate

1. It is a common practice that various overseas affiliates of domestic entities provide loans to such domestic entities where the consideration is only in the form of interest or discount. Whether provision of such a loan would be treated as a taxable supply or not was clarified vide the captioned circular.

2. The CBIC has clarified that extending of loans/advances, the consideration of which is in the form of interest or discount, including those from overseas affiliates to Indian affiliates, are exempt from GST under entry 27(a) of the Service Exemption Notification.^[30]

3. For loans provided between related parties, no ‘processing’ of loan or ‘administrative cost’ may be involved as the related lender may not need to gather information about the related borrower’s business, financial standing and credibility, etc. Accordingly, where no consideration is charged by an overseas affiliate from its Indian party, for extending loan or credit, other than by way of interest or discount, it cannot be said that any supply of service is being provided between the said related persons in the form of processing/facilitating/administering the loan under Schedule III of the CGST Act. Therefore, there is no question of levy of GST on the same by resorting to open market value for valuation of the same as per Rule 28 of CGST Rules.

4. For loans provided between related parties, where any processing fee/administrative charges/service fee/loan granting charges, etc. is charged, over and above the interest or discount, the same may be treated as consideration for the supply of services of processing/facilitating/administering of the loan, subject to GST.

219/13/2024-GST

ITC eligibility for ducts and manholes in OFC[31] networks for telecommunication services

1. Eligibility of ITC on procurement of ducts/manholes was being denied under Section 17(5) of the CGST Act treating it as blocked credit being immovable property.

2. Clarification on availability of ITC on procurement of ducts and manholes has been provided to state that ducts and manholes are basic components for OFC network used in providing telecommunication services, where Polyvinyl Chloride (PVC) ducts/sheaths are components in which OFCs are housed and manholes serve as nodes of the network and are necessary for not only laying of OFC but also their upkeep and maintenance.

3. Accordingly, ducts and manholes qualify as “plant and machinery” under GST laws. As such, they are not subject to ITC restrictions under Section 17(5)(c) and (d) of the CGST Act.

221/15/2024-GST

Time of supply for HAM[32] Highway Projects

1. HAM contracts are typically spread over a period of 15 (fifteen) to 17 (seventeen) years, wherein the contractor undertakes construction, operation and maintenance of roads. Generally, payments are also spread over the term of the contract either on specified dates or on milestones basis. Clarification on determination of time of supply of service under such HAM contracts has been clarified.

2. HAM contracts fall under ‘continuous supply of services’ as defined under Section 2(33) of the CGST Act. In terms of Section 13(2) read with Section 31(5) of the CGST Act, the time of supply for such contract (for both construction and O&M[33] portion) will be:

a) if the invoice is issued on or before the specified date or the date of completion of the event specified in the contract: the date of issuance of such invoice, or date of receipt of payment, whichever is earlier; and

b) if the invoice is not issued on or before the specified date or date of completion of the event specified in the contract: the date of provision of service (i.e., due date of payment as per the contract), or date of receipt of payment, whichever is earlier.

3. Tax will be payable on the amount of instalments/annuity payable by National Highways Authority of India to the concessionaire including interest.

Transfer of goods from one warehouse operating under Section 65 of the Customs Act[34] to another

Instruction No. 16/2024 – Customs dated June 25, 2024

CBIC has clarified that the transfer of resultant goods from one unit operating under Section 65 of the Customs Act to another such unit is permitted subject to filing of due documentation (such as Form for transfer of goods from a warehouse, etc.), sending intimation to bond officer and complying with other conditions and procedures prescribed under the Manufacturing and Other Operations in Warehouse Regulations read with warehousing provisions under Chapter IX of the Customs Act. However, prior permission of the proper officer is not an essential condition for removal of warehoused goods (as part of resultant goods).

New mechanism for ISD[35] prescribed

Notification No. 12/2024 – Central Tax dated July 10, 2024

Pursuant to the Finance Act 2024-25, with effect from such date as may be notified, the definition of ISD and Section 20 of the CGST Act were amended (a) to provide for mandatory distribution of ITC through ISD mechanism only; and (b) to omit the earlier procedure and mechanism prescribed to distribute ITC through ISD. A detailed mechanism prescribing the manner of distribution through ISD was awaited.

To the above effect, CBIC has amended Rule 39 of CGST Rules with effect from a date to be notified, to prescribe mechanism for distribution of ITC through ISD. It may be noted that the mechanism is similar to the mechanism earlier prescribed under Section 20 of the CGST Act (which was omitted vide Finance Act 2024-25). The following conditions and procedure have been prescribed:

ITC available for distribution in a month will be distributed in the same month;
the amount of ITC distributed will not exceed the amount of ITC available for distribution;
an ISD is required to distribute ITC attributable to relevant recipient in the ratio of its respective turnover (including taxable and non-taxable) of the preceding FY;
ITC of IGST to be distributed as ITC of IGST;
ITC of CGST and SGST to be distributed:
1. If recipient located in same State as that of ISD, be distributed as ITC of CGST and SGST respectively; and
2. If recipient located in a State other than that of ISD, be distributed as IGST.
ISD will issue an ISD invoice for the above distribution.

This Newsletter has been prepared by:

Manish Mishra
Partner & Head of
Practice – Indirect Tax

Shareen Gupta
Partner

Shikha Parmar
Principal Associate

Chayank Bohra
Associate

Dhwani Vyas
Associate

For more details, please contact [email protected]

[1] 2024 (6) TMI 233 – Allahabad High Court

[2] Allahabad High Court

[3] Notification No. 09/2023 – Central Tax dated dated March 31, 2023, and the corresponding State Notification No. 515/2023 dated April 24, 2023

[4] Central Goods and Services Tax Act, 2017

[5] Suo Moto Writ Petition (C) No. 3 of 2020, in Re: Cognizance for Extension of Limitation

[6] 2024 (6) TMI 288 – Kerala High Court

[7] Kerala High Court

[8] Input Tax Credit

[9] Financial Year

[10] Central Goods and Services Tax Rules, 2017

[11] 2024 (6) TMI 489 – Bombay High Court

[12] Business Transfer Agreement

[13] Maharashtra Value Added Tax Act, 2002

[14] Value Added Tax

[15] Show cause Notice

[16] Intellectual Property Rights

[17] Bombay High Court/

[18] Special Leave Petition

[19] Central Board of Indirect Taxes and Customs

[20] The Integrated Goods and Services Tax Act, 2017

[21] Central Goods and Services Tax Rules, 2017

[22] Central Goods and Services Tax Act, 2017

[23] Reverse charge mechanism

[24] Input tax credit

[25] Chartered Accountant/ Certified Management Accountant

[26] Unique Document Identification Number

[27] Employee Stock Option Plan, i.e., option granted to employee to avail stock/ securities of foreign holding company.

[28] Employee Stock Purchase Plan, i.e., option granted to employee to avail stock/ securities of foreign holding company.

[29] Restricted Stock Unit, i.e., stock/ securities issued to employees in the form of awards/ rewards contingent upon the employee meeting specific performance standards.

[30] Notification No. 12/2017 – Central Tax (Rate) dated June 16, 2017

[31] Optical Fiber Cables

[32] Hybrid Annuity Model

[33] Operation and Maintenance

[34] The Customs Act, 1962

[35] Input Service Distributor

Tags Central Board of Indirect Taxes and Customs, High Court, Indirect Tax, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, Newsletter

Taxation of overseas investments by Indian investors decoded

An increasing number of Indians have started investing directly in foreign assets like shares, immovable properties, etc. as they provide an interesting avenue for diversification and potentially higher returns due to the added benefit of foreign exchange fluctuation.

The monetary limits and manner of making offshore investments are governed by the regulations framed by the Reserve Bank of India under the Indian exchange control laws.

Please click here to read the full article by Kumarmanglam Vijay, Surajkumar Shetty and Tejasvi Shukla, published in Financial Express.

Tags Foreign Exchange, JSA, Leading Law Firm, Leading Lawyers, Regulations

Key Highlights of the 53rd GST Council Meeting

Please click here to download the Prism as a PDF.

The 53^rd GST Council meeting chaired by the Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman was held on June 22, 2024, at Delhi. The GST Council has recommended various changes in GST rates, measures for facilitation of trade and streamlining GST compliances.

The key recommendations of the GST Council are summarized below.

Measures for reducing tax disputes

Insertion of Section 128A for conditional waiver of interest and penalty

Given the difficulties faced by taxpayers in the initial years of implementation of the GST law, Section 128A is proposed to be inserted in the CGST Act[2] for waiver of interest and penalty for demand notices issued under Section 73 of the CGST Act for period FY[3] 2017-2018, 2018-2019 and 2019-2020. The benefit of Section 128A will be available subject to the condition that the entire tax demanded in the demand notice is paid by March 31, 2025. The said waiver will not be applicable for recovery of erroneous refunds.

Monetary limit for filing an appeal by the GST Department

To reduce litigations, the following monetary limits for filing appeals by the GST authorities has been recommended:

Sr. No.	Forum	Monetary Limit (INR)
1.	GSTAT[4]	20,00,000 (Indian Rupees twenty lakh)
2.	High Court(s)	1,00,00,000 (Indian Rupees one crore)
3.	Supreme Court of India	2,00,00,000 (Indian Rupees two crore)

It remains to be clarified whether the said monetary limit pertains to the tax demanded or includes interest and penalty as well.

Reduction in amount of pre-deposit required to file appeals under GST

To ease cashflow and working capital blockage, the amount of pre-deposit prescribed under Sections 107 and 112 of the CGST Act are proposed to be reduced:

Provision	Existing pre-deposit		Proposed pre-deposit
Provision	Percentage of tax demand	Maximum pre-deposit payable (INR)	Percentage of tax demand	Maximum pre-deposit payable (INR)
Section 107 – Appeal before the Appellate Authority	10%	25,00,00,000 (Indian Rupees twenty-five crore)	10%	20 (Indian Rupees twenty crore)
Section 112 – Appeal before the Appellate Tribunal	20%	50 (Indian Rupees fifty crore)	10%	20 (Indian Rupees twenty crore)

Extension of limitation period for filing appeal before the GSTAT

As per Section 112 of the CGST Act, an appeal before the relevant GSTAT is to be filed within 3 (three) months from the date of communication of the order. On account of non-constitution of GSTAT, it was clarified that the period of 3 (three) months was to be computed from the date on which the President or the State President of GSTAT enters office.

The GST Council has recommended an amendment to Section 112 of the CGST Act whereby the limitation period is to be computed from a date which will be notified.

Alignment of time limit for issuance of demand notice and orders

Sections 73 and 74 of the CGST Act provide different time limits for issuance of demand notice(s)/ order(s) depending upon whether charges of fraud, suppression, willful misstatement etc. are involved or not. In order to simplify the implementation of these provisions, it has been recommended that Section 74A be introduced to align the time limits prescribed for issuance of demand notice(s)/order(s) under the said sections for tax demands pertaining to FY 2024-25 onwards.

It is also proposed to increase the time limit for availing the benefit of reduced penalty on voluntary payment of tax demanded and interest, from 30 (thirty) days to 60 (sixty) days.

Insertion of Section 11A in CGST Act to give power not to recover duties

It is recommended that to empower the government to regularize non-levy/ short levy of tax as a result of common trade practices.

Amendments with respect to ITC[5]

Extension of time limit for availment of ITC for FY 2017-18 to FY 2020-21

Retrospective amendment of Section 16(4) of CGST Act is recommended to prescribe the time limit for availment of ITC in relation to invoice and debit notes recorded through Form GSTR-3B filed for FY 2017-18 to FY 2020-21 may be deemed to be November 30, 2021.

Further, in relation to returns filed after revocation of cancellation of registration, it is recommended that time limit of 30 (thirty) days from the order of revocation be provided.

Time limit to avail ITC in case of invoices issued by recipients in reverse charge scenario

It is recommended to clarify that in cases involving supplies from unregistered suppliers, where tax is payable by the recipient under RCM[6], the relevant FY for computing the time limit prescribed under Section 16(4) of the CGST Act to claim ITC will be the FY in which the invoices are issued by the recipient.

Transitional credit to Input Service Distributors

It is recommended to retrospectively amend Section 140(7) of the CGST Act to allow Input Service Distributors (ISD) to transition credit in respect of services and invoices received prior to implementation of GST.

Due date for filing Form GSTR-4 to be amended

The due date of filing Form GSTR-4 which is a quarterly return to be filed by composition taxpayers is April 30^th of the next FY. It is recommended that an amendment be made to the due date from April 30^th to June 30^th, for FY 2024-25 onwards

Measures for facilitating GST compliances

Introduction of optional facility by way of Form GSTR-1A to amend details reported in Form GSTR-1

To facilitate taxpayers to add/ amend any particulars of supply which was missed out while filing Form GSTR-1, the Council has recommended a new optional facility by way of Form GSTR-1A before filing Form GSTR-3B.

Amendment of Rule 88B of CGST Rules for interest on delayed filing of returns where credit is available in Electronic Cash Ledger

In light of various ongoing disputes, it has been recommended by the Council to amend Rule 88B of CGST Rules to provide that an amount which is available in the Electronic Cash Ledger as on the due date of filing of return in Form GSTR-3B and is debited while filing the said return, will not be included while computing interest under Section 50 of CGST Act in respect of delayed filing of return.

Threshold for filing annual return in Form GSTR-9/9A for FY 2023-24

It is recommended that a taxpayer with turnover upto INR 2,00,00,000 (Indian Rupees two crore) be exempted from the requirement filing annual returns for FY 2023-24.

Amendments in relation to anti-profiteering provisions

It is recommended that Section 171 of the CGST Act be amended to provide for a sunset clause for anti-profiteering under GST laws by April 1, 2025. As a consequence, no new applications will be taken up post April 1, 2025 for profiteering under the GST laws, for past as well as future periods.

Further, amendments under Section 109 of the CGST Act are proposed to empower the Principal Bench of the GSTAT for handling of all anti-profiteering matters.

Recommendations relating to supply of goods and services

Recommendations relating to supply of goods (including rates of GST)
- Exemption from payment of Compensation Cess on (i) imports by SEZ[7] unit/developer for authorized operations, with effect from July 1, 2017, and (ii) supply of aerated beverages and energy drinks supplied to authorized customers in canteens operated by the Ministry of Defence.
- IGST[8] exemption on import of specified items for defence forces extended to be extended for a further period of 5 (five) years (till June 30, 2029).
- Import of ‘parts, components, testing equipment, tools and tool-kits of aircrafts’ irrespective of its HSN[9] classification for MRO[10] activities to attract uniform rate of 5% IGST, subject to specified conditions.
- Rate of GST applicable on supply of ‘carton, boxes and cases for both corrugated and non-corrugated paper on paper board’ (covered under HSN 481910 & 481920) reduced to 12% from 18%.
Recommendations relating to supply of services (including rates of GST)
- Exemption on the supply of following services:
  - Accommodation services having value of supply of accommodation of up to INR 20,000 (Indian Rupees twenty thousand) per month per person, subject to the condition that the accommodation service is supplied for a minimum continuous period of 90 (ninety) days.
  - Services provided by Indian Railways to general public viz. sale of platform tickets, cloak room services, waiting room services, etc. and for intra-railway transactions.

- - Statutory collections made by RERA[11].

- - Sharing of incentives by acquiring bank with other stakeholders under ‘incentives scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions’.
- The following transactions to be excluded from the scope of ‘supply’:
  - Co-insurance premium apportioned by lead insurer to the co-insurer for the supply of insurance services by the lead insurer and co-insurer to the insured.
  - Re-insurance commission ceded by the insurer to the re-insurer.
Relief to E-Commerce Operators

Section 52(1) of the CGST Act requires an E-Commerce Operator (ECO) to collect tax at source (TCS) on net taxable supply at the rate of not more than 1% (0.5% CGST + 0.5% SGST). The GST Council has recommended reduction of this rate from 1% to 0.5% (0.25% CGST + 0.25% SGST).

The GST Council further clarifies that penalties prescribed under Section 122(1B) of the CGST Act will be applicable only to ECOs covered under Section 52 of the CGST Act and not to other ECOs.

Issuance of clarification(s) to reduce litigation

The GST Council has recommended to issue clarification(s) for trade and tax officers, to reduce litigation, on the following matters:

Taxability of re-imbursement of securities/shares as ESOP/ESPP/RSU[12] provided by a company to its employees.
Taxability of wreck and salvage values in motor insurance claim.
Requirement of reversal of ITC in respect of amount of premium in life insurance services.
Warranty/Extended warranty provided by manufacturers to the end customers.
Availability of ITC on repair expenses incurred by the insurance companies in case of reimbursement made of settlement of motor vehicle insurance claim
Taxability of loan granted between related persons and between group companies.
Time of supply in annuity payments under hybrid annuity model projects.
Time of supply in respect of allotment of spectrum to telecom companies in cases where payment of license fee and spectrum usage charges is to be made in instalments.
Place of supply of goods supplied to unregistered persons, where delivery address is different from the billing address
Mechanism for providing evidence by the suppliers for compliance of the conditions of Section 15(3)(b)(ii) of CGST Act in respect of post-sale discounts, to the effect that ITC has been reversed by the recipient on the said amount.
Various issues pertaining to special procedures for the manufacture of the specified commodities like pan masala, tobacco etc.
Various issues regarding valuation of services of providing corporate guarantee between related parties after insertion of rule 28(2) in CGST Rules.

Other key recommendations/clarifications

The GST Council has recommended some of the key recommendations/ clarifications as below:

It is recommended that a mechanism for claiming refund of additional IGST paid on account of upward revision in price of the goods, subsequent to their export, be prescribed.
It has been recommended to clarify that in cases where foreign affiliates are providing certain services to related domestic entity for which full ITC is available to recipient, the value of supply of services declared in invoice by the domestic entity may be deemed as open market value in terms of second proviso to Rule 28(1) of the CGST Rules. Where no invoice has been raised, the value of service will be deemed to be declared Nil and may be deemed as open market value in terms of second proviso to Rule 28(1) of CGST Rules. This clarification is in line with the circular[13] issued by the CBIC[14].
Amendment to Section 16 of IGST Act and Section 54 of CGST Act to restrict GST/ITC refund in respect of goods which are subjected to export duty, irrespective of whether said goods are exported with/ without payment of duty. This restriction will also be applicable if such goods are supplied to SEZ developer or a SEZ unit for authorized operations.
The place of supply for custodial services provided by Indian banks to foreign portfolio investors to be determined as per Section 13(2) of the IGST Act.
Threshold for reporting of B2C inter-state supplies invoice-wise in Table 5 of GSTR-1 recommended to be reduced from INR 2,50,000 (Indian Rupees two lakh fifty thousand) to INR 1,00,000 (Indian Rupees one lakh).
Return in GSTR-7 to be filed by registered persons who are required to deduct tax at source under Section 51 of CGST Act, is to be filed every month irrespective of whether any tax has been deducted in the said month or not. No late fee may be payable for delayed filing of Nil GSTR-7. Invoice-wise details will be required to be furnished in GSTR-7.

The above recommendations of the GST Council as discussed during the meeting held on June 22, 2024 are published by way of a press release. The amendments and clarifications proposed above will be effective only when notified/ clarified vide the Finance Bill, 2024 (proposed to be tabled in the second or third week of July 2024) or notifications and circulars issued by CBIC from time to time.

This Prism has been prepared by:

Manish Mishra
Partner & Head of
Practice – Indirect Tax

Shareen Gupta
Partner

Ruchita Modi
Senior Consultant

Tanay Vyas
Associate

Dhwani Vyas
Associate

For more details, please contact [email protected]

[1] Goods and Services Tax

[2] Central Goods and Services Tax Act, 2017

[3] Financial Year

[4] Goods and Services Tax Appellate Tribunal

[5] Input tax credit

[6] Reverse charge mechanism

[7] Special Economic Zone

[8] Integrated Goods and Service Tax

[9] Harmonized System of Nomenclature

[10] Maintenance, Repair and Operation

[11] Real Estate Regulatory Authority

[12] Employee Stock Option Plan/ Restricted Stock Units/ Employee Share Purchase Plan

[13] Circular No. 199/11/2023-GST, dated July 17, 2023, issued by the Central Board of Indirect Taxes and Customs

[14] Central Board of Indirect Taxes and Customs

Tags GST Council, Indirect Tax, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates

Recent modifications to Indian tax regulations that affect foreign investments

Under the present overseas investment regime an Indian resident can make an overseas investment overseas under the Liberalized Remittance Scheme (‘LRS’), wherein investment upto USD 2,50,000 can be made in overseas listed and unlisted companies or under the Overseas Direct Investments (ODI) regime where investments can be made through an Indian company in overseas entities as equity investments, loans or guarantees depending on the business needs of the foreign investee entity. Equity shares can also be acquired under a private arrangement or from the market through stock exchanges.

Please click here to read the full article by Kumarmanglam Vijay and Divyam Mittal, published in Financial Express.

Tags JSA, Leading Law Firm, Leading Lawyers, Tax

New Filters: Tax

Key Highlights of the 54th Goods and Services Tax Council Meeting

Recent Rulings by Courts and Authorities

Supreme Court

High Courts

Notifications and Circulars

Constitution of Principal and State benches of GSTAT[23]

CGST Rules amended to give effect to the recommendations of the 53rd GST Council meeting held on June 22, 2024

Threshold for filing annual return for FY 2023-24

Reduction in rate of GST collected by the e-commerce operators

Guidelines for handling recovery of outstanding dues in cases where taxpayers could not file an appeal due to non-constitution of GSTAT

Recent Rulings by Courts and Authorities

High Courts

Notifications, Circulars and Instructions

Transfer of goods from one warehouse operating under Section 65 of the Customs Act[34] to another

New mechanism for ISD[35] prescribed

Deals & Matter Corner

Articles & Publications

JSA Live

Blogs

Disclaimer & Confirmation

Key Highlights of the 54^th Goods and Services Tax Council Meeting