Author: karthikandsunil

Work from Home, Employee Monitoring & DPDP Compliance

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Prefatory Note — The Policy Context

The Prime Minister’s appeal for enabling Work from Home, hybrid working arrangements, online meetings and reduced travel wherever operationally feasible deserves a positive response from employers. WFH is not merely a welfare measure — it reduces urban congestion, carbon footprint, and commuting costs, and can demonstrably improve productivity when implemented thoughtfully.

Employers who embrace WFH should do so, however, through a written WFH policy that is legally reviewed and addresses the full spectrum of applicable Indian law — including Indian labour laws (Factories Act, Industrial Disputes Act, Shops and Establishments Acts as applicable to the state of operation), employment contracts, standing orders where applicable, POSH obligations (Prevention of Sexual Harassment at the Workplace Act, 2013), applicable social security obligations (EPF, ESI, gratuity), and the Digital Personal Data Protection Act, 2023.

The DPDP dimension of Work from Home, particularly in relation to what employee monitoring an employer may or may not lawfully conduct, forms the subject matter of this advisory. Although the DPDP framework is being implemented in phases and is expected to become fully effective from May 13, 2027, organisations should use the transition period to align their WFH monitoring practices with the principles of notice, purpose limitation, data minimisation, proportionality, security and employee privacy.

Setting the Legal Framework

In the DPDP context, the employer is the Data Fiduciary — the entity that determines the purpose and means of processing personal data (Section 2(i), DPDP Act). The employee is the Data Principal — the individual to whom the personal data relates (Section 2(j)). Every monitoring mechanism deployed in a WFH environment involves the collection and processing of the employee’s personal data, and in several cases, personal data of other household members who are entirely outside the employment relationship.

The key lawful basis available to employers under the DPDP Act for processing employee data without requiring consent is Section 7(i) — which permits processing for purposes of employment or those related to safeguarding the employer from loss or liability, such as prevention of corporate espionage, maintenance of confidentiality of trade secrets, intellectual property, classified information, or provision of any service or benefit sought by a Data Principal who is an employee.

This is a legitimate use — but it is not a blanket surveillance licence. It is bounded by two fundamental constraints that apply throughout the DPDP Act.

The first is data minimisation and necessity: under Section 6(1), processing must be limited to personal data that is necessary for the specified purpose. The same principle is expressed in the Second Schedule to the DPDP Rules, which requires processing to be limited to such personal data as is necessary for such uses or achieving such purposes.

The second is proportionality: the Puttaswamy judgment (Justice K.S. Puttaswamy (Retd.) vs Union of India, 2018, included in the project knowledge base) lays down the constitutional standard — a limitation of a fundamental right is permissible only if it is designated for a proper purpose, the measures are rationally connected to that purpose, the measures are necessary in that there are no alternative measures that may similarly achieve the same purpose with a lesser degree of limitation, and there is a proper balance between the importance of the purpose and the importance of the right being limited. This proportionality doctrine — not merely statutory compliance — governs what an employer may permissibly do in a WFH monitoring context.

Issue 1 — Screen Activity Monitoring and Recording

What is collected: Application usage, websites visited, documents accessed, communications composed, work patterns, keystroke sequences, and browsing behaviour.

DPDP Analysis:

Screen monitoring limited to work-device activity during designated working hours has a defensible basis under Section 7(i) for the purpose of preventing corporate data leakage, protecting trade secrets, and ensuring compliance with confidentiality obligations. However, the following distinctions are critical.

Monitoring which applications are open, whether corporate systems are being accessed, and whether DLP alerts are triggered — these are proportionate to the stated purpose. They constitute access logs and activity metadata, not a reproduction of content.

Full-day screen recording — capturing every pixel of everything displayed on an employee’s screen continuously — is disproportionate. It records personal communications, personal browser activity, medical or financial information briefly displayed, and the content of confidential client communications. The Puttaswamy proportionality test asks whether there is a less intrusive measure that achieves the same purpose. The answer here is yes — DLP alerts, access logs, and application monitoring achieve the security objective without wholesale content surveillance.

Keystroke logging is particularly invasive. It captures passwords, personal messages, draft communications subsequently deleted, and information entirely unrelated to work. No legitimate employment purpose requires the capture of every keystroke. It fails the proportionality test.

Notice obligation: Even where Section 7(i) applies and consent is not required, Section 5 of the DPDP Act requires the employer to give the employee a notice describing the personal data being collected and the purpose. A monitoring policy must be explicitly communicated in clear and plain language — not merely buried as a clause in an employment agreement signed on joining.

Assessment: Limited, purpose-specific screen activity monitoring is defensible. Full-day screen recording and keystroke logging are disproportionate and non-compliant.

Issue 2 — Webcam Open During Working Hours (Continuous Video Feed)

What is collected: Real-time visual data of the employee, their home environment, family members, and potentially other individuals who happen to be present.

DPDP Analysis:

A continuously open webcam during working hours collects several distinct categories of personal data simultaneously, each with a distinct legal problem.

The employee’s own image is personal data under Section 2(t). Continuous live video of a person in their home environment — revealing health indicators, emotional state, domestic circumstances, and living conditions — goes well beyond what is necessary to verify that work is being performed. Login activity, task completion, and access logs establish work activity without visual surveillance of the employee’s home.

Far more seriously, the webcam captures the personal data of household members — family, children, domestic workers — who are entirely outside the employment relationship and have given no consent whatsoever. They are Data Principals under the Act with full rights. The employer has no lawful basis — neither consent under Section 6 nor legitimate use under Section 7(i) — to collect their personal data. Section 7(i) is expressly limited to employment purposes; it does not extend to surveillance of third parties who happen to share the employee’s home.

The presence of children in the webcam feed creates an additional dimension. Section 9 of the DPDP Act requires verifiable parental consent before processing the personal data of a child under eighteen years of age. A household webcam that captures a child in the background is processing a child’s personal data without any consent mechanism at all.

Assessment: Continuous webcam monitoring during working hours is legally indefensible under the DPDP Act. It collects the personal data of third parties who have given no consent, captures children’s data in violation of Section 9, and fails the proportionality test even for the employee’s own data. This practice must be discontinued.

Issue 3 — Periodic Photographs Captured via Webcam

What is collected: Timestamped still facial images of the employee at regular automated intervals.

DPDP Analysis:

A facial photograph is unambiguously personal data. Periodic automated facial photographs, particularly when used for identity verification or attendance confirmation, constitute biometric data processing. The Puttaswamy judgment extensively addresses biometric data protection internationally, noting that facial scans require explicit consent and robust safeguards — principles consistent with the DPDP Act’s consent framework.

If the employer relies on Section 7(i), it must demonstrate that periodic facial photograph capture is necessary to prevent corporate espionage or safeguard trade secrets. This argument is very difficult to sustain. Login event logs, VPN connection records, and access logs establish that an authorised employee is operating the device — without requiring the capture and storage of biometric-level facial images at regular intervals.

If the employer instead relies on employee consent under Section 6, that consent must be free, specific, informed, unconditional, and unambiguous. The Puttaswamy judgment and DPDP consent jurisprudence recognise that consent given in an employment context — where an employee may fear job loss for withholding consent — is of questionable freedom. Consent embedded in a joining formality cannot satisfy the “free” requirement of Section 6(1).

The retention of these timestamped photographs over months or years represents a significant and growing database of biometric personal data, subject to Rule 8’s erasure obligations and Rule 6’s security requirements.

Assessment: The highest-risk element of WFH monitoring. Periodic facial photograph capture via webcam is biometric data processing that fails both the proportionality test under Section 7(i) and the free consent standard under Section 6(1). This practice carries acute DPDP compliance risk and must be discontinued.

Issue 4 — IP Address Capture and Tracking

What is collected: The employee’s home IP address, from which approximate residential location and internet service provider can be derived.

DPDP Analysis:

An IP address is personal data under Section 2(t). A home IP address additionally reveals information about the employee’s private residence. Two distinct use cases must be separated.

IP address for access authentication — verifying that a VPN or corporate system connection originates from an authorised device — has a clear and defensible basis under Section 7(i). This is consistent with the CERT-In Elemental Cyber Defense Controls (ACIM.1, ACIM.2), which require unique user IDs and role-based access controls. Using IP as an authentication signal in this context is proportionate.

Continuous tracking and storage of home IP addresses over time — correlating them to build location patterns, monitoring for address changes, or retaining them as a surveillance dataset — has no proportionate justification under the legitimate use basis. It constitutes location surveillance of an employee’s private residence, with no rational connection to the purpose of protecting trade secrets or corporate data.

Additionally, an employer who stores a database of all employees’ home IP addresses creates a significant breach risk. If that database is compromised, the residential network details of every WFH employee are exposed — creating a real-world security risk for the employees themselves that the employer, as Data Fiduciary, is responsible for preventing under Rule 6(1).

Assessment: IP capture for authentication is permissible. Continuous tracking, profiling, or retention of home IP addresses as a surveillance instrument is disproportionate and non-compliant.

Issue 5 — Aggregation and Profiling

What is collected: The combination of screen data + webcam feed + facial photographs + keystroke logs + IP address + application usage = a comprehensive behavioural profile of the employee in their home environment.

DPDP Analysis:

Each element of the monitoring regime creates a data exposure. But the aggregation of these elements into a combined profile is qualitatively more invasive than any single element. The Puttaswamy judgment specifically addresses informational privacy as a distinct constitutional right — the right to control what information about oneself is collected, aggregated, and used by others.

The aggregated profile reveals not just work activity but health patterns (movement in webcam), domestic relationships (household members visible), financial circumstances (home environment), and psychological state (work patterns and response times). None of this is necessary for employment management. It is behavioural surveillance that goes far beyond the employer’s legitimate interests under Section 7(i).

Assessment: Behavioural profiling through data aggregation in a WFH context has no valid lawful basis under the DPDP Act. It is disproportionate, exceeds any employment purpose, and constitutes a systematic interference with the employee’s informational privacy.

What the Employer Should Do — The Permissible Framework

Employers have a genuine and legitimate interest in protecting confidential information, trade secrets, intellectual property, customer data, and business systems. The DPDP Act fully recognises this under Section 7(i). The question is not whether to protect these interests but how — through measures that are proportionate, transparent, and respectful of the employee’s privacy in their home.

Recommended measures that are defensible under Section 7(i):

Secure VPN access — all WFH connections should be routed through a corporate VPN, ensuring encrypted transmission and access authentication without exposing the employee’s home network. MFA for all corporate systems, particularly those accessing customer data, financial records, or intellectual property. Role-based access control (RBAC) ensuring employees can access only the data their role requires. Access logs and audit trails showing which systems were accessed, when, and by whom — without recording the content of what was viewed. DLP (Data Leakage Prevention) alerts triggered when confidential data is transmitted outside authorised channels — flagging the event, not recording all activity. Device management policies governing corporate devices used for WFH, including remote wipe capability in the event of loss or separation. Task-based performance review and deliverable tracking — the most privacy-preserving and effective form of WFH productivity management, requiring no personal data beyond work outputs.

Measures that should not be deployed without strict necessity, proportionality, explicit notice, legal review, and a valid lawful basis:

Continuous webcam monitoring during working hours. Periodic automated facial photograph capture. Full-day screen recording. Keystroke logging. Home environment surveillance of any kind. Continuous home IP address tracking or location profiling. Behavioural profiling through data aggregation.

For any such measure that an employer nonetheless believes is strictly necessary for a specific, documented security purpose, the following conditions must all be met before deployment: a written documented justification of strict necessity, a proportionality assessment demonstrating no less intrusive alternative exists, a standalone clear and plain notice to employees specifying exactly what is collected, how it is stored, who can access it, for how long, and what rights the employee has, legal review of the lawful basis, defined retention and erasure schedules under Rule 8, and a grievance mechanism under Section 13 through which employees can raise objections.

The Preferred WFH Governance Model

The preferred model for WFH governance under DPDP is trust-based, deliverable-based, and security-led — not surveillance-led.

Trust-based: employees are presumed to be performing their duties unless there is a specific, documented reason to investigate otherwise. Surveillance is not a substitute for management.

Deliverable-based: performance is measured by outputs, outcomes, and quality of work — not by hours of screen visibility or number of keystrokes. This is both more legally defensible and more effective at driving actual productivity.

Security-led: the employer’s legitimate concerns about data security and IP protection are addressed through robust technical controls — VPN, MFA, RBAC, DLP, access logs — that protect the organisation’s assets without surveilling employees’ homes.

Summary Assessment Table

WFH PracticeLawful Basis AvailableDPDP StatusRecommendation
Secure VPN accessSection 7(i) ✅CompliantImplement as standard
MFA for all systemsSection 7(i) ✅CompliantImplement as standard
Role-based access controlSection 7(i) ✅CompliantImplement as standard
Access logs and audit trailsSection 7(i) ✅CompliantImplement with retention schedule
DLP alerts (not full recording)Section 7(i) ✅CompliantImplement as standard
Task/deliverable-based reviewNo personal dataPreferred modelImplement as primary PM tool
Limited screen activity monitoringSection 7(i) — conditionalDefensible if scopedLimit to access metadata only
Full-day screen recordingNo valid basisNon-compliantDo not deploy
Keystroke loggingNo valid basisNon-compliantDo not deploy
Continuous webcam monitoringNo valid basisNon-compliantDo not deploy
Periodic webcam photographsNo valid basisNon-compliant — biometric dataDo not deploy
Home IP continuous trackingNo valid basisNon-compliantAuthentication use only
Behavioural profilingNo valid basisNon-compliantDo not deploy

The Bottom Line

WFH is now policy-positive, PM-endorsed, and legally permissible. It is a legitimate, productivity-enhancing, environmentally responsible mode of working that Indian employers should embrace wherever operationally feasible.

The monitoring architecture that accompanies it, however, must be minimal, transparent, proportionate, labour-law compliant, and privacy-preserving.

An employer who enables WFH while deploying continuous webcam surveillance, periodic facial photographs, keystroke logging, and full-day screen recording has not implemented WFH — it has installed a surveillance apparatus inside the employee’s home. That is not what the PM’s appeal envisioned, it is not what good management requires, and it is not what Indian law — including the DPDP Act — permits.

The right model is this: protect the organisation’s data and systems through robust technical controls. Measure performance through outputs and outcomes. Trust the employee with the dignity of their private home environment. And build the WFH policy on a legal foundation that will withstand scrutiny — from the Data Protection Board, from employees who know their rights, and from a workforce that will perform best when it is trusted rather than surveilled.

Source note: All DPDP analysis is derived from the Digital Personal Data Protection Act, 2023 (Sections 2(i), 2(j), 2(t), 2(u), 5, 6, 7(i), 8, 9, 12, 13), the DPDP Rules, 2025 (Rules 6, 8, Second Schedule), the Justice K.S. Puttaswamy (Retd.) vs Union of India Supreme Court judgment (2018) on the right to privacy and proportionality doctrine, and the CERT-In Elemental Cyber Defense Controls for MSMEs (Version 1.0, dated 01.09.2025). References to labour law, POSH, EPF, ESI and Shops and Establishments requirements.

Disclaimer

This note is for general informational purposes only and should not be treated as legal opinion or professional advice. The applicability of Work from Home, employee monitoring, DPDP Act requirements, and labour law obligations may vary based on the facts, sector, state laws, employment terms, and internal policies.

Organisations should obtain a specific legal opinion from a qualified advocate / labour-law expert / data-protection professional before implementing or relying on any Work from Home or employee monitoring policy.

CA.Sunil E
Partner

Work from Home, Employee Monitoring & DPDP Compliance

Date Extension- RoC Forms

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Important Update about Filing of AOC-4 and MGT-7

Relaxation on levy of additional fees is given till 15.03.2022 for filing of e-forms AOC-4, AOC-4 (CFS), AOC-4, AOC-4 XBRL AOC-4 Non-XBRL and 31.03.2022 for MGT-7/MGT-7A for the Financial Year 2020-21.

Date Extension- RoC Forms

Updated Return Proposed in Finance Bill, 2022

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Introduction

It is proposed to introduce a new provision in section 139 of the Act for filing an updated return of income by any person, whether he has filed a return previously for the relevant assessment year or not, and Section 140B for payment of tax.

Proposed Subsection (8A) of Section 139

A new subsection (8A) in section 139 is proposed to be introduced. The details are as follows:

Any person, whether he has furnished a return u/s.139 or not may furnish an updated return of his income or the income of any other person in respect of which he is assessable under the Act, for the previous year relevant to such assessment year, within twenty-four months from the end of the assessment year.

Not applicable if the updated return

  • Is a loss return
  • has the effect of decreasing the total tax liability determined on the basis of return furnished earlier
  • results in refund or increases the refund

Not Eligible in following cases

  • search has been initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of such person, or
  • a survey has been conducted under section 133A, other than subsection (2A) of that section, in the case such person, or
  • a notice has been issued to the effect that any money, bullion, jewellery or valuable article or thing, seized or requisitioned under section 132 or section 132A in the case of any other person belongs to such person, or
  • a notice has been issued to the effect that any books of account or documents, seized or requisitioned under section 132 or section 132A in the case of any other person, pertain or pertains to, or any other information contained therein, relate to, such person.

This provision is for the assessment year relevant to the previous year in which such search is initiated, or survey is conducted, or requisition is made and two assessment years preceding such assessment year.

Other scenarios where updated return cannot be filed

  • Already filed updated return for the assessment year; i.e., updated return can be filed only once for an Assessment Year
  • any proceeding for assessment or reassessment or recomputation or revision of income under the Act is pending or has been completed for the relevant assessment year in his case, or
  • the Assessing Officer has information in respect of such person for the relevant assessment year in his possession under the Prevention of Money Laundering Act, 2002 or the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 or the Prohibition of Benami Property Transactions Act, 1988 or The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 and the same has been communicated to him, prior to the date of his filing of return under the proposed sub-section (8A) of section 139 of the Act, or
  • information for the relevant assessment has been received under an agreement referred to in sections 90 or 90A of the Act in respect of such person and the same has been communicated to him, prior to the date of his filing of return under the proposed sub-section (8A) of section 139 of the Act, or
  • any prosecution proceedings under Chapter XXII have been initiated for the relevant assessment year in respect of such person, prior to the date of his filing of return under the proposed sub-section(8A) of section 139 of the Act, or
  • he is a person or belongs to a class of persons, as maybe notified by the Board in this regard.

A return filed under the proposed sub-section (8A) of the said section 139 shall be defective unless such return is accompanied by the proof of payment of tax as required under the proposed section 140B.

Section 140B: Payment of Tax, Additional Tax

  1. When return under section 139 is not filed: Assessee will be liable to pay the tax due together with interest and fee payable under any provision of the Act for any delay in furnishing the return or any default or delay in payment of advance tax, along with the payment of additional tax. Tax payable shall be computed after taking into consideration amount of tax paid including advance tax, TDS, relief under section 89,90,90A,91 and any tax credit claimed to be set off in accordance with the provisions of section 115JAA or section 115JD
  2. When return of income under Section 139 is filed: Assessee will be liable to pay the tax due together with interest and fee payable under any provision of the Act for any delay in furnishing the return or any default or delay in payment of advance tax, along with the payment of additional tax. Tax payable shall be computed after taking into consideration amount of tax paid including advance tax, TDS, the amount of relief or tax, referred to in sub-section (1) of section 140A, relief under section 89,90,90A,91 and any tax credit claimed to be set off in accordance with the provisions of section 115JAA or section 115JD. The aforesaid tax shall be increased by the amount of refund, if any, issued in respect of such earlier return.

In addition to the above, additional tax needs to be paid which needs to be calculated as follows:

  1. 25% of aggregate tax and interest payable as determined in points 1 & 2 above if such return is furnished after expiry of the time available under sub-section (4) or sub-section (5) of section 139 and before completion of period of twelve months from the end of the relevant assessment year.
  2. In other cases, the additional tax will be 50% of the aggregate tax and interest payable.

Interest u/s. 234A and 234C needs to be calculated till the date of filing return. Interest under section 234B needs to calculate on the assessed tax as per return under section 139(8A) as reduced by the interest paid in the return already filed. In case, no return under section 139 as per existing provisions is filed, interest paid will be taken as ‘nil’.

Updated Return Proposed in Finance Bill, 2022

Budget 2022: Direct Tax Proposals

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1. New updated Return will be implemented – Updated return can be filed within 2 years from the end of the Assessment year

2. Reduced MAT/AMT for Co-operatives – Reduce rate of Co-op Societies to 15% – The surcharge is reduced from 15% to 12% for those having income between Rs.1 Crore to Rs.10 Crore

3. The payment of annuity and lumpsum amount for Parents/Guardian is made availalble.

4. NPS Contribution – The tax deduction limit increased at par with Central Govt. Employees for state Govt. Employees

5. Incentives for start-up: Tax Incentive – Period extended till 31.3.2023

6. Manufacturing Companies – Commencement of production – Period extended till 31.03.2024

7. Virtual Digital Asset: 30% tax rate. Only Cost of acquisition can be deducted. No carry forward of loss. TDS implemented. 

8. LTCG Maximimum Surcharge capped to 15%

9. Surcharge/Cess on income is not allowable as expenditure

10. Undisclosed cannot be setoff against brought forward loss in case of search and survey cased

Budget 2022: Direct Tax Proposals

Budget Updates: MSME Related Announcements

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MSMEs such as Udyam, e-shram, NCS & Aseem portals will be inter-linked, their scope will be widened.

A fund with blended capital raised under co-investment model facilitated through NABARD to finance startups in agriculture & rural enterprises for farm produce value chain

ECLGS to be extended upto March 2023, guaranteed cover extended by another Rs 50,000 crore.

Budget Updates: MSME Related Announcements

Budget 2022 Updates

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Focus areas of Budget

  • PM Gati Shakti
  • Inclusive Development
  • Productivity Enhancement
  • Sunrise Opportunities
  • Energy Transition
  • Climate Action
  • Financing of investments

PM Gati Shakti – Will generate more job opportunities and econmic development

400 new-generation Vande Bharat trains will be developed and manufactured in next 3 years.

Rs 48, 000 crore is allotted for PM Awas Yojana

Budget 2022 Updates

GST: Clarification on GST Refunds – Circular 166/2021

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CBIC had issued circular 166/2021 dated 17.11.2021, covering the following various issues in  Refunds related to Electronic Cash Ledger and Deemed Exports:

1. Refund of excess balance in Electronic Cash Ledger – Time Period mentioned in sub section 1 of Section 54 is not applicable for refund of excess balance in Electronic Cash Ledger. As per Section 54(1) the time limit for application of refund is 2 years from the relevant date.

2. The declaration under Rule 89(2)(l) or 89(2)(m) of CGST Rules, 2017 (Declaration in case the refund of amount is less than Rs.2 Lakhs and Certificate from Chartered Accountant in other cases, as to the incidence of tax, interest or any other amount claimed as refund is not been passed on to any other person) is not required.

3. The refund of TDS/TCS deposited in electronic cash ledger under the provisions of section 51 /52 of the CGST Act can be refunded as excess balance in cash ledger.

4. Relevant date in case of deemed exports of goods by the recepient, will be the date of furnishing the return by the Supplier of Goods.

The entire text of the circular is reproduced below for the reference:

Circular No. 166/22/2021-GST

F.No. CBIC-20021/4/2021-GST

Government of India Ministry of Finance Department of Revenue

Central Board of Indirect Taxes and Customs GST Policy Wing

****

New Delhi, Dated the 17th Nov, 2021

To,

The    Principal     Chief    Commissioners/Chief     Commissioners/Principal     Commissioners/ Commissioners of Central Tax (All)

The Principal Directors General/ Directors General (All) Madam/Sir,

Subject:          Clarification on certain refund related issues- reg.

Various representations have been received from taxpayers and other stakeholders seeking clarification in respect of certain issues relating to refund. The issues have been examined. In order to ensure uniformity in the implementation of the provisions of the law across field formations, the Board, in exercise of its powers conferred by section 168(1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies each of these issues as under:

S. No.IssueClarification
1.Whether the provisions of sub- section (1) of section 54 of the CGST Act regarding time period, within which an application for refund can be filed, would be applicable in cases of refund of excess balance in electronic cashledger?No, the provisions of sub-section (1) of section 54 of the CGST Act regarding time period, within which an application for refund can be filed,would not be applicable in cases of refund of excess balance in electronic cash ledger.
2.Whether certification/ declaration under Rule 89(2)(l) or 89(2)(m) of CGST Rules, 2017 is required to be furnished along with the application for refund of excess balance inNo, furnishing of certification/ declaration under Rule 89(2)(l) or 89(2)(m) of the CGST Rules, 2017 for not passing the incidence of tax to any other person is not required in cases of refund of excess balance inelectronic cash ledger as
 electronic cash ledger?unjust enrichment clause is not applicable insuch cases.
3.Whether refund of TDS/TCS deposited in electronic cash ledger under the provisions of section 51/52 of the CGST Act can be refunded as excess balancein cash ledger?The amount deducted/collected as TDS/TCS by TDS/ TCS deductors under the provisions of section 51 /52 of the CGST Act, as the case may be, and credited to electronic cash ledger of the registered person, is equivalent to cash deposited in electronic cash ledger. It is not mandatory for the registered person to utilise the TDS/TCS amount credited to his electronic cash ledger only for the purpose for discharging tax liability. The registered person is at full liberty to discharge his tax liability in respect of the supplies made by him during a tax period, either through debit in electronic credit ledger or through debitin electronic cash ledger, as per his choice and availability of balance in the said ledgers. Any amount, which remains unutilized in electronic cash ledger, after discharge of tax dues and other dues payable under CGST Act and rules made thereunder, can be refunded to the registered person as excess balance in electronic cash ledger in accordance with the proviso to sub-section(1) of section 54, read with sub-section (6) of section 49 of CGST Act.
4.Whether relevant date for the refund of tax paid on supplies regarded as deemed export by recipient is to be determined as per clause (b) of Explanation (2) under section 54 of CGST Act and if so, whether the date of return filed by the supplier or date of return filed by the recipient will be relevant for the purpose of determining relevant date for such refunds?Clause (b) of Explanation (2) under Section 54 of CGST Act reads as under: “(b) in the case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the date on which the return relating to such deemed exports is furnished;” On perusal of the above, it is clear that clause (b) of Explanation (2) under section54 of the CGST Act is applicable for determining relevant date in respect of refund of amount of tax paid on the supplyof   goods   regarded   as  deemed   exports,
  irrespective of the fact whether the refund claim is filed by the supplier or by the recipient. Further, as the tax on the supply of goods, regarded as deemed export, would be paid by the supplier in his return, therefore, the relevant date for purpose of filing of refund claim for refund of tax paid on such supplies would be the date of filing of return, related to such supplies, by the supplier.

2.   It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

3.  Difficulty, if any, in the implementation of this Circular may be brought to the notice of the Board. Hindi version will follow.

(Sanjay Mangal) Principal Commissioner

GST: Clarification on GST Refunds – Circular 166/2021

GST: Dynamic QR Code – Recepient Located outside India – Circular 165

karthikandsunil, , , , 1 Comment

CBIC had issued Circular No. 165/21/2021 dated 17th November, 2021, clarifying about the applicability of Dynamic QR Code on service invoices where recepient is located outside India and place of supply is in India.

Dynamic QR Code is not required in case invoice is issued to a recipient located outside India, for supply of services, for which the place of supply is in India, as per the provisions of IGST Act 2017, and the payment is received by the supplier, in convertible foreign exchange or in Indian Rupees wherever permitted by the RBI.

The entire text of the Circular is given below:

Circular No. 165/21/2021-GST

CBEC-20/16/38/2020 -GST

Government of India Ministry of Finance Department of Revenue

Central Board of Indirect Taxes and Customs GST Policy Wing

New Delhi, dated the 17th November, 2021

To

The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners / Commissioners of Central Tax (All)

The Principal Directors General / Directors General (All)

Madam/Sir,

Subject: Clarification in respect of applicability of Dynamic Quick Response (QR) Code on B2C invoices and compliance of notification 14/2020- Central Tax dated 21st March, 2020 – Reg.

Various references have been received from trade and industry seeking further clarification on applicability of Dynamic Quick Response (QR) Code on B2C (Registered person to Customer) invoices for compliance of notification 14/2020-Central Tax, dated 21st March, 2020 as amended. It has been represented that in some cases where, though the service recipient is located outside India and place of supply of the service is in India as per IGST Act 2017, the payment is received by the service provider located in India not in foreign exchange, but through other modes approved by RBI. In such cases, the supplier will not be fulfilling the condition specified in S. No. 4 of the Circular No. 156/12/2021 dated 21st June 2021, and accordingly, will be required to have dynamic QR code on the invoice. It has been also represented that relaxation from dynamic QR code on the invoices in such cases should be available if the payment is received through any RBI approved mode of payment, and not necessarily in foreign exchange.

2.  The issues have been examined and in order to ensure uniformity in the implementation of the provisions of the law across the field formations, the Board, in exercise of its powers conferred under section 168(1) of the CGST Act, 2017, hereby clarifies the issues hereafter.

3.                  It is observed that from the present wording of S. No. 4 of Circular No. 156/12/2021 dated 21stJune 2021, doubt arises whether the relaxation from the requirement of dynamic QR code on the invoices would be available to such supplier, who receives payments from the recipient located outside India through RBI approved modes of payment, but not in foreign exchange. It is mentioned that the intention of clarification as per S. No. 4 in the said circular was not to deny relaxation in those cases, where the payment is received by the supplier as per any RBI approved mode, other than foreign exchange.

4.                  Accordingly, to clarify the matter further, the Entry at S. No. 4 of the Circular No. 156/12/2021-GST dated 21st June, 2021 is substituted as below:

4.” In cases, where receiver of services is located outside India, and payment is being received by the supplier of services ,through RBI approved modes of payment, but as per provisions of the IGST Act 2017, the place of supply of such services is in India, then such supply of services is not considered as export of services as per the IGST Act 2017; whether in such cases, the Dynamic QR Code is required on the invoice issued, for such supply of services, to such recipientlocated outside India?No. Wherever an invoice is issued to a recipient located outside India, for supply of services, for which the place of supply is in India, as per the provisions of IGST Act 2017, and the payment is received by the supplier, in convertible foreign exchange or in Indian Rupees wherever permitted by the RBI, such invoice may be issued without having a Dynamic QR Code, as such dynamic QR code cannot be used by the recipient located outside India for makingpayment to the supplier.”

5.  Circular No. 156/12/2021-GST, dated 21.06.2021 stands modified to this extent.

6.    It is requested that suitable trade notices may be issued to publicize the contents of this circular.

7.  Difficulty, if any, in the implementation of the above instructions may please be brought to the notice of the Board. Hindi version would follow.

(Sanjay Mangal) Principal Commissioner

GST: Dynamic QR Code – Recepient Located outside India – Circular 165