GST

GST: ITC on Debit Note, Invoice – Movement of Goods & Refund – NIL rated Export Goods

karthikandsunil, Leave a comment

CBIC vide Circular No. 160/16/2021-GST dated 20-09-2021, had clarified the following:

1. ITC of Debite Notes: w.e.f. 01.01.2021, in case of debit notes, the date of issuance of debit note (not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of the CGST Act.

2. Physical Copy of Invoice in case of Invoices generated from Common Goods and Service Tax Electronic Portal: It is clarified that there is no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules and production of the Quick Response (QR) code having an embedded Invoice Reference Number (IRN) electronically, for verification by the proper officer, would suffice.

3. Unutilised ITC on Goods having NIL rate of Export Duty: Goods, which are not subject to any export duty and in respect of which either NIL rate is specified in Second Schedule to the Customs Tariff Act, 1975 or which are fully exempted from payment of export duty by virtue of any customs notification or which are not covered under Second Schedule to the Customs Tariff Act, 1975, would not be covered by the restriction imposed under the first proviso to section 54(3) of the CGST Act for the purpose of availment of refund of accumulated ITC.

The complete text of the Ciruclar is given below:

Circular No. 160/16/2021-GST

F. No. CBIC-20001/8/2021-GST

Government of India Ministry of Finance Department of Revenue

Central Board of Indirect Taxes and Customs GST Policy Wing

******

New Delhi, dated the 20th September, 2021

To

The Pr. 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 certain GST related issues – reg.

Various representations have been received from taxpayers and other stakeholders seeking clarification in respect of certain issues pertaining to GST laws. 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.Section 16 (4), as amended with effect from 01.01.2021, provides that a registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.   Doubts have been raised seeking following clarification: Which of the following dates are relevant to determine the ‘financial year’ for the purpose of section 16(4):date of issuance of debit note, ordate of issuance of underlying invoice. Whether any availment of input tax credit, on or after 01.01.2021, in respect of debit notes issued either prior to or after 01.01.2021, will be governed by the provisions of the amended section 16(4), or the amended provision will be applicable only in respect of the debit notes issued after 01.01.2021?1. With effect from 01.01.2021, section 16(4) of the CGST Act, 2017 was amended vide the Finance Act, 2020, so as to delink the date of issuance of debit note from the date of issuance of the underlying invoice for purposes of availing input tax credit. The amendment made is shown as below: “A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.” As can be seen, the words “invoice relating to such” were omitted w.e.f. 01.01.2021.   The intent of law as specified in the Memorandum explaining the Finance Bill, 2020 states that “Clause 118 of the Bill seeks to amend sub-section (4) of section 16 of the Central Goods and Services Tax Act so as to delink the date of issuance of debit note from the date of issuance of the underlying invoice for purposes of availing input tax credit.   Accordingly, it is clarified that:   w.e.f. 01.01.2021, in case of debit notes, the date of issuance of debit note (not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of the CGST Act. The availment of ITC on debit notes in respect of amended provision shall be applicable from 01.01.2021. Accordingly, for availment of ITC on or after 01.01.2021, in respect of debit notes issued either prior to or after 01.01.2021, the eligibility for availment of ITC will be governed by the amended provision of section 16(4), whereas any ITC availed prior to 01.01.2021, in respect of debit notes, shall   be   governed   under   the provisions of section 16(4), as it existed before the said amendment on 01.01.2021.   Illustration 1. A debit note dated 07.07.2021 is issued in respect of the original invoice dated 16.03.2021. As the invoice pertains to F.Y. 2020- 21, the relevant financial year for availment of ITC in respect of the said invoice in terms of section 16(4) of the CGST shall be 2020-21. However, as the debit note has been issued in FY 2021-22, the relevant financial year for availment of ITC in respect of the said debit note shall be 2021-22 in terms of amended provision of section 16(4) of the CGST Act.   Illustration 2. A debit note has been issued on 10.11.2020 in respect an invoice dated 15.07.2019. As per amended provision of section 16(4), the relevant financial year for availment of input tax credit on the said debit note, on or after 01.01.2021, will be FY 2020-21 and accordingly, the registered person can avail ITC on the same till due date of furnishing of FORM GSTR-3B for the month of September, 2021 or furnishing of the annual return for FY 2020-21, whichever is earlier.
2.Whether carrying physical copy of invoice is compulsory during movement of goods in cases where suppliers have issued invoices in the manner prescribed under rule 48 (4) of the CGST Rules, 2017 (i.e. in cases of e-invoice).Rule 138A (1) of the CGST Rules, 2017 inter-alia, provides that the person in charge of a conveyance shall carry— (a) the invoice or bill of supply or delivery challan, as the case may be; and (b) a copy of the e-way bill or the e-way bill number, either physically or mapped to a Radio Frequency Identification Device embedded on to the conveyance in such manner as may be notified by the Commissioner.   Further, rule 138A (2) of CGST Rules, after being amended vide notification No. 72/2020-Central Tax dated 30.09.2020, states that “In case, invoice is issued in the manner prescribed under sub-rule (4) of rule 48, the Quick Reference (QR) code having an embedded Invoice Reference Number (IRN) in it, may be produced electronically, for verification by the proper officer in lieu of the physical copy of such tax invoice”   A conjoint reading of rules 138A (1) and 138A (2) of CGST Rules, 2017 clearly indicates that there is no requirement to carry the physical copy of tax invoice in cases where e-invoice has been generated by the supplier. After amendment, the revised rule 138A (2) states in unambiguous words that whenever e- invoice has been generated, the Quick Reference (QR) code, having an embedded Invoice Reference Number (IRN) in it, may be produced electronically for verification by the proper officer in lieu of the physical copy of such tax invoice.   Accordingly, it is clarified that there is no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules and production of the Quick Response (QR) code having an embedded Invoice Reference Number (IRN) electronically, for verification by the proper officer, would suffice.
3.Whether the first proviso to section 54(3) of CGST / SGST Act, prohibiting refund of unutilized ITC is applicable in case of exports of goods which are having NIL rate of export duty.1. The term ‘subjected to export duty’ used in first proviso to section 54(3) of the CGST Act, 2017 means where the goods are actually leviable to export duty and suffering export duty at the time of export. Therefore, goods in respect of which either NIL rate is specified in Second Schedule to the Customs Tariff Act, 1975 or which are fully exempted from payment of export duty by virtue of any customs notification or which are not covered under Second Schedule to the Customs Tariff Act, 1975, cannot be considered to be subjected to any export duty under Customs Tariff Act, 1975. Accordingly, it is clarified that only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) from availment of refund of accumulated ITC. Goods, which are not subject to any export duty and in respect of which either NIL rate is specified in Second Schedule to the Customs Tariff Act, 1975 or which are fully exempted from payment of export duty by virtue of any customs notification or which are not covered under Second Schedule to the Customs Tariff Act, 1975, would not be covered by the restriction imposed under the first proviso to section 54(3) of the CGST Act for the purpose of availment of refund of accumulated ITC.
  • It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
  • 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: ITC on Debit Note, Invoice – Movement of Goods & Refund – NIL rated Export Goods

Recommendations of 45th GST Council Meeting

karthikandsunil, Leave a comment

Several people centric decisions taken by GST Council

Posted On: 17 SEP 2021 9:16PM by PIB Delhi

  • Life-saving drugs Zolgensma and Viltepso used in treatment of Spinal-Muscular Atrophy exempted from GST when imported for personal use
  • Extension of existing concessional GST rates on certain COVID-19 treatment drugs upto 31st December 2021
  • GST rates on 7 other medicines recommended by Department of Pharmaceuticals reduced from 12% to 5% till 31st December 2021
  • GST rate on Keytruda medicine for treatment of cancer reduced from 12% to 5%
  • GST rates on Retro fitment kits for vehicles used by persons with special abilities reduced to 5%
  • GST rates on Fortified Rice kernels for schemes like ICDS reduced from 18% to 5%

Council also recommends major changes in GST rates and scope of exemption on Services

Recommends several clarifications in relation to GST rates on Goods and Services

Council recommends several measures relating to GST law and procedure

Council decides to set up 2 GoMs to examine issue of correction of inverted duty structure for major sectors and for using technology to further improve compliance, including monitoring

The GST Council’s 45th meeting was held today in Lucknow under the chairmanship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. The GST Council has inter-alia made the following recommendations relating to changes in GST rates on supply of goods and services and changes related to GST law and procedure:

I. Recommendations relating to GST rates on goods and services

A. COVID-19 relief measure in form of GST rate concessions

1. Extension of existing concessional GST rates (currently valid till 30th September, 2021) on following Covid-19 treatment drugs, up to 31st December, 2021, namely-

  1. Amphotericin B -nil
  2. Remdesivir – 5%
  3. Tocilizumab -nil
  4. Anti-coagulants like Heparin – 5%

2. Reduction of GST rate to 5% on more Covid-19 treatment drugs, up to 31st December, 2021, namely-

  1. Itolizumab
  2. Posaconazole
  3. Infliximab
  4. Favipiravir
  5. Casirivimab & Imdevimab
  6. 2-Deoxy-D-Glucose
  7. Bamlanivimab & Etesevimab

B. Major recommendations on GST rate changes in relation to Goods [w.e.f 1.10.2021 unless otherwise stated]

S. No.DescriptionFromTo
GST rate changes
1.Retro fitment kits for vehicles used by the disabledAppl. rate5%
2.Fortified Rice Kernels for schemes like ICDS etc.18%5%
3.Medicine Keytruda for treatment of cancer12%5%
4.Biodiesel supplied to OMCs for blending with Diesel12%5%
5.Ores and concentrates of metals such as iron, copper,aluminum, zinc and few others5%18%
6.Specified Renewable Energy Devices and parts5%12%
7.Cartons, boxes, bags, packing containers of paper etc.12%/18%18%
8.Waste and scrap of polyurethanes and other plastics5%18%
9.All kinds of pens12%/18%18%
10.Railway parts, locomotives & other goods in Chapter 8612%18%
11.Miscellaneous goods of paper like cards, catalogue,printed material (Chapter 49 of tariff)12%18%
12.IGST on import of medicines for personal use, namelyZolgensma for Spinal Muscular AtrophyViltepso for Duchenne Muscular DystrophyOther medicines used in treatment of muscular atrophy recommended by Ministry of Health and Family Welfare and Department of Pharmaceuticals.  12%Nil
13.IGST exemption on goods supplied at Indo-Bangladesh Border haatsAppl. rateNil
14.Unintended waste generated during the production of fishmeal except for Fish OilNil (for theperiod 1.7.2017 to 30.9.2019)

C. Other changes relating to GST rates on goods

  1. Supply of mentha oil from unregistered person has been brought under reverse charge. Further, Council has also recommended that exports of Mentha oil should be allowed only against LUT and consequential refund of input tax credit.
  1. Brick kilns would be brought under special composition scheme with threshold limit of Rs. 20 lakhs, with effect from 1.4.2022. Bricks would attract GST at the rate of 6% without ITC under the scheme. GST rate of 12% with ITC would otherwise apply to bricks.

D. Correction in Inverted Duty structure in Footwear and Textiles sector

GST rate changes in order to correct inverted duty structure, in footwear and textiles sector, as was discussed in earlier GST Council Meeting and was deferred for an appropriate time, will be implemented with effect from 01.01.2022.

E. In terms of the recent directions of the Hon’ble High Court of Kerala, the issue of whether specified petroleum products should be brought within the ambit of GST was placed for consideration before the Council. After due deliberation, the Council was of the view that it is not appropriate to do so at this stage.

F. Major GST changes in relation to rates and scope of exemption on Services [w.e.f 1.10.2021 unless otherwise stated]

No.DescriptionFromTo
1.Validity of GST exemption on transport of goods by vessel and air from India to outside India is extended upto 30.9.2022.–Nil
2.Services by way of grant of National Permit to goods carriages on payment of fee18%Nil
3.Skill Training for which Government bears 75% or more of the expenditure [ presently exemption applies only if Govt funds 100%].18%Nil
4.Services related to AFC Women’s Asia Cup 2022.18%Nil
5.Licensing services/ the right to broadcast and show original films, sound recordings, Radio and Television programmes [ to bring parity between distribution and licencing services]12%18%
6.Printing and reproduction services of recorded media where content is supplied by the publisher (to bring it on parity with Colour printing of images from film or digital media)12%18%
7.Exemption on leasing of rolling stock by IRFC to Indian Railways withdrawn.
8.E Commerce Operators are being made liable to pay tax on following services provided through themtransport of passengers, by any type of motor vehicles through it [w.e.f. 1st January, 2022]restaurant services provided through it with some exceptions [w.e.f. 1st January, 2022]
9.Certain relaxations have been made in conditions relating to IGST exemption relating to import of goods on lease, where GST is paid on the lease amount, so as to allow this exemption even if (i) such goods are transferred to a new lessee in India upon expiry or termination of lease; and (ii) the lessor located in SEZ pays GST under forward charge.

G. Clarification in relation to GST rate on Goods

  1. Pure henna powder and paste, having no additives, attract 5% GST rate under Chapter 14.
  2. Brewers’ Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues, falling under HS code 2303 attract GST at the rate of 5%.
  3. All laboratory reagents and other goods falling under heading 3822 attract GST at the rate of 12%.
  4. Scented sweet supari and flavored and coated illachi falling under heading 2106 attract GST at the rate of 18%
  5. Carbonated Fruit Beverages of Fruit Drink” and “Carbonated Beverages with Fruit Juice” attract GST rate of 28% and Cess of 12%. This is being prescribed specifically in the GST rate schedule.
  6. Tamarind seeds fall under heading 1209, and hitherto attracted nil rate irrespective of use. However, henceforth they would attract 5% GST rate (w.e.f. 1.10.2021) for use other than sowing. Seeds for sowing will continue at nil rate.
  7. External batteries sold along with UPS Systems/ Inverter attract GST rate applicable to batteries [ 28% for batteries other than lithium-ion battery] while UPS/inverter would attract 18%.
  8. GST on specified Renewable Energy Projects can be paid in terms of the 70:30 ratio for goods and services, respectively, during the period from 1.7.2017 to 31.12.2018, in the same manner as has been prescribed for the period on or after 1st January 2019.
  9. Due to ambiguity in the applicable rate of GST on Fibre Drums, the supplies made at 12% GST in the past have been regularised. Henceforth, a uniform GST rate of 18% would apply to all paper and paper board containers, whether corrugated or non-corrugated.
  10. Distinction between fresh and dried fruits and nuts is being clarified for application of GST rate of “nil” and 5%/12% respectively;
  11. It is being clarified that all pharmaceutical goods falling under heading 3006 attract GST at the rate of 12% [ not 18%].
  12. Essentiality certificate issued by Directorate General of Hydrocarbons on imports would suffice; no need for taking a certificate every time on inter-state stock transfer.

H. Clarification in relation to GST rate on services

  1. Coaching services to students provided by coaching institutions and NGOs under the central sector scheme of ‘Scholarships for students with Disabilities” is exempt from GST
  2. Services by cloud kitchens/central kitchens are covered under ‘restaurant service’, and attract 5% GST [ without ITC].
  3. Ice cream parlor sells already manufactured ice- cream. Such supply of ice cream by parlors would attract GST at the rate of 18%.
  4. Overloading charges at toll plaza are exempt from GST being akin to toll.
  5. The renting of vehicle by State Transport Undertakings and Local Authorities is covered by expression ‘giving on hire’ for the purposes of GST exemption
  6. The services by way of grant of mineral exploration and mining rights attracted GST rate of 18% w.e.f. 01.07.2017.
  7. Admission to amusement parks having rides etc. attracts GST rate of 18%. The GST rate of 28% applies only to admission to such facilities that have casinos etc.
  8. Alcoholic liquor for human consumption is not food and food products for the purpose of the entry prescribing 5% GST rate on job work services in relation to food and food products.

II. On the issue of compensation scenario, a presentation was made to the Council wherein it was brought out that the revenue collections from Compensation Cess in the period beyond June 2022 till April 2026 would be exhausted in repayment of borrowings and debt servicing made to bridge the gap in 2020-21 and 2021-22. In this context various options, as have been recommended by various committees/ forums were presented. The Council deliberated at length on the issue. The Council decided to set up a GoM to examine the issue of correction of inverted duty structure for major sectors; rationalize the rates and review exemptions from the point of view of revenue augmentation, from GST. It was also decided to set up a GoM to discuss ways and means of using technology to further improve compliance including monitoring through improved e-way bill systems, e-invoices, FASTag data and strengthening the institutional mechanism for sharing of intelligence and coordinated enforcement actions by the Centre and the States.

III. Recommendations relating to GST law and procedure

I. Measures for Trade facilitation:

  1. Relaxation in the requirement of filing FORM GST ITC-04:

Requirement of filing FORM GST ITC-04 under rule 45 (3) of the CGST Rules has been relaxed as under:

  1. Taxpayers whose annual aggregate turnover in preceding financial year is above Rs. 5 crores shall furnish ITC-04 once in six months;
  2. Taxpayers whose annual aggregate turnover in preceding financial year is upto Rs. 5 crores shall furnish ITC-04 annually.
  1. In the spirit of earlier Council decision that interest is to be charged only in respect of net cash liability, section 50 (3) of the CGST Act to be amended retrospectively, w.e.f. 01.07.2017, to provide that interest is to be paid by a taxpayer on “ineligible ITC availed and utilized” and not on “ineligible ITC availed”. It has also been decided that interest in such cases should be charged on ineligible ITC availed and utilized at 18% w.e.f. 01.07.2017.
  1. Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons (entities having same PAN but registered in different states), without going through the refund procedure, subject to certain safeguards.
  1. Issuance of the following circulars in order to remove ambiguity and legal disputes on various issues, thus benefiting taxpayers at large:
  1. Clarification on scope of “intermediary services”;
  2. Clarification relating to interpretation of the term “merely establishment of distinct person” in condition (v) of the Section 2 (6) of the IGST Act 2017 for export of services. A person incorporated in India under the Companies Act, 2013 and a person incorporated under the laws of any other country are to be treated as separate legal entities and would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act 2017 for considering a supply of service as export of services;
  3. Clarification in respect of certain GST related issues:
    1. W.e.f. 01.01.2021, the date of issuance of debit note (and not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of CGST Act, 2017;
    2. There is no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules, 2017;
    3. Only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) of CGST Act, 2017 from availment of refund of accumulated ITC.
  1. Provision to be incorporated in in CGST Rules, 2017 for removing ambiguity regarding procedure and time limit for filing refund of tax wrongfully paid as specified in section 77(1) of the CGST/SGST Act and section 19(1) of the IGST Act.

J. Measures for streamlining compliances in GST

  1. Aadhaar authentication of registration to be made mandatory for being eligible for filing refund claim and application for revocation of cancellation of registration.
  1. Late fee for delayed filing of FORM GSTR-1 to be auto-populated and collected in next open return in FORM GSTR-3B.
  1. Refund to be disbursed in the bank account, which is linked with same PAN on which registration has been obtained under GST.
  1. Rule 59(6) of the CGST Rules to be amended with effect from 01.01.2022 to provide that a registered person shall not be allowed to furnish FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for the preceding month.
  1. Rule 36(4) of CGST Rules, 2017 to be amended, once the proposed clause (aa) of section 16(2) of CGST Act, 2017 is notified, to restrict availment of ITC in respect of invoices/ debit notes, to the extent the details of such invoices/ debit notes are furnished by the supplier in FORM GSTR-1/ IFF and are communicated to the registered person in FORM GSTR-2B.

K. GST Council has also recommended amendments in certain provisions of the Act and Rules.

*****

Note: The recommendations of the GST Council have been presented in this release containing major item of decisions in simple language for information of all stakeholders. The same would be given effect through relevant Circulars/ Notifications/ Law amendments which alone shall have the force of law.

Recommendations of 45th GST Council Meeting

GST Annual Return – FY 2018-19 – Date extended

karthikandsunil, , , , , , Leave a comment

Central Board of Indirect Taxes and Customs (CBIC), in a recent tweet informed that the due date for filing Annual Returns of Financial Year 2018-19 in GSTR-9 and GSTR-9C is extended to 31.10.2020 from 30.09.2020. As per the tweet, notification will be issued later.

GST Annual Return – FY 2018-19 – Date extended

GST Council Decisions: Interest on net liability, Revocation of Cancellation till 30-06-2020 and more…

karthikandsunil, , , , , , , , , , , , Leave a comment

The GST Council, in its 39th meeting held on 14.03.2020, has made the following
recommendations:

  1. Measures for Trade facilitation:
    a. Interest for delay in payment of GST to be charged on the net cash tax liability w.e.f. 01.07.2017 (Law to be amended retrospectively).
    b. Where registrations have been cancelled till 14.03.2020, application for revocation of cancellation of registration can be filled up to 30.06.2020 (extension of period of application as one-time measure to facilitate those who want to conduct business).
    c. Annual Return:
    i. Relaxation to MSMEs from furnishing of Reconciliation Statement in
    FORM GSTR-9C, for the financial year 2018-19, for taxpayers having
    aggregate turnover below Rs. 5 crores;
    ii. Due date for filing the Annual return and the Reconciliation Statement for financial year 2018-19 to be extended to 30.06.2020; and
    iii. Late fees not to be levied for delayed filing of the Annual return and the Reconciliation Statement for financial year 2017-18 and 2018-19 for taxpayers with aggregate turnover less than Rs. 2 crores.
    d. A new facility called ‘Know Your Supplier’ to be introduced so as to enable every registered person to have some basic information about the suppliers with whom they conduct or propose to conduct business.
    e. The requirement of furnishing FORM GSTR-1 for 2019-20 to be waived for taxpayers who could not opt for availing the option of special composition scheme under notification No. 2/2019-Central Tax (Rate) dated 07.03.2019 by filing FORM CMP-02.
    f. A special procedure is being prescribed for registered persons who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016 and are undergoing the corporate insolvency resolution process, so as to enable them to comply with the provisions of GST Laws during the CIRP period.
    g. A special procedure for registered persons in Dadra and Nagar Haveli & Daman and Diu during transition period, consequent to merger of the UTs w.e.f. 26.01.2020; transition to be completed by 31.05.2020.
    h. Extension of due dates for FORM GSTR-3B for the month of July, 2019 to January, 2020 till 24th March, 2020 for registered persons having principal place of business in the Union territory of Ladakh. Similar extension is also recommended for FORM GSTR-1 & FORM GSTR-7.
    i. Bunching of refund claims allowed across financial years to facilitate exporters.
  2. Deferment of E-invoice and QR Code:
    a. Certain class of registered persons (insurance company, banking company, financial institution, non-banking financial institution, GTA, passenger transportation service etc.) to be exempted from issuing e-invoices or capturing dynamic QR code; and
    b. The dates for implementation of e-invoicing and QR Code to be extended to 01.10.2020.
  3. Deferment of e-wallet Scheme:
    a. Extension of the time to finalize e-Wallet scheme up to 31.03.2021; and b. Extension of the present exemptions from IGST and Cess on the imports made under the AA/EPCG/EOU schemes up to 31.03.2021.
  4. Continuation of existing system of furnishing FORM GSTR-1 & FORM GSTR-3B till September, 2020;
  5. Other new initiatives:
    a. Seeking information return from Banks;
    b. To curb fake invoicing and fraudulent passing of ITC, restrictions to be imposed on passing of the ITC in case of new GST registrations, before physical verification of premises and Financial KYC of the registered person.
  6. Issuance of circulars in respect of:
    a. Clarification in apportionment of ITC in cases of business reorganization under section 18 (3) of CGST Act read with rule 41(1) of CGST Rules;
    b. Appeals during non-constitution of the Appellate Tribunal;
    c. Clarification on refund related issues; and
    d. Clarification on special procedure for registered persons who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016, undergoing the corporate insolvency resolution process.
  7. Amendments to the CGST Rules: Key amendments are as below:
    a. Procedure for reversal of input tax credit in respect of capital goods partly used for affecting taxable supplies and partly for exempt supplies under rule 43 (1) (c);
    b. ceiling to be fixed for the value of the export supply for the purpose of calculation of refund on zero rated supplies;
    c. to allow for refund to be sanctioned in both cash and credit in case of excess payment of tax;
    d. to provide for recovery of refund on export of goods where export proceeds are not realized within the time prescribed under FEMA; and
    e. to operationalize Aadhaar authentication for new taxpayers.
  8. Certain amendments to be carried out in the GST laws.

GST Council Decisions: Interest on net liability, Revocation of Cancellation till 30-06-2020 and more…

20% Input Tax Credit Restrictions – An analysis in Q & A format

karthikandsunil, , , , , , Leave a comment

Introduction

CBIC vide notification 49/2019 – Central Tax dated 09th October, 2019, inserted new sub rule (4) to Rule 36 of CGST Rules, 2017. The text of the rules is re-produced below:

(4) Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37[D1] , shall not exceed 20 per cent of the eligible credit [D2] available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37.

The details of the new provision is discussed below by way of questions and answers:

Q1. What is the purpose of this rule?

The Purpose of this rule is to restrict availing Input Tax Credit to the extend on 20% of the eligible ITC reflected in GSTR-2A.

Q2. Will this to be followed while filing each tax period returns?

Yes.

Q3. What is the effective date of this provision?

The effective date is 09th October, 2019.

Q4. Whether the GSTIN portal will automatically calculate the ITC available?

No. The calculation needs to be made manually on self-assessment basis.

Q5. What are the Invoices/Debit notes on which the above provisions apply?

The restriction of availment of ITC is imposed only in respect of those invoices / debit notes, details of which are required to be uploaded by the suppliers under sub-section (1) of section 37 and which have not been uploaded. So the restriction applies to invoices/debit notes which are not uploaded by suppliers in Form GSTR-1.

Q6. Whether this provision is applicable on Reverse Charge, ISD Invoices, IGST paid on Imports?

No. This provision is not applicable in above cases. The same is clarified by the Board in Circular 123/42/2019– GST dated 11th November, 2019. But, while calculating the eligible credit by an ISD, this restriction will apply. As ISD is not required to file GSTR-1, the recipient of ISD invoices can claim the credit.

Q7. While calculating the 20%, whether the ITC in respect of Reverse Charge, IGST on Import and ISD Invoices can be considered?

The 20% is available only on the eligible credit reflected in GSTR-2A.

Q8. Will this provision applicable only to invoices/debit notes issued on or after 09th October, 2019?

This provision is applicable not only to invoices/debit notes issued on or after 09th October, 2019, but also to invoices / debit notes on which credit is availed after 09.10.2019. This was clarified by the Board in Circular 123/42/2019– GST dated 11th November, 2019.

Q9. Whether this provision will be applicable to returns filed for tax periods prior to October, 2019, filed on or after 09th October, 2019?

Yes. Applicable

Q10. Whether the restriction to be calculated supplier wise or Consolidated basis?

The restriction is to be calculated consolidated wise only

Q11. Whether 20% can be calculated on the entire amount available in Form GSTR-2A?

No. The 20% will be available only on eligible credits. The in-eligible credits like section 17(5) blocked credits, Rule 42 (Common Credits etc) needs to be reduced.

Q12. Whether ITC related to Capital Goods being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies (Rule 43) needs to be reduced for calculating the 20% eligible credit?

No, as per Rule 43, the amount of ITC that needs to be reversed should be added to the output tax liability and no need to reverse from the ITC availed.

Q13. Whether the amount of ITC available in GSTR-2A at the time of filing return can be considered for calculating 20%?

As per boards circular, the taxpayer may have to ascertain the same from his auto populated FORM GSTR 2A as available on the due date of filing of FORM GSTR-1 under sub-section (1) of section 37. The due date for filing GSTR-1 is 11th of the succeeding month. So, all the taxpayers have to download GSTR-2A ideally by in the early hours of the succeeding month as the date wise report is not available in the GSTIN portal.

Q14. Whether the ITC on invoices related to quarterly GSTR-1 can be availed on monthly basis?

No. ITC can be availed only when the same is reflected in GSTR-2A. As per a tweet by CBIC, only 7% of tax payers were opting for quarterly filing and so the same will be covered in the 20%.

Q15. Whether the GSTR-1 needs to be submitted by the supplier to avail the ITC?

As per the above provision, the word used is uploaded. So the submission of GSTR-1 is not seems to be Compulsory.

Q16. What will be the consequences for not following Rule 36(4)?

The consequences will be there will be demand for interest for the excess credit availed. The Assessing Officer may direct to reverse the excess credit availed and if such reversal of ITC is made after the due date for filing return of subsequent month, then the such ITC, even if the invoice reflected in GSTR-2A subsequently, cannot be availed. Many experts are of the view that, interest will be applicable in such cases.

In addition to the interest and reversal if any, penalty proceeding can also be initiated. The penalty will depend upon on which section (Section 73 or Section 74) the notice is issued.

Q17. How the Calculation for availment of ITC to be made in case details of some of the invoices have not been uploaded by the suppliers under subsection (1) of section 37?

The calculation is explained by way of an example:

A taxpayer “R” receives 100 invoices (for inward supply of goods or services) involving ITC of Rs. 10 lakhs, from various suppliers during the month of Oct, 2019 and has to claim ITC in his FORM GSTR-3B of October, to be filed by 20th Nov, 2019.

  1. No. of Invoices Uploaded by suppliers                                               70 Invoice
  2. ITC available in up-loaded invoices                                       Rs.6,00,000/-
  3. 20% of eligible credit of invoices up-loaded                        Rs.1,20,000/-
  4. Eligible ITC that can be taken in GSTR-3B [(b)+(c)]             Rs.7,20,000/-

Q18. When and how can the balance ITC can be claimed?

The same is also explained by way of an example, which is a continuation of the example in Q15

Case 1

  1. No. of Invoices of October-19, reflected in Novemer-19 GSTR-2A              15 Invoices
  2. ITC available on above invoices                                                                    Rs.1,00,000/-
  3. 20% of eligible credit on all 85 invoices of Oct-19

(Rs.6,00,000 +Rs.1,00,000) X 20%                                                   Rs.1,40,000/-

  • Eligible ITC for Oct-19                                                                                    Rs.8,40,000/-
  • ITC availed in Oct-19 GSTR-3B return                                                          Rs.7,20,000/-
  • ITC that can be availed in Nov-19 return[ (d)-(e)]                                          Rs.1,20,000/-

Case 2

  1. No. of Invoices of October-19, reflected in Novemer-19 GSTR-2A              20 Invoices
  2. ITC available on above invoices                                                                    Rs.2,34,000/-
  3. 20% of eligible credit on all 85 invoices of Oct-19

(Rs.6,00,000 +Rs.2,34,000) X 20%                                                   Rs.1,66,800/-

  • Eligible ITC for Oct-19

(Least of Rs.10 lakhs or Rs.8,34,000+Rs.166,800)                                       Rs.10,00,000/-

  • ITC availed in Oct-19 GSTR-3B return                                                          Rs.7,20,000/-
  • ITC that can be availed in Nov-19 return[ (d)-(e)]                                          Rs.2,80,000/-

The  taxpayer may avail full ITC in respect of a tax period, as and when the invoices are uploaded by the suppliers to the extent Eligible  ITC/ 1.2. In the above example (Case 2), the suppliers had uploaded more than invoices having ITC of Rs.8,33,333.33 (Rs.10,00,000/1.2), and hence the tax payer can avail full ITC to the extent of Rs.10 Lakhs.

Q19. The Supplier had uploaded GSTR-1, but not paid the tax. Whether the same can be considered for calculating 20%?

Rule 36(4), talks about eligible credits. As per Section 16, in order to take ITC, payment of taxes and filing of return under section 39 (GSTR-3B as of now) is some of the eligibility conditions. In the case of same month return, as the due date for filing GSTR-1 falls first and the due date for filing GSTR-3B is at a later date, the tax payer can take credit based on the entry if GSTR-2A. If the tax is not paid or GSTR-3B return is not filed, it is advisable to reverse such Input Credit as it’ll be a contravention to the provisions of the Act.

Q20. What are all the other issues that may arise due to this provision?

  1. All quarterly GSTR-1 filers may be forced to opt for monthly filing
  2. Invoice not reflected in GSTR-2A, even though the same is uploaded by the supplier due to technical glitches
  3. Another case of litigation, if officers ask to reverse ITC for non-compliance

 [D1]GSTR-1

 [D2]Section 17(5) In-eligible Credit – Sec.42 common credit

Disclaimer: Users are requested to verify the validity of content before taking informed decisions.

20% Input Tax Credit Restrictions – An analysis in Q & A format

GST Annual Return extended

karthikandsunil, , , , , Leave a comment

CBIC vide Removal of Difficulties Order 7/2019 dated 26th August, 2019 extended the due date for furnishing annual returns for the Financial Year 2017-18 from 31-8-2019 to 30-11-2019.

To see the order click the see below:

GST Annual Return extended

Penal Interest: Taxability under GST

karthikandsunil, , , , , Leave a comment

CBIC vide circular no. 02/21/2019-GST dated 28th June, 2019 clarified taxability of penal interest on EMI payments. The circular discuss about two scenarios involving EMI transactions, and the same is reproduced below:

Case — 1:

X sells a mobile phone to Y. The cost of mobile phone is Rs 40,000/-. However, X gives Y an option to pay in installments, Rs 11,000/- every month before 10th day of the following month, over next four months (Rs 11,000/- *4 = Rs. 44,000/-). Further, as per the contract, if there is any delay in payment by Y beyond the scheduled date, Y would be liable to pay additional / penal interest amounting to Rs.500/- per month for the delay. In some instances, X is charging Y Rs. 40,000/- for the mobile and is separately issuing another invoice for providing the services of extending loans to Y, the consideration for which is the interest of 2.5% per month and an additional / penal interest amounting to Rs. 500/- per month for each delay in payment.

Analysis:

As per the provisions of sub-clause (d) of sub-section (2) of section 15 of the CGST Act, the value of supply shall include “interest or late fee or penalty for delayed payment of any consideration for any supply”.

As per the provisions of sub-clause (d) of sub-section (2) of section 15 of the CGST Act, the amount of penal interest is to be included in the value of supply. The transaction between X and Y is for supply of taxable goods i.e. mobile phone. Accordingly, the penal interest would be taxable as it would be included in the value of the mobile, irrespective of the manner of invoicing.

Case — 2:

X sells a mobile phone to Y. The cost of mobile phone is Rs 40,000/-. Y has the option to avail a loan at interest of 2.5% per month for purchasing the mobile from M/s ABC Ltd. The terms of the loan from M/s ABC Ltd. allows Y a period of four months to repay the loan and an additional / penal interest @ 1.25% per month for any delay in payment.

Analysis

In terms of Sl. №27 of notification №12/2017- Central Tax (Rate) dated the 28.06.2017 “services by way of (a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services)”is exempted. Further, as per clause 2 (zk) of the notification №12/2017-Central Tax (Rate) dated the 28th June, 2017, “‘interest’ means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) but does not include any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised;”.

The additional / penal interest is charged for a transaction between Y and M/s ABC Ltd., and the same is getting covered under Sl. №27 of notification №12/2017- Central Tax (Rate) dated 28.06.2017. Accordingly, in this case the ‘penal interest’ charged thereon on a transaction between Y and M/s ABC Ltd. would not be subject to GST, as the same would not be covered under notification №12/2017-Central Tax (Rate) dated 28.06.2017. The value of supply of mobile by X to Y would be Rs. 40,000/- for the purpose of levy of GST.

It is further clarified that the transaction of levy of additional / penal interest does not fall within the ambit of entry 5(e) of Schedule II of the CGST Act i.e. “agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act”, as this levy of additional / penal interest satisfies the definition of “interest” as contained in notification №12/2017- Central Tax (Rate) dated 28.06.2017.

It is further clarified that any service fee/charge or any other charges that are levied by M/s ABC Ltd. in respect of the transaction related to extending deposits, loans or advances does not qualify to be interest as defined in notification №12/2017- Central Tax (Rate) dated 28.06.2017, and accordingly will not be exempt.

Penal Interest: Taxability under GST

GST Council Decisions: New GST Returns

karthikandsunil, , , , , , , , Leave a comment

GST Council in its 35th meeting recommended following schedule for implementation of new GST returns. The recommendations are given below:

A. For Small tax payers (those having turnover of upto Rs. 5 Crores in previous financial year)

i) Form GST ANX-1: Quartely starting from period October, 2019 to December, 2019 in January, 2020.

ii) Form GST RET-01: Quartely starting from period October, 2019 to December, 2019 in January, 2020.

iii) Form GST PMT-08: To filed from October, 2019

Note: Form GSTR-3B need not be filed from October,2019

B. Large Tax Payer (those having turnover of more than Rs. 5 Crores in previous financial year)

i. Form GST ANX-1: Compulsory filing from October 2019

ii. Form GSTR-3B: To be filed for October 2019 & November 2019

iii. Form GST RET-01: To be filed from December 2019

It is also decided that Form GST ANX-I and Form GST ANX-2 will be available on trial basis to taxpayers between July 2019 to September 2019.

There will be an option to upload Invoices etc. FORM GST ANX-1 on a continuous basis both by large and small taxpayers from October 2019 onwards. During this period, FORM GST ANX-2 may be viewed simultaneously, but no action can be taken.

GSTR-3B will be completely phased out by January, 2020.

GST Council Decisions: New GST Returns

GST Council Decisions: Extension of time limit for filing Returns

karthikandsunil, , , , , , , Leave a comment

GST Council in it’s 35th meeting decided to extend the due dates of the following returns to 31st August, 2019 from 30th June, 2019:

  1. GSTR-9, GSTR-9A and GSTR-9C of Financial year 2017-18
  2. GSTR ITC-04 for the period July, 2017 to June, 2019

Council has also extended the due date for filing CMP-02 for persons who wants to opt for Composition Scheme for Service Providers.

GST Council Decisions: Extension of time limit for filing Returns

GST Defaulters may get arrested without FIR – Supreme Court

karthikandsunil, , , , , , , Leave a comment
GST Defaulters – Can be arrested without FIR, Anticipatory bail unlikely….

The Supreme Court suggested to the high courts on Wednesday not to grant anticipatory bail to those who default on the goods and services tax (GST), and reminded them that the SC has upheld the Telangana HC’s decision not to grant bail to such defaulters, the Times of India said in a report.

On April 18, a division of the Telangana HC had upheld the authority and power of the commissioner of the central goods and services tax (CGST) to arrest and rejected any interim relief to those accused of violating the CGST Act, 2017.

On May 27, the Supreme Court dismissed an appeal against the HC order. The Centre had argued that CGST officers were not police and hence not required to follow the provisions of the Criminal Procedure Code, which mandates registration of FIR prior to arrest, the ToI report mentioned.

However, the Bombay high court had passed a series of orders granting pre-arrest bail to CGST Act violators on the ground that the CGST officials had not registered any FIR as warranted under the CrPC. Following these orders, the Centre had filed a bunch of appeals in the SC against the Bombay high court orders.

Challenging the Bombay HC’s orders, solicitor general Tushar Mehta said Parliament had segregated CGST Act from CrPC and provided a separate procedure for dealing with offenders. Mehta said the HC’s orders had brought “functions of the directorate general of GST intelligence to a grinding halt”.

According to the daily, a vacation bench of Chief Justice Ranjan Gogoi and Justice Aniruddha Bose said, “As different high courts of the country have taken divergent views in the matter, we are of the view that the position in law should be clarified by this court. Hence the notice.”

“As the accused-respondents have been granted the privilege of pre-arrest bail by high courts by the impugned orders, at this stage, we are not inclined to interfere with the same. However, we make it clear that the high courts, while entertaining such requests in future, will keep in mind that the Supreme Court by order dated May 27 had dismissed the special leave petition filed against the judgment and order of the Telangana high court in a similar matter, wherein the high court of Telangana had taken a view contrary to what has been held by the high court (of Bombay) in the present case. Beyond the above, we do not consider it necessary to observe anything further,” the ToI report quoted the top court as saying in the notice.

However, senior advocate Mukul Rohatgi requested the CJI to delete the reference to the apex court upholding the Telangana HC order as it would “close all doors” for the accused under CGST Act to seek relief. The bench refused to oblige and said, “That is the whole idea.”

Source: Times of India

GST Defaulters may get arrested without FIR – Supreme Court