CMA Rakesh BhallaCMA Rakesh Bhalla
Past chairman NIRC of ICAI (CMA)*

GST

♣ Eight State Legislative Assemblies (Haryana, Madhya Pradesh, Uttarakhand, Telangana, Bihar, Rajasthan, Jharkhand and Chhattisgarh) have passed their respective State Goods and Services Tax (SGST) Bills so far.

♣ Rule – making has gained momentum and CBEC has released several draft rules like draft accounts & records rules, draft assessment & audit rules, draft appeals & revision rules, draft advance rulings rules and draft-way bill rules.

♣ Draft accounts & records rules seek to prescribe various obligations for manufactures, service providers, agents, works contract service providers, carriers and C&F agents.

♣ Draft e-way bill rules mandate generation of e-way bill number before transportation / movement of goods of value more than Rs. 50,000 commences.

The Uttar Pradesh government also approved implementation of the Goods and Services Tax (GST) in the state and the same will be passed in the Assembly in the session commencing from May 15.

Not to spring any surprises in fixing tax rates under the new GST regime– Finance Minister , saying they will not be “significantly different” from current levels. He, however, said companies should pass on to consumers the benefit of reduction in taxes under GST which will eliminate the current compounding effect of different central and state levies.

The GST Council, headed by Mr Jaitley and comprising representatives of all the states, is scheduled to meet in Srinagar on May 18-19 to finalise tax rates on different goods and services after unifying at least 10 indirect taxes into the Goods and Services Tax (GST).

President approves amendment to Customs & Central Excise laws for GST- The Taxation Laws (Amendment) Act 2017.

Excise

Cenvat credit on capital goods installed away from factory, when eligible:

  • The appellant, involved in the manufacture of Horlicks, Boost, etc., procured milk from nearby villages, and to facilitate collection and storage of same at a specific temperature installed ‘Bulk Milk Coolers’ and ‘DG Sets’on the leased premises.
  • Cenvat credit was denied on the aforesaid capital goods since these were used outside the factory. [Glaxo Smithkline Consumer Health Ltd. v. Commissioner-2017 (348) ELT 328 (Tri. – Chandigarh.)]

Cenvat credit on items used in transmission line erected as dedicated line for assessee:

  • CESTAT Delhi  has allowed Cenvat credit on items (cement, cables, etc.), used in the transmission line for use by the assessee.
  • Revenue department’s contention that transmission line were immovable property and that they did not had any relation to the process of manufacture of the final products, was rejected by the Tribunal. [Prime Cement Ltd. v. Commissioner – 2017-VIL-327-CESTAT-DEL-CE]

Manufacture – Refining of waste and used oil and sale thereof to industrial customers in bulk packs is not ‘manufacture’:

  • CESTAT Bench at Allahabad has, in this regard, observed that according to the relevant chapter note, to examine whether manufacture has taken place, it is essential to establish that

(a) Relabeling has taken place

(b) Re-packing from bulk packs to retail packs has taken place and

(c) Such treatment has rendered the product marketable.

[IEP Petro Products Pvt. Ltd. v. Commissioner – 2017 (348) ELT 172 (Tri. – All.)]

Interest on delayed refund when Court stipulated period for authority to decide application – Relying on Supreme Court’s decision in the case of Ranbaxy Laboratories Ltd., Gujrat High Court has rejected the contention of the Revenue department that orders sanctioning rebate having been passed and the amount having been paid within the time limit stipulated by the High Court, no interest is payable. [kamakshi Tradexim (India) Pvt. Ltd. v. Union of India – 2017-VIL-209-GUJ-CE]

Area based exemption – Change in ownership, alteration of machinery and addition of new products do not affect eligibility to exemption:

  • CESTAT Chandigarh has held that the assessee would be eligible to avail the area based exemption under Notification No. 50/2003-C.E. read with CBEC Circular No. 939/29/2010-CX even after change in ownership, alteration of machinery and addition of new products, within a period of 10 years as per the said notification. [khurana Oleo Chemicals v. Commissioner – 2017 (348) ELT 332 (Tri.-Chan.)]

Area based exemption under Notification No. 32/99-C.E., when old machinery sold and fresh investment made – CESTAT Kolkata has held that the spirit of the Notification No. 32/99-C.E. is to boost growth of industries in the North East Region by way of expansion of the old units as well as to set up the new units and that the new unit should not be set up at the expense of old units. In the instant case wherein the total investment in the subsequent plant was of Rs. 34 lakhs and the earlier parts and machineries were sold for Rs. 20 Lakhs, it was held that the appellant never started a new unit or expanded its unit. Therefore the exemption was disallowed. [ATC Agro Industries Ltd. v. Commissioner – 2017 (4) TMI 89-CESTAT Kolkata]

EOU – Epoxy resins used for polishing of granite slabs are not raw materials – The issue involved was whether exemption under Notification No. 22/2003-C.E. was available to an EOU when epoxy resins were imported for polishing of granite slabs.

  • Observing that epoxy resins only add to the glossiness and smoothness of the slabs and that granite slabs are complete for their intended use even without use of such resins since they only improve the visual appearance of the slabs,
  • CESTAT Hyderabad has held that epoxy resins cannot be considered as raw materials used in manufacture of granite slabs.
  • Exemption was, therefore, allowed to granite slabs cleared in DTA, since goods were produced wholly from material produced in India. [Commissioner v. Alliance Minerals Pvt. Ltd. – 2017 (348) ELT 155 (Tri. – Hyd.)]

Milk powder with addition of Maltodextrine and artificial flavouring substance – Classification of : CESTAT Delhi rejected the contention of the Revenue department that with the addition of Maltodextrine and artificial flavouring substance, item manufactured (milk powder) would go out of the purview of Heading 0404 of Central Excise Tariff and would be classifiable under Heading 1901 – food preparation of goods of Heading 0401 to 0404. [Nestle India Limited v. Commissioner -2017-VIL-324-CESTAT-DEL-CE]

Aerated drink with fruit pulp or juice – Use of fruit concentrate – The appellant claimed the benefit of Notification No. 3/2001-C.E. and 6/2002-C.E. for its products, Maaza Orange drink and Maaza Pineapple drink made with imported ‘Authentic Aseptic Pineapple Concentrate’, as drinks which are manufactured out of fruit juice and fruit pulp, CESTAT Chennai however, considering that there was no fruit pulp or fruit juice used in the manufacture of drinks, there being absence of any purchase record produced before any authority to prove purchase of fruit pulp or fruit juice, held the product to be classifiable under sub-heading 2202.99 of Central Excise Tariff. Benefit of the exemption notification for goods falling under said sub-heading was held to be inapplicable. [Hindustan Coca Cola Beverages P. Ltd. v. Commissioner – 2017 (3) TMI 1410 – CESTAT CHENNAI]

Service Tax

Due date for filing ST-3 Returns extended to 30 April – CBEC has extended the last date for filing service tax return (ST-3) for the half-year 1st October, 2016 to 31st March, 2017 to 30-4-2017.

Transportation of goods by vessel for import into India where both provider and receiver are located in non-taxable territory – Liability revised:

  • With effect from 23-4-2017, importer of goods has been made liable for paying service tax in respect of service of transportation of goods by sea provided by a foreign shipping line to a foreign charterer with respect to goods destined for India.
  • Further by Notification No. 14/2017-S.T., point of taxation in respect of such services has been specified as the date of bill of lading of goods in the vessel at the port of export.
  • It may be noted that CBEC Circular No. 206/4/2017-S.T., dated 13-4-2017 also states that no service tax is leviable if the bill of lading is of date prior to 22nd January, 2017.
  • Further, Cenvat Credit Rules, 2004 have been amended to allow the importer to avail Cenvat credit on the basis of the challan of payment of service tax by such importer.
  • The circular also states that benefit of conditional Notification No. 26/2012-S.T. (SI. No. 10) would not be available in this case.

Cargo Handling service or Packaging service – Scope – Distinguishing between Cargo Handling service and Packaging service, the Supreme Court of India has held that though the word ‘packing’ is included in the definition of ‘Cargo handling service’,  the same is referable to the word ‘cargo’ whereas packing activity is defined to mean ‘packaging of goods’ in the definition under Section 65(76b) of the Finance Act, 1994.[Signode India Ltd. v. Commissioner – 2017 (50) STR 3 (SC)]

Reverse charge mechanism – Liability when foreign entity has establishment in India, and in case of repayment of term loan – CESTAT Delhi has set aside the demand of service tax under reverse charge mechanism in a case where assesse had taken loan from a foreign bank and the foreign bank had representative office in India by way of another branch entity of the bank.

  • The dispute involved an agreement between three parties namely,

(a) The appellant as borrower of loan

(b) ABN Amro Bank, NV, Singapore as lender and

(c) ABN Amro Bank, NV, New Delhi as Security Trustee.

  • The demand under RCM, in respect of another amount paid to another foreign bank in respect of latter taking insurance of buyer’s credit, was also set aside by the Tribunal. [India Glycols Ltd. v. Commissioner – 2017 – VIL-274-CESTAT-ST]

BAS-Activity of physical printing of telephone bills not covered under ‘billing’ – CESTAT Delhi has held that printing of telephone bills and certain post printing operation like stuffing the bills in the envelops and bunching them together as per area code for further dispatch by the telecom company, would not be covered under ‘billing’ in Section 65 (19) (vii) of the Finance Act, 1994 providing for definition of Business Auxiliary Service. [Commissioner v. Ricoh India Ltd. – 2017-VIL-284-CESTAT-DEL-ST]

Support service of business or commerce – Scope: CESTAT Mumbai has held that unless an activity is optional for the continued existence of the organization and permits the flexibility of self-performance vis-a-vis outsourcing, it is not covered under the scope of ‘Support service of business or commerce’,

  • The assessee was involved in auditing of accounts, checking of clients’ accounting data consultancy, VAT and IT return checking, preparation of documents in compliance with various statutes besides representing clients before tax authorities and statutory bodies.
  • The contention of the department that such services would be covered under BSS and not legal consultancy service, was rejected by the Tribunal. [Commissioner v. RD Kute & Co. – 2017-VIL-360-CESTAT-MUM-ST]

Cenvat credit when Broadcasting service also rendered in J&K – In a case involving provision of ‘broadcasting service’ and failure to maintain separate records for taxable and exempted services when the services provided in Jammu and Kashmir were not subject to service tax, CESTAT Mumbai has set aside the demand for excess utilisation of Cenvat credit for payment of tax.

  • According to the Revenue department, the assessee was required to restrict the utilisation of Cenvat credit to 20% for payment of tax.
  • The Tribunal however held that there is no logic to hold that the inputs/input services used for restricted to such quantum as used for rendering service in the rest of India. [Reliance Media World Limited v. Commissioner – 2017-TIOL-1251-CESTAT-MUM]

BAS – Promotion of trademark, not covered – CESTAT Mumbai has rejected the contention of the Revenue department that since the agreement between the assessee and his supplier required the main assessee to promote the trademark, which is ‘goods’, they would be liable to service tax under Business Auxiliary Service.

  • The agreement in the dispute involved sale of concentrate to the main appellant and conditions for bottling the beverage using the trademark.
  • The Tribunal in this regard took note of the fact that assessee was not required to promote or market sale of goods produced or provided or belonging to the supplier (concentrate for beverages). [SMV Beverages Pvt. Ltd. v. Commissioner – 2017-TIOL-1150-CESTAT-MUM]

Customs

Reward scheme scrips (MEIS and SEIS) allowed to be utilised for EO default duty payment under previous FTPs – Duty Credit scrips issued under Chapter 3 of the Foreign Trade Policy can be utilised for payment of Customs duties in case of default of export obligation for authorisations issued under Chapter 4 and 5 of the earlier Foreign Trade Policies as well. Provisions of Para 3.18 (a) of the FTP, before amendment by DGFT Notification No. 4/2015-20, dated 21-4-2017, stated that scrips can be utilised in respect of authorisations issued under the Policy.

EOU – No requirement of refund of deemed export benefit when goods procured indigenously returned back – CBEC has clarified that once applicable Customs duty is paid at the time of transfer/sale back into DTA in respect of goods procured indigenously, there is no requirement of refund of the deemed export benefits or for the production of a certificate from the Development Commissioner regarding refund or non-availment of deemed export benefits. Circular No. 13/2017-Cus., dated 10-4-2017 issued for this purpose further states that this would also be applicable when EOU seeks exit from the scheme.

Exemption when contract registered under Project Import Regulations – CBEC has rescinded Circular F.No. 528/2131/87-Customs (TU) dated 8-8-1987 which stipulated that once a contract has been registered for a project, the imports mede there under lose their identity, become classifiable under Heading 9801, and are to be assessed only at the project import rate. Circular No. 15/2017-Cus., dated 19-4-2017 issued in this regard notes that the Supreme Court has allowed benefit of individual notifications even for imports assessed under Heading 9801.

Exemption to specified medicines for supply under Patient Assistance Programmes – Complete exemption from BCD has been extended to specified drugs and medicines for supply under Patient Assistance Programmes run by the specified pharmaceutical companies, subject to conditions mentioned therein. Notification No. 16/2017-Cus., dated 20-4-2017 lists some 27 medicines which would be eligible for the benefit, if supplied free of cost to the patients under the specified Patient Assistance Programmes.

Exemption to goods imported by Navy, Air Force or CRPF – Complete exemption from BCD and CVD has been extended to all goods imported into India by or along with a unit of the Army, the Navy, the Air Force or the Central Paramilitary Forces on the occasion of its return to India after a tour of service abroad. Notification No. 17/2017-Cus. dated 21-4-2017 issued in this regard states that such exemption would be available provided that such goods are proved to have been exported by or along with such unit on the occasion of its departure from India.

Valuation of goods imported from sister concern, when correct – In this case, CESTAT Mumbai has upheld the transaction value. Observing that there was absence of sale transaction as material supplied was purchased from third party, the Tribunal was of the view that value as declared being value of third party, was correct. [GKN Sinter Metals Ltd. v. Commissioner – Order dated 1-2-2017 in Appeal No. C/46/07-Mum, CESTAT Mumbai]

Refund of SAD – Absence of sale invoice for imported goods when not fatal – In a case involving import of sanitary fittings, CESTAT Hyderabad has allowed refund of SAD under Notification No. 102/2007-Cus., rejecting department’s contention that there was no evidence for sale of the imported goods as the imported goods were fixed in the bathroom of apartments sold by the assessee. It was observed that non-issuance of invoices was not a choice but a composite shceme. [Lodha Healthy Construction and Developers Pvt. Ltd. v. Commissioner – 2017-VIL-323-CESTAT-HYD-CU]

Second hand furniture imported by service provider covered under ‘ capital goods’ – CESTAT Mumbai has held that import of second hand furniture (not more than 10 years old) by service provider would be covered under the term ‘plant’ in the definition of ‘capital goods’ in the EXIM Policy. [Warburg Pincus India Pvt. Ltd. v. Commissioner – 2017-TIOL-1359-CESTAT-MUM]

Certified copy of Country of Origin certificate can be produced post import – CESTAT Hyderabad has allowed refund of BCD on production of certified copy of the Country of Origin certificate at a later stage. The Tribunal in this regard relied upon Rule 3(f) of the Implementation Procedures provided in Appendix-A to Annexure-2 of Notification No. 55/2011-Cus. (N.T.).

Conversion of Shipping Bill from Duty drawback to DFIA Scheme – Limitation – CESTAT Mumbai has held that CBEC Circular No. 36/2010-Cus., dated 23-9-2010, seeking restriction on time limit for conversion of shipping bill goes beyond mandate of the law. [Products Pvt. Ltd. v. Commissioner – Order dated 6-2-2017 in Appeal No. C/87134/16, CESTAT Mumbai]

VAT

Rajasthan VAT and Entry Tax – Amnesty Schemes introduced –

  • By Notification No. S.O. 159 No. F 12 (14)FD/Tax/2017-92 dated 8th March, 2017, Amnesty Scheme 2017 has been introduced under the Rajasthan Value Added Tax Act, 2003. This scheme is effective from 8th March, 2017 to 30th April, 2017.
  • Further, by Notification No. S.O. 163 No. F.12 (14) FD/Tax/2017-96 dated 8th March, 2017, New Voluntary Amnesty Scheme for Entry Tax-2017 has been introduced under the Rajasthan Tax on Entry of Goods into Local Area Act, 1994 and RVAT Act. This scheme is also effective from 8th March, 2017 to 30th April, 2017.

Karnataka – Amnesty Scheme introduced – By Order No. FD 24 CSL 2017, Bengaluru dated 31st March, 2017, Karasamadhana Scheme, 2017 has been introduced by Government of Karnataka.

Entry Tax on machine brought from outside, used and then sent back, valid – On appeal by the department before the Allahabad High Court, while examining Section 2 (c) of the Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 that defines “entry of goods”.

  • The Court held that the machine was brought from beyond the territory of India and used for due performance under the contract, as such, Section 2 (c) was attracted.
  • The Court rejected the view taken by the Tribunal that only if machine is embedded to earth, liability of entry tax would arise.
  • The assesse was held to be liable to pay entry tax. [Commissioner v. Charington Driling Services Ltd. – 2017-VIL-198-ALH]

ITC on goods received back from job worker – Period of 90 days prescribed in Punjab VAT Rule 20 is directory – The petitioner engaged in the business of manufacture of jewellery was entitled to Input Tax Credit of the tax paid on purchase of gold used in the manufacture of jewellery. ITC was claimed on purchase of bullion which was not received back from the job workers after it was processed and reconditioned, within the time prescribed in Rule 20 of the Punjab VAT Rules, 2005.

*Member ZAC Chandigarh, Service Tax, Govt. of India, Member RAC Chandigarh, Central Excise & Customs, Member Indirect Tax committee SIAM , Member, ASSOCHAM Indirect Taxes Committee, Chief General Manager Finance- SML Isuzu Ltd. Winner Achiever  Award 2015 By ICAI (CMA)

Information source- M/s LKS, M/s Nitya tax Associates, Economic Times, Financial express, GST.com and other sources-many thanks to all.

(Author can be reached at nancybhalla@yahoo.com )

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6 responses to “GST, Excise, Service Tax, Customs & VAT updates for April 2017”

  1. CSR Dubey says:

    no hue & cry over 18% service tax in GST regime? Even a Domestic maid uses Mobile phone & pays electricity bills not only the middle income group! It should be at least 2 tier – one for essential services & second for luxury services like hotels/ restaurants / air travel ?

  2. Somnath Bhattacharya says:

    It is indeed a note worthy article. I appreciate the pain the author took to collect all the updated information. I salute for such work.
    My question what will be treatment for transit sale in GST regime, as now available both in CST Act as well as Central Excise Act.
    Please elaborate in your next post.
    Thanks & Regards.
    S.N.Bhattacharya

  3. Ramesh Goradia says:

    Dear Sir,
    Can you please give guidance on what will be GST rate structure on Building under Re-Development for Rehabilitation to existing tenants in city of Mumbai. Presently, on agreement there is a Stamp duty of 5 % + registration charges of 1 %. please give guidance for GST rates on being applicable from july,2017.regards. Ramesh Goradia Mumbai 10May,2017

    • CMA Rakesh Bhalla says:

      Term Rental is covered under the preview of Supply definition in GST. However, rates under GST regime yet to be notified by the Government. Further as per my understanding, Government may consider the renting for residential purposes as exempted service in GST regime in line with presently exempted under service tax.

  4. Bhupendra Madhiwalla says:

    Since Feb.2017 Chennai Customs is giving abatement of only 30% on MRP declared for calculation of CVD for import of lubricating oil for machinery. Until then the abatement was 35%. Customs have failed to provide us with related notification/circular. Please inform is it 30% or 35%.?. If 30% give us notification no.
    Warm regards
    Overseas Trading Corp., Mumbai

    • CMA Rakesh Bhalla says:

      For MRP based valuation CBEC, has issued notification 49/2008 dated 24 Dec 2008 as applicable declaring tariff wise abatement. In the below notification, Two rates for Lubricants have been mentioned i.e. Chapter, heading, sub-heading or tariff item No – 2710 – Lubricating oils and Lubricating preparations – 35% & second is Chapter, heading, sub-heading or tariff item No. 3403 – Lubricating preparations (including cutting-oil preparations, bolt or nut release preparations, anti-rust or anti-corrosion preparation and mould release preparations based on lubricants) -30%. Please check your item’s Chapter Heading/Tariff Item & see your final rate category.

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