Direct and Indirect Tax updates May 2020

DIRECT TAXES UPDATES

Recent circulars/ notifications/ rules/ clarifications/News

♦ CBDT notifies new form for 26AS which shall also include information relating to assessee’s specified financial transaction (Information of property and share transactions etc.), payment of taxes, demand/ refund and pending / completed proceedings (Notification No. 30/2020-Income Tax/G.S.R. 329(E) dated 28.05.2020)

♦ CBDT amended Guidelines for application of section 9A. It contains provisions related to Certain activities not to constitute business connection in India.( Notification No. 29/2020-Income Tax [G.S.R. 315(E)dated 27.05.2020)

♦ CBDT notified the year of applicability of the ‘Safe Harbour Rules for International Transactions’ for AY 2020-21, as the existing rules were applicable only up to AY 2019-20. (Notification No. 25/2020-Income Tax/G.S.R. 304(E) dated 20.05.2020)

♦ Section 269SU (using online mode for payments) is not applicable for specified person having only B2B transactions (circular no. 12/2020 dated 20th May 2020)

♦ CBDT issues a circular for exclusion of period of 22nd March 2020 to 31st March 2020 for computation of residential status for the financial year 2019-20 (circular no. 11/2020 dated 8th May 2020)

♦ Instant PAN facility basis Aadhar based e-KYC launched. Now PAN can be obtained near to real time basis. (Notification dated 28.05.2020)

♦  Reduction of Tax deduction at Source and Tax collected at Source by 25% or remaining period of FY 2020-21 (ref. relief measures announced by FM dated 13th May 2020)

♦ New procedure for registration , approval, etc. of certain entities deferred to 1st October, 2020 (Press release dated 9th May 2020)

Income Tax Compliance calendar – June 2020

Note- CBDT vide the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 dated 31-03-2020 has extended all respective due dates, falling during the period from 20-03-2020 to 29-06-2020, till June 30, 2020. The benefit of extended due date shall not be available in respect of payment of tax. However, any delay in payment of tax which is due for payment from 20-03-2020 to 29-06-2020 shall attract interest at the lower rate of 0.75% for every month or part thereof if same is paid after the due date but on or before 30-06-2020.

Things to remember

• Due date for deposit of Tax deducted/collected for the month of May, 2020. However, all sum deducted/collected by an office of the government shall be paid to the credit of the Central Government on the same day where tax is paid without production of an Income-tax Challan
• Due date for issue of TDS Certificate for tax deducted under section 194-IA in the month of April, 2020
• Due date for issue of TDS Certificate for tax deducted under section 194-IB in the month of April, 2020
• Due date for issue of TDS Certificate for tax deducted under section 194M in the month of April, 2020
• Due date for furnishing of Form 24G by an office of the Government where TDS/TCS for the month of May, 2020 has been paid without the production of a challan
• Quarterly TDS certificates (in respect of tax deducted for payments other than salary) for the quarter ending March 31, 2020
• First instalment of advance tax for the assessment year 2021-22
• Certificate of tax deducted at source to employees in respect of salary paid and tax deducted during Financial Year 2019-20
• Due date for furnishing statement in Form no. 3BB by a stock exchange in respect of transactions in which client codes been modified after registering in the system for the month of May, 2020
• Due date for e-filing of a statement (in Form No. 3CEK) by an eligible investment fund under section 9A in respect of its activities in financial year 2019-20
• Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA in the month of May, 2020
• Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IB in the month of May, 2020
• Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194M in the month of May, 2020
• Return in respect of securities transaction tax for the financial year 2019-20
• Quarterly return of non-deduction of tax at source by a banking company from interest on time deposit in respect of the quarter ending March 31, 2020
• Statement to be furnished (in Form No. 64C) by Alternative Investment Fund (AIF) to units holders in respect of income distributed during the previous year 2019-20
• Report by an approved institution/public sector company under Section 35AC(4)/(5) for the year ending March 31, 2020
• Due date for furnishing of statement of income distributed by business trust to its unit holders during the financial year 2019-20. This statement is required to be furnished to the unit holders in form No. 64B

Important cases decided

♦ Registration under section 12AA cannot be rejected merely on the basis of suspicion (Lady Floreance Education Society vs CIT (ITAT Delhi)

♦ Appeal can be signed by authorised POA holder of Foreign company (South Staffordshire PLC, Vs DCIT (International Taxation) (ITAT Delhi)

♦ Section 43B is not applicable on RTO registration fees collected from customers (Thar Automobiles Pvt. Ltd. Vs ITO (ITAT Delhi)

♦ If reply to email notices is not done due to computer illiteracy, then it is consider genuine reason (BM Sarin Vs ACIT)

♦ No reassessment after 4 years in case there was no disclosure failure on the part of Assessee (PCIT vs SKI retail Capital Ltd)

♦ Assessment done without issuing notice under section 143(2), shall not be considered valid (ITO vs Satish Singh Bhati)

INDIRECT TAXES UPDATES

GST

– GST Compliance Calendar – Returns for the M/O May 2020 to be filed in June 2020

Return		Original  Date	Revised Date
GSTR-1	Outward supply for the month of May  2020	11thJune 2020	30th June 2020
GSTR-5	Non-resident foreign taxpayers return for the month of May   2020	20thJune 2020
GSTR-6	Input service distributor for the month of May   2020	13thJune 2020
GSTR-7	Tax Deducted at Source for May  2020	10thJune 2020
GSTR-8	Tax Collected at Source by e-commerce operator for May   2020	10thJune 2020
GSTR-3B	Summary return tax payment for the month of May    2020	20thJune 2020
Annual Return	For the F.Y. 2018-19	30th September 2020 notified vide notification 41/2020 CGST

Concession in filing GSTR3B (Tax deposit) returns for the months of Feb to April 2020 in June 2020

Annual Turnover	Tax period	Due Date	Concession
More than 5 Crores	Feb’20	March’20	Option to file returns by last week of June’20 with interest but without penalty or late fee
	March’20	April’20
	April’20	May’20
Up to  5 Crores	Feb’20	22/24 March’20	Option to file returns by last week of June’20 No interest ,penalty and   late fee would be charged
	March’20	22/24 April’20
	April’20	22/24 May’20

(Refer Notification No. 31/2020- Central Tax, Notification No. 32/2020- Central Tax, notification No. 35/2020- Central Tax and Circular No. 136/06/2020, all dated April 3, 2020)

GSTR-3B for May 2020 – Last date extended: GSTR-3B for the month of May 2020 can be filed by 27-06-2020 by tax payers having an aggregate turnover of more than Rupees 5 crore in the previous financial year. However, taxpayers having aggregate turnover less than Rupees 5 crore can file this return by 12th or 14th of July, depending upon the State in which they have their principal place of business. Broadly these taxpayers in southern and western States must file this return by 12-07-2020 while such taxpayers in Northern and Eastern part of India have to file GSTR-3B by 14-07-2020. (Notification No. 36/2020-Central Tax, dated 03-04-2020)

TRAN-1 – Time limit for filing – CGST Section 140 amended with effect from 01-07-2017: Section 128 of Finance Act, 2020 had proposed to amend Section 140 of the Central Goods and Services Tax Act, 2017 with effect from 01-07-2017. The said amendment which was not brought into force immediately on the enactment of the Finance Act, has now been notified. As per Notification, 18-05-2020 is the date from which provisions of Section 128, making such retrospective amendments, have come into force. (Notification No. 43/2020-Central Tax, dated 16- 05-2020)

E-way Bill – Extension of validity: Validity period of E-Way Bill generated on or before 24-03-2020 where its validity expired during the period from 20-03-2020 to 15-04-2020, has been extended (deemed extension) till 31-05-2020. (Notification No. 40/2020-Central Tax, dated 05- 05-2020)

COVID-19 related relaxations in various time lines: CBIC has clarified that the requirement of exporting the goods by the merchant exporter within 90 days from the date of issue of tax invoice by the registered supplier, as prescribed under Notification No. 40/2017-Central Tax , will get extended to 30-06-2020, provided the completion of such 90 days period falls within 20- 03-2020 to 29-06-2020. Due date of furnishing of FORM GST ITC-04 for the quarter ending March 2020 also stands extended to 30th June 2020 (Circular No. 138/08/2020-GST dated 06- 05-2020)

GSTR3B can furnish through EVC during period from 21st April to 30th June 2020– CGST (Fifth Amendment) Rules, 2020 notified: Central Goods and Services Tax Rules, 2017 have been amended to insert a proviso in Rule 26(1) of the CGST Rules, 2017 and, from a date to be notified later, a new Rule 67A. As per the new proviso in Rule 26(1), a Registered Person registered under the Companies Act, 2013 can furnish GSTR-3B, verified through an electronic verification code (“EVC”) during the period from 21-04-2020 to 30-06-2020. Further, as per new Rule 67A, Nil return GSTR-3B can be filed through a short messaging service (“SMS”) using the registered mobile number and the said return shall be verified by a registered mobile number based One Time Password facility. Meaning of Nil return has also been provided in the new Rule. (Notification no. 38/2020- CT dated 05- 05-2020)

Cases Law

Department could not operationalize the statutory forms (GSTR-2A) envisaged under the CGST Act, Rectification of previously filed Form GSTR-3B, in the period to which it relates, permissible: The Delhi High Court has allowed a writ petition for rectification of previously filed Form GSTR-3B in the period to which it was related. It held that Para 4 of the Circular No. 26/26/2017-GST, dated 29-12-2017, which stated that Form GSTR-3B can be corrected only in the month in which the errors were noticed (by filing return for that subsequent month), was not in consonance with the provisions of the CGST Act. The Court was also of the view that since the Department could not operationalize the statutory forms (GSTR-2A) envisaged under the CGST Act, resulting in depriving the Petitioner to accurately reconcile its input tax credit, the Department cannot deprive the Petitioner of the benefits that would have accrued in favour of the Petitioner, if such forms would have been enforced. The petitioner in its monthly returns GSTR-3B from July till September 2017 recorded the ITC based on estimate and the exact ITC was discovered only in October 2018 when GSTR-2A was operationalised. (Bharti Airtel Limited v. Union of India – 2020 VIL 197 DEL)

Transportation by own vehicle – Issuance or not of consignment note, not material for GST liability: Rejecting an appeal against an advance ruling holding that non-issue of a consignment note for transportation by own vehicles on the basis of invoice(s) and e-way bill will not be an exempt supply, the Rajasthan Appellate AAR has held that if the lien of the goods is transferred and the appellant becomes responsible for the goods till its safe delivery to the consignee, the services will be classifiable as goods transport agency services and issuance of consignment note or not does not make any difference. It was ruled, however, that if the vehicles are provided to the client on rental for use as per their requirement, the services will be classifiable as ‘rental services of transport vehicles’. The services to be provided by the appellant was held liable to GST under Notification No. 11/2017-Central Tax (Rate), under the services relating to transportation of goods or rental services of transport vehicle including supporting service, depending upon the exact nature of the activity to be carried out by them. (K M Trans Logistics Private Limited – 2020 VIL 22 AAAR)

Valuation – Inclusion/exclusion of various types of income in aggregate turnover: AAR Karnataka has held that the income received towards salary/remuneration as a Non-Executive Director of a private limited company; renting of commercial property and the values of amounts extended as deposits/loans/advances out of which interest is being received, are to be included in the aggregate turnover, for registration. It also held that the income received from renting of residential property is to be included in the aggregate turnover, though it is an exempted supply. The Authority, however, was of the view that Partner’s salary or share of profit, received as partner, from applicant’s partnership firm; maturity proceeds of life insurance policy and dividend Income on shares and capital gain/loss on sale of shares, were not includible. (Anil Kumar Agrawal – 2020- VIL 118 AAR)

Customs

Validity of existing Export Performance Certificates for FY 2019-20 extended up to 30-09-2020: CBIC has made amendments in various conditions under Notification No. 50/2017-Cus. -(Jumbo exemption notification) to extend the validity of existing Export Performance Certificates for the financial year 2019-20, up to 30-09-2020. Notification amends Condition Nos. 10, 21, 28, 32, 33, 36 and 101 of the basic notification. Accordingly, Export Performance Certificates issued for the FY 2019-20 and valid till 31-03-2020 will now be eligible for import of unutilised value and quantity of goods specified in the certificate, till 30-09-2020 (Notification No. 23/2020-Cus., dated 14-05-2020)

Masks – Export policy revised: DGFT Notification No. 44, dated 31-01-2020 and Notification No. 52 dated 19-03-2020 have been amended by the DGFT vide to allow the export of non-surgical and non-medical masks of all types (cotton, skill, wool and knitted) falling under ITC (HS) Codes 392690, 621790, 630790, 901890 and 9020. It may be noted that export of all other masks, falling under any ITC(HS) Code including the abovementioned, continues to remain prohibited (Notification No. 6/2015-20, dated 16-05-2020)

Sanitizers – Export policy of sanitizers, other than alcohol-based hand sanitizers, relaxed: Vide Notification No. 53/2015-20, dated 24-03-2020 export of sanitizers [Sr. No. 207D of Schedule 2 of ITC (HS)] with HS Codes 3401, 3402, 30049087 and 380894 was prohibited. However, said notification has now been amended by DGFT to prohibit export of only alcohol-based hand sanitizers falling under HS codes 3004, 3401, 3402 and 380894. (Notification No. 4/2015-20, dated 06-05-2020)

Metallic scrap and waste – Submission of scanned copy of Pre-shipment Inspection Certificate: Scanned copy of Pre-shipment Inspection Certificate (PSIC) along with an undertaking in a specified format is now acceptable till 30-06-2020, in place of a physical copy, for Customs clearance of metallic scrap and waste. According to Trade Notice issued in this context ,which also specifies the undertaking, the original PSIC needs to be submitted to the Customs within 60 days of the clearance. (Trade Notice No. 9/2020-21, dated 06-05-2020)

Cases Law

Valuation – Turnkey contracts – Value of drawings and designs for post importation activities when not includible without specific finding on existence of “condition” as contemplated in Rule 9(1)(e), value of all these components could not be added to arrive at the assessable value of equipment: Supreme Court has upheld the CESTAT decision accepting the importer’s plea for segregating the value of equipments and the other fees on services covered by the same contracts, where the latter charges were meant for post-importation phase of the arrangement between the contracting parties. Revenue’s contention that these were turnkey contracts and hence import of designs and drawings, etc., even for post-importation activities should be treated as condition of import of the equipments as those intangible items formed an integral part of the arrangement, was thus rejected. The Court observed that an importer of equipments of a plant could always choose to obtain drawings and designs for undertaking post importation activities from an overseas supplier of the equipments and it may confer on such arrangements attributes of a turnkey contract, but that fact by itself would not automatically attract the “condition” clause contained in Rule 9(1)(e) of the Valuation Rules, 1988. The Apex Court also noted that the Revenue had not made out a case that the disputed items of contract did not relate to post-importation activities. The Court was of the view that just because different components of a contract or multiple contracts gave the shape of turnkey project to the imported items, without specific finding on existence of “condition” as contemplated in Rule 9(1)(e), value of all these components could not be added to arrive at the assessable value of equipment. (Commissioner v. Steel Authority of India Ltd. – Judgement dated 27-04-2020 in Civil Appeal No. 6398 of 2009, Supreme Court)

CA certificate not conclusive to overcome unjust enrichment: CESTAT Ahmedabad has held that a CA Certificate alone cannot be a conclusive document to overcome the aspect of unjust enrichment, where the assessee could not submit the books of accounts. The Tribunal in this regard noted that even though the CA certificate can be taken as support for establishing unjust-enrichment, but in the present case both the CA certificates were of very old period. It held that for the purpose of unjust- enrichment the present position is relevant for which neither any CA certificate nor any books of account were produced. (Varsha Plastics Pvt. Ltd. v. Commissioner – 2020 (1) TMI 360 CESTAT Ahmedabad)

Excise & Service Tax

Sabka Vishwas Legacy Dispute Resolution Scheme – Non-mention of penalty in application form not fatal – It was by mistake and allowed to make necessary corrections : Guwahati High Court has allowed the petitioner-assessee to make necessary corrections in their application earlier filed in respect of Sabka Vishwas Legacy Dispute Resolution Scheme 2019. The Revenue department had earlier rejected the application as assessee had not mentioned about the penalty imposed. The Court was of the view that the mistake made by the petitioner by not stating about the penalty, in Form SVLDRS-1, cannot be said to be a mistake by which the petitioner claimed an undue benefit which they otherwise were not entitled under the law, and hence was a curable mistake. It observed that the assessee may be more benefited and would be entitled to a greater exemption if the amount of penalty was mentioned. (Assam Cricket Association v. Union of India – 2020 VIL 219 GAU ST)

Manufacture – Fixing hologram/barcode and placing outer cover on bottles of medicines is not manufacture: Fixing the hologram and the barcode to avoid duplicity and placing outer cover to ensure safe transportation does not amount to ‘manufacture’. Dismissing Revenue’s appeal, the Madhya Pradesh High Court in this regard observed that it is the same process which is being carried out by the companies like Flipkart, Amazon, etc., as they are also just putting a cover over the goods received from various companies who have paid the duty and are delivering to the consumers. The Court also noted that the goods received by the assessee were already in a pre-packed form, bore necessary declaration including MRP and that it was nobody’s case that the goods were sold above the MRP to the consumer. CBIC Circular dated 08-12-2011 was relied upon. The department had relied upon Chapter Note 6 to Chapter 30 and Chapter Note 5 to Chapter 33 of the Central Excise Tariff to contend ‘manufacture’. (Commissioner v. Manish Singhal – 2020 VIL 211 MP CE)

With Warm Regards & Jai Hind

CMA Rakesh Bhalla – Email: nancybhalla@yahoo.com

Information Source – M/s LKS, CBIC.gov.in., various internet websites including Income tax website, Dailyhunt, Deloitte, livemint.com, related links and various notifications, circulars, orders, press releases and other sources-many thanks to all.