DIRECT TAXES UPDATES FOR OCTOBER 2019
Recent CBDT circulars/ notifications/ rules/ clarifications/News/Order
♦ Clarifications in respect of option exercised under section 115BAA (related to lower rate of 22%) inserted through The Taxation Laws (Amendment) Ordinance, 2019- related to allowability of brought forward loss on account of additional depreciation; and allowability of brought forward MAT credit. (Circular no. F, No. 142120/2019-TPL dated 2nd October 2019)
♦ Central Board of Direct Taxes hereby directs that the Income-tax Authority of Regional e-Assessment Centres (read as ReAC) hall exercise the powers and functions of the Assessing Officer concurrently to facilitate the conduct of e-assessment proceedings (Notification No. 77/2019 dated 3rd October 2019)
♦ CBDT sets up ReACs under the e-assessment Scheme 2019 (Order no. F No. 187/7/2019-ITA-I dated 3rd October 2019)
♦ Agreement between the Government of the Republic of India and the Government of the Kingdom of Morocco for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes (Notification no. 84/2019 dated 22nd October 19)
♦ Central Government notifies IDFC Infrastructure Finance Limited as an infrastructure debt fund for the assessment year 2020-21 and subsequent assessment years (Notification No. 83/2019 dated 21st October, 2019)
♦ CBDT notifies Corrigendum to Income Tax Notification No. 48/2018 dated 14/09/2018– (related to notifying Gujarat Water Supply and Sewerage Board’, Gandhinagar, a Board constituted by Government of Gujarat, under section 10(46)) – For “Grant received from state government” read “Grant received from Government, Local Bodies and Other Government Agencies” (Notification No. 81/2019 dated 21st October, 2019)
♦ CBDT exempts cash withdrawal by the authorised dealer and its franchise agent and sub-agent; and Full-Fledged Money Changer (FFMC) licensed by the Reserve Bank of India and its franchise agent from TDS under Section 194N (TDS on cash withdrawals) subject to conditions (Notification No. 80/2019 dated 15th October, 2019)
♦ Central Government designates Special Court in the State of Karnataka u/s 280A(1) (Notification No. 79/2019 dated 11th October, 2019)
♦ Central Government notifies ‘Kerala Bamboo, Kattuvalli and Pandanus Leaf Workers’ Welfare Fund Board’, a Board constituted by the Government of Kerala, u/s 10(46) in respect of specified income (Notification No. 78/2019 dated 9th October, 2019)
♦ CBDT invites application for prescribing eligible electronic payment mode u/s 269SU (provides that every person having a business turnover of more than Rs 50 Crore shall mandatorily provide facilities for accepting payments through prescribed electronic modes) (FTS- 1275045/2019 dated 18th October 2019)
|Date||Things to remember|
|7th November||-Due date for deposit of tax deducted/collected for the month of October, 2019. 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.|
|14th November||Issue of TDS certificate u/s 194IA and 194IB|
|15th November||-Issue of quarterly (July to September 2019) TDS certificate in respect of withholding on payments other than salary in Form 16A
– Due date for furnishing of Form 24G by an office of the Government where TDS/TCS for the month of October, 2019 has been paid without the production of a challan
– 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 October, 2019
|30th November||-Filing of income tax return and other certifications (in Form 3CEB) for taxpayers subject to TP compliance, for the tax year 2018-19
– Challan-cum-statement for TDS u/s 194IA and 194IB for the period October 2019.
– Report in Form No. 3CEAA by a constituent entity of an international group for the accounting year 2018-19
– Country-By-Country Report in Form No. 3CEAD by a parent entity or an alternate reporting entity or any other constituent entity, resident in India, for the accounting year 2018-19.
– Statement of income distribution by Venture Capital Company or venture capital fund in respect of income distributed during previous Year 2018-19 (Form No. 64)
– Statement to be furnished in Form No. 64D by Alternative Investment Fund (AIF) to Principal CIT or CIT in respect of income distributed (during previous year 2018-19) to units holders
– Due date to exercise option of safe harbour rules for international transaction by furnishing Form 3CEFA
– Due date to exercise option of safe harbour rules for specified domestic transaction by furnishing Form 3CEFB
– Due date for filing of statement of income distributed by business trust to unit holders during the financial year 2018-19. This statement is required to be filed electronically to Principal CIT or CIT in form No. 64A
– Due date for e-filing of report (in Form No. 3CEJ) by an eligible investment fund in respect of arm’s length price of the remuneration paid to the fund manager.
– Application in Form 9A for exercising the option available under Explanation to section 11(1) to apply income of previous year in the next year or in future (if the assessee is required to submit return of income on November 30, 2019)
– Statement in Form no. 10 to be furnished to accumulate income for future application under section 10(21) or 11(1) (if the assessee is required to submit return of income on November 30, 2019
– Submit copy of audit of accounts to the Secretary, Department of Scientific and Industrial Research in case company is eligible for weighted deduction under section 35(2AB) [if company has any international/specified domestic transaction]
– Statement by scientific research association, university, college or other association or Indian scientific research company as required by rules 5D, 5E and 5F (if due date of submission of return of income is November 30, 2019)
– Due date for claiming foreign tax credit, upload statement of foreign income offered for tax for the previous year 2018-19 and of foreign tax deducted or paid on such income in Form no. 67. (if due date of submission of return of income is November 30, 2019).
♦ Letters in refutal of allegations contained in news items cannot be treated as admission of non- disclosure (M/s Goodyear India Ltd. Vs CIT (Supreme Court)-16/10/2019)
♦ After conclusion of proceeding u/s 147, AO cannot take aid of Exp 3 to section 147 to make any addition (M/s JDC Traders Pvt. Ltd. Vs DCIT (ITAT Delhi)- 11/10/2019)
♦ Term “Recovery” includes adjustment thereby reducing demand (Volvo Group India Pvt. Ltd Vs DCIT (ITAT Bangalore)- 14/10/2019)
INDIRECT TAXES UPDATES
– GST Compliance Calendar – Returns for the M/O Oct. 2019 to be filed in Nov. 2019
|GSTR-1||Outward supply for the month of October 2019||11th November 2019|
|GSTR-5||Non-resident foreign taxpayers return for the month of October 2019||20th November 2019|
|GSTR-6||Input service distributor for the month of October 2019||13th November 2019|
|GSTR-7||Tax Deducted at Source for October 2019||10th November 2019|
|GSTR-8||Tax Collected at Source by e-commerce operator for October 2019||10th November 2019|
|GSTR-3B||Summary return tax payment for the month of October 2019||20th November 2019|
Notifications and Circulars
Central Goods and Services Tax Rules, 2017 (‘CGST Rules’) vide Notification No. 49/2019-Central Tax dated October 9, 2019. Vide this amendment, the Government has inserted Rule 36(4) in the CGST Rules to provide restriction on availment of Input Tax Credit (‘ITC’).
ITC on invoices and debit notes not uploaded by the suppliers in GSTR-1, shall not be available to the extent it exceeds 20% of ITC on invoices and debit notes uploaded.
The restriction shall apply on invoices and debit notes uploaded by the suppliers (including supplies made by registered suppliers covered under reverse charge mechanism).
The transactions of ISD, import of goods, import of services, other reverse charge procurements from unregistered suppliers (where the suppliers do not upload invoices and debit notes).
The restriction same can be understood by way of following illustration:
(Inward supplies other than Section 17(5) of the CGST Act)
(Tax amount in ₹)
|S. No.||Document for availing ITC||ITC||ITC reflected in GSTR-2A||ITC not reflected in GSTR-2A|
(including issued by registered RCM suppliers)
|3||Bill of entry||50||NA||NA|
|4||ISD invoice (not relevant for this computation)||20||20||–|
(issued by recipient for unregistered RCM suppliers)
In the above example, out of ITC of ₹ 40 not reflected in GSTR-2A of the recipient, the taxpayer is eligible to claim ITC of ₹ 22 only.
Vide Notification No. 49/2019-Central Tax dated October 9, 2019 , the Government has amended Rule 61(5) of the CGST Rules to make Form GSTR-3B a return under Section 39(1) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) where due date of filing return under Form GSTR-1 or Form GSTR-2 is extended. The amendment has effectively replaced Form GSTR-3 with Form GSTR-3B with effect from July 1, 2017
The impact of this retrospective amendment on last date to avail Input Tax Credit (ITC) for FY 2017-18 and FY 2018-19- Notification No. 10/2017-Central Tax dated June 28, 2017 amended Rule 61 of the CGST Rules to provide that if filing of return under Form GSTR-1 or Form GSTR-2 is extended, then the return under Section 39 of the CGST Act shall be filed in Form GSTR-3B.
The last date of availing ITC under Section 16(4) of the CGST Act is earlier of:
1) Due date of filing of return under Section 39 for March of succeeding year (FY 2017-18) and for September of succeeding year (FY 2018-19 onwards); or
2) Date of filing of annual return.
With this amendment, the date of return under Section 39 shall be due date of filing Form GSTR-3B. Hence, the last date of availing ITC shall be earlier of:
With this amendment, taxpayers who took credit of FY 2017-18 post April 20, 2019 will need to reverse the same. Similarly, the taxpayers will not be allowed to avail ITC for FY 2018-19 post October 20, 2019.
Confiscation of conveyance and goods – Hearing and passing of speaking order mandatory: Observing that principles of natural justice were violated by the adjudicating authority, the Gujarat High Court has set aside the order of confiscation of conveyance and goods, earlier found to be not in possession of mandatory documents. The Court noted that petitioner was not afforded opportunity of hearing inasmuch as matter was kept for hearing on 28-8-2019 but the impugned confiscation order was passed on 24-8-2019. It also observed that the confiscation order was not a speaking order and did not reflect the reason as to why the officer had concluded on confiscation. The impugned order was also found to be silent as regards which provision was violated and which clause of Section 130 was attracted. The Court also noted that the departmental officer had levied more than the maximum fine leviable in terms of Section 130(2) of CGST Act. The matter was remanded for decision afresh. [Sitaram Roadways v. State of Gujarat (Gujarat High Court)]
Refund of IGST after adjusting higher rate of duty drawback: Kerala High Court has directed the department to adjust the amount already availed by the petitioner on account of higher rate of duty drawback and pay the balance of IGST payable to the petitioner on account of exports. The petitioner was earlier granted drawback of Central Excise component and denied refund of IGST paid on zero-rated transaction, during the transition period. The Court noted that the department did not deny refund of IGST to petitioner, an exporter, on a zero-rated transaction under Section 16 of IGST Act but contended that the petitioner had already drawn higher rate of duty drawback and was supposed to refund the same. [G NXT Power Corp Vs Union of India (Kerala High Court)]
Anti-profiteering – Discount due to slump in market is not passing of ITC benefit: Accepting the DGAP report that assessee-respondent availed additional benefit of ITC of 2.42% after implementation of GST as ITC ratio to the turnover during the pre GST period was 2.06% as compared to the post GST period, where it was 4.48%, NAPA has directed the respondent-builder to pass the benefit of ITC to the flat buyers. The Authority rejected the plea that amount had been passed to home buyers as shown in their ledger. It observed that there was no evidence to prove that the amount was released because of ITC benefit. Further, NAPA was of the view that entry was made on account of the discount which the assessee had offered to the buyers due to slump in the market. It also rejected the plea that it was difficult to calculate ITC in real estate business as benefit of ITC was available during the whole period of construction however the sale of houses was not linked to it. It observed that the assessee had obtained the completion certificate and hence complete details of ITC availed as well as the turnover realised were available. [Gaurav Gulati v. Paramount Propbuilt (P) Ltd. – Order dated 26-9-2019 in Case No. 47/2019, NAA]
Recovery of parental health insurance premium from employees is not “supply”: Maharashtra AAR has held that providing mediclaim policy to parents of employees through an insurance company and recovering 50% of insurance premium from employees is not a supply of service. The AAR was of the view that such provision neither satisfies the conditions of Section 7 of the CGST Act nor is it covered under the term ‘business’ of Section 2(17). The Authority observed that such activity cannot be treated as an activity done in the course of business or for the furtherance of business as applicant was not in the business of providing insurance. It also noted that said insurance scheme was optional for the employees and that non-provision of such insurance would not affect applicant’s business. [In re Jotun India Pvt. Ltd (GST AAR Maharashtra)]
No ITC in respect of goods or services attributable to incentives provided to dealers: Karnataka AAR has denied ITC in respect of goods or services which are attributable to the incentives provided in the form of gifts to the dealers and painters under various incentive schemes run by the applicant, a manufacturer of paints. The applicant incentivized its dealers/painters by providing them goods or services in the form of gifts or foreign or local trips and itself procured such goods or services on payment of applicable tax. The Authority referred to Section 17(5)(h) of the CGST Act, 2017, which provides that ITC in respect of goods disposed by way of gifts shall not be available. Further, Circular No. 92/11/2019-GST, dated 07.03.2019, wherein it was clarified that “ITC shall not be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts or free samples distributed without any consideration”, was also relied upon. [In re M/s Surfa Coats (India) Pvt. Ltd. (GST AAR Karnataka)]
No late fee for delay in filing Bill of Entry where importer takes all efforts to clear goods within reasonable time: CESTAT Chennai has held that late fee imposed on the appellant for delay in filing of Bill of Entry was not proper, since the delay had occurred only because the original importer had failed to clear the goods. The Tribunal observed that present importer had taken efforts to get the IGM amended, get the earlier Bill of Entry cancelled within a reasonable time and filed the new Bill of Entry within three days from the cancellation order of the earlier Bill of Entry, and hence could not be saddled with the late fee. CBIC’s standing order that the late charges due to delay in filing the Bill of Entry has to be considered judiciously, was also relied upon. [ECOM Gill Coffee Trading Pvt. Ltd. v. Commissioner – Final Order No. 41155/2019, dated 30-9-2019, CESTAT Chennai]
DFIA – Benefit available even when specific name of import product not mentioned in licence: Observing that there was no doubt that the green cardamom was used in making biscuits and pickles as flavouring agent and food additives, respectively, CESTAT Ahmedabad has rejected the department’s plea that since specific name of the product was not mentioned or ITC (HS) did not match in the DFIA licence, benefit thereunder was not available. It noted that the imported goods were covered under the broad description in the licence. The Tribunal also noted that there was no requirement of any actual use and that the only requirement was that whether the goods are capable of being used in export goods. [M/s Pace Ventures Pvt. Ltd Vs C.C. Ahmedabad (CESTAT Ahmedabad)]
Valuation – Ship demurrage charges are not includible: Following the decision of the High Court of Orissa in the case of Tata Steel v. Union of India & Ors. [W.P. (C) No. 7917 of 2009],wherein the Explanation to Rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 was struck down as ultra vires, being beyond the scope of Section 14 of the Customs Act, 1962, to the extent it includes demurrage charges in the assessable value of imported goods, CESTAT Delhi has held that ship demurrage charges are not includible in the assessable value of the imported goods. The Tribunal in this regard noted the fact that the department had not produced any ruling to the contrary. [Jubilant Life Science Ltd. v. Additional Director General (Adjudication) – Final Order No. 51288/2019, dated 3-10-2019, CESTAT Delhi]
Refund available even in absence of payment challan: A claim of refund was denied on the ground that the duty payment challans were not been produced. CESTAT Ahmedabad however observed that the amount had been deposited, received by the department through banker’s cheque and had also been realized, and that no challan was taken by the assessee. It was held that even in the absence of challan, where such payment has been made correctly, the assessee was entitled for refund. [Deep Exports Vs Commissioner of Customs (CESTAT Ahmedabad)]
Central Excise, Service Tax & VAT
Withdrawal of exemption from duty/tax – Principle of promissory estoppel not invokable if public interest so warrants: 3-Judge Bench of Supreme Court has held that the inapplicability of doctrine of promissory estoppel is established when the larger public interest demands so. Observing that pan masala (with or without tobacco) was found to be one of the causes of oral cancer, the Court was of the view that withdrawal of exemption for said items was in the larger public interest. Setting aside the High Court order, the Apex Court reiterated that an exemption notification does not make the items which are subject to levy as items not leviable to such duty. It only suspends the levy and collection, and that such an exemption by its very nature is susceptible of being revoked or modified or subjected to other conditions. The Court noted that under the General Clauses Act, an authority which has the power to issue a notification has the power to rescind or modify the notification in the like manner, and that supersession or revocation of an exemption notification in public interest is an exercise of the statutory power by the State under the law itself. [Union of India v. Unicorn Industries – Judgement dated 19-9-2019 in Civil Appeal No. 7432 of 2019, Supreme Court]
No service tax on surrender charges for pre-mature termination of insurance policy: CESTAT Delhi has held that surrender charges in case of pre-mature termination of ULIP policy were not liable to service tax. It observed that the service tax was leviable only on management fee or fixed charges as approved by the IRDA or levied by the insurer, whichever was higher. The Tribunal in this regard noted that the legislature had clarified by substituting, on 1-7-2010, clause (ii) in Explanation to Section 65(105)(zzzzf) of the Finance Act, 1994, that service tax was leviable only on management fee or charges. Further, observing that explanation was meant for clarifying the provision of the main section and accordingly had retrospective effect, i.e. normally effective from the date of the statute, unless otherwise provided, CESTAT set aside the demand of service tax for the period 1-10-2008 to 30-6-2010. [Max Life Insurance Co. India Ltd. Vs. Commissioner Central Excise and Service Tax (CESTAT Delhi)]
Repeal of VAT Act – Savings clause saves all rules, regulations, orders, notifications, etc.: Section 78 of Maharashtra Goods and Services Tax Related Laws (Amendments, Validation and Savings) Act, 2017, which saves Section 64 of Maharashtra Value Added Tax Act, 2002 is constitutionally valid. Bombay High Court has held that by virtue of Section 78 of State GST Savings Act read with Section 19 of Constitution (One Hundred and First Amendment) Act, 2016, the VAT Act, the rules and regulations, and notifications issued thereunder continue to have effect including for assessment, reassessment, production and inspection of accounts and recovery of any tax under the VAT Act, relating to any period before the appointed day of the State GST Act. The Court was of the view that to survive the repeal, there is no need of specific mention of subordinate legislation in the saving clause and that saving provision is both explicit and expansive. It held that a saving clause saves all rules, regulations, orders, notifications, form, certificate and notices, appointments and delegation of powers issued under the VAT Act. [Magma Fincorp Limited Vs State of Maharashtra & Anr. (Bombay High Court)]
With Warm Regards & Jai Hind
CMA Rakesh Bhalla
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.