DIRECT TAXES UPDATES

 Recent circulars/ notifications/ rules/ clarifications/News

♦ CBDT notified the procedure for notification of Pension funds (PF) for claiming exemption under section 10(23FE) for income from Investment in Specified Infrastructure business (Notification no. 67/2020 dated 17.08.2020)

CBDT notifies 34 authorities for Faceless Assessment (Notification no. 64/2020 dated 13.08.2020)

CBDT notifies the Faceless Assessment Procedure (Notification no. 61/2020 & 60/2020 dated 13.08.2020)

CBDT notifies prescribed authority under section 133C related to Power to call for information by Prescribed Income Tax Authority (Notification no. 60/2020 dated 13.08.2020)

CBDT inserted a new provision in section 269SU instructing Banks to refund charges on account of Transactions made through Debit Card, BHIM UPI & BHIM UPI QR CODE w.e.f 01.01.2020 (Circular no. 16/2020 dated 30.08.2020)

Direct & Indirect Taxes Updates

Income Tax Compliance calendar – September 2020

Things to remember
Due Date Particulars
7th September 2020 Due date for deposit of Tax deducted/collected for the month of August, 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
14 September 2020
  • Due date for issue of TDS Certificate for tax deducted under section 194-IA in the month of July, 2020
  • Due date for issue of TDS Certificate for tax deducted under Section 194-IB in the month of July, 2020
  • Due date for issue of TDS Certificate for tax deducted under Section 194M in the month of July, 2020
15 September 2020
  • Due date for furnishing of Form 24G by an office of the Government where TDS/TCS for the month of August, 2020 has been paid without the production of a challan
  • Second instalment of advance tax for the assessment year 2021-22​
  • 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 August, 2020
30 September 2020
  • Due date for filing of audit report under section 44AB for the assessment year 2020-21 in the case of a corporate-assessee or non-corporate assessee (who is required to submit his/its return of income on October 31, 2020).
  • The due date for filing of audit report has been extended from September 30, 2020 to October 31, 2020 vide the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 read with Notification No.35 /2020, dated 24-06-2020.
  • Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA in the month of August, 2020
  • Due date for furnishing of challan-cum-statement in respect of tax deducted under Section 194-IB in the month of August, 2020
  • Due date for furnishing of challan-cum-statement in respect of tax deducted under Section 194M in the month of August, 2020
  • Return of income for the assessment year 2019-20 for all assessee
  • The due date for filing of return of income under section 139 for the assessment year 2019-20 has been extended to September 30, 2020 vide the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 read with Notification No. 35 /2020, dated 24-06-2020 and Notification No. 56/2020, dated 29-07-2020.

Important cases decided 

INDIRECT TAXES UPDATES  

GST

GST Compliance Calendar – Returns to be filed in the M/O September 2020

GST Return Form Name Filing Period Due Dates in September 2020
GSTR-1 (Outward return) Monthly (August  2020) 11th September 2020
GSTR 3B (Tax summary return) August  ‘2020 20th September 2020 ( In case Aggregate turnover more  than or equal to Rs 5 crore in the previous Year)

1st /3rd  October 2020 (in case Aggregate turnover less than or equal to Rs 5 crore in the previous financial year

GSTR 5A (online information & data access) August  ‘2020 20th September 2020
GSTR 05 (by non-taxable resident persons ) August  ‘2020 20th September 2020
GSTR 06 (ISD) August  ‘2020 13th September 2020
GSTR 07 (TDS) August  ‘2020 10th September 2020
GSTR 08 (TCS) August  ‘2020 10th September 2020
Annual Return – Form 9 & 9C FY 2018-19 30th September 2020

 Interest on delayed payment of GST to be paid on net tax liability Amendment in CGST Section 50 comes into force from 01-09-2020: The Central Government has appointed 01-09- 2020 as the date on which the provisions of Section 100 of the Finance (No. 2) Act, 2019 shall come into force. Section 100 inserts a proviso in Section 50 of the Central Goods and Services Tax Act, 2017, prescribing that interest in case of delayed furnishing of Section 39 return (e.g. GSTR-3B), shall be levied on that portion of tax that is paid by debiting the electronic cash ledger, i.e., after excluding input tax credit (ITC). The new proviso however excludes situation when such return is furnished after commencement of any proceedings under Section 73 or Section 74. It may be noted that the GST Council in its 39th meeting held on 14- 03-2020 has recommended that interest for delay in payment of GST is to be charged on the net cash tax liability with effect from 01-07-2017, and that the law should be amended retrospectively. (Notification No. 63/2020-Central Tax, dated 25-08-2020) 

Registration Amendments in Aadhar based authentication process: The Ministry of Finance has amended the Central Goods and Services Tax Rules, 2017 (“CGST Rules, 2017”) to revise the procedure for Aadhar based authentication process for registration under GST. According to the newly substituted sub-rule (4A) of Rule 8, if any person [other than those notified under Section 25(6D)] opts to undergo authentication of Aadhar number, the date of submission of application will be the date of authentication of the Aadhar number or 15 days from submission of application in Part B of Form GST REG-01, whichever is earlier. In case a person [other than those notified under Section 25(6D)] fails to undergo such authentication or does not opt for it, notice in Form GST REG-03 may be issued within 21 days from the date of submission of the application. Further, amendment has been made in Rule 9(4) to substitute the word “shall” by the word “may” in respect of rejection of registration application. Rule 9(5) has also been amended to revise few timelines in respect of deemed approval of application for grant of registration. (Notification No. 62/2020-Central Tax, dated 20-08-2020) 

E-invoice Increase in threshold limit and exclusion of SEZ units will be effective from 01-10-2020: Registered persons having aggregate turnover in a Financial Year exceeding INR 500 crore are only required to comply with Rule 48(4) of the Central Goods and Services Tax Rules,   2017, i.e. e-invoice provisions. The threshold limit was INR 100 crore earlier. Further, Special Economic Zone units have been excluded from complying with e- invoice provisions in addition to persons referred to in Rule 54(2), (3), (4) and (4A). (Notification No. 61/2020-Central Tax, dated 30-07-2020) 

 Cases Law

No detention when e-way bill did not mention tax amount: The Kerala High Court has allowed the writ petition in a case where the goods were detained during transportation alleging that there was no mention of the tax amount separately in the e-way bill that accompanied the goods Observing that Form GST EWB-01 as prescribed under Rule 138(A) of CGST Rules, 2017 does not have any field wherein the transporter is required to indicate the tax amount payable in respect of the goods being transported, the Court held that the non-mentioning of the tax amount is not in contravention of the Rules. It also noted that the transporation was covered by a valid tax invoice which clearly showed the tax amount. Detention under Section 129 of the CGST Act, 2017 was hence set aside. (M.S. Steel and Pipes v. Asst. State Tax Officer – Judgement dated 12- 08-2020 in W.P(C). No. 16356 of 2020, Kerala )

No detention when invoices not bearing continuous serial number: The Kerala High Court has set aside the detention of goods in a case where the department had objected that the invoices accompanying the goods did not bear continuous numbers and hence the invoices with serial numbers falling between could have been used for transportation of other goods which were not brought to their notice. The Court observed that goods were accompanied by tax invoices as also e-way bills that clearly indicated the particulars required under Rule 46 of CGST Rules, 2017. Allowing the writ petition, it was held that detention under Section 129 of CGST Act, 2017 was also not justified as department’s doubt pertained to goods other than those which were actually detained. (Devices Distributors v. Assistant State Tax Officer – Judgement dated 23-07-2020 in W.P(C). No. 14969 of 2020, Kerala High Court) 

Best judgement assessment can be done immediately after failure to file return despite notice: The Kerala High Court has held that the reference to Section 44 of the CGST Act, 2017 in Section 62 does not mandate that the steps for completing the best judgment assessment should be initiated only after 31st December, following the end of the financial year in which the default in filing of monthly returns occurred. Dismissing the writ petition, the Court held that the reference to Section 44 in Section 62(1) is only for determining the five-year period within which the assessing officer has to complete the best judgment assessment. It held that best judgment assessment can be done immediately after detection of the failure to file the returns despite service of notice, and that the outer time limit for completing the best judgment assessment is five years from the date specified under Section 44. (Amani Machine Centre v. State Tax Officer – Judgement dated 30-07-2020 in WP(C). No. 2757 of 2020, Kerala High Court)

Anti-profiteering No penalty imposable for  violations before 01-01-2020: Observing that penalty provisions were not in existence between the period from 01-07-2017 to 31-08-2018 when the assessee had violated the provisions of Section 171(1) of the CGST Act, 2017 relating to anti-profiteering, the National Anti-Profiteering Authority has held that the penalty prescribed under Section 171(3A) cannot be imposed. The Authority observed  that specific penalty provisions for violation of Section 171(1) came into force only from 01-01-2020 and cannot operate retrospectively. It also noted that violation of the provisions of Section 171(1) is not covered under Section 122 as it does not provide penalty for not passing on the benefits of tax reduction and ITC and since the profiteered amount is not a tax imposed under the CGST Act, 2017. (Varun Goel v. Eldeco Infrastructure and Properties Ltd. – 2020 TIOL 43 NAA GST) 

Supply of food to hospitals on outsource basis is liable to GST Exemption available only to clinical establishments: AAR Telangana has held that GST is payable on the food supplied to hospitals on outsourcing basis. It held that exemption under Notification No. 12/2017-Central tax (Rate) was available only when the clinical establishment itself supplies food as part of health care services to in-patients. It noted that the proposition was supported by CBIC Circular No. 32/06/2018-GST, dated 12-02-2018. As regards the rate of tax, CGST and SGST @ 9% were held applicable as per Sl. No. 7(v) of Notification No. 11/2017-Central Tax (Rate) during 01-07-2017 to 26-07-2018. Further, from 27-07-2018 onwards CGST and SGST @ 2.5% were held applicable, with the condition of non-availability of input tax credit. The applicant supplied food and beverages at the canteen of various hospitals and were not getting paid by the consumers of the food and beverages, but by the hospitals on monthly basis based on the coupons collected. (Navneeth Kumar Talla – 2020 VIL 228 AAR)

Customs

Faceless assessment 2nd phase launched with inclusion of Delhi and Mumbai: CBIC has from 03-08-2020 begun the 2nd phase of all India roll-out of faceless assessment. While Delhi and Mumbai Customs Zones have been included, the scope of faceless assessment at Chennai and Bengaluru Customs Zones have been extended. Now, while Bengaluru, Chennai and Delhi Customs Zones will cover faceless assessments for imports under Chapters 50 to 71, 84, 85, and 89 to 92, Mumbai will cover import of goods falling under Chapter 29 of the Customs Tariff Act, 1975 

Gold, silver, other precious and semi precious metals and articles Regulations notified for manufacture in special warehouse: The Ministry of Finance has notified the Manufacture and Other Operations in Special Warehouse Regulations, 2020 which have come into force from 17-08-2020. These regulations allow manufacturing and other operations in a special warehouse licensed under Section 58A of the Customs Act, 1962 with regard to warehoused goods specified in clause (1) of Notification No. 66/2016-Cus. (N.T.), i.e. gold silver, other precious metals and semi-precious metals and articles thereof. Circular No. 36/2020-Cus., dated 17-08-2020 while explaining the Regulations,specifies procedures and documentation for such warehouse in a comprehensive manner including application for seeking permission under Section 65, provision of execution of the bond and security by the licensee, receipt, storage and removal of goods, maintenance of accounts, conduct of audit, etc. Consequential amendments have also been made in Manufacture and Other Operations in Warehouse (no. 2) Regulations, 2019 and Special Warehouse (Custody and Handling of Goods) Regulations, 2016.

 Import of pets or live animals Procedure revised: In line with the Ministry of Fisheries, Animal Husbandry & Dairying, Department of Animal  Husbandry & Dairying Office Memorandum dated 15-07-2020 prescribing procedure for import of live animals in general and also for import of pets (only dogs and cats) as baggage/personal imports by passengers, the CBIC has also revised the procedure to be followed for clearance of pets/live animals including dogs and cats. As per Circular No. 35/2020-Cus., dated 10-08-2020, passengers have to obtain advance NOC from Animal Quarantine and Certification Service as the airline will not lift the live animals until advance NOC from AQCS is obtained by the passenger

Colour television sets Import Policy revised: Import Policy of colour television sets falling under ITC (HS) Code 8528 7211 to 8528 7219 has been amended to ‘restricted’ from ‘free’. Further, as per DGFT Notification No. 22/2015-20, dated 30-07-2020, amending Chapter 85 of ITC (HS), actual user condition would not be applicable for importers applying for an authorisation to import said goods. 

Cases Law

Child parts used in manufacture of parts of motor vehicle seats are classifiable under Heading 9401: CESTAT Ahmedabad has held that the child parts imported by the appellant are classifiable under Tariff Item 9401 90 00 as parts of vehicle seats as declared by the importer-assessee and not under Tariff Item 8708 99 00 as parts and accessories of motor vehicles of Heading 8701 to 8705 of the Customs Tariff Act 1975 as assessed by the Customs. The imported child parts where assembled into round recliners which were further used to make recliner assembly which in turn was welded into seat frame for manufacture of complete seat for motor vehicles. The Tribunal noted that classification of round recliner and all subsequent goods under Heading 9401 was not disputed by department and that vehicle seats are not covered under Heading 8708. It also observed that child parts were not used in the motor vehicle but were used in the manufacture of other parts and were an integral part of motor vehicle seats. (Shiroki Auto Components India Pvt. Ltd. v. Commissioner – Final Order No. A/11132/2020, dated 29-07-2020, CESTAT Ahmedabad)

Digital cameras for capturing still images and videos classifiable under Tariff Item 8525 80 20: CESTAT Mumbai has held that goods ‘GoPro HERO5 Black’ Action Camera is classifiable under Tariff Item 8525 80 20 of the Customs Tariff Act, 1975 and eligible for exemption under Notification No. 50/2017- Cus. Revenue department’s claim of classification under TI 8525 80 90, solely for the reason that the cameras were capable of capturing still as well as moving images, was dismissed observing that description under said TI as ‘others’ was more of general type. Allowing the appeal and the exemption, the Tribunal held that the embargo created in the earlier Notification 15/2012-Cus. in terms of the criterion of quality and capacity to record images/events, will not impact eligibility under the superseding Notification 50/2017-Cus. Exemption provided for “digital still image video camera” was held to be available. (Creative Peripherals & Distribution Ltd v. Commissioner – 2020 TIOL 1146 CESTAT MUM)

Valuation   Advertisement and sales promotion expenses incurred by importer on own account, not includible: CESTAT Delhi has held that in absence of any condition precedent, the expenditure by the importer-appellant on advertisement and sales promotion incurred on its own account and not for discharge for any obligation of the seller (foreign exporter) under the terms of the sale, is a post import activity and does not attract provision of Rule 10(1)(e) of the Custom Valuation (Determination of Value of Imported Goods) Rules, 2007. Relying upon Interpretative Note to Rule 3(b) of the Rules, it noted that any activity undertaken by the buyer on its own account, even though by agreement, are not considered as indirect payment, even though they might be regarded as benefit to the seller. It was held that such expenditure cannot be added to the value of the goods under Rule       10  while     determining transaction value. (Indo Rubber and Plastic Works v. Commissioner – 2020 (373) ELT 250 (Tri. – Del.)

Excise & Service Tax

Foreign bank’s charges for transfer of money to settle export payments, not liable to service tax in the hands of the bank of Indian exporter: CESTAT Delhi has held that charges charged by foreign bank (bank of the importer) or a foreign intermediary bank in the course of settlement of export payments, in a case of exports from India, are not liable to service tax under reverse charge mechanism at the hands of the Indian bank (bank of the exporter). The department had contended that the foreign bank provided a service to the Indian bank in relation to transfer of money and letter of credit, which was classifiable under Section 65(12)(a)(ix) during period prior to 2012 and under 65B(44) of the Finance Act, 1994 for the period under the Negative list regime. The Tribunal however held that the bank in India cannot be the recipient of service for the activities undertaken by the foreign banks, the charges for which were deducted at source on the export bill. Further, observing that there is marked distinction between‘ conditions to a contract’  and ‘considerations for the contract’, the Tribunal noted the Indian bank had not paid any consideration to the foreign bank and hence also was not the recipient of service. (State Bank of Bikaner & Jaipur v. Commissioner – Final Order No. 50737/2020, dated 05-08-2020, CESTAT Delhi)

Cenvat credit when portion of output service not liable to service tax: CESTAT Bengaluru has held that Cenvat credit of service tax paid under reverse charge mechanism for availing services of insurance agents was available in a case when a portion of the premium amount (consideration towards output service), in case of ULIP policies, was not liable to service tax. It observed that the assessee was engaged only in rendering insurance services and merely because a portion of the premium amount (investment opportunity) charged in respect of ULIP policies was not liable to tax, it cannot be said that the said service was exempted, when tax was paid on the portion of premium collected on risk coverage. It held that provision of break-up of premium amount as shown in the policy was immaterial, as the subscriber had not taken two separate policies. (Metlife India Insurance Company Limited v Commissioner – Final Order No. 20467/2020, dated 18-08-2020, CESTAT Bengaluru) 

*****

CMA Rakesh Bhalla 9779010685 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.

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