DIRECT TAXES UPDATES
– Government issues a circular clarifying the requirements for opening of Senior Citizen Savings Scheme Account (Circular no. File No. FS-10/17/2020-FS dated 07.12.2020)
– CBDT releases answers to FAQs on Vivad-se-Vishwas scheme (Circular No. 21/2020-Income Tax dated 04.12.2020)
– Govt further extends the dates for various compliances such Tax Audit, ITR, VSV scheme etc (Press release dated 30.12.2020)
i) Due date for filing ITR (Non tax audit) extended till 10/01/2021.
ii) Due date for filing Tax Audit and TP Audit Report extended till 15/01/2021.
iii) Due date for filing ITR (Tax audit and TP audit) extended till 15/02/2021.
iv) Vivad Se Vishwas Scheme extended till 31/01/2021.
Income Tax Compliance calendar – January 2021
|Things to remember|
|7th January||Due date for deposit of Tax deducted/collected for the month of December, 2020. However, all the 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 deposit of TDS for the period October 2020 to December 2020 when Assessing Officer has permitted quarterly deposit of TDS under section 192, section 194A, 194D or 194H
|10th January||– Return of income for the assessment year 2020-21 for all assessee other than (a) corporate-assessee or (b) non-corporate assessee (whose books of account are required to be audited) or (c) partner of a firm whose accounts are required to be audited or (d) an assessee who is required to furnish a report under section 92E.|
|14th January||– Due date for issue of TDS Certificate for tax deducted under section 194-IA in the month of November, 2020
– Due date for issue of TDS Certificate for tax deducted under section 194M in the month of November, 2020
|15th January||– Due date for furnishing of various audit reports including tax audit report and report in respect of international/specified domestic transaction for the Assessment Year 2020-21.
– Due date for furnishing of Form 24G by an office of the Government where TDS/TCS for the month of December, 2020 has been paid without the production of a challan
– Quarterly statement of TCS for the quarter ending December 31, 2020
– Quarterly statement in respect of foreign remittances (to be furnished by authorized dealers) in Form No. 15CC for quarter ending December, 2020
– Due date for furnishing of Form 15G/15H declarations received during the quarter ending December, 2020
|30th January||- Quarterly TCS certificate in respect of quarter ending December 31, 2020
– Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA in the month of December, 2020
– Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IB in the month of December, 2020
– Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194M in the month of December, 2020
|31st January||Quarterly statement of TDS for the quarter ending December 31, 2020
– Quarterly return of non-deduction at source by a banking company from interest on time deposit in respect of the quarter ending December 31, 2020
– Intimation under section 286(1) in Form No. 3CEAC, by a resident constituent entity of an international group whose parent is non-resident
– Furnishing of declaration to opt for Vivad se Vishwas Scheme.
Important cases decided
INDIRECT TAXES UPDATES
|GST Return Form Name||Filing Period||Due Dates in December 2020|
|GSTR-1 (Outward return)||Monthly (December 2020)||11th January 2021|
|GSTR 3B (Tax summary return)||December ‘2020||20th January 2021 (In case Aggregate turnover more than or equal to Rs 5 crore in the previous Year)
22nd/24th January 2021 (in case Aggregate turnover less than or equal to Rs 5 crore in the previous financial year registered in X /Y category respectively.
|GSTR 5A (online information & data access)||December ‘2020||20th January 2021|
|GSTR 05 (by non-taxable resident persons )||December 2020||20th January 2021|
|GSTR 06 (ISD)||December ‘2020||13th January 2021|
|GSTR 07 (TDS)||December ‘2020||10th January 2021|
|GSTR 08 (TCS)||December ‘2020||10th January 2021|
GST Compliance Calendar – Returns to be filed in the M/O January 2021
No penalty for non-compliance between 1 December 2020 to 31 March 2021 to have Dynamic QR Code for B2C invoices –: The Central Board of Indirect Taxes and Customs (‘CBIC’) has waived the penalty under Section 125 of the Central Goods and Services Tax Act, 2017 for non-compliance of Notification No. 14/2020-Central Tax during the period from 1 December 2020 to 31 March 2021. The said notification which has come into effect from 1 December 2020, mandates specified taxpayers to have Dynamic Quick Response (‘QR’) Code in invoices issued to unregistered persons (B2C transactions). It may however be noted that according to Notification No. 89/2020-Central Tax, dated 29 November 2020, the penalty waiver is subject to the condition that the said person complies with the provisions of the said notification from 1 April 2021.
In 3rd week of December, Government has brought in some strict amendments in GST Laws to keep check on fraudulent transactions. (Notification 92 to 94 CT dated 22nd December ‘2020 issued in this context) This changes will significantly affect the way various compliances in the business is being carried on from 1 January 2021 onwards.
Some of the significant changes have been tabulated below
|1||Amendment in Rule 138(10) Validity of E Way Bill||E Way Bill Validity Period has been reduced to half.
Earlier limit of 100 Kms per day, trucks will now have to cover 200 kms in a day and days in E-way bill calculate accordingly.
e.g. earlier for 1000 kms there was 10 days . but now 5 days shall be available
|1 January 2021|
|2||Amendment in Rule 138E Generation of E Way Bills||The portal will restrict E Way Bill generation if the Business has not furnished the return whether GSTR 1 or GSTR 3B for the consecutive 2 tax periods.
At the same time, you should also know that whether a consignor or consignee or transporter, who are registered with GST and whose details are mentioned in the E Way Bill, none of these can be a defaulter.
|1 January 2021|
|3||Amendment in Rule 36(4) Restrictions on taking ITC||As per the prevailing norms, you could claim a credit of up to 110% of the eligible ITC reflected in GSTR 2A in GSTR 3B, which has now been reduced to 105% of the filed returns.
This will make ITC provisions more stringent then ever before and will also have cash flow impact
|1 January 2021|
|4||Introduction of Rule 86B Restrictions on use of amount available in the Electronic Credit Ledger||Businesses with turnover of more than 50 Lacs will not be allowed to utilise more than 99% of the Electronic Credit Ledger, unless-
a) Business or its stakeholder have paid more than Rs 1 lakh as Income Tax in the preceding 2 years for which due date to file ITR has expired.
b) The taxpayer has received a refund of more than 1 Lacs as an exporter or on account of inverted Duty Structure in the preceding financial year on account of unutilised input tax credit.
c) The business has paid at least 1% of the total output tax liability in cash in the current year applied cumulatively, up to the said month in the current financial year. (by paying cash liability 1% , Assessee can utilise 99% of the ITC amount in credit cash ledger)
d) Business is Government Department, PSU, Local Authority or Statutory Body.
Business which does not satisfy the above Conditions as restriction on ITC will have cash flow impact.
|1 January 2021|
|5||Amendment in Rule 21 Cancellation of Registration||Some more conditions have been added /amended, based on which registration can be cancelled like
(a) Issues invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made thereunder;
(b) Availed ITC wrongly;
(c) Declared Excess Outward Supply in GSTR 1 in compare to GSTR 3B for one or more tax periods;
(d) Set off of excess ITC from Electronic Credit Ledger as discussed in point 4 (Rule 86B) i.e. more than 90%.
|6||Amendment in Rule 21A Suspension of Registration||GST officer are now been given the authority to compare your GSTR 3B with GSTR 1 and GSTR 2A.
Before initiating the cancellation proceeding, he will have to issue a notice in form REG 21 and demanded clarification from the taxpayer.
E-way Bill validity not relevant at the time of unloading: The Karnataka High Court has rejected the Revenue department’s contention that e-way bill must be valid even at the time when the goods are being unloaded from the conveyance. The petitioner had transported vehicles in a conveyance under appropriate e-way bills that reached the place of destination before the validity of the e-way bill expired. However, the goods from the conveyance were unloaded on the subsequent day. The department issued a notice under Section 129(3) of the CGST Act, 2017 stating that goods had to be unloaded from the conveyance before the validity of e-way bill expired. Noting that the conveyance had reached the destination well within the expiry of e-way bills, the High Court quashed the notice. (Hemanth Motors v. State of Karnataka – 2020 VIL 618 KAR)
No detention on the ground that the value mentioned in delivery challan to job worker mis-matched with value mentioned in e-way bill from job worker: In a case where the goods were detained during transit since there was a mismatch between the value of goods mentioned in the delivery challan (issued by the principal earlier while sending goods for job work) and the value shown in the e-way bill and the job work invoice on the return journey, i.e. from the job workers premises, the Kerala High Court has set aside the detention of the goods. The Court observed that both job work invoice as well as e-way bill (for return journey) specified the correct quantity and description of goods and that there was no doubt on identity of the goods transported. It noted that the difference in value shown in the e-way bill and the delivery challan was only for maintaining uniformity between the e-way bill and the job work invoice. (P. H. Muhammad Kunju And Brothers Vs Assistant State Tax Officer (Kerala High Court); WP(C).No. 25943 of 2020(P); 25/11/2020)
ITC on promotional material given to franchisees and retailers: The Karnataka AAR has held that Input Tax Credit (‘ITC’) is available to the assessee on uniforms, gifts and carry bags provided to the franchisees to be used by them or to be given by them free of cost to the purchasers. The AAR observed that franchisees of the applicant are associated in the business and hence are related persons. The goods given by way of gifts and free supplies to promote business were hence held to be supplies in terms of Para 2 of Schedule I to the CGST Act, 2017. The AAR was of the view that the applicant needs to discharge GST on such supplies and thereby is entitled to avail input tax credit on the said supply of goods. The AAR however held that ITC would not be available in case the similar goods are given to other shops/retailers, as they are not covered as related persons to the assessee. (In re Page Industries Limited (GST AAR Karnataka); Advance Ruling No. KAR ADRA 54/2020; 15/15/2020)
Faceless assessment – Mandatory uploading of supporting documents in e-Sanchit w.e.f. 15 January 2021: The CBIC has issued an elaborate circular to provide clarifications on various aspects of faceless assessment. Emphasizing that re-assessment should be in accordance with the principles of natural justice, the Circular also advises the importers and customs brokers to give complete description of the imported goods while filing the Bill of Entry (‘B/E’). Circular No. 55/2020-Cus., dated 15 December 2020 also states that with effect from 15 January 2021, importers would be required to mandatorily upload the supporting document along with the B/E in e-Sanchit. Further, the along with the B/E in e-Sanchit. Board has enhanced the monetary limit of assessment of B/E by the Appraising Officers. The new limit of INR 5 lakh is applicable from 21 December 2020. (Circular No. 55/2020-Cus., dated 15 December 2020)
Crude palm oil – BCD reduced: Notification No. 50/2017-Cus. has been amended to reduce Basic Customs Duty from 44% to 27.5% on crude palm oil covered under Tariff Item 1511 10 00 of the Customs Tariff Act, 1975. Notification No. 43/2020-Cus., dated 26 November 2020 amends Sl. No. 57 of the original notification with effect from 27 November 2020 for this purpose.
Gems and Jewellery export permissible through courier mode: The CBIC has clarified that Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 and Courier Imports and Exports (Clearance) Regulations, 1998 do not restrict exports of gems and jewellery through courier mode. According to Circular No. 52/2020-Cus., dated 27 November 2020, the restriction is only applicable on imports of such goods. The Gems and Jewellery Export Promotion Council had sought such clarification.
Drawback – Limitation for SCN under Drawback Rules, 1995 and saving of SCNs, for earlier period, issued after Drawback Rules, 2017: The Supreme Court has stayed the operation of the Punjab & Haryana High Court’s 2019 decision wherein the High Court had held that any notice issued under Rule 16 of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 beyond 5 years from the date of export is barred by limitation. It had observed that the department cannot open any assessment at its whims and fancies. The High Court had further observed that Rule 20(2) of Drawback Rules, 2017 does not deal with drawback claims filed and sanctioned prior to 1 October 2017 and does not save recovery proceedings of already paid drawback. It had however noted that had there not been Rule 20(2) then Section 159A of Customs Act, 1962 would have saved all the rights and liabilities arising out of the 1995 Rules (Union of India Vs Famina Knit Fabs (Supreme Court); Special Leave Petition (Civil) Diary No(S). 14404/2020; 20/11/2020)
Detention of imported goods without seizure is illegal: The Bombay High Court has held the customs authorities cannot proceed with detention without initiating the procedure of seizure prescribed under Section 110 of the Customs Act, 1962. Holding that the detention of goods without effecting seizure was illegal, the Court also observed that there was no provision under the Customs Act for detention of goods. It observed that ‘detention’ and ‘seizure’ are two distinct terms which cannot be used interchangeably and that detention would be at a stage after seizure. It also noted that there cannot be any detention of goods even in the case of seizure, without issuing show-cause notice under Section 124(a) of the Customs Act (Exim Incorporation v. UOI – 2020 (12) TMI 329-Bom HC)
Seizure for overvaluation of exports – Valuation provisions to be considered at stage of confiscation and not seizure: The CESTAT New Delhi has held that provisions of Section 14 of the Customs Act, 1962 and Rule 3 of the Export Valuation Rules have to be applied only at the stage of considering liability to confiscation (in a case of alleged overvaluation), after providing an opportunity as contemplated in Section 124, and not at the stage of seizure. The Tribunal was of the view that it is only at the stage of confiscation it is determined whether the goods entered for exportation correspond in value or in any material particulars with the entry made in the shipping bill. Noting that for seizure of goods, the proper officer should only have reason to believe that the goods are liable to confiscation, the Tribunal set aside the Order of Commissioner (A) which in turn had set aside the seizure observing that transaction value can be challenged only in accordance with the Export Valuation Rules and that the procedure prescribed therein was not followed by the department. (Commissioner of Customs (Preventive) Vs Bushrah Export House (CESTAT Delhi); Custom Appeal No. 70210 of 2020; 10/11/2020)
Excise & Service Tax
Commission paid to whole time directors not liable to service tax under reverse charge mechanism: The CESTAT Kolkata has held that mere fact that the whole-time Director was compensated by way of variable pay (commission based on percentage of profit), will not in any manner alter or dilute the position of employer-employee status between the company-assessee and the whole-time Director. Setting aside the demand of service tax under reverse charge mechanism, the Tribunal observed that the whole-time Director was essentially an employee of the company and accordingly, whatever remuneration was paid in conformity with the provisions of the Companies Act, was pursuant to employer-employee relationship. It noted that when the provisions of the Companies Act made the whole-time director (as also in capacity of key managerial personnel) responsible for any default/offences, those directors are employees. (Bengal Beverages Pvt. Ltd. v. Commissioner – 2020 VIL 533 CESTAT KOL ST)
Sabka Vishwas (LDR) Scheme – Quantification of tax amount – Statement recorded during investigation: Observing that the assessee, in his statement recorded by the investigating authorities, had admitted the service tax liability which was also corroborated later by the department’s letter, the Bombay High Court has set aside the Order of the Designated Authority rejecting the assessee’s application under Sabka Vishwas (Legacy Dispute Resolution) Scheme. The Writ petition was allowed observing that rejection of the application on the ground that the investigation was still going on and that there was no quantification of demand, was not justified. Court’s recent decision in the case of Thought Blurb v. Union of India was relied upon. (G. R. Palle Electricals v. Union of India – 2020 VIL 593 BOM ST )
With Warm Regards & Jai Hind
CMA Rakesh Bhalla – 9779010685 – [email protected]
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.