pri Direct & Indirect Taxes Updates- January 2021 Direct & Indirect Taxes Updates- January 2021

DIRECT TAXES UPDATES

Recent circulars/ notifications/ rules/ clarifications/News

♦ CBDT issues notification and notifies Faceless assessment scheme 2021 and direction to give effect to the Faceless Penalty scheme,2021 (Notification No. 03/2021 dated 12/01/2021)

♦  Amount of remuneration u/s 9a(3)(m) of the Income Tax Act (Circular No. 1 of 2021 dated 15.01.2021)

Budget Highlights

> No changes in Income Tax Slab rates

> Employee contribution deposited late by Employers will not be available as deduction to the employer.

> Reduced time limit for reopening of tax assessments to 3 years– Presently an assessment can be opened in 6 years.

> Insertion of new section 206AB and section 206 CCA for providing higher tax rate of TDS/ TCS for non-filers of Income Tax Return. The tax will be higher of the following-

-Twice the rate specified in relevant provision

-Twice the rate or rates in force

-The rate of five percent

> No depreciation on Goodwill shall be allowed. However, the deduction for the amount paid for acquiring Goodwill shall be allowed on sale of Goodwill.

> TDS of 0.1% to be levied on a purchase transaction exceeding Rs. 50 lakh in a year. The responsibility of deduction shall lie only on the persons whose turnover exceeds 10 crore.

> Tax exemption to be provided to the amount given to an employee in lieu of LTC, subject to incurring of specified expenditure.

> Restricting tax exemption for the interest income earned on the employees’ contribution to various provident funds to the annual contribution of Rs. 2.5 lakh. This restriction shall be applicable only for the contribution made on or after 01.04.2021.

> Income Tax returns will have prefilled data from capital gains from listed securities, Dividend income etc.

> Advance tax on dividend to accrue only after it is declared.

> Extension of eligibility of deduction under affordable housing scheme – The additional deduction of Rs. 1.5 lakh shall therefore be available for loans taken up till 31st March 2022.

> No tax returns for Senior Citizens, age 75 years and above who have Pension and Interest income

> Faceless Income tax Appellate Tribunals National faceless ITAT centre to be set up

> Tax Audit threshold of turnover further increased for digital transactions to Rs. 10 crores from Rs. 5 crores

> Dispute Resolution Panel for small taxpayers- For anyone with a taxable income up to 50 lakh and disputed income up to 10 lakh shall be eligible to approach the Committee.

> To enable deduction of tax on dividend income at lower treaty rates for FPIs

Income Tax Compliance calendar – February 2021

Things to remember
Due Date Particulars
7th February 2021 Due date for deposit of Tax deducted/collected for the month of January, 2021. 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
14th February 2021 ​-Due date for issue of TDS Certificate for tax deducted under section 194-IA in the month of December, 2020

– ​Due date for issue of TDS Certificate for tax deducted under section 194-IB in the month of December, 2020

– ​Due date for issue of TDS Certificate for tax deducted under section 194-IB in the month of December, 2020

15th February 2021 – Due date for filing of return of income for the assessment year 2020-21 if the assessee is (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) required to submit a report under section 92E pertaining to international or specified domestic transaction(s)

Note: The due date for submission of return of income for the Assessment Year 2020-21 has been further extended to February 15, 2021 vide Press Release, dated 30-12-2020.

Due date for furnishing of Form 24G by an office of the Government where TDS/TCS for the month of January, 2021 has been paid without the production of a challan

– Quarterly TDS certificate (in respect of tax deducted for payments other than salary) for the quarter ending December 31, 2020

Important cases decided 

♦ Penalty u/s 271AAB (penalty on undisclosed income) cannot be levied if no search u/s 132 is done (Ashok B Sureban Vs ACIT (ITAT Bangalore)

♦ Stamp duty expenses on IPO allowable u/s 35D (CIT Vs Onmobile Global Ltd. (Karnataka High Court)

♦ Section 68 addition cannot be levied merely for low income of creditor (Carissa Investment (P) Ltd. Vs ACIT (ITAT Delhi)

♦ Loss due to pull back of inventory from Market on expiry of product is allowable (Hindustan Coca-Cola Marketing Company Pvt. Ltd Vs DCIT (ITAT Delhi)

INDIRECT TAXES UPDATES

Budget Highlights

GST

> Omission on requirement of GST Audit as per Section 35(5) of CGST Act- GSTR 9 C reconciliation to give way to new self certified reconciliation with GSTR 9.

> Mutuality of supply between person and its members/constituents shall form part of definition of supply retrospectively w.e.f. 01-07-2017. All judgments overruled. Para 7 of Schedule II also omitted consequentially.

> Condition inserted in section 16(2) that ITC can be taken only if communicated in GSTR-1 of supplier.

> Interest on late payment from cash ledger u/s 50 given retrospective effect w.e.f. 01-07-2017

> Recovery proceedings u/s 79 can be initiated in cases where outward supply declared in GSTR-1 but tax not paid in GSTR 3B

> For appeal against detentions u/s 129, 25% of penalty has to be pre deposited.

> If the consignor/consignee comes forward, then penalty has to be paid @ 200%. Applicable tax has been waived. 

Custom Duty

> Customs duty uniformly reduced to 7.5% on semis, flat, and long products of non-alloy, alloy, and stainless steels.

> To provide relief to metal re-cyclers, mostly MSMEs, duty on steel scrap exempted for a period up to 31st March, 2022.

> ADD and CVD on certain steel products has been revoked.

> To provide relief to copper recyclers, duty on copper scrap reduced from 5% to 2.5%.

GST

GST Compliance Calendar – Returns to be filed in the M/O February 2021

GST Return Form Name Filing Period Due Dates in February 2021
GSTR-1 (Outward return) Monthly (January 2021) 11th February  2021
GSTR 3B (Tax summary return) January ‘2021 20th February 2021 ( In case Aggregate turnover more  than or equal to Rs 5 crore in the previous Year)

22nd  / 24th  February 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) January ‘2021 20th February 2021
GSTR 05 (by non-taxable resident persons ) January 2021 20th February 2021
GSTR 06 (ISD) January ‘2021 13th February 2021
GSTR 07 (TDS) January’2021 10th February 2021
GSTR 08 (TCS) January 2021 10th February 2021
Annual GST Return FY 2019-20 28th February 2021

RoDTEP Scheme – What Exporters Must Do 

The Government has implemented the Remission of Duties and Taxes on Exported Products (‘RoDTEP’) scheme. The scheme has replaced the popular Merchandise Exports from India Scheme (‘MEIS’) as the latter was found to violate WTO norms.

SALIENT FEATURES OF RoDTEP

  • Under the scheme, the embedded central, state and local duties or taxes would be refunded to the exporters by way of credit to their ledger accounts maintained with Customs.
  • There will be product specific rates to be applied on Freight On Board (‘FOB’) value of exports for calculating the credit amount under the scheme. It is expected (but unclear) that the RoDTEP rate for Project Exports will remain at the higher side.
  • Such credit can be utilized towards payment of customs duties and would be freely transferrable.
  • The benefit under RoDTEP would be available for all exports made on or after January 1, 2021 irrespective of the date of notification of the scheme.

IMMEDIATE TO-DOES FOR EXPORTERS

  • Exporters must register themselves on ICEGATE with Digital Signature.
  • Exporters must create a ledger account by clicking on the ‘RoDTEP’ tab under the ‘Our Services’ section on ICEGATE website.
  • Exporters must declare their intention to claim RoDTEP for each product in the shipping bill.

DECLARATION IN SHIPPING BILL

  • The exporter will have to make following declarations in the SW_INFO_TYPE Table of the Shipping Bill for each item:

CASES WHERE RoDTEP NOT AVAILABLE

  • It is proposed that the RoDTEP benefit is not available to an Export Oriented Unit (‘EOU’). This has raised concerned for units under Special Economic Zones (‘SEZ’) too. The Government’s rationale behind EOU or SEZ exclusion is that almost all the Central, State and Local taxes are being exempted for EOUs and SEZs. It is, therefore, these units have protested that they should not be left at the mercy of these exemptions.

Second in the possible exclusions list is Advance Authorization, Jobbing etc. This indicates that exporters availing duty drawback may not be allowed benefit under RoDTEP. 

Cases Law

The Supreme Court dismissed the appeal of the Revenue on delay as well as on meritsheld that the taxpayer must be allowed to carry forward the credit through TRAN-1 even after the due date.  Revenue SLP (22386/2020) against the Delhi High Court (‘HC’) decision in the case of Aagman Services Private Limited v. Union of India, 2019-VIL-705-DEL  has been  dismissed

The Delhi HC had observed that even though there is a mistake on the part of the taxpayer while filing the TRAN-1 but the mistake was unintentional. Thus, it was held that the taxpayer must be allowed to carry forward the credit through TRAN-1 even after the due date. Aagman Services Private Limited v. Union of India, 2019-VIL-705-DEL

Revenue is disputing classification of parts and accessories of motor vehicles as adopted by taxpayers. As per the revenue, these goods fall under Headings 8708 and 8714 which cover ‘parts and accessories of motor vehicles’ and attract Basic Customs Duty (BCD) of 15 percent and GST of 28 percent vis-à-vis other Headings which usually attract BCD of 7.5 percent / 10 percent and GST of 18 percent.

 It is pertinent to note that several advance rulings have been passed under GST regime on classification of automotive components which has added more debate to this issue.  One of the recent ruling given by the Authority for Advance Ruling (‘AAR’) on this issue,  is given below are below: 

Advance Ruling Product Taxpayer’s classification Revenue’s classification Classification upheld Ruling
A Raymond Fasteners India Pvt. Ltd., 2021-VIL-01-AAAR Fasteners 7318 8708 8708 The Appellate AAR (‘AAAR’) classified fasteners under Heading 8708 basis Supreme Court’s decision in the case of G.S. Inter-national Ltd. V. CCE, 2003-VIL-42-SC-CE.

 The AAAR did not refer to Section Notes of Section XVII, which provide that goods of Heading 7318 (being parts of general use of iron and steel) will not be classified under Heading 8708.  

Caution

Classification of parts and accessories of motor vehicles has always been a contentious issue under Indirect Tax regime. A perusal of aforesaid rulings under GST regime, indicates that the issue is far from getting settled in near future. The revenue is classifying all goods under Heading 8708 without going into nature of goods or correct legal position. The revenue has also started seeking information from automotive OEMs as well as part / component manufacturers as pre-cursor to litigation on this issue. Hence, taxpayers are advised to re-analyze correct classification of parts and accessories of motor vehicles imported or supplied by them.

Customs 

Transhipment of Import & Export Cargo via Sri Lanka and Bangladesh-Waiver of bank guarantee –CBIC Circulars No.45/2005-Customs, dated 24.11.2005 and No.8/2019-Customs, dated 26.02.2019 dealing with transhipment of import and export cargo and carriage of coastal cargo. In this regard, representations have been received that Customs authorities at some ports are insisting that ship owners provide Bank Guarantee for carriage of EXIM containers for transhipment from East Coast to West Coast ports, via Colombo. The matter has been examined. It is seen that Circulars No.45/2005-Customs, dated 24.11.2005 waives the requirement of execution of bank guarantee for the purpose of transhipment in respect of . In view of the above, Board has decided to extend the exemption from requirement of furnishing of Bank Guarantee by the carriers for carriage of EXIM cargo for transhipment through foreign territories of Sri Lanka and Bangladesh. This relaxation would apply,if the carrier fulfils the requirement of waiver of Bank Guarantee in a like manner, as provided for by Circulars No.45/2005-Customs, dated 24.11.2005.

Directorate General of Foreign Trade (‘DGFT’) has introduced an e-PRC System for application seeking Policy or HBP relaxation in terms of Para 2.58 of the FTP 2015-20.

All the applications on or after January 25, 2021 shall be filed on the e-PRC system only. DGFT will not accept any manual application post January 24, 2021. The entire process is designed to be paperless and contactless. Any PRC submission, communication, clarification, correction as well as the approval on submitted applications would be electronic. The stakeholder in International Trade can follow the following process for filing an application: https://dgft.gov.in———–Services———-Policy Relaxation Committee (Trade Notice No.38/2020-21,  dated the 15th January, 2021)

Cases Law

Excise & Service Tax

Brand promotion v. promotion of product Service tax when not liable under BAS: In a case where the assessee had made available his celebrity image as a brand ambassador for promotion, the CESTAT Kolkata has set aside the demand of service tax under Business Auxiliary services (‘BAS’) for the period from 2006 till 2010. The Tribunal observed that the activity was rightly classifiable as promotion of brand of goods by appearing in advertisement, which service would be taxable only under Section 65(105)(zzzzq) of the Finance Act w.e.f. 1 July 2010. It noted that the assessee was required to provide services in connection with advertisement, promotion, marketing and endorsement of the products under the particular

trade mark or advertise and promote the business of a particular company. CBIC’s Instruction dated 26 February 2020 stating that if the brand name/house mark is promoted by a celebrity, without reference to any specific product or services, the service would not be classified under BAS, was relied upon. [Sourav Ganguly v. Commissioner – 2020 TIOL 1687 CESTAT KOL]

With Warm Regards & Jai Hind 

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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