prpri Direct & Indirect Taxes Updates- November 2020 Direct & Indirect Taxes Updates- November 2020

DIRECT TAXES UPDATES

Recent circulars/ notifications/ rules/ clarifications/News

♣ CBDT issues a circular condoning the delay in filing of form No. 10 BB (Form for furnishing the audit report of the accounts of a fund or trust or institution or any university or other educational institution or any hospital or other medical institution) for AY 2016-17 and onwards (Circular no. 19/2020 dated 03th November 2020)

♣  Income tax department issues SOPs for faceless Income Tax Assessment Scheme, 2019 (Instruction no. F. No. Pr.CCIT(NeAC)/2019-20/343 and F. No. Pr. CCIT/NeAC/SOP/2020-21 dated 19th November 2020)

Income Tax Compliance calendar – December 2020

Things to remember
Due Date Particulars
7 December 2020 Due date for deposit of Tax deducted/collected for the month of November, 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
15 December 2020 -Due date for furnishing of Form 24G by an office of the Government where TDS/TCS for the month of November, 2020 has been paid without the production of a challan​

-Third instalment of advance tax for the assessment year 2021-22

-Due date for issue of TDS Certificate for tax deducted under section 194-IA in the month of October, 2020

-Due date for issue of TDS Certificate for tax deducted under Section 194-IB in the month of October, 2020

-Due date for issue of TDS Certificate for tax deducted under Section 194M in the month of October, 2020

-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 November, 2020​

30 December 2020 Due date for furnishing of challan-cum-statement in respect of tax deducted under Section 194-IB in the month of November, 2020

-Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194M in the month of November, 2020

-Furnishing of report in Form No. 3CEAD for a reporting accounting year (assuming reporting accounting year is January 1, 2019 to December 31, 2019) by a constituent entity, resident in India, in respect of the international group of which it is a constituent if the parent entity is not obliged to file report under section 286(2)or the parent entity is resident of a country with which India does not have an agreement for exchange of the report etc

-Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA in the month of November, 2020

31 December 2020 -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.

-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

Important cases decided 

INDIRECT TAXES UPDATES

GST

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

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

22nd / 24th December 2020 (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) November ‘2020 20th December 2020
GSTR 05 (by non-taxable resident persons ) November 2020 20th December 2020
GSTR 06 (ISD) November ‘2020 13th December 2020
GSTR 07 (TDS) November ‘2020 10th December 2020
GSTR 08 (TCS) November ‘2020 10th December 2020
Note- Due Dates for the GST Annual Return i.e. GSTR 9/9A/9C of FY 2018-19 is 31st December 2020

E-invoice threshold lowered to INR 100 crore from 1 January 2021: E-invoicing provisions would be applicable, with effect from 1 January 2021, to exceeds taxpayers INR 100 whose aggregate turnover crores in any preceding Financial Year from 2017-18 onwards. It may be noted that the Government had earlier proposed to apply the said provisions in respect of such assessees with effect from 1 October 2020 but had enhanced the threshold to INR 500 crore by Notification No. 61/2020-Central Tax. It seems that the process has now stabilised after certain relaxations were introduced for the month of October 2020. The threshold will hence be lowered to the original level from 1 January 2021 (Notification No. 88/2020-Central Tax, dated 10 November 2020)

Quarterly Return Monthly Payment Scheme introduced for specified taxpayers: The CBIC has introduced an optional scheme, effective from 1 January 2020, for quarterly filing of returns (GSTR-3B) and monthly payment of tax by taxpayers with aggregate turnover up to INR 5 crores. Notifications and Circular dated 10 November 2020 have been issued for the purpose. Certain aspects of the scheme are highlighted below.

  • Registered person required to furnish Form GSTR-3B and having an aggregate turnover of up to INR 5 crore in the preceding financial year, is eligible of preceding quarter to the last day of the first month of the quart
  • No requirement is there to exercise the option every quarter.
  • Distinct persons have the option to avail the Scheme for one or more GSTINs
  • Quarterly filing of GSTR-1 but, option available for Invoice Furnishing Facility (‘IFF’), to furnish the details of outward supplies (to a registered person), for each of the first and second months of a quarter, between the 1st and 13th day of the succeeding month.
  • Monthly payment of tax by 25th of next month, for first two months of the quart
  • Option available to pay tax either by fixed sum method or self-assessment metho
  • Form GSTR-3B to be quarterly filed by 22nd or 24th day of the month succeeding the qua
  • No interest liability when system calculated amount (fixed sum method) and the entire liability for the quarter are deposited by the due dat
  • Late fee will not be applicable for the delay in payment of tax in first two months of the qua
  • Scheme can be opted-in and opted-out for any quarter from the first day of second month

(Notifications Nos. 81, 82, 84 and 85/2020- Central Tax and Circular No. 143/13/2020-GST, all dated 10 November 2020)

 Cases Law

Show Cause Notice (‘SCN’) is not uploaded on the Goods and Services Tax (‘GST’) portal, merely e-mailing is not valid service of the Notice – High Court of Madhya Pradesh (‘HC’) in the case of Akash Garg / Shri Shyam Baba Edible Oils v. CC, 2020-VIL-576-MP, has held that where a Show Cause Notice (‘SCN’) is not uploaded on the Goods and Services Tax (‘GST’) portal, merely e-mailing it to the taxpayer will not make it a valid service of notice. The HC held that only mode prescribed for communicating the SCN is by way of uploading the same on the GST portal refer Rule 142 of the CGST Rules.

This decision does not touch Clause (c) & (d) of Section 169 clearly provide that the communication of a SCN, inter alia, can be made by an e-mail provided at the time of GST registration or by uploading the same on the portal respectively and will lead to implications later on. (Akash Garg / Shri Shyam Baba Edible Oils v. CC, 2020-VIL-576-MP) 

 Interest on delayed payment Proviso to Section 50 of CGST Act is effective from 1 July 2017: The Madras High Court has held that the Proviso to Section 50 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) is retrospective in operation notwithstanding the notification which brings it into effect from 1 September 2020. Thus, interest is leviable, with effect from 1 July 2017, only on that portion of the output GST liability which is discharged belatedly by way of cash. The Court observed that interest is intended to compensate the revenue for loss of capital and there is no loss here as the revenue is in possession of the credit which is as good as cash. It also observed that where a Proviso is designed to eliminate unintended and prejudicial consequences which would cause hardship to a party, it should be seen to be remedial and one that mitigates the prejudice caused from inception. It also noted that the entire controversy was settled by the CBIC vide its Circular in F. No. CBIC 20/01/08/2019-GST, dated 18 September 2020 where the Board has reiterated that the said amendment is intended to be retrospective. (Maansarovar Motors Private Limited and Ors. v. Assistant Commissioner – Judgment dated 29 September 2020 in W.P. Nos. 28437, 29998, 31081 of 2019 and Ors., Madras High Court) 

Error in GSTR-1 not to deprive ITC to recipient, in the absence of matching mechanism: The Madras High Court has held that in the absence of enabling mechanism GSTR-2A and GSTR-1A) as contemplated under the statute, assessees should not be prejudiced from availing the credit in case of error in GSTR-1 by seller. The petitioner had, while reporting outward supplies in GSTR-1, inadvertently reported them as inter-state sales instead of intra-state sales, during the period August 2017 to December 2017. The error was noticed later when the recipient of credit approached the supplier. A writ petition was filed since request for amendment in GSTR-1 filed was rejected on the ground that amendment cannot be granted in GSTR-1 after 31 March 2019 as per Notification 71/2018-Central Tax. The Court permitted the petitioner to re-submit the annexures to Form GSTR-3B with the correct distribution of credit, observing that as per Section 39(1) of the CGST Act, any mismatch between Form GSTR-1 and Form GSTR-2A is to be declared by the recipient by way of a tabulation in Form GSTR-1A, and that the said forms were yet to be notified. (Sun Dye Chem v. Assistant Commissioner – 2020 VIL 523 MAD)

Detention of goods during transit Nature of contravention and presence of intention to evade are important: In a case involving transit sale and direct delivery to job worker, when the goods were detained because as per the e-way bill the goods were destined for a different location, the Telangana High Court has directed the department to refund with interest, the amount paid under protest to get the goods and vehicle released. It noted that once the vehicle driver had the correct tax invoice and e-way bill (after transit sale), it would have complied with the provisions of CGST Act, 2017. The High Court also held that in detention cases department should closely look at the nature of contravention and as to whether there is intention to evade. Holding departmental action as arbitrary, the Court relied upon the Gujarat High Court decision in the case of Synergy Fertichem Pvt. Ltd. and CBIC Circular in F. No 20/16/03/2017-GST. (Sree Rama Steels v Deputy State Tax Officer – 2020 TIOL 1899 HC TELANGANA GST ) 

Provisional attachment of bank account during pendency of search proceedings under Section 67 Supreme Court stays the Gujarat High Court decision: The Supreme Court has stayed the Gujarat High Court decision in the case of Kushal Ltd. v. Union of India, wherein the High Court had set aside the provisional attachment of the bank account of the assessee observing that there was absence of pendency of any proceedings under Section 62, 63, 64, 67, 73 or 74 of the CGST Act, 2017. Observing that search proceedings were conducted on 27 September 2018 with subsequent visit by the department on 1 April 2019 and that there was no search thereafter, the High Court had held that therefore the search proceedings had ended. The High Court was of the opinion that pursuant to the search, inquiry or other proceedings may have been undertaken, however, such inquiry or other proceedings were not under Section 67 and hence, it cannot be said that any proceedings were pending under Section 67. (Union of India v. Kushal Ltd. – Order dated 16 November 2020 in SLP No. 10070/2020, Supreme Court)

Restaurant service GST liability on supply of beverages, cigarettes to customers and free food to employees: The Authority for Advance Rulings (‘AAR’) Tamil Nadu has held that supply of beverages by a restaurant is a composite supply of services (beverages are normally supplied by the restaurants and therefore, is naturally bundled with the restaurant service) and is taxable @ 18%. However, in respect of supply of cigarettes, the Authority was of the view that such supply is a mixed supply (cigarettes are not normally supplied by the restaurants and therefore, is not naturally bundled with restaurant service) and is taxable @ 28%. The Authority also held that the supply of free food to employees would be liable to GST as the employees were related person and supply of free food to related persons was envisaged as supply of service in Para 2 to Schedule I of the CGST Act, 2017.(In Mfar Hotels & Resorts Pvt. Ltd. – 2020 VIL 296 AAR)

Customs

Manufacture and other operations in warehouse Job work clarified: The CBIC has clarified on various issues relating to job work for the unit working under the scheme of Manufacturing and Other Operations in Warehouse (‘MOOW Scheme’) under Section 65 of the Customs Act, 1962. The CBIC Circular No. 48/2020-Cus., dated 27 October 2020 also clarifies various issues in case where the job work activity is done by a unit working under the MOOW Scheme, for other units

Job work for unit working under the MOOW

GST provisions need to be followed in respect of procedures and time lines.

  • Imported goods to be first deposited in premises before sending for job w
  • Only inputs can be sent out for job w
  • Capital goods can be sent out for repair after permission of bond officer
  • Drawings can be sent out for exclusive use by the job worker for concerned un
  • For removal of goods from job worker’s premises, Regulations 14 and 15 of the Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019 to be follow Date of removal from job workers premises will deemed to be the date of removal from warehouse.
  • Scrap, waste and remnants generated during job work to be either returned to
  • MOOW Scheme unit or cleared from job work unit on payment of duty.
  • In case of any violation, the goods will be deemed to be cleared for home consumption on the date of clearance for job work

Job work by MOOW Scheme unit

  • MOOW Scheme unit, being a GST registered unit, can do job work for o
  • If imported inputs are used in job work, duty is required to be paid by filing Ex-bond Bill of Entry, only when job worked goods are returned to
  • No duty payable if job worked goods exported from premises of MOOW Scheme unit.

The Circular also states that MOOW Scheme unit can source capital goods and inputs from Special Economic Zones and Free Trade and Warehousing Zones. (Circular No. 48/2020-Cus., dated 27 October 2020)

Faceless assessment CBIC introduces measures for timely assessment: Observing that prompt and timely assessment of Bills of Entry and clearance of imported consignments are key objectives of Turant Customs and the Faceless assessment, the CBIC has introduced continuous assessment of goods on Saturdays and Sundays. According to Circular No. 45/2020-Cus., dated 12 October 2020, CBIC has decided to make all Saturdays (except second Saturday) as working day for all the faceless assessment groups across the country. Further, the CBIC has requested National Assessment Centres to monitor clearance of time-sensitive/ urgent consignments along with the DG systems. It has been clarified that the statutory compliances would only be checked during the Customs Compliance Verification stage at the port of import and the Appraising Officer will not keep pending such consignments for assessment. The Circular further enlists situations where, depending on the nature of the product and the fulfilment of certain other conditions, the First Check and Second Check will be undertaken by the faceless assessment group officers. In addition, guidelines with respect to re- assessment of Bill of Entry under faceless assessment regime have also been laid down. (Circular No. 45/2020-Cus., dated 12 October 2020)

Cases Law

Integrated tax and compensation cess are not included in the phrase ‘duty of customs’ for purposes of customs notification: Observing that the phrase ‘duty of customs’ refers to the ‘duty’ as defined under Section 2(15) of the Customs Act, 1962 which is leviable under Section 12(1) thereof, the CESTAT New Delhi has held that any other duty or tax which is not levied under the Customs Act, 1962 is not to be treated as ‘duty of customs’ for the purposes of customs notifications. Noting that the integrated tax is levied and collected under Section 5 of the Integrated Goods and Services Tax Act, 2017, and that Section 3(7) of the Customs Tariff Act, 1975 merely provides the manner of its collection in case of import/re-import, it held that integrated tax cannot be considered as ‘duty of customs’ for the purpose of customs notification. On facts, the Tribunal allowed exemption from integrated tax and compensation cess in case of re-imports (after repair) of aircrafts and parts under Notification No. 45/2017-Cus.(Interglobe Aviation Ltd. v. Commissioner – Final Order No. 51226-51571/2020, dated 2 November 2020, CESTAT New Delhi)

TED payment by mistake No provision for refund Government cannot unduly retain amount: The Kerala High Court has held that even if inadvertently certain amount has been paid in a case where there is no provision in the Foreign Trade Policy for refund, the Government cannot unduly retain the amount. The case involved payment of Terminal Excise duty, after availing Cenvat credit, by the assessee-EOU while making certain clearances to another EOU. The High Court observed that the appellate authority ought to have examined the matter in the background that it is a welfare State and the Department/ Government do not indulge into profit making. The appellate authority was directed to decide the appeal afresh. (Carlo Technical Plastics Pvt. Ltd. v. Union of India – 2020 VIL 554 KER CU)

Excise & Service Tax

Sabka Vishwas (LDR) Scheme Rectification of mistake in declaration by assessee: In a case where the assessee had mistakenly filed the declaration under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 under the category of ‘voluntary disclosure’ instead of litigation’, the Delhi High Court has directed the department to rectify the declaration and consider it as one filed under the ‘litigation’ category. The Court noted that the petitioner’s mistake was not only a procedural/clerical error that was apparent on the face of the record but was of an inadvertent nature not deliberately made to claim any undue benefit. It noted that the petitioner by making a declaration under the wrong category stood to gain nothing. It was also held that not state that an error/mistake apparent on the face of the record that can be rectified has to be committed by the Designated Committee only. (Bhawna Malhotra v. Union of India – 2020 VIL 533 DEL CE)

Sabka Vishwas (LDR) Scheme Declarant cannot be put in worse condition: In a dispute involving quantification of ‘tax dues’ for the purpose of filing declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, the Bombay High Court has held that a declarant who seeks benefit under the scheme cannot be put in a worse off condition than he was before making declaration under the scheme. The Court rejected the department’s contention that since the adjudication order, lowering the demand, was set aside by the CESTAT (on appeal by the assessee) while remanding the matter for decision afresh, it is only the show cause notice that survived and the original demand would be relevant for computation of ‘tax dues’. The High Court was of the view that since the figures in the order-in-original were accepted by the department (no appeal was filed by department before CESTAT against such order), those figures would be material and not the figures mentioned in the SCN. (Jyoti Plastic Works Pvt. Ltd. v. Union of India – 2020 TIOL 1874 HC MUM CX)

 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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