DIRECT TAXES UPDATES

Recent circulars/ notifications/ rules/ clarifications/News

-Without tax audit- 31.12.2020

-Transfer pricing and tax audit- 31.01.2021

-Income Tax return FY 2018-19 -30.11.2020

-31st December 2020- Last date for filing the declaration

-31st March 2021- Last date for paying the amount payable as per the third column of the table to section 3

-1st April 2021- Last date for paying the amount payable as per the fourth column of the table to section 3

Income Tax Compliance calendar – November 2020

Things to remember
Due Date Particulars
7th November –  Due date for deposit of Tax deducted/collected for the month of October, 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
14th November ​​​Due date for issue of TDS Certificate for tax deducted under section 194-IA in the month of September, 2020

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

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

15th November Quarterly TDS certificate (in respect of tax deducted for payments other than salary) for the quarter ending September 30, 2020​

– ​Due date for furnishing of Form 24G by an office of the Government where TDS/TCS for the month of October, 2020 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, 2020​

30th November ​-Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA in the month of October, 2020

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

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

-Report in Form No. 3CEAA by a constituent entity of an international group for the accounting year 2019-20​

-Statement of income distribution by Venture Capital Company or venture capital fund in respect of income distributed during previous Year 2019-20 (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 2019-20) 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 2019-20. This statement is required to be filed electronically to Principal CIT or CIT in form No. 64A

-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, 2020)​

-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, 2020)​

-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, 2020)​

-Due date for claiming foreign tax credit, upload statement of foreign income offered for tax for the previous year 2019-20 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, 2020).​

Important cases decided

INDIRECT TAXES UPDATES

GST

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

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

22nd/24th  November 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) October 2020 20th November 2020
GSTR 05 (by non-taxable resident persons ) October 2020 20th November 2020
GSTR 06 (ISD) October 2020 13th November 2020
GSTR 07 (TDS) October 2020 10th November 2020
GSTR 08 (TCS) October 2020 10th November 2020

Goods & Services Tax (GST) assesses will have some relief as the Finance Ministry on Saturday had again extended the date for filing annual return and reconciliation statement for financial year 2018-19 to December 31. Earlier, it was October 31– The Government has been receiving a number of representations regarding need to extend due date for filing Annual Return (FORM GSTR-9) and Reconciliation Statement (FORM GSTR-9C) for 2018-19 on the grounds that on account of the COVID-19 pandemic related lockdown and restrictions, normal operation of businesses has still not been possible in several parts of the country. It has been requested that the due dates for the same be extended beyond 31st October 2020 to enable the businesses and auditors to comply in this regard,” statement in Press release dated 24th October 2020)

GSTR-1 and GSTR-3B Due dates prescribed for period October 2020 to March 2021: CBIC has prescribed the due dates for submission of Forms GSTR-1 and GSTR-3B for the period from October 2020 till March 2021. Accordingly,

  • Registered persons having aggregate turnover of more than INR 5 crore will be required to furnish monthly GSTR-1 by     11th of the succeeding month, those with turnover up to INR 1.5 crore will have to furnish the said return quarterly by 13th of the month succeeding the quarter.
  • GSTR-3B must be furnished by 20th of succeeding month by taxpayers having turnover more than INR 5 Taxpayers having turnover up to INR 5 crore will have to furnish GSTR-3B by 22nd of next month if they are in western, central and southern India. Those located in northern and eastern India can furnish the said return by 24th of next month. (Notification No. 75 & 76/2020- Central Tax, dated 15-10-2020)

Cumulative reconciliation of ITC under Rule 36(4) clarified: CBIC has issued clarifications in respect of implementation of provisions of Rule 36(4) of the Central Goods and Services Tax Rules, 2017 (‘CGST Rules, 2017’) for the months of February to August 2020. According to Circular No. 142/12/2020-GST, dated 09-10-2020, the cumulative amount of Input Tax Credit (‘ITC’) availed for the said months in Form GSTR-3B should not exceed 110% of the cumulative value of the eligible credit available in respect of invoices or debit notes, the details of which have been uploaded by the suppliers, till the due date of furnishing of the statements in Form GSTR-1 for the month of September, 2020. The Circular also notes that availability of 110% of the cumulative value of the eligible credit available does not mean that total credit can exceed the tax amount as reflected in the total invoices Further, the Circular explains by way of illustration the manner of cumulative reconciliation for the said months in terms of the provisions. (Circular No. 142/12/2020-GST, dated 09-10-2020)

Number of digits of HSN Codes required in invoices increased: As recommended by the GST Council in its 42nd meeting, the CBIC has increased number of digits of HSN Code that would be required to be mentioned in invoices by taxpayers. With effect from 01-04-2021, the taxpayers with aggregate turnover more than INR 5 crore will be required to mention 6 digits of the HSN Code in the tax invoice. It may be noted that those with up to INR 5 crore turnover while required to mention 4 digits of the Code for supplies to registered person, will be exempted from such requirement when supplying to unregistered persons. (Notification No. 78/2020- Central    Tax, dated 15-10-2020)

Cases Law

Transition of Cenvat credit of Education Cesses and Krishi Kalyan Cess in GST regime not available: The Division Bench of the Madras High Court has held that transition of accumulated   unutilised  Education  Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess into the GST regime is not permissible. Allowing department’s intra-Court appeal against the single-Judge decision which allowed the benefit, the Court held that the assessee is not entitled to carry forward unutilised credit of Cesses for utilisation against the output GST liability under the provisions of Section 140 of the CGST Act, 2017. It held that the Court by any intendment or implication cannot include the three Cesses within ‘Eligible Duties and Taxes’ or ‘Eligible Duties’ as Explanations 1 and 2 to Section 140, and that sub-section (8) are not excluded from effect of Explanation 3. The High Court was also of the view that merely carry forward of unutilised credit in electronic ledger will not entitle the assessee to utilise same against output GST liability. It also noted that the 3 Cesses were not subsumed in the GST law.(Assistant Commissioner v. Sutherland Global Services Private Limited – Judgement dated 16-10-2020 in Writ Appeal No. 53 of 2020, Madras High Court)

Payment of tax in installments during COVID- 19 situation: The Kerala High Court has allowed the petitioner to discharge the tax liability inclusive of interest and late fee thereon in equal successive monthly installments in view of financial difficulties faced by his business during COVID-19 pandemic situation. The department was directed to accept the belated return filed by the petitioner for the period from February, 2020 to April, 2020, without insisting on payment of the admitted tax declared therein. The petitioner was permitted to discharge the tax liability, inclusive of any interest and late fee thereon, in equal successive monthly instalments commencing from 15-11-2020 and culminating on 15-08-2021. (Malayalam Motors Pvt. Ltd. v. The Assistant State Tax officer – 2020 VIL 496 Ker)

Transportation of goods to different place of business in same State other than the address mentioned in invoice and e-way bill does not automatically attract GST and penalty: Telangana High court has held that it cannot be said that the petitioner by transporting goods to additional place of business instead of principal place of business in the same State has indulged in an illegal activity as it would merely amount to stock transfer involving no element of supply of goods or services. The goods were transported from corporate office in Tamil Nadu to one of its depot in State of Telangana however the e-way bill contained the address of a different depot in State of Telangana. The department was directed to refund the sum collected towards GST and penalty with interest. (Same Deutzfahir India P. Ltd. v. State of Telangana – 2020 VIL 467 TEL)

Reclaiming reusable sand from waste sand is manufacture and not  job-work: The Maharashtra AAR has held that activity of reclaiming reusable sand from the waste sand, having no commercial value, received from foundry industries,  is not job work but ‘manufacture’. The Authority noted that applicant was processing waste sand vide heat treatment and various other set of small procedures using its own consumables and bringing into existence a fresh new finished usable product which was a distinct commodity having a different name, character and use as compared to the input and had a commercial value. Further, observing that value of raw material received from customers was nil while value of own material and labour used by the assessee contributed to the value of finished goods, it held that the activity was not job work and the assessee was not job worker. Lastly, observing that the new product was a movable property, qualifying as ‘goods’, it held that activity was a supply of goods. (Kolhapur Foundry and Engineering Cluster – 2020 TIOL 263 AAR GST )

Sale of Transferable Development Rights liable to GST under Real Estate services: The Maharashtra AAAR has held that GST is leviable on sale of Transferable Development Rights (‘TDR’)/ Floor Space Index (‘FSI’) received as a consideration for surrendering the joint rights in lands. Examining the definition of ‘goods’ and ‘services’, it was held that the transfer of TDR made for a consideration in the course or furtherance of business would be a supply of service and taxable as per the provisions of CGST Act, 2017. The AAAR specifically clarified that the levy of tax in case of TDR was not on land and any transaction relating to sale of TDR would not be considered as sale of land. It noted that the tax was levied on the benefit arising out of the land, which was supply of service. The Appellate Authority also held that TDR was not covered under the definition of ‘money’ provided in the CGST Act, 2017. The said service was held to be covered under Heading 9972 as ‘real estate services’ attracting GST at 18%.(Vilas Chandanmal Gandhi – 2020 VIL 55 AAAR)

Customs 

Advance authorisations Date of submission of documents for EO fulfilment extended: The Directorate General of Foreign Trade (‘DGFT’) has extended the last date for submission of documents for Export Obligation (‘EO’) fulfilment to 31-12-2020 in cases where the EO fulfilment period is expiring or has expired between 01-02-2020 and 31-10-2020. A new Para 4.44(g) has been inserted in Handbook of Procedures 2015-20, for this purpose, by DGFT Public Notice No. 26/2015-20, dated 16-10-2020.

Deemed exports Duty drawback on steel supplied through distributors/dealers: Steel manufacturers can now claim duty drawback in respect  of  supplies against Advance Authorisation, on steel supplied through service centres/distributors/dealers/stock yards. Sub-para 7.07(iv) has been inserted in Chapter 7 of the Foreign Trade Policy 2015-20 by Notification No. 35/2015-20, dated 01-10-2020.

Steel Import Monitoring System  Compulsory registration of all goods falling under Chapters 72, 73 and 86 of ITC (HS): Import under all HS Codes of Chapters 72, 73 and 86 of ITC (HS), 2017 shall now require compulsory registration under Steel Import Monitoring System (‘SIMS’). DGFT Notification No. 33/2015-20, dated 28-09-2020 amends Policy Condition in Chapters 72, 73 and 86 of the Schedule-I to the ITC (HS), for this purpose. Further, according to DGFT Public Notice No. 19/2015-20, also dated 28-09-2020, implementation date in respect of the additional Codes now covered under SIMS by this notification, is 16-10-2020. It may be noted that vide DGFT Notification No. 17/2015-20, dated 05-09-2019 the import policy of some 284 specified Codes under said Chapters of the ITC (HS) was already changed from ‘free’ to ‘free subject to compulsory registration under SIMS’. The latest notification now extends the SIMS requirement to import of all other goods under these Chapters.

Rebate of State Levies on export of garments and made-ups Scheme notified under scrip mechanism: The DGFT has notified the procedure for application and issuance of scrips under the Scheme for Rebate of State Levies (‘RoSL’). The RoSL scrips would be available for export of garments and made-ups exported by shipping bills prior to 07-03-2019 which have been transmitted from the ICEGATE server to DGFT server and for which the exporters have not received any RoSL amount. DGFT Public Notice No. 25/2015-20, dated 13-10-2020 inserted Para 4.97 and 4.98 in the Handbook of Procedures for this purpose. Consequently, the CBIC has also issued Notifications Nos. 38/2020-Cus. and 07/2020-C.E., both dated 21-10-2020, for conditional exemption from whole of Customs duty including additional duty and Central Excise duty, respectively, when such scrips are used.

Cases Law

Prohibited goods  can be provisionally released under Customs Section 110A: The Bombay High Court has held that Section 110A of the Customs Act, 1962 does not impose any limitation that the  goods  categorized as ‘prohibited goods’ under Section 2(33) cannot be subjected to provisional release under Section 110A. Noting that the words ‘goods, documents and things seized’ in Section 110A were expressions of general import without any qualifications and/or were not accompanied by any qualifying words, it held that hence no restriction can be read into the said expressions which was not contemplated by the statute. The petitioner had requested for provisional release of the vehicle seized by the Customs alleging it to be a second-hand vehicle, around 50-60 years old, and thus in violation of the Import Policy. The petitioner had claimed that the vehicle was a brand new one. (Sidharth Vijay Shah Vs Union of India and others (Bombay High Court))

Jt. DGFT has no power to review his own orders under FTDR Section 16 Limitation of 2 years for review notice to start from date of order to be reviewed: Observing that once the Jt. DGFT issued the EPCG licence and the Export Obligation Discharge Certificate, he becomes functus officio, the Madras High Court has held that such an order can be reviewed only by the Director General under Section 16 of the Foreign Trade (Development and Regulation) Act, 1992. The notice issued by the Jt. DGFT was held without jurisdiction and contrary to statutory provisions. On the issue of limitation, the High Court held that in terms of Section 16, the two-year period for issuance of notice for regularisation will commence from the date of the decision or order which is sought to be reviewed and not the date of demand notices as argued by the Department. (Simplex Infrastructures Ltd. v. Union of India and Ors. – 2020 VIL 446 MAD CU)

Valuation Procedure for rejection of transaction value: Observing that the proper officer did not ask the importer to furnish any information in a case where he had reason to doubt the truth or accuracy of the declared value of imported goods, CESTAT New Delhi has held that the rejection of the transaction value was arbitrary. Reliance in this regard was placed on Rule 3 read with Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. It held that rejection of transaction value of second-hand machinery/capital goods based on the valuation done by the Chartered Engineer was not in accordance with the general principles of valuation. (Champion Photostat Industrial Corporation v. Commissioner – 2020 (9) TMI 661)

Excise & Service Tax

Sabka Vishwas Scheme Amount in arrears Deposits to be adjusted after determination of amount payable: The Madras High Court has held that for cases falling under ‘Amount in arrears’ category under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, the deposits  should   be adjusted after the determination of the amount payable. Department’s contention that the sum paid was to be deducted first and the amount payable was to be computed thereafter, as endorsed by CBIC Circular bearing F. No. 867/78/2019-CX-8, dated 25-09-2019, was thus rejected. The Court was of the view that Section 124(2) shows that calculation of relief for all the categories set out in Section 124(1) must uniformly be done at the stage of calculating amount payable and that otherwise, the proviso to Section 124(2) will be rendered otiose. The Court however dismissed the petition filed by the assessee, as it observed that the payment made by the petitioner was made voluntarily towards tax liability and hence does not qualify as either deposit or pre-deposit. (Solamalai Automobiles Pvt. Ltd. v. The Designated Committee – WP (MD) No. 8227 of 2020, decided on 14-09-2020, Madras High Court)

BAS Trade discount not liable to service tax even if named as ‘commission’: In a case where the assessee had deducted 11% from the export invoice and had mentioned it as deduction under the head commission,  CESTAT Ahmedabad has held that the same is not liable to service tax under Business Auxiliary service (‘BAS’) and taxable under reverse charge mechanism. It was held that since there was transaction of sale and purchase between the assessee-exporter and buyer of the goods, whatever value was shown in the invoice was a sale value and the deduction was a discount given by the exporter to the foreign buyer. It also noted that the heading of column in the bank realisation certificate was ‘commission/discount paid to foreign buyer, agent’. Absence of any evidence to show that there was a commission agent in the transaction and any amount of commission was paid to such person, was also noted by the Tribunal while it held that trade discount even though in the name of commission, cannot be considered as commission paid towards commission agent service. (Laxmi Exports v. Commissioner – Final Order No. A/11247-11251/2020, dated 22-09-2020, CESTAT Ahmedabad)

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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