During the week ending 13th October 2024, several key notifications and circulars were issued covering Income Tax and GST updates. The Central Board of Direct Taxes (CBDT) extended the deadline for trusts to submit audit reports in Form 10B/10BB to 10th November 2024. Additionally, public suggestions were invited for the comprehensive review of the Income-tax Act. In GST updates, rates on cancer drugs were reduced to 5%, and savoury snacks to 12%. Reverse charge mechanisms were introduced for metal scrap supplies and non-residential property renting services. Several clarifications were provided, including the applicability of GST on services like helicopter passenger transport and university affiliation services. Amendments were made to the Central Goods and Services Tax (CGST) rules, including changes to tax invoice deadlines, refund claims, and waivers for late GSTR-7 returns. Furthermore, rectification procedures for input tax credit-related disputes and updates on TDS provisions for metal scrap supplies were introduced. These changes aim to streamline tax compliance, reduce litigation, and enhance efficiency in processing tax filings.
A. Income Tax
Extension of timeline for Trusts to submit Audit Reports in Form 10B/10BB: CBDT has issued an order under section 119 of the Income-tax Act, allowing trusts, institutions, and funds to submit their audit reports for AY 2023-24 in Form No. 10B or 10BB by November 10, 2024. (The Circular No. 02/2024, initially provided a deadline of March 31, 2024, for the filing of these reports). (Income Tax Order Dated 07/10/2024)
Suggestions invited for comprehensive review of Income-tax Act: A comprehensive review of the Income-tax Act was announced in the union budget. The goal is to make it concise, clear, and easy to understand, which will reduce disputes, litigation, and provide greater tax certainty to taxpayers. An internal committee has been formed to oversee this review. The committee has invited public inputs and suggestions in four categories: Simplification of Language, Litigation Reduction, Compliance Reduction, and Redundant/Obsolete Provisions. (Income tax Press Release Dated 07/10/2024)
Obtaining suggestions for Project Integrated e-filing and CPC (IEC) 3.0: The Integrated e-filing and Centralized Processing Centre (IEC) project provides e-filing platform enabling taxpayers to file their returns, submit statutory forms, and access various services. The IEC system is the Centralized Processing Centre (CPC), which handles the processing of returns. The IEC also provides a Back-Office (BO) portal, which is used by the field officers to access taxpayer filing and processing data.
— The process of bringing in a new Project, ‘Project IEC 3.0’ (that shall replace the existing Project IEC 2.0) has already been initiated to put in place a significantly improved system to ensure a secure and user-friendly environment. The Pr.CCIT may constitute a Committee (headed by an officer not below the rank of CIT) for obtaining and consolidating the opinion/ views/ suggestions from department officers, tax professionals, tax payers and other stakeholders, in their respective Regions. (income Tax (Systems) Letter Dated 08/10/2024)
SC, Section 254 allows ITAT to entertain new claims, but power must be exercised during hearings: Case of Shriram Investments vs Commissioner of Income Tax, SC Judgement Dated 4th October 2024. The court considered that the Tribunal has not exercised its power under Section 254 of the IT Act to consider the claim. Instead, the Tribunal directed the assessing officer to consider the appellant’s claim. The assessing officer had no jurisdiction to consider the claim made by the assessee in the revised return filed after the time prescribed by Section 139(5) for filing a revised return had already expired. (SC Judgement Dated 04/10/2024)
HC, Merely Writing ‘I am Satisfied’ Not Valid Approval for Section 148 Notice: Case of Capital Broadways vs ITO, Dated 3rd October 2024. The court considered that mere repeating of the words of the statute, mere rubber stamping of the letter seeking sanction or using similar words like “Yes, I am satisfied” will not satisfy the requirement of law. Hence, we are of the firm view that PCIT has failed to satisfactorily record his concurrence. The mere use of expression “Yes, I am satisfied” cannot be considered to be a valid approval as the same does not reflect an independent application of mind. The approval granted by the PCIT for issuance of notice under Section 148 of the Act is not valid. (Delhi HC Judgement Dated 03/10/2024)
HC, Attachment of Cash Credit or Overdraft untenable: Case of Kundlas Loh Udyog vs Union of India, Himachal Pradesh HC Judgement Dated 30th September 2024. The petitioner deals in the work of Iron and Steel for which it purchases raw material and thereafter manufactures the final products as per the demand. It has the bank accounts in the nature of “Over Cash Credit” (OCC Account)/ “Cash Credit (CC)” with huge debit balance. The court held that mere providing a facility of an overdraft, it cannot be said that the bank is a debtor to its customers or holds the money for account of its customers. The Cash Credit limit is a facility provided by the bank to its customers to use and utilize the money and if such facility availed of, it would attract the interest to be charged for the same so utilized and, therefore, the amount cannot be attached. (Himachal HC Judgement Dated 30/09/2024)
B. GST
Changes in GST rate for Goods: The GST rates have been revised:
- Cancer drugs such as Trastuzumab Deruxtecan, Osimertinib, and Durvalumab providing relief to patients to 5% (earlier rate 12%),
- Extruded or expanded savoury snacks, classified under HS 1905 90 30 to 12% (earlier rate 18%) and
- Car Seats classified under HS 9401 to 28% (earlier rate 18%).
It shall be effective from 10th October 2024. (CGST Notification 05/2024 (Rate), IGST Notification 05/2024 (Rate) and UTGST Notification 05/2024 (Rate) all Dated 08/10/2024)
Reverse Charge Mechanism for supply of Metal Scrap: The supply of metal scrap relating to Chapters 72, 73, 74, 75, 76, 77, 78, 79, 80 or 81, by an unregistered person to a registered person has been brought under Reverse Charge Mechanism. It shall be effective from 10th October 2024. (CGST Notification 06/2024 (Rate), IGST Notification 06/2024 (Rate) and UTGST Notification 06/2024 (Rate) all Dated 08/10/2024)
Changes in GST rate for Services: The GST rates for transportation of passengers by helicopters services on sharing basis to be 5%, provided input tax charged on goods used in supplying the service has not been taken. It shall be effective from 10th October 2024. (CGST Notification 07/2024 (Rate), IGST Notification 07/2024 (Rate) and UTGST Notification 07/2024 (Rate) all Dated 08/10/2024)
Services exempted from GST: The services exempted from GST, mainly relates to, Application fees/ connection rental charges for electricity connection; Research and development grants from private or public sector to recognised educational institutions; Services of affiliation provided by a Central or State Educational Board or Council or any other similar body; Import of services by foreign airline companies. It shall be effective from 10th October 2024. (CGST Notification 08/2024 (Rate), IGST Notification 08/2024 (Rate) and UTGST Notification 08/2024 (Rate) all Dated 08/10/2024)
Reverse Charge Mechanism for services related to renting of any property other than residential dwelling: The Supply of Service related to renting of any property other than residential dwelling by any unregistered person to any registered person, has been brought under Reverse Charge Mechanism. It shall be effective from 10th October 2024. (CGST Notification 09/2024 (Rate), IGST Notification 09/2024 (Rate) and UTGST Notification 09/2024 (Rate) all Dated 08/10/2024)
Amendment to Central Goods and Services Tax (CGST) Rules: The amendments include changes to various rules concerning tax invoices, including the timeline for issuing invoices in specific circumstances. It also include the addition of provisions related to the issuance of invoices when the recipient is required to do so, and the revision of deadlines for submitting GSTR-7 forms. Other amendments relates to refund claims and the introduction of new rules regarding the waiver of interest and penalties under specified sections. It shall be effective from 1st November 2024. (CGST Notification 20/2024 Dated 08/10/2024)
GST Payment Deadlines to get Waiver of Interest or Penalties: The notification specifies the dates up to which tax should be paid for waiver of interest/penalties under section 128A of CGST Act. Registered persons who have received notices or statements or orders can make tax payments without incurring interest or penalties until March 31, 2025. Additionally, for registered persons notified under section 74, the payment deadline extends to six months following the issuance of a re-determination order by the appropriate officer. It shall be effective from 1st November 2024. (CGST Notification 21/2024 Dated 08/10/2024)
Special procedure for rectification of certain specified GST orders confirming demand for wrongful availment of input tax credit: The notification provide a special procedure for rectifying orders issued under sections 73, 74, 107, or 108 of the CGST Act, for addressing cases where the ITC, initially disallowed, is now permissible under the law, allowing taxpayers to avoid unnecessary litigation. It relate to cases where ITC initially disallowed under section 16(4), is now available under Section 16(5) or Section 16(6). The rectification process allows affected persons to submit an electronic application within six months of the notification’s issuance and decision within three months. (CGST Notification 22/2024 Dated 08/10/2024)
Late fee waiver for GSTR-7 returns from June 2021 onwards: The notification waives late fees for registered persons required to deduct tax at source under section 51 of the CGST Act, who failed to submit their GSTR-7 returns for the month of June 2021 and onwards by the due date. The late fee exceeding twenty-five rupees per day is waived, with the total waiver capped at one thousand rupees. Further, if a registered person has nil central tax deducted at source for a particular month, the entire late fee will be waived. It shall be effective from 1st November 2024. (CGST Notification 23/2024 Dated 08/10/2024)
Exclusion of suppliers of metal scrap from provisions of earlier notification: The suppliers engaged in the supply of metal scrap falling under Chapters 72 to 81 of the Customs Tariff Act, 1975, are excluded from the provisions of notification 5/2017 dated 19th June 2017. It shall be effective from 10th October 2024. The intent is to streamline the taxation of the metal scrap sector in line with the recommendations of GST Council. (CGST Notification 24/2024 Dated 09/10/2024)
Metal scrap brought under Tax Deducted at Source (TDS) provisions: The notification mandates that registered persons receiving metal scrap under chapters 72 to 81 of the Customs Tariff Act must deduct tax at source @ 2% when making payments to registered suppliers. It shall be effective from 10th October 2024. (CGST Notification 25/2024 Dated 09/10/2024)
Clarifications regarding applicability of GST on certain services: The clarifications mainly include-
– The universities’ affiliation services to colleges and educational boards’ affiliation services to schools are subject to an 18% GST, with a recent exemption for government schools.
– The flying training courses approved by the Directorate General of Civil Aviation (DGCA) are exempt from GST.
– The passenger transport by helicopters on a seat-share basis is subject to a 5% GST, while charter operations continue at 18%.
– The ancillary services related to goods transportation by road will generally be treated as part of the composite supply of transport, unless invoiced separately.
– The payment of GST on service imports by foreign airline establishments when made without consideration is regularized for the period from 01.07.2017 to 09.10.2024 on ‘as is where is’ basis.
– The Preferential Location Charges (PLC) for residential or commercial property sales will attract the same GST rate as construction services.
– The certain support services provided by electricity transmission utilities will now be exempt from GST, with retroactive application to past periods. (CGST Circular 234/2024 Dated 11/10/2024)
Clarification regarding GST rates & classification of goods: The clarifications mainly include-
– The extruded or expanded savoury food products will attract a GST rate of 12% from October 10, 2024, while un-fried snack pellets will maintain a 5% rate. For past periods, an 18% GST is applicable.
– The Roof Mounted Package Unit (RMPU) Air Conditioning Machines for Railways fall under HS 8415 and attract a GST rate of 28%, not 18%.
– The seats for four-wheeled vehicles are classified under HS 9401, attracting a GST rate of 18%, while two-wheeler seats are classified under HS 8714 with a 28% rate. To ensure parity, from October 10, 2024, car seats will also attract a GST rate of 28%. (CGST Circular 235/2024 Dated 11/10/2024)
Clarification regarding the scope of “as is / as is, where is basis” mentioned in the GST Circulars: In the context of GST, the phrase ‘regularized on as is where is’ basis means that the payment made at lower rate or exemption claimed by the taxpayer shall be accepted and no refund shall be made if tax has been paid at the higher rate. The intention is to regularize payment at a lower rate including nil rate due to the tax position taken by taxable person, as full discharge of tax liability. The tax position of a taxable person is reflected in the returns filed by the person where the applicable rate of tax (or relevant exemption entry) on a transaction/supply is declared. However, the circular specifies that these provisions do not cover cases where no GST was paid (not involving doubt/ interpretation issue), and the full tax amount will still be collectible in such instances. (CGST Circular 236/2024 Dated 11/10/2024)
Union Territory Goods and Services Tax (Ladakh) Rules, 2024: The UTGST (Ladakh) Rules have been notified based on adaptation of CGST Rules, to the specific context of Ladakh. The key adaptations cover various areas such as scope of supply, composition levy, input tax credit, registration, tax invoices, and assessment processes. Specific modifications include replacing references to the Central GST Rules with the new Ladakh Rules and adjustments to rules regarding deficiencies communicated under FORM GST RFD-03. (UTGST Notification 02/2024 Dated 07/10/2024)
AAR, GST classification and tax rates for body building activities on motor vehicle chassis provided by customers: Case of Kailash Vahan Private Limited, AAR Chennai Ruling Dated 23rd September 2024. The chassis is owned by the customer, and once the body is built, the vehicle is registered in the customer’s name. AAR ruled that the activity of body building on chassis owned by registered customer or un-registered customer both fall under the scope of supply of service and as per the scheme of classification of services, merits classification under Service code (Tariff) 998881 ‘Manufacturing services on physical inputs (goods) owned by others- Motor vehicle and trailer manufacturing services’. Only the supply of the activity of body building on chassis owned by GST registered customer is Job work. The rate of tax applicable would be 18%. (AAR Ruling Dated 23/09/2024)
C. Central Excise
No Notification/ Circular during the week.
D. Custom Duty
Authority for SCN adjudication appointed for case involving Penta Gold Limited: The notification appoints adjudicating authorities to handle Show Cause Notices (SCNs) related to customs violations involving Penta Gold Limited based in Mumbai, and others. (Custom Notification 65/2024 (NT) Dated 07/10/2024)
E. Directorate General of Foreign Trade (DGFT)
Import policy conditions for parts of pocket lighters, gas fuelled, non-refillable or refillable lighters: The notification relates to import policy conditions, for import of parts of pocket lighters, gas fuelled, non-refillable or refillable lighters (Cigarette lighters). These shall be ‘Restricted, with immediate effect. (DGFT Notification 36/2024 Dated 13/10/2024)
NOC by Advance Authorisation holders not required for procurements from SEZ Unit: DGFT clarified that the provisions requiring NOC under para 4.08 (ii) of HBP will not be applicable in case of procurement of Acetic Anhydride by an Advance Authorisation holder from SEZ Unit, against certificate of supplies, provided the same is manufactured by an unit operating inside SEZ. (DGFT Policy Circular 08/2024 Dated 11/10/2024)
Inclusion of additional items under Global Authorization for SCOMET transfer: DGFT amends Appendix 10M of Paragraph 10.15 in the Handbook of Procedures of the Foreign Trade Policy (FTP) 2023. These amendments expand the range of items covered under the Global Authorization for Intra-Company Transfer (GAICT) for SCOMET items, software, and technology. The updated list now includes additional items such as advanced materials, technology for electromagnetic absorption, hydrophone arrays, and specialized software for real-time processing. (DGFT Public Notice 26/2024 Dated 07/10/2024)
Clarifications on the import or re-import of Exhibits and Samples: The Para 2.60 of the Handbook of Procedures (HBP) 2023 provides that the import or re-import of exhibits and samples for demonstrations, displays, exhibitions, or participation in fairs, whether in India or abroad, can proceed without authorization. DGFT confirms that such imports will not require authorization or registration, provided compliance with other conditions in Para 2.60 of HBP is ensured. (DGFT Trade Notice 20/2024 Dated 07/10/2024)
F. Securities and Exchange Board of India (SEBI)
Timelines for disclosures by Social Enterprises on Social Stock Exchange (SSE): The timeline for annual disclosures and annual impact report under LODR Regulations, by Social Enterprises on Social Stock Exchange, for FY 2023- 24 has been extended up to 31st January 2025. (SEBI Circular Dated 07/10/2024)
Specific due diligence of investors and investments of AIFs: The circular mandates that AIFs must conduct due diligence on their investors and investments to prevent circumvention of various regulatory frameworks. It include provisions related to Qualified Institutional Buyers (QIBs), Qualified Buyers (QBs), and regulations set by the Reserve Bank of India (RBI) concerning stressed assets. AIFs must ensure that no investments indirectly allow RBI regulated entities to acquire interests they cannot hold directly. The circular also outlines due diligence checks for existing investments, particularly those from countries sharing land borders with India. Custodians are responsible for compiling and reporting investment details. (SEBI Circular Dated 08/10/2024)
Extension of timeline for implementation of pay-out of securities directly to the client’s demat account: SEBI vide circular dated 5th June 2024 has mandated pay-out of securities directly to the client’s demat account. The circular was to come in to effect from October 14, 2024. Based on the review meeting held with MIIs and representation received from Brokers’ ISF, it has been decided that the circular shall come into effect from 11th November 2024. (SEBI Circular Dated 10/10/2024)
Change in timing for securities pay-out in the Activity schedule for T+1 Rolling Settlement. SEBI vide circular dated 5th June 2024, has mandated that the pay-out of securities be credited directly to the client account by the Clearing Corporations (CCs). As a consequence of the above, the timing of the pay-out of securities shall be revised from 1:30 PM to 3:30 PM. Thus, as a result of Direct Pay-out, the securities shall be credited to the clients’ demat account on the same settlement day instead of one working day from the receipt of pay-out from the Clearing Corporation. (SEBI Circular Dated 10/10/2024)
Consultation paper on draft circular for Policy for Sharing Data for the Purpose of Research / Analysis: The Data Sharing Policy was introduced in 2018, aimed to facilitate analytics and research activities. SEBI has identified the need for modifications to streamline the process and address data authenticity and privacy concerns. The proposed framework will categorize shared data into two groups: public data, which can be freely disseminated, and confidential data, which cannot be shared. The data ownership should lie with market intermediaries (MIIs), such as stock exchanges and clearing corporations, which are tasked with developing their own data sharing policies. The comments are invited from stakeholders. (SEBI Consultation Paper Dated 08/10/2024)
G. Ministry of Corporate Affairs (MCA)
Amendment to Companies Adjudication of Penalties Rules: A new proviso has been inserted in rule 3A(1) which stipulates that any proceedings already pending before an Adjudicating Officer or Regional Director at the time of this amendment will continue according to the rules that were in place prior to the amendment. The updated rules aim to ensure consistency in handling ongoing cases despite the regulatory changes. (MCA Notification Dated 09/10/2024)
NFRA penalties auditors and audit firm for professional misconduct i audit of Coffee Day Enterprises Limited (CDEL): The NFRA investigated the firm’s actions following a SEBI report revealing a Rs 3,535 crore fund diversion from seven CDEL subsidiaries to Mysore Amalgamated Coffee Estate Limited (MACEL), a promoter-owned entity. The failed to address clear red flags of fraud outlined in CBI report, such as loans and advances without commercial justification and evergreening of debts. NFRA found the auditors negligent in adhering to standards, failing to conduct proper audit procedures, and delivering contradictory audit reports. It imposed a Rs 2 crore fine on CA firm Venkatesh & Co., Rs 10 lakh on CA Dasaraty V., and Rs 5 lakh on CA Desikan G. The auditors are also barred from practicing for 10 years and 5 years, respectively. (NFRA Order Dated 10/10/2024)
H. Insolvency and Bankruptcy Board of India (IBBI)
Extension of time for filing Forms to monitor liquidation processes: The representations have been received from the liquidators and Insolvency Professional Agencies for extending the date citing the technicalities and issues involved in timely submission of the forms. The IBBI has decided to extend the deadline for submission to 30th November 2024. (IBBI Circular Dated 09/10/2024)
Extension of time for filing Forms to monitor voluntary liquidation processes: The representations have been received from the liquidators and Insolvency Professional Agencies for extending the date citing the technicalities and issues involved in timely submission of the forms. The IBBI has decided to extend the deadline for submission to 30th November 2024. (IBBI Circular Dated 09/10/2024)
NCLAT, Claims could not be entertained by Resolution Professional arising after commencement of CIRP: Case of Gujarat Uurja Vikas Nigam vs Udayraj Patwardhan, NCLAT Judgement Dated 23rd September 2024. Resolution Professional cannot entertain any claims arising after the commencement of the Corporate Insolvency Resolution Process ( CIRP ) as it was a clear law that Resolution Professional could only entertain claims due and filed till CIRP commencement date. (NCLAT Judgement Dated 23/09/2024)
IBBI suspends registration of IP Yogesh Kumar Gupta for violation of provisions of IBC: The committee found that he violated the provisions by removing the CoC members from the list of the CoC and revised their voting shares on the basis that some of the CoC members had not contributed to the CIRP cost, and has not taken approval from the CoC for the going concern expenses. IBBI suspended the registration of Mr. Yogesh Kumar Gupta for a period of three years. (IBBI Order Dated 11/10/2024)
I. Reserve Bank of India (RBI)
Interest Equalization Scheme (IES) on Pre and Post Shipment Rupee Export Credit: Government has allowed for an extension of the Interest Equalization Scheme for Pre and Post Shipment Rupee Export Credit for three months up to December 31, 2024. Fiscal benefits of each MSME, on aggregate, will be restricted to ₹50 lakhs for the Financial Year 2024-25 till December 31, 2024. (RBI Notification 80/2024 Dated 09/10/2024)
Implementation of Credit Information Reporting Mechanism subsequent to cancellation of licence or Certificate of Registration: As per the Credit Information Companies (Regulation) Act, 2005 (CICRA), only entities defined as Credit Institutions (CIs) can provide credit information to Credit Information Companies (CICs). Once a CI’s license is cancelled, it can no longer be considered a CI, and its borrowers’ repayment histories will not be updated, creating difficulties for borrowers who continue to meet their obligations. To address this issue, the RBI mandates that CIs with cancelled licenses must still report credit information related to borrowers onboarded before cancellation and until the loan lifecycle is completed or the institution is wound up. (RBI Notification 81/2024 Dated 10/10/2024)
Submission of information to Credit Information Companies (CICs) by Asset Reconstruction Companies (ARCs): ARCs are now required to become members of all CICs and submit borrower data in the RBI-prescribed Uniform Credit Reporting Format. The submitted data must be updated at least on a fortnightly basis, or more frequently as agreed with the CICs. The guidelines call for ARCs to adopt best practices, including appointing a nodal officer for CIC matters, ensuring regular data updates, centralising no-objection certificates, and prioritising customer grievance redressal, particularly concerning credit information updates. (RBI Notification 82/2024 Dated 10/10/2024)
Facilitating accessibility to digital payment systems for Persons with Disabilities: The differently abled persons, are increasingly adopting digital payment systems. To promote effective access, payment system participants (PSPs) are advised to review their payment systems / devices in terms of accessibility to Persons with Disabilities, and carry out the necessary modifications, such that all their payment systems and devices, such as Point-of-Sale machines, can be accessed and used by them with ease. In this connection, the Accessibility Standards issued by the Ministry of Finance referred to above may also be adhered to, as applicable, by all PSPs. (RBI Notification 83/2024 Dated 11/10/2024)
Internal Risk Assessment Guidance for Money Laundering/ Terrorist Financing Risks: RBI released the “Internal Risk Assessment Guidance for Money Laundering/Terrorist Financing” for regulated entities (REs) to enhance compliance with Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) regulations. REs are mandated to periodically conduct Money Laundering (ML) and Terrorist Financing (TF) risk assessments. The guidance provides principles and methodologies to help identify and mitigate risks associated with clients, services, and transactions. It emphasizes a Risk- Based Approach (RBA) that allows entities to allocate resources effectively based on the risk profiles of their customers and products. (RBI Press Release Dated 10/10/2024)
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Disclaimer: The contents of this article are for informational purposes only. The user may refer to the relevant notification/ circular/ decisions issued by the respective authorities for specific interpretation and compliances related to a particular subject matter)
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