40th GST Council Meeting & Recent Developments

Faceless Assessments under Customs

Faceless Assessments – Customs Cir – 28/2020 dt 5th June 2020 N No 50/2020 dt 5th June 2020 Ins 09/2020 dt 5th June 2020

Various Digitalization & Ease of Business Initiatives by Customs –

1. E- Gatepass

2. E- Out of Charge

3. Faceless Assessments – Start on 8th June & will be implemented across by 31st Dec 2020

4. Authorized Economic Operator

5. E- Bill of Entry & E-Registration of Goods on arrival

6. Turant Customs – Cir 9/2019

Trade & Industry may take benefit of this for Cost Reduction at this crucial juncture

Expectations

Would Reduce

– classification disputes

– valuation issues

– uniformity in assessment

– avoid frivolous assessments

– Cost

Procedure of Faceless Asmt

1. Appeals will still continue to be taken up locally

2. Faceless Assessment Group (FAG) consisting of appraisers / Superintendents and Assistant Commissioners / Deputy Commissioners for verification of assessment

3. The Customs Automated System (ICEGATE) will assign the bill of entry to FAG for assessment.

4. Assessment of bill of entry is done remotely or virtually

5. FAGs are different from the existing Port Assessment Group (PAG) located in each port of import for clearance of Bill of Entry

6. There is no face to face interaction between the assessee and FAGs since location of the FAGs are not known. The communication is electronically through ICEGATE for query / replies.

7. Faceless assessment in a phased manner

8. To begin with, Phase 1 of faceless assessment: – Phase 1 is introduced w.e.f. 08.06.2020.

• Only the goods imported under Chapter 84 & 85 of Customs Tariff (primarily for capital goods) are covered in phase 1.
• Phase 1 is rolled out across Chennai and Bangalore Custom Zones only and accordingly govt. notified FAG’s in Chennai and Bangalore.
• Any imports made under these customs jurisdiction falling under Chapter 84 & 85, the Customs Automated System (ICEGATE) will mark for assessment to FAGs.

9. All documents / additional documents required for assessment of Bill of Entry is to be electronically uploaded through e-Sanchit in ICEGATE which is already in place.

10. By 31.12.20, govt wants to roll out FACELESS ASSESSMENT OF B/E across India

11. Turant Suvidha Kendra roles –

I. Accept Bond or Bank Guarantee;

II. Carry out any other verifications that may be referred by Faceless Assessment Groups;

III. Defacing of documents/ permits licences, wherever required;

IV. Debit of documents/ permits/ licences, wherever required; and

V. Other functions determined by Commissioner to facilitate trade.

12. In certain exceptional circumstances FAG may transfer assessment of bill of entry to PAG:

– Where imported goods are liable for confiscation under Section 111 of the Customs Act

– Related party transactions referred to Special Valuation Branch

– FAG not able to complete assessment for want of additional documents, test reports etc or specific alert or intelligence report available

13. Once the Faceless Assessment is put in place, the Govt. is going to set up a separate National Assessment Commissionerate (NAC) which facilitate to bring in uniformity and enhanced quality of assessment across India.

14. Faceless Assessment also carries the functions like provisional assessment, reassessment, amendment to bill of entry

15. In case of re-assessment of bill of entry which varies with self-assessment, FAG will give an opportunity to be heard through video conferencing before passing a speaking order.

16. Issuing of demand notice under Section 28 of the Customs Act, adjudication thereof and handling of audit objections will be done by PAG.

17. Principal Commissioner/Commissioner of Customs, Bengaluru City, Bengaluru, Principal Commissioner/Commissioner of Customs, Airport and Air Cargo Complex, Bengaluru, Principal Commissioner/Commissioner of Customs (II), Chennai and Principal Commissioner/ Commissioner of Customs (VII), Air Cargo Complex Chennai to be the nodal Commissioners for the purpose of administratively monitoring the assessment practice in respect of imported goods which are assigned in the Customs Automated System to the officers of the Faceless Assessment Groups in Bengaluru and Chennai

New Provisions/amendments to be notified in GST in Coming months. 40th GST Council Meeting Important Decisions, Recent Circulars & Notifications

Expected enforcement of FA 2020 Section 16(4)

S 16(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or 4[invoice relating to such] debit note pertains or furnishing of the relevant annual return, whichever is earlier.

4. Omitted vide FA 2020, dated: 27.03.2020, w.e.f. ____; earlier read as: “invoice relating to such”

Expected enforcement of FA 2020 Section 31(2)

(2) A registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as may be prescribed:

1[Provided that the Government may, on the recommendations of the Council, by notification,-

(a) specify the categories of services or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed;

(b) subject to the condition mentioned therein, specify the categories of services in respect of which-

(i) any other document issued in relation to the supply shall be deemed to be a tax invoice; or

(ii) tax invoice may not be issued.]

.. S31(2)

Substituted vide FA 2020, dated 27.03.2020, w.e.f. ____; earlier read as:

“Provided that the Government may, on the recommendations of the Council, by notification and subject to such conditions as may be mentioned therein, specify the categories of services in respect of which–

(a) any other document issued in relation to the supply shall be deemed to be a tax invoice; or

(b) tax invoice may not be issued.”

Expected enforcement of FA 2020 S 51 (3) & (4)

S 51 TDS –

1[(3) A certificate of tax deduction at source shall be issued in such form and in such manner as may be prescribed.]

(4) 2[Omitted]

1. Substituted vide FA 2020, dated 27.03.2020, w.e.f. ____; earlier read as:

“(3) The deductor shall furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the Government and such other particulars in such manner as may be prescribed.“

2. Omitted vide FA 2020, dated 27.03.2020, w.e.f. ____; earlier read as:

“(4) If any deductor fails to furnish to the deductee the certificate, after deducting the tax at source, within five days of crediting the amount so deducted to the Government, the deductor shall pay, by way of a late fee, a sum of one hundred rupees per day from the day after the expiry of such five days period until the failure is rectified, subject to a maximum amount of five thousand rupees.”

Expected enforcement of FA 2020 S 122 (1A)

122. (1) Where a taxable person who—

(i) supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

(ii) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder;

(vii) takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;

(ix) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder;

S 122 (1A)

S 122

1[(1A) Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.] 

1. Inserted vide FA 2020, dated 27.03.2020; w.e.f. ____

S 132 Punishment for certain offences

132. (1) 1[Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences], namely:-

2[(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;] 

(e) evades tax 3[Omitted] or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d);

1. Substituted vide FA 2020, dated 27.03.2020, w.e.f. ____; earlier read as: “Whoever commits any of the following offences”

2. Substituted vide  FA 2020, dated 27.03.2020, w.e.f. ____; earlier read as: “(c) avails input tax credit using such invoice or bill referred to in clause (b);”

3. Omitted vide  FA 2020, dated 27.03.2020, w.e.f. ____; earlier read as: “, fraudulently avails input tax credit”

Expected enforcement of FA 2020 Section 29(1)(c)

29. (1) The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where,–…

… 2[(c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to opt out of the registration voluntarily made under sub-section (3) of section 25:]

2. Substituted vide FA 2020, dated: 27.03.2020, w.e.f. ____; earlier read as:

“(c) the taxable person, other than the person registered under sub-section (3) of section 25, is no longer liable to be registered under section 22 or section 24.”

Council Decision: Reduction in Late Fee for past Returns

As a measure to clean up pendency in return filing, late fee for non-furnishing FORM GSTR-3B for the tax period from July, 2017 to January, 2020 has been reduced / waived as under: –

i. ‘NIL’ late fee if there is no tax liability;

ii. Maximum late fee capped at Rs. 500/- per return if there is any tax liability.

The reduced rate of late fee would apply for all the GSTR-3B returns furnished between 01.07.2020 to 30.09.2020

Comments – Late fees for this period is NIL – 15500/-

Council Decision: Reduction in Interest

Further relief for small taxpayers for late filing of returns for February, March & April 2020 Tax periods:

For small taxpayers (aggregate turnover upto Rs. 5 crore), for the supplies effected in the month of February, March and April, 2020, the rate of interest for late furnishing of return for the said months beyond specified dates (staggered upto 6th July 2020) is reduced from 18% per annum to 9% per annum till 30.09.2020.

In other words, for these months, small taxpayers will not be charged any interest till the notified dates for relief (staggered upto 6th July 2020) and thereafter 9% interest will be charged till 30.09.2020

Council Decision: Return & Payment Dates Extended for next 3 months

Relief for small taxpayers for subsequent tax periods (May, June & July 2020):

In wake of COVID-19 pandemic, for taxpayers having aggregate turnover upto Rs. 5 crore, further relief provided by waiver of late fees and interest if the returns in FORM GSTR-3B for the supplies effected in the months of May, June and July, 2020 are furnished by September, 2020 (staggered dates to be notified)

Comments – Interest & Late Fees already waived for Feb, Mar & April returns filed till 29th June to 6th July

Even after 6th July, Interest @9% and not 18%

Facility to revoke cancellation

One time extension in period for seeking revocation of cancellation of registration:

To facilitate taxpayers who could not get their cancelled GST registrations restored in time, an opportunity is being provided for filing of application for revocation of cancellation of registration up to 30.09.2020, in all cases where registrations have been cancelled till 12.06.2020.

Comments – Earlier revocation allowed for all cancellations till 31st Mar 2019 by 22.7.2019

Recent Developments in GST, Customs & FTP

Extentions

– AEO License expiring between 1st March & 31st May 2020 – Till 30th June 2020

– Duty Credit Scrips issued between 01.03.2018 and 30.06.2018 shall be valid till 30.09.2020

– In MEIS applications which attracted a late cut as on 01.03.2020, the period between 01.03.2020 and 30.06.2020 shall not be counted and the last date for submission of various categories of applications attracting that late cut and the applicable cuts will be accordingly suitable re-determined.

– For SEIS applications

a. For the services rendered in FY 2016-17, the last date of application with 10% late cut would be 30.06.2020 and after that date it would become time barred. b.  For the services rendered in the FY 2017-18, 5% late cut as was applicable on 31.03.2020, shall continue to be applicable for applications submitted till 30.06.2020, and thereafter 10% late cut would be applicable for applications submitted till 31.03.2021

GST on Directors’ Remuneration

(a) Applicability of GST on remuneration paid to whole-time directors including managing director who are employees of the company –

(a) Salary – No GST

(b) % of Sales (paid as employee) under contract & TDS u/s 192 – No GST

(c) % of Sales as a professional & TDS u/s 194J – GST under Reverse Charge

(d) Professional Services & TDS u/s 194J – GST under Reverse Charge

(b) Liability to GST in respect of remuneration paid to independent directors as defined in Section 149(6) of Companies Act, 2013 or those directors who are not employees of the company –

(a) Sitting Fees – GST under Reverse Charge

(b) Fixed Monthly fees – GST under Reverse Charge

Safeguards

(a) Contract for Employment must be clear on ‘relationship with company’.

(b) ‘TDS under Income Tax Act’ is a crucial determining factor.

(c) Commission or incentive can be paid both as under a ‘contract for service’ and ‘contract of service’.

(d) For other Services say incase of renting of property, in a capacity other than a professional.

N No 46/2020

Even if the reply to SCN for Refunds is received by the officer within 20th March 2020 to 29th June 2020 and even if the time limit of 60 days for refunds expires, Yet the Department officers has time till 30th June 2020 to pass Orders for refunds.

This has been done under powers granted by Sec 168A of CGST Act

44/2020 – CT on SMS Return

From 8th June 2020, a “NIL” Return can be filed through SMS

However it needs to be noted that the facility is only for GSTR 3B filing and NOT for GSTR 1. Large assesses need to be careful as a ‘Delivery Challan’ may be issued and has to be reflected in the Documents column but may be missed as there is no impact on taxes.

Recent Important Judicial Pronouncements

Brand Equity Treaties Limited vs. Union of India & Ors – 2020-VIL-196-DEL & N No 43/2020- CT

Rule 117 is director, insofar as it prescribes the time-limit for transitioning of credit. The same would not result in the forfeiture of the rights, in case the credit is not availed within the period prescribed. In terms of the residuary provisions of the Limitation Act, the period of three years should be the guiding principle for time limit to take Transitional ITC.

Petitioners are permitted to file relevant TRAN-1 Form on or before 30.06.2020.

In order to invalidate the aforesaid judgment, Government vide Notification No. 43/2020-Central Tax dated 16.05.2020 appoints 18th May, 2020 as the date on which section 128 of the Finance Act’ 2020 shall be come into force which amends Section 140 of the CGST Act, 2017 and in a way, it provides that transitional credit can no longer be taken after due date.

Revision in GSTR 3B – Bharti Airtel Limited

Bharti Airtel Limited [2020-VIL-197-DEL] – The assessee had mentioned the amount of Input Tax Credit (‘ITC’) in GSTR-3B for the months of July 2017 to September 2017 on an estimate basis due to difficulties in computing the actual ITC. On subsequent reconciliation, it was found that the amount of ITC mentioned in GSTR-3B was underreported, resulting in an excess payment of GST liability by way of cash.

Held – The right of the assessee to rectify GSTR-3B cannot be deprived

Some Impacts

– Assessees whose monthly output tax liability is not expected to be substantial enough to utilise the unclaimed ITC within a reasonable period of time from a business standpoint. Such assessees may prefer to rectify their GSTR-3B to prevent credit accumulation.

– In case a supplier is allowed to reduce the output supply in GSTR-3B, corresponding changes may be required to be made in Form GSTR-1 of the supplier. Therefore, as a consequence of rectifying GSTR-1, Government may introduce a mechanism where revised Form GSTR-2A is generated. The department could then contend that the recipient of such supply is also required to reverse the corresponding ITC, since such amount would not be reflecting in the revised Form GSTR-2A. Accordingly, proceedings could be initiated under Section 73 of the CGST Act to recover tax along with interest.

Goods Released under Indemnity

2020-VIL-245-TRI

M/s SRI GOPIKRISHNA INFRASTRUCTURE PVT LTD Vs THE STATE OF TRIPURA

GST – petition seeking provisional release of vehicle upon furnishing of indemnity bond – petitioner made trans-shipment of goods due to mechanical failure in the goods carrying vehicle but could not immediately amend the e-way bill due to lockdown – detention of vehicle on finding that proper e-way bill was not being carried – levy of tax and penalty – Department case the seized goods may be released on a provisional basis upon execution of a bond and furnishing of bank guarantee and there is no provision to release seized goods on the basis of indemnity bond only – HELD – the petitioner got the E-way bill amended by the competent authority and the same was produced to the superintendent but he denied to take cognizance of the amended e-way bill and refused to release the goods – it would be appropriate for fair ends of justice that the respondents shall release the goods and the vehicle, if the petitioner furnished the indemnity bond giving the relevant undertaking – the interim order shall be subject to the final decision of this Court – the writ petition is disposed of

Disallowance of ITC on Railway Sliding – Stayed

2020-VIL-239-CHG

NMDC LIMITED Vs UNION OF INDIA AND OTHERS

GST – Challenge to GST AAAR Order – Eligibility to avail Input tax credit on GST paid towards construction of railway siding and lighting of plant road, boundary and watchtower – HELD – Taking into consideration the provisions of Section 16 of the GST Act and also taking note of the decision rendered by the Supreme Court in the case of Jayaswal Neco Ltd [2015-VIL-31-SC-CE] prima facie, a strong case for grant of interim relief has been made out by the petitioner-assessee – there shall be stay of the effect and operation of the impugned AAAR order till next date of hearing 

Jayaswal Neco Ltd – Apex Court [2015-VIL-31-SC-CE]

It is clear that the railway tracks are installed not only within the plant, but the main objective and purpose for which the capital expenditure on laying these railway tracks is incurred by the appellant is for transporting hot metal in ladle placed on ladle car from blast furnace to pig casting machine through ladle car where hot metal is poured into pig casting machine for manufacture of pig iron. It is clear from the above that the use of railway tracks inside the plant not only form the process of manufacturing, but it is inseparable and integral part of the said process inasmuch as without the aforesaid activity for which railway tracks are used, there cannot be manufacturing of pig iron – We set aside the order of the Commissioner as well as of CEGAT insofar as it pertains to item “railway track material used for handling raw materials, process goods” and hold that the appellant has rightfully claimed for MODVAT credit in respect of this item which credit is wrongly reversed by the authorities below – Appeal allowed