Whether Form ‘C’ should be made available to an assessee even after implementation of GST?

Whether Form ‘C’ should be made available to an assessee even after implementation of the goods and services tax?

Introduction:  On July 1, 2017, India ushered the Goods and Service Tax, the country’s biggest indirect tax reform since Independence and now GST has completed its successful one year. In GST, not all the goods are covered, the following goods, inter alia, have been kept out of GST purview.

They are Petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel etc. and they are called as non-GST goods. However, the taxes for these products are attracted as per the applicable structure before introduction of GST.

Definition of Goods under Central Sales Tax Act, 1956 after 01.07.2017.

In view of implementation of GST with effect from 1st July 2017, definition of “goods” under clause (d) of Section 2 of CST Act, 1956 has been amended and the same is reproduced as under:

‘(d) “goods” means-

1) petroleum crude;

2) high speed diesel,

3) motor spirit (commonly known as petrol);

4) natural gas,

5) aviation turbine fuel; and

6) alcoholic liquor for human consumption’

The Ministry of Finance, Department of Revenue, State Tax Division, New Delhi has issued a clarification in Office Memorandum dated 7th November 2017 vide reference Office Memorandum dated 7th November, 2017 issued by Ministry of Finance, Department of Revenue, State Tax Division, New Delhi vide F No.28011/03/2014-ST-11 , clarifying “ ‘Goods’ referred to in section 8(3)(b) of the CST Act, 1956 will have the same meaning as defined and amended under section 2(d) of the said Act. However it does not affect the provisions of section 8(3)(b) of the CST Act relating to communication network or mining or generation or distribution of electricity or any other form of power”.

Further, the goods referred to in section 8(3)(b) of the CST Act are the class or classes of goods specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in the telecommunication network or in mining or in the generation or distribution of electricity or any other form of power.

Recent case law: M/s Carpo Power Limited, the petitioner, has challenged the Commercial Taxes Department, the respondents, refusal to issue `C’ Forms in respect of natural gas purchased by it in the course of inter- state trade or commerce and used by it for the generation of electricity. The petitioner seeks a writ of mandamus before the Hon’ble High Court of Punjab and Haryana, Chandigarh directing the respondents to issue `C’ Forms under the Central Sales Tax Act, 1956 and the Central Sales Tax (Registration and Turnover) Rules, 1957 in respect of the inter-state sales of natural gas, a non-GST goods, by certain oil companies based in Gujarat to the petitioner in Haryana and used by the petitioner for generating electricity.

It has been held that the respondents are liable to issue `C’ Forms in respect of the natural gas purchased by the petitioner from the Oil Companies in Gujarat and used in the generation or distribution of electricity at its power plants in Haryana. In the event of the petitioner having had to pay the oil companies any amount on account of the first respondent’s wrongful refusal to issue `C’ Forms the petitioner shall be entitled to refund and/or adjustment of the same from the concerned authorities who collected the excess tax through the oil companies or otherwise. The concerned authorities shall process such a claim within twelve weeks of the same being made by the petitioner in writing and the petitioner furnishing the requisite documents/form. The matter went to the Hon’ble Supreme Court.

The question arose before the Hon’ble Supreme court whether Form C should be made available to an assessee even after implementation of GST. The question was  answered in the affirmative, in favour of the Assessee.

The Supreme Court has upheld the decision of the Punjab and Haryana High Court that Form ‘C’ should be made available to an assessee even after implementation of the goods and services tax (GST). A Bench led by justice Ranjan Gogoi, while dismissing a Haryana government’s appeal, observed that “if you (Haryana government) poke industries like this, they will run away”.

The issue before the court was whether after the amendment to the Central Sales Tax Act, 1956, power company Caparo Power was entitled to be issued ‘C’ Forms in respect of natural gas purchased from Gujarat-based BPCL and IOC in the course of inter-state sales for generation of electricity.

The HC held that the sale tax law as defined in Section 2(i) of CST Act will mean the law for the time being in force in any state for levy of taxes on sale and purchase of goods. It further ruled that the definition is inclusive, and not restrictive, hence will include the HGST Act 2017 as well.

Form C is issued by a purchasing dealer to a selling dealer to avail of the benefit of the concessional rate of CST. The objectives of providing benefit vide C Form are to negate effect of high rate of taxation and to safeguard the consumers’ interest.

The Haryana government in its appeal said Caparo was not engaged in re-selling of these goods and its registration under the CST Act lapsed on the commencement of the HGST Act. So, the company was not entitled for Form C. It further said the provisions of the CST Act would apply only if it sold the same goods that it had purchased (natural gas).

However, the HC said the CST Act does not restrict the usage of Form C only for the purpose of resale, but can be used for resale, manufacture, processing or generation/distribution of electricity.

In view of the Supreme Court directions, Form-C declarations are to be issued for the period from 1 July 2017 onwards ‘ only in respect of inter-state purchase of goods enumerated in section 2 (d) of the CST Act, 1956 for any of the following purposes:

a) resale of six goods;

b) use in the manufacture or processing of six goods for sale;

c) use in the telecommunication network or in mining

d) or in the generation or distribution of electricity or any other form of power.

Conclusion: The Karnataka State Government has already issued a circular No.16/2017-18 dt 02.03.2018 stating that Form ‘C’ can be issued for non-GST goods ie., goods listed in section 2 (d) of the CST Act, 1956.  Based on the Supreme Court decision, the Commercial Tax Department should not deny C forms for the non-GST goods, as long as the Form B CST certificate of the Assessee indicates the class of goods and it should specify the purpose of use of the goods.

The author is a director in Ms Lore Tax Professionals Private Ltd., Coimbatore and can be reached at [email protected].

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