GST, Excise, Service Tax & Customs updates for January 2019

Article contains  Amendments in GST Law from 01st February 2019, Proposal of 32nd GST council meeting, Budget Update, Important cases decided on GST, GST Compliance calendar for February 2019, Customs Changes for the month of February 2019,  Important cases decided on Custom Law and Important cases decided on Central Excise & Service Tax.

A. Amendments in GST Law from 01st February 2019

Amendments to CGST Act 2017 vide CGST (Amendment) Act 2018 which will be in force from 01st February 2019.  The key amendments that will take effect are as under:

a. Supplies from unregistered persons – Section 9(4) substituted

Section 9 has been amended to provide that tax shall be liable to be paid under RCM by specified class of persons on supply of specified categories of goods or services received from un-registered persons.

Earlier, taxpayers were liable to pay tax under RCM in case of receipt of supplies from un-registered persons (though this provision has been kept suspended)

b. Composition levy / scheme – Section 10 amended

♦ Section 10(1) amended to clearly provide that the composition option is with respect to tax payable under Section 9(1)

♦  Government empowered to increase threshold limit for composition taxpayers to Rs. 1.5 Crores as per GST Council’s recommendation.

♦  Composition taxpayers shall be allowed to supply services upto a Value of Rs. 10% of turnover or Rs. 5 lakhs, whichever is higher.

c. Input Tax Credit

♦ Section 16 of CGST Act amended to provide for deemed receipt of services by registered person where the services are provided by the supplier to any person on the direction and on account of such registered person.

♦ Credit available on motor vehicles for transportation of persons having a seating capacity of more than 13 passengers.

♦ Credit on services of insurance, servicing, repair and maintenance of motor vehicles has been barred and will be available in specified circumstances.

♦ Credit on leasing, renting or hiring of motor vehicles barred and available only in cases where credit on motor vehicle itself would have been available or used for making outward supply of same category.

♦ Credit on food and beverages, outdoor catering, health services etc. remains barred except where such expenses are obligatory under any law.

d. ITC restriction – Amendment in Section 17

♦ Value of exempt supply (for proportionate reversal) will not include activities specified in Schedule III, except sale of land & sale of building in respect of which construction has been completed prior to sale.

♦ Section 17(5)(a) amended to provide ITC in respect of motor vehicles only in certain cases

♦ ITC will be available in respect of motor vehicles having approved seating capacity of more than 13 persons. For motor vehicles having approved seating capacity upto 13 persons, ITC will be available only when such vehicles are used for

• Further supply of such motor vehicles
• Transportation of passengers
• Imparting training on driving such motor vehicles

ITC in respect of general insurance, servicing, repair and maintenance relating to motor vehicles, vessels and aircraft will not be available if credit of motor vehicles is restricted.

ITC, however, will be available if the recipient is engaged in the:

(i) manufacture of such motor vehicles, vessels or aircraft; or

(ii) supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;

e. Credit distribution by ISD – Turnover – Amendment in Section 20

Definition of turnover for the purpose of distribution of ITC by Input Service distributor not to include CST paid on non-GST supplies.

f. Amendment in Section 22 (Persons liable for registration)

♦ Threshold limit for registration can be increased to Rs. 20 lakhs from Rs. 10 lakhs on request by special category State and based on recommendations of GST Council

♦ Special Category States – meaning amended to exclude Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand

g. Amendments in Section 25 (Procedure for registration)

♦ SEZ developer or SEZ unit shall be required to obtain separate registration distinct from its registration for place of business located outside SEZ.

♦ A person having multiple places of business in a State/UT shall be allowed to obtain a separate registration for each such place of business subject to prescribed conditions.

h. Amendment in Section 29 (Cancellation of registration)

Provisions included for suspension of registration when cancellation proceedings are pending.

i. Amendment in Section 34 (Credit / debit notes)

Section 34 has been amended to enable issuance of single debit / credit note in respect of multiple invoices issued for supplies made during a financial year.

j. C& AG audited entities-Amendment in Section 35

Audit by Chartered Accountant as per Section 35 not required for department of Central / State Government or local authority whose accounts are subject to audit by C&AG.

k. Amendment in Section 49 (Credit utilisation – priority rule)

Balance of ITC in SGST / UTGST ledger shall be allowed for payment of IGST only when balance of ITC in CGST ledger is

not available for payment of IGST.

l. Insertion of new Section 49A (Credit utilisation)

ITC on account of CGST, SGST or UTGST to be first utilised for payment of IGST, CGST, SGST or UTGST only after ITC available on account of IGST has been first utilised fully towards such payment.

m. Amendment in Section 54 (Refund)

Section 54(8)(a) has been amended to provide that tax paid at the time of exports shall be refunded to the applicant in case of exports – reference to zero rated supply effectively omitted and amended to reflect only exports

n. Amendment in Section 107 (Pre-deposit before Appellate Authority)

Maximum pre-deposit amount in case of appeal before an Appellate Authority capped at Rs. 25 Crores.

o. Amendment in Section 112 (Pre-deposit before Tribunal)

Maximum pre-deposit amount in case of appeal before Appellate Tribunal capped at Rs. 50 Crores.

p. Amendment in Section 129

Time period for payment of tax and penalty by a transporter or owner on seizure of goods increased from 7 to 14 days.

q. Amendment in Section 143 (Job work)

Time period for which goods/capital goods can be retained by job-worker may be extended by Commissioner for one more year in case of inputs and two more years in case of capital goods

r. Entry 4 of Schedule I amended to provide that import of services by any person from a related person or from any of his other establishments outside India, in the course or furtherance of business shall be deemed to be supply even if made without consideration. [‘Taxable person’ substituted with ‘person’]

s. Amendment in Schedule III (Neither supply of goods nor services

Following new entries inserted in Schedule III:

♦ Supply of goods from a place in non-taxable territory to another place in non-taxable territory without such goods entering into India.

♦ Supply of warehoused goods to any person before clearance for home consumption.

♦ Supply of goods by consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.

t. Clarification on GST rate applicable on supply of food and beverage services by educational institution

Government of India issued Circular No. 85/04/2019-GST dated 1st January 2018 titled “Supply of all services by an educational institution to its students, faculty, and staff is exempt under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

♦ Supply of all services including supply of food and beverages by an educational institution to its students, faculty, and staff would also be exempt from tax.

♦ Supply of food and beverages by any person other than the educational institutions based on a contractual arrangement with such institution is leviable to GST@ 5%.

B. Proposal of 32^nd GST council meeting

a. GST registration threshold for supply of  goods proposed to be doubled

GST Council in its 32 meeting held on 10-1-2019 has recommended increase in the GST registration  threshold for supply of goods from Rs 20 lakh to Rs 40 lakh with effect from 1-4-2019. This threshold will also be doubled for the special category States from Rs. 10 lakh to Rs 20 lakh.

b. GST Composition Scheme set to be broadened

GST Council has recommended increase in turnover threshold for Composition Scheme for goods to Rs 1.5 crore from the present limit of Rs. 1 crore. Suppliers rendering either independent services or providing a mixed supply of goods & services with a turnover of up to Rs 50 lakhs p.a can join this scheme, where the tax rate is fixed at 6%. Now Composition tax payers will pay tax quarterly, but file returns annually.

c. States given powers -For choosing if they want to sustain the threshold exemption at Rs 20 Lakh or Rs 40 Lakh

d. Real Estate sector – A committee has been set up to consider real estate GST rates

e. Calamity cess – A cess rate of 1% by Kerala state to be imposed on intra state sales for a period of 2 years

C. Budget Update- there is no major changes in GST except following

♦ Government has moved GST Council to appoint a Group of Ministers to examine and make recommendations to reduce GST burden on home buyers at the earliest.

♦ GST registered SME units will get 2% interest rebate on incremental loan of Rs 1Crore.

♦ Requirement of sourcing by government enterprises from SMEs increased up to 25%, of which, at least 3% to be sourced from women-led SMEs

♦ Government E-procurement Marketplace (GeM) platform extended to Central Public Sector Enterprises

D. Important cases decided on GST

a.  Anti-Profiteering has issued Order No. 17/2018 dated 07-12-2018 in case of  M/S Harish Bakers & Confectioners Pvt. Ltd.–

Applicant had alleged that although the GST rate applicable on the Chocolates had been reduced from 28% to 18% w.e.f. 15.11.2017, the Respondent had not reduced the prices of 2 products viz. the Nestle Munch Nuts 32 Gm Chocolate and the Cadbury Dairy Mik Chocolate (here-in-after referred to as the products) and had thus not passed on the benefit of such rate reduction to him. He had also submitted the pre-rate reduction invoice  and the post rate reduction invoice.

b.  Anti-Profiteering has issued Order No. 28/2018 dated 27-12-2018 in case of  M/S Ahuja Radios.- No Profiteering proved–

Anti-profiteering allegations were investigated on the supply of product on account of not passing on the benefit of reduction in the rate of tax w.e.t. 15.11.2017. NAA held that – There was no increase in the per unit price (excluding GST) in respect  of both the products and Allegation of profiteering by the Respondent was not sustainable.

c. Detention of goods not permissible over minor detectable errors 

The High Court, however, held that if IGST has not been paid correctly, goods need to be released only on furnishing of the bank The Court was also of the view that if a human error which can be seen by naked eye is detected, the same cannot   be   capitalised   for   penalization. (Rai Prexim India Pvt. Ltd. v. State of Kerala –  2018- VIL-553-KER)

d.  Seizure orders and notices were issued to petitioners under sections 129 (1) and (3), respectively, on ground that E-Way Bill-01 were not accompanied by Transporters when goods were intercepted. Batch of all the writ petitions were in the month of March 2018. The High Court of Allahabad decided a case of Godrej & Boyce Manufacturing Co. Ltd Held that Vehicle transporting the goods broke down hence, goods transferred to another vehicle, therefore delay was neither intentional nor deliberate and hence penalty was not attracted Fault in any case is unintentional and thus no seizure or imposition of penalty under section 129 is possible

 e. Sale to international passenger from shop at domestic airport attracts GST–

Sale of goods to international passenger from a shop located at a domestic airport or domestic security hold area is liable to Bombay High Court has held that such supply is not a taxable supply under Section 2(78) of the CGST Act, which is only applicable to shops past immigration counter and customs frontiers at international airports. Madhya Pradesh High Court has held that supply to such shop would be liable to GST [ A-1  Cuisines (P) Ltd. v. Union of India – 2018-VIL-575-BOM]

f.  Seizure  due   to   expiry   of   e-way   bill,   when wrong

Allahabad High Court has allowed   release of goods noting that instructions   received from department did  not  match  with  the documents produced (Timexo Fasteners State of UP – 2018-VIL-532-ALH)

 g. Purchase in different State, and subsequent transportation– omission of e-way bill

Kerala High Court has quashed detention of a car purchased in  Puducherry and carried to Kerala, on omission  of e-way It pointed that sale was of intra-State nature, since purchaser acquired   temporary registration and insurance in Puducherry. Transport of the vehicle by the  dealer on behalf of the purchaser was hence  termed  to  be  of  used  personal  effects, thereby attracting exemption from the e-way bill. [ Kun Motors Co. Pvt. Ltd. v.  Asst.  State  Tax   Officer. Judgement dated 6  -12-2018 in W.A. N  o. 1803 of 2018, Kerala High Court]

 h. Place of supply of imports made through different State 

In a case where importer in Mumbai importing at Haldia (W.B) and then supply therefrom after storing the goods in the warehouse at Haldia, Maharashtra AAR has held that place from where the supplier makes a taxable supply shall be the location of the supplier e. Mumbai Head Office, since the applicant do not have any godown in the state of West Bengal. [ In RE  :  Sonkamal Enterprises Private Limited – 2018-VIL-309-AAR]

i.  Construction service Occupancy certificate is completion certificate –

Considering Karnataka State local law, AAR Karnataka has held  that chartered enginner’s completion certificate for date of completion of property cannot be a substitute to the one issued by the competent authority which decides tax liability on Immoveable property.  It was also held that any consideration received before such date will be considered as towards supply and liable under Entry 5 of Schedule II of the CGST Act [ In RE : Bindu Ventures – Advance  Ruling No. KAR ADRG 32/2018, dated 3-12-2018, AAR

 j. Supplies to duty–free shop at airport liable to GST, as it is not export

Observing that duty-free shop (DFS) situated at airport cannot be treated as a territory outside India as per provisions of IGST Act [Vasu Clothing (P) v. UOI – 2018-VIL-577-MP]

k. Bill-to-ship-to mode not limited to only three parties

Holding that IGST Section 10(1)(b) does not limit transaction to only three parties, AAR Raj asthan has allowed the applicant to transact on bill-to-ship-to mode in a transaction involving 4 (Sanjog Steels Pvt. Ltd. Advance Ruling No. RAJ/AAR/2018-19/25, dated 2-11-2018, AAR Rajasthan

 l. Service to other units by employees at Services rendered by employees at corporate office in areas of accounting, administrative work and IT system maintenance, which benefits units  in other parts of the country is “supply” (Columbia Asia Hospitals Pvt Ltd. – Order No. KAR/AAAR/05/2018-19, dated 12-12-2018, AAAR Karnataka)

m. Service not ‘Pure Service’ when goods used significantly

In a case involving street lighting infrastructure and upkeep services provided to a municipal corporation, Odisha AAR has held that, considering contractual nature of work which fits in Section 2(119) of CGST Act and significant use of goods/material involved, said services will not constitute ‘pure services’  (Super  Wealth  Financial  Enterprises      Order No. 4/ODISHA-AAR/2018-19, dated      31-10-2018, AAR Odisha]

n. Transport service accompanying supply of food to attract 18% GST

Telangana AAR has held that supply of food by also transporting it from place of production to the place of sale is a composite supply under Section 8 of CGST Act and that transportation is ancillary with supply of food (outdoor catering) being the principal supply. (In Prism Hospitality Services – TSAAR Order No. 12/2018, dated 26-9-2018, AAR Telangana)

o. ITC of IGST paid in Bill-to-ship-to model, available

AAR Rajasthan has held that ITC of IGST paid on  -to-ship-applicant purchases goods from a supplier in a different State but asks him to deliver them to another person in that very State, is available. Provisions of Sections 16 and 17 of CGST were relied. [In RE: Umax Packaging Advance Ruling No. RAJ/AAR/2018-19/23, dated 2-11-2018, AAR Rajasthan]

p. Transfer of development rights to a developer

Karnataka AAR has held that a land owner who supplies development rights to a developer for a consideration received in the form of construction services shall pay GST at the time when the builder transfers share of land owner’s premises.  (Patrick Bernardinz Advance Ruling No. KAR ADRG 29/2018, dated 28-11-2018, AAR Karnataka] 

E. GST Compliance calendar – February 2019  

~ February 2019 ~
Sun	Mon	Tue	Wed	Thu	Fri	Sat
					1	2
3	4	5	6	7	8	9
10 (GSTR-7 &8)	11 (GSTR-1)	12	13 GSTR-6)	14	15	16
17	18	19	20 (GSTR-3B)	21	22	23
24	25	26	27	28

–

GSTR-1	Outward supply for the month of January 2019
GSTR-5	Non resident foreign taxpayers return for the month of January 2019
GSTR-6	Input service distributor for the month of January 2019
GSTR-7	Tax Deducted at Source for January 2019
GSTR-8	Tax Collected at Source by e-commerce operator for January 2019
GSTR-3B	Summary return tax payment for the month of January 2019

F. Customs Changes for the month of February 2019

♦ Documents for online IEC applications, clarified- DGFT has clarified that if IEC is required to be issued in the name of the firm, the application must be made in the name of the firm. (Trade Notice No. 39/2015-20)

 ♦ Advance authorisation available to other exporters based on ratified norms: All applicants of Advance Authorization are now eligible to apply and get their authorizations based on ratified norms which are available on DGFT website in the form of minutes.  (DGFT Public Notice No. 64/2015-20)

 ♦ IGST refund on exports Resolution of some EGM related errors: CBIC has instructed its officers to take all necessary steps to ensure that all EGMs of cargo related to past cases are filed before 31-1-2019. (Circular No. 1/2019-Cus.)

♦ EPCG Scheme – List of products importable revised: EPCG scheme now allows import of furniture and fixtures, flooring materials and furnishing materials for hospitals. (Public Notice No. 61/2015-20)

♦ Re-export/return of imported SCOMET items Procedure prescribed: DGFT has prescribed procedure for re-export/return of imported SCOMET items due to reasons of obsolescence of technology of imported items, cancellation of order by Indian buyer/end user, dead on arrival (Public Notice No. 59/2015-20)

 ♦ Customs duty reduced on specified imports from Malaysia, ASEAN, South Korea and Japan: Customs duties on import of specified goods from Malaysia, South Korea and from ASEAN countries have been reduced. Further, basic customs duty has been reduced on gear box and parts thereof [Tariff Item 8708 40 00], of specified motor vehicles, when imported from Japan under the India-Japan Comprehensive Economic Partnership Agreement.

♦ Capital goods for distribution of power not importable under EPCG: Import of capital goods required for distribution of electrical energy (power) in not permitted under EPCG scheme. (DGFT Circular No. 15/2015-20, dated 4-1-2019 ) 

G. Important cases decided on Custom Law

♦ Valuation Assessing officer to give reasons for rejecting value: Supreme Court has held that it is incumbent upon assessing officer to give reasons for rejecting transaction value; to establish that price is not the sole consideration; and to give the reasons supported by material to arrive at own assessable value (Commissioner v. Sanjivani Non-Ferrous Trading Judgement dated 10-12-2018 in Civil Appeal Nos. 18300-18305 of 2017, Supreme Court)

♦ Exemption Use in any other project but for specified work, does not bar exemption: CESTAT Mumbai has allowed benefit of Notification No. 21/2002-Cus. (Sl. No. 230) to hydraulically operated self-propelled piling rig for construction of road in a case where it was alleged that the goods were involved in activities other than those specified. (Gammon India Ltd. Vs Commissioner of Customs (Import) (CESTAT Mumbai))

H. Important cases decided on Central Excise & Service Tax

♦ Cenvat  credit on inputs used in excess  of what  prescribed  when  available:  Observing that actual consumption of material could vary from bill of material supplied along with designs and drawings by the principal, CESTAT  Kolkata has set aside  demand  of  Cenvat   credit on alleged excess inputs- (Bhawani Press Metal & Body Building Pvt. Ltd. Vs CCEx. (CESTAT Kolkata); Ex.Appeal Nos.124,149,152,166/09 & 78230,78231/18; 04/12/2018)

♦ Excise duty based on different MRPs affixed on  different packages, correct: CESTAT Kolkata has dismissed plea of the  department that since same type of cement was being sold at different MRPs, the highest of the  MRPs was to be taken for purpose of payment of central excise duty-  (Nuvovo Vistas Corporation Ltd v. Commissioner–Order No. FO/A/77087/2018, dated 4-12-2018, CESTAT Kolkata)

♦ Distribution of Cenvat credit to other units optional till 2016: Bombay High Court hasheld that it was within the discretion of the assessee whether to utilize Cenvat credit at one of its unit or distribute it amongst other units providing output The High Court however dismissed appeal observing that the entire exercise was revenue neutral as distribution of Cenvat credit to various units would result in lesser service tax being paid by them. [Commissioner, Central Tax Vs Oerlikon Balzers Coating India P Ltd. (Bombay High Court); Central Excise Appeal No. 117 of 2018; 19/12/2018]

♦  Refund -Limitation – Time taken by Ministry to be excluded: Bombay High Court has held that time consumed by the concerned Ministry in granting certificates required for retrospective exemption and refund must be ignored  [JSW Dharmatar Port Pvt. Ltd. Vs Union of India (Bombay High Court); Writ Petition No. 1910 of 2018; 14/12/2018]

CMA Rakesh Bhalla, nancybhalla@yahoo.com*

*Member ZAC & RAC Chandigarh – Central Excise & Service Tax (now GST) & Customs, Govt. of India, Member of Indirect Tax committee SIAM , Member, ASSOCHAM National Indirect Taxes Committee, Chief General Manager Finance- SML Isuzu Ltd., Winner Achiever Award 2015 by ICAI (CMA).