CMA Rakesh Bhalla
CMA Rakesh BhallaIndirect Taxes Updates GST, Customs, Excise, Service Tax & VAT Month – January 2018 (updated up to 02.02.2018)

Trial Phase period for generation of e-way bill has been extended:-  In view of difficulties faced by the trade in generating e-way bill due to initial technical glitches, it has been decided by the Govt. to extend the trial phase for generation of e-way bill, both for inter and intra- state movement of goods. It shall be made compulsory from a date to be announced. (Source: Twitter Message 1st February 2018 from GST@GOI).

GST (Compensation to States) Amendment Bill, 2017 receives Presidential assent- GST (Compensation to States) Amendment Bill, 2017 has received the assent of the President of India on 19th of January, 2018. The Act repeals Ordinance- Goods and Services Tax (Compensation to States) Amendment Ordinance, 2017, issued earlier to enhance Compensation Cess on mid-segment cars, large cars and Sports Utility Vehicles (SUVs).

GST rates to be revised on number of goods: While the rate is being reduced on number of items including old and used motor vehicles, there is a slight increase in GST rates on cigarette filter rods and rice barn (other than de- oiled). Further, exemption from Compensation cess on old and used vehicles and ambulances has also been recommended.

GST rate is also proposed to be reduced on sugar boiled confectionery, drinking water packed in 20 liters bottles, fertilizer grade phosphoric acid, bio-diesel, certain bio-pesticides, drip irrigation system including laterals, sprinklers, mechanical sprayer, tamarind kernel powder, velvet fabric, diamonds and precious stones, and de- oiled rice bran. According to the Press Release, these changes in GST rate will be effective from 25th of January, 2018.

GST Council recommends revision in tax rate for many services:  Rate of GST on number of services is proposed to be revised from 25th of January, 2018. It has been decided to reduce GST rate on construction of metro and monorail projects. Exemption from GST has been recommended, till 30-9-2018, on service of transportation of goods from India to a place outside India, by air or sea.

The latest recommendations also include exemption from IGST payable on supply of IPR Services to the extent of duties and taxes leviable under relevant provisions of Customs Tariff Act read with IGST Act on part of consideration declared under Customs Act towards royalty and license fee includible in transaction value. Rate of tax on Works Contract Services (WCS) provided by a sub-contractor to the main contractor providing WCS to Central/State Government, Union territory, a local authority, a Governmental Authority or a Government entity, is also proposed to be reduced.

Late fees for filing of certain GST returns to be reduced:- Late fee payable for failure to furnish FORM GSTR-1 (details of outward supply), FORM GSTR-5 (applicable in case of non-resident taxable person) or FORM GSTR5A (applicable in case of Online Information and Database Access and Retrieval services) is being reduced to Rs. 50 per day. This late fees will however be Rs. 20/day for NIL return filers. According to latest recommendations of the GST Council, after its 25th meeting on 18-1-2018, late fee payable in case of FORM GSTR-6 (applicable for Input Service Distributor) will also be Rs. 50/day.

Cancellation of registration Relaxations recommended: GST Council has recommended to allow taxable persons who have obtained voluntary registrations to cancel such registration even before expiry of one year from the effective date of registration.

According to the Press Release dated 18-1-2018 issued after the 25thmeeting of the GST Council, the last date for filing FORM GST REG-29, for cancellation of registration by migrated taxpayers, will also be extended by three months, i.e. till 31st March, 2018.

GST exemption to hostel mess clarified:-Catering services are provided by anyone other than the educational institution then it is a supply of service to the educational institution, attracting GST at the rate of 5%, without the facility of input tax credit (ITC). Circular No. 28/2/2018-GST, dated 8-1 -2018.

GST rate under Composition Levy reduced for manufacturers: GST rate for manufacturers under Composition Levy has been reduced to 1% (0.5% each of CGST and SGST) from 2% (1% each of CGST and SGST) with effect from 1-1-2018.

GST liability under Legal services clarified: Legal services including representational services provided by an advocate including a senior advocate to a business entity, are liable to GST under Reverse Charge Mechanism (RCM) in such cases GST is required to be paid by the recipient of the service, i.e. the business entity.CBEC Circular No. 27/1/2018- GST issued on 4th of January, 2018

Gambling, horse racing and entry in casino value for GST:CBEC has clarified that “entry to casinos and gambling are two different services and GST is leviable is 28% on both these services. It is also clarified that GST on gambling services provided by casinos is to be levied on transaction value,i.e., the total bet value, in addition to GST levy on any other services provided by casinos. GST is leviable on total of face value of all bets paid into the totalizator or placed with licensed bookmakers, in respect of horse racing. 27/1/2018-GST, dated 4-1-2018.

Accommodation services clarified: CBEC has clarified that if declared tariff of the accommodation provided by hotel by way of upgrade is Rs. 10000, but amount charged is Rs 7000, GST would be levied at higher rate [28%] on Rs. 7000. Circular No. 27/1/2018-GST in this regard also states that declared tariff at the time of supply would be applicable, GST will be payable on actual amount charged and that room rent in hospitals is exempt.

Rate of GST on goods of Heading 6802:- According to circular issued by Rajasthan Commercial Tax Department, SGST rates on following items will be as follows:

Item Description Rate of SGST
Statutes, statuettes, pedestals; high or low reliefs, crosses, animal figures, bowls, vases, cups, cachou boxes, writing sets, ashtrays, paperweights, artificial fruit and foliage, etc. 6%
Remaining items like worked monumental or building stone (except slate) and articles thereof;mosaic cubes of natural stone; artificially Colored granules, chippings of natural stone. 9%

E-way Bill under GST for entry in West Bengal Validity of old way bills:-E-way Bill provisions under GST law will come into effect from 1-2-2018. According to circular issued by West Bengal Directorate of Commercial Taxes, generation of waybill keys shall stop from that date and waybill generated till that time will be valid for entry into West Bengal till 15-2-2018. Circular dated 8-1- 2018 also states that cancellation of unused keys or generated e-waybills will continue till 15-2-2018. If waybill is cancelled after midnight of 31-1-2018 then the user can only generate new waybill.

No GST on price discounted from MRP Consumer Forum: Charging extra GST or any tax on the price discounted from MRP would amount to deficiency in service and indulgence in unfair trade practice.

[Shiti Dutt v. Woodland -Decision dated 3-1-2018 in CC/657/2017, District Consumer Disputes Redressal Forum-I, Chandigarh]


Key Highlights from Budget 2018 regarding Customs:-

S. No. Amendments affecting rates of Basic Custom Duty Rate of Duty
From To
1 CKD imports of motor vehicles 10% 15%
2 CBU imports of motor vehicles 20% 25%
3 Truck and bus radial tyres 10% 15%
4 Mobile phones 15% 20%
5 LCD/LED/OLED panels of television 7.5% 15%
6 Specified parts/accessories of motor vehicles, 7.5%/10% 15%
7 Levy of Social Welfare Surcharge on imported goods to finance education, housing and social security Nil 10% of
aggregate duties
of customs
8 Abolition of Education Cess and Secondary and Higher Education Cess on imported goods 3% of aggregate
duties of Customs

Temporary import of broadcasting equipment and sport goods, exempted:The Central Government has exempted certain specified goods- equipment for press, sound and television broadcasting equipment, sports goods and equipment for testing, measuring or calibration, when same are imported under Customs Convention on A.T.A. carnet for Temporary Admission of Goods. Exemption has been provided from whole of Basic Customs duty and from whole of IGST, subject to conditions including that such goods have to be exported within 2 months from the date of importation.Notification No. 4/2018-Cus., dated 18-1-2018 has been issued for the purpose.

Customs duty reduced on imports from Malaysia, ASEAN, Korea RP and Japan: Customs duty has been reduced on import of specified goods from Malaysia, Korea RP, Japan, and from countries part of Association of South East Asian Nations (ASEAN). This annual reduction, effective from 1-1-2018.

Telecommunication Antenna covered under TI 8517 62:-CBEC has clarified that antenna used at Base Transceiver Station/NodeB/eNodeB in a wireless telecommunication network, should be classified under TI 8517 62 90 of the Customs Tariff. Instruction No. 1/2018-Cus, dated 15-1-2018.

Valuation- Payment for distribution rights when not includible: CESTAT Delhi has held that payment for distribution rights paid to another Indian subsidiary, should not be added to the price for import of such goods if there does not exist any such condition of sale (import). [Commissioner Luxottica India Eye wear Pvt.Ltd. – Final Order No. 50245/2018, dated 18-1-2018, CESTAT Delhi].

Valuation- Advertising and promotion expenses borne by importer: New Delhi Bench of CESTAT has upheld inclusion of cost relating to advertising and promotion borne by the importer, in the value of imported goods. [Reebok India Company v. Commissioner – Final Order No. 50117/2018, dated 12-1-2018, CESTAT Delhi].

SAD refund – Non-mentioning of grades in sales invoice is not fatal: CESTAT Chennai has held that mere non-mentioning of grades of plastic granules in the sales invoices will not make the importer ineligible to refund of SAD It noted that the same was not required to be mentioned in terms of the Tamil Nadu VAT Act allowing refund it was observed that the department had no case that imported goods were ultimately not sold and VAT was not paid. Bills of Entry in this case described goods as various types of plastic granules such as LLDPE, HDPE, polypropylene, PVC of various grades, while sales invoice stated them as plastic granules only.

[Damodar Trade Links Pvt. Ltd. v. Commissioner – Final Order No. 42565 / 2017, dated 25-10-2017, CESTAT Chennai]

SEZ- Scope of words “Infrastructure facility”:-Facilities or amenities needed for the units cannot be the“Infrastructure facilities” Needed for the SEZ as contemplated in Section 2(p) of the SEZ Act read with Rule2(1)(s) of SEZ Rules.[Gujarat State Petronet Ltd. v.GAIL India Ltd. – 2018-VIL-09-GUJ].

EPCG – Maintenance of logbooks of use of imported cars when not required: Mere use of the car by Directors in exigency did not debar importer from the benefit of the EPCG scheme[Hotel Tunga Regency Pvt. Ltd. v. Commissioner – Order dated 14-12-2017 in Appeal No. C/87187/2016, CESTAT Mumbai].

Thermistor & thermistor sub-assembly classifiable under Ch. 85:-CESTAT Delhi has held that thermistor and thermistor sub-assembly are classifiable under TI 8533 40 30 of the Customs [Subros Ltd. v. Commissioner – Final Order No. 50021/2018, dated 3-1-2018, CESTAT Delhi].

No appeal lies against revocation of suspension of CHA license:Ina dispute involving suspension of customs house agent’s license, CESTAT Mumbai has held that review under Section 129D of Customs Act, and consequent appeal against Order setting aside suspension of the CHA license, is not legal Relying on CHA Regulations 1984, it was held that no authority higher than the Commissioner is envisaged for discharge of any function in relation to CHA. [Commissioner v. Mukadam Freight Systems Order in Appeal No. C/203/2006, CESTAT Mumbai].

Central Excise and Service Tax

Key Highlights from Budget 2018 regarding Central Excise and Service Tax:-

Changes in Indirect Tax rates on Motor Spirit and HSD:-

  • Basic Excise duty on manufacture of Motor Spirit and HSD reduced by Rs. 2/- per liter.
  • Road cess of Rs. 6/- per liter on petroleum products abolished.
  • Road and Infrastructure cess (R&I Cess) on petroleum products of Rs. 8/- per liter
  • Additional Duty of Customs levied on Import of Motor spirit and HSD abolished.

Changes in service Tax:-

Following retrospective exemptions introduced under Service Tax:

  • Services by Naval group of Insurance fund by way of life Insurance to personnel of Coast Guard, under group Insurance schemes of the Central Government. (From 10th September 2004 to 30th June 2017).
  • Services by GSTN to the Central Government or State Governments or Union territories administration (From 28th March 2013 to 30th June 2017).
  • Consideration paid to Government in the form of Government’s share of profit petroleum in respect of services provided or agreed to be provided by the Government by way of grant of license or lease to explore or mine petroleum crude or natural gas or both (1st April 2016 to 30th June 2017).

Customer’s premises when to be considered as “Place of removal”:-Supreme Court of India has dismissed Special Leave Petition filed against the Chhattisgarh High Court Order by the Revenue department on the question as to whether “place of removal” of goods was factory gate or customer’s premises. The apex court was of the view that there was no legal and valid ground interference. The high court in its impugned order had affirmed tribunal’s view that customer’s premises was the place of removal. [Commissioner v. Ultra Tech Cement Ltd. – SLP (Civil) No. 38843/2017, decided on 11-1-2018, Supreme Court].

Valuation-Deduction of VAT subsidy given by State of Rajasthan:- CESTAT Delhi has rejected department’s peal that VAT liability discharged by utilizing subsidy granted in the form 37B by the Rajasthan Government was not VAT actually paid, for purpose of Section 4 of Central Excise Act, 1944. The assesse was required to remit VAT initially on sales made and then part of such VAT was given back as a subsidy in Challan 37B, for further utilization in payment of VAT the tribunal held that such challans were as good as cash as payment of VAT using such challan was considered legal payment of tax.[Shree Cement Ltd. v. Commissioner – Final Order No. 50189-50191/2018, dated 18-1-2018, CESTAT Delhi].

  Cenvat credit – Excess goods as found by department, not suppression: – Cenvat credit is not to be denied merely because excess quantity was noticed during physical verification of the imported goods by the Customs Department at the port.[Bayer Crop science Ltd. v. Commissioner Final Order No. A/13876/2017, dated 29-12-2017, CESTAT Ahmedabad].

Cenvat credit on cleaning, air travel agent and convention services: -CESTAT has allowed Cenvat credit on cleaning/house-keeping services availed by a manufacturer for keeping the environment clean in their factory premises and in the marketing office. Cenvat credit on Air Travel Agent service and Convention service was also allowed observing that said services had direct nexus with the manufacturing activity.[Hawkins Cookers Ltd. v. Commissioner – Final Order No. 62166 62167/2017, dated 13-12-2017, CESTAT Chandigarh].

Area based exemption to different “Unit” in same factory:– CESTAT Chandigarh held that a factory and a Unit have two different connections and a factory can have different Industrial units. CBEC Circular Nos. 939/29/2010-CX and 960/03/2012-CX, as relied on by department, were distinguished in this case involving area based exemption.

Usage of common facilities like electricity sub-station, control board, generator set, water source, effluent treatment plant, sewerage system and canteen was held not material to deny benefit under notification No. 50/2003-CE to unit producing different product. [Wipro Enterprises Limited v. Commissioner – Final Order No. 62164, dated 11-12-2017, CESTAT Chandigarh].

Banking and other financial services– Coverage of “Operating Lease”:- CESTAT New Delhi has rejected department’s contention of covering business in “Operating lease” of motor vehicle given to clients, under financial lease. Demand of Service Tax for the said service under Banking and other Financial Services was hence rejected. The Tribunal relied on Accounting Standards (AS) 19 issued by the Institute of Chartered Accountants and the Supreme Court decision in the case of Association of Leasing and Financial Service Company.[Commissioner v. Lease Plan India Limited – Final Order Nos. 50113- 50116/2018, dated 10-1-2018, CESTAT Delhi].

Exemption when service provided to UN entity: -Subcontractor providing taxable service to the United Nations or an international organization. In this case though the services were rendered to UNICEF, the bills were raised in the name of another company (principal contractor). On perusal of those bills, the Tribunal allowed assesse’s appeal holding that the nature of services is for UNICEF and hence exemption was available. [Ball set Entertainment Pvt. Ltd. v. Commissioner – Final Order No. 58436/2017, dated 19-12-2017, CESTAT Delhi].

Cenvat credit on STTG certificate issued by Railways before August, 2014:- CESTAT has allowed Cenvat credit on documents (monthly consolidated certificate/RR/money receipt) issued by the Railways during the period prior to Notification No. 26/2014-C.E. (N.T.) which made Service Tax Certificate for Transportation (STTG Certificate) issued by the Railways eligible for taking Cenvat credit. [JK Lakshmi Cement Ltd. v.Commissioner – Final Order No. 57354-57355/2017, dated 16-10-2017, CESTAT Delhi].

Food preparations for infants Scope of classification:- Food products for infant use, cleared in unit container to an industrial consumer, whether are classifiable under subheading1901.11 or 1901.19 of erstwhile Central Excise Tariff? CESTAT Chandigarh in this regard could not reach any conclusion, with both Members of CESTAT having different views. While according to one view, goods were ultimately used by infants and legislature did not bar use by other industrial unit for further.

Manufacture, according to the other view, goods were intermediate products not capable of being used by infants as such. The appeal of the assesse was however allowed on limitation.[Kayem Food Industries v. Commissioner– Final Order No. 62165/2017, dated 5-12- 2017, CESTAT Chandigarh].

Mounting electric components on board is not “Manufacture”:-

Mere putting together ofitems by itself does not constitute assembly of a new item. [TGL Enterprises Pvt. Ltd. v. Commissioner –Final Order No. 58605-58606/2017, dated 28-12- 2017,ESTAT Delhi].

Video Tape Production service- Scope:- Chennai Bench of the CESTAT has held that services of Computer Graphics, Digital Restoration, and Reverse Telecine, all involving activities on old feature films are post- production film activities rendered for service recipients’ asper their requirements. Further, observing that the adjudicating authority had stated that the Assesse appellants were not engaged in the recording of any program, etc., it was held that services of restoration, giving special effects etc., in respect of old films would not be covered under Video Tape Production service. [Prasad Corporation Ltd. v. Commissioner – Final Order No. 42464/2017, dated 30-10-2017, CESTAT Chennai].


Exports- Exemption from Sales Tax when transaction inextricably connected: –  

Madras High Court has held that in a case where transaction between manufacturer and the exporter and the transaction between the latter and the foreign buyer are inextricably connected with each other, the “same goods” theory would not apply. The Court hence allowed exemption under the provisions of Central Sales Tax Act, 1956. The petitioner sold zip- fasteners to manufacturer of ready made garments who after fixing same in garments, exported the garments. [Zip Industries Ltd. v.Commercial Tax Officer – 2018-VIL-22-MAD].

Karnataka VAT – ITC and scope of Section10 (3) of KVAT: Karnataka High Court has rejected the contention of the department that Input Tax Credit (ITC) is deductible only in that “Tax period” during which the Invoices of the selling dealer is raised.

[Kirloskar Electric Co. Ltd. v. Stateof Karnataka – 2018-VIL-36-KAR].

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

Information source- M/s LKS, M/s Nitya tax Associates, Economic Times, Financial express, and other sources-many thanks to all.

With Warm Regards & Jai Hind

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