Amendments to GST rules (23.03.2020)

CA Harshi Modi
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Amendments to GST rules (23.03.2020)

Summary of Important Amendments to GST Rules as per the notifications issued on 23.03.2020:-

GST Registration:-

As per Notification No. 16/2020- dated 23.03.2020:-

Authentication of Aadhaar number for grant of registration

  • As per  Rule 8 (4A) of CGST Rules, 2017 -The applicant shall, while submitting an application for registration under Rule 8(4)   with effect from 01.04.2020 undergo authentication of Aadhaar number for grant of registration.
  • As per Rule 9, effective from 01.04.2020 in case the applicant fails to provide Aadhaar number at the time of application for registration within 60 days from the date of application, registration shall be granted only after physical verification of principal place of business.

Input Tax credit on Capital Goods:-

Rule 43 (1) of CGST and SGST Rules, 2017

(a)Amount of ITC in respect of Capital Goods used or intended to be used exclusively for non-business purpose or exclusively for effecting exempt supplies shall not be credited to electronic credit ledger.

(b) Amount of ITC in respect of Capital Goods used or intended to be used exclusively for taxable supply including Zero rated supply shall be credited to electronic credit ledger.

(c)This clause has been substituted as follow:- The amount of input tax in respect of capital goods not covered under clauses (a) and (b), denoted as ‘A’ being the amount of tax as reflected on the invoice, shall credit directly to the electronic credit ledger and the validity of the useful life of such goods shall extend up to 5 years from the date of the invoice for such goods:

Provided that where any capital goods earlier covered under clause (a) is subsequently covered under this clause, input tax in respect of such capital goods denoted as ‘A’ shall be credited to the electronic credit ledger subject to the condition that the ineligible credit attributable to the period during which such capital goods were covered by clause (a),denoted as ‘Tie’, shall be calculated at the rate of 5% points for every quarter or part thereof and added to the output tax liability of the tax period in which such credit is claimed:

(d) This clause shall be substituted namely “The aggregate of the amounts of  “A” credited to the electronic credit ledger under clause (c) in respect of common capital goods whose useful life remains during the tax period, to be denoted as “Tc”, shall be the common credit in respect of such capital goods:

Provided that where any capital goods earlier covered under clause (b) are subsequently covered under clause (c), the input tax credit claimed in respect of such capital good(s) shall be added to arrive at the aggregate value “Tc”.

(e) The amount of ITC attributable to a tax period on common capital goods during the residual life , be denoted as Tm and calculated as  Tm=Tc/60, In clause (e), the following Explanation shall be inserted:-

Explanation.- For the removal of doubt, it is clarified that useful life of any capital goods shall be considered as five years from the date of invoice and the said formula shall be applicable during the useful life of the said capital goods.

Threshold limit for GST Audit for F.Y. 2018-19.

Rule 80(3) of CGST Rules, 2017- Provided that every registered person whose aggregate turnover during the financial year 2018-2019 exceeds Rs.5 crore shall get his accounts audited as specified u/s-35(5) and he shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C for the financial year 2018-2019, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.

  • Electronic Cash ledger:
  • Rule-86(4A) of CGST Rules, 2017 where a tax payer has claimed refund of any amount as “tax wrongly paid or paid in excess” for which debit has been made from the electronic credit ledger and if such refund is proper and admissible then instead of giving refund in cash, such amount shall be re-credited in the electronic credit ledger by the proper officer by an order made in FORM GST PMT-03.

Valuation of Goods Exported under LUT option:-

  • In case of zero rated supply of goods or services or both without payment of tax under Bond/LUT in accordance with the provision of S. 16(3) of IGST Act, refund of ITC shall be granted as per the formula specified in Rule 89(4) of CGST Rules, 2017.
  • Refund Amount =(Turnover of Zero rated supply of goods and services) *Net ITC/ Adjusted Total turnover.

For the above purpose, Turnover of Zero rated supply of Goods has been substituted as “The value of zero-rated supply of goods made during the relevant period without payment of tax under bond or LUT or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed supplier, as declared by the supplier, whichever is less, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both;” [ clause C of Rule 89(4) substituted].

Refund of IGST paid on goods and services Exported outside India:-

  • In Rule 96, in sub-rule (10), clause (b) with effect from the 23rd October, 2017, the following Explanation shall be inserted:
  • Explanation. – For the purpose of this sub-rule, the benefit of the notifications mentioned therein shall not be considered to have been availed only where the registered person has paid IGST, Service tax and compensation Cess on inputs and has availed exemption of only Basic Customs Duty (BCD) under the said notifications.
  • Rule 96B of CGST Rules, 2017 in case of refund of unutilized ITC on account of export of goods under LUT option or of IGST paid on export of goods, if sale proceeds in respect of such exports have not been realized within the prescribed time limit allowed under Foreign Exchange Management Act, 1999 (FEMA) then – the person to whom the refund has been made shall deposit the amount so refunded, to the extent of non-realization of sale proceeds, along with applicable interest within 30 days of the expiry of the said period.

What is Reverse Charge Mechanism in GST?

Vedant Biyani
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What is Reverse Charge Mechanism in GST?

Normally, GST on goods and services is payable by the taxable person (i.e. person registered or liable to be registered under GST). However the Government have, on the recommendation of the council, by notification specified categories of supply of goods or services or both, the tax on which shall be paid on the reverse charge basis (by recipient) and all the provision of GST as applicable to the supplier shall apply to such recipient as if he is the supplier of goods and/or service.

 What is Reverse Charge Mechanism?

“Reverse charge” means the liability to pay tax by the person receiving goods or services or both instead of supplier of such goods and/or services under section 9(3) or 9(4) of CGST act or Section 5(3) or 5(4) of IGST Act.

Where is Reverse Charge Applicable?

There are two provisions under which GST is payable on the Reverse Charge:-

Reverse charge under gst notification:

Supply of goods where GST is payable under Reverse Charge is mentioned in Notification No. 4/2017-CT (Rate) and 4/2017-IT (Rate) both dated 28.06.2017 effective from 01.07.2017. This List includes items like Cashew nuts, Bidi wrapper leaves (tendu), Tobacco leaves, Silk Yarn, Supply of Lottery, Used vehicles, seized and confiscated goods, old and used goods, waste and scrap to Government or local authority, Raw Cotton, Priority Sector Lending Certificate.

Supply of Services where GST is payable under Reverse Charge is mentioned in Notification No. 13/2017-CT (Rate) and 10/2017- IT (Rates) both dated 28.06.2017.This list is mentioned at the end of the article.

Reverse charge where supplies is from unregistered person:-

If a vendor who is not registered under GST, supplies goods to a person who is registered under GST, then Reverse Charge would apply. This means that the GST will have to be paid directly by the receiver to the Government instead of the supplier.

However, an exemption was granted by Central Government vide Notification No. 08/2017 – Central Tax (Rate) dated 28-06-2017 to those registered dealers whose aggregate value of such supplies of goods or services or both received from any or all the suppliers, who is or are not registered, not exceeding five thousand rupees in a day.[This provision not relevant from 13.10.2017]

As the Central Government is yet to notify, on the recommendation of the council,  class of registered person and specified categories of goods or services or both, the applicability of provisions cannot be ascertained as on date.

Time of Supply under Reverse Charge:-

Time of Supply is the point to determine when the supply is liable to GST.

In case of Supply of Goods:-

The time of supply shall be the earliest of the following dates:

  • The date of receipt of goods
  • The date of payment
  • The date immediately after 30 days from the date of issue of an invoice by the supplier

If it is not possible to determine the time of supply, the time of supply shall be the date of entry in the books of account of the recipient.

Date of Payment: – The date of payment in the above situation refers to the date on which the payment is recorded in the books of account of entity that receives the service (recipient of service) or the date on which the payment is debited from the entity’s bank account, whichever is earlier.

In case of Supply of Service:-

The time of supply shall be the earliest of the following dates:-

  • The date of payment
  • The date immediately after 60 days from the date of issue of invoice by the supplier

Compliance in respect of Supplies under GST Reverse Charge Mechanism:-

  • Person who are liable to pay tax under Reverse Charge are required to get registered, irrespective of the threshold limit specified- Section 24 of CGST Act. However, persons who are exempt from registration under section 23 of CGST Act are not required to get registration under Section 24. Section 23 of CGST Act provides for exemption from registration to those who are exclusively engaged in the supply of goods or services or both which are not liable to tax or are fully exempt.
  • As per Section 31 of the CGST Act, 2017 read with Rule 46 of the CGST Rules, 2017, every tax invoice has to mention whether the tax in respect of supply in the invoice is payable on reverse charge under gst. Similarly, this also needs to be mentioned in receipt voucher as well as refund voucher, if tax is payable on reverse charge under gst.
  • Self-invoicing is to be done when you have purchased from an unregistered supplier and such purchase of goods or services falls under reverse charge. This is due to the fact that your supplier cannot issue a GST-compliant invoice to you, and thus you become liable to pay taxes on their behalf. Hence, self-invoicing, in this case, becomes necessary.
  • Maintenance of accounts by registered persons: Every registered person is required to keep and maintain records of all supplies attracting payment of tax on reverse charge.
  • Any amount payable under reverse charge shall be paid by debiting the electronic cash ledger. In other words, reverse charge liability cannot be discharged by using input tax credit. However, only after discharging reverse charge liability, credit of the same can be taken by the recipient, if he is otherwise eligible.
  • Only a registered person is liable to pay tax under GST. Thus a person who is not required to get registered under GST is not required to pay GST under Reverse charge.

Also Read:
The loophole in GST Refund Application

List of Services as notified till 01.10.2019 under RCM is mentioned as below:-

GTA Services:- (From 01.07.2017)

Supply of Goods by GTA in respect of transpiration of goods by road to Factory/Society/Co-operative society/Firm, AOP, Body corporate, Casual taxable person if such recipients are located in a taxable territory.

If GTA is registered under GST and issue invoice along with GST, No tax shall be payable by the recipient of such service.

Also Read:

Amendments to GST Rules

Person who is paying freight is liable for the payment of GST.

[Not Applicable – Services provided by GTA to establishment of CG/SG/UT/LA/person registered under GST for the purpose of deducting TDS.]

Legal Services:- (From 01.07.2017)

Service supplied  by  an individual advocate including senior advocate by way of representational service before any court, Tribunal, or authority.

Services supplied by Individual or firm of advocate to another firm of advocate or to Business entity by way of legal services.

Also Read:

TDS in Priovision

Arbitral Services:- (From 01.07.2017)

Services supplied by an arbitral Tribunal to a business entity.

Sponsorship Services:- (From 01.07.2017)

Service provided by way of Sponsorship Service to anybody corporate or partnership firm located in a taxable territory.

Government Services:- (From 01.07.2017)

Services supplied by the CG/SG/UT/LA to a business entity (located in taxable territory) except the following:-

  • Renting of immovable property service, and
  • Services by the Department of posts by way of speed post, life insurance, and express parcel post and agency services provided to a person other than CG/SG/UT/LA.
  • Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
  • Transport of goods or passengers.

Services by the Government:- (From 25.01.2018)

Services supplied by the CG/SG/UT/LA by way of renting of immovable property to a person registered under the CGST Act, 2017

Transfer of Development Rights or FSI:- (From 01.04.2019)

Services supplied by any person by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project by a promoter.

Lease of land:- ( From 01.04.2019)

Long term lease of land (30 years or more) by any person against consideration in the form of upfront amount (premium) and/or periodic rent for construction of a project by a promoter.

Services by the Director:– (From 01.07.2017)

Services supplied by a director of company/body corporate to the said company or a body corporate

Insurance Agent Service:- (From 01.07.2017)

Services provided by an insurance agent to person carrying on insurance business.

Recovery Agent Service:- (From 01.07.2017)

Services provided by a recovery agent to a banking company or a financial institution or NBFC.

Copyright Service:- (From  01.07.2017 to 30.09.2019)

Supply of Services by an author, music or the like by way of transfer or permitting the use or enjoyment of a copyright to Publisher, Music company, producer or the like.

Copyright Service:- (From 01.10.2019)

Supply of services by a music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright to Music company, producer or the like

Copyright Service by Author:- (From 1.10.2019)

Supply of services by an author by way of transfer or permitting the use or enjoyment of a copyright to publisher.

Provided that nothing contained in this shall apply where, –

  • The author has taken registration under the GST Act, 2017 and where he exercises the option to pay central tax on the service specified in accordance with Section 9 (1) GST Act, 2017 along with declaration that he shall not withdraw the said option within a period of 1 year from the date of exercising such option
  • The author makes a declaration, as prescribed in Annexure II on the   invoice issued by him in Form GST Inv-I to the publisher.

Reserve Bank Services:- (From 13.10.2017)

Supply of services by the members of Overseeing Committee to RBI.

Services by DSAs:- (From 27-7-2018).

Services supplied by individual Direct Selling Agents (DSAs) other than a body corporate partnership or LLP to bank or NBFCs

Business Facilitator:- (From 01.01.2019)

Services provided by Business Facilitator (BF) to a banking company

Business Correspondent:- (From 01.01.2019)

Services provided by an agent of Business Correspondent (BC) to Business Correspondent (BC)

Security Services:- (From 01.01.2019)

Services provided by  any person other than body corporate to a registered person by way of supply of security personnel but Not applicable to establishment of CG/SG/LA/UT, government agencies, Registered person paying tax under composition scheme.

Lending of Securities:- (From 01.10.2019)

Services of lending of securities under Securities Lending Scheme, 1997 (“Scheme”) of SEBI, as amended.

Renting of Motor Car:- (From 01.10.2010).

Services provided by way of renting of a motor vehicle provided to a body corporate

29 Things To Do This Lock Down

CA Chayan Agarwal
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29 Things To Do This Lock Down

We are at a stage and phase, no one planned. But this has happened in past too, experiencing and passing through a phase totally new for the world, which became history and the people who witnessed  could tell the world, ‘I witnessed ……..’ Some of these events which happened over past years were World War I & II, 1947, India Pakistan War, Emergency and many. This time it is LOCK-DOWN.

Lock Down – We haven’t experienced this – Staying at home for so many days, not having access to outside physical world, but just an internet world. Here is an attempt to list down the possible things we can do. Dividing list into 3.

Suggestion 1- Get back to normal work routine, Lock-down is not a holiday.

ONLY WORK during working hours (No Netflix, No series, No Movies, NO TP)

1.BUSINESS PLAN [i. Immediate – After Lockdown ends – understanding the impact & ii. Future- 3yr atleast)
2.TALKING WITH CLIENTS (This is a good time to build relationship and get in touch with them, discussing future developments, feedback, reviews and more 
3.UPGRADE (Use of Technology, Social Media, Cloud Service in your business)
4.INNOVATE & THINK-NEW – Business dynamics are getting competitive, this is the best time to think/discuss with your team about future developments/ restructuring/ expansions
5.ACCOUNTS COMPLETION (Today is 31st March, you need to get your accounts completed & finalised, if you don’t have access to your accounts at this time, think!!- Cloud)
6.SWOT Analysis of your business
7.DEVELOPING SOP for your non SOP workings
8.LEGAL & TAX discussion on pending matters with your consultant
9.Financial & INVESTMENT Review/Planning
10.CSR – How to contribute and become a helping hand towards society in this tough time.

Suggestion 2- Self Development & Learning- Optimum use of timing 

11.QUORA – Learn about topic of interest, Ask questions- Get answered from experts, also lots of existing content available.
12.CREATE YOUR OWN WEBSITE– The blog you are reading is my personal website & this website was fully created by me, from domain and webspace to designing everything (100%) done by me, no IT person involved.How? Youtube Channel – Nayyar ShaikhPS- I am commerce graduate 🙂
13.READ BOOKS – Pick the book available with you have at home also sharing some downloadable E-Books in the comment section.Couple of days back, I did webinar on Importance of Reading Habit – Link
14.YOUTUBE– There’s a lot to learn from youtube, select your topics of interest and search. Recommended Option – Technology, Innovation, Motivation, Economics, etc
15.LEARNING ABOUT FINANCE & STOCK MARKET – @stockistaan conducts financial literacy workshops through Webinar & Offline Certification workshops.
16.TEDx – Lots of video content available on app and youtube channel
17.LINKEDIN & OTHERS – Updating/completing incomplete details on various professional platforms
18.Learn PHOTOSHOP or VIDEO editing tools
19.FITNESS & MEDITATION – This might be your long-awaited wish list, time is right to start and give some time to your body and soul.

Suggestion 3- Enjoy!!

20.Movies (New and old favs)
21.     Series & Shows on various platforms (I watched Mahabharat’s 93 episodes few months back on Youtube, believe me it’s the most addicted series you will come across once you start)
22.Laughter Dose- On Various Apps, youtube (A popular old one – Great Indian Laughter Challenge)
23.Music
24.Video Games
25.Board Games
26.Kitchen Experiment- An attempt – Master Chef
27.Any long pending Wish (Singing, Dancing, Tik Tok, other)
28.Long hours of Sleep
29.    Refreshing Old Memories – Pictures and videos are not just to save in ever increasing mobile memory, but to cherish old memories, time is now to do that now.

Above are things you can do this lock-down apart from having good time with your family. If you have some other suggestion, please post in comment section.

Some suggestions

Youtube – Coldfusion (Interesting stuffs), Gaurav Kapoor, Gaurav Gupta (Laughter Dose), TEDx Talks (Learning), Berklee College of Music (AR Rehman’s lover)

Good Books to Read – Rich Dad Poor Dad, Who moved my cheese, Think & Grow Rich

Financial Learning – STOCKISTAAN

Connect on Twitter – @cachayan

If you have added any of the above point in your to do list, I’ll appreciate if you can share this. Thanks 🙂 

(Suggestion – 1 may not be fully possible for few professionals, you can ignore few and suggest some other applicable possibilities)

Writer – CA Chayan Agarwal (www.chayanagarwal.com)

Amendments in TDS Provision in Finance bill, 2020 – Section 194J, 194, 194K

Khushi Surana
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Amendments in TDS Provision in Finance bill, 2020 – Section 194J, 194, 194K

The Union Budget 2020 has brought several changes in the provisions of TDS which will take effect this financial year. Here are the Key Amendments that were introduced in the TDS Provision:

Section 194J-Fees for professional or technical services
There has been a change in the percentage of TDS rate which was 10% earlier for both professional and technical services. The rate has been reduced to 2% of such sum in case of technical services (not being professional services) and 10% of such sum in rest other cases.

The term ‘Professional Services’ means services rendered by a person carrying on Legal; Medical; Engineering or architectural profession or accountancy profession; Technical consultancy or interior decoration or advertising; or such other profession as notified by Board for the purpose of section 44AA.

Fees for technical services’ means any consideration for the rendering of any managerial, consultancy, or technical services. It includes the provision of services of technical or other personnel. It doesn’t include consideration for any construction, mining, assembly or like project undertaken by the recipient or consideration chargeable under the head ‘salary’.

Analysis- Technical Services TDS @ 2% and Professional Services & others cases of 194J @ 10%. However definition of both technical and profession services includes the term “Consultancy or Technical Services”, hence it opens a wide scope of variability in application of this new amendment.

Section 194– TDS on Dividends           

Dividend declared by domestic companies were subject to Dividend Distribution Tax (DDT) and dividend received was not taxable in the hands of recipient except income exceeding 10 Lakhs. With effect from 1st April 2020 , dividend received is taxable in the hands of the recipient if paid in any mode if income exceeds Rs. 5000, at the rate of 10 %.

Analysis- Dividend distribution tax has been withdrawn and the liability of taxability on dividend vests in the hands of the recipient. Also basic threshold is increased from Rs 2,500/- to Rs 5,000/- for dividend paid other than cash. Further, earlier the mode of payment was given as “an account payee cheque or warrant” which is now changed to any mode. 

Section 194K- TDS on Income from Certain Units

The said section was omitted w.e.f 01.06.2016 by the Finance Act 2016 and now the same is reintroduced. Section specifies any person responsible for paying to a resident any income in respect of

  1. units of a Mutual Fund specified under clause (23D) of section 10 or
  2. units from the administrator of the specified undertaking or
  3. units from the specified company

shall at the time of credit of such income to the account of the payee or at the time of payment thereof by any mode, whichever is earlier, deduct TDS at the rate of 10%. This section shall not apply if such income or aggregate of such income in a financial year does not exceed 5000 rupees.

Analysis- The threshold limit is Rs.5,000/- and this section applies to income only from the above specified units and not form Capital Gain

Disclaimer: This article doesn’t constitute professional advice. The author does not represent that the said information is correct and complete in all regards. The views contained in this article are personal views of the author and may change depending upon underlying facts and circumstances. Judicial and legal authorities may not subscribe to the views of author and can take different view. Readers of this article are advised to take professional advice before taking any course of action or decision. The author does not assume any responsibility or liability in respect of the information contained in this article or for any decision/ course of action readers may take based on information contained in this article.

GST is applicable on transfer of title without affecting the delivery of goods – Tamilnadu Advance Ruling Authority

CA Priya Agarwal
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GST is applicable on transfer of title without affecting the delivery of goods – Tamilnadu Advance Ruling Authority

AAR (Advance Ruling) Case Law Details

Applicant Name :  Automative Components Technology India Private Limited

Appeal Number : Order No. 05/ARA/2020

Date of Judgement/Order : 31/01/2020

Courts : AAR Tamilnadu (96) Advance Rulings (1253)

Question(s) on which Advance Ruling was sought :

1.Whether GST will be applicable on the transfer of title in moulds from applicant to Indian buyer?

2. If yes, whether the Indian buyer would be eligible to take credit of the GST paid to the applicant for said purchase?

Note: The provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.

Facts of the case

M/s. Automative Components Technology India Private Limited , Plot No.3/39 B, Sri Nagar, Thodukkadu(Post), Mannur Kootu Road, Sriperumbudur District, Thiruvallur, Tamil Nadu-602105 (hereinafter referred to as the ‘Applicant’ or ACTI’) is registered under GST vide GSTIN 33AANFP5828N1ZM.

1. The applicant stated that they are engaged in the supply of automotive components such as door locks and strikers (in short ‘parts’) .They supply such parts to a wide range of customers which inter – alia include moulds and tools (in short –moulds’). They propose to enter into the below transaction- They agree to supply certain parts, including the moulds to an Indian company (in short ‘Indian buyer’), located in the State of Tamil Nadu. In this regard, they place an order for manufacturing the said parts and moulds on a Thailand Company (in short ‘Foreign supplier’).

 Accordingly, the foreign supplier manufactures the parts and the same are physically imported into India. However, the moulds developed by the foreign supplier are retained in Thailand and are not physically imported into India.

Thus, there is only a transfer of ownership in the mould from the foreign supplier to Applicant and the foreign supplier retains the physical possession of the moulds.

 The foreign supplier raises an invoice on the Applicant for the parts and moulds separately. Similarly, the Applicant raises separate invoices on the Indian buyer.

The applicant has stated that in the present case as well, only the title in moulds are transferred to the Indian buyer, wherein the moulds physically continue to remain in possession of the foreign supplier. Thus, with regard to the moulds, there are two transactions involved in the present case:

T1: Transfer of title in moulds from the foreign supplier to the Applicant.

T2: Transfer of title in moulds from the Applicant to the Indian buyer.

They also stated that the moulds are never physically imported into India. The moulds will be disposed as waste in Thailand after its usage for manufacturing the requisite parts. In the above background, with regard to T2 the Applicant was of the view that the transfer of title in moulds (without physical import of the same from Thailand) would not make the said transaction liable to GST under Section 5 of the IGST Act read with Section 7(5)(a) of Integrated Goods and Services Tax Act 2017 and thereby not be required to charge IGST on the moulds sold to the Indian buyer.

2. As per the applicant’s interpretation of law, the transaction between them and the Indian buyer for transfer of title of moulds would not be liable to IGST as the same extends beyond territorial jurisdiction as the possession is retained by the foreign supplier .

As the moulds are supplied by the Applicant to the Indian buyer, by way of transfer in title, the Applicant is said to be the ‘Supplier’.

 With regard to place of supply, section 10(1)(c) would get and as there is no movement of goods from Thailand by any of the parties to the transaction and thus the place of supply of goods would be Thailand . Further stated that GST may not take within its fold a transaction wherein the place of supply is outside the territory of India.

In light of the above facts the applicant contended that the transaction would not subject to IGST.

3. Further, the applicant contended that the said transaction does not constitute import of goods as there is no physical movement of goods into India.

4. Further, the applicant submitted that if at all tax is applicable on the transaction then input tax credit of the same should be available to the recipient of Supply as the major objective of introducing GST is to allow seamless flow of credit .

The applicant stated that ITC should be available as per section 16(2)(b) of CGST Act 2017. If the transaction is deemed to be an inter-state supply and if the same is made liable to GST ‘ then it should be deemed that such goods have been received from perspective and the credit should accordingly be made available to him.

Key Observation of Authority for Advance Ruling, Tamilnadu

Tamilnadu Authority for Advance Ruling observed as follows:

1. The applicant is engaged in the supply of automotive components. They have stated that they agree to supply certain parts, including moulds to Indian Company located in the State of TamilNadu, for which they place an order for manufacturing the said parts and moulds on a Thailand Company. The parts manufactured are physically imported, while the moulds developed are retained in Thailand and are not physically imported into India, but the ownership in the mould is transferred from the foreign supplier to the Applicant and from the applicant to the Indian buyer by raising of separate invoices.

In view of the above the applicant raised the following questions:

(I) Whether GST will be applicable on the transfer of title in moulds from applicant to Indian buyer?

(II) If yes, whether the Indian buyer would be eligible to take credit of the GST paid to the applicant for said purchase?

2.  Section 97(2) of the CGST Act / Tamil Nadu GST Act (TNGST) gives the scope of Advance Ruling Authority, i.e., the question on which the Advance Ruling can be sought.

The Act limits the Advance Ruling Authority to decide the issues earmarked for it under Section 97(2) and no other issue can be decided by the Advance Ruling Authority. Of the above questions on which ruling is sought by the applicant, the question at (2) relates to eligibility to credit of tax paid by them at their buyers’ end.

The eligibility to credit of input tax paid by the applicant alone is covered under clause (d) of Section 97(2)  and the eligibility at the buyers’ hand when raised by an applicant do not fall under any of the category specified under Section 97(2) of the Act and therefore not within the ambit of this authority.

The First Question relating to whether GST is applicable on a transaction is within the ambit of this authority and is taken up for consideration.

3. In the case at hand, the applicant is undertaking two transactions-

T1 : Transfer of title in moulds from the foreign supplier to the Applicant

T2: Transfer of title in moulds from the applicant to the Indian buyer.

 The question raised by the applicant is with respect to transaction at T2 above. The applicant on his interpretation of law has stated that on application of Section 10 (1)(c) of IGST Act 2017, the place of supply is Thailand and the supplier is in India, therefore the supply could not get covered under IGST Act as IGST levy can be imposed only to supplies within the territorial jurisdiction of the IGST Act.

4. From the documents and averments of the applicant, the transaction involved requiring the clarification by the applicant is that the title in the moulds got manufactured by the applicant are transferred to the applicant and thereupon to the applicants’ vendor by way of declaration and against invoice indicating the “consideration” for the moulds. The moulds/tools remains with the manufacturer for manufacturing the parts, i.e., the moulds are supplied free of cost to the parts manufacturer and it is stated that the cost of the moulds are not amortised in the parts cost.

5. Having seen the factual position, the relevant statutory provisions examined as under. Supply is defined under Section 7 of the CGST Act 2017 and the same is reproduced below for reference:

Section 7(1) For the purposes of this Act, the expression “supply” includes—

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

(b) import of services for a consideration whether or not in the course or furtherance of business; and

(c) the activities specified in Schedule I, made or agreed to be made without a consideration;

(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.;

Schedule II determines the list of activities to be considered as supply of goods/Services and entry Sl.No. 1 is as follows:

1. Transfer

(a) any transfer of the title in goods is a supply of goods;

From the above, it is evident that “transfer of the title in goods” is “supply of goods”. In the case at hand there is transfer in title of moulds for a consideration and the supply is in the course of business therefore, the same constitutes supply of goods and GST is liable to be paid on such supply.

Ruling from Authority for Advance Ruling, Tamilnadu

 In view of the above, authority ruled as under:

1. GST is applicable on the transfer of title in moulds from the applicant to the India buyer.

2. The question is not answered as the same is not in the ambit of this authority as per Section 97(2) of the Act.

ORDER OF AUTHORITY FOR ADVANCE RULING , TAMILNADU

TDS provision under GST

CA Harshi Modi
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TDS provision under GST

TDS provision under GST

There are certain category of persons for whom registration under GST act is mandatory irrespective of their turnover limits as specified in Section 22. These categories have to get register themselves on mandatory basis under GST act by virtue of Section 24 of the act. Thus mandatory registration is required for TDS deductors separately under this act even though they hold a separate registration number under any other category in act itself. So, the person who is required to deduct tax under Section 51 (i.e. deductor) would have to take registration under GST.

For taking registration as deductor, such person requires to submit application in Form GST REG-07 duly signed and verified on common portal. After due verification of the same, proper officer grant certificate of registration in Form GST REG-06 within 3 Working days from the date of submission of the application.

Other important provisions related to TDS have been highlighted below.

  • The provisions of TDS have been notified and made effective from 01.10.2018
  • Section 51 of CGST Act, 2017 Government may order the following person (deductor) to deduct  Tax at source:-
  • Department/ Establishment of Central/ State Government
  • Local Authority
  • Governmental agencies
  • An authority or a board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity (control) owned by the government.
  • A society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860.
  • Public sector undertakings.

Section 51(1) – Applicability of TDS provision:-Where Total value of Taxable supply under the contract exceeds ₹ 2.50 lakhs (Excluding GST).

TDS is required to be deducted even if an individual invoice is less than ₹ 2.50 lakhs, if the total value of contract is exceeding ₹ 2.50 lakhs.

In the following cases TDS is not required to be deducted:-

  • Total value of Taxable supply < ₹ 2.5 lakhs
  • Contract value > ₹2.5 lakhs for both taxable supply and exempt supply but value of taxable supply under the contract < ₹ 2.5 lakhs
  • Receipt of services which are exempted.
  • Receipt of Goods which are exempted.
  • Goods on which GST is not leviable.
  • Where the payment is made to the unregistered supplier.
  • Where tax is to be paid on RCM basis by recipient.
  • All activities or transactions as specified in schedule-III of CGST/SGST Act, 2017.(Transactions which shall be treated neither as a supply of goods nor a supply of services.)
  • Where any amount was paid in advance prior to 01.10.2018 and tax invoice has been issued on or after 01.10.2018,to the extent of advance payment made before 01.10.2018 
  • Where place of supply is in state different from the state in which deductor is registered. [Goods and services are not supplied to recipient where he is located but at another state or union territory.]

TDS deduction and payment:-

  • 1% of CGST+1% of SGST= 2% [in case of intra state supply]
  • 2% of IGST [in case of interstate supply]
  • TDS is required to be deducted on net value excluding CGST,SGST/UTGST and IGST
  • Deductor to pay tax deducted to the government within 10 days after end of month, in a prescribed manner.

Other Compliances:-

  • Person who is liable to deduct TDS has to compulsorily register and there is no threshold limit for this as stated above.
  • Deductor is required to file TDS return in GSTR-7 within 10 days after end of each month.
  • The details furnished by the deductor shall be made available electronically to each supplier in Part-C of GSTR-2A/ GSTR-4A for composition dealer.
  • A TDS Certificate is required to be issued by deductor in GSTR-7A within 5 days of crediting the amount to the government.
  • Deductee can reject the details filed by deductor, if he may find that amount deducted by deductor doesn’t pertains to his supply.
  • The deductor shall furnish to the deductee a certificate manually mentioning therein contract value, rate of deduction, Amount deducted and paid to the appropriate government.

Credit of TDS in Electronic Cash register of deductee –There will an Automatic reflection in the Electronic ledger of dedcutee, once the deductor files his return.

Consequences of not complying with TDS provisions:-

S/No. Event Consequences
1 TDS not deducted Interest to be paid along with the TDS amount, else the amount shall be determined and recovered as per the law.
2. TDS certificate not issued or delayed beyond the prescribed period of five days   Late fee of Rs. 100/- per day subject to maximum of Rs. 5000
3 TDS deducted but not paid to the government or paid later than 10th of the succeeding month Interest to be paid along with the TDS amount; else the amount shall be determined and recovered as per the law.
4. Late filing of TDS returns Late fee of Rs. 100/- for every day during which such failure continues subject to a maximum amount of five thousand rupees.

          * consequences of non-compliances as stated above are as prescribed under the Act and the same are subject to change from time to time as per the notification issued in this regard.

Ordinance for extension of time limits under Taxation and Benami Act

CA Richa Agarwal
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Ordinance for extension of time limits under Taxation and Benami Act

The Union Finance & Corporate Affairs Minister Smt. Niramla Sitharaman announced several important relief measures taken by the Government of India in view of COVID-19 outbreak vide Press Release dated 24.03.2020, especially on statutory and regulatory compliance matters related to several sectors. In order to give effect to the announcements the government has brought in an Ordinance on 31.03.2020 which provides for extension of various time limits under the Taxation and Benami Acts.

Following are the decisions with respect to matters related to Direct Tax and Benami:

  1. Extension of last date of filing of original as well as revised Income-tax returns for the FY 2018-19 (AY 2019-20) to 30th June, 2020.
  2. Extension of Aadhaar-PAN linking date to 30th June, 2020.
  3. The date for making various Investment/ Payment for claiming deduction under Chapter-VIA-B of IT Act which includes Section 80C (LIC, PPF, NSC etc.), 80D (Mediclaim), 80G (Donations), etc. has been extended to 30th June, 2020. Hence the investment/payment can be made up to 30.06.2020 for claiming the deduction under these sections for FY 2019-20.
  4. The date for making investment/construction/purchase for claiming roll over benefit/deduction in respect of capital gains under sections 54 to 54GB of the IT Act has also been extended to 30th June 2020. Therefore, the investment/ construction/ purchase made up to 30.06.2020 shall be eligible for claiming deduction from capital gains arising during FY 2019-20.
  5. The date for commencement of operation for the SEZ units for claiming deduction under deduction 10AA of the IT Act has also extended to 30.06.2020 for the units which received necessary approval by 31.03.2020.
  6. The date for passing of order or issuance of notice by the authorities under various Direct Taxes & Benami Law has also been extended to 30.06.2020.
  7. It has provided that reduced rate of interest of 9% shall be charged for non-payment of Income-tax (e.g. advance tax, TDS, TCS) Equalization Levy, Securities Transaction Tax (STT), Commodities Transaction Tax (CTT) which are due for payment from 20.03.2020 to 29.06.2020 if they are paid by 30.06.2020. Further, no penalty/ prosecution shall be initiated for these non-payments.
  8. Under Vivad se Vishwas Scheme, the date has also been extended up to 30.06.2020. Hence, declaration and payment under the Scheme can be made up to 30.06.2020 without additional payment.

A special fund “Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND)” has been set up for providing relief to the persons affected from the outbreak of Corona virus. The donation made upto 30th June 2020 to the PM CARES Fund shall be eligible for 100% deduction under section 80G of the IT Act. Further, the limit on deduction of 10% of gross income shall also not be applicable. Hence, any person including corporate paying concessional tax on income of FY 2020-21 under new regime can make donation to PM CARES Fund up to 30.06.2020 and can claim deduction u/s 80G against income of FY 2019-20 and shall also not lose his eligibility to pay tax in concessional taxation regime for income of FY 2020-21.

Disclaimer: This article doesn’t constitute professional advice. The author does not represent that the said information is correct and complete in all regards. The views contained in this article are personal views of the author and may change depending upon underlying facts and circumstances. Judicial and legal authorities may not subscribe to the views of author and can take different view. Readers of this article are advised to take professional advice before taking any course of action or decision. The author does not assume any responsibility or liability in respect of the information contained in this article or for any decision/ course of action readers may take based on information contained in this article.

Transfer of ITC in case of business reorganization

CA Harshi Modi
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Transfer of ITC in case of business reorganization

Transfer of ITC in case of sale, merger, demerger amalgamation, lease or transfer of business:-

  • As per section 18(3) of CGST Act, 2017 in case of change in the constitution of registered person on account of sale, merger, demerger, amalgamation, lease or transfer of business with specific provision of transfer of liabilities, the transferor shall be allowed to transfer ITC which remains Unutilized in his electronic credit ledger (as on the date of filing GST ITC-02) to the transferee.
  • As per Rule 41(1) of CGST Rules, 2017, the transferor has to file GST ITC -02 on common portal regarding the details of transfer along with a request to transfer the unutilized ITC to the transferee.
  • The transferor shall be at liberty to determine the amount to be transferred under each head (CGST, SGST, IGST and compensation cess) subject to the ITC balance available with the transferor as on effective date of merger and acquisition as clarified in circular No. 133 03/2020-GST.
  • The transferor is required to file GST ITC-02 only in those states where both the transferor and transferee are registered as clarified in Circular No. 133 03/2020-GST. Let’s understand this with the help of an example. ABC is transferor having registration in UP and MP having two assets in each state. XYZ is the transferee having registration in UP and MP. If all the assets of ABC are to be transferred to XYZ’s business unit having registration in UP, whether it would be logical to transfer ITC under Rule 41(1) to both the units of XYZ? As the asset is to be used by XYZ’s business unit having registration in UP so same must be transferred only to XYZ’s business unit having registration in UP not to the XYZ’s business unit having Registration in MP. Thus in the above case, ABC is required to file GST ITC-02 only for his registration in the state of U.P.
  • Proviso to rule 41(1) is applicable for all forms of business organization that results in partial transfer of business assets along with liabilities. In case of demerger, ITC (CGST+SGST+IGST) as available in electronic credit ledger as on date of filing form GST ITC-02 shall be apportioned in the ratio of value of assets of new units as specified in the demerger scheme.

As per the explanation to rule inserted WEF 29.03.2019 “Value of assets” means  the value of  the entire assets of the business (Whether or not ITC has been availed thereon ) as on the appointed date of demerger as specified in demerger Scheme.

Value of assets shall be taken on state level basis and not at the all India level. E.g. A Company ABC is registered in two states of Gujarat and Maharashtra. Its total value of assets is worth Rs.100 crore, while its assets in State of Gujarat and Maharashtra are Rs 60 crore and Rs 40 crore respectively. It demerges a part of its business to company XYZ. As a part of such demerger, assets of ABC amounting to Rs 30 Crore are transferred to company XYZ in State of Gujarat while assets amounting to Rs.10 crore only are transferred to XYZ  in State of Maharashtra (Total assets amounting to Rs 40 crore at all-India level are transferred from ABC to XYZ). The unutilized ITC of ABC in State of Gujarat shall be transferred to XYZ on the basis of ratio of value of assets in State of GUJARAT, i.e. 30/60 = 0.5 and not on the basis of all-India ratio of value of assets, i.e. 40/100=0.4. Similarly, unutilized ITC of ABC in State of Maharashtra will be transferred to XYZ in ratio of value of assets in State of Maharashtra i.e. 10/40 = 0.25.

  • As per rule 41(2), the transferor shall also submit the copy of certificate issued by practicing chartered or cost accountant certifying that such transfer has been done with the specific provision of transfer of liabilities.
  • As per rule 41(3), the transferee shall on the common portal, accept the details submitted by transferor and upon such acceptance, the utilized ITC as specified in ITC-02 shall be credited to his electronic credit ledger.
  • As per rule 41(4),the inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of accounts.

Procedures to be followed in case of death of sole proprietor:

Application for cancellation of registration shall be made in form GST REG-16 by legal heir/successor of the deceased. But before that the transferee/successor shall apply for registration under GST Act in REG-01 only thereafter legal heir can file application for cancellation of registration.

Now if legal heir continue the business it will be considered as transfer of business and credit shall be allowed to be transferred as per section 18(3) of CGST Act, read with rule 41 of CGST Rules.GST ITC-02 should be filed before filing application for cancellation of registration. On acceptance by transferee/Successor, Unutilized ITC as specified in ITC-02 shall be credited to the electronic credit ledger of transferee.

Procedure for filing ITC-02

By Transferor after log in to GSTN portal:-

Services>Returns>ITC Forms> Online preparation of ITC-02> Transferor has to entered the GSTIN of transferee and amount of matched ITC to be transferred> Enter the particulars of certifying chartered /cost accountant > Attach the certificate > Upload the form using DSC or EVC.

By transferee after log in to GST portal:-

Services> ITC02- pending for actions> Click on ARN link> Accept/Reject> File it with DSC or EVC for the acceptance of ITC.  On such Acceptance transferred inputs and capital goods should be properly accounted in the books of accounts.

On Acceptance by the acquiring merged entity (transferee), The ITC will be transferred to the transferee and Electronic credit ledger of (transferee) Acquiring Entity will get updated.

Clarification regarding Set-aside matters under Direct Tax Vivad Se Vishwas Act-2020

Sneh Mehta
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Clarification regarding Set-aside matters under Direct Tax Vivad Se Vishwas Act-2020

Guided by “Sabka Saath, Sabka Vikas, Sabka Vishwas”, the Finance Minister Smt. Nirmala Sitharaman had introduced a new No Dispute but Trust Scheme – ‘Vivad Se Vishwas’ in the Budget 2020 in the Lok Sabha on 5th February, 2020. As per the combined reading of the amended The Direct Tax Vivad se Vishwas Bill, 2020 introduced on 14.02.2020 and Clarifications issued by CBDT vide Circular No. 07/2020 on 04.03.2020, the issues regarding the set aside matters were squarely resolved as under:

  1. In case of an order passed by any Appellate Authority with the direction to set aside a matter back to the file of the Assessing Officer [excluding the matters for which fresh assessment i.e. denovo assessment is to be carried on] for giving proper opportunity to the assessee or to carry out fresh examination of the issue with specific direction, the assessee can opt under Vivaad se Vishwas Scheme and pay the disputed tax.
  2. The disputed tax shall be the same tax (including surcharge and cess) calculated on the addition in respect of which the set-aside order was passed as if it was added again by AO.

It is to be noted that issues which are not covered in the Order of the Appellate Authority and therefore are not directed to be set-aside to the file of the Assessing Officer are eligible to be duly settled as per the general provision of this Act.

For better clarification regarding determination of the amount of disputed tax let us understand it through the following example:

Sr. No. Particulars Scenario 1 Scenario 2
I Addition by AO Rs.50000/- Rs. 75,000/-
II Disputed Tax

(Including Surcharge & Cess)

Rs.15,600/- Rs. 23,400/-
III Interest Rs.6,250/- Rs. 8,750/-
IV Decision of CIT(A) Addition Confirmed Addition Confirmed
V Decision of ITAT Addition Confirmed Matter set aside to Assessing officer
VI Option To opt Vivaad Se Vishwas Scheme Can avail Scheme only if further appeal is filled or time limit to file appeal against the order has not expired Can avail the scheme after paying the amount of disputed Tax of Rs. 23,400/-
  1. In such cases assessee while filing the declaration form can indicate that with respect to the set-aside issues the appeal is pending with the Commissioner (Appeals).

Conclusion-  The issues regarding the matters which are set aside to the file of Assessing officer by any Appellate authority can opt the scheme of ‘Vivad se Vishwas’ and simplify the Tax Litigation burdens and get quick redressal .

Disclaimer

This article doesn’t constitute professional advice. The author does not represent that the said information is correct and complete in all regards. The views contained in this article are personal views of the author and may change depending upon underlying facts and circumstances. Judicial and legal authorities may not subscribe to the views of author and can take different view. Readers of this article are advised to take professional advice before taking any course of action or decision. The author does not assume any responsibility or liability in respect of the information contained in this article or for any decision/ course of action readers may take based on information contained in this article.

Can assessee avail Vivad se Vishwas scheme for some of the issues and not for other issues in a pending appeal?

CA Nilisha Shah
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Can assessee avail Vivad se Vishwas scheme for some of the issues and not for other issues in a pending appeal?
Under the proposed Vivad Se Vishwas scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty provided he pays by March 31, 2020. Those who avail this scheme after March 31, 2020 will have to pay some additional amount of 10% of disputed tax. The income tax (I-T) department has so far approached 5,627 entities to avail of the Vivad se Vishwas, or direct tax dispute settlement, scheme. Those approached include large taxpayers, mostly foreign banks, which have disputes relating to international taxes. If the tax arrears include tax on issues that are excluded from the Vivad se Vishwas, such cases are not eligible to file declaration under Vivad se Vishwas. There is no provision under Vivad se Vishwas to settle part of a pending dispute in relation to an appeal or writ or SLP for an assessment year. For one pending appeal, all the issues are required to be settled and if anyone of the issues make the declaration invalid, no declaration can be filed. Picking and choosing issues for settlement of an appeal is not allowed. With respect to one order, the appellant must choose to settle all issues and then only he would be eligible to file declaration.  
Disclaimer
This article doesn’t constitute professional advice. The author does not represent that the said information is correct and complete in all regards. The views contained in this article are personal views of the author and may change depending upon underlying facts and circumstances. Judicial and legal authorities may not subscribe to the views of author and can take different view. Readers of this article are advised to take professional advice before taking any course of action or decision. The author does not assume any responsibility or liability in respect of the information contained in this article or for any decision/ course of action readers may take based on information contained in this article.
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