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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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GST Update on Industry wants to know-Part-II

Daily Dose of GST update on FAQ in seminar with Industries

INDUSTRY WANTS TO KNOW – PART 2

Here is the 2nd installment to the series where we try to find answers to the unanswered questions and queries coming from the trade and industry.

Question: How will the transitional provisions operate in the new regime? Whether credit will be available on finished goods which were exempted earlier but taxable under GST?

Answer: Transitional provisions have been prescribed in section 141 to section 162E of Model GST law. In brief, it facilitates availment of cenvat credit which will be carried forward from the old regime to the new regime. Primarily the cenvat reflecting as closing balance in the last excise/service tax/VAT returns will be carried forward as opening balance of cenvat under GST. Simultaneously, stock of such goods which were earlier exempted under old regime but are taxable in the new law shall also be considered for availing cenvat. The credit on stock of inputs for such finished goods will be allowed under GST. One important thing to note here is that the cenvat on exempted goods shall be eligible only if the goods are chargeable to GST under the new regime of GST. In cases where they are still exempted goods in the new regime then no credit will be admissible. Even if after a certain period they are declared as taxable goods, no enabling provision is there to avail cenvat of stock of such goods.

Question: Can a particular factory practice different transitional provision for different goods manufactured in that same factory? It means that if a factory has taxable final product as well as exempted taxable goods under old regime and these are both chargeable to duty under the new era of GST then credit on both of them will be available under transitional provisions?

Answer: This is a question which is subject to a lot of interpretation. Suppose a factory manufactures both taxable and exempted goods. In the transitional phase, section 143(Amount of CENVAT credit carried forward in a return to be allowed as input tax credit) will be applicable on taxable goods and section 145(Credit of eligible duties and taxes in respect of inputs held in stock to be allowed in certain situations) will be applicable on exempted goods. Now the question is that whether both the sections can be applicable simultaneously for a single factory on both type of products. Going by a logical view and looking at the assessee friendly intention of the law, there should not be any bar on simultaneous application of these provisions but still it will be open to interpretation of the law.

Question: How the new registration norms for business verticals will have to be implemented? To be specific, even if an assessee having two factories with two separate registration number is operating within a state and he is required to obtain only one registration under new GST law then how his registration will be migrated under the new law?

Answer: It is proposed that business verticals within a state can opt for single registration based on individual discretion. Although it is a choice given to the assessees but still it should be noted that if a person opts for single registration then it is to be seen how the GSTN allows him to migrate under the new GST law as a single registration. No procedure has been prescribed but we hope that the GSTN will come with a solution and it is not difficult also becuase registration is PAN based.

Question: How the different units of same person having same registration will operate under GST? How they will maintain accounts as well as issue invoices?

Answer: No procedure is prescribed for units having single registration will have to issue a common invoice or can maintain different set of invoices. If the start same serial number of invoices for both the units then they will face difficulty in filing of return. Such problem will also arise for keeping records of stock. Whether there will be consolidated books of accounts which will be very difficult unless and until they have a software which allows such maintenance. If they maintain the separate invoice, separate inventory then how to file the returns. If the audit or anti evasion comes, how they will reconcile the things. These questions are to be answered and the GST authorities will prescribe the procedure for the same.

Question: How the transitional provisions will apply when an assessee had two different registration under earlier law but now have a single registration under GST. On the contrary, if he had single VAT registration and now decides to have separate registration then how he will distribute the credit of VAT under separate units.

Answer:- No provision has been prescribed for the same. Logically we can say that the credit of units registered separately should be clubbed together. Even there is no procedure for separation of VAT. Such practical problems should be represented before the appropriate authorities so that timely solution can be obtained in this regard.

Question:-what are the consequences of an invalid return and are there any remedies to it?

Answer: If a supplier fails to pay the taxes due then the return filed by him will be deemed to be invalid and the grave consequence of it will be that the buyer/receiver of the goods and services will not be able to avail the cenvat of the taxes paid by him on procurement of such goods and services. The credit paid by supplier will be added in his liability and buyer has to pay the tax.

The only remedy provided in the law is that if the supplier pays his dues then the return will again gain validity but this not without its own ifs and buts. A whole lot of communications will have to be gone through to rectify the mismatch and then only such cenvat will be eligible. The new law in this regards seems regressive rather than being progressive as it puts the burden of default of supplier on the buyer which is actually unjust enrichment.

Question: If to avail the cenvat, the buyer pays the dues of the supplier, what will be the consequences of the same? To be more specific, can a buyer pay the amount of GST directly in Government account in the name of supplier? In that case, whether the credit passed on by the supplier will not be added to buyer?

Answer: As such there is no provision facilitating this kind of arrangement. It would need a well designed mechanism to track these kinds of adjustments. But overall, resorting to this kind of mechanism will prove to be non-practical in the long run. This is because the supplier must have supplied material to other buyers. Even if a single buyer pays his amount then also he will be defaulter for other buyers. In that case also, the amount will be added in the liability of buyer and credit will be disallowed to him.

Question:- Whether the buyer withhold the amount of supplier till the time valid return is filed by him and credit is passed on to him?

Answer:- There is no such provision in draft GST law. But it seems to be more practical solution to this problem. But it will not operate when supplier is in commanding position. Sometimes we have to make advance payment for procurement of inputs. The most feasible position is that we should represent to the government to bring a much more practical mechanism.

Question: Whether reverse charge mechanism will continue on the good transport agents? What will the treatment of cenvat? Whether the credit will be available of GST paid on freight outward?

Answer: Another question being constantly raised is that if the GTA will continue to be taxed under RCM scheme. If we look at the draft law there is provision of RCM but the goods or services covered under the same is not specifically mentioned. However draft procedure for the invoice format, the situation may look contradictory. The invoice format has separate column to mention if the tax is to be paid by the consignor or the consignee which implies that reverse charge is applicable on transporter under GST also.

Another big question is that of the cenvat credit of GST paid on the GTA outward. Currently it has been under a lot of litigation with decisions flowing in both in favor and against. Will its cenvat be eligible under the new regime or not is also subject to interpretation but as of now, there is no restraining provision in the new law to bar such cenvat. The current definition of input services uses terms like place of removal in Cenvat credit Rules that has generated a lot of litigation. But the new definition is free from use of such terms. Still it has to be waited and seen that what the new provisions will have to offer.

We will carry some other questions in our next update.

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