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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 No 196 ON REPERCUSSIONS OF SC DECISION QUASHING LEVY OF GST ON OCEAN FREIGHT

GST UPDATE No 196 ON REPERCUSSIONS OF SC DECISION QUASHING LEVY OF GST ON OCEAN FREIGHT
In our previous update we had discussed the reasoning adopted by the Hon’ble Supreme Court wherein it was concluded that the transaction of service element of transportation of goods by foreign shipping line engaged by foreign exporter in CIF contract of sale of goods is composite supply under section 2(30) of the CGST Act, 2017 which is liable to tax as principal supply as per provision contained in section 8 of the CGST Act, 2017. It was also held that although as per section 7(3) of the CGST Act, 2017, the Central Government has the power to notify an import of goods as import of services and vice-versa; there is no such power to interpret composite supply of goods and services as two segregable supply of goods and supply of services. Hence, the Supreme Court agreed with the view of the Gujarat High Court that a tax on supply of a service which has already been included by the legislation as a tax on the composite supply of goods cannot be allowed by treating the transaction of sale of goods and ocean freight as separate. The repercussions of this decision are the subject matter of discussion of our present update. The analogy adopted by the Apex Court appears to distort the concept of taxation at multiple stages under GST law to facilitate formation of a valid input tax credit chain. There are numerous transactions wherein the GST is being levied more than once on the premise that the input tax credit is anyways available to the recipient. To illustrate- A Chartered Accountant providing representational services to a client claims various out of pocket expenses incurred such as accommodation services, travelling cost etc. on which GST is already being paid by the service provider. The Chartered Accountant while raising bill to its clients includes such charges as a part of composite supply and charges GST @18% as applicable on consultancy services inspite of the fact that the expenses incurred might have suffered lower GST rate of 12% or 5%. However, it is settled principle that the Chartered Accountant will avail the input tax credit of the tax so paid to the CA. PRADEEP JAIN ??www.capradeepjain.com??pradeep@capradeepjain.com??5 service providers and will charge GST @18% from its clients which is the basic framework of the GST regime. However, if the ratio of the above cited judgment is applied, it may lead to absurd results as the chartered accountant may plead that since the tax on such charges is being levied as a part of the composite supply, the said charges cannot be subject to levy of GST by the service provider of accommodation services/travelling expenses. Similarly, in case of domestic supplies wherein transportation charges are included in the value of taxable supply of goods, the assessee may contend that they are not liable to pay GST under reverse charge mechanism on the transportation charges paid to the GTA service provider as the said transportation charges are inevitable part of the composite supply of goods and cannot be taxed separately. However, it is pertinent to mention that the practically, the assessees are paying GST on the transportation charges at the GST rate applicable to the products in case of composite supplies and are also paying GST under reverse charge mechanism on the transportation charges. It is different matter that input tax credit of the tax paid under reverse charge mechanism on the transportation charges is admissible to the assessee. In our opinion, if the ratio of the Supreme Court decision is made applicable, then assessees may contend that GST will not be leviable separately on all the supply of goods and services which are part of the composite supply which definitely does not appear to be the intention of the legislature. It is submitted that although the decision is a boon to the assessees as it seeks to quash the levy of GST on ocean freight which is revenue neutral situation but at the same time, the reasoning adopted may lead to chaos with respect to normal transactions as discussed above. There is high probability that the judgment will be reviewed.
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PRADEEP JAIN, F.C.A.

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