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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 HC DECISION ON INTERMEDIARY SERVICES PART-3 120/2020-21

GST UPDATE ON HC DECISION ON INTERMEDIARY SERVICES PART-3 120/2020-21
We had discussed the controversy regarding applicability of CGST/SGST on the transaction of intermediary located in India providing services outside India in our earlier update. The present update seeks to discuss the contention regarding violation of Article 286 of the Constitution of India pleaded by the petitioner and the aspect of double taxation as considered in the HC decision.
 
The petitioner pleaded that as per Article 286 of the Indian Constitution, States cannot impose tax in cases where supplies are made outside the State or takes place in the course of import or export of goods or services. It was contended that since the provision contained in section 13(8) of the IGST Act, 2017 determines place of supply as location of supplier, then the tax to be levied is CGST/SGST because the location of supplier and place of supply are in the same State. However, in reality, the recipient is located outside India and so it was contended that levy of SGST on such transaction is violative of Article 286 of the Constitution of India. In this respect, in our view, the contention does not appear to be correct as there are situations wherein CGST/SGST is being levied even when the location of recipient is outside India. To illustrate- in case of hotel services provided to a foreigner, the hotel charges CGST/SGST because as per provision contained in section 13(3)(b) of the IGST Act, 2017, the place of supply in case of hotel services is the location of hotel. Consequently, the location of supplier and the place of supply is in same State and CGST/SGST is being levied. In case of hotel services, it does not matter who is the recipient of service. Therefore, even if services are provided to a foreigner, CGST/SGST is being levied and so there is no embargo in imposition of State tax in cases where recipient of service is located outside India. Hence, in our opinion, the Hon’ble High Court has correctly stated that there is no violation of Article 286 of the Constitution of India because as per Article  246A, Parliament is empowered with exclusive right to make laws with respect to GST where supply takes place in the course of inter-state trade or commerce and so the place of supply provisions implemented are in consonance with the powers given to the Parliament. Therefore, the pleading that State tax cannot be imposed is fallacious at the outset and was rightly rejected by the Hon’ble High Court.  
However, another aspect regarding double taxation was not accepted in the manner in which the petitioner placed it before the Hon’ble High Court. It was pleaded that levy of tax on such transaction would lead to payment of tax by the intermediary in India and the recipient situated abroad thereby leading to double taxation. However, the Hon’ble High Court stated that the recipient located outside India would be claiming the amount paid as an expense and so tax is being levied only once in India on the said transaction. In this regard, it is pertinent to mention that whether tax is levied in the recipient’s country or not depends on law prevalent in respective country and this cannot be generalised. Consequently, the aspect of double taxation is to be examined on the basis of laws prevalent in each country and it cannot be said that there is no double taxation.
 
We will discuss other points related to this landmark HC decision in our next update.
 
This is solely for educational purpose.
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