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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 11.01.2016

REASONS FOR CONFLICTS BETWEEN CENTRE AND STATES

GST DAILY DOSE OF UPDATION:-
 
REASONS FOR CONFLICTS BETWEEN CENTRE AND STATES:-
 
The implementation of the most awaited GST law is being delayed for mainly two reasons. First is the opposition from the Congress Party regarding three issues, i.e., Abolition of proposal to levy 1% additional tax, incorporation of GST rate in constitution itself and creation of Dispute Resolution Mechanism. Second reason for delayed implementation of GST is the conflicts between Centre and States on certain key issues. The first reason has already been discussed in our earlier update and the second reason is the subject matter of discussion of this update.
 
The first and foremost reason for lack of consensus between the Centre and States was the compensation to be given to the States during the loss of revenue in the initial years of implementation of GST. There has been a huge dispute as regards the compensation to be received by different States as GST is consumption based taxation. As it is known that India comprising of different States out of which some States significantly contribute to the manufacturing activities whereas some states are consuming states. Consequently, manufacturing states will lose significantly during the initial years of implementation of GST. Moreover, the period during which compensation will be given to the States is also a crucial factor for determination as after implementation of GST, the consuming states will earn at higher rate while manufacturing states will lose revenue at higher rate. Consequently, proper equilibrium needs to be maintained. Finally, in order to achieve consensus, it has been proposed to compensate states for a period of 5 years wherein 100% compensation will be for first 3 years, 75% in the fourth year and 50% for the fifth year of implementation of GST. But states still doubt the timely compensation from centre as centre has not given promised CST compensation to states till date.
 
The second reason of dispute for lack of consensus was exclusion of certain items from the purview of GST law for certain specified period of time like Petroleum, High Speed Diesel, Natural Gas, Aviation Turbine Fuel and alcohol for human consumption. It is being demanded from States that only states should have power to levy taxes on these items except in case of imports and inter state trade. The tax from these items is major source of revenue for the states and they do not want to forgo the same.
 
Another reason for conflict between Centre and States was the fixation of threshold limit. While the Centre wants the exemption limit to be Rs. 25 Lakhs, the States are not agreeing for higher threshold limit and support lower threshold limit of Rs. 10 Lakhs. According to the Centre, the contribution of small traders to tax revenue is minimum and insignificant and so the threshold limit should be reasonable keeping into mind the fact that the GST regime will subsume excise duty also which has current threshold limit of Rs. 1.5 Crores. However, with a view to reach consensus with the implementation of GST regime, for the time being it was decided that the threshold limit will be determined by the GST Council.
 
Still another dispute is about the adjudication and appellate authorities to be appointed for the GST. These authorities will come from state or from the centre. While GST has two type of taxes i.e. CGST and SGST and they will be handled by Centre as well as by state. Hence, the field formation of both centre and state will be looking after the same. But smooth implementation of GST require that there should be common adjudication and appellate authorities. But Centre want that these officers should come from centre but the state does not want to lose their power. But to avoid conflict, this matter will be decided later on and centre wants that the constitutional amendment bill is passed at the moment.
 
 
Another dispute is about the rate of tax is to be levied on GST. The states wants it to be higher side so that there is no loss to them. But the centre wants that it should be normal so that it does not add to inflation. They were agreeing around 22% but the opposition congress party want it should not go beyond 18% . This restriction should be placed in constitutional bill itself. But the ruling BJP party does not agree to it. But after the promise of compensation of loss of revenue to states, the state will also agree to the same. But the manufacturing state has demanded additional 1% non cenvatable tax so that there loss is minimum.  The centre is also agreeing to the same but the opposition party is not agreeing the same. The centre wants that the matter will be resolved by GST council.
 
The above reasons for conflicts are sought to be temporarily resolved in order to initiate the process of implementation of GST regime so that a new beginning of unified taxation can be made.

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