SECTION 10 POWER TO GRANT EXEMPTION FROM TAX

GST Update 03.02.2016

GST DAILY DOSE OF UPDATION:-

SECTION 10 POWER TO GRANT EXEMPTION FROM TAX:-

It is proposed in section 10 of GST Act, 2016, that if the Central or State Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally either absolutely or subject to such conditions as may be specified in the notification, goods and/or services of any specified description from the whole or any part of the tax leviable thereon. Furthermore, the explanation states that where exemption under sub-section (1) in respect of any goods and/or services from the whole of the tax leviable thereon has been granted absolutely, the taxable person providing such goods and/or services shall not pay the tax on such goods and/or services.

The provision contained in the explanation that if there is complete exemption in respect of goods and/or services from whole of the tax leviable, the taxable person shall not pay tax on such goods or services. This provision leads to unwarranted litigation as regards availment of cenvat credit by the buyer of said goods. Presently, similar provisions are contained in section 5A of the Central Excise Act, 1944 which states that if there is absolute exemption from the levy of excise duty then the manufacturer is not required to pay excise duty. This has the consequence that recovery of cenvat credit proceedings are being initiated against the buyers of said goods on the premise that duty mistakenly deposited is in the nature of deposit and not duty for which credit is available. However, presently there are no such provisions in Service Tax laws but incorporating explanation both for goods and services will definitely lead to such litigation as regards input tax credit in the proposed GST regime. It is pertinent to note that there are a number of judicial pronouncements rendered by Apex Court wherein it is being held that the cenvat credit cannot be denied to downstream units on the allegation that no duty/tax was required to be paid by the manufacturer/supplier of goods. This is because assessment of duty/tax cannot be done at the end of receiver of goods. The said decisions are listed as follows:-

· COMMISSIONER OF CENTRAL EXCISE & CUSTOMS VERSUS MDS SWITCHGEAR LTD. [2008 (229) E.L.T. 485 (S.C.)]

· COMMISSIONER OF C. EX., AHMEDABAD-III VERSUS NAHAR GRANITIES LTD. [2014 (305) E.L.T. 9 (Guj.)]upheld by Supreme Court.

It is submitted that incorporation of provisions similar to section 5A (1A) of the Central Excise Act, 1944 in the proposed GST Act, 2016 will lead to importing the litigation prevalent in respect of cenvat credit availability to the downstream units. Consequently, appropriate provisions should also be incorporated so as to ensure that if duty/tax was mistakenly paid by the manufacturer/supplier, the cenvat credit should not be denied to the buyer.

Comments

GST Update 03.02.2016

Post a Comment

Query