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GST Evasion
Gujarat HC serves notices on govt, GST council for breach of refund norms

Gujarat HC serves notices on govt, GST council for breach of refund norms

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The Gujarat High Court has issued notices to the union government and the GST Council over the alleged breach of refund norms by field officers under the goods and services tax (GST) regime.

Under the Rule 92 of the Central GST (CGST) Act, the claim of the refund has to be made in the RFD 04 form. Thereafter, the officer concerned can accept or reject the claim after his investigations.

If the claim is accepted, he would issue refund in the form RFD 06. In case the refund is required to be adjusted, the officer would withhold it in the form RFD 07. If the refund is not admissible, partly or wholly, this would be communicated through the form RFD 08.

If the amount is rejected, it would be credited to the government account under the Rule 93 of the

Gujarat HC serves notices on govt, GST council for breach of refund norms CGST Act, but for that, due process of RFD forms has to be followed.
A petitioner moved the high court, saying the field officer concerned rejected his claim of refunds without resorting to RFD forms. He reversed it under the Rule 93, which, he argued, could not be done without following the due process.

Abhishek Rastogi, counselor of the petitioner and partner at Khaitan & Co, said many petitioners were keen to move the court over the lapses. “The law provides that the denial of the refund has to happen only after compliance with the procedure laid down. We have challenged the rejection order, which has not followed the due process of law,” he said.

Source: Business-Standard.

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28th GST Council Meeting
No GST at duty-free shops: HC

No GST at duty-free shops: HC

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Multiple court rulings on payment of goods and services tax (GST) at duty-free shops are making life confusing for those buying perfumes and chocolates from these stores.

A recent Allahabad high court judgment may, however, provide some relief with the court ruling that there shall be no tax levied in case of purchases made at duty free stores at the arrival or departure terminals. The court held that tax will not be levied as the goods never cross customs border and passengers carry the items as their personal belonging.

The ruling is similar to the one by Karnataka high court where in case of Flemingo Duty Free Shop, it was held that sale or purchase by such stores would be a transaction in the course of export or import.

But what complicates matters is a ruling by the MP high court in the case of Vasu Clothing, where it held that the transactions were liable to GST as supply to a duty-free shop by an Indian supplier is not to “a place outside India” and therefore such supplies do not qualify as exports under GST.

Moreover, the Authority for Advance Ruling (AAR) had held that supply of goods to passengers going abroad from duty-free shops at Delhi International Airport is liable to GST. Alcohol, which is the most popular item at duty-free shops, is outside the ambit of GST.

“Applicability of GST on duty-free shops has been a perennial issue under the erstwhile VAT regime with multiple diverse rulings. The situation has not improved even under GST on account of diverse rulings by MP and Karnataka high courts. The new ruling seems to have rightly interpreted the provisions under the GST law as well as baggage rules to arrive at the conclusion which appears to be rational and in line with the legislative intent,” said Harpreet Singh, partner at consulting firm KPMG.

The Allahabad HC order came in response to a PIL filed by Atin Krishna on the grounds that the exchequer is losing revenue. The petitioner has argued that the respondent is liable to pay Central and state GST on the goods sold to international passengers at its departure terminal and is ineligible to get refunds of the accumulated input tax credit.

The respondents countered it saying that the supply of goods till they cross customs border should be considered as an inter-state supply under the integrated GST.

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Source: Times of India.
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High Court issues notice to Centre and Delhi govt on ‘blocked credits’ under GST

High Court issues notice to Centre and Delhi govt on ‘blocked credits’ under GST

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The Delhi High Court on Monday issued a notice to the Centre and the Delhi government on the issue of ‘blocked credits’ under the Goods & Services Tax (GST) regime. Such a mechanism is affecting hotels and malls.

The GST Act has a provision, under Section 16, for input tax credit (ITC), which helps businesses deduct the tax paid on inputs at the time of paying tax on output, thus lowering the tax paid in cash. However, this Section is subject to certain restrictions as laid down under Section 17 of the Act. These restrictions are also referred to as ‘blocked credits’.

The related Section says: “Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.”

The petition was moved by a firm building a five-star hotel in the Capital. It has been procuring multiple goods and services, including works contract services, for use in the construction of the property.

Denial of credit

The petition mentioned that by virtue of provisions under the Act, the input tax credit available on the procurement of goods and services or both, including works contract services used for the construction of the immovable property, is denied to the petitioner.

The denial of credit disregards that the property so constructed by the petitioner would be used by it for furtherance of business, it said.

The petition specifically talks about two provisions related with ‘blocked credits’. Section 17(5)(c) ITC shall not be available in respect of the “works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service”.

Similarly, Section 17(5)(d) says ITC will not be available for “…goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account, including when such goods or services or both are used in the course or furtherance of business.”

It was prayed before the court to quash and declare both the provisions as violating the fundamental right of the petitioner and, therefore, violation of Article 14 of the Constitution (equality before law).

According to Abhishek A Rastogi, partner at Khaitan & Co, who is arguing the matter in the Delhi High Court, the arbitrariness with respect to Section 17(5) of the CGST Act and the respective State Acts arises as these provisions intend to deny credit for construction projects while the objectives of the GST are completely different and provide for credits to the receiver when the output is in the course or furtherance of business. The impugned provisions have been challenged on the grounds of arbitrariness and vagueness of the phrase ‘on his own account’.

“The distinction between B2B (business to business) and B2C (business to consumer) transactions, especially for cases when the output activity is charged to GST, needs to be looked into to avoid tax cascading effect,” he said.

Source: The-Hindu-Business-Line.

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Relief for importers as Gujarat HC stays IGST levy on ocean freight

Relief for importers as Gujarat HC stays IGST levy on ocean freight

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Importers can breathe easy as the Gujarat High Court has stayed the levy of Integrated Goods & Service Tax (IGST) on ocean freight. IGST is levied on all Inter-State supplies of goods and/or services. It is also applicable on any supply of goods and/or services in cases of import into and export from the country.

Under the GST, there is specific provision with respect to taxability on the component of ocean freight. The law specifically provides that the importers are required to discharge IGST at the rate of 5 per cent on ocean freight services under the Reverse Charge Mechanism (RCM). Under RCM, it is the duty of importer to pay IGST on behalf of foreign buyer. However, at the same time, customs duty on the CIF value (which includes the component of freight as well) of the goods imported into India is also paid by the importer. As a result, there is double taxation on the component of ocean freight under GST law which is an impediment and has bloated the cost of imports.

Keeping this in mind, a petition was filed with the Gujarat High Court. The petitioner, Mohit Minerals Pvt Ltd challenged vires of IGST related notification. The petition has principally three elements. First, having paid the tax under IGST Act on the entire value of imports (inclusive of the ocean freight), the petitioner cannot be asked to pay tax on the ocean freight all over again under a different notification. Secondly, in case of CIF (Cost, Insurance and Freight) contracts, the service provider and service recipient both are outside the territory of India. No tax on such service can be collected even on reverse charge mechanism. And thirdly, in case of High Sea sales, the burden is cast on the petitioner as an importer whereas, the petitioner is not the recipient of the service at all. It is the petitioner’s seller of goods on high sea basis who has received the services from the exporter/ transporter. The matter is pending.

A similar petition was filed by Ghanshyamlal and Company. The court took notice of order passed in the previous matter and granted stay. Now notice has been issued to the Central Government and both the matter will be heard on June 19.

Commenting on the development, Harpreet Singh, Partner in KPMG, said this is indeed a positive development and should come as relief to importers at large. The issue of double taxation has been at the forefront of recommendations by various industry bodies. “While the present order grants stay on levy of IGST on ocean freight, it would be interesting to track this case as importers would be hoping the final outcome settles the long pending issue of double taxation,” he said.


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Source: The-Hindu -Business-line.
GST
Power companies challenge GST on green certificates

Power companies challenge GST on green certificates

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Are renewable energy certificates, bought by power companies, goods or services?

Neither. And so, must be out of the indirect tax ambit, according to power companies which have suffered higher costs because of the Goods and Services Tax (GST).

The power companies that buy these certificates to comply with the environmental norms challenged the levy through a write petition filed in the Delhi High Court on Tuesday.

Power companies buy these certificates from renewable energy exchanges to abide by government norms that mandate that a certain percentage of power generated should be through renewable sources.

The certificates are derivatives based on the power generated in green route. Most power generators buy renewable energy from their green peers, sometimes based abroad. These certificates also work as a source to buy the balance quantity of renewable energy that cannot be bought or generated directly by the power firms.

“The taxability of renewable energy certificates has been challenged as these are securities which are excluded from both goods and services. These scrips are traded every Wednesday on IEX (Indian Energy Exchange) and PXIL (Power Exchange India), the two exchanges for the trading purposes,” said Abhishek A Rastogi, partner, Khaitan and Co.

According to the power companies, a government circular that came out in June last year added to their woes. It talked about the applicability of GST on the renewable energy certificates at 12%. “It is hereby clarified that Renewable Energy Certificates (RECs) and Priority Sector Lending Certificates (PSLCs) and other similar documents are classifiable under heading 4907 and attract 12% GST,” it read.

“Taxing renewable energy certificates will prove to be fatal for the power consumers by further increasing the cost of electricity. The regulatory obligations to consume renewable energy as a part of the climate change initiative to control global warming and the taxability can only be decided by the court,” said Harry Dhaul, director general of the Independent Power Producers Association of India (IPPAI).

“The circular provides for the taxability of renewable energy certificates and it will have to be determined in light of the statutory provisions,” said Rastogi.


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Source: Economic Times.