|
Tax Vista Your weekly tax recap Edn. 135 - 16th Jan 2023 By Dr. G. Gokul Kishore |
|
ITC mismatch - High Court directs applying circular for 2019-20 also
High Courts have wide latitude when it comes to justice delivery and when such latitude is used to dispense justice in a deserving case, the faith of taxpayers in judiciary gets strengthened. The issue is incorrect mention of GSTIN in the invoice - instead of a particular company's GSTIN, it appears the GSTIN mentioned was that of one of the group companies of the recipient-buyer. Because of this reason, there was mismatch between GSTR-2A and GSTR-3B in respect of input tax credit. The High Court held that such error is bona fide and constituted sufficient cause and therefore, CBIC Circular No. 183 will be applicable. The Court ordered the authorities to take action (verification) as per the instructions contained in the circular and consider the request of the petitioner regarding verification so as to enable availment of input tax credit by the recipient. The year for which such direction has been given is 2019-20 also while the circular specifically covered FYs 2017-18 and 2018-19 only. The ground adduced by the Court is that the errors committed are identical for all these years and the petitioner / taxpayer would be entitled to benefit of such circular for all the three years - 2017-18, 2018-19 and 2019-20.
This will be immensely helpful to taxpayers not only in Karnataka but also in other States to at least plead grant of similar relief though High Courts in other States may or may not accept. Instead of harping on amendment made to CGST Rules through Rule 36(4) in 2019, CBIC should make the circular applicable without reference to any period when the error is clerical and bona fide like in the above case of mentioning incorrect GSTIN when the transaction is otherwise genuine [2023-VIL-22-KAR].
Provisional attachment after making pre-deposit for appeal, is not valid
Tax authorities are so attached to the property of taxpayers that even after filing appeal by making the required pre-deposit, provisional attachment continues. In a case of this nature, the appellate authority ordered de-freezing of bank account alone and other property of the taxpayer and debtors remained under provisional attachment after filing of appeal with the first appellate authority. The department's counsel had argued that attachment of bank account has been lifted but justified continued attachment of other properties. The High Court noted that as per Section 107 of CGST Act, 2017, once pre-deposit of 10% of tax demanded is paid, recovery of balance amount is deemed to be stayed and attachment of property despite payment of pre-deposit is not valid. It ordered revocation of attachment. There is no mention in the order about one year period after which attachment lapses. When the provision is unambiguous as to stay of recovery after payment of pre-deposit, acting against such statutory mandate is abuse of law. The officers who had taken such action curtailing the liberty of the taxpayer beyond what is permitted by law should be proceeded against [2023-VIL-25-HP].
Hostel is not residential dwelling - Exemption not available
It is a common practice to construct residential premises with self-contained rooms for accommodation by students when the property is near educational institutions. These rooms / accommodations serve like hostel. In the case before Appellate AAR, the monthly rent for such room per student was less than Rs. 1000 per month. In the advance ruling against which appeal was filed it was held that the agreement between the taxpayer and the lessee was on the basis of built-up area and not on unit cost of accommodation and the lessee was a person who in turn provided accommodation to students. Based on such grounds, exemption was held as not admissible. The Appellate AAR noted that the building was constructed as hostel building as per plan approved by appropriate authority and the approval was not for residential dwelling. The hostel building has been leased to the person who in turn had sub-leased to the education society. All the parties in the chain are business entities and the building is not used as residential dwelling by the tenant but only to further their business. The AAAR has labored to find out that a mess is run adjacent to the property / hostel building and such factor takes the same out of residential building. It upheld the advance ruling and thus exemption to the appellant for leasing of hostel building stood denied.
Hostel when put to use as place of accommodation whether gets covered under residential dwelling - this question may have to wait for some more time to be answered finally. The presence of multiple parties and layers in the transaction whether dilutes applicability of exemption also needs to be answered conclusively [2023-VIL-03-AAAR].
Important of documents like MOA in claiming exemption
Works contract service by way of construction of quarters for employees of government entity is exempted if such work is entrusted by government. The question before AAR was construction for employees of nuclear power corporation. The AAR had denied concessional rate of GST on the ground that proper evidence was not produced. Before the Appellate AAR, the appellant submitted MOA and other documents to prove that acquisition of apartments is an incidental activity to achieve main objective and the work has been entrusted by the government to such entity. The Appellate AAR held that concessional rate of 12% GST would be available. This ruling is factual and may not have much precedential value but the importance of documents like MOA gets reiterated by such rulings. If basic documents are impeccable, then the case of the taxpayer gets fortified and in many cases, not only documents are weak, sometimes they are even absent. Major transactions are undertaken without even an agreement sometimes [2023-VIL-04-AAAR].
Consultancy relating to oil & gas exploration - AAAR rules out concessional GST rate
In Tax Vista dated 4th April, 2022, an advance ruling was discussed wherein it was held that project management consultancy services for oil and gas exploration would not be entitled to concessional GST rate of 12%. It was remarked that the projects belong to core sector and tariff concession is one of the methods to provide some cushion to otherwise capital intensive, long-gestation projects in oil and gas sector and the parties involved may have to seek CBIC's clarification again so that tax cost does not escalate. However, it seems, in a similar case, the taxpayer has opted for appeal and the Appellate AAR has upheld the advance ruling now.
The relevant headings in Notification No. 11/2017-Central Tax (Rate) are (a) 9983 relating to professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas and (b) 9986 on support services to exploration, mining or drilling. Readers may see the order for elaborate arguments and the reasoning of Appellate AAR to hold that both these entries are not applicable but residuary entry providing for 18% GST would be applicable. The ruling appears to indicate some research by the AAAR also but the endeavor to somehow deny the concessional rate is palpable. Some of the arguments are specious and lack substance. The crux seems to be that physical performance or actual rendering of exploration service and management or supervision does not get covered [2023-VIL-05-AAAR].
Consented value is transaction value - CESTAT reiterates
It is settled law that when the importer has consented to the enhanced value, then such enhanced value would become the transaction value under Customs Act and Customs Valuation Rules. This has been reiterated in a recent order wherein the original order rejecting declared value for mis-declaration, was set aside by Commissioner (Appeals) on the ground that except statements, no evidence was relied on by the department. Department had filed appeal in CESTAT which has been allowed. The importer had given statements accepting re-determination of value and waiving SCN and personal hearing before the Customs authorities. The Tribunal ruled that while speaking order is required for rejection of declared value, the importer has the right to seek information or documents based on which such endeavor is made by the Customs authorities but the importer in this case had accepted re-determination and also waived SCN. Enhancement of value has been upheld by the Tribunal. Though this order follows precedent decisions, it is highlighted in this column as importers under pressure to get the goods released due to various reasons, accept whatever Customs authorities say at that moment and the consequences are drastic at a later stage. Lack of proper advice at that stage is also seen in many cases coupled with the fear of escalating demurrage and detention charges [2023-VIL-26-CESTAT-DEL-CU].
GST Council decisions - Circulars issued
GST Council in its last meeting had recommended issuance of circulars to clarify various issues. CBIC had issued Circulars No. 183 to 188 on 27th December, 2022. Two more circulars No. 189 and 190 have been issued on 13th January, 2023. Circular No. 189 provides clarification on GST rates and classification for certain goods. One of the controversial issues clarified pertains to classification of, and tax rate for, carbonated beverages of fruit drink or carbonated beverages with fruit drink. Specific entries were created for such goods by amendments with effect from 1-10-2021 and therefore, such goods are classifiable under sub-heading 2202 99. These goods are subject to GST rate of 28% and compensation cess of 12%. It further clarifies that the heading covers all such goods containing carbon di-oxide whether as preservative or additive. A few taxpayers have sought advance ruling on classification of fryums and the present circular clarifies them as classifiable under tariff item 1905 90 30 attracting 18% GST.
(The author is an Advocate, Gokul & Subha Advocates, Chennai. The views expressed are personal. The author has published books on cross-border taxation and investigations & appeals under GST. He edits R.K. Jain's GST Law Manual. E-mail - gokulkishore@gmail.com)