Tax Vista Your weekly tax recap Edn. 20 - 2 November, 2020 By Dr. G. Gokul Kishore

E-way bill for intra-State movement - Liability of transporter

Rule 138(1) of CGST Rules requires a registered taxpayer to furnish information in Part A of EWB-01 (form relating to e-way bill) before commencement of movement of goods. E-way bill is mandatorily required if the value of the consignment is more than Rs. 50,000 though the rules provide for generation of e-way bill on optional basis even if value is less than such threshold. Sub-rule (7) of Rule 138 places a burden on the transporter when consignor or consignee has not generated e-way bill, ostensibly due to consignment value being less than Rs. 50,000. The transporter is required to generate e-way bill based on copy of invoices given to him if the aggregate value of consignments transported by him exceeds Rs. 50,000.

The consignors, it appears, had filled up Part A of EWB-01 though value of their individual consignment was less than Rs. 50,000 but did not provide information in Part B. Goods were detained and vehicles were seized as e-way bills were not generated by the transporter when the aggregate value of consignments exceeded Rs. 50,000. The transporter was before the Kerala High Court challenging such detention of vehicles by filing writ petition. The High Court did not interfere and relegated them to avail adjudication / appellate remedies. The order mentions that the goods were transported intra-State. The requirement to generate e-way bill by the transporter as per Rule 138(7) arises in cases of inter-State supply of goods. In this case, the transporter-petitioner was not liable when goods were being transported within the State. The detention order appears to be not sustainable and arguments on illegality might have resulted in quashing of such order by the Court [Bon Cargos Pvt. Ltd. v. Asst. State Tax Officer - 2020-VIL-519-KER].

Refund to exporters - Tale of simple GST

Rule 96(10) of CGST Rules was amended several times and in particular, the condition relating to claiming of refund of IGST paid on exports by those who have availed benefits like Advance Authorization Scheme on imports. Anyone who claims GST to be good and simple tax can be requested to read the recent judgment of Gujarat High Court on a related issue. Not only the conditions were re-phrased, amended, retrospectively amended, etc., but also merged resulting in exporter's nightmare. Because the condition to bar refund to those who have claimed AA benefit came to be inserted later but with retrospective effect, the exporter had to approach the High Court. In the meanwhile, an amendment apparently clarifying the chaos has been made and this has been taken note of the Court to put the matter to rest. The notifications, amendments, etc., have not been discussed to relieve the readers of the agony that exporters have undergone [Cosmo Films Ltd. v. UOI - 2020-VIL-514-GUJ].

Interest on net cash tax liability - Who bears the litigation cost'

Section 50 of CGST Act was amended last year to provide for charging of interest on delayed payment of tax on the portion of tax paid by cash (after deducting admissible ITC). Being a provision benevolent to taxpayers, it was implemented only from September this year. Entire landscape was replete with notices, interpretation of the amendment, etc. GST Council recommended that such amendment be given retrospective effect from 1st July, 2017 but amendments in GST regime take much longer time as they have to go through the process both in the Parliament and the State Legislatures. When the confusion was at its peak, the department in Mumbai had embarked on even initiating garnishee proceedings from customers of the taxpayer for recovery of interest based on gross tax liability. The taxpayer had to rush to High Court. The drama has just ended with a benign CBIC instruction issued on 18-9-2020 explaining the entire issue and directing the officers to keep the notices in call book till the law is amended from 1-7-2017. This has been taken note of by the High Court to quash the garnishee notices [KLT Automotive and Tubular Products Ltd. v. UOI - 2020-VIL-517-BOM].

As noted in the previous case of refund to exporters, this issue could also have been eminently avoided had the CBIC been clear on its position. Though one may feel relieved at the turn of events, the business lost due to time spent and litigation cost incurred by taxpayers should be recoverable from the exchequer. But this will remain Utopian as the might of the State always prevails.

Supply of trade advertisement materials is supply of goods - AAAR

Karnataka Appellate Authority for Advance Rulings has set aside the order of AAR by holding that supply of trade advertisement materials like banners, display unit or boards by the appellant after printing the content provided by the customer would be supply of goods and not supply of service. The AAR had held that it would be supply of service.

The Appellate AAR has held that CBIC circular on printing contracts relied on by AAR as not applicable to the present case since the contract in the case before it is for supply of trade advertising material. According to the ruling, content will always be given by the customer who will have the usage rights and the same is not relevant in this case. It held that the activity of digital printing brings into existence a new product with specific use for advertising and known in common parlance as 'flex banner' or 'flex bill-board' etc., and the appellant is not merely printing the content but making a product. Classification has been held to be under Heading 4911 10 with applicable rate of GST of 12% [Macro Digital Imaging Pvt. Ltd. - 2020-VIL-66-AAAR].

On this issue, divergent rulings are now available. It is time for CBIC to take into account the practices prevalent in the industry and issue a circular. Advertising and sales promotion expenses account for major expense for any entity and tax implication can hardly be ignored.

Agricultural produce - Storage of exempted goods, taxable

As per Notification No. 11/2017-Central Tax (Rate), storage or warehousing of agricultural produce attracts NIL rate of GST. Specific exemption has also been provided for such services in Notification No. 12/2017-Central Tax (Rate). The expression 'agricultural produce' has been defined which covers only those which have not been processed after cultivation or only such processing has been carried out to make it marketable in primary market. The key determinant is processing should not result in changing the essential characteristics. CBIC clarified in 2017 that jaggery, tea, pulses, processed spices, etc., were not agricultural produce and hence, not exempted in so far storage or warehousing of such goods is concerned. Later, in 2019, after amendments, exemption was extended to storage or warehousing of cereals, pulses, fruits, vegetables, nuts, spices, jaggery, tea, coffee, etc.

The applicant before the Authority for Advance Rulings (Uttarakhand) sought answer to questions on applicability of exemption to storage of various items. The AAR held that the above said exemption would not be available to storage or warehousing service in respect of curd, desi ghee, dried makhana, amla pishti, aam papad as they are not 'agricultural produce' as per the notification. Such services provided for fruits, pulses, dates, figs, rice (branded / unbranded) and jaggery would be exempt [Roorkee Cold Storage (P) Ltd. - 2020-VIL-304-AAR].

The seemingly innocuous but important question raised in this application was whether GST would be applicable on storage of exempted goods and the AAR has held in the affirmative. Exempting goods but taxing services related to such exempted goods lacks rationale. If particular goods deserve to be exempted for some eminent reason, then the same reason would hold for services related to such goods to merit an exemption.

(The author is an Advocate practising independently. The views expressed are personal)