RECENT DEVELOPMENTS IN GST

NOTIFICATIONS

(a)        Extension
of time limit – Notification No. 66/2020-Central Tax dated 21^st
September, 2020

The above Notification seeks to amend Notification No. 35/2020-Central
Tax dated 3^rd April, 2020. By this amendment, a second proviso is inserted in the said Notification. As per section
31(7) of the CGST Act, when the goods are sent on approval basis the invoice is
required to be made at the time of supply or six months from the date of
removal, whichever is earlier. However, the said time limit for goods sent out
of India on approval during the period from 20^th March, 2020 till 30^th
October, 2020 and where completion or compliance could not be made within the
given time, is extended up to 31^st October, 2020 by the above
Notification.

(b) Waiver of late fees –
Notification No. 67/2020-Central Tax dated 21^st September, 2020

By this Notification the time limit for filing return in Form GSTR4
(applicable to composition dealers) for the quarters from July, 2017 to March,
2019 is extended up to 31^st October, 2020. If the returns are filed
as above, then late fees applicable u/s 47 will get fully waived, if the tax
payable is Nil in the return concerned and in other cases late fees in excess
of Rs. 250 will be waived.

(c) Extension of time limit and
waiver – Notification No. 68/2020-Central Tax dated 21^st September,
2020

By this Notification, the late fees for delay in filing final return in
Form GSTR10 (applicable in case of cancellation of RC) in excess of Rs. 250 is
waived if such return is filed up to 31^st December, 2020.

(d) Extension of time limit –
Notification No. 69/2020-Central Tax dated 30^th September, 2020

The time limit for filing annual return in Form 9 for the year 2018-2019
is extended till 31^st October, 2020.

(e)        E-invoicing
/ criteria for applicability – Notification No. 70/2020-Central Tax dated 30^th
September, 2020

As per Notification No. 13/2020 dated 21^st March, 2020,
E-invoicing is made applicable from 1^st October, 2020 to registered
persons having turnover exceeding Rs. 500 crores in a financial year. However,
there was no clarity about the financial year for which the turnover is to be
seen. Now, by the above Notification dated 30^th September, 2020 it
is provided that the financial year will be any preceding financial year from
2017-18 onwards. The implication is that if the turnover has exceeded Rs. 500
crores in any financial year from 2017-18 till 2019-20, then the E-invoicing
provision will be applicable. It may be noted that E-invoicing will apply to
export supply also.

(f) QR code – Notification No.
71/2020-Central Tax dated 30^th September, 2020

As per Notification No. 14/2020 dated 21^st March, 2020 the
QR code is made applicable to registered persons having turnover exceeding Rs.
500 crores in a financial year. However, there was no clarity about which
financial year is to be considered for the above turnover limit. By the above
amendment Notification, it is provided that the financial year should be any
financial year from 2017-18 onwards. Further, the applicability of the above
provision is shifted to 1^st December, 2020 instead of 1^st
October, 2020.

(g) Amendments in Rules – Notification
No. 72/2020-Central Tax dated 30^th September, 2020

Various Rules are amended by the above Notification. The amendments are
in Rules 46, 48 and 138A with a view to align the said Rules with the new
requirements of E-invoicing and QR code.

(h) Relaxation in relation to
E-invoicing – Notification No. 73/2020-Central Tax dated 1^st
October, 2020

Though E-invoicing is made applicable for specified persons, some
relaxation is given for the first month, i.e., October, 2020. The IRN (Invoice
Reference Number) is required to be obtained before issue of E-invoice.
However, for October, 2020 such IRN can be obtained within 30 days from the
date of invoice, and if it is done so it will be a valid invoice. The above
relaxation will not be available from 1^st November, 2020.

(i) Special
Provision for outward supply returns – Notification No. 74/2020-Central Tax
dated 15^th October, 2020

By the above Notification special provision is made for outward supply
return in GSTR1 for registered person having turnover up to Rs. 1.5 crores in
previous financial year or current financial year. The special provision
related to returns is as under:

(j) Extension
of time limit – Notification No. 75/2020-Central Tax dated 15^th
October, 2020

The time limit for filing GSTR1 for registered person having turnover
more than Rs. 1.5 crores in preceding financial year or current year shall be
the 11^th day from the end of the month concerned. This treatment is
for monthly returns for October, 2020 to March, 2021.

(k)        Due
date for filing GSTR3B – Notification No. 76/2020-Central Tax dated 15^th
October, 2020

By this Notification some extension is given for filing return in Form
GSTR3B for the months of October, 2020 to March, 2021.

If the turnover is less than Rs. 5 crores in the previous financial year
and if the principal place of business is in Chhattisgarh, Madhya Pradesh,
Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra
Pradesh, the Union Territories of Daman and Diu and Dadra and Nagar Haveli,
Puducherry, Andaman and Nicobar Islands or Lakshadweep, then the due date will
be the 22^nd day from the end of the month concerned for which the
return is to be filed.

If the above category of registered persons have their principal place
of business in Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar
Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura,
Meghalaya, Assam, West Bengal, Jharkhand or Odisha, the Union Territories of
Jammu and Kashmir, Ladakh, Chandigarh or Delhi, then the due date will be the
24^th day from the end of the month concerned.

The tax as per above return should also be paid by the above respective
dates. These changes are with a view to avoid any load on the system. The due
date for registered persons having a turnover of more than Rs. 5 crores remains
the same, that is, the 20^th day from the end of the month concerned.

(l) Optional
Annual Return – Notification No. 77/2020-Central Tax dated 15^th
October, 2020

Filing of annual return by registered person for the years 2017-2018 and
2018-2019 is made optional by Notification No. 47/2019-Central Tax dated 9^th
October, 2019 in case of registered person whose turnover is below Rs. 2 crores
in the relevant financial year. The said optional scheme is extended for F.Y.
2019-20 by the above amendment Notification.

(m) HSN code – Notification No.
78/2020-Central Tax dated 15^th October, 2020

The scheme of mentioning HSN code in the Tax Invoice is amended with
effect from 1^st April, 2021. Accordingly, where the aggregate turnover
in the preceding financial year exceeded Rs. 5 crores, HSN code should be in
six digits and in other cases up to 4 digits. However, where the turnover is up
to Rs. 5 crores and supply is to unregistered person, the mentioning of HSN
code is exempted.

(n) Amendment to Rules –
Notification No. 79/2020-Central Tax dated 15^th October, 2020

By this Notification, Rule 46 is amended whereby powers are given to the
Board for specifying the requirement of HSN by different categories of
registered persons.

By the amendment in Rule 67A, a facility of filing Nil return in Form
GSTR3B, GSTR1 or GST-CMP-08 by SMS is provided. The SMS should be from the
registered mobile number.

By the amendment in Rule 80(3), the turnover limit for GST Audit in Form
9C for the years 2018-19 and 2019-20 is enhanced to Rs. 5 crores. In other
words, if the aggregate turnover exceeds Rs. 5 crores only then will audit in
Form 9C apply for the above years.

By the amendment in Rule 138E, the restriction in respect of
non-generation of E-way for defaulter of returns for the period February, 2020
to August, 2020 has been removed for E-way bills to be generated during the
period 20^th March, 2020 to 15^th October, 2020.

In the amendment in Rule 142, there are some grammatical corrections.

(o) Extension of exemption –
Notification No. 04/2020-Central Tax (Rate) dated 30^th September,
2020

The exemption provided on services by way of transportation of goods by
air or sea from customs station of clearance in India to a place outside India
is extended by one year, that is, up to 30^th September, 2021.

CIRCULARS

Clarification about Rule 36(4) –
Circular No. 142/12/2020-GST dated 9^th October, 2020

CBIC has issued the above Circular in which detailed clarifications are
given about working for the purposes of Rule 36(4) of the CGST rules. The said
Rule is regarding matching of 2A vis-a-vis claim of ITC while filing respective returns. Various clarifications
with examples are given.

ADVANCE RULING

Air conditioning system – whether works contract

M/s Nikhil Comforts
(MAH/GST/AAAR/SS-RJ/16/ 2019-20 dated 11^th November, 2019) (Mah.)

The issue before the Appellate Authority for Advance Ruling (AAAR) has come
from the Advance Ruling order passed by the Authority for Advance Ruling (AAR)
of Maharashtra.

The transaction carried out by the appellant was for providing an air
conditioning system. The brief details of the said work as noted in the AAAR
order can be noted as under:

‘The VRF system of each premise is unique in terms of configurations and
the sizing and selection of various components. Depending on the interior
layout and the orientation of the building, the indoor and outdoor units are
selected. The refrigerant piping path is decided as per the site condition.
Based on this configuration and path, the refrigerant piping and the branching
joints vary from site to site. The refrigerant pipes and branching joints are
joined by brazing and are insulated. Thus, the entire VRF system is a network
of indoor and outdoor units connected by refrigerant piping and branching
joints, suitably sized as described above. This entire network is tested for
leakages and then vacuumed and charged with a specifically calculated quantity
of gas. The entire network is controlled by microprocessors in indoor and
outdoor units which communicate with each other through interconnecting
communication cables. The commissioning process involves addressing of various
components of network which is unique to each site.’

Based on the above facts of an air conditioning system, the questions
posed before the learned AAR were as under:

Question No. 1: The transaction would be classifiable under the
definition of ‘works contract’ liable to CGST/SGST/IGST covered under Sr. No. 3
item No. 3 of Notification No. 20/2017-Central Tax rate dated 22^nd August,
2017.

OR

Question
No. 2: The transaction is composite supply liable to tax @ 14%, principal goods
involved being air conditioner which falls under Schedule IV, Sr. No. 119 of
Notification No. 1/2017-Central Tax rate dated 28^th June, 2017.

In AR dated 24^th May, 2019, the learned AAR decided the above
two questions:

The AAR held that the transaction is not a works contract but a composite
contract where the principal supply is goods. Accordingly, it was held that on
the whole contract price, tax is payable @ 28% u/e 119 of Schedule IV of
Notification No. 1/2017-Central Tax rate dated 28^th June, 2017.

The appellant challenged the decision of the AAR before the AAAR by
giving exhaustive facts about the nature of the transaction and supporting
judgments.

The main plank of the arguments of the appellant was that the transaction
is for providing an air conditioning system and not an air conditioner.

It was his argument that a system has no marketability as it is area /
premises specific. Further, the system cannot be shifted to another site
without dismantling. The appellant also cited the order of the Government of
India, Ministry of Finance, Department of Revenue, Central Board of Excise
& Customs dated 15^th January, 2002 in which it is held that air
conditioner is different from air conditioning system.

The appellant made the following consolidated arguments:

‘Keeping in view the principles laid down in the judgments and authority
noticed above, and having regard to the facts of this case, it is submitted
that the air conditioning plant brought into existence is immovable property
which could not be shifted without first dismantling it and then re-erecting it
at another site and satisfies the test of permanency and non-marketability,
therefore is immovable hence will cover under the definition of “works
contract” under the GST statute, and come under the definition of “works
contract” [section 2 sub-section (119)], liable to CGST/SGST/IGST covered under
Sr. No. 3 item No. 3 of Notification No. 20/2017-Central Tax rate dated 22^nd
August, 2017.’

The respondent / Department cited the judgment in Vodafone Mobile
Services Ltd. vs. Commissioner of Sales Tax (2018-VIL-506-DEL-DCE dated 31^st
October, 2018) in which the
principles for determining movable / immovable property are analysed.

AAAR

The learned AAAR referred to the above arguments and observed that the
main intention is to provide air conditioning, though on extensive basis.

As per the AAAR there is no difference between room air conditioner and
air conditioning system in the present case, except that a large area is
covered with connected pipes where required.

The AAAR relied on the judgment of the Supreme Court in Sirpur Paper
Mills vs. CCE dated 11^th December, 1997 and observed as under:

‘By the application of the above tests laid down by the Supreme Court it
cannot be said that the said transaction is a contract for immovable property.
It is seen from the arguments of the appellant that he has nowhere denied that
the system cannot be dismantled. It is only argued that the plant can be
shifted only after dismantling the plant. However, in the above judgment the
Court has observed that just because the system needs to be dismantled before
it is re-erected does not make it an immovable property. The system has to be
dismantled but it can be re-erected at any other site.’

The AAAR confirmed the order of the AAR and upheld the levy of tax @ 28%
holding the transaction as a composite transaction where air conditioning goods
is the principal supply.

SUB-CONTRACTING OF
GTA

M/s Liberty Translines
(MAH/AAAR/RS-SK/26/2020-21 dated 17^th September, 2020) (MAH)

A very peculiar issue arose before the learned AAR (Mah).

The appellant is a transporter and covered by tax @ 5% under RCM. One M/s
Posco ISDC Pvt. Ltd. carries on transportation activity of goods for clients.
The clients hand over their goods to Posco ISDC Pvt. Ltd. for transporting and
Posco issues the Lorry Receipt to them as well as generates the E-way bill. As
such, it is a GTA falling under SAC 996791.

The appellant does the actual transportation of goods and issues L.R. to
Posco ISDC Pvt. Ltd. Now, the appellant wants to change the mode of his
charging tax, whereby it wants to issue L.R. to Posco and wants to become a GTA
by itself. The presumption of the appellant is that it is also a GTA and hence
entitled to fall under Forward Charge System (12%) as per Notification No.
20/2017-C.T.(R) dated 22^nd August, 2017. By doing this, the
appellant will be charging GST on forward charge basis to Posco and Posco will
be entitled to ITC for the same.

The appellant applied for Advance Ruling posing the following questions
to the AAR:

‘(i)   Considering the nature of
transaction, under the new proposition where Liberty Translines, the appellant,
would be issuing the consignment note to M/s Posco ISDC Pvt. Ltd. in addition
to the consignment note, issued by Posco to their clients, whether the services
rendered by the applicant to Posco as a sub-contractor would be classified as
GTA service (SAC 996791), when the service rendered by Posco as the main
contractor is already classified as GTA service (SAC 996791) and is going to
remain unchanged?

(ii)   Whether the appellant would
be right in charging GST @ 12%, under forward charge mechanism to Posco in
terms of Notification No. 20/2017-Central Tax (Rate) dated 22^nd
August, 2017 when Posco as the main contractor is already charging GST @ 12%
under the same Notification, which is going to remain unchanged?

(iii)  Whether Posco would be
eligible to claim credit of the 12% GST charged by the appellant in its
invoices issued under forward charge mechanism?

(iv)  Procedurally, is it correct
to have two GTA service providers and two consignment notes for the same
movement of goods, one issued by the appellant as a sub-contractor and the
other by Posco as the main contractor?’

In respect
of Question (i), the AAR held that the appellant is not a GTA. In respect of
Question (ii), the appellant, not being a GTA, is not entitled for forward
charge. Question (iii) was not decided holding that the appellant has no locus standi.
Question (iv) was also decided in the negative. Therefore, this appeal was
filed before the AAAR.

The appellant repeated its arguments. The AAAR, however, confirmed the
order of the AAR and analysed the position as under:

‘The meaning of GTA has been provided under the Explanation to the
Heading 9967 of the Notification No. 11/2017-C.T.(Rate) dated 28^th June,
2017 amended by Notification No. 20/2017-C.T.(Rate) dated 22^nd
August, 2017 which is being reproduced herein as under:

Explanation: “goods transport
agency” means any person who provides service in relation to transport of goods
by road and issues consignment note, by whatever name called.

Thus, on perusal of the aforementioned meaning of GTA, it is clearly seen
that issuance of the consignment note is an essential condition for any person
to act as GTA. Now, we intend to explore the meaning of term “consignment
note”. On perusal of the CGST Act, 2017, it is revealed that the term
consignment note is not defined anywhere in the CGST Act, 2017. However, the
mention of the same was made under the explanation to Rule 4B of the Service
Tax Rules, 1994 which is being reproduced herein under:

Explanation: For the purpose of this rule and the second proviso to Rule 4A, “consignment note” means a document issued by
a goods transport agency against the receipt of goods for the purpose of
transport of goods by road in a goods carriage, which is serially numbered, and
contains the name of the consignor and consignee, registration number of the
goods carriage in which the goods are transported, details of the goods
transported, details of the place of origin and destination, person liable for
paying service tax whether consignor, consignee or the goods transport agency.

Even the dictionary meaning of the
term consignment note is in conformity with the aforesaid meaning of the term
consignment note as provided under Rule 4B of erstwhile Service Tax Rules,
1994.

Now, on perusal of the aforesaid meaning of the term consignment note, it
is conspicuous that the goods are received by the goods transport agency from
either the consignor or the consignee of the goods, the details of which are
mentioned in the consignment note along with the description of the goods being
transported. In the subject case, the appellant is not receiving goods directly
from the consignor or consignee of the goods, but from M/s Posco ISDC Pvt.
Ltd., who themselves are acting as GTA, where they are receiving the goods from
the consignor / consignee and issuing the consignment notes in respect thereof.
The appellant is merely a goods transport operator here and not a GTA.’

Thus, the AAAR negatived the contentions of the appellant about bailment
and sub-bailment, holding that the privity of contract is between the client
and Posco, not with the appellant.

The AAAR also rejected the contention that the appellant is a
sub-contractor.

The AAAR held that the appellant is only renting its transport vehicles.
The further argument that by the above AR the appellant is stopped from doing
its business activity was also rejected, observing that there is no stoppage
for direct transactions. The Advance Rulings from other states were
distinguished on facts as also on the ground that they are not binding. The AAAR held that the service of the appellant falls in SAC 9966 and
not SAC 9967 for GTA. The rulings on the other questions were also confirmed by
the AAAR.

COMPOSITE SUPPLY
VIS-À-VIS DISTINCT PERSONS

M/s Vertiv Energy Private Limited
(MAH/AAAR/SS-RJ/22/2019-20 dated 7^th February, 2020)

The present appeal before the Appellate Authority (AAAR) Maharashtra was
out of the Advance Ruling order passed by the AAR Maharashtra dated 4^th
October, 2019. The facts, in brief, are that the appellant has received a
contract from Delhi Metro Railway Corporation (DMRC) wherein it has to supply
UPS and install and commission the same. The UPS are to be supplied from Maharashtra
where the appellant’s Maharashtra unit raises invoices under Maharashtra GSTIN.
The installation and commissioning services are to be supplied by the Delhi
unit of the appellant under invoice to be raised under Delhi GSTIN.

The appellant filed the AR to know whether the above transaction is
‘works contract’ so as to be liable @ 12% GST. The AAR in the above order held
that the transaction is not a works contract but composite supply. The
appellant concurred with the findings that it is not ‘works contract’ under
GST. However, it was aggrieved by holding that the transaction is composite
supply, hence this appeal was filed.

The AAAR considered the facts and noted the arguments. Basically, the
appellant was arguing that both the contracts, i.e., supply of UPS and
installation, are separate contracts though embodied in a single document.

It was demonstrated that the ownership in UPS passed before installation.
It was further argued that the Delhi unit is a distinct person and thus the
supplies are by two persons. Under these circumstances, the theory of composite
supply cannot apply. The AAAR made reference to the definitions of ‘composite
supply’, ‘principal supply’ and other provisions. And after analysing the
position, AAAR held as under:

‘Now, having regard to the above facts and circumstances, the only moot
issue before us is as to whether the aforesaid supply would be construed as
composite supply or not. At the outset we would like to first examine the
meaning of “Composite Supply” as provided under section 2(30) of the CGST Act,
2017, which is being reproduced herein under:

30. “composite supply” means a
supply made by a taxable person to a recipient consisting of two or more
taxable supplies of goods or services or both, or any combination thereof,
which are naturally bundled and supplied in conjunction with each other in the
ordinary course of business, one of which is a principal supply;

Illustration: Where goods are packed
and transported with insurance, the supply of goods, packing materials,
transport and insurance is a composite supply and supply of goods is a
principal supply.

Thus, for any combination of supplies to qualify as “composite supply” it
has to satisfy the following conditions:

(i)  It should be made by a taxable
person;

(ii)  It should be made to a
recipient;

(iii) Supplies should be naturally
bundled and supplied in conjunction with each other in the ordinary course of
business;

(iv) One of the supplies should be
the principal supply.’

After observing as above, the learned AAAR found that the AR order passed
by the AAR is erroneous on the following three grounds:

(i)  When there are two distinct
persons, composite supply is ruled out;

(ii)  The supply of UPS and
installation services are not in conjunction. Installation is after supply of
UPS is complete;

(iii) There is no principal supply
as supply of goods and supply of services are equally important.

Therefore, the AAAR modified the AR and held that there is no composite
supply.

CLASSIFICATION –
‘EARTHWORK’

M/s Soma Mohite Joint Venture
(MAH/AAAR/SS-RJ/21/2019-20, dated 20^th January, 2020) (MAH)

The appellant is a contractor who has undertaken a contract for
construction of a tunnel and allied works for Nira-Bhima Link No. 5, Indapur
Taluka, Pune. In relation to the said contract, the following three questions
were raised before the AAR.

‘I.  Whether the said contract is
covered under Sl. No. 3A, Chapter No. 99 as per Notification No. 2/2018-Central
Tax (Rate) dated 25^th January, 2018, w.e.f. 25^th January,
2018?

II.  Whether the said contract is
covered under the term “Earth Work” and covered under Sl. No. 3 Chapter No.
9954 as per Notification No. 31/2017-Central Tax (Rate) dated 13^th
October, 2017?

III. If the appellants are covered under
Sl. No. 3 Chapter No. 9954 as per Notification No. 31/2017-Central Tax (Rate)
dated 13^th October, 2017 w.e.f. 13^th October, 2017, then
what is the meaning of “Earth Work”?’

The AAR did not decide question No. 1 (except for making an initial
reference) and held in negative for question Nos. 2 and 3.

Hence this appeal before the AAAR.

The AAAR observed that not deciding question No. 1 on merits by the AAR
is not correct and the AAR should have decided the said question.

The AAAR decided the first question on merits. The given entry 3A is
reproduced as under:

The AAAR held that the work allotted does not fit into Minor Irrigation
Project covered by article 243G for Panchayat, but is part of Major Irrigation Project. Therefore, AAAR
ruled out classification under above entry 3A.

Regarding question (2), the AAAR reproduced the said entry as under:

*(Effective rate 5% as mentioned in AAAR order)

The AAR rejected this ground on the basis that the work is of tunnel
construction and not earthwork. He examined the meaning of ‘earth work’ in
various dictionaries and observed that it can be both excavation and
fortification.

The AAAR also observed that the earth work portion is 92.66% in the given
contract, i.e., more than 75%. The AAAR held that a contract, whether ‘earth
work’ or not, cannot be decided as per names such as tunnel, building, road,
etc. It is the nature of the work that is to be seen. If the earth work in the
given work is more than 75%, it can be classified under the above entry.

Thus, the AAAR modified the AR and held the contract as covered by entry
3 in Chapter 9954 as per Notification No. 31/2017-Central Tax (Rate) dated 13^th
October, 2017.

A nation of sheep will beget a
government of wolves

 —  Edward R. Murrow