I.
HIGH COURT
6. [2019] TIOL-2217 (HC-Kerala-GST) G NXT Power
Corporation vs. Union of India Date of order: 29th August, 2019
IGST amount to be
refunded after adjusting the higher rate of duty drawback amount already
availed by the petitioner
FACTS
The petitioner was granted drawback of Central
Excise component and therefore refund of IGST paid in cash was not granted. It
was argued by the assessee that the denial of refund of IGST on a supply which
is zero-rated is illegal and contrary to Article 265 of the Constitution of
India. However, since the drawback according to the Revenue was availed at a
higher rate, the refund of IGST was denied.
The Respondent contended that in order to avail the refund of the IGST
paid, the petitioner is required to refund the higher rate of duty drawback
already availed with interest. Simultaneously, the petitioners argued that if the drawback is required to be paid with interest, the department
should also grant interest to them from the date on which the claim of refund of IGST was made.
HELD
The Court primarily noted that the transaction under consideration is a
zero-rated supply covered u/s 16 of the IGST Act, 2017. Accordingly, the Court
directed the respondents to pay the balance amount, i.e., IGST minus higher
rate of duty drawback already availed by the petitioner, within the time
granted by the Court and thus relieved the additional burden of interest payment on the IGST refund.
7. [2019] TIOL-2377 (HC-AP-GST) Garuda Packaging Pvt. Ltd vs. Assistant Commissioner of State Tax Date of order: 29th August, 2019
TRAN-1 directed to be
either opened on the portal or a manual application be accepted
FACTS
The petitioner made several attempts to file form TRAN-1 for availing
the VAT credit. However, either the system did not allow him to file the return
on account of there being no connection to the GSTN, or by indicating that the
due date for filing such form was over. It was claimed that such error messages
appeared despite the form being uploaded before the due date. The
jurisdictional GST officer was approached and the issue was also reported to
the technical team; however, no remedial action was taken to resolve the issue.
Hence the present petition.
HELD
The Court noted that the entire GST system was still in a
trial-and-error phase and that it would be too much of a burden to place on the
assessees to expect them to comply with the requirements of law where they are
unable to even connect to the system on account of network or other failures.
Thus, the authorities were directed to either open the portal to enable the
petitioner to once again file form GST TRAN-1 electronically, or else accept
the form manually.
8. [2019] (28) GSTL 3 (Kar.) L.C. Infra Projects Pvt.
Ltd. vs. Union of India Date of order: 22nd July, 2019
Interest cannot be
recovered under GST without issuing SCN
FACTS
The petitioner wrongly availed ITC, therefore the department issued a demand
notice for recovery of tax and interest without issuing a show-cause notice
(SCN) contending that section 75(12) of the Act empowers the authorities to
proceed with recovery without issuing an SCN. However, the petitioner claimed
that the interest recovery cannot be made without issuing SCN as per section 73
of the CGST Act, 2017.
HELD
Recovery of interest by the department without issuing an SCN was not
viable as it was against the principles of natural justice and thus all rights
and contentions were left open to the petitioner.
II. AUTHORITY FOR ADVANCE RULING (AAR)
9. [2019] 107
taxmann.com 269 (AAR – Tamil Nadu) Daimler Financial Services India (P) Ltd. Date of order: 15th April, 2019
Differential interest (i.e. financer’s regular
interest rate and the rate actually charged by financer to the customer at the
request of the applicant) paid by the applicant to the financer, in terms of
MOU, is liable for GST
FACTS
The applicant, an NBFC and manufacturer-seller
of vehicles, entered into an arrangement whereby he agreed to provide loans to
buyers of vehicles of the said manufacturer at interest rates lower than its
regular rates; the differential in interest rates was compensated by the
vehicle manufacturer-seller to the NBFC, termed as ‘interest subvention
income’. The applicant sought a ruling as to whether the said interest
subvention income attracts GST or not?
RULING
AAR observed that in terms of the agreement between
the applicant and the said manufacturer, the former agreed to provide vehicle
loan to buyers of the said manufacturer at a lower interest rate and also
provide better customer experience, structured insurance product offerings with
claims processing within minimum turnaround time, tailor-made products, quick
loan approvals, maintaining good customer relations, etc. For the same, the
manufacturer would compensate the applicant with the differential in interest
rates so that the customers could obtain loans at a lower interest rate.
AAR held that the agreement between the vehicle
manufacturer and the applicant is for the furtherance of the business of
lending of the applicant, as they are the preferred financiers of the
manufacturer’s vehicles. Customers buying vehicles would prefer to take loans
from the applicant because of the lower interest rates offered as a consequence
of the agreement. Therefore, the said transaction between applicant and vehicle manufacturer is ‘supply of services’ u/s 7 of the CGST Act, 2017,
classifiable as ‘other miscellaneous services’ under heading 9997 and
chargeable to 18% GST.
10. [2019] 107 taxmann.com 263 (AAR – Rajasthan)
Greentech Mega Food Park (P) Ltd. Date of order: 28th May, 2019
AAR held that long-term
lease agreement entered into for 99 years, wherein plots of land are given on
lease for separate industrial units in food parks and consideration is charged
towards booking and allotment of developed plots, is an agreement for lease of
immovable property and chargeable to 18% GST and it’s not a case of agreement
for sale of immovable property
FACTS
The applicant is responsible for establishing the food park, including
design, engineering, procurement, financing, construction and operation. As a
part of development or setting up of the food park, the applicant identified /
developed certain individual plots at the project site for the purpose of
transferring them for a lease of 99 years and setting up industrial units, inter
alia, for manufacturing of food and related products as well as food
processing activities.
The applicant proposed to enter into lease agreements with several
lessees for a period of 99 years for separate industrial units situated at
Greentech Mega Food Park, for consideration towards booking and allotment of
developed plots. The applicant sought the present ruling as to whether the said
lease agreement between applicant and lessees for a period of 99 years was a
sale of immovable property and outside GST and thus exempt from levy of GST? If
taxable, then at what rate and what HSN Code would apply?
RULING
AAR observed that the lease agreement between the applicant and the
lessee for a long term of 99 years is for lease with many restrictions and he
has no right to further sell the allotted plot; whereas in the sale deed the
purchaser becomes the absolute owner of the plot and is not dependent on the
lessor for renewal or extension of the lease period.
As regards the applicant’s submission that the
said transaction amounts to transfer of rights in immovable property, and hence
it is sale outside the scope of GST, AAR observed that merely charging stamp
duty at par with sale deeds by the registration and stamps department of the
government does not change the status of the document from lease agreement to
sale deed. Accordingly, AAR held that the lease agreements in question for a
period of 99 years are lease agreements for the transfer of immovable property
and will attract GST at 18%, classifiable under SAC 997212 ‘Rental or leasing
services involving own or leased non-residential property’.
11. [2019] 107 taxmann.com 276 (AAR – Tamil Nadu)
Venkatasamy Jagannathan Date of order: 21st May, 2019
When employee of the
company entered into a profit-sharing agreement with shareholders of company,
wherein said employee was entitled to share of profit for a strategic sale of
certain number of equity shares over and above a specified sale price per
equity share by a set of shareholders of company, AAR held that such
profit-sharing agreement is an actionable claim u/s 2(1) of CGST Act, 2017 not
liable for GST, as it is covered under schedule III to CGST Act which is
neither a supply of goods nor a service
FACTS
The applicant is an employee in the company limited by shares and also
holds ownership of shares of the company. He entered into a profit-sharing
agreement (PSA) with various investors / shareholders of the said company,
wherein the applicant would get a profit from a strategic sale of equity shares
over and above a specified sale price per equity share by a set of shareholders
of the company. The PSA was approved by the board / shareholders as well as by
the IRDA. The applicant sought the present ruling as to whether the said
profit-sharing agreement between the applicant as an employee of the company
and the shareholders attracted GST?
RULING
AAR noted that the profit-sharing agreement is entered into between the
applicant and shareholders of the company. However, the shareholders are not
the company and they cannot and do not act on behalf of the company. Also, no
amount was payable to the applicant by the company as per the PSA. Thus, AAR
held that since the PSA is between the applicant and the shareholders and not
between the applicant and the company, the transaction is not a service from an
employee to the employer.
Further, as per the terms of the PSA, the entitlement amount and
additional entitlement amounts, payable by the shareholders to the applicant,
are dependent on the difference in the sale price at the time of the event to
the pre-determined base price of the equity shares. The shareholders are
obliged to pay such amounts as profits to the applicant. It was noted that the
applicant has a claim to the specified amounts in the event of the occurrence
of the specified strategic sale or IPO and the said claim is contingent on such
events occurring. The applicant has a beneficial interest in the profits
arising out of such a strategic sale or IPO. Therefore, AAR held that such a
profit-sharing agreement is an ‘actionable claim’.
Further, it was observed that the events of strategic sale or IPO are
contingent and such events may or may not occur and, thus, the claim is also
contingent and the actionable claim as defined in Transfer of Property Act can
be contingent. The movable property which is the amount of profit on such
contingent events occurring is currently not in possession of the claimant,
i.e., the applicant. The AAR also noted that civil courts recognise and can
provide grounds for relief if and when the applicant makes a claim to such
beneficial interest in future profits.
Therefore, it was held that the transaction between the applicant and
the shareholders is an ‘actionable claim’ u/s 2(1) of the CGST Act read with
section 3 of the Transfer of Property Act, 1882 and the same is covered under
schedule III to the CGST Act and the SGST Act as neither a supply of goods nor
a supply of services, and hence not chargeable to GST.
12. [2019] 107
taxmann.com 276 (AAR – Rajasthan) Vedant Synergy (P) Ltd. Date of order: 3rd June, 2019
When the applicant
company is engaged by the state government for implementation and maintenance
of software of video conferences, in the Centre for e-Governance of the State
Government, AAR held that supply of goods and services by the applicant company
is composite supply and not works contract. The principal supply being video
conferencing software / solution, the whole supply will fall under HSN 998316
and will attract 18% GST
FACTS
The applicant company applied in a government
bidding for selection to implement and maintain software of video conferences
up to Gram Panchayat and government offices conducted by the Centre for
e-Governance of the State Government. The applicant supplied various goods such
as central MCU and other equipment in high availability mode, various client
licenses, speakers and cameras. The applicant is responsible for providing
operation and maintenance support for a period of five years. He is also
required to supply manpower, i.e., video conferencing and helpdesk engineers,
for a period of five years.
The applicant sought the present ruling as to
what would be the classification of goods and services supplied by him and at
what rate would GST be chargeable on these goods and services? The applicant
contended that the said supply was a works contract and chargeable to GST at
12%.
RULING
AAR observed that the goods supplied by the applicant under the said
contract were not of immovable nature and can be dismantled in general view.
Thus, the character of immovability cannot be attached to the supply of goods.
It further observed that various services, i.e., O&M services and supply of
manpower of engineers were in conjunction with the supply of goods. Therefore,
the supply of goods and services by the applicant did not fall under the
category of works contract service, though it was a composite supply.
As regards what would constitute ‘principal supply’ in the present case,
in terms of section 2(90) of the CGST Act, 2017, AAR observed that the
essential element of the whole supply was video conference software / network
and all other goods and services were involved in carrying out of smooth
fixture and operation of video conference, and therefore, the principal supply
was of video conference software / solution classifiable under HSN 998316 at
18% GST.
13. [2019] 107 taxmann.com 225
(AAR – Mah.) Konkan LNG (P) Ltd. Date of order: 24th May, 2019
AAR held that a
breakwater wall constructed as part of an existing jetty, where the activities
of regasification of LNG were undertaken, cannot be regarded as ‘plant and
machinery’ in terms of section 17(6) of CGST Act, 2017 as such jetty could
function without existence of breakwater wall and also the activity of
regasification undertaken by the applicant was not for making any outward
taxable supply. Consequently, ITC in respect of goods and services used for the
construction of a breakwater wall would not be available to the applicant
FACTS
The applicant had an LNG regasification plant.
LNG, the raw material, reaches the plant through a jetty where it is unloaded
from various cargo ships. The applicant submitted that adjacent to the jetty
there is an existing breakwater wall which is in an incomplete state of
construction, which acts as a safety wall for preventing high waves and tides
to touch the jetty and cargo / ships of LNG and, thus, prevents damage to the
ships due to high waves and water current. However, the existing breakwater
wall being incomplete requires reconstruction in order to keep the jetty and
cargo safe during the LNG unloading process. Due to the breakwater wall being
incomplete, for safety purposes berthing of the cargo of LNG is only permitted
when the height of the waves is less than 0.5 meters. Hence, the berthing of
ships is not possible at all times of the day. After the construction of the
breakwater wall, there would be no time restriction on ships entering the
jetty. The applicant proposed to complete the construction of such a breakwater
wall and contractors would be engaged for the same.
The applicant sought the present ruling as to whether in terms of
sections 16 and 17 of the CGST Act, 2017 the applicant was entitled to take an
input tax credit of GST charged by the contractors? The applicant contended
that the breakwater wall can be considered as ‘plant and machinery’ since
‘acropods’, which are used to construct the breakwater are interlocking devices
fixed to the earth by the foundation of the rock armour of different sizes, are
nothing but apparatus.
RULING
On whether the said breakwater wall can be considered as ‘plant and
machinery’, AAR noted that any apparatus, equipment and machinery fixed to
earth by foundation or structural support that are used for making an outward
supply of goods or services or both can be considered as plant and machinery.
In the present case, AAR noted that for inclusion in the term ‘plant’, it must
be established that it is impossible for the regasification plant to function
without the breakwater wall.
Reference was made to the decision of the Hon’ble Bombay High Court in CIT
vs. Mazagon Dock Ltd. [1991] 58 Taxman 98/191 ITR 460 (Bom.), wherein
it was held that in order for a building or concrete structure to qualify for
inclusion in the term ‘plant’, it must be established that it is impossible for
the equipment to function without the particular type of structure. However, in
the present case, the applicant’s regasification plant is already functioning
without the complete breakwater in place. Further, AAR also noted that the
breakwater wall would be used by the applicant for facilitating the receipt of
raw material, i.e., LNG and not for rendering outward supply of goods or
services, or both.
Therefore, it was held that such a breakwater wall cannot be considered
as ‘plant and machinery’ as per explanation to section 17(6) of the CGST Act,
2017 and it is ‘immovable property’. In terms of section 17(5)(d) of the CGST
Act, 2017 when the goods or services are used for construction of immovable
property other than plant and machinery, the ITC in respect of such goods and
services is not available.
