GOODS AND SERVICES TAX (GST)

I.      HIGH COURT

Sections 33,
129 of the CGST Act, 2017 – Detention of goods merely on the ground that E-way bill
does not contain details of tax amount is not justified

FACTS

The consignment
of goods transported was covered by E-way bill and valid tax invoice which
clearly showed the tax collected. However, the goods were detained on the
ground of invalid E-way bill as the tax amount was not mentioned separately on
it. The petitioner argued that there was no requirement under the Act or the
Rules to mention the tax amount separately on the E-way bill and that if the
invoice and the E-way bill were viewed together, the fact of payment of tax on
this transaction was evident. The respondent alleged that E-way bill, being a
document akin to a tax invoice, in relation to assessment to tax, was raised in
contravention of section 33 of the CGST Act.

HELD

The High Court
observed that a person transporting the goods was obliged to carry invoice,
bill of supply or delivery challan and the copy of the E-way bill in the
prescribed format. If as per the format prescribed by the statute there is no
field in the E-way bill to capture details of tax payable, non-mentioning of
tax amount cannot be viewed as contravention of the Rules. Further, power of
detention can be exercised only on contravention of the provisions of the Act
and Rules and not simply because a document relevant for assessment did not
contain details of tax payment. Thus, the respondents were directed to release
the goods and the vehicle expeditiously.

II. TRIBUNAL –
COMMISSIONER (APPEALS)

11. [2020
(40) GSTL 358 (Comm. App. Raj.)] Sanganeriya
Spinning Mills Ltd.

41(JPM)CGST/JPR/2020 Date of order: 13^th May, 2020

Sections 2, 54,
74 and 122 of the CGST Act, 2017 and R 89(5) of the CGST Rules, 2017 – Refund
of tax paid on input services and capital goods not to be allowed as part of accumulated
ITC on account of inverted rated structure

FACTS

The appellant,
engaged in manufacturing and supplying acrylic yarn, claimed refund under
inverted rated structure and was granted 90% of the refund claim on provisional
basis. However, on detailed scrutiny of the documents, the Department passed an
order that the appellant claimed excess refund of ITC relating to input
services and capital goods. Consequently, excess refund claim along with
interest and penalties was demanded. An appeal was therefore filed contending
that there was also deemed export and instead of two separate refund claims, one of
inverted rated structure and another of deemed exports, the appellant submitted one combined refund claim
which could be treated as a procedural lapse. Further, the definitions u/s 2
are applicable only where the law specifically requires a separate context. In
case of inverted rated structure, proviso (ii) to section 54(3) uses the
words ‘output’ and ‘input’ together, therefore, the definition of ‘inputs’
provided u/s 2 cannot be referred to in the said context. Besides, the word
defined is ‘input’, whereas the word used under refund provisions is ‘inputs’
(plural). Consequently, input tax credit of entire intake during a
manufacturing process is allowable as refund.

Rule 89(5) is
in line with proviso (ii) to section 54(3) but the interpretation
thereof through the circular is contrary to the provisions of law. Further, Net
ITC excludes ITC of Rule 89(4A) and (4B) and such Rules provide for inputs as well
as input services. Therefore, a harmonious reading suggests that input services
are included in Net ITC in cases of inverted rated structure. If the
interpretation of Revenue is adopted, then the Rule is ultra vires
as it travels beyond the Act. Since this matter is sub judice in
another case, until the writ petition is disposed of this matter should not be
decided. Furthermore, as per the SCN, penalty was proposed u/s 122(1) but was
confirmed u/s 122(2)(b) in the order.

HELD

The Authority,
referring to the relevant CGST provisions, various notifications and circulars
held that both the law and the rules intend to prevent refund of tax paid on
input services and capital goods. Thus, for the purpose of calculating refund
under inverted duty structure, the term ‘Net ITC’ shall mean input tax credit
availed on inputs only. Though the demand with interest was confirmed, the
penalty was set aside since the order was beyond the scope of the SCN to that
extent.

12. [2020
(40) GSTL 490 (Comm. App. Raj.)] Aadhaar
Wholesale Trading & Distribution Ltd. 42(JPM)CGST/JPR/2020 Date of order: 14^th May, 2020

Sections 7, 68,
129 and 130 of the CGST Act, 2017 – Transfer of fixed assets to new branch
within state qualifies as supply of goods, GST applicable and E-way bill
mandatorily required

FACTS

For setting up
infrastructure at a new branch, the appellant transferred certain fixed assets
like used tube lights, computer peripherals, fans, etc. from its Bagru branch
to its Bayana branch, all within Rajasthan. Goods were accompanied by a
serially-numbered delivery challan. But the goods in movement were
detained for non-availability of E-way bill. An order was passed confirming
demand of tax with penalty equal to 100% of the tax.

Aggrieved by
the order, the appellant filed an appeal on the grounds that an E-way bill was
not required on mere shifting of old used fixed assets from one branch to
another having the same GSTIN. The appellant also argued that a person cannot
sell goods to himself. Moreover, the appellant contested that delivery challan
of a series separate from the tax invoice was issued which was verified at the
time of detention and, therefore, there was no tax implication and requirement
of E-way bill on such movement of goods. As this was not a case of supply,
there was a delivery challan accompanying the goods and the adjudicating
authority verified the assets physically, the appellant pleaded for waiver of
penalty in view of his case being bona fide.

HELD

The Authority
held that the scope of ‘supply’ under GST law is wide and it includes supply
made without ‘consideration’ and supplies which are beyond ‘in the course or
furtherance of business’. Transfer of going concern is considered as supply
even if the same is not made in the course of or for furtherance of business.
Further, transfer of business assets is considered as supply of goods as per
Entry 4 of Schedule II read with section 7(1A) of the CGST Act. Therefore,
transfer of fixed assets was considered as supply of goods and not stock
transfer. Besides, the delivery challan mentioned the applicable tax and
the fact of stock transfer was not evident on the face of the said challan.
In such a case, GST and E-way bill were held applicable but were not complied
with.

 III. ADVANCE RULING

13. [2020
(40) GSTL 252 (App. AAR Kar.)] Ascendas
Services (India) Private Limited KAR/AAAR-14-E/2019-20 Date of order: 14^th February, 2020

Sections 2(13)
and 15(2) of the CGST Act, 2017 – Service for arranging transportation with
active involvement of scheduling route and issuing passes does not qualify as
an intermediary service, hence value of passes includible with facilitation
charge

FACTS

The appellant
was engaged in the business of operation and maintenance of International Tech
Park, Bangalore. Additionally, the appellant arranged for transportation of the
staff and employees of corporate clients in the Tech Park (referred to as
‘commuters’), for which it had entered into a contract with Bangalore
Metropolitan Transport Corporation (referred to as ‘BMTC’). BMTC used to allot
one bus to the appellant for every 50 bus passes purchased. BMTC did not charge
GST for passes of non-AC buses in view of the exemption, but charged GST @ 5%
for bus passes for AC buses. For arranging the transportation facility, the
appellant charged facilitation fees.

The Authority
for Advance Ruling held that the appellant’s services was not merely
facilitation between BMTC and the commuters and the value of the bus passes
would be included in the value of the appellant’s services. The appellant filed an appeal on the grounds that the recipient of service is
one who benefits from the service and in the present case the commuters were beneficiaries and
consequently, the recipients. Referring to the CBEC Education Guide under
Service Tax laws, the appellant contested that it was an intermediary, acting
as a pass-through for providing the bus passes. The appellant did not provide
the transportation service on its own account nor did it hold requisite permits
for operating stage carriage and contract carriage. Supplementing its claim,
the appellant also submitted that supply of BMTC was not a supply made by the
appellant and, therefore, the value of bus passes should not be included in the
value of supply of the appellant. The bus passes given were akin to the
recharge or coupon vouchers and qualified to be an ‘actionable claim’ and,
thus, not be included in the value of facilitation charges.

HELD

The Authority
observed that the appellant was actively involved in scheduling routes and
transportation of commuters and, thus, was rendering services for a
consideration; it was not a case of facilitation of service between BMTC and
the commuters. The ‘recipient’ of the service should be determined considering
the contract between the parties and in reference to (a) who has the
contractual right to receive the services; and (b) who was responsible for the
payment for the services provided. The contract for transportation was entered
into between the appellant and BMTC and, thus, the appellant was obliged to pay
BMTC.

Commuters were
only beneficiaries and actual users of the services provided by BMTC but not
recipients of the services. They were required to carry bus passes issued by the appellant
and not BMTC. In fact, the appellant was neither appointed as broker nor agent
nor was the transaction on principal-to-principal basis to qualify as an
intermediary. Further, bus passes were a contract for carriage and could not be characterised as
actionable claim. It only gave commuters the right to travel within a
particular time frame and was an instrument accepted as consideration / part
consideration while purchasing the service. Therefore, the value of bus passes
should be included with facilitation charges.

14. [2020
(40) GSTL 420 (App. AAR Kar.)] Rajendran
Santhosh KAR
AAAR-14-G/2019-20 Date of order: 18^th February, 2020

Section 7 of
the CGST Act, 2017; sections 2(13), 13(8) of the IGST Act, 2017 – Sale
representation services of the product of foreign company would qualify as
Intermediary Services

FACTS

The appellant,
an Indian resident, was appointed as an independent regional sales manager of a
foreign company for India and the Middle-East markets. His role was limited to
presenting products offered by the foreign company in the manner specified by the company but had no role to
conclude contracts or deal with products in any manner. He used to report to
the sales manager in Europe on the status of sales development periodically.
Customers approached by the appellant placed their orders directly with the
foreign company and made payments to the foreign company’s account. The appellant
did not raise any invoices for the products offered by the company. A lump sum
amount was paid on monthly basis to the appellant for his services along with payment of
reimbursable expenses through a credit card.

An appeal was
filed by the appellant against AAR wherein it was ruled that the appellant was
acting as intermediary and not as an employee. It was contested that
considering United Nation’s Central Product Classification adopted for service
classification under the Indian GST context, the appellant was rendering market
research services falling under Service Code 998371 which was export of
services. Additionally, the appellant informed that it did not constitute a
liaison office or permanent establishment of the foreign company.

HELD

On the basis of the meaning of the term ‘Intermediary’ in pre- and
post-GST regime, the Authority was of the view that the appellant was
facilitating supply of goods between the foreign company and its customers and
was not supplying such goods on his own account. In view of the explanatory
notes for classification of services, service of sales presentation was held to
be classifiable as ‘Other professional, technical and business services’ under
Service Code 998311 and is intermediary service as defined in section 2(13) of
the IGSR Act.

15. [2020-TIOL-260-AAR-GST] Midcon Polymers
Pvt. Ltd. Date of order:
16^th September, 2020 [AAR-Karnataka]

Property tax is
includible in the value of supply of renting of immovable property service.
Notional interest is includible in the value if the same has influenced the
price

FACTS

The applicant
proposed to engage in the business of renting of commercial property on monthly
rent and allied business. They have sought advance ruling in respect of the
following questions: (i) For the purpose of arriving at the value of rental
income, whether the applicant can seek deduction of property taxes and other
statutory levies; (ii) For the purposes of arriving at total income from
rental, whether notional interest on the security deposit should be taken into
consideration; and (iii) Whether the applicant is entitled for exemption of tax
under the general exemption of Rs. 20 lakhs?

HELD

The Authority
noted that any taxes, cesses, fees and charges levied under any law for the
time being in force are includible in the value of taxable supply as per
section 15(2) of the GST law. Thus, the monthly rent is the transaction value
and the same would be the value of supply of the impugned service. Therefore,
the property tax is not deductible from the value of taxable supply of ‘Renting
of Immovable Property’ service. Security deposit is obtained by the applicant
as a guarantee against damage to property and will be returned to the lessee at
the expiration of the lease period and hence shall not be considered as
consideration for the supply. However, at the expiry of the lease tenure if the
entire deposit or a part of it is withheld and not paid back as a charge
against damages, then at that stage such amounts not refunded will be liable to
GST.

Further, with respect to the notional interest, it is held that the same
is includible in the value of supply only if the said interest influences the
price. With respect to the exemption from registration, it is held that the
same is available, subject to the condition that their annual total turnover
which includes monthly rent and notional interest, if it influences the value
of supply, does not exceed the threshold limit.

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Pay it forward.
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trust and even that only for a little while, for the sooner a man begins to
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