I.
High Court
34. [2019] 105 taxmann.com 324 (Orissa HC) Safari
Retreats (P.) Ltd. vs. CC-CGST
Date
of order: 17th April, 2019
High Court held that input tax
credit in respect of input and input services used for construction of
immovable property can be utilised for payment of GST on rent charged for
letting out such property and restrictions imposed u/s 17(5)(d) of Finance Act,
1994 would not be applicable in such cases
FACTS
The petitioner constructed a
shopping mall for the purpose of letting out the same to numerous tenants and
lessees. He paid GST on various inputs and input services consumed in the
course of construction of the mall. But the petitioner is liable to charge GST
on the rents charged for supply of services of letting out the units in the
mall. The petitioner approached the Revenue authorities as to whether he can
utilise the input tax credit of GST paid on inputs and input services used for
construction of the shopping mall towards payment of GST charged on rent
received from tenants of the mall. However, he was advised to deposit GST
liability without taking input tax credit, in view of restrictions placed as per
section 17(5)(d) of the CGST Act, 2017 and was warned of penal consequences if
he did not do so. Accordingly, the petitioner filed the present writ petition.
HELD
The Hon’ble High Court opined that
while considering the provisions of section 17(5)(d), the narrow construction
of interpretation put forward by the Department is frustrating the very
objective of the Act, inasmuch as the petitioner has to pay huge amount without
any basis. In the present case, the petitioner is retaining the property and is
not using it for his own purpose; he is letting out the property on which he is
covered under the GST, but still has to pay huge amount of GST for which he is
not liable. The Court noted that in light of the decision of the Supreme Court
in Eicher Motors Ltd. vs. Union of India 1999 taxmann.com 1769 (SC),
the very purpose of the credit is to give benefit to the assessee. Therefore,
it was held that when the assessee is required to pay GST on the rental income
arising out of the investment on which he has paid GST, the assessee would be
entitled to take ITC which is otherwise considered as blocked credit in terms
of section 17(5)(d) of the GST law.
35. [2019] TIOL-1443 (HC-Ahm.-GST) M/s Amit
Cotton Industries vs. Principal Commissioner of Customs
Date of order: 27th
June, 2019
Circular 37/2018-Customs stating
that refund of IGST cannot be granted if the drawback is claimed at a higher
rate is contrary to the statutory rules and therefore has no legal force
FACTS
The applicant exported goods in
July, 2017 and availed drawback at 1% higher; he also availed refund of the
IGST paid in regard to the ‘Zero Rated Supply’, i.e., the goods exported out of
India. It is submitted that the refund ought to have been sanctioned
immediately irrespective of the fact whether the drawback was claimed at the
rate of 1% (higher rate) or at the rate of 0.15% (lower rate). Further, it is
not in dispute that the differential drawback is paid back. The Revenue argued
that the return of the drawback amount is a unilateral act not recognised in
law. Further, reliance was placed on Circular No. 37/2018-Customs dated 9th
October, 2018 which categorically provides that it is not justified allowing
exporters to avail IGST refund after initially claiming the benefit of higher
drawback.
HELD
The Court noted that the contention
of the Revenue that there is no option available in the system to consider the
drawback to be paid back and therefore the applicant is not entitled to refund
of the IGST, is not acceptable. Further, the circular upon which reliance has
been placed cannot be said to have any legal force. The circular cannot run
contrary to the statutory rules, more particularly, Rule 96 referred. Rule 96
is relevant for two purposes. The shipping bill that the exporter may file is
deemed to be an application for refund of the integrated tax paid on the goods
exported out of India and the claim for refund can be withheld only if a
request is received from the Jurisdictional Commissioner, or if the export is
done in violation of the provisions of the Customs Act, 1962. Accordingly, the
respondents were directed to immediately sanction the refund of the IGST paid.
II.
AUTHORITY FOR ADVANCE RULING (AAR)
36. [2019] TIOL-173 (AAR-GST) Kansai Nerolac
Paints Ltd.
Date
of order: 19th March, 2019
In case of supplies made between
distinct entities, Rule 28 of the Central Goods and Services Tax Rules, 2017
can be applied and the value will not be questioned, if the recipient is
eligible to avail full input tax credit
FACTS
The applicant is engaged in the
manufacture and sale of decorative and industrial paints to its customers
across the states from its factories and depots located all over India. They
seek a ruling as to whether value of supply of goods by one distinct entity
(factory / depot) to another distinct entity can be determined on the basis of
cost of production as the same depends mainly on cost of inputs and input
services, and which fluctuates, inasmuch as the company is contemplating
determining the value of supply of goods as per the second proviso to Rule 28
of the CGST Rules and replacing the existing method of valuation of goods,
viz., 110% of the manufacturing cost prescribed under Rule 30 of the Rules.
HELD
The Authority noted that Rule 28
has been specified to determine the value of transactions between related
persons – moreover, Rule 30 will come into operation in a situation where the
value of a supply of goods or services or both is not determinable by any of
the rules preceding Rule 30 of Chapter IV of the CGST Rules (thus Rule 28 is
the specified rule); also, as per the second proviso to Rule 28 if the
recipient is eligible for full ITC, the invoice value will be deemed to be the
open market value. Therefore, the Authority finds no breach by the applicant in
changing the method of determination of value of supply by the application of
Rule 28 instead of Rule 30.
37. [2019] TIOL-188 (AAR-GST) Time Tech Waste
Solutions Pvt. Ltd.
Date
of order: 27th June, 2019
The provisions of section 51 of the
GST law dealing with tax deducted at source are not applicable to exempt
supplies
FACTS
The applicant is providing
conservancy / solid waste management service to Bally Municipal Corporation
(BMC) merged with Howrah Municipal Corporation (HMC). The BMC is deducting TDS
while paying consideration for the supply in terms of Notification
50/2018-Central Tax (Rate) and insists that the applicant take registration.
However, since their services are exempted in terms of serial No. 3 of
Notification 12/2017-Central Tax (Rate), they are not required to pay tax and
consequently not liable for registration.
HELD
The Authority noted that the
recipient is a municipal corporation, which is a local authority as defined in
section 2(69) of the Act. Article 243W refers to the functions listed under the
12th Schedule and serial No. 6 of the Schedule refers to public
health, sanitation, conservancy and solid waste management. Therefore, the
applicant’s supply to BMC / HMC is a function mentioned under the 12th
Schedule and their service is exempt. Since they are making an exempt supply,
the provisions of section 51 of the Act dealing with tax deducted at source do
not apply. Further, since supply of unbranded organic manure, unless packed in
containers, is classifiable under HSN 3101 and Municipal Waste is classifiable
under HSN 3825, supplies of both of these are exempt under serial Nos. 108 and
110 of the exemption notifications (goods) [2/2017-Central Tax (Rate)], and
therefore if the applicant’s turnover consists entirely of exempt supplies he
is not liable to registration u/s 23 of the Act.
38. [2019] 105 taxmann.com 143 (AAR-W. Beng.)
Senco Gold Ltd., In re
Date
of order: 8th May, 2019
AAR held that the applicant can
discharge consideration for inward supplies to recipient by way of ‘book
adjustment’ and in such case, ITC will not be required to be reversed in light
of section 16(2) of CGST Act, 2017 prescribing condition of payment of value of
supply along with tax to the recipient within 180 days from the date of
invoices
FACTS
The applicant,
a manufacturer and retailer of jewellery and other articles made of gold,
silver, platinum, diamonds and other precious stones, also maintains a network
of franchisee-operated stores. The applicant raises tax invoices on the
franchisees for the supply of jewellery and other articles and also for
franchise support services in terms of the agreement periodically. On its part,
the franchisee also raises tax invoices on the applicant for the supply of old gold,
silver, etc. received from the customers. The applicant intends to settle the
mutual debts through book adjustments. The applicant sought the present advance
ruling on whether the input tax credit is admissible when he settles through
book adjustment the debt created on inward supplies from the franchisee, as in
light of section 16(2) of CGST Act, 2017 if the recipient fails to make payment
of value of supply along with tax to the supplier within 180 days from date of
issue of invoice, the recipient is liable to reverse ITC in respect of such
invoice.
HELD
The Authority noted that the
‘consideration’, as defined u/s 2(31), provides the scope and ambit for modes
of payment and it includes in relation to the supply of goods or services, any
payment made or to be made, whether in money or otherwise, and also the
monetary value of any act or forbearance. AAR held that if the payee owes the
payer a debt, and accepts a reduction in such a debt liability as a valid form
of payment, i.e., reduction in book debt (an asset in the payer’s books of
accounts) should also be regarded as a valid ‘consideration’ for a supply.
Therefore, AAR held that unless the law specifically restricts the recipient
from claiming the input tax credit when consideration is paid through book
adjustment, credit of input tax cannot be denied.
39. [2019] 105 taxmann.com 91 (AAR-Mah.) Puranik
Construction (P.) Ltd., In re
Date
of order: 20th March, 2019
Once the construction project
qualifies to be an affordable housing project, the benefit of concessional GST
rate of 12% is available, irrespective of whether the project is undertaken by
a developer or a contractor appointed
by a developer
FACTS
The applicant engaged in the
business of civil construction of residential premises as a contractor has
proposed to enter into civil construction contracts with a developer for
construction of a residential project comprising of 135 buildings, wherein 98.5%
sq. mtrs. of FSI will be consumed for flats having residential units with a
carpet area of up to or less than 60 sq. mtrs., i.e., an ‘Affordable Housing
Project’ (AHP). The applicant sought a ruling on whether the construction
services proposed to be provided will qualify for the reduced GST rate of 12%,
as provided in Sr. No. 3, item (v)(c) of Notification No. 11/2017 Central Tax
(Rate) dated 28th June, 2017, as amended by Notification No. 1/2018
Central Tax (Rate), dated 25th January, 2018.
HELD
AAR held that the issue was similar
to that raised in Prajapati Developers, In re [2018] 97 taxmann.com 21/69
GST 851 (AAR-Mah.) with a slight variation, i.e., in said application
it was the developer who had raised the question and in the present case it is
the contractor providing composite supply to the developer who is raising the
question. AAR held that the entry (v)(da) of Notification 01/2018 mentioned
above nowhere restricts the benefit to a ‘Developer’ only.
The Notification entry is qua
the supply of service and not qua the person and therefore once a
project qualifies as an AHP, the benefit of concessional rate of tax would be
available in respect of works contract services pertaining to low cost houses,
irrespective of it being supplied by the developer or the contractor. Since the
project proposed to be undertaken by the applicant qualified to be an AHP, AAR
held that the benefit of concessional rate of tax would be available to the
applicant.
