By G. G. Goyal | Chartered Accountant
C. B. Thakar | Advocate
NOTIFICATIONS
(a) Extension for anti-profiteering compliance – Notification No. 91/2020-Central Tax dated 14th December, 2020
By the above Notification the principal Notification, No. 35/2020 dated 3rd April, 2020 as amended by Notification No. 65/2020 dated 1st September, 2020, is further amended. The effect of this amendment is that the time of compliances and actions under anti-profiteering measures gets extended till 31st March, 2021.
(b) Implementation of amendments – Notification No. 92/2020-Central Tax dated 22nd December, 2020
The Central Government has effected amendments in the CGST Act vide the Finance Act, 2020 (12 of 2020). The amendments were to be brought into operation by issue of a Notification. Now, by the above Notification the amendments effected by sections 119, 120, 121, 122, 123, 124, 126, 127 and 131 of the Finance Act, 2020 (12 of 2020) are brought into force from 1st January, 2021. The indicative changes are stated as under:
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Sl. No.
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Section of Finance
Act, 2020
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Relevant section of
CGST Act
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Indicative changes
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1.
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Section
119
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Section
10(2)(b) / (c) / (d)
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Section
10(2)(b) / (c) / (d) of the CGST Act is amended to include services also in
the said section. Section 10 relates to the composition scheme and by the
amendment, services are also included in the above provisions relating to
restrictions under composition
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2.
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Section
120
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Section
16(4)
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By
this amendment, the requirement of correlating debit note with invoices is
done away with. The ITC reflected in debit notes can be claimed
independently, irrespective of the date of the original invoice
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3.
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Section
121
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Section
29(1)
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Sub-clause
(c) in section 29(1) is replaced. Now the cancellation of registration
facility is extended and made available to a person who wishes to opt out of
the voluntary registration
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4.
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Section
122
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Section
30(1)
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The
proviso is substituted. Due to substitution, power is given to the Additional
Commissioner or Joint Commissioner to extend the time for filing application
for revocation of cancellation of registration up to 30 days in deserving
cases
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5.
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Section
123
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Section
31(2)
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The
proviso u/s 31(2) is substituted. By the substitution more powers are given
to the Government about prescribing requirements for tax invoices in relation
to services
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6.
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Section
124
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Section
51(3)
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Power
is taken to issue prescribed form for TDS certificate. Exemption is given to
Government enterprises from late fees applicable for failure to furnish TDS
certificates
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7.
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Section
126
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Section
122
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Sub-section
(1A) is inserted in section 122. The newly-inserted section widens the scope
of penalty provision and intends to cover the beneficiary and connected
persons. The quantum of penalty is also prescribed
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8.
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Section
127
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Section
132(1)
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Section
132(1) of the CGST Act relates to punishment. By amendment in section 132(1),
in addition to the person who has committed the offence, the person who
causes the offence and retains benefit is also made liable for punishment.
The scope of clauses (c) and (e) is also widened to include ITC taken
fraudulently
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9.
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Section
131
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Paragraph
(4) in Schedule II
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The
amendment in paragraph (4) in Schedule II to the CGST Act is to remove the
words ‘whether or not for a consideration’ from the said paragraph. The above
paragraph (4) relates to transfer or disposal of business assets, etc., and
prescribes the same as supply of goods or services in different clauses in
the said paragraph. By removal of the above words, it appears that the
transaction without consideration may not be covered by the above paragraph.
However, the matter requires clarification
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All the above amendments are made effective from 1st January, 2021.
(c) Waiver of late fee – Notification No. 93/2020-Central Tax dated 22nd December, 2020
By the above Notification, the late fee for filing GSTR4 (composite persons) for the financial year 2019-20 is waived for the registered persons whose principal place of business is in the Union Territory of Ladakh if such return is filed till 31st December, 2020.
(d) Amendments to Rules – Notification No. 94/2020-Central Tax dated 22nd December, 2020
Through this Notification, amendments are made in various Rules under the CGST Rules, 2017. The indicative changes are as under:
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Sl. No.
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Indicative changes in
CGST Rules
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a)
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Rule
8(4A) is substituted and further requirements like biometric-based Aadhaar
authentication and KYC documents are introduced for registration. The
amendment to be effective from a date to be notified;
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b)
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Rules
9(1) and (2) are amended to extend the time for grant of new registration
from three days to seven days and up to 30 days in specified cases, i.e.,
where physical verification is involved;
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c)
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Rule
21 about cancellation of registration is amended. The following three
contingencies are also added to cancel the registration:
(i) Availing ITC in
contravention of section 16 or the Rules thereunder;
(ii) Amounts reflecting in
GSTR1 being more than amounts reflecting in GSTR3B;
(iii) ITC claimed is more
than allowed by the newly-introduced Rule 86B;
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d)
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Rule
21A(2) relates to suspension of registration. The power to suspend
registration, pending cancellation, etc., is now made strict in the sense no
hearing will be required to be given before such suspension;
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e)
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Sub-rule
(2A) is inserted in Rule 21A.
By
the above Rule, suspension can also be made in case there is significant
difference between outward / inward supplies furnished in Form GSTR1 and
return in GSTR3B. Pending final cancellation, an opportunity to clarify the
differences within 30 days will be given;
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f)
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Sub-rule
(3A) is inserted in above Rule 21A and it is further provided that the person
whose registration is suspended will not be eligible for refund u/s 54 during
the period of suspension;
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g)
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Sub-rule
(4) of Rule 21A is amended to give power of revocation of suspension, if the
proper officer deems it fit;
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h)
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In
Rule 22 consequential changes are made to align the same with amendments in
Rule 21A;
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i)
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Amendments
are effected in Rule 36 from 1st January, 2021. The major
amendment in Rule 36(4) is that if the supplier has not furnished details of
supplies in GSTR1 or using invoice furnishing facility, then additional ITC
can be availed at 5% of the eligible ITC. In other words, the previous limit
of 10% is reduced to 5%;
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j)
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Rule 59 is amended to debar the person from filing
GSTR1 or invoice furnishing facility if he has not furnished return in GSTR3B
for preceding two months or preceding tax period.
Similarly, a person who is allowed to use his ITC for
more than 99% of his tax liability under Rule 86B, will also not be allowed
to furnish GSTR1 or use the invoice furnishing facility, if he has not filed
GSTR3B for the preceding tax period;
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k)
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Rule
86B is inserted from 1st January, 2021. The newly-inserted Rule
puts restriction on the use of ITC in credit ledger for discharging outward
liability. A registered person can use only 99% of outward tax liability for
adjustment towards his outward tax liability, if his taxable supplies in a month
are more than Rs. 50 lakhs (excluding exempt supply or zero-rated supply).
Certain registered persons are excluded from the above restriction.
If
proprietor, karta, partners or directors, etc. are paying more than Rs. 1
lakh income tax in the last two financial years, then the entity concerned
will not be governed by the above restriction.
Similarly,
if the registered person has received refund of more than Rs. 1 lakh in the
preceding financial year as exporter or under inverted duty structure, the
above restriction will not apply.
The
above restriction will also not apply to registered person who has discharged
his output liability through electronic cash ledger exceeding 1% of total
output liability applied cumulatively up to the current month of filing
return. The said restriction will also not apply to Government authorities.
Power
is also given to the Commissioner or an officer authorised by him to remove
the restriction after verification and safeguard as he deems fit;
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l)
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Rule
138(10) is amended. The earlier limit for validity of E-way bill for 100 km.
for one day is changed to 200 km. for one day;
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m)
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Rule
138E is amended and ‘two months’ are substituted by ‘two tax periods’. Thus,
failure to file two returns as per tax period will bring the person under the
above rule and will not be eligible to generate E-way bill.
Similarly,
a person whose registration is under suspension will not be allowed to
generate E-way bill.
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(e) Extension of filing annual return – Notification No. 95/2020-Central Tax dated 30th December, 2020
By the above Notification the due date for filing annual return for the year 2019-2020 is extended up to 28th February, 2021.
(f) Amendment to Rules – Notification No. 01/2021-Central Tax dated 12th January, 2021
By this notification, Rule 59 is amended and new sub-rule (6) is inserted in Rule 59. The amendment seeks to debar a person from filing GSTR1 if he has not filed GSTR3B for the preceding two months or the preceding tax period, as the case may be.
(g) Amendment to Rules – Notification No. 02/2021-Central Tax dated 1st January, 2021
Through this Notification, administrative changes in appellate authorities are notified.
CIRCULARS
The Government of Maharashtra has issued Circular No. 1T of 2021 dated 12th January, 2021. Through this, the earlier Circular No. 39T of 2019 dated 5th July, 2019 is withdrawn. By that Circular (39T of 2019), there was deemed adoption of Circulars issued by the CBIC for the MGST Act. Now, the State Government will examine the Circulars issued by the CBIC and will issue a separate Circular regarding their applicability for implementation of the MGST Act. The effect will be that there will be confusion about following the same under the CGST Act. This will also lead to different situations under CGST and MGST for the same subject. However, sometimes the State Government may give more benefit compared to the CBIC Circular.
ADVANCE RULINGS
1. Classification – Classic Malabar parota and whole wheat Malabar parota
M/s Modern Food Enterprises Pvt. Ltd. (Order No. KER/23/2018 Dated 12th October, 2018) (Ker)(AAAR)
The above appeal was against the Advance Ruling Order (AR) dated 12th October, 2018 passed by the Kerala AAR. In that, the above products were held to be covered by CTH 2106 and not entitled to exemption as per heading 1905. They were held to be liable to GST @18% (9% CGST and 9% SGST).
In the appeal, the appellant reiterated its contentions, mainly that the parota meets the description of heading 1905 and hence is exempt as per Notification No. 2/2017-Central Tax SRO No. 361/2017.
The learned AAAR examined the contents and manufacturing process of the parota and noted as follows:
‘7. During the course of final hearing, the appellant has submitted a detailed list of ingredients, manufacturing process chart, etc., as explained in paragraphs 3.2 and 3.3 above. It is noticed that the impugned products are manufactured by the appellant using various ingredients including refined wheat flour atta (maida) / wheat atta, purified water, edible vegetable oil (sunflower oil), milk solids, sugar, common salt and yeast. The impugned goods also contain permitted quantities of gluten, preservative, emulsifier and acidity regulator. Upon raw material intake, the ingredients go through various processes as detailed in paragraph 3.3. The whole wheat Malabar parota and the Classic Malabar parota are made up of whole wheat flour and refined wheat flour (maida), respectively. Preservatives and acidity regulators are added for a longer shelf life for distribution in the retail chain. The appellant has stated that the impugned goods are branded as “100% whole wheat Malabar parota” and “Classic Malabar parota” and sold in poly-laminated packets. The impugned products are not readily consumable (ready to eat) but need to be heated or further processed before consumption.’
The AAAR also analysed the HSNs 2106 and 1905. The comparative study showed that items under 1905 are ready to consume bakery products.
He observed that the parotas in the present case are not ready to consume but require a process before consumption. He also referred to the Rules of Classification given under Custom Tariff. Even by this analysis, the AAAR came to the conclusion that even if the products are considered to be falling equally in 1905 and 2106, heading 2106 comes last. Exemption can be availed if the product comes under 1905. Observing as above, the AAAR confirmed the order of the AAR, holding that the products are liable to 18% GST. However, in conclusion the AAAR clarified as under:
‘It is further clarified that this ruling is not applicable to generic parota and wheat parota that is supplied as a part of composite supply of services mentioned in item 6(b) of schedule II to KSGST and CGST Acts.’
The parties concerned will be required to consider the above position.
2. Agency – Electricity payment M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd., Narmada Nagar, Bharuch, Gujarat (Order No. GUJ/GAAR/R/93/2020 Dated 17th September, 2020) (Guj.)
The applicant, Gujarat Narmada Valley Fertilizers & Chemicals Ltd. (GNFC) (also referred to as lessor) has rented its premises situated in Ahmedabad to the Central Government for use by its CGST Department. The rent is fixed at Rs. 20,80,848 per month. In addition, there was the following clause in the agreement:
‘9) “the Govt. of India” shall pay all charges in respect of electric power, air-conditioning charges, light and water used along with the applicable taxes thereon for the said premises during the continuance of these presents”.’
Under the Service Tax regime, the applicant was paying service tax on rent and electricity charges paid by it and collected from the Central Government as per the above clause. The applicant had provided a sub-meter for calculating electricity charges as per actuals and also did the same for its other lessees. However, when the CGST Act came into operation, the Central Government conveyed to the applicant that no GST is payable on electricity charges paid by it to the applicant for onward payment to the electricity company.
In view of this, GNFC applied to the AAR to know about its liability to pay GST on electricity charges collected by it from the lessee, the Central Government. The following questions were raised:
‘1. When the landlord charges electricity or incidental charges in addition to rent as per the lease agreement for immovable property rented to the tenant, is the landlord liable to pay and recover GST from the tenant on the electricity or incidental charges charged by it?
2. Can electricity charges paid by the landlord to Torrent Power Ltd. (the supplier of electricity) for electricity connection in the name of the landlord and recovered based on the sub-meters from different tenants be considered as amount recovered as pure agent of the tenant when the legal liability to pay the electricity bill to Torrent Power Ltd. is that of the landlord?’
The applicant was canvassing that the electricity meter is in its own name and it is the applicant who is liable to pay for the electricity. It was further contended that such charges are incidental; are other charges liable to be clubbed in taxable consideration as per section 15(c) of the CGST Act? The applicant was inclined to collect GST on electricity charges and pay it to the Government.
The learned AAR discussed the facts and legal provisions. He felt that the rental amount is fixed and GST is being paid on the said amount.
Regarding collection towards electricity charges, he observed that as per the specific clause in the agreement, the responsibility is of the lessee to pay electricity charges and it is independent of rent, which is a fixed amount. The AAR held that such charge is not incidental or other charges for renting.
The AAR applied Rule 33 of the CGST Rules about agency transaction. The relevant observations are as under:
‘16.2 The above discussion read with the agreement entered into between the applicant and the Government of India makes it expressly clear that the agreement contains an inbuilt clause of actual payment of electric charges by the lessee directly to the electric company. However, due to lack of infrastructure on the part of the lessor, there is a silent agreement between both the parties that the applicant will collect the actual usage charges on the basis of the reading of the sub-meter and in turn pay the same to the electric company. Since this arrangement has been on-going since a long time, it can be clearly said that there is a mutual understanding between both the parties and such mutual understanding is also called an “agreement” in terms of the provisions of the Indian Contract Act, 1852. Thus, the conditions of Rule 33 of the CGST Rules, 2017 also stand satisfied in the instant case and as such it is concluded that the electricity expenses incurred by the applicant on behalf of the lessee have been incurred in the capacity of a pure agent. At this point it is reiterated that the decision would apply only in respect of the agreement under discussion and analogy of this decision would not be applicable to different set of circumstances.’
Thus, based on the peculiar terms of the agreement, the AAR held that it is the lessee who is liable to pay electricity charges to the electricity supply company. The applicant is arranging it on behalf of the lessee, so it is an agent of the lessee for such payment. The learned AAR ruled that there is no liability on the applicant to pay GST on electricity charges collected by it from the lessee and paid to the electricity supply company. This is one of those cases where the supplier also becomes an agent of the recipient.
