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January 2022

RECENT DEVELOPMENTS IN GST

By G.G. Goyal
Chartered Accountant | C.B. Thakar
Advocate
Reading Time 19 mins
I. NOTIFICATIONS

a) Changes in Rate of Tax

Sr. No.

Notification No.

Reference of Entry in
which change is made

Indicative changes
(changes are made effective from
1st January, 2022)

1.

14/2021-Central Tax (Rate) and 14/2021-Integrated Tax (Rate)
both dated 18th November, 2021. Changes in rate of tax on goods.

These Notifications are applicable from
1st January, 2022

Entries at Sr. Nos. 203, 207, 211, 216, 217, 218, 218B, 218C,
219A, 219AA, 219B, 220, 221, 222, 223, 224, 224A and 225 under Schedule I,
and Entries from Sr. Nos. 132A, 132B, 132C, 132D and 171 under Schedule II,
and Entries from Sr. Nos. 159 to 163 under Schedule III are omitted. The said
Entries are not given here for sake of brevity

The goods covered by the above Entries in Schedule I, like woven
fabrics of silk or of silk waste (Entry 203), are removed from 2.5% slab and
incorporated in 6% slab. New Entries are added as mentioned subsequently.

In Schedule II changes are to segregate goods contained therein
into separate Entries for more clarity. The changes in Schedule III are
consequential

 

 

Schedule-II (6%)

 

2.

14/2021-Central Tax (Rate) and 14/2021-Integrated Tax (Rate),
both dated 18th November, 2021, changes to add Entries in Schedule
II, effective from
1st January, 2022

a) Entry 132AA is inserted

Woven fabrics of silk or of silk waste are brought under this
new Entry

b) Entry 132AB is inserted

Woven fabrics of carded wool or of carded fine animal hair

c) Entry 132AC is inserted

Woven fabrics of combed wool or of combed fine animal hair

d) Entry 132AD is inserted

Woven fabrics of coarse animal hair or of horse hair

e) Entry 132AE is inserted

Woven fabrics of cotton, containing 85% or more by weight of
cotton, weighing not more than 200g/m2

f) Entry 132AF is inserted

Woven fabrics of cotton, containing 85% or more by weight of
cotton, weighing more than 200g/m2

g) Entry 132AG is inserted

Woven fabrics of cotton, containing less than 85% by weight of
cotton, mixed mainly or solely with man-made fibres, weighing not more than
200g/m2

h) Entry 132AH is inserted

Woven fabrics of cotton, containing less than 85% by weight of
cotton, mixed mainly or solely with man-made fibres, weighing more than
200g/m2

2.
(continued)

 

i) Entry 132AI is inserted

Other woven fabrics of cotton.

j) Entry 132AJ is inserted

Woven fabrics of flax.

k) Entry 132AK is inserted

Woven fabrics of jute or of other textile-based fibres of
heading 5303

l) Entry 132AL is inserted

Woven fabrics of other vegetable textile fibres, woven fabrics
of paper yarn

m) Entry 132BA is inserted

Sewing thread of man-made filaments, whether or not put up for
retail sale

n) Entry 132BB is inserted

Synthetic filament yarn (other than sewing thread), not put up
for retail sale, including synthetic monofilament of less than 67 decitex

o) Entry 132BC is inserted

Artificial filament yarn (other than sewing thread), not put up
for retail sale, including artificial monofilament of less than 67 decitex

p) Entry 132BD is inserted

Synthetic monofilament of 67 decitex or more and of which no
cross-sectional dimension exceeds 1 mm; strip and the like (for example,
artificial straw) of synthetic textile materials of an apparent width not
exceeding 5 mm

q) Entry 132BE is inserted

Artificial monofilament of 67 decitex or more and of which no
cross-sectional dimension exceeds 1 mm; strip and the like (for example,
artificial straw) of artificial textile materials of an apparent width not
exceeding 5 mm

r) Entry 132BF is inserted

Man-made filament yarn (other than sewing thread) put up for
retail sale

s) Entry 132BG is inserted

Woven fabrics of synthetic filament yarn, including woven
fabrics obtained from materials of heading 5404

t) Entry 132BH is inserted

Woven fabrics of artificial filament yarn, including woven
fabrics obtained from materials of heading 5405

u) Entry 132CA is inserted

Synthetic filament tow

v) Entry 132CB is inserted

Artificial filament tow

w) Entry 132CC is inserted

Synthetic staple fibres, not carded, combed or otherwise
processed for spinning

x) Entry 132CD is inserted

Artificial staple fibres, not carded, combed or otherwise
processed for spinning

y) Entry 132CE is inserted

Waste (including noils, yarn waste and garnetted stock) of
man-made fibres

z) Entry 132CF is inserted

Synthetic staple fibres, carded, combed or otherwise processed
for spinning

aa) Entry 132CG is inserted

Artificial staple fibres, carded, combed or otherwise processed
for spinning

2.
(continued)

 

bb) Entry 132CH is inserted

Sewing thread of man-made staple fibres, whether or not put up
for retail sale

cc) Entry 132CI is inserted

Yarn (other than sewing thread) of synthetic staple fibres, not
put up for retail sale

dd) Entry 132CJ is inserted

Yarn (other than sewing thread) of artificial staple fibres, not
put up for retail sale

ee) Entry 132CK is inserted

Yarn (other than sewing thread) of man-made staple fibres, put
up for retail sale

ff) Entry 132CL is inserted

Woven fabrics of synthetic staple fibres, containing 85% or more
by weight of synthetic staple fibres

gg) Entry 132CM is inserted

Woven fabrics of synthetic staple fibres, containing less than
85% by weight of such fibres, mixed mainly or solely with cotton, of a weight
not exceeding 170g/m2

hh) Entry 132CN is inserted

Woven fabrics of synthetic staple fibres, containing less than
85% by weight of such fibres, mixed mainly or solely with cotton, of a weight
exceeding 170g/m2

ii) Entry 132CO is inserted

Other woven fabrics of synthetic staple fibres

jj) Entry 132CP is inserted

Woven fabrics of artificial staple fibres

kk) Entry 139 is substituted

By substitution, Entry reads as under:
‘Twine, cordage, ropes and cables, whether or not plaited or braided and
whether or not impregnated, coated or sheathed with rubber or plastics’

ll) Entry 139A is inserted

Knotted netting of twine, cordage or rope; made up of fishing
nets and other made-up nets, of textile materials

mm) Entry 146A is inserted

Woven pile fabrics and chenille fabrics, other than fabrics of
heading 5802 or 5806

nn) Entry 151A is inserted

Narrow woven fabrics, other than goods of heading 5807; narrow
fabrics consisting of warp without weft assembled by means of an adhesive
(bolducs)

oo) Entry 154 is substituted

By substitution, Entry reads as under:

‘Braids in the piece; ornamental trimmings
in the piece, without embroidery, other than knitted or crocheted; tassels,
pompons and similar articles’

pp) Entry 155 is substituted

By substitution, Entry reads as under: ‘Woven fabrics of metal
thread and woven fabrics of metallised yarn of heading 5605, of a kind used
in apparel, as furnishing fabrics or for similar purposes, not elsewhere
specified or included’

qq) Entry 156 is substituted

By substitution, Entry reads as under: ‘Embroidery in the piece,
in strips or in motifs’

rr) Entry 168 is substituted

In above Entry: for the words ‘this Chapter’, the word and the
figure ‘Chapter 59’ is substituted

2.
(continued)

 

ss) Entry 168A is inserted

Pile fabrics, including ‘long pile’ fabrics and terry fabrics,
knitted or crocheted is brought under this new Entry

tt) Entry 168B is inserted

Knitted or crocheted fabrics of a width not exceeding 30 cm,
containing by weight 5% or more of elastomeric yarn or rubber thread, other
than those of heading 6001

uu) Entry 168C is inserted

Knitted or crocheted fabrics of a width not exceeding 30 cm,
other than those of heading 6001 or 6002

vv) Entry 168D is inserted

Knitted or crocheted fabrics of a width exceeding 30 cm,
containing by weight 5% or more of elastomeric yarn or rubber thread, other
than those of heading 6001

ww) Entry 168E is inserted

Warp knit fabrics (including those made on galloon knitting
machines), other than those of headings 6001 to 6004

xx) Entry 168F is inserted

Other knitted or crocheted fabrics

yy) Entry 169 is substituted

By substitution, Entry reads as under: ‘Articles of apparel and
clothing accessories knitted or crocheted’

zz) Entry 170 is substituted

By substitution, Entry reads as under: ‘Articles of apparel and
clothing accessories, not knitted or crocheted’

aaa) Entry 171A1 is inserted

Blankets and travelling rugs brought under this new Entry

bbb) Entry 171A2 is inserted

Bed linen, table linen, toilet linen and kitchen linen

ccc) Entry 171A3 is inserted

Curtains (including drapes) and interior blinds; curtains or bed
valances

ddd) Entry 171A4 is inserted

Other furnishing articles, excluding those of heading 9404

eee) Entry 171A5 is inserted

Sacks and bags, of a kind used for the packing of goods

fff) Entry 171A6 is inserted

Tarpaulins, awnings and sun blinds; tents; sails for boats, sailboards
or land craft; camping goods

ggg) Entry 171A7 is inserted

Other made-up articles, including dress patterns

hhh) Entry 171A8 is inserted

Sets, consisting of woven fabric and yarn, whether or not with
accessories, for making up into rugs, tapestries, embroidered table cloths or
serviettes, or similar textile articles, put up in packings for retail sale

iii) Entry 171A9 is inserted

Worn clothing and other worn articles

jjj) Entry 171A10 is inserted

Used or new rags, scrap, twine, cordage, rope and cables and
worn out articles of twine, cordage, rope or cables, of textile materials

2.
(continued)

 

kkk) Entry 171A11 is inserted

Footwear of sale value not exceeding Rs.1,000 per pair

3.

15/2021-Central Tax (Rate) and 15/2021-Integrated Tax (Rate),
both dated 18th November, 2021. This Notification is applicable
from
1st January, 2022

a) Changes in (Sl. No. 3 in TABLE) in Notification No.
11/2017-Central Tax (Rate) and 08/2017-Integrated Tax (Rate), both dated 28th
June, 2017

In the description of Services at item Nos. (iii), (vi), (vii),
(ix) & (x), the words ‘Union territory, a local authority, a Governmental
Authority or a Government Entity’ are substituted with ‘Union territory or a
local authority’. The scope of coverage reduced

b) Change in Sl. No. 26 in Notification No. 11/2017-Central Tax
(Rate) and 8/2017-Integrated Tax (Rate), both dated 28th June,
2017

In item (i)(b) in column (3), after the words numbers, figures
and brackets, ‘Customs Tariff Act, 1975 (51 of 1975)’ the words ‘except
services by way of dyeing or printing of the said textile and textile
products’ is inserted

4.

16/2021-Central Tax (Rate) and 16/2021-Integrated Tax (Rate),
both dated 18th November, 2021. This notification is applicable
from
1st January, 2022

Changes in Notification No. 12/2017-Central Tax (Rate) and
09/2017-Integrated Tax (Rate), both dated 28th June, 2017

a) Changes in Sl. Nos. 3 & 3A of TABLE

b) In item (2) in Sl. No. 15 in TABLE

c) In Sl. No. 17

In the description of Services, in Entries at Sr. Nos. 3 &
3A of TABLE the words ‘or a Governmental authority or a Government Entity’
are omitted

Following Clause is inserted after item (c) of Sl. No. 15 in
TABLE:

‘Provided that nothing contained in items (b) and (c) above
shall apply to services supplied through an electronic commerce operator, and
notified under sub-section (5) of section 9 of the Central Goods and Services
Tax Act, 2017 (12 of 2017)’

After Clause (e) in Entry at Sl. No. 17, following clause is
inserted:

‘Provided that nothing contained in item (e) above shall apply
to services supplied through an electronic commerce operator, and notified
under sub-section (5) of section 9 of the Central Goods and Services Tax Act,
2017 (12 of 2017)’

5.

17/2021-Central Tax (Rate) and 17/2021-Integrated Tax (Rate),
both dated 18th November, 2021. This Notification is applicable
from
1st January, 2022

Changes in Notification No. 17/2017-Central Tax (Rate) and
14/2017-Integrated Tax (Rate), both dated 28th June, 2017a) Clause
(i) is substituted

This Notification is about supplies through e-commerce

 

In Clause (i) after the words ‘and motor cycle’ the words ‘motor
cycle, omni bus or any other motor vehicle’ is substituted

b) Clause (iv) is inserted

‘Supply of restaurant service other than the services supplied
by restaurant, eating joints, etc., located at specified premises’ is
inserted

c) Explanation – item (b) is substituted

In item (b) in Explanation, following substitution is made:

d) Item (c) in Explanation is inserted

‘Specified premises means premises providing hotel accommodation
service having declared tariff of any unit of accommodation above Rs. 7,500
per unit per day or equivalent’

b) Changes in Rules – Notification No. 37/2021-Central Tax dated 1st December, 2021

By the above Notification, changes have been made in the CGST Rules. Rule 137 is for prescribing the tenure of the National Anti-Profiteering Authority. The tenure was four years which is now made five years by the above amendment.

Certain changes are also made in Form GST DRC-03.

II. ADVANCE RULINGS

A) Classification – Namkeen / sweetmeats vis-à-vis jackfruit chips, banana chips and sharkara variety and others

M/s Sri Abdul Aziz, Glow Worm Chips AR Order No. KER/113/2021 dated 26th May, 2021

The applicant is engaged in business as a supplier of goods such as jackfruit chips, banana chips and sharkara variety without brand name. The applicant also intends to engage in the manufacture and supply of salted as well as masala chips made from tapioca and potato, roasted / roasted and salted / salted preparations made out of groundnuts, cashewnut and other seeds.

The applicant requested advance ruling on the following questions:
‘1. Whether jackfruit chips and banana chips (salted and masala varieties) made out of raw as well as ripe banana and sold without brand name are classifiable as namkeens and are covered by HSN code 2106.90.99 and taxable under Entry 101A of the Schedule of Central Tax (Rate) Notification No. 1 of 2017?
2. Whether sharkara variety sold without brand name is classifiable as sweetmeat and is covered by HSN code 2106.90.99 and taxable under Entry 101A of the Schedule of Central Tax (Rate) Notification No. 1 of 2017?
3. Whether roasted and salted / salted / roasted preparations such as of groundnuts, cashewnut and other seeds are namkeens and when sold without a brand name can they be classified under HSN 2106.90.99 and taxed under Entry 101A of Schedule I of Central Tax (Rate) Notification No. 1 of 2017?
4. Whether salted and masala chips of potato and tapioca are classifiable as namkeens and when sold without a brand name can they be classified under HSN 2106.90.99 and taxed under Entry 101A of Schedule I of Central Tax (Rate) Notification No. 1 of 2017?’

The applicant described the methods of preparation. It was submitted that jackfruit chips are made by frying the fruit in edible oil. Banana chips are made by slicing raw / ripe bananas into thin round pieces and frying in edible oil. Salt and turmeric are also applied. By adding masala fried banana masala chips are prepared. Sharkara variety is made by frying thick pieces of banana slices in edible oil. Thereafter, they are mixed thoroughly in a dense syrup of jaggery and then mixed in a powder of dried ginger and cardamom. Thus, jackfruit chips, banana chips and sharkara variety are edible preparations and the first two are savouries and sharkara variety is a sweetmeat. Accordingly, the applicant was levying GST at the rate of 5% by classifying the commodities under Entry 101A of Schedule I of Central Tax (Rate) Notification No. 1 of 2017.

In respect of further products to be dealt with, such as salted and masala chips made from tapioca and potato, it was submitted that these are sliced into round pieces and fried in edible oil. Salt is applied at the time of frying. After frying, these are sold as such or after mixing with masala. Salted chips and masala chips of tapioca and potato are commonly understood as namkeens. In respect of other products like roasted and salted / salted / roasted preparations made of groundnuts, cashewnuts and other seeds, it was submitted that they are commonly understood as namkeens.

The technical details and complete analysis of the above edibles is made in the AR. The claim of the applicant was that the products are classifiable under heading 2106 attracting a rate of 5% under Entry 101A of Schedule 1 of Notification No. 1/2017-Central Tax (Rate) dated 28th June, 2017.

The contention of the Revenue Officer was that the items were essentially prepared of vegetables, fruits, nuts or other parts of plants which fall under Chapter 20 of the Customs Tariff and even if a process is done, they remain in the above category.

The AAR considered the arguments in detail and observed that Chapter 21 of the Customs Tariff covers ‘Miscellaneous edible preparations’. The Heading 2106 of Chapter 21 covers food preparations not elsewhere specified or included, in the sense that these are residuary Entries in respect of edible preparations and hence the edible preparations shall be classified under this Entry only if the same are not classifiable under any of the other specific Entries for edible preparations.

He also referred to the Explanation appended to Notification No. 01/2017-Central Tax (Rate) dated 28th June, 2017 which directs to consider interpretation rules of the Custom Tariff Act for interpretation of entries in GST.

He referred to the rules for interpretation in the Custom Tariff Act and after analysing the same, he observed as under:
‘7.6. Accordingly, applying the principles of interpretation in Rule 2 of the General Rules for Interpretation of the First Schedule to the Customs Tariff Act, 1975 the jackfruit chips, banana chips, sharkara variety, tapioca chips and potato chips (whether salted / masala or otherwise) are classifiable under Tariff Heading 2008 19 40 of the Customs Tariff Act, 1975. Regarding classification of roasted / salted / roasted and salted cashewnuts, groundnuts and other nuts, there are specific headings under Chapter 20 that cover the products. Accordingly, roasted / salted / roasted and salted cashewnuts are classifiable under Tariff Heading 2008 19 10 and other roasted / salted / roasted and salted nuts and seeds are classifiable under 2008 19 20 of the Customs Tariff Act, 1975.’

The AAR referred to Entry 40 of Schedule II of Notification No. 1/2017-Central Tax (Rate) dated 28th June, 2017 and found that on a plain reading of the said Entry all the products that fall under Chapter Heading 2008 of the Customs Tariff Act,1975 attract GST at the rate of 12% (6% CGST + 6% SGST).

Accordingly, he determined the rate for different products as under:

Sr. No.

Products

Entry

Rate

1.

Jackfruit chips

Entry at Sl. No. 40 of Schedule II of Notification No. 01/2017
Central Tax (Rate) dated 28th June, 2017

12%

2.

Banana chips

 – do –

12%

3.

Sharkara variety

– do –

12%

4.

Roasted and salted preparation of groundnut / cashewnut

– do –

12%

5.

Salted and masala potato and tapioca

– do –

12%

B) Rate of Tax on Construction Service / Eligibility to ITC

M/s Building Roads Infrastructure & Construction P. Ltd. AAR order No. 07/AP/GST/2021 dated 18th January, 2021

The applicant is an unregistered dealer expecting a contract for construction, erection, commissioning, widening of roads and completion of bridges for road transportation for use of the general public. He has to act as a sub-contractor to the main contractor who has been awarded a contract by the NHAI to construct, erect, commission, widen roads and completion of bridges in the State of Andhra Pradesh.

For clarity of liability under GST, the following questions were raised before the AAR:
‘1. What is the classification of the “works contract” services pertaining to construction, erection, commissioning and completion of “Bridges and Roads” provided by the applicant as a sub-contractor to the contractors who have been awarded the construction contract pertaining to construction / widening of roads by the Government Entities such as National Highway Authority of India?
2. Clarification for rate of tax chargeable on the outward supplies, i.e., on the RA bills raised on the main contractor.
3. Whether eligible to claim input tax credit on inward supply of the following goods: JCB, Road Roller, Grader, Hydra Crane, Transit Mixer, Generator, Excavator and Sensor Paver?’

The applicant was canvassing that this contract will fall under sub-Entry (iv) in Sr. No. 3 of Notification No. 11/2017 which reads as under:

Sr. No.

Chapter, Section or Heading

Description of Service

Rate
(per cent)

Condition

1.

Heading 9954 (Construction Services)

iv) Composite supply of works contract as defined in clause
(119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied
by way of construction, erection, commissioning, installation, completion,
installation, completion, fitting out, repair, maintenance, renovation, or
alteration of – (a) a road, bridge, tunnel, or terminal for road
transportation for use by general public…

12%

—

It was further submitted that the other competing Entries at Serial No. 3(ix) and 3(x) are not applicable to the applicant as they are applicable to services provided by a sub-contractor to the main contractor who is in turn providing services specified in Serial No. 3(iii), 3(vi) and 3(vii) to the Government. Since the activity of construction of roads and bridges for transportation for use by general public of the Government (NHAI) is not specified in Serial No. 3(iii), 3(vi) and 3(vii), the activity of the applicant should correctly be classifiable under Entry at Serial No. 3(iv). It was also submitted that since the Entry at Serial No. 3(iv) does not specify that it should be made applicable only to a main contractor, it can be applicable to the main contractor as well to the sub-contractor appointed by the main contractor and accordingly the applicant is duly covered by the above Entry 3(iv).

In respect of ITC on inward supply of goods like JCB, Road Roller, etc., it was submitted that they are received and will be used in execution of works. They are received and used in the course of business and furtherance of business and therefore ITC is eligible.

The AAR referred to the above facts and Entry 3(iv). He further referred to the GST Council proceedings at its 25th meeting on 18th January, 2018 in which the recommendations at Item No. 12 were as under:
‘to reduce GST rate (from 18% to 12%) on the Works Contract Services (WCS) provided by sub-contractor to the main contractor providing WCS to Central Government, State Government, Union Territory, a Local Authority, a Governmental Authority or a Government Entity, which attract GST of 12%. Likewise, in WCS attracting 5% GST, their sub-contractor would also be liable to pay @ 5%.’

The AAR also observed that the National Highways Authority of India was set up by an Act of the Parliament, NHAI Act, 1988, under the administrative control of the Ministry of Road Transport and Highways to develop, maintain and manage the National Highways entrusted to it by the Government of India.

Accordingly, he held that the instant case was qualified to fit in the above category. He also agreed that its supply of service will fall under the Item 3(iv) of the amended provisions of the Notification No. 11/2017-Central Tax (Rate) and the rate of tax applicable will be 12% (CGST 6% + SGST 6%).

In respect of eligibility of ITC on JCB and other equipment, he referred to the Scheme of ITC in section 16(1) and held that the applicant is eligible to ITC as per section 16(1) subject to fulfilment of the conditions mentioned in Section 16(2), such as being in possession of tax invoice, having actually received goods or services, tax being paid by the supplier, return being filed u/s 39 and so on.

Referring to section 17(5)(c) of the CGST Act, 2017, the AAR held that it blocks ITC if input is work contract service. That not being the case here, the application of section 17(5)(c) was ruled out. Further, he referred to section 17(5)(d) which blocks ITC if there is own construction. Since that is also not the case in the instant case, he held that the applicant is eligible to ITC on the above goods.

Accordingly, the learned AAR opined in the affirmative on the given questions.

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