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FINAL COURSE SUPPLEMENTARY STUDY PAPER – 2023 PAPER 8: INDIRECT TAX LAWS

[A discussion on amendments made by the Finance Act, 2021 and Finance Act, 2022 and other important Notifications/ Circulars between 1st May, 2021 and 31st October, 2022]

(Relevant for students appearing in May, 2023 and

November, 2023 examinations)

BOARD OF STUDIES THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

This Supplementary Study Paper has been prepared by the Faculty of the Board of Studies of the Institute of Chartered Accountants of India with a view to assist the students in their education. While due care has been taken in preparing this Supplementary Study Paper, if any errors or omissions are noticed, the same may be brought to the attention of the Director of Studies. The Council of the Institute is not responsible in any way for the correctness or otherwise of the amendments published herein.

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BEFORE WE BEGIN …

Indirect Tax Laws is one of the dynamic subjects of the chartered accountancy course. The subject of Indirect Tax Laws at the Final level is divided into two parts, namely, Part I: Goods and Services Tax for 75 marks and Part II: Customs & Foreign Trade Policy (FTP) for 25 marks. The syllabus of Part I: Goods and Services Tax of Paper 8: Indirect Tax Laws covers the provisions of the Central Goods and Services Tax Act, 2017 and Integrated Goods and Services Act, 2017 and of Part II: Customs & FTP covers Customs Law as contained in the Customs Act, 1962 and the Customs Tariff Act, 1975 and Foreign Trade Policy to the extent relevant to the indirect tax laws. Students not only have to be thorough with the basic provisions of the relevant laws, but also need to constantly update their knowledge pertaining to statutory developments.

The subject matter of Part I: Goods and Services Tax of October 2021 Edition of the Study Material of Final Paper 8: Indirect Tax Laws is based on the provisions of the CGST Act and the IGST Act as amended upto 30.04.2021.

The amendments made by the notifications and circulars issued between 01.05.2021 and 31.10.2022 in GST laws as well as the amendments made by the Finance Act, 2021 and Finance Act, 2022 which became effective between 01.05.2021 and 31.10.2022, are given in this Supplementary Study Paper.

The content discussed in Part II: Customs & FTP of October 2021 Edition of the Study Material is based on the customs law as amended by the Finance Act, 2021 and significant notifications and circulars issued till 30.04.2021. The amendments made by the Finance Act, 2022 in Customs & FTP as well as significant notifications/ circulars issued, between 01.05.2021 and 31.10.2022, are given in this Supplementary Study Paper.

These amendments are very important to the students for updating their knowledge pertaining to the latest statutory developments. This Supplementary Study Paper is relevant for students appearing in May, 2023 and November, 2023 examinations.

For the ease of reference, the amendments have been grouped into Chapters which correspond with the Chapters of the Study Material.

For the sake of brevity, Central Goods and Services Tax, Integrated Goods and Services Tax, Central Goods and Services Tax Act, 2017, Integrated Goods and Services Tax Act,

2017, Central Goods and Services Tax Rules, 2017 and Integrated Goods and Services Tax Rules, 2017 have been referred to as CGST, IGST, CGST Act, IGST Act, CGST Rules and IGST Rules respectively.

Unless otherwise specified, the section numbers and rules referred to in the chapters of Part I: Goods and Services Tax pertain to CGST Act and CGST Rules respectively (except Chapter 5 : Place of Supply, where the section numbers and rule numbers pertain to IGST Act and IGST Rules).

The amendments made by way of notifications/circulars and other legislative amendments made after 31st October, 2022 and which are relevant for November, 2023 examinations will be given in the Statutory Updates for November, 2023 examinations.

Happy Reading and Best Wishes for the forthcoming examinations!

PART-I: GOODS AND SERVICES TAX

Activities/ transactions between a person, other than an individual, and its members/constituents for consideration included in scope of supply [Section 7 and Schedule II to the CGST Act]

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SUPPLY UNDER GST

Following amendments have been made by the Finance Act, 2021 in section 7 and Schedule II to the CGST Act:

• 1. Earlier, supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration, was treated as supply of goods. [Para 7 of Schedule II to the CGST Act]. The said para has been omitted from Schedule II retrospectively with effect from 01.07.2017.
  2. A new clause (aa) has been inserted in sub-section (1) of section 7 retrospectively with effect from 01.07.2017. This includes the following activities/ transactions within the scope of supply:

Activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.

The intent of the above amendments is to put an end to the ambiguity whether activities/ transactions involving supply of goods/ services, by any person, other than an individual, to its members or vice-versa fall within the purview of supply or not. The amendments bring in the certainty that said activities/ transactions are covered within the scope of supply under GST and ensure the levy of GST on such activities/transactions.

Further, an explanation has also been inserted to section 7(1)(aa), to clarify that for the purpose of this clause, the person and its members/ constituents shall be deemed to be two separate persons and the supply of activities/ transactions inter se shall be deemed to take place from one person to another. The clarification provides for a non-obstante clause as it shall have an overriding effect over anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority. This explanation prevents the use of doctrine of mutuality by such person(s) to avoid GST liability1.

Perquisites provided in terms of contractual agreement to employee – not liable to GST

Circular No. 172/04/2022 GST dated 06.07.2022 clarifies issue as to whether various perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are liable for GST.

Clarification: Schedule III to the CGST Act provides that “services by employee to the employer in the course of or in relation to his employment” will not be considered as supply of goods or services and hence GST is not applicable on services rendered by employee to employer provided they are in the course of or in relation to employment.

Any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. It follows therefrom that perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee will not be subjected to GST.

Clarification regarding GST applicability on liquidated damages, compensation and penalty arising out of breach of contract or other provisions of law

Circular No. 178/10/2022 GST dated 03.08.2022 clarifies issues with

1 The above amendment, in effect, overrules the judgment of the Hon’ble Supreme Court in State of West Bengal v. Calcutta Club Limited wherein it was held that the transactions between a Club and its members cannot be taxed owing to the doctrine of mutuality, i.e., a person cannot make a profit from himself.

respect to GST applicability on liquidated damages, compensation and penalty arising out of breach of contract or other provisions of law.

Clarification: “Agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act” has been specifically declared to be a supply of service in para 5(e) of Schedule II to the CGST Act, 2017 if the same constitutes a “supply” within the meaning of the CGST Act.

Expression “Agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act” has three limbs

Agreeing to the obligation to refrain from an act

Agreeing to the obligation to tolerate an act or a situation

Agreeing to the obligation to do an act

Agreeing to the obligation to refrain from an act

Example of activities that would be covered by this part of the expression would include non-compete agreements, where one party agrees not to compete with the other party in a product, service or geographical area against a consideration paid by the other party.

Another example of such activities would be a builder refraining from constructing more than a certain number of floors, even though permitted to do so by the municipal authorities, against a compensation paid by the neighbouring housing project, which wants to protect its sunlight, or an industrial unit refraining from manufacturing activity during certain hours against an agreed compensation paid by a neighbouring school, which wants to avoid noise during those hours.

Agreeing to the obligation to tolerate an act or a situation

This would include activities such a shopkeeper allowing a hawker to operate from the common pavement in front of his shop against a monthly payment by the hawker, or an RWA tolerating the use of loud speakers for early morning prayers by a school located in the colony subject to the school paying an agreed sum to the RWA as compensation.

Agreeing to the obligation to do an act

This would include the case where an industrial unit agrees to install equipment for zero emission/discharge at the behest of the RWA of a neighbouring residential complex against a consideration paid by such RWA, even though the emission/discharge from the industrial unit was within permissible limits and there was no legal obligation upon the individual unit to do so.

Above three activities must comply with the following conditions:

There must be an expressed or implied agreement or contract must exist

Above three activities must be under an “agreement” or a “contract” (whether express or implied) to fall within the ambit of para 5(e) of Schedule II. In other words, one of the parties to such agreement/contract (the first party) must be under a contractual obligation to either (a) refrain or (b) tolerate or (c) do.

Such contractual arrangement must be an independent arrangement in its own right. Such arrangement/agreement can take the form of an independent stand- alone contract or may form part of another contract. Thus, a person (the first person) can be said to be making a supply by way of refraining from doing something or tolerating some act or situation to another person (the second person) if the first person was under an obligation to do so and then performed accordingly.

Such a contract cannot be imagined or presumed to exist just because there is a flow of money from one party to another. There must be an expressed or implied promise by the recipient of money to agree to do or abstain from doing something in return for the money paid to him.

Consideration must flow in return to this contract/agreement

Some “consideration” must flow in return from the other party to this contract/agreement (the second party) to the first party for such (a) refraining or (b) tolerating or (c) doing.

Taxability of some of the transactions has been discussed in detail as under:

Liquidated Damages

It is common for the parties entering into a contract, to specify in the contract itself, the compensation that would be payable in the event of the breach of the contract. Black’s Law Dictionary defines ‘Liquidated Damages’ as cash compensation agreed to by a signed, written contract for breach of contract, payable to the aggrieved party.

The taxability or otherwise of liquidated damages is clarified as under:

It is argued that performance is the essence of a contract. Liquidated damages cannot be said to be a consideration received for tolerating the breach or non-performance of contract. They are rather payments for not tolerating the breach of contract. Payment of liquidated damages is stipulated in a contract to ensure performance and to deter non-performance, unsatisfactory performance or delayed performance.

Liquidated damages are a measure of loss and damage that the parties agree would arise due to breach of contract. They do not act as a remedy for the breach of contract. They do not restitute the aggrieved person.

A contract is entered into for execution and not for its breach. The liquidated damages or penalty are not the desired outcome of the contract. By accepting the liquidated damages, the party aggrieved by breach of contract cannot be said to have permitted or tolerated the deviation or non-fulfilment of the promise by the other party.

Where the amount paid as ‘liquidated damages’ is an amount paid only to compensate for injury, loss or damage suffered by the aggrieved party due to breach of the contract and there is no agreement, express or implied, by the aggrieved party receiving the liquidated damages, to refrain from or tolerate an act or to do anything for the party paying the liquidated damages, in such cases liquidated damages are merely a flow of money from the party who causes breach of the contract to the party who suffers loss or damage

due to such breach. Such payments do not constitute consideration for a supply and are not taxable.

Examples of such cases are:

• • 1. damages resulting from damage to property, negligence, piracy, unauthorized use of trade name, copyright,
    2. penalty stipulated in a contract for delayed construction of houses,
    3. forfeiture of earnest money by a seller in case of breach of ‘an agreement to sell’ an immovable property by the buyer or by Government or local authority in the event of a successful bidder failing to act after winning the bid, for allotment of natural resources.

The key in such cases is to consider whether the impugned payments constitute consideration for another independent contract envisaging tolerating an act or situation or refraining from doing any act or situation or simply doing an act. If the answer is yes, then it constitutes a ‘supply’ irrespective of by what name it is called, otherwise it is not a “supply”.

If the payment is merely an event in the course of the performance of the agreement and it does not represent the ‘object’, as such, of the contract then it cannot be considered ‘consideration’.

On the contrary, consider the following examples:

1. A contract may provide that payment by the recipient of goods or services shall be made before a certain date and failure to make payment by the due date shall attract late fee or penalty.
2. A contract for transport of passengers may stipulate that the ticket amount shall be partly or wholly forfeited if the passenger does not show up.
3. A contract for package tour may stipulate forfeiture of security deposit in the event of cancellation of tour by the customer.
4. A contract for lease of movable or immovable property may stipulate that the lessee shall not terminate the lease before a certain period and if he does so he will have to pay certain amount as early termination fee or penalty.
5. Some banks similarly charge pre- payment penalty if the borrower wishes to repay the loan before the maturity of the loan period.

In the above exaomles, amounts paid for acceptance of late payment, early termination of lease or for pre-payment of loan or the amounts forfeited on cancellation of service by the customer as contemplated by the contract as part of commercial terms agreed to by the parties, constitute consideration for the supply of a facility, namely, of acceptance of late payment, early termination of a lease agreement, of prepayment of loan and of making arrangements for the intended supply by the tour operator respectively.

Therefore, such payments, even though they may be referred to as fine or penalty, are actually payments that amount to consideration for supply, and are subject to GST, in cases where such supply is taxable.

Since these supplies are ancillary to the principal supply for which the contract is signed, they shall be eligible to be assessed as the principal supply. Naturally, such payments will not be taxable if the principal supply is exempt.

Cheque dishonor fine/ penalty

The supplier wants payment to be received on time and does not want cheque to be dishonoured. There is never an implied or express offer or willingness on part of the supplier that he would tolerate deposit of an invalid, fake or

unworthy instrument of payment against consideration in the form of cheque dishonour fine or penalty.

The fine or penalty that the supplier or a banker imposes, for dishonour of a cheque, is a penalty imposed not for tolerating the act or situation but a fine, or penalty imposed for not tolerating, penalizing and thereby deterring and discouraging such an act or situation. Therefore, cheque dishonor fine or penalty is not a consideration for any service and not taxable.

Penalty imposed for violation of laws

Penalty imposed for violation of laws such as traffic violations, or for violation of pollution

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norms or other laws are also not consideration for any supply received and are not taxable.

Same is the case with fines, penalties imposed by the mining Department of a Central or State Government or a local authority on discovering mining of excess mineral beyond the permissible limit or of mining activities in violation of the mining permit.

Laws are not framed for tolerating their violation. They stipulate penalty not for tolerating violation but for not tolerating, penalizing and deterring such violations. There is no agreement between the Government and the violator specifying that violation would be allowed or permitted against payment of fine or penalty. There cannot be such an agreement as violation of law is never a lawful object or consideration.

In short, fines and penalty chargeable by Government or a local authority imposed for violation of a statute, bye-laws, rules or regulations are not leviable to tax.

Forfeiture of salary or payment of bond amount in the event of the employee leaving the employment before the minimum agreed period

The provisions for forfeiture of salary or recovery of bond amount in the event of the employee leaving the employment before the minimum agreed period are incorporated in the employment contract to discourage non-serious candidates from taking up employment.

The said amounts are recovered by the employer not as a consideration for tolerating the act of such premature quitting of employment but as penalties for dissuading the non-serious employees from taking up employment and to discourage and deter such a situation.

Further, the employee does not get anything in return from the employer against payment of such amounts.

Therefore, such amounts recovered by the employer are not taxable as consideration for the service of agreeing to tolerate an act or a situation.

Late payment surcharge or fee

The facility of accepting late payments with interest or late payment fee, fine or penalty is a facility granted by supplier naturally bundled with the main supply. It is not uncommon or unnatural for customers to sometimes miss the last date of payment of electricity, water, telecommunication services

etc.

Almost all service providers across the world provide the facility of accepting late payments with late fine or penalty.

Even if this service is described as a service of tolerating the act of late payment, it is an ancillary supply naturally bundled and supplied in conjunction with the principal supply, and therefore should be assessed as the principal supply.

Since it is ancillary to and naturally bundled with the principal supply such as of electricity, water, telecommunication, cooking gas, insurance etc. it should be assessed at the same rate as the principal supply.

However, the same cannot be said of cheque dishonor fine or penalty as discussed earlier.

Fixed charges for power

The price charged for electricity by the power generating companies from the State Electricity Boards (SEBs)/DISCOMS or by SEBs/DISCOMs from individual customers has two components, namely, a minimum fixed charge (or capacity charge) and variable per unit charge.

The fact that the minimum fixed charges remain the same whether electricity is consumed or not or it is scheduled/consumed below the contracted or available capacity or a minimum threshold, does not mean that minimum fixed charge or part of it is a charge for tolerating the act of not scheduling or consuming the minimum the contracted or available capacity or a minimum threshold.

Both the components of the price, the minimum fixed charges/capacity charges and the variable/energy charges are charged for sale of electricity and are thus not taxable as electricity is exempt from GST.

Cancellation charges

It is a common business practice for suppliers of services such as hotel accommodation, tour and travel, transportation etc. to provide the facility of cancellation of the intended supplies within a certain time period on payment of cancellation fee.

Cancellation fee can be considered as the charges for the costs involved in making arrangements for the intended supply and the costs involved in cancellation of the supply, such as in cancellation of reserved tickets by the Indian Railways.

Services such as transportation travel and tour constitute a bundle of services. The transportation service, for instance, starts with booking of the ticket for travel and lasts at least till exit of the passenger from the destination terminal.

All services such as making available an online portal or convenient booking counters with basic facilities at the transportation terminal or in the city, to reserve the seats and issue tickets for reserved seats much in advance of the travel, giving preferred seats with or without extra cost, lounge and waiting room facilities at airports, railway stations and bus terminals, provision of basic necessities such as soap and other toiletries in the wash rooms, clean drinking water in the waiting area etc. form part and parcel of the transportation service; they constitute the various elements of passenger transportation service, a composite supply.

The facilitation service of allowing cancellation against payment of cancellation charges is also a natural part of this bundle. It is invariably supplied by all suppliers of passenger transportation service as naturally bundled and in conjunction with the principal supply of transportation in the ordinary course of business.

Therefore, facilitation supply of allowing cancellation of an intended supply against payment of cancellation fee or retention or forfeiture of a part or whole of the consideration or security deposit in such cases should be assessed as the principal supply.

For example, cancellation charges of railway tickets for a class would attract GST at the same rate as applicable to the class of travel (i.e., 5% GST on first class or air-conditioned coach ticket and nil for other classes such as second sleeper class). Same is the case for air travel.

Accordingly, the amount forfeited in the case of non-refundable ticket for air travel or security deposit or earnest money forfeited in case of the customer failing to avail the travel, tour operator or hotel accommodation service or such other intended supplies should be assessed at the same rate as applicable to the service contract, say air transport or tour operator service, or other such services.

However, as discussed earlier, forfeiture of earnest money by a seller in case of breach of ‘an agreement to sell’ an immovable property by the buyer or such forfeiture by Government or local authority in the event of a successful bidder failing to act after winning the bid for allotment of natural resources, is a mere flow of money, as the buyer or the successful bidder does not get anything in return for such forfeiture of earnest money. Forfeiture of earnest money is stipulated in such cases not as a consideration for tolerating the breach of contract but as a compensation for the losses suffered and as a penalty for discouraging the non-serious buyers or bidders. Such payments being merely flow of money are not a consideration for any supply and are not taxable.

Manufacturers of fly ash bricks/blocks, building bricks, bricks of fossil meals, earthen/roofing tiles, etc. also ineligible to opt for composition levy

3

CHARGE OF GST

As per section 10(2)(e) read with Notification No. 14/2019 CT dated 07.03.2019, manufacturers of following goods cannot opt for composition scheme under section 10(1) and 10(2):

Tariff item, sub-heading, heading or Chapter

2105 00 00

2106 90 20

24

2202 1010

Description

Ice cream and other edible ice, whether or not containing cocoa

Pan Masala

All goods i.e. Tobacco and manufactured tobacco substitutes

Aerated water

Notification No. 14/2019 CT dated 07.03.2019 has been amended to include following items in the above list:

 

Tariff item, sub-heading, heading or Chapter

6815

6901 00 10

6904 10 00

6905 10 00

Description of goods

Fly ash bricks; Fly ash aggregates2; Fly ash blocks

Bricks of fossil meals or similar siliceous earths

Building bricks

Earthen or roofing tiles

Thus, manufacturers of the above-mentioned goods have become ineligible to opt for composition levy under section 10(1) and 10(2).

[Notification No. 04/2022 CT dated 31.03.2022 as amended by Notification No. 16/2022 CT dated 13.07.2022]

1. Amendments in the list of notified services tax on which is payable under reverse charge by the recipient

Notification No. 13/2017 CT (R) dated 28.06.2017 as amended has notified specified categories of supply of services wherein whole of the tax shall be paid on reverse charge basis by the recipient of services.

With effect from 18.07.2022, the said list of services tax on which is payable under reverse charge has been amended as follows:-

S. No.	Category of supply of service	Supplier of service	Recipient of Service
1	Supply of services by a Goods Transport Agency (GTA) in respect of transportation of	Goods Transport Agency (GTA) who has not paid CGST @ 6%	Any factory registered under or governed by the Factories Act, 1948; or any society

2 Between 01.04.2022 and 18.07.2022, manufacturers of fly ash aggregate were ineligible to opt for composition scheme under section 10(1) and 10(2) only when the fly ash content of fly ash aggregate was 90% or more.

goods by road to- any factory registered under or governed by the Factories Act, 1948; or any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India; or any co-operative society established by or under any law; or any person registered under the CGST Act or the IGST Act or the SGST Act or the UTGST Act; or any body corporate established, by or under any law; or any partnership firm whether registered or not under any law including association of persons; or any casual taxable person.

registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India; or any cooperative society established by or under any law; or any person registered under the CGST Act or the IGST Act or the SGST Act or the UTGST Act; or any body corporate established, by or under any law; or any partnership firm whether registered or not under any law including association of persons; or any casual taxable person; located in the taxable territory. [Hereinafter referred as Specified recipients]

However, reverse charge mechanism (RCM) shall not apply to services provided by a GTA, by way of transport of goods in a goods carriage by road to- a Department/ establishment of the Central Government/ State Government/ Union territory; or local authority; or Governmental agencies, which has taken registration under the CGST Act only for the purpose of deducting tax under section 51 and not for making a taxable supply of goods or services. Further, nothing contained in this entry shall apply where, – the supplier has taken registration under the CGST Act, 2017 and exercised the option to pay tax on the services of GTA in relation to transport of goods supplied by him under forward charge; and the supplier has issued a tax invoice to the recipient charging CGST at the applicable rates and has made the prescribed declaration on such invoice issued by him.
5	Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding, – renting of immovable property, and services specified below- services by the Department of Posts by way of speed post, express parcel post,	Central Government, State Government, Union territory or local authority	Any business entity located in the taxable territory.

life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority;

1. services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
2. transport of goods or passengers.

5AA

Service by way of renting of residential

Any person

Any registered person

dwelling to a registered person

Parallel amendments in reverse charge entries in case of inter-State supply of services have been carried out by amending Notification No. 10/2017 IT(R) dated 28.06.2017.

[Notification No. 05/2022 CT(R) dated 13.07.2022 and Notification No. 05/2022 IT(R) dated 13.07.2022]

1. Tax on passenger transportation services by motorcab, maxicab, motor cycle, omnibus or any other motor vehicle and supply of restaurant service at other than specified premises, supplied through ECO, payable by ECO

The Government may, on the recommendations of the GST Council, notify specific categories of services the tax [CGST/SGST/IGST] on supplies of which shall be paid by the electronic commerce operator (ECO) if such services are supplied through it. Such services shall be notified on the recommendations of the GST

Council [Section 9(5) of the CGST Act/section 5(5) of the IGST Act].

Notification No. 17/2017 CT (R) dated 28.06.20173/ Notification No. 14/2017 IT

(R) dated 28.06.20174 as amended has notified the specific categories of services the tax on supplies of which shall be paid by the electronic commerce operator (ECO) if such services are supplied through ECO.

Hitherto, following services were so notified:

1. services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle;
2. services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration under section 22(1).
3. services by way of house-keeping, such as plumbing, carpentering etc, except where the person supplying such service through electronic commerce operator is liable for registration under section 22(1).

With effect from 01.01.2022, entry (i) above has been amended to include services by way of transportation of passengers by an omnibus or any other motor vehicle also.

The term ‘omnibus’ shall have the same meaning as assigned to it under the Motor Vehicle Act, 1988.

Further, with effect from 01.01.2022, supply of restaurant service other than the services supplied by restaurant, eating joints etc. located at specified premises has also been notified under the category of services, the tax on which is payable by the ECO if such service is supplied through ECO.

3 This notification notifies specific categories of services the CGST/SGST on intra-State supplies of which shall be paid by ECO.

4 This notification notifies specific categories of services the IGST on inter-State supplies of which shall be paid by ECO.

In other words, the tax on supplies of restaurant service supplied through ECO shall be paid by the ECO.

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

The ECO may, on services notified under section 9(5), including on restaurant service provided through ECO, may continue to pay GST, by furnishing the details in Form GSTR-3B, reporting them as outward taxable supplies for the time being.

In this regard, following issues have been clarified:

ECOs not to collect TCS in respect of restaurant services so notified

ECOs will no longer be required to collect TCS and file Form GSTR-8 in respect of restaurant services on which it pays tax in terms of section 9(5).

ECOs not required to take separate registration for paying tax on restaurant service supplied through them

As ECOs are already registered in accordance with rule 8 (as a supplier of their own goods or services), there would be no mandatory requirement of taking separate registration by ECOs for payment of tax on restaurant service under section 9(5).

ECO to pay tax on any restaurant services supplied through them

ECOs will be liable to pay GST on any restaurant service supplied through them including services supplied by an unregistered person.

Supply of restaurant services to be included in aggregate turnover of person supplying restaurant services through ECO

It is clarified that the aggregate turnover of person supplying restaurant service through ECOs shall be computed in accordance with definition of aggregate turnover under section 2(6) and shall include the aggregate value of supplies made by the restaurant through ECOs. Accordingly, for threshold consideration or any other purpose in the CGST Act, the person providing restaurant service through ECO shall account such services in his aggregate turnover.

Restaurant services provided through ECO not to be considered as inward supply for ECOs liable to RCM

ECOs are not the recipient of restaurant service supplied through them. Since these are not input services to ECO, these are not to be reported as inward supply (liable to reverse charge) in Form GSTR-3B.

Reversal of proportionate ITC on input goods and services not required by ECO

ECOs provide their own services as an electronic platform and as an intermediary for which it would acquire inputs/input service on which ECOs avail input tax credit (ITC). The ECO charges commission/fee etc. for the services it provides. The ITC is utilised by ECO for payment of GST on services provided by ECO on its own account (say, to a restaurant). The situation in this regard remains unchanged even after ECO is made liable to pay tax on restaurant service. ECO would be eligible to ITC as before. Accordingly, it is clarified that ECO shall not be required to reverse ITC on account of restaurant services on which it pays GST in terms of section 9(5).

It may also be noted that on restaurant service, ECO shall pay the entire GST liability in cash (No ITC could be utilised for payment of GST on restaurant service supplied through ECO).

GST to be paid by the supplier on services not notified under section 9(5) of CGST Act but supplied through ECO

In respect of supplies not notified under section 9(5) but supplied through ECO, the liability to pay GST continues on such supplier and ECO shall continue to deposit TCS on such supplies.

ECO to raise invoice in respect of restaurant service supplied through ECO

The invoice in respect of restaurant service supplied through ECO under section 9(5) will be issued by ECO.

Billing in case of ‘restaurant service’ and goods/services other than restaurant service being sold by a restaurant to a customer under the same order

There can a situation where ‘restaurant service’ and goods or services other than restaurant service are sold by a restaurant to a customer

under the same order. The question arises as to who shall be liable for raising invoices in such cases.

Considering that liability to pay GST on supplies other than ‘restaurant service’ through the ECO, and other compliances under the CGST Act, including issuance of invoice to customer, continues to lie with the respective suppliers (and ECOs being liable only to collect tax at source (TCS) on such supplies), it is advisable that ECO raises separate bill on restaurant service in such cases where ECO provides other supplies to a customer under the same order.

[Notification No. 17/2021 CT(R) dated 18.11.2021 and Notification No. 17/2021 IT(R) dated 18.11.2021 read with Circular No. 167/23/2021 GST dated 17.12.2021]

1. Situations in which corporate recipients are liable to pay GST on renting of motor vehicles designed to carry passengers under reverse charge mechanism

In case of services provided by a non-body corporate to a body corporate by way of renting of any motor vehicle for transport of passengers, tax is required to be paid by the body corporate under reverse charge mechanism (RCM).

The question which arose for consideration is whether RCM is applicable on:

• 1. service of renting of motor vehicle designed to carry passengers

or

• 1. service of transportation of passengers.

The circular clarified that there is a clear distinction between the two services which is as under:

1. The two services fall under two different headings in the Tariff.

(i) Services of renting of motor vehicles designed to carry passengers covers:

• • renting of motor vehicle
  • for transport of passengers
  • for a period of time
  • where the renter defines how and when the vehicles will be

operated, determining schedules, routes and other operational considerations.

• • 1. ‘Passenger transport services’ covers passenger transport services over pre-determined routes on pre-determined schedules.

Accordingly, it is clarified that where the body corporate hires the motor vehicle (for transport of employees etc.) for a period of time, during which the motor vehicle shall be at the disposal of the body corporate, the service would fall under ‘services of renting of motor vehicles designed to carry passengers’, and the body corporate shall be liable to pay GST on the same under RCM. Thus, reverse charge would apply on act of renting of vehicles by body corporate and in such a case, it is for the body corporate to use in the manner as it likes subject to agreement with the person providing vehicle on rent.

However, where the body corporate avails the passenger transport service for specific journeys or voyages and does not take vehicle on rent for any particular period of time, the service would fall under ‘passenger transport services’ and the body corporate shall not be liable to pay GST on the same under RCM.

[Circular No. 177/09/2022 GST dated 03.08.2022]

Entry Nos. referred to in this chapter correspond to entries in Notification No. 12/2017 CT (R) dated 28.06.2017 which grants exemption from GST for intra-State supply of specified services. However, these entry numbers have been given only for reference purposes and are not relevant for examination purpose.

4

EXEMPTIONS FROM GST

Amendments in the services exempted from GST

Notification no. 12/2017 CT(R) dated 28.06.2017 provides list of services exempted from CGST. Parallel exemptions from IGST have been granted to inter-State supply of services vide Notification No. 9/2017 IT(R) dated 28.06.2017.

The amendments in the list of exempted services have been highlighted in bold/in strikethrough form, hereunder:

Amendments in the existing exemptions

Following existing exemptions have been amended:

Effective from

01.01.2022

Sl. No.

3

Description of services
Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union
territory or local authority	or a Governmental

	or a Governmental
authority or a Government Entity

 

3A

6

authority or a Government Entity	by way of
any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.
Composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.
Services by the Central Government, State Government, Union territory or local authority excluding the following services— services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; transport of goods or passengers; or (d) any service, other than services covered under entries (a) to (c) above, provided to business entities.

01.01.2022

18.07.2022

7	Services provided by the Central Government, State Government, Union territory or local authority to a business entity with an aggregate turnover of up to such amount in the preceding financial year as makes it eligible for exemption from registration under the CGST Act, 2017. Explanation.- For the purposes of this entry, it is hereby clarified that the provisions of this entry shall not be applicable to- services,- by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; of transport of goods or passengers; and services by way of renting of immovable property.	18.07.2022
8	Services provided by the Central Government, State Government, Union territory or local authority to another Central Government, State Government, Union territory or local authority. However, nothing contained in this entry shall apply to services- (i) by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services	18.07.2022

	provided to a person other than the Central Government, State Government, Union territory; in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; of transport of goods or passengers.
9	Services provided by Central Government, State Government, Union territory or a local authority where the consideration for such services does not exceed ` 5,000. However, nothing contained in this entry shall apply to shall apply to – services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; transport of goods or passengers. Further, in case where continuous supply of service* is provided by the Central Government, State Government, Union territory or a local authority, the exemption shall apply only where the consideration charged for such service does not exceed ` 5,000 in a FY. *as defined in section 2(33)	18.07.2022

 

12

15

Services by way of renting of residential dwelling for use as residence except where the residential dwelling is rented to a registered person.

Transport of passengers, with or without accompanied belongings, by – air in economy class, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; non-air conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or stage carriage other than air-conditioned stage carriage. However, nothing contained in items (b) and (c) above shall apply to services supplied through an electronic commerce operator (ECO), and notified under section 9(5) of the CGST, 2017. Services notified under section 9(5) are the services by way of transportation of passengers by a radio-taxi, motorcab, maxicab, motor cycle, omnibus or any other motor vehicle, supplied through ECO. In such a case, the tax on supplies of such services shall be paid by the ECO. In other words, in case where services of transport of passengers, by non-air conditioned contract carriage other than radio taxi excluding tourism, conducted tour, charter or hire or by non-air conditioned stage carriage, are supplied through ECO, such services are not exempt from GST. Further,

18.07.2022

01.01.2022 and 18.07.2022

	tax on such services shall be paid by ECO.
17	Service of transportation of passengers, with or without accompanied belongings, by— railways in a class other than— (i) first class; or (ii) an air-conditioned coach; metro, monorail or tramway; inland waterways; public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and metered cabs or auto rickshaws (including e-rickshaws) However, nothing contained in item (e) above shall apply to services supplied through an electronic commerce operator (ECO), and notified under section 9(5) of the CGST, 2017. Services notified under section 9(5) are the services by way of transportation of passengers by a radio- taxi, motorcab, maxicab, motor cycle, omnibus or any other motor vehicle, supplied through ECO. In such a case, the tax on supplies of such services shall be paid by the ECO. In other words, in case where service of transport of passengers by metered cabs or auto rickshaws (including e-rickshaws) are supplied through ECO, such services are not exempt from GST. Further, tax on such services shall be paid by ECO.	01.01.2022

 

19A

19B

20

21

Services by way of transportation of goods by an aircraft from customs station of clearance in India to a place outside India This exemption is applicable upto 30.09.2022.

Services by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India This exemption is applicable upto 30.09.2022.

Services by way of transportation by rail or a vessel from one place in India to another of the following goods – relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; defence or military equipments; newspaper or magazines registered with the Registrar of Newspapers; railway equipments or materials; agricultural produce; milk, salt and food grain including flours, pulses and rice; and organic manure

Services provided by a goods transport agency, by way of transport in a goods carriage of – agricultural produce; goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed `1,500; goods, where consideration charged for transportation of all such goods

18.07.2022

18.07.2022

 

24B

54

for a single consignee does not exceed ` 750; milk, salt and food grain including flour, pulses and rice; organic manure; newspaper or magazines registered with the Registrar of Newspapers; relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or defence or military equipments.

Services by way of storage/ warehousing of cereals, pulses, fruits, nuts and vegetables, spices, copra, sugarcane, jaggery, raw vegetable fibres such as cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, coffee and tea.

Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by way of— agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing; supply of farm labour; processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and

18.07.2022

18.07.2022

72

74

such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market; renting or leasing of agro machinery or vacant land with or without a structure incidental to its use; loading, unloading, packing, storage or warehousing of agricultural produce; agricultural extension services; services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce. services by way of fumigation in a warehouse of agricultural produce.
Services provided to the Central Government, State Government, Union territory administration under any training programme for which 75% or more of the total expenditure is borne by the Central Government, State Government, Union territory administration
Services by way of-
(a) health care services by a clinical establishment, an
practitioner or para-medics; However, nothing in this entry shall apply to the services provided by a clinical establishment by way of providing room [other than Intensive

01.10.2021

18.07.2022

authorised medical

	Care Unit (ICU)/Critical Care Unit (CCU)/Intensive Cardiac Care Unit (ICCU)/Neo natal Intensive Care Unit (NICU)] having room charges exceeding ` 5000 per day to a person receiving health care services. services provided by way of transportation of a patient in an ambulance, other than those specified in above.
80	Services by way of training or coaching in recreational activities relating to- (a) arts or culture, or (b) sports by charitable entities registered under section 12AA or 12AB of the Income-tax Act. Services by way of training or coaching in- recreational activities relating to arts or culture, by an individual, or sports by charitable entities registered under section 12AA or 12AB of the Income-tax Act.	18.07.2022

New exemptions introduced

Following new services have been exempted from CGST:

Sl. No.

24C

52A

Description of services

Services by the Department of Posts by way of post card, inland letter, book post and ordinary post (envelopes weighing less than 10 grams).

Tour operator service, which is performed partly in India and partly outside India, supplied by a tour operator to a foreign tourist, to the extent of the value of the tour operator

Effective from

18.07.2022

18.07.2022

service which is performed outside India. However, value of the tour operator service performed outside India shall be such proportion of the total consideration charged for the entire tour which is equal to the proportion which the number of days for which the tour is performed outside India has to the total number of days comprising the tour, or 50% of the total consideration charged for the entire tour, whichever is less. Further, in making the above calculations, any duration of time equal to or exceeding 12 hours shall be considered as one full day and any duration of time less than 12 hours shall be taken as half a day. Explanation. – “foreign tourist” means a person not normally resident in India, who enters India for a stay of not more than 6 months for legitimate non-immigrant purposes. Illustrations: A tour operator provides a tour operator service to a foreign tourist as follows: – 3 days in India, 2 days in Nepal; Consideration charged for the entire tour: ` 1,00,000/- Exemption: ` 40,000/- (=`1,00,000/- x 2/5) or, ` 50,000/- (= 50% of ` 1,00,000/-) whichever is less, i.e., ` 40,000/-(i.e., Taxable value: ` 60,000/-); 2 days in India, 3 nights in Nepal; Consideration charged for the entire tour: ` 1,00, 000/- Exemption: ` 60,000 (=` 1,00,000/- x 3/5) or, ` 50,000/- (= 50% of ` 1,00,000/-) whichever is less, i.e., ` 50,000/-(i.e., Taxable value: ` 50,000/-);

(c) 2.5 days in India, 3 days in Nepal; Consideration charged for the entire tour: ` 1,00,000/- Exemption: ` 54,545 (=` 1,00,000/- x 3/5.5) or, ` 50,000/- (= 50% of ` 1,00,000/-) whichever is less, i.e., ` 50,000/-(i.e., Taxable value: ` 50,000/-).

Services by way of granting National Permit to a goods carriage to operate through-out India/ contiguous States.

Withdrawal of existing exemptions

61A

01.10.2021

Exemption from CGST available to following services has been withdrawn:

Sl. No.

14

26

32

33

43

Description of services

Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having value of supply of a unit of accommodation below or equal to ` 1,000 per day or equivalent

Services by the Reserve Bank of India.

Services provided by the IRDAI (Insurance Regulatory and Development Authority of India) to insurers under IRDAI Act, 1999.

Services provided by the SEBI (Securities and Exchange Board of India) set up under the SEBI Act, 1992 by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market.

Services of leasing of assets (rolling stock assets

Effective from

18.07.2022

18.07.2022

18.07.2022

18.07.2022

01.10.2021

 

47A

51

53A

56

73

75

including wagons, coaches, locos) by the Indian Railways Finance Corporation to Indian Railways.

Services by way of licensing, registration and analysis or testing of food samples supplied by the Food Safety and Standards Authority of India (FSSAI) to Food Business Operators.

Services provided by the GSTN (Goods and Services Tax Network) to the Central Government or State Governments or Union territories for implementation of Goods and Services Tax.

Services by way of fumigation in a warehouse of agricultural produce.

Services by way of slaughtering of animals.

Services provided by the cord blood banks by way of preservation of stem cells or any other service in relation to such preservation.

Services provided by operators of the common bio-medical waste treatment facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto.

18.07.2022

18.07.2022

18.07.2022

18.07.2022

18.07.2022

18.07.2022

Parallel amendments in exemptions from IGST to inter-State supply of services have been carried out by amending Notification No. 9/2017 IT(R) dated 28.06.2017.

[Notification No. 07/2021 CT(R) dated 30.09.2021, Notification No. 16/2021 CT(R) dated 18.11.2021, Notification No. 04/2022 CT(R) dated 13.07.2022, Notification No. 07/2021 IT(R) dated 30.09.2021, Notification No. 16/2021 IT(R) dated 18.11.2021, and Notification No. 04/2022 IT(R) dated 13.07.2022]

• • • 1. Clarification regarding applicability of GST on supply of food in anganwadis and schools

The issue which arose for consideration was as to whether serving of food in schools under Mid-Day Meals Scheme would be exempt if such supplies are funded by government grants and/or corporate donations.

Entry 66(b)(ii) exempts services provided to an educational institution, by way of catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory. This entry applies to pre-school and schools.

Accordingly, as per said entry 665, any catering service provided to an educational institution is exempt from GST and it includes mid- day meal service also. The scope of this entry is thus wide enough to cover any serving of any food to a school (including pre-school).

An anganwadi, inter alia, provides pre-school non-formal education. Hence, aganwadi is covered by the definition of educational institution (as pre- school). Further, it is clarified that services provided to an educational institution by way of serving of food (catering including mid- day meals) is exempt from levy of GST irrespective of its funding from government grants or corporate donations.

Hence, serving of food to anganwadi shall also be covered by said exemption, whether sponsored by government or through donation from corporates.

[Circular No. 149/05/2021 GST dated 17.06.2021]

5 Services provided – (a) ……….

(aa) ……………..

(b) to an educational institution, by way of,- (i) ……….

(ii) catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory;

(iii) ……………….. (iv) ……………….. (v) ………………..

However, nothing contained in sub-items (i), (ii) and (iii) of item (b) shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent.

Clarification regarding applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity)

Circular No.150/06/2021 GST dated 17.06.2021 clarifies the applicability of GST on annuities paid for construction of road where certain portion of consideration is received upfront while remaining payment is made through deferred payment (annuity) spread over years.

It is important to note that Entry 23A exempts the access to road or bridge on payment of annuity, but it does not cover construction of road services6.

Thus, it has been clarified that Entry 23A does not exempt GST on the annuity (deferred payments) paid for construction of roads.

Clarification regarding GST on supply of various services by Central and State Boards

Circular No. 151/07/2021 GST dated 17.06.2021 clarifies the taxability of various services supplied by Centre and State Boards such as National Board of Examination (NBE). These services include entrance examination (on charging a fee) for admission to educational institution, input services for conducting such entrance examination for students, accreditation of educational institutions or professional so as to authorise them to provide their respective services.

For example, NBE provides services of conducting entrance examinations for admission to courses including Diplomat National Board (DNB) and Fellow of National Board (FNB), prescribes courses and curricula for PG medical studies, holds examinations and grant degrees, diplomas and other academic distinctions. It carries out all functions as are normally carried out by central or state educational boards and is thus a central educational board. “Central and State Educational Boards” are treated as educational institution for the limited purpose of providing services by way of conduct of examination to the students. Therefore, NBE is an ‘educational institution’ in so far as it provides services by way of conduct of examination, including any entrance examination, to the students.

6 Services by way of construction of road, inter alia, covers general construction services of highways, streets, roads railways, airfield runways, bridges and tunnels.

It is clarified that:

• • • • 1. GST is exempt on services provided by Central or State Boards (including the boards such as NBE) by way of conduct of examination for the students, including conduct of entrance examination for admission to educational institution under Entry 66(aa)7. Therefore, GST shall not apply to any fee or any amount charged by such Boards for conduct of such examinations including entrance examinations.
        2. GST is also exempt on input services relating to admission to, or conduct of examination, such as online testing service, result publication, printing of notification for examination, admit card and questions papers etc, when provided to such Boards under Entry 66(b)(iv).
        3. GST is applicable to other services provided by such Boards, namely of providing accreditation to an institution or to a professional (accreditation fee or registration fee such as fee for FMGE screening test) so as to authorise them to provide their respective services.

Clarification regarding applicability of GST on milling of wheat into flour or paddy into rice for distribution by State Governments under PDS

The issue which arose for consideration was as to whether composite supply of service by way of milling of wheat into wheat flour, alongwith fortification, by any person to a State Government for distribution of such wheat flour under Public Distribution System (PDS) is eligible for exemption under Entry 3A.

7 Entry 66 exempts services provided – (a) ……….

(aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee;

1. to an educational institution, by way of,- (i) ……….
2. ………
3. ………
4. services relating to admission to, or conduct of examination by, such institution;

(v) ………..

Entry 3A exempts composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.

Public Distribution specifically figures at entry 28 of the 11th Schedule to the Constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution.

Hence, said Entry 3A would apply to composite supply of milling of wheat and fortification thereof by miller, or of paddy into rice, provided that value of goods supplied in such composite supply (goods used for fortification, packing material etc) does not exceed 25% of the value of composite supply.

It is a matter of fact as to whether the value of goods in such composite supply is up to 25% and requires ascertainment on case-to-case basis.

[Circular No. 153/09/2021GST dated 17.06.2021]

• • • 1. Clarification regarding applicability of GST on service supplied by State Government to their undertakings or PSUs by way of guaranteeing loans taken by them

The issue which arose for consideration was regarding applicability of GST on supply of service by State Government to their undertakings or PSUs by way of guaranteeing loans.

Entry 34A exempts services supplied by Central Government, State Government, Union territory to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the banking companies and financial institutions.

Accordingly, it is reiterated that guaranteeing of loans by Central or State Government for their undertaking or PSU is specifically exempt under said entry 34A.

[Circular No.154/10/2021 GST dated 17.06.2021]

• • • 1. Clarification regarding coaching services supplied by coaching institutions and NGOs under the central sector scheme of ‘Scholarships for students with Disabilities’

Free coaching services provided by coaching institutions and NGOs under the central scheme of “Scholarships for students with Disabilities” where total expenditure8 is borne by the Government to coaching institutions by way of grant in aid is covered under entry 72 and hence is exempt from GST.

[Circular No. 164/20/2021 GST dated 06.10.2021]

• • • 1. Clarification regarding GST on overloading charges at toll plaza

Entry 23 exempts service by way of access to a road or a bridge on payment of toll charges.

With regard to said entry, following issues have been clarified:

• • • • 1. Ministry of Road Transport and Highways (MORTH) permitted the overloaded vehicles to ply on the national highways after payment of higher toll charges. It has been clarified9 that overloading charges at toll plazas would get the same treatment as given to toll charges.
        2. MORTH10 has directed to collect additional amount from the users of the road to the extent of two times of the fees applicable to that category of vehicle which is not having a valid functional Fastag.

Essentially, the additional amount collected from the users of the road not having a functional Fastag, is in the nature of toll charges and should be treated as additional toll charges. Therefore, it is clarified11 that additional fee collected in the form of higher toll charges from

8 This circular was issued prior to amendment in Entry 72 when the exemption was available only when total expenditure under the training programme was borne by the Central Government, State Government, Union territory administration.

However, as seen earlier in this chapter, Entry 72 has subsequently been amended and now exemption is available even when 75% or more of the total expenditure under the training programme is borne by the Central Government, State Government, Union territory administration.

Hence, the words “total expenditure” should be read as “75% or more of the total expenditure”.

9 vide Circular No. 164/20/2021 GST dated 06.10.2021

10 vide circular dated 16.02.2021

11 vide Circular No. 177/09/2022 GST dated 03.08.2022

vehicles not having Fastag is essentially payment of toll for allowing access to roads or bridges to such vehicles and may be given the same treatment as given to toll charges.

Clarification regarding renting of vehicles to State Transport Undertakings and Local Authorities

Entry 22 exempts services by way of giving on hire (a) to a state transport undertaking, a motor vehicle meant to carry more than 12 passengers; or (aa) to a local authority, an Electrically Operated vehicle meant to carry more than 12 passengers.

It is clarified that the expression “giving on hire” here includes renting of vehicles.

Accordingly, where the said vehicles are rented or given on hire to State Transport Undertakings or Local Authorities, said services are eligible for above exemption irrespective of whether such vehicles are run on routes, timings as decided by the State Transport Undertakings or Local Authorities and under effective control of State Transport Undertakings or Local Authorities which determines the rules of operation or plying of vehicles.

[Circular No. 164/20/2021 GST dated 06.10.2021]

• • • 1. Clarification regarding applicability of GST on application fee charged for entrance or the fee charged for issuance of eligibility certificate for admission or for issuance of migration certificate by educational institutions

The issue which arose for consideration was regarding applicability of GST on application fee charged for entrance or the fee charged for issuance of eligibility certificate for admission or for issuance of migration certificate by educational institutions.

In this regard, it is stated that educational services supplied by educational institutions to its students are exempt from GST vide Entry 66, relevant portion of which reads as under-

Services provided –

(a) by an educational institution to its students, faculty and staff;

(aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee.

Therefore, it can be seen that all services supplied by an ‘educational institution’ to its students are exempt from GST. Consideration charged by the educational institutes by way of entrance fee for conduct of entrance examination is also exempt.

The exemption is wide enough to cover the amount or fee charged for admission or entrance, or amount charged for application fee for entrance, or the fee charged from prospective students for issuance of eligibility certificate to them in the process of their entrance/admission to the educational institution.

Services supplied by an educational institution by way of issuance of migration certificate to the leaving or ex-students are also covered by the exemption.

Accordingly, such activities of educational institutions are also exempt.

[Circular No. 177/09/2022 GST dated 03.08.2022]

• • • 1. Clarification regarding applicability of GST on transportation of empty containers returning from Nepal and Bhutan after delivery of transit cargo, to India

The issue which arose for consideration was regarding applicability of GST on transportation of empty containers returning from Nepal and Bhutan to India, after delivery of transit cargo.

Entry 9B exempts GST on supply of services associated with transit cargo to Nepal and Bhutan.

In this regard, it is clarified that exemption under Entry 9B covers services associated with transit cargo both to and from Nepal and Bhutan.

It is also clarified that movement of empty containers from Nepal and Bhutan, after delivery of goods there, is a service associated with the transit cargo to Nepal and Bhutan and is therefore covered by the exemption.

[Circular No. 177/09/2022 GST dated 03.08.2022]

• • • 1. Clarification regarding applicability of GST on sanitation and conservancy services supplied to Army and other Central and State Government Departments

The issue which arose for consideration was regarding taxability of sanitation and conservancy services supplied to Army and other Central and State Government Departments.

Municipalities and Panchayats and other local authorities such as Cantonment Boards listed in section 2(69)12 carry out functions entrusted to them under articles 243W & 243G of the Constitution respectively.

Functions that may be entrusted to municipalities and panchayats are listed in Schedules 11 & 12 of the Constitution. Central Government, State Governments & Union Territories also perform functions listed in Schedules 11 & 12 such as irrigation, public health etc.

Services by Central Government, State Government, Union Territory or any local authority by way of any activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution or to a municipality under article 243W of the Constitution have been declared as ‘neither a supply of goods nor a supply of service’13.

The exemption under entries 3 & 3A14 has been given on pure services & composite supplies procured by Central Government, State Government, Union Territories or local authorities for performing functions listed in the 11th and 12th Schedules of the Constitution.

It is clarified that if such services are procured by Indian Army or any other Government Ministry/Department which does not perform any functions listed in the 11th and 12th Schedule, in the manner as a local authority does for the general public, the same are not eligible for exemption under Entries 3 and 3A.

[Circular No. 177/09/2022 GST dated 03.08.2022]

12 Section 2(69) contains the definition of ‘Local authority’.

13 vide Notification no. 14/2017 CT (R) dated 28.06.2017

14 Entry 3 exempts pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.

Entry 3A exempts composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.

Clarification regarding applicability of GST on transport of minerals from mining pit head to railway siding, beneficiation plant etc., by vehicles deployed with driver for a specific duration of time

The issue which arose for consideration was whether transport of minerals within a mining area, say from mining pit head to railway siding, beneficiation plant etc., by vehicles deployed with driver for a specific duration of time would be covered under Entry 18 which exempts transport of goods by road except by a GTA.

Usually in such cases the vehicles such as tippers, dumpers, loader, trucks etc., are given on hire to the mining lease operator. Expenses for fuel are generally borne by the recipient of service. The vehicles with driver are at the disposal of the mining lease operator for transport of minerals within the mine area (mining pit to railway siding, beneficiation plant etc.) as per his requirement during the period of contract.

Such services are nothing but “rental services of transport vehicles with operator”. The person who takes the vehicle on rent defines how and when the vehicles will be operated, determines schedules, routes and other operational considerations.

The person who gives the vehicles on rent with operator cannot be said to be supplying the service by way of transport of goods.

Accordingly, it is clarified that such renting of trucks and other freight vehicles with driver for a period of time is a service of renting of transport vehicles with operator and not service of transportation of goods by road.

Consequently, it is not eligible for exemption under Entry 18.

[Circular No. 177/09/2022 GST dated 03.08.2022]

• • • 1. Location charges or preferential location charges (PLC) collected in addition to the lease premium for long term lease of land constitute part of the lease premium or of upfront amount charged for long term lease of land and thus exempted

The issue which arose for consideration was whether location charges or preferential location charges (PLC) collected in addition to the lease premium for long term lease of land constitute part of the lease premium or

upfront amount charged for long term lease of land and are eligible for the same tax treatment.

As per entry 41, upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease (of 30 years, or more) of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 20% or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area is exempt from GST.

Allowing choice of location of plot is integral part of supply of long-term lease of plot and therefore, location charge is nothing, but part of consideration charged for long term lease of plot. Being charged upfront along with the upfront amount for the lease, the same is exempt.

Accordingly, it is clarified that location charges or preferential location charges (PLC) paid upfront in addition to the lease premium for long term lease of land constitute part of upfront amount charged for long term lease of land and are eligible for the same tax treatment, and thus eligible for exemption under Entry 41.

[Circular No. 177/09/2022 GST dated 03.08.2022]

• • • 1. Clarification regarding GST on payment of honorarium to the Guest Anchors

The circular clarifies the applicability of GST on honorarium paid to Guest Anchors. Sansad TV and other TV channels invite guest anchors to participate in their shows and pay remuneration to them in the form of honorarium.

It is clarified that supply of all goods & services are taxable unless exempt or declared as ‘neither a supply of goods nor a supply of service’. Services provided by the guest anchors in lieu of honorarium attract GST liability. However, guest anchors whose aggregate turnover in a financial year does not exceed ` 20 lakh (` 10 lakh in case of specified Special Category States) shall not be liable to take registration and pay GST.

[Circular No. 177/09/2022 GST dated 03.08.2022]

• • • 1. Clarification regarding applicability of GST on services in form of ART/ IVF

The issue which arose for consideration was whether GST is applicable on services by way of Assisted Reproductive Technology (ART) procedures such as In vitro fertilization (IVF).

Health care services provided by a clinical establishment, an authorized medical practitioner or para-medics are exempt vide Entry 74.

As per the definition of health care services, it means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma.

Since, the abnormality/disease/ailment of infertility is treated using ART procedure such as IVF, it is clarified that services by way of IVF are also covered under the definition of health care services.

[Circular No. 177/09/2022 GST dated 03.08.2022]

• • • 1. Clarification regarding applicability of GST on sale of land after levelling, laying down of drainage lines etc.

The circular clarifies applicability of GST on sale of land after levelling, laying down of drainage lines etc.

As per Para 5 of Schedule III of the CGST Act, 2017, ‘sale of land’ is neither a supply of goods nor a supply of services. Therefore, the sale of land does not attract GST.

Land may be sold either as it is or after some development such as levelling, laying down of drainage lines, water lines, electricity lines, etc. It is clarified that sale of such developed land is also sale of land and is covered by Para 5 of Schedule III and accordingly, does not attract GST.

However, it may be noted that any service provided for development of land, like levelling, laying of drainage lines (as may be received by developers) shall attract GST at applicable rate for such services.

[Circular No. 177/09/2022 GST dated 03.08.2022]

• • • 1. Clarification regarding hiring of vehicles by firms for transportation of their employees to and from work

The issue which arose for consideration was as to whether the engagement of non-air conditioned contract carriages by firms for transportation of their employees to and from work is exempt under entry 15(b).

Entry 15(b) exempts transport of passengers, with or without accompanied belongings, by non-air conditioned contract carriage, other than radio taxi, for transport of passengers, excluding tourism, conducted tour, charter or hire.

The said exemption would apply to passenger transportation services by non-air conditioned contract carriages where transportation takes place over pre-determined route on a pre-determined schedule. The exemption shall not be applicable where contract carriage is hired for a period of time, during which the contract carriage is at the disposal of the service recipient and the recipient is thus free to decide the manner of usage (route and schedule) subject to conditions of agreement entered into with the service provider.

[Circular No. 177/09/2022 GST dated 03.08.2022]

• • • 1. Clarification regarding applicability of GST on tickets of private ferry used for passenger transportation

The circular clarifies the applicability of GST on private ferry tickets. For instance, private ferries are used as means of transport from one island to another in Andaman and Nicobar Islands.

As per Entry 17(d), transportation of passengers by public transport, other than predominantly for tourism purpose, in a vessel between places located in India is exempted.

It is clarified that this exemption would apply to tickets purchased for transportation from one point to another irrespective of whether the ferry is

owned or operated by a private sector enterprise or by a PSU/government.

It is further clarified that, the expression ‘public transport’ used in the exemption notification only means that the transport should be open to public. It can be privately or publicly owned. Only exclusion is on transportation which is predominantly for tourism, such as services which may combine with transportation, sightseeing, food and beverages, music, accommodation such as in shikara, cruise etc.

[Circular No. 177/09/2022 GST dated 03.08.2022]

1. Place of supply of B2B MRO services in case of shipping industry shall be the location of the recipient.

.

6

PLACE OF SUPPLY

Section 13 of the IGST Act determines the place of supply of services where location of supplier or location of recipient is outside India. In order to prevent double taxation or non-taxation of supply of any service, sub- section (13) of said section empowers the Government to notify any service for which the place of supply shall be the place of effective use and enjoyment of service. Few services had already been notified in this regard vide Notification No. 4/2019 IT dated 30.09.2019.

Said notification has been amended to notify the place of supply of maintenance, repair or overhaul service in respect of ships and other vessels, or parts thereof as follows

The place of supply in respect of B2B supply of maintenance, repair or overhaul service (hereinafter referred to as MRO service) in respect of ships and other vessels, their engines and other components or parts supplied to a person for use in the course or furtherance of business shall be the location of the recipient of service.

By virtue of this notification, if an Indian shipping company has received MRO service in respect of a ship/vessel from a foreign supplier, place of supply of such service is in India (location of recipient being in India) and said service would qualify as an ‘import of service’.

Resultantly, GST is payable under reverse charge on these services15.

[Notification No. 03/2021 IT dated 02.06.2021]

1. Clarification on doubts related to scope of “Intermediary”

Circular No. 159/15/2021 GST dated 21.09.2021 has clarified the doubts related to the intermediary16 services. The circular clarifies that the concept of intermediary services requires following basic prerequisites:

• 1. Minimum of three parties: By definition, an intermediary is someone who arranges or facilitates the supplies of goods or services or securities between two or more persons.

It is thus a natural corollary that the arrangement requires a minimum of three parties, two of them transacting in the supply of goods or services or securities (the main supply) and one arranging or facilitating (the ancillary supply) the said main supply. An activity between only two parties can, therefore, NOT be considered as an intermediary service.

An intermediary essentially “arranges or facilitates” another supply (the “main supply”) between two or more other persons and, does not himself provide the main supply.

• 1. Two distinct supplies: As discussed above, there are two distinct supplies in case of provision of intermediary services:
     1. Main supply, between the two principals, which can be a supply of goods or services or securities;
     2. Ancillary supply, which is the service of facilitating or arranging the main supply between the two principals.

15 In the absence of such notification, the place of supply of such MRO service provided by a foreign supplier to an Indian shipping company would have been the location where the services are actually performed, determined in terms of section 13(3)(a) of the IGST Act. Accordingly, the place of supply of such services would have been outside India and thus, they would not have qualified as import of services, thus, not been liable to GST.

16 ‘Intermediary’ has been defined in of section 2(13) of the IGST Act, as “Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.”

This ancillary supply is the supply of intermediary service and is clearly identifiable and distinguished from the main supply.

A person involved in supply of main supply on principal-to-principal basis to another person cannot be considered as supplier of intermediary service.

• 1. Intermediary service provider to have the character of an agent, broker or any other similar person: The definition of “intermediary” itself provides that “intermediary service provider means a broker, an agent or any other person, by whatever name called….”.

This part of the definition is not inclusive but uses the expression “means” and does not expand the definition by any known expression of expansion such as “and includes”.

The use of the expression “arranges or facilitates” suggests a subsidiary role for the intermediary. It must arrange or facilitate some other supply, which is the main supply, and does not himself provides the main supply. Thus, the role of intermediary is only supportive.

• 1. Does not include a person who supplies such goods or services or both or securities on his own account: The definition of intermediary services specifically mentions that intermediary “does not include a person who supplies such goods or services or both or securities on his own account”.

Use of word “such” in the definition with reference to supply of goods or services refers to the main supply of goods or services or both, or securities, between two or more persons, which are arranged or facilitated by the intermediary.

It implies that in cases wherein the person supplies the main supply, either fully or partly, on principal-to-principal basis, the said supply cannot be covered under the scope of “intermediary”.

• 1. Sub-contracting for a service is not an intermediary service: The supplier of main service may outsource the supply of the main service, either fully or partly, to one or more sub-contractors.

Such sub-contractor provides the main supply, either fully or a part thereof, and does not merely arrange or facilitate the main supply between the principal supplier and his customers, and therefore, clearly is not an intermediary.

‘A’ and ‘B’ have entered into a contract as per which ‘A’ needs to provide a service of, say, annual maintenance of tools and machinery to ‘B’. ‘A’ subcontracts a part or whole

of it to ‘C’. Accordingly, ‘C’ provides the service of annual maintenance to ‘A’ as part of such sub-contract, by providing annual maintenance of tools and machinery to the customer of ‘A’, i.e. to ‘B’ on behalf of ‘A’.

Though ‘C’ is dealing with the customer of ‘A’, but ‘C’ is providing the main supply of annual maintenance service to ‘A’ on his own account,

i.e. on principal to principal basis.

In this case, ‘A’ is providing supply of annual maintenance service to ‘B’, whereas ‘C’ is supplying the same service to ‘A’. Thus, supply of service by ‘C’ will not be considered as an intermediary.

• 1. The specific provision of place of supply of ‘intermediary services’ under section 13 of the IGST Act shall be invoked only when either the location of supplier of intermediary services or location of the recipient of intermediary services is outside India.

Applying the abovementioned guiding principles, the issue of intermediary services is clarified through the following examples:

‘A’ is a manufacturer and supplier of a machine. ‘C’ helps ‘A’ in selling the machine by identifying client ‘B’ who wants to purchase this machine and helps in finalizing the contract of supply of machine by ‘A’ to ‘B’. ‘C’ charges ‘A’ for his services of

locating ‘B’ and helping in finalizing the sale of machine between ‘A’ and ‘B’, for which ‘C’ invoices ‘A’ and is paid by ‘A’ for the same. While ‘A’ and ‘B’ are involved in the main supply of the machinery, ‘C’, is facilitating the supply of machine between ‘A’ and ‘B’. In this arrangement, ‘C’ is providing the ancillary supply of arranging or facilitating the ‘main supply’ of machinery between ‘A’ and ‘B’ and therefore, ‘C’ is an intermediary and is providing intermediary service to ‘A’.

‘A’ is a software company which develops software for the clients as per their requirement. ‘A’ has a contract with ‘B’ for providing some customized software for its business operations.

‘A’ outsources the task of design and development of a particular module of

the software to ‘C’, for which “C’ may have to interact with ‘B’, to know their

specific requirements. In this case, ‘C’ is providing main supply of service of design and development of software to ‘A’, and thus, ‘C’ is not an intermediary in this case.

An insurance company ‘P’, located outside India, requires to process insurance claims of its clients in respect of the insurance service being provided by ‘P’ to the clients. For processing insurance claims, ‘P’ decides to outsource this work

to some other firm. For this purpose, he approaches ‘Q’, located in India, for arranging insurance claims processing service from other service providers in India. ‘Q’ contacts ‘R’, who is in business of providing such insurance claims processing service, and arranges supply of insurance claims processing service by ‘R’ to ‘P’. ‘Q’ charges P a commission or service charge of 1% of the contract value of insurance claims processing service provided by ‘R’ to ‘P’. In such a case, main supply of insurance claims processing service is between ‘P’ and ‘R’, while ‘Q’ is merely arranging or facilitating the supply of services between ‘P’ and ‘R’, and not himself providing the main supply of services. Accordingly, in this case, ‘Q’ acts as an intermediary as per definition of section 2(13) of the IGST Act.

‘A’ is a manufacturer and supplier of computers based in USA and supplies its goods all over the world. As a part of this supply, ‘A’ is also required to provide customer care service to its customers to address their queries and complains related to

the said supply of computers. ‘A’ decides to outsource the task of providing customer care services to a BPO firm, ‘B’. ‘B’ provides customer care service to ‘A’ by interacting with the customers of ‘A’ and addressing / processing their queries / complains. ’B’ charges ‘A’ for this service. ‘B’ is involved in supply of main service ‘customer care service’ to ‘A’, and therefore, ’B’ is not an intermediary.

The examples given above are only indicative and not exhaustive. Whether or not a specific service would fall under intermediary services within the meaning of section 2(13) of the IGST Act, would depend upon the facts of the specific case. While examining the facts of the case and the terms of contract, the basic characteristics of intermediary services, as discussed in preceding paras, should be kept in consideration.

1. Supply from a company incorporated in India to its related establishments outside India, which are incorporated under the laws outside India, would qualify as ‘export of services’

The issue which arose for consideration was as to whether the supply of service by a subsidiary/ sister concern/ group concern, etc. of a foreign company in India, which is incorporated under the laws in India, to the foreign company incorporated under laws of a country outside India, will qualify as export of services under section 2(6) of the IGST Act.

Relevant legal provisions are as under:

As per section 2(6) of the IGST Act, export of services means the supply of any service when,–

• 1. the supplier of service is located in India;
  2. the recipient of service is located outside India;
  3. the place of supply of service is outside India;
  4. the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and
  5. the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8.

Explanation 1 of the section 8 of the IGST Act provides for the conditions wherein establishments of a person would be treated as establishments of distinct persons, which is reproduced as under:

For the purposes of this Act, where a person has,-

1. an establishment in India and any other establishment outside India;
2. an establishment in a State or Union territory and any other establishment outside that State or Union territory; or
3. an establishment in a State or Union territory and any other establishment registered within that State or Union territory,

then such establishments shall be treated as establishments of distinct persons.

As per the above Explanation, an establishment of a person in India and another establishment of the said person outside India are considered as establishments of distinct persons.

Explanation 2 of Section 8 of the IGST Act provides that a person carrying on a business through a branch or an agency or a representational office in any territory shall be treated as having an establishment in that territory.

Section 2(84) of the CGST Act provides that “person” includes- (a) ……..

(b) ……..

(c) a company; (d) ……..

(e) ……..

(f) ……..

(g) ……..

(h) any body corporate incorporated by or under the laws of a country outside India;

(i) ……..

(j) ……..

(k) Central Government or a State Government; (l) ……..

(m) ……..

(n) ……..

Definitions of company and foreign company as provided under section 2 of Companies Act 2013 are as under:

Company means a company incorporated under this Act or under any previous company law.

Foreign company means any company or body corporate incorporated outside India which—

1. has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
2. conducts any business activity in India in any other manner.

Analysis

Section 2(6)(v) of the IGST Act, which defines “export of services”, places a condition that the services provided by one establishment of a person to another establishment of the same person, considered as establishments of distinct persons as per Explanation 1 of section 8 of the IGST Act, cannot be treated as export.

In other words, any supply of services by an establishment of a foreign company in India to any other establishment of the said foreign company outside India will not be covered under definition of export of services.

Further, perusal of the Explanation 2 to section 8 of the IGST Act suggests that if a foreign company is conducting business in India through a branch or an agency or a representational office, then the said branch or agency or representational office of the foreign company, located in India, shall be treated as establishment of the said foreign company in India.

Similarly, if any company incorporated in India, is operating through a branch or an agency or a representational office in any country outside India, then that branch or agency or representational office shall be treated as the establishment of the said company in the said country.

In view of the above, it can be stated that supply of services made by a branch or an agency or representational office of a foreign company, not incorporated in India, to any establishment of the said foreign company outside India, shall be treated as supply between establishments of distinct persons and shall not be considered as “export of services” in view of condition (v) of section 2(6) of IGST Act.

Similarly, any supply of service by a company incorporated in India to its branch or agency or representational office, located in any other country and not incorporated under the laws of the said country, shall also be considered as supply between establishments of distinct persons and cannot be treated as export of services.

From the perusal of the definition of “person” under section 2(84) of the CGST Act and the definitions of “company” and “foreign company” under section 2 of the Companies Act, 2013, it is observed that a company incorporated in India and a foreign company incorporated outside India, are separate “person” under the provisions of CGST Act and accordingly, are separate legal entities.

Thus, a subsidiary/ sister concern/ group concern of any foreign company which is incorporated in India, then the said company incorporated in India will be considered as a separate “person” under the provisions of CGST Act and accordingly, would be considered as a separate legal entity than the foreign company.

Conclusion

In view of the above, it is clarified that a company incorporated in India and a body corporate incorporated by or under the laws of a country outside India, which is also referred to as foreign company under the Companies Act, are separate persons under the CGST Act, and thus are separate legal entities.

Accordingly, these two separate persons would not be considered as “merely establishments of a distinct person in accordance with Explanation 1 in section 8”.

Therefore, supply of services by a subsidiary/ sister concern/ group concern, etc. of a foreign company, which is incorporated in India under the Companies Act, 2013 (and thus qualifies as a ‘company’ in India as per Companies Act), to the establishments of the said foreign company located outside India (incorporated outside India), would not be barred by the condition (v) of section 2(6) of the IGST Act 2017 for being considered as export of services, as it would not be treated as supply between merely establishments of distinct persons under Explanation 1 of section 8 of IGST Act 2017.

Similarly, the supply from a company incorporated in India to its related establishments outside India, which are incorporated under the laws outside India, would not be treated as supply to merely establishments of distinct person under Explanation 1 of section 8 of IGST Act 2017.

Such supplies, therefore, would qualify as ‘export of services’, subject to fulfilment of other conditions as provided under section 2(6) of IGST Act.

[Circular No. 161/17/2021 GST dated 20.09.2021]

1. Clarification regarding place of supply of satellite launch services

Circular No. 2/1/2017 IGST dated 27.09.2017 had earlier clarified that the place of supply (PoS) of satellite launch services supplied by ANTRIX Corporation Ltd. to customers located outside India is outside India and such supply which meets the requirements of section 2(6) of the IGST Act, constitutes export of service and shall be zero rated. If the service recipient

is located in India, the satellite launch services would be taxable.

Circular No. 164/20/2021 GST dated 06.10.2021 has clarified the issue as whether the satellite launch services supplied by M/s New Space India Limited (NSIL) to international customers qualify as export of service.

It is clarified that as the satellite launch services supplied by M/s New Space India Limited (NSIL)17 to international customers are similar to those supplied by ANTRIX Corporation Ltd, the said Circular No. 2/1/2017 IGST is applicable to them.

17 NSIL is a wholly owned Government of India Company under the administrative control of Department of Space (DoS).

ITC can be availed by the recipients only if, inter alia, (i) the suppliers have uploaded the relevant invoices/debit notes in their Form GSTR-1/ IFF and such details have been communicated to the recipients in Form GSTR-2B and (ii) the details of ITC in respect of the said supply communicated under section 38 has not been restricted [Section 16(2) and rule 36(4) amended]

8

INPUT TAX CREDIT

With effect from 01.01.2022, a new clause (aa) has been added to section 16(2) by the Finance Act, 2021 to stipulate a new condition for availment of ITC. It provides that input tax credit in respect of any supply of goods or services or both is available to a registered person only if the details of the invoice/debit note in respect of said supply has been furnished by the supplier in the statement of outward supplies (Form GSTR-1) and such details have been communicated to the recipient of such invoice/debit note in the manner specified under section 37.

Consequently, with effect from 01.01.2022, rule 36(4) has been substituted to give effect to aforesaid amendment. Substituted rule 36(4) reads as follows:

No input tax credit shall be availed by a registered person in respect of invoices or debit notes the details of which are required to be furnished under section 37(1) unless,-

• 1. the details of such invoices or debit notes have been furnished by the supplier in the statement of outward supplies in Form GSTR-1 or using the invoice furnishing facility (IFF); and
  2. the details of input tax credit in respect of18 such invoices or debit notes have been communicated to the registered person in Form GSTR-2B under rule 60(7).

Thus, ITC can now be taken only for those invoices/debit notes whose details are reflected in Form GSTR-2B i.e only when the respective suppliers (vendors) have filed the details of such invoices in their Form GSTR-119.

Subsequently, with effect from 01.10.2022, a new clause (ba) has been added to section 16(2) by the Finance Act, 2022 to stipulate another new condition for availment of ITC. It provides that input tax credit in respect of any supply of goods or services or both is available to a registered person only if the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted.

Further, owing to omission of section 43A20, reference to section 43A has also been removed from clause (c) of section 16(2).

[Notification No. 40/2021 CT dated 29.12.2021]

1. Time limit for availment of ITC by a registered person in respect of any invoice/debit note pertaining to a FY extended upto 30th November of the following FY [Section 16(4) amended]

Earlier, section 16(4) provided as follows:

A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.

18 These words have been inserted subsequently vide Notification No. 19/2022 CT dated 28.09.2022 and said amendment is effective from 01.10.2022.

19 Earlier, ITC in respect of invoices/debit notes not uploaded by the suppliers in their Form GSTR-1s/IFF, could be availed by recipient upto 5% of the eligible credit available in respect of invoices/debit notes the details of which had been furnished by the suppliers in their Form GSTR-1s/ using IFF.

20 Discussed in detail in Chapter 13- Returns

With effect from 01.10.2022, section 16(4) has been amended by the Finance Act, 2022. Amended section 16(4) reads as follows:

A registered person shall not be entitled to take ITCin respect of any invoice or debit note for supply of goods or services or both after the 30th day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Date of issuance of debit note to determine the relevant financial year for the purpose of section 16(4)

Section 16(4) was earlier amended (with effect from 01.01.2021) vide the Finance Act, 2020, so as to delink the date of issuance of debit note from the date of issuance of the underlying invoice for purposes of availing ITC. Students may refer section 16(4) as given above.

A doubt arose as to which of the following dates are relevant to determine the ‘financial year’ for the purpose of section 16(4) in terms of the provision as amended:

• 1. date of issuance of debit note, or
  2. date of issuance of underlying invoice.

In this regard, Circular No. 160/16/2021 GST dated 20.09.2021 has clarified that with effect from 01.01.2021, in case of debit notes, the date of issuance of debit note (not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4).

A debit note dated 07.07.2021 is issued in respect of the original invoice dated 16.03.2021. As the invoice pertains to

F.Y. 2020- 21, the relevant financial year for availment of ITC in respect of the said invoice in terms of section 16(4) shall be FY

2020-21. However, as the debit note has been issued in FY 2021-22, the relevant financial year for availment of ITC in respect of the said debit note shall be FY 2021-22 in terms of amended provision of section 16(4).

Value of supply of Duty Credit scrips to be excluded while computing the aggregate value of exempt supplies for the purposes of rules 42 and 43 [Explanation 1 to rule 43 amended]

Rule 42 and rule 43 provide the manner of determination of ITC in respect of inputs/input services and capital goods respectively and also provide the reversal thereof.

Explanation 1 to rule 43 has amended to exclude the value of supply of Duty Credit scrips while computing the aggregate value of exempt supplies for the purposes of rules 42 and 43. As per amended Explanation 1 to rule 43, the aggregate value of exempt supplies for the purposes of rule 42 and rule 43, excludes: –

1. the value of services by way of accepting deposits, extending loans or advances in so far as the consideration is represented by way of interest or discount, except in case of a banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances; and
2. the value of supply of services by way of transportation of goods by a vessel from the customs station of clearance in India to a place outside India.]

the value of supply of Duty Credit Scrips specified in Notification No. 35/2017CT (R) dated 13.10.2017.

Clause (d) above has been inserted with effect from 05.07.2022.

[Notification No. 14/2022 CT dated 05.07.2022]

1. Availment of ITC not blocked in case of leasing, other than leasing of motor vehicles, vessels and aircrafts

Circular No. 172/04/2022 GST dated 06.07.2022 clarifies the issue as to whether provisions of section 17(5)(b)(i) bar the availment of ITC on input services by way of “leasing of motor vehicles, vessels or aircraft” or whether ITC on input services by way of any type of leasing is barred under the said provisions.

Section 17(5)(b)(i) provides that ITC shall not be available in respect of following supply of goods or services or both—

“(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:

Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the

same category of goods or services or both or as an element of a taxable composite or mixed supply.”

It is clarified that “leasing” referred herein refers to leasing of motor vehicles, vessels and aircrafts only and not to leasing of any other items.

Accordingly, availment of ITC is not barred in case of leasing, other than leasing of motor vehicles, vessels and aircrafts.

Proviso after section 17(5)(b)(iii) applies to entire section 17(5)(b)

Section 17(5)(b) provides that ITC shall not be available in respect of following supply of goods or services or both—

1. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:

Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

1. membership of a club, health and fitness centre; and
2. travel benefits extended to employees on vacation such as leave or home travel concession:

Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.

Circular No. 172/04/2022 GST dated 06.07.2022 clarifies that the proviso after sub-clause (iii) [highlighted above] is applicable to the whole of section 17(5)(b).

Removal of reference to Form GSTR-2 from rules 36(2), 42 and 43

Pursuant to the amendment made in section 38 [discussed subsequently in Chapter 13 – Returns] with regard to removal of Form GSTR-2 and doing away with two-way communication process, with effect from 01.10.2022,

rule 36(2)21 has been amended to remove the reference to Form GSTR-2 therefrom. Further, it has been provided that the details of invoices or debit notes for ITC availment shall be communicated in Form GSTR-2B.

Extract of amended rule 36(2) reads as follows:

Input tax credit shall be availed by a registered person only if all the applicable particulars as specified in the provisions of Chapter VI22 are contained in the said document, and the relevant information, as contained in the said document, is furnished in FORM GSTR-2 by such person.

Moreover, with effect from 01.10.2022, rules 42 and 43 also have been suitably amended to remove the reference to Form GSTR-2.

[Notification No. 19/2022 CT dated 28.09.2022]

1. In case of non-payment of the value of supply plus tax in respect of an inward supply within 180 days, ITC so availed need to be paid alongwith interest under section 50 while filing GSTR-3B [Rule 37 substituted]

Rule 37 provides for reversal of ITC in case of non-payment of consideration. Sub-rule (1) and (2) have been substituted and sub-rule (3) has been omitted, with effect from 01.10.2022. Consequently, the amended position of law is as follows:

The registered person must pay to the supplier, the value of the goods and/or services along with the tax within 180 days from the date of issue of invoice [Second proviso to section 16(2)].

However, where a registered person, who has availed of ITC on any inward supply fails to pay to the supplier thereof, the amount towards the value of such supply along with the tax payable thereon, within the time limit specified in the second proviso to section 16(2) [viz. 180 days from the date of issue of invoice], shall pay an amount equal to the ITC availed in respect of such supply along with interest payable thereon under section 50, while furnishing the return in Form GSTR-3B for the tax period immediately following the period of 180 days from the date of the issue of the invoice.

21 Rule 36 prescribes the documentary requirements and conditions for claiming ITC.

22 Chapter VI relates to tax invoice, credit and debit notes.

Exceptions

This condition of payment of value of supply plus tax within 180 days does not apply in the following situations:

• 1. Supplies on which tax is payable under reverse charge
  2. Deemed supplies without consideration
  3. Additions made to the value of supplies on account of supplier’s liability, in relation to such supplies, being incurred by the recipient of the supply

Under situations given in points (b) & (c), the value of supply is deemed to have been paid.

[Notification No. 19/2022 CT dated 28.09.2022]

1. 50% of inadmissible ITC to be reversed in GSTR-3B by a banking company or financial institution [Rule 38 amended]

With effect from 01.10.2022, rule 38 providing for claim of credit by a banking company or a financial institution has been amended to remove the reference to Form GSTR-2 therefrom. Further, clause (d) of rule 38 has also been omitted.

Amended rule 38 reads as follows:

A banking company or a financial institution, including a non-banking financial company, engaged in the supply of services by way of accepting deposits or extending loans or advances that chooses not to comply with the provisions of sub-section (2) of section 17, in accordance with the option permitted under sub-section (4) of that section, shall follow the following procedure, namely,-

1. the said company or institution shall not avail the credit of,-
   1. the tax paid on inputs and input services that are used for non- business purposes; and
   2. the credit attributable to the supplies specified in sub-section (5) of section 17, in GSTR-2
2. the said company or institution shall avail the credit of tax paid on inputs and input services referred to in the second proviso to sub- section (4) of section 17 and not covered under clause (a);
3. 50% of the remaining amount of input tax shall be the input tax credit

admissible to the company or the institution and the balance amount of input tax credit shall be reversed in Form GSTR-3B23;

the amount referred to in clauses (b) and (c) shall, subject to the provisions of sections 41, 42 and 43, be credited to the electronic credit ledger of the said company or the institution.

[Notification No. 19/2022 CT dated 28.09.2022]

23 Substituted for the words, “and shall be furnished in Form GSTR-2”.

Aadhaar authentication mandatory for existing registered person [New rule 10B]

9

REGISTRATION

Lately Aadhaar authentication has been made mandatory for the new registrants as well as for the existing registrants. With regard to existing registrants, section 25(6A) stipulates that every registered person shall undergo authentication, or furnish proof of possession of Aadhaar number, in

the prescribed form, manner and time. With effect from 01.01.2022, new rule 10B prescribes the manner in which aadhaar authentication needs to be done by a registered person.

A registered person, who has been issued a certificate of registration under GST, shall undergo authentication of the Aadhaar number of:-

• • Proprietor, in the case of proprietorship firm,
  • Any partner, in the case of a partnership firm,
  • Karta, in the case of a Hindu undivided family,
  • Managing director or any whole-time director, in the case of a company,
  • Any of the Members of the Managing Committee of an Association of persons or body of individuals or a Society, or
  • Trustee in the Board of Trustees, in the case of a Trust; and of the Authorized Signatory,

in order to be eligible for the following purposes:

• for filing of application for revocation of cancellation of registration [Rule 23]
• for filing of refund application in Form RFD-01 [Rule 89]
• for refund of the IGST paid on goods exported out of India [Rule 96]

Consequential amendments by virtue of insertion of rule 10B have been made in rule 23(1) (revocation of cancellation of registration), in rule 89(1) (application for refund of tax, interest, penalty, fees or any other amount), and in rule 96(1) (refund of integrated tax paid on goods or services exported out of India).

First proviso to section 25(6A) provides that if an Aadhaar number is not assigned to an existing registered person, such person shall be offered alternate and viable means of identification in the prescribed manner. Such manner has been prescribed by rule 10B as follows:

If Aadhaar number has not been assigned to the person required to undergo authentication of the Aadhaar number, such person shall furnish the following identification documents, namely: –

1. his/ her Aadhaar Enrolment ID slip; and
2. (i) Bank passbook with photograph; or
   1. Voter identity card issued by the Election Commission of India; or
   2. Passport; or
   3. Driving license issued by the Licensing Authority

However, once Aadhaar number is allotted to such person, he shall undergo the authentication of Aadhaar number within a period of 30 days of the allotment of the Aadhaar number.

The afore-said rule 10B shall not be applicable to persons notified under section 25(6D), i.e. to persons exempt from aadhaar authentication.

[Notification No. 35/2021 CT dated 24.09.2021 & Notification No. 38/2021 CT dated 21.12.2021]

1. Enhanced threshold limit of ` 40 lakh for registration available to persons exclusively engaged in making supplies of goods not applicable to suppliers of fly ash bricks/blocks, building bricks, bricks of fossil meals, earthen/roofing tiles, etc.

Notification No. 10/2019 CT dated 07.03.2019 exempts any person who is engaged exclusively in intra-State supply of goods and whose aggregate turnover in a financial year does not exceed ` 40 lakh, from obtaining the registration.

However, the persons engaged in making following supplies are not eligible for said exemption:

Tariff item, sub- heading, heading or Chapter

2105 00 00

2106 90 20

24

Description of goods

Ice cream and other edible ice, whether or not containing cocoa

Pan masala

All goods, i.e. Tobacco and manufactured tobacco substitutes

With effect from 01.04.2022, persons engaged in making supplies of following goods will also not be eligible to avail benefit of said exemption from registration even if they are engaged exclusively in intra-State supply of goods and their aggregate turnover in a financial year is upto ` 40 lakh:

Tariff item, sub- heading, heading or Chapter

6815

6901 00 10

Description of goods

Fly ash bricks; Fly ash aggregates24; Fly ash blocks

Bricks of fossil meals or similar siliceous earths

24 Between 01.04.2022 and 18.07.2022, suppliers of fly ash aggregate were ineligible for said exemption from registration only when the fly ash content in fly ash aggregate was 90% or more.

6904 10 00	Building bricks
6905 10 00	Earthen or roofing tiles

[Notification No. 03/2022 CT dated 31.03.2022 as amended by Notification No. 15/2022 CT dated 13.07.2022]

1. Extension of time-limit for filing application for revocation of cancellation of registration by a registered person permitted beyond the stipulated time [Rule 23 amended]

With effect from 01.01.2021, proviso to section 30(1) was substituted by the Finance Act, 2020 to permit the extension of time-limit for filing application for revocation of cancellation of registration by a registered person. It stipulated that the time period prescribed for filing of application for revocation of cancellation of registration, (viz., 30 days from the date of service of the order of cancellation of registration), may, on sufficient cause being shown, and for reasons to be recorded in writing, be extended—

1. by the Additional Commissioner or the Joint Commissioner, as the case may be, for a period not exceeding 30 days;
2. by the Commissioner, for a further period not exceeding 30 days, beyond the period specified in clause (a).

In view of the above amendment, rule 23(1) has been suitably amended to give effect to aforesaid amendment. Amended rule 23(1) reads as follows:

A registered person, whose registration is cancelled by the proper officer on his own motion, may subject to provisions of rule 10B submit an application for revocation of cancellation of registration, in prescribed form, to such proper officer, within a period of 30 days from the date of the service of the order of cancellation of registration or within such time period as extended by the Additional Commissioner or the Joint Commissioner or the Commissioner, as the case may be, in exercise of the powers provided under the proviso to section 30(1), at the common portal, either directly or through a Facilitation Centre notified by the Commissioner.

[Notification No. 15/2021 CT dated 18.05.2021]

1. Registration liable to be cancelled, where – (i) a composition tax payer fails to furnish return for a FY beyond 3 months from due date and (ii) a person, other than composition tax payer, fails to furnish returns for such continuous tax period as may be prescribed [Section 29(2) amended]

With effect from 01.10.2022, following amendments have been made by the Finance Act, 2022 in section 29(2):

Section No.	Existing provisions	Provisions as amended by the Finance Act, 2022
29(2)	The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where,- (a) …………. a person paying tax under section 10 has not furnished returns for 3 consecutive tax periods; or any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or (d) ……………. (e) …………….	The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where,- (a) …………. a person paying tax under section 10 has not furnished the return for a financial year beyond 3 months from the due date of furnishing the said return; or any registered person, other than a person specified in clause (b), has not furnished returns for such continuous tax period as may be prescribed; or (d) ……………. (e) …………….

Deemed revocation of suspended GST registration upon furnishing of all the pending returns by the taxpayer [Rule 21A(4) amended]

As seen above, the proper officer may cancel registration in case where (i) a composition taxpayer has not furnished the return for a financial year beyond 3 months from the due date of furnishing the said return or (ii) any registered person, other than composition taxpayer, has not furnished returns for such continuous tax period as may be prescribed [Clauses (b) & (c) of section 29(2)].

Rule 21A contains provisions relating to suspension of registration and its sub-rule (4) provides for deemed revocation of suspended GST registration by the proper officer upon completion of the proceedings under rule 2225.

Said rule has been amended to provide that there will be deemed revocation of suspended GST registration upon furnishing of pending GST returns, where GST registration was suspended due to non-filing of GST return for a financial year beyond 3 months from the due date of furnishing the said return by a composition taxpayer or returns for such continuous tax period as may be prescribed by registered persons (other than composition taxpayer) subject to the condition that the registration has not been cancelled by the proper officer under rule 22.

Amended rule 21A(4) provides as follows:

The suspension of registration under sub-rule (1) or sub-rule (2) or sub-rule (2A) shall be deemed to be revoked upon completion of the proceedings by the proper officer under rule 22 and such revocation shall be effective from the date on which the suspension had come into effect.

However, the suspension of registration under this rule may be revoked by the proper officer, anytime during the pendency of the proceedings for cancellation, if he deems fit.

Further, where the registration has been suspended under rule 21A(2A) for contravention of the provisions contained in clause (b) or clause (c) of section 29(2) and the registration has not already been cancelled by the proper officer under rule 22, the suspension of registration shall be deemed to be revoked upon furnishing of all the pending returns.

[Notification No. 14/2022 CT dated 05.07.2022]

25 Rule 22 contains provisions relating to cancellation of registration.

Registration liable to be cancelled if monthly return filer fails to file return continuously for 6 months or a person opting for QRMP fails to file return for 2 tax periods [Clauses (h) & (i) inserted to rule 21]

Rule 21 contains prescribed contraventions which make a registered person liable to cancellation of registration.

With effect from 01.10.2022, two more contraventions have also been prescribed by inserting clauses (h) & (i) to rule 21, which provide that the registration granted to a person is liable to be cancelled, if the said person –

1. being a registered person required to file return under section 39(1) for each month or part thereof (i.e. monthly return filer), has not furnished returns for a continuous period of 6 months.
2. being a registered person required to file return under proviso to section 39(1) for each quarter or part thereof (i.e. quarterly return filer), has not furnished returns for a continuous period of 2 tax periods.

[Notification No. 19/2022 CT dated 28.09.2022]

• 1. E-invoicing mandatory for all registered businesses with aggregate turnover in any preceding financial year from 2017-18 onwards greater than ` 10 crore

10

TAX INVOICE, CREDIT

AND DEBIT NOTES

With effect from 01.10.2020, e-invoicing was made mandatory for all registered businesses with an aggregate turnover (based on PAN) in any preceding financial year from 2017-18 onwards greater than ` 500 crore for issue of all B2B invoices. Since then, the threshold limit of aggregate turnover for issuing the e-invoices is being progressively reduced.

With effect from 01.10.2022, such limit has been reduced to ` 10 crore. Thus, e-invoicing has been made mandatory for all registered businesses with an aggregate turnover in any preceding financial year from 2017-18 onwards greater than ` 10 crore26.

[Notification No. 17/2022 CT dated 01.08.2022]

26 Prior to 01.04.2022, threshold limit of aggregate turnover for e-invoicing was ` 50 crore. Notification No. 01/2022 CT dated 24.02.2022 had reduced such limit to ` 20 crore with effect from 01.04.2022. Between 01.04.2022 and 30.09.2022, threshold limit for e-invoicing was ` 20 crores.

Government Department and a local authority exempted from e- invoicing requirement.

As seen above, e-invoicing is mandatory for all registered businesses with an aggregate turnover in any preceding financial year from 2017-18 onwards greater than ` 10 crore. However, following entities are exempt from the mandatory requirement of e-invoicing:-

• Special Economic Zone units
• Insurer or banking company or financial institution including NBFC
• GTA supplying services in relation to transportation of goods by road in a goods carriage
• Supplier of passenger transportation service
• Person supplying services by way of admission to exhibition of cinematograph films in multiplex screens.

With effect from 01.06.2021, a Government Department and a local authority also have been exempted from the mandatory requirement of e- invoicing even if their aggregate turnover in any previous financial year from 2017-18 onwards exceeds ` 10 crore.

Further, such taxpayers are now required to provide a declaration on the tax invoice stating that though their aggregate turnover exceeds the notified aggregate turnover for e-invoicing, they are not required to prepare an e-invoice

This is done by inserting clause (s) to rule 46. Rule 46 prescribes the particulars of a tax invoice. Newly inserted clause (s) to said rule, with effect from 05.07.2022, provides that tax invoice shall have:

a declaration as below, that invoice is not required to be issued in the manner specified under rule 48(4), in all cases where an invoice is issued, other than in the manner so specified under the said rule 48(4), by the taxpayer having aggregate turnover in any preceding financial year from 2017-18 onwards more than the aggregate turnover as notified under rule 48(4) [presently its ` 10 crore]-

“I/We hereby declare that though our aggregate turnover in any

preceding financial year from 2017-18 onwards is more than the aggregate turnover notified under sub-rule (4) of rule 48, we are not required to prepare an invoice in terms of the provisions of the said sub-rule.”

[Notification No. 23/2021 CT dated 01.06.2021 and Notification No. 14/2022 CT dated 05.07.2022]

• 1. Clarification in respect of applicability of Dynamic Quick Response (QR)code

With effect from 01.12.2020, all B2C invoices issued by a registered person whose aggregate turnover in any preceding financial year from 2017-18 onwards exceeds ` 500 crores are mandatorily required to have a Dynamic QR code [Notification No. 14/2020 CT dated 21.03.2020].

In this regard, Circular No. 156/12/2021 GST

dated 21.06.2021 and Circular No. 165/21/2021 GST dated 17.11.2021

have clarified that:

Dynamic QR Code required to be provided on invoice issued to a person having a UIN

Any person who has obtained a Unique Identity Number (UIN), is not a “registered person” as per the definition of ‘registered person’ provided under section 2(94). Therefore, any invoice, issued to such person having a UIN, shall be considered as invoice issued for a B2C supply and shall be required to comply with the requirement of Dynamic QR Code.

No Dynamic QR code required on an invoice issued to a recipient located outside India for supply of services whose POS is in India and payment received in FOREX

In cases, where an invoice is issued to a recipient located outside India, for supply of services, for which the place of supply is in India, as per the provisions of the IGST Act, and the payment is received by the supplier, in convertible FOREX or in Indian Rupees wherever permitted by the RBI (such supply of services is not considered as export of services as per the IGST Act), such invoice may be issued

without having a Dynamic QR Code, as such dynamic QR code cannot be used by the recipient located outside India for making payment to the supplier.

• • 1. In some instances of retail sales over the counter, the payment from the customer is received on the payment counter by displaying dynamic QR code on digital display, whereas the invoice, along with invoice number, is generated on the processing system being used by supplier/ merchant after receiving the payment.

In such cases, it may not be possible for the merchant/ supplier to provide details of invoice number in the dynamic QR code displayed to the customer on payment counter. However, each transaction i.e. receipt of payment from a customer is having a unique Order ID/ sales reference number, which is linked with the invoice for the said transaction.

The question which arose for consideration is whether in such cases, the order ID/ reference number of such transaction can be provided in the dynamic QR code displayed digitally, instead of invoice number.

It has been clarified that in such cases, the unique order ID/ unique sales reference number, which is uniquely linked to the invoice issued for the said transaction, may be provided in the Dynamic QR Code for digital display, as long as the details of such unique order ID/ sales reference number linkage with the invoice are available on the processing system of the merchant/ supplier and the cross reference of such payment along with unique order ID/ sales reference number are also provided on the invoice.

• • 1. The purpose of dynamic QR Code is to enable the recipient/ customer to scan and pay the amount to be paid to the merchant/ supplier in respect of the said supply.

When the part-payment for any supply has already been received from the customer/ recipient, either in advance or by adjustment (e.g. using a voucher, discount coupon etc), before the dynamic QR Code is generated, then the dynamic QR code may provide only the remaining amount payable by the customer/ recipient against “invoice value”.

The details of total invoice value, along with details/ cross reference of the part payment/ advance/ adjustment done, and the remaining

amount to be paid, should be provided on the invoice.

Time limit for issuance of credit notes in respect of any supply made in a FY extended upto 30th November of the following FY [Section 34(2) amended]

With effect from 01.10.2022, following amendments have been made by the Finance Act, 2022 in section 34(2):

Existing provisions

Provisions as amended by the Finance Act, 2022

Section 34(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed.

Section 34(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than the 30th day of November following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed.

E-way bill generation facility to be blocked only in respect of outward movement of goods, by the defaulting registered person [Rule 138E amended]

11

ACCOUNTS AND RECORDS; E-WAY BILL

Rule 138E contains provisions pertaining to blocking of e-way bill generation facility, i.e. disabling the generation of e- way bill.

Earlier, a user was not able to generate e-way bill for a GSTIN at all if the said GSTIN became ineligible for e-way bill generation in terms of rule 138E. It implies that the GSTINs of such blocked taxpayers could not be used to generate the e-way bills either as supplier (consignor) or as recipient (consignee).

Said rule has been amended to relax such restriction. Henceforth, blocking of GSTIN for e-way bill generation facility is only in respect of any outward movement of goods of the registered person who is ineligible for e-way bill generation as per rule 138E. E-way bills can be generated in respect of inward supplies received by said registered person.

Mr. A, a registered person paying tax under regular scheme in Delhi, has not filed Form GSTR-1 for last 2 months. Mr. B, Haryana, (a regular return filer) wants to generate an e-way bill for goods to be supplied to Mr. A. As per earlier position of law,

Mr. B would not have been able to generate e-way bill with Mr. A’s GSTIN.

In terms of the amended position of law, there will be no more restriction in generating e-way bill as Mr. B who is making outward movement of goods is a regular return filer.

Mr. A wants to generate an e-way bill in respect of an outward supply of goods to Mr. H. E-way bill generation is blocked in this case as it’s an outward movement of goods of Mr. A who has not filed Form GSTR-1 for past 2 months.

[Notification No. 15/2021 CT dated 18.05.2021]

1. In case of issuance of e-invoice, no requirement to carry the physical copy of tax invoice

The question which arose for consideration was whether carrying physical copy of invoice is compulsory during movement of goods in cases where suppliers have issued e-invoices.

It is clarified that there is no requirement to carry the physical copy of tax invoice in cases where e-invoice has been generated by the supplier. Whenever e-invoice has been generated, production of the Quick Reference (QR) code having an embedded Invoice Reference Number (IRN) electronically, for verification by the proper officer, would suffice.

[Circular No. 160/16/2021 GST dated 20.09.2021]

• 1. Guidelines for disallowing debit of electronic credit ledger under rule 86A

12

PAYMENT OF TAX

Rule 86A provides that in certain specified circumstances, Commissioner or an officer authorised by him, not below the rank of Assistant Commissioner, on the basis of reasonable belief that ITC available in the electronic credit ledger has been fraudulently availed or is ineligible, may not allow debit of an amount equivalent to such credit in electronic credit ledger. CBIC has issued guidelines for disallowing debit of said amount from electronic credit ledger under rule 86A.

On perusal of rule 86A, it is evident that Commissioner, or an officer authorised by him, not below the rank of Assistant Commissioner, must have “reasons to believe” that ITC available in the electronic credit ledger is either ineligible or has been fraudulently availed by the registered person, before disallowing the debit of amount from electronic credit ledger of the said registered person under rule 86A.

Grounds for disallowing debit of an amount from electronic credit ledger

The reasons for such belief must be based on one or more following grounds:

• • • The credit is availed by the registered person on the invoices or debit notes issued by a supplier, who is found to be non-existent or is found not to be conducting any business from the place declared in registration.
  • The credit is availed by the registered person on invoices or debit notes, without actually receiving any goods or services or both.
  • The credit is availed by the registered person on invoices or debit notes, the tax in respect of which has not been paid to the government.
  • The registered person claiming the credit is found to be non-existent or is found not to be conducting any business from the place declared in registration.
  • The credit is availed by the registered person without having any invoice or debit note or any other valid document for it.

Proper authority for the purpose of rule 86A

The Commissioner/Principal Commissioner is the proper officer for the purpose of exercising powers under rule 86A. The Commissioner/Principal Commissioner may authorize any officer subordinate to him, not below the rank of Assistant Commissioner to be the proper officer for exercising powers under rule 86A based on the following monetary limits as mentioned below:

Total amount of ineligible or fraudulently availed ITC

Not exceeding ` 1 crore

Above ` 1 crore but not exceeding ` 5 crore

Above ` 5 crore

Officer to disallow debit of amount from electronic credit ledger under rule 86A

Deputy Commissioner/Assistant Commissioner

Additional Commissioner/Joint Commissioner

Principal Commissioner/Commissioner

The Additional Director General /Principal Additional Director General of DGGI can also exercise the powers assigned to the Commissioner under rule 86A. The monetary limits for authorization for exercise of powers under rule 86A to the officers of the rank of Assistant Director and above of DGGI by the Additional Director General /Principal Additional Director General may be same as mentioned for equivalent rank of officers in the table above.

[CBEC – 20/16/05/2021 GST/1552 dated 02.11.2021]

• 1. In case the registered person deposits the amount of erroneous refund sanctioned to him along with interest and penalty from its electronic cash ledger, proper officer to re-credit said amount to its electronic credit ledger [Rule 86 amended]

Rule 86 contains provisions relating to Electronic Credit Ledger.

With effect from 05.07.2022, sub-rule (4B) has been inserted to said rule to provide that if the registered person deposits the amount of erroneous refund sanctioned to him under section 54(3), or under rule 96(3), in contravention to rule 96(10), along with interest and penalty, if any, through prescribed form by debiting the electronic cash ledger either on his own or being pointed out by the officer, then the same shall be re-credited to the electronic credit ledger by an order passed by the proper officer.

Newly inserted sub-rule (4B) to rule 86 reads as follows:

Where a registered person deposits the amount of erroneous refund sanctioned to him, –

1. under section 54(3) of the Act, or
2. under rule 96(3), in contravention of rule 96(10),

along with interest and penalty, wherever applicable, through the prescribed form, by debiting the electronic cash ledger, on his own or on being pointed out, an amount equivalent to the amount of erroneous refund deposited by the registered person shall be re-credited to the electronic credit ledger by the proper officer by an order made in prescribed form.

[Notification No. 14/2022 CT dated 05.07.2022]

• 1. Transfer of amount available in electronic cash ledger under the CGST Act of a registered person to the electronic cash ledger under the CGST Act/IGST Act of a distinct person allowed [Section 49 amended]

Following amendments have been made by the Finance Act, 2022 in section 49, with effect from 01.10.2022, unless otherwise specified:

Existing provisions	Provisions as amended by the Finance Act, 2022
Section 49 (1) …………….. (2) The input tax credit as self-	Section 49 (1) …………….. (2) The input tax credit as self-

assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with section 41 or section 43A, to be maintained in such manner as may be prescribed. (3) ……………… (4) The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions within such time as may be prescribed. (5) …… (6) ………. (7) …….. (8) ………. (9) ………… (10)27 A registered person may, on the common portal, transfer any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger under this Act, to the electronic cash ledger for integrated tax, central tax, State tax, Union territory tax or cess, in such form and manner and subject to such

assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with section 41 or section 43A, to be maintained in such manner as may be prescribed. (3) ……………… (4) The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and restrictions within such time as may be prescribed. (5) …… (6) ………. (7) …….. (8) ………. (9) ………… A registered person may, on the common portal, transfer any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger under this Act, to the electronic cash ledger for,–– integrated tax, central tax, State tax, Union territory tax or cess; or integrated tax or

27 Effect from 05.07.2022

conditions and restrictions as may be prescribed and such transfer shall be deemed to be a refund from the electronic cash ledger under this Act. (11) …………..

central tax of a distinct person as specified in sub-section (4) or, as the case may be, sub- section (5) of section 25, in such form and manner and subject to such conditions and restrictions as may be prescribed and such transfer shall be deemed to be a refund from the electronic cash ledger under this Act: Provided that no such transfer under clause (b) shall be allowed if the said registered person has any unpaid liability in his electronic liability register. (11) ………….. (12) Notwithstanding anything contained in this Act, the Government may, on the recommendations of the Council, subject to such conditions and restrictions, specify such maximum proportion of output tax liability under this Act or under the IGST Act, 2017 which may be discharged through the electronic credit ledger by a registered person or a class of registered persons, as may be prescribed.

Deposit in Electronic Cash Ledger can be made through UPI and IMPS as well. Facility provided on GST portal to transfer any amount available in the electronic cash ledger under CGST Act to the electronic cash ledger for central tax or integrated tax of a distinct person [Rule 87 amended]

Rule 87(3) lists the modes of making deposit of amount towards tax, interest, penalty, fee or any other amount, in Electronic Cash Ledger. Said rule has been amended to include two additional modes of making the deposits. Now the amount may also be deposited through Unified payment interface (UPI) or Immediate Payment Services (IMPS) from any bank, on the GST portal.

Extract of amended rule 87(3) is as follows:

The deposit under sub-rule (2) shall be made through any of the following modes, namely:-

1. Internet Banking through authorised banks;

(ia) Unified Payment Interface (UPI) from any bank; (ib) Immediate Payment Services (IMPS) from any bank;

1. Credit card or Debit card through the authorised bank;
2. National Electronic Fund Transfer or Real Time Gross Settlement from any bank; or
3. Over the Counter payment through authorised banks for deposits up to ten thousand rupees per challan per tax period, by cash, cheque or demand draft.

Consequential amendment has been made in rule 87(5).

Extract of amended rule 87(5) is as follows:

Where the payment is made by way of National Electronic Fund Transfer or Real Time Gross Settlement, or Immediate Payment Service mode from any bank, the mandate form shall be generated along with the challan on the common portal and the same shall be submitted to the bank from where the payment is to be made.

Further, as seen earlier, section 49(10) has been amended by the Finance Act, 2022 to permit the transfer of amount available in electronic cash ledger under the CGST Act of a registered person to the electronic cash ledger under the said Act or the IGST Act of a distinct person.

Consequently, sub-rule (14) has been inserted to rule 87 to provide a facility on the common portal to transfer any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger under CGST Act to the electronic cash ledger for central tax or integrated tax of a distinct person through the prescribed form.

Newly inserted sub-rule (14) to rule 87 reads as follows:

A registered person may, on the common portal, transfer any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger under the Act to the electronic cash ledger for central tax or integrated tax of a distinct person as specified in sub-section (4) or, as the case may be, sub-section (5) of section 25, in the prescribed form.

However, no such transfer shall be allowed if the said registered person has any unpaid liability in his electronic liability register.

[Notification No. 14/2022 CT dated 05.07.2022]

• 1. Levy of interest provided on ITC wrongly availed and utilised [Section 50(3) substituted]

Section 50 provides for interest on delayed payment of tax. Sub-section (3) of the said section has been substituted retrospectively, with effect from 01.07.2017, by the Finance Act, 2022.

Existing provisions	Provisions as amended by the Finance Act, 2022
Section 50(3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be,	Section 50(3) Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding 24% as may be notified by the Government**, on the recommendations of the

at such rate not exceeding 24%, as may be notified by the Government on the recommendations of the Council.

Council, and the interest shall be calculated, in such manner as may be prescribed.

**Rate of interest under section 50(3) is notified vide Notification No. 13/2017 CT dated 28.06.2017. Earlier, the rate of interest notified under said section was 24% per annum28. Notification No. 13/2017 CT dated 28.06.2017 has been amended by the Finance Act, 2022 retrospectively with effect from 01.07.2017, to reduce the rate of interest under section 50(3) from 24% to 18% per annum.

Manner of calculating interest on delayed payment of tax [New rule 88B]

In view of the power given by section 50(3) to prescribe the manner of computing the interest on delayed payment, a new rule 88B has been inserted retrospectively with effect from 01.07.2017 to provide the manner of calculating interest on delayed payment of tax.

New rule 88B provides as follows:

In case, where the supplies made during a tax period are declared by the registered person in the return for the said period and the said return is furnished after the due date in accordance with provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, the interest on tax payable in respect of such supplies shall be calculated on the portion of tax which is paid by debiting the electronic cash ledger, for the period of delay in filing the said return beyond the due date, at such rate as may be notified under section 50(1).

28 Prior to amendment made by the Finance Act, 2022, interest under section 50(3) was leviable on a taxable person who makes an undue or excess claim of ITC under section 42(10) or undue or excess reduction in output tax liability under section 43(10). Since the provisions of section 42(10) and 43(10) never came into effect, the provisions relating to interest payment under section 50(3) also didn’t become effective. Thus, rate of interest of 24% per annum notified earlier for the purposes of section 50(3) had never been effective.

In all other cases, where interest is payable under section 50(1), the interest shall be calculated on the amount of tax which remains unpaid, for the period starting from the date on which such tax was due to be paid till the date such tax is paid at the rate specified under section 50(1).

Where interest is payable on the amount of ITC wrongly availed and utilised in accordance with section 50(3), the interest shall be calculated on the amount of input tax credit wrongly availed and utilised, for the period starting from the date of utilisation of such wrongly availed input tax credit till the date of reversal of such credit or payment of tax in respect of such amount at the rate specified under section 50(3).

The explanation to the rule lays down that-

1. input tax credit wrongly availed shall be construed to have been utilised, when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, and the extent of such utilisation of input tax credit shall be the amount by which the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed.
2. the date of utilisation of such input tax credit shall be taken to be-
   1. the date, on which the return is due to be furnished under section 39 or the actual date of filing of the said return, whichever is earlier, if the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, on account of payment of tax through the said return; or
   2. the date of debit in the electronic credit ledger when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, in all other cases.

[Notification No. 14/2022 CT dated 05.07.2022]

• 1. Clarifications regarding utilization of the amounts available in the electronic credit ledger and the electronic cash ledger for payment of tax and other liabilities

Issue 1: Whether the amount available in the electronic credit ledger can be used for making payment of any tax under the GST Laws?

Clarification: In terms of section 49(4), the amount available in the electronic credit ledger may be used for making any payment towards

output tax under the CGST Act or the IGST Act, subject to the provisions relating to the order of utilisation of ITC as laid down in section 49B read with rule 88A.

Rule 86(2) provides for debiting of the electronic credit ledger to the extent of discharge of any liability in accordance with the provisions of section 49/49A/49B.

Further, output tax in relation to a taxable person (i.e. a person who is registered or liable to be registered under section 22 or section 24) is defined in section 2(82) as the tax chargeable on taxable supply of goods or services or both but excludes tax payable on reverse charge mechanism.

Accordingly, it is clarified that any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding instituted under the provisions of GST laws, can be made by utilization of the amount available in the electronic credit ledger of a registered person.

It is further reiterated that as output tax does not include tax payable under reverse charge mechanism, implying thereby that the electronic credit ledger cannot be used for making payment of any tax which is payable under reverse charge mechanism.

Issue 2: Whether the amount available in the electronic credit ledger can be used for making payment of any liability other than tax under the GST laws?

Clarification: As per section 49(4), the electronic credit ledger can be used for making payment of output tax only under the CGST Act or the IGST Act. It cannot be used for making payment of any interest, penalty, fees or any other amount payable under the said Acts. Similarly, electronic credit ledger cannot be used for payment of erroneous refund sanctioned to the taxpayer, where such refund was sanctioned in cash.

Issue 3: Whether the amount available in the electronic cash ledger can be used for making payment of any liability under the GST laws?

Clarification: As per section 49(3), the amount available in the electronic cash ledger may be used for making any payment towards tax, interest,

penalty, fees or any other amount payable under the provisions of the GST laws.

[Circular No. 172/04/2022 GST dated 06.07.2022]

• 1. Rule 85 amended owing to omission of sections 42 & 43

Rule 85 contains provisions relating to the Electronic Liability Register. Since, sections 42, 43 and 43A have been omitted so as to do away with two-way communication process in return filing29, consequential amendments have been made in rule 85(2).

Accordingly, with effect from 01.10.2022, clause (c) of rule 85(2) has been omitted as the said clause referred to the amount of tax and interest payable as a result of mismatch under sections 42 or 43 or 50.

Amended rule 85(2) reads as follows:

The electronic liability register of the person shall be debited by-

1. the amount payable towards tax, interest, late fee or any other amount payable as per the return furnished by the said person;
2. the amount of tax, interest, penalty or any other amount payable as determined by a proper officer in pursuance of any proceedings under the Act or as ascertained by the said person; or

the amount of tax and interest payable as a result of mismatch under section 42 or section 43 or section 50; or

1. any amount of interest that may accrue from time to time.

[Notification No. 19/2022 CT dated 28.09.2022]

• 1. Last date upto which the rectification of errors allowed in the statement furnished by ECO, extended upto 30th November of the following FY [Proviso to section 52(6) amended]

Section 52 contains provisions relating to collection of tax at source by an electronic commerce operator (ECO). An ECO liable to collect tax at source is required to furnish a monthly statement in Form GSTR-8 electronically through the common portal.

29 These amendments have been discussed subsequently in Chapter 13 – Returns.

Form GSTR-8 contains the details of supplies of goods or services or both effected through ECO, including the supplies of goods or services or both returned through it and the amount of tax collected at source.

If after submission of Form GSTR-8, the ECO discovers any discrepancy therein on his own – not being the result of any scrutiny, audit, inspection or enforcement proceedings – he should rectify such discrepancy in Form GSTR-8 to be filed for the month during which such discrepancy is noticed, subject to payment of interest under section 50.

With effect from 01.10.2022, Finance Act, 2022 has extended the last date upto which the rectification of discrepancies/errors is allowed in such statement furnished by ECO, as follows:

Existing provisions	Provisions as amended by the Finance Act, 2022
Proviso to section 52(6) Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of statement for the month of September following the end of the financial year or the actual date of furnishing of the relevant annual statement, whichever is earlier.	Proviso to section 52(6) Provided that no such rectification of any omission or incorrect particulars shall be allowed after 30th day of November following the end of the financial year or the actual date of furnishing of the relevant annual statement, whichever is earlier.

Maximum late fees payable under section 47 for delayed filing of Forms GSTR-1, GSTR-3B, GSTR-4 and GSTR-7, rationalized

13

RETURNS

Section 47 stipulates a specified amount of late fee for delay in filing any of the following by their respective due dates:

• 1. Statement of Outward Supplies [Section 37]
  2. Returns (including returns under QRMP Scheme) Returns [Section 39]
  3. Final Return [Section 45]

An equal amount of late fee is payable by such person under the respective SGST/UTGST Act as well.

The late fee can be waived off partially or fully by the Central Government. Consequently, since the inception of GST law, late fee is being regularly waived off by the Central Government either partially or fully.

From the tax period June, 2021 onwards or quarter ending June, 2021 or FY 2020-21 onwards, as the case may be, late fee for delayed filing of Forms GSTR-1, GSTR-3B, GSTR-4 and GSTR-7, has been rationalized as follows:

For delayed filing of GSTR-1 and/or GSTR-3B:-

Total amount of late fee payable under section 47 from June, 2021 / quarter ending June, 2021 onwards, by the registered person who fail to furnish Form GSTR-1 and/or Form GSTR-3B by the due date, shall be as follows:

1. Registered persons who have nil outward supplies in the tax period/ whose total amount of tax payable in the GSTR- 3B is Nil, as the case may be

Delayed filing of GSTR-1 and/or GSTR-3B

Aggregate

t 5

` 500 (` 250 each under CGST & SGST/UTGST)

` 2,000 (` 1,000

1. Registered persons other

than those covered in (1) above

urnover ≤ ` 1. crores in the preceding FY

` 5 crores ≥ Aggregate turnover > ` 1.5 crores, in the preceding FY

each under CGST & SGST/UTGST)

` 5,000 (` 2,500

each under CGST & SGST/UTGST)

Registered persons other than (1) and (2)

Late fee as specified under section 47

For delayed filing of GSTR-4:-

Total amount of late fee payable under section 47 of the CGST Act from

F.Y. 2021-22 onwards, by the registered person (composition taxpayer) who fail to furnish Form GSTR-4 by the due date, shall be as follows:

(1) Total tax payable in GSTR-4 is Nil

` 500 (` 250 each under CGST & SGST/UTGST)

Where

(2) Registered persons other than those covered in (1) above

` 2,000 (` 1,000 each under CGST & SGST/UTGST)

For delayed filing of GSTR-7:-

Total amount of late fee payable under section 47 by any registered person, required to deduct tax at source under the provisions of section 51 for delayed filing of GSTR-7, from the month of June 2021 onwards, shall be as follows:

 

Quantum of late fee

` 100

` 25 for every day during which such

failure continues.

whichever is lower

[Notification Nos 19-22/2021 CT all dated 01.06.2021]

1. Mandatory requirement of getting annual accounts audited and reconciliation statement submitted by specified professional, done away with [Section 35(5) omitted and section 44 substituted]

Earlier, section 35(5) provided that every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under section 44(2) and such other documents in such form and manner as may be prescribed.

However, this provision did not apply to any Department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.

With effect from 01.08.2021, sub-section (5) of section 35 has been omitted by the Finance Act, 2021 as to remove the mandatory requirement of getting annual accounts audited and reconciliation statement submitted by specified professional.

Further, with effect from 01.08.2021, section 44 has been substituted by the Finance Act, 2021 so as to remove the mandatory requirement of furnishing a reconciliation statement duly audited by specified professional. Substituted section 44 provides for filing of the annual return on self- certification basis. It further provides for the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return.

Consequently, corresponding rule 80 has also been substituted with effect from 01.08.2021.

The provisions of substituted section 44 read with rule 80 have been elaborated as follows:

Who is required to furnish the annual return and what is the due date for the same?

All registered persons are required to file an annual return. However, following persons are not required to file

annual return:

GSTR-9

• 1. Casual taxable persons
  2. Non-resident taxable person
  3. Input service distributors
  4. Persons authorized to deduct/collect tax at source under section 51/52, and

The Commissioner may, on the recommendations of the Council, by notification, exempt any class of registered persons from filing annual return under this section.

The annual return for a financial year needs to be filed by 31st December of the next financial year.

1. What is the prescribed form for annual return/statement?

The annual return is to be filed electronically in Form GSTR-9 through the common portal.

Person registered under composition levy: A person paying tax under composition scheme is required to file the annual return in Form GSTR-9A.

ECO required to collect tax at source: An ECO required to collect tax at source is required to file an annual statement referred to in section 52(5) in Form GSTR-9B (yet to be notified). The statement for a financial year needs to be filed by 31st December of the next financial year.

Who is required to furnish a self-certified reconciliation statement?

• 1. All registered persons are required to file furnish a self-certified reconciliation statement alongwith annual return if their aggregate turnover during a financial year exceeds ` 5 crores. However, following persons are not required to file self-certified reconciliation statement:
     1. Casual taxable persons
     2. Non-resident taxable person
     3. Input service distributors
     4. Persons authorized to deduct/collect tax at source under section 51/52, and
  2. Such registered person should furnish, electronically, the annual return along with a copy of self-certified reconciliation statement, duly certified, in Form GSTR-9C

Self-certified reconciliation statement will reconcile the value of supplies declared in the return furnished for the financial year with the audited annual financial statement.

Value of supplies declared

in Annual return

Value of supplies declared in audited

Annual Financial Statement

The department of the Central/State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor- General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force, are exempt from the requirement of furnishing an annual return including self-certified reconciliation statement.

[Notification No. 30/2021 CT dated 30.07.2021]

1. Registered person debarred from furnishing details of outward supplies in Form GSTR-1/IFF [Rule 59(6) amended]

Rule 59(6) stipulating the cases where a registered person is debarred from furnishing details of outward supplies in Form GSTR-1/IFF, has been amended, with effect from 01.01.2022, as follows:

1. A registered person shall not be allowed to furnish the details of outward supplies in Form GSTR-1, if he has not furnished the return in Form GSTR-3B for the preceding month.
2. A registered person, opting for QRMP scheme shall not be allowed to furnish the details of outward supplies in Form GSTR-1 or using IFF, if he has not furnished the return in Form GSTR-3B for preceding tax period.

A registered person, who is restricted from using the amount available in electronic credit ledger to discharge his liability towards tax in excess of 99% of such tax liability under rule 86B of the CGST Rules, shall not be allowed to furnish the details of

outward supplies in Form GSTR-1 or using IFF, if he has not furnished the return in Form GSTR-3B for preceding tax period.

[Notification No. 35/2021 CT dated 24.09.2021]

1. GSTR-2B is an “auto-generated” statement [Rule 60 amended]

Rule 60, inter alia, provides the form and manner of ascertaining details of inward supplies in Form GSTR-2A and Form GSTR-2B. Erstwhile rule 60(7) provided that Form GSTR-2B is an auto-drafted statement containing the details of ITC. With effect from 01.10.2022, rule 60(7) has been amended to consider Form GSTR-2B as an auto-generated statement.

[Notification No. 19/2022 CT dated 28.09.2022]

5. Omission of rules 69, 70, 71, 72, 73, 74, 75, 76, 77 and 79

As a result of doing away with the two-way communication process for return filing, with effect from 01.10.2022, following CGST rules have been omitted:-

• Rule 69 – Matching of claim of input tax credit;
• Rule 70 – Final acceptance of input tax credit and communication thereof;
• Rule 71 – Communication and rectification of discrepancy in claim of input tax credit and reversal of claim of input tax credit;
• Rule 72 – Claim of input tax credit on the same invoice more than once;
• Rule 73 – Matching of claim of reduction in output tax liability;
• Rule 74 – Final acceptance of reduction in output tax liability and communication thereof;
• Rule 75 – Communication and rectification of discrepancy in reduction in output tax liability and reversal of claim of reduction;
• Rule 76 – Claim of reduction in output tax liability more than once;
• Rule 77 – Refund of interest paid on reclaim of the reversals;
• Rule 79 – Communication and rectification of discrepancy in details furnished by the e-commerce operator and the supplier.

[Notification No. 19/2022 CT dated 28.09.2022]

1. GST practitioner permitted only to furnish the details of outward supplies on behalf of a registered person [Rule 83(8) amended]

Section 48 relating to Goods and Services Tax Practitioners has been amended30 to remove reference to section 38 [Communication of details of inward supplies and input tax credit] therefrom.

Rule 83(8) enlists activities that can be undertaken by a GST Practitioner on behalf of a registered person if so authorised by him.

Earlier, as per rule 83(8)(a), GST practitioners were allowed to furnish the details of both outward and inward supplies on behalf of a registered person if so authorised.

However, with effect from 01.10.2022, rule 83(8)(a) has been amended. Now, a GST practitioner is only allowed to furnish the details of only outward supplies and not inward supplies on behalf of a registered person if so authorised by him.

[Notification No. 19/2022 CT dated 28.09.2022]

1. Omission of Forms GSTR-1A, GSTR-2 & GSTR-3

With effect from 01.10.2022, Forms GSTR-1A, GSTR-2 & GSTR-3, which never came into effect and whose applicability was persistently being deferred, have now been omitted.

[Notification No. 19/2022 CT dated 28.09.2022]

1. Amendments carried out by the Finance Act, 2022 in sections 37, 38, 39, 41, 42, 43, 43A, 47, 48 & 52

With effect from 01.10.2022, sections 37, 38, 39, 41, 42, 43, 43A, 47, 48 and 52 have been amended by the Finance Act, 2022:

Section 37 has been amended so as to:

• 1. provide for prescribing conditions and restrictions for furnishing the details of outward supply and for communication of the details of such outward supplies to concerned recipients;
  2. do away with two-way communication process in return filing;

30 Discussed subsequently in this chapter

• 1. provide for an extended time upto 30th day of November of the following financial year for rectification of errors in respect of details of outward supplies furnished under sub-section (1)
  2. provide for tax period-wise sequential filing of details of outward supplies under sub-section (1).

Section 38 has been substituted for prescribing the manner as well as conditions and restrictions for communication of details of inward supplies and input tax credit to the recipient by means of an auto-generated statement and to do away with two-way communication process in return filing.

Section 39 has been amended so as to:

1. provide that the non-resident taxable person shall furnish the return for a month by 13th day of the following month;
2. provide an option to the persons furnishing return under proviso to sub-section (1), to pay either the self-assessed tax or an amount that may be prescribed;
3. provide for an extended time upto 30th day of November of the following financial year, for rectification of errors in the return furnished under section 39;
4. provide for furnishing of details of outward supplies of a tax period under sub-section (1) of section 37 as a condition for furnishing the return under section 39 for the said tax period.

Section 41 has been substituted so as to do away with the concept of “claim” of eligible input tax credit on a “provisional” basis and to provide for availment of self-assessed input tax credit subject to such conditions and restrictions as may be prescribed.

Sections 42, 43 and 43A have been omitted so as to do away with two-way communication process in return filing.

Section 47 has been amended so as to provide for levy of late fee for delayed filing of return under section 52. Further, reference to section 38 is being removed consequent to the amendment in section 38.

Consequent to the amendment in section 38, sub-section (2) of section 48 has been amended so as to remove reference to section 38 therefrom.

The above amendments have been given in the table below:

Existing provisions

Provisions as amended by the Finance Act, 2022

Section 37 (1) Every registered person, other than an Input Service Distributor, a non-resident taxable person and a person paying tax under the provisions of section 10 or section 51 or section 52, shall furnish, electronically in such form and manner as may be prescribed, the details of outward supplies of goods or services or both effected during a tax period on or before 10th day of the month succeeding the said tax period and such details shall be communicated to the recipient of the said supplies within such time and in such manner as may be prescribed. Provided that the registered person shall not be allowed to furnish the details of outward supplies during the period from 11th day to 15th day of the month succeeding the tax period.

Section 37 (1) Every registered person, other than an Input Service Distributor, a non-resident taxable person and a person paying tax under the provisions of section 10 or section 51 or section 52, shall furnish, electronically subject to such conditions and restrictions and in such form and manner as may be prescribed, the details of outward supplies of goods or services or both effected during a tax period on or before 10th day of the month succeeding the said tax period and such details shall, subject to such conditions and restrictions, within such time and in such manner as may be prescribed, be communicated to the recipient of the said supplies. Provided that the registered person shall not be allowed to furnish the details of outward supplies during the period from 11th day to 15th day of the month succeeding the tax period.

Provided further that the Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for furnishing such details for such class of taxable persons as may be specified therein: Provided also that any extension of time limit notified by the Commissioner of State tax or Commissioner of Union territory tax shall be deemed to be notified by the Commissioner. Every registered person who has been communicated the details under sub-section (3) of section 38 or the details pertaining to inward supplies of Input Service Distributor under sub- section (4) of section 38, shall either accept or reject the details so communicated, on or before 17th day, but not before 15th day, of the month succeeding the tax period and the details furnished by him under sub-section (1) shall stand amended accordingly. Any registered person, who has furnished the details

Provided further that the Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for furnishing such details for such class of taxable persons as may be specified therein: Provided further that any extension of time limit notified by the Commissioner of State tax or Commissioner of Union territory tax shall be deemed to be notified by the Commissioner. Every registered person who has been communicated the details under sub-section (3) of section 38 or the details pertaining to inward supplies of Input Service Distributor under sub- section (4) of section 38, shall either accept or reject the details so communicated, on or before 17th day, but not before 15th day, of the month succeeding the tax period and details furnished by him under sub-section (1) shall stand amended accordingly. Any registered person, who has furnished the details

under sub-section (1) for any tax period and which have remained unmatched under section 42 or section 43, shall, upon discovery of any error or omission therein, rectify such error or omission in such manner as may be prescribed, and shall pay the tax and interest, if any, in case there is a short payment of tax on account of such error or omission, in the return to be furnished for such tax period: Provided that no rectification of error or omission in respect of the details furnished under sub-section (1) shall be allowed after furnishing of the return under section 39 for the month of September following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier. Provided further that …………

under sub-section (1) for any tax period and which have remained unmatched under section 42 or section 43, shall, upon discovery of any error or omission therein, rectify such error or omission in such manner as may be prescribed, and shall pay the tax and interest, if any, in case there is a short payment of tax on account of such error or omission, in the return to be furnished for such tax period: Provided that no rectification of error or omission in respect of the details furnished under sub-section (1) shall be allowed after the 30th day of November following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier. Provided further that ………… (4) A registered person shall not be allowed to furnish the details of outward supplies under sub-section (1) for a tax period, if the details of outward supplies for any of the previous tax periods has not been furnished by him: Provided that the

Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow a registered person or a class of registered persons to furnish the details of outward supplies under sub- section (1), even if he has not furnished the details of outward supplies for one or more previous tax periods.

Section 38 has been substituted as follows: The details of outward supplies furnished by the registered persons under sub-section (1) of section 37 and of such other supplies as may be prescribed, and an auto-generated statement containing the details of input tax credit shall be made available electronically to the recipients of such supplies in such form and manner, within such time, and subject to such conditions and restrictions as may be prescribed. The auto-generated statement under sub-section (1) shall consist of–– details of inward supplies in respect of which credit of input tax may be available to the recipient; and details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the recipient, on account of the details of the said supplies being furnished under sub-section (1) of section 37,–– by any registered person within such period of taking registration as may be prescribed; or by any registered person, who has defaulted in payment of tax and where such default has continued for such period as may be prescribed; or

by any registered person, the output tax payable by whom in accordance with the statement of outward supplies furnished by him under the said sub-section during such period, as may be prescribed, exceeds the output tax paid by him during the said period by such limit as may be prescribed; or by any registered person who, during such period as may be prescribed, has availed credit of input tax of an amount that exceeds the credit that can be availed by him in accordance with clause (a), by such limit as may be prescribed; or by any registered person, who has defaulted in discharging his tax liability in accordance with the provisions of sub-section (12) of section 49 subject to such conditions and restrictions as may be prescribed; or by such other class of persons as may be prescribed.

Section 39 (1) ……. (2) …… (3) …… (4) …… (5) Every registered non- resident taxable person shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, within 20 days after the end of a calendar month or within 7 days after the last day of the period of registration specified under

Section 39 (1) ……. (2) …… (3) ……. (4) ……. (5) Every registered non-resident taxable person shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, within 13 days after the end of a calendar month or within 7 days after the last day of the period of registration specified under

section 27(1), whichever is earlier. (6) …… (7) …… Provided that every registered person furnishing return under the proviso to sub-section (1) shall pay to the Government, the tax due taking into account inward and outward supplies of goods or services or both, input tax credit availed, tax payable and such other particulars during a month, in such form and manner, and within such time, as may be prescribed. (8) …… (9) Subject to the provisions of sections 37 and 38, if any registered person after furnishing a return under sub-section (1) or sub-

section 27(1), whichever is earlier. (6) …… (7) …… Provided that every registered person furnishing return under the proviso to sub-section (1) shall pay to the Government, in such form and manner, and within such time, as may be prescribed,–– an amount equal to the tax due taking into account inward and outward supplies of goods or services or both, input tax credit availed, tax payable and such other particulars during a month; or in lieu of the amount referred to in clause (a), an amount determined in such manner and subject to such conditions and restrictions as may be prescribed. (8) …… (9) Where any registered person after furnishing a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-

section (2) or sub-section (3) or sub-section (4) or sub- section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the return to be furnished for the month or quarter during which such omission or incorrect particulars in such form and manner as may be prescribed, subject to payment of interest under this Act: Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of return for the month of September or second quarter following the end of the financial year to which such details pertain, or the actual date of furnishing of relevant annual return, whichever is earlier. (10) A registered person shall not be allowed to furnish a return for a tax period if the return for any of the previous tax periods has not been furnished by him.

section (4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the return to be furnished for the month or quarter during which such omission or incorrect particulars in such form and manner as may be prescribed, subject to payment of interest under this Act: Provided that no such rectification of any omission or incorrect particulars shall be allowed after the 30th day of November following the end of the financial year to which such details pertain, or the actual date of furnishing of relevant annual return, whichever is earlier. (10) A registered person shall not be allowed to furnish a return for a tax period if the return for any of the previous tax periods or the details of outward supplies under sub- section (1) of section 37 for

	the said tax period has not been furnished by him: Provided that the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow a registered person or a class of registered persons to furnish the return, even if he has not furnished the returns for one or more previous tax periods or has not furnished the details of outward supplies under sub- section (1) of section 37 for the said tax period.
Section 41 has been substituted as follows: Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to avail the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited to his electronic credit ledger. The credit of input tax availed by a registered person under sub-section (1) in respect of such supplies of goods or services or both, the tax payable whereon has not been paid by the supplier, shall be reversed along with applicable interest, by the said person in such manner as may be prescribed: Provided that where the said supplier makes payment of the tax payable in respect of the aforesaid supplies, the said registered person may re-avail the amount of credit reversed by him in such manner as may be prescribed.
Sections 42, 43 and 43A have been omitted so as to do away with two-way communication process in return filing.

Section 42: Matching, reversal and reclaim of input tax credit Section 43: Matching, reversal and reclaim of reduction in output tax liability. Section 43A: Procedure for furnishing return and availing input tax credit
Section 47 (1) Any registered person who fails to furnish the details of outward or inward supplies required under section 37 or section 38 or returns required under section 39 or section 45 by the due date shall pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum amount of ` 5,000. (2) ………………..	Section 47 (1) Any registered person who fails to furnish the details of outward or inward supplies required under section 37 or section 38 or returns required under section 39 or section 45 or section 52 by the due date shall pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum amount of ` 5,000. (2) ………………..
Section 48 (1) ……….. (2) A registered person may authorise an approved goods and services tax practitioner to furnish the details of outward supplies under section 37, the details of inward supplies under section 38 and the return under section 39 or section 44 or section 45 and to perform such other functions in such manner as may be prescribed. (3) …………….	Section 48 (1) ……….. (2) A registered person may authorise an approved goods and services tax practitioner to furnish the details of outward supplies under section 37, the details of inward supplies under section 38 and the return under section 39 or section 44 or section 45 and to perform such other functions in such manner as may be prescribed. (3) …………….

Refund of GST can be claimed on submitting the attested copy of tax invoice by the UIN holder, if UIN is not mentioned therein [Rule 95 amended]

15

REFUNDS

UN bodies and other entities notified under section 55 can claim refund of the taxes paid by them on their notified inward supplies. Rule 95 contains the provisions relating to refund of such taxes paid on the notified inward supplies to specified specialized agency of UNO or Multilateral Financial Institution and Organisation specified under the United Nations (Privileges and Immunities) Act, 1947 or Consulate or Embassy of foreign countries or any other notified person/class of persons.

One of the conditions prescribed therein for sanction of refund is that name and GSTIN/UIN of the applicant is mentioned in the tax invoice [Sub-rule (3)]. A proviso has been inserted retrospectively, with effect from 01.04.2021, to said sub-rule to provide that where UIN of the applicant is not mentioned in a tax invoice, the refund of tax paid by the applicant on such invoice shall be available only if the copy of the invoice, duly attested by the authorised representative of the applicant, is submitted along with the refund application in prescribed form.

Thus, if UIN is not mentioned in the tax invoice, then refund shall be available to the applicant on submission of the attested copy of such invoice in the prescribed form.

[Notification No. 40/2021 CT dated 29.12.2021]

• 1. Clarification on certain refund related issues

Circular No. 166/22/2021 GST dated 17/12/2021 provides clarification on certain refund related issues as follows:-

Clarification with regard to refund of excess balance in the electronic cash ledger

• • • 1. No time period for filing refund claim

The provisions of section 54(1) regarding time period, within which an application for refund can be filed, would not be applicable in cases of refund of excess balance in electronic cash ledger.

No certificate/declaration required to establish that there is no unjust enrichment

In case of refund of excess balance in electronic cash ledger, neither a declaration by the applicant31 nor a certificate by a Chartered Accountant/ Cost Accountant32 is required to be furnished, to establish that there is no unjust enrichment (i.e. for not passing the incidence of tax to any other person).

TDS/TCS deposited in electronic cash ledger can be refunded as excess balance in cash ledger

The amount deducted/collected as TDS/TCS by TDS/TCS deductors under the provisions of sections 51/52 and credited to electronic cash ledger of the registered person, is equivalent to cash deposited in electronic cash ledger.

It is not mandatory for the registered person to utilise the TDS/TCS amount credited to his electronic cash ledger only for the purpose for discharging tax liability. The registered person is at full liberty to discharge his tax liability in respect of the supplies made by him during a tax period, either through debit in electronic credit ledger or through debit in electronic cash

31 A declaration by the applicant is otherwise required in a case where the amount of refund claimed does not exceed ` 2 lakh

32 A certificate by a Chartered Accountant/ Cost Accountant is otherwise required where the amount of refund claimed exceeds ` 2 lakh

ledger, as per his choice and availability of balance in the said ledgers.

Any amount, which remains unutilized in electronic cash ledger, after discharge of tax dues and other dues payable under the CGST Act and rules made thereunder, can be refunded to the registered person as excess balance in electronic cash ledger in accordance with the proviso to section 54(1) read with section 49(6).

Clarification on determination of relevant date for filing refund claim in case of deemed exports

It has been clarified that clause (b) of Explanation (2) under section 5433 is applicable for determining relevant date in respect of refund of amount of tax paid on the supply of goods regarded as deemed exports, irrespective of the fact whether the refund claim is filed by the supplier or by the recipient.

Further, as the tax on the supply of goods, regarded as deemed export, would be paid by the supplier in his return, therefore, the relevant date for purpose of filing of refund claim for refund of tax paid on such supplies would be the date of filing of return, related to such supplies, by the supplier.

In case of deficiency in refund application, limitation period of 2 years for making refund claim to exclude the time period from the date of filing of the refund claim till the date of communication of the deficiencies [Rule 90(3) amended]

The time period for making an application for claiming refund of tax, interest or any other amount is 2 years from the ‘relevant date’ [Section 54(1)].

Further, as per rule 90(3), where any deficiencies are noticed in the application for refund claim, the proper officer shall communicate the deficiencies to the applicant in Deficiency memo, requiring him to file a fresh refund application after rectification of such deficiencies.

33 Clause (b) of Explanation (2) under section 54 stipulates that in the case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the relevant date means the date on which the return relating to such deemed exports is furnished.

A proviso has been inserted to the said sub-rule to provide that the time period from the date of filing of the refund claim till the date of communication of the deficiencies in the prescribed form by the proper officer, shall be excluded from the period of ‘2 years’ as specified under section 54(1), in respect of any such fresh refund claim filed by the applicant after rectification of the deficiencies.

[Notification No. 15/2021 CT dated 18.05.2021]

• 1. Facility of withdrawal of refund application by taxpayer introduced [New sub-rules (5) and (6) inserted to rule 90]

Earlier the taxpayers had no option to withdraw their refund applications, if they had committed any mistakes, while filing the application. A functionality has now been implemented for the taxpayer [by inserting sub- rules (5) and (6) to rule 90], to withdraw an already filed refund application, by filing an application in prescribed form upto a specified time. Newly inserted sub-rules provide as follows:

The applicant may, at any time before issuance of provisional refund sanction order or final refund sanction order or payment order or refund withhold order or show-cause notice, in respect of any refund application filed, withdraw the said application for refund by filing an application in the prescribed form.

On submission of such withdrawal application, any amount debited by the applicant from electronic credit ledger or electronic cash ledger, as the case may be, while filing refund application, shall be credited back to the ledger from which such debit was made.

[Notification No. 15/2021 CT dated 18.05.2021]

• 1. Order for release of withheld refund to be issued where refund no longer liable to be withheld. Order for complete adjustment of demand for refund not required to be issued [Rule 92(1) and (2) amended]

Earlier, in case where refund is completely adjusted against any outstanding demand, an order giving details of the adjustment was issued [Proviso to rule 92(1)]. The said proviso has been omitted. Resultantly, no such order will now be issued.

Further, proviso to rule 92(2) has been inserted to provide that where the proper officer or the Commissioner is satisfied that the refund is no longer

liable to be withheld, he may pass an order for release of withheld refund in prescribed form.

[Notification No. 15/2021 CT dated 18.05.2021]

Only those goods on which some export duty has to be paid at the time of export to be covered under the restriction imposed under second proviso to section 54(3)

Whether second proviso to section 54(3)34, prohibiting refund of unutilized ITC is applicable in case of exports of goods which are having Nil rate of export duty?

The term ‘subjected to export duty’ means where the goods are actually leviable to export duty and suffering export duty at the time of export.

Therefore, goods in respect of which either Nil rate is specified in Second Schedule to the Customs Tariff Act, 1975 or which are fully exempted from payment of export duty by virtue of any customs notification or which are not covered under Second Schedule to the Customs Tariff Act, 1975, cannot be subjected to any export duty under Customs Tariff Act, 1975. Such goods would not be covered by the restriction imposed under the second proviso to section 54(3) for the purpose of availment of refund of accumulated ITC.

Accordingly, it is clarified that only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under said restriction.

[Circular No. 160/16/2021 GST dated 20.09.2021]

• 1. Amendments in rule 89 – Application for refund of tax, interest, penalty, fees or any other amount

Amended rule 89 reads as follows:

1. Any person, except the persons covered under notification issued under section 55 claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49 or35 any tax, interest, penalty, fees or any other amount

34 Second proviso to section 54(3) provides that no refund of unutilised ITC shall be allowed in cases where the goods exported out of India are subjected to export duty.

35 with effect from 01.10.2022 vide Notification No. 19/2022 CT dated 28.09.2022.

paid by him, other than refund of integrated tax paid on goods exported out of India, may file electronic cash ledger in accordance with the provisions of sub-section (6) of section 49 or subject to the provisions of rule 10B36 an application electronically in prescribed form through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.

Provided that any claim for refund relating to balance in the electronic cash ledger in accordance with the provisions of sub- section (6) of section 49 may be made through the return furnished for the relevant tax period in Form GSTR 3 or Form GSTR 4 or Form GSTR 7, as the case may be.37

Provided that38 in respect of supplies to a Special Economic Zone unit or a Special Economic Zone developer, the application for refund shall be filed by the –

• 1. supplier of goods after such goods have been admitted in full in the Special Economic Zone for authorised operations, as endorsed by the specified officer of the Zone;
  2. supplier of services along with such evidence regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone:

Provided further that39 in respect of supplies regarded as deemed exports, the application may be filed by, –

1. the recipient of deemed export supplies; or
2. the supplier of deemed export supplies in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund]

Provided also that refund of any amount, after adjusting the tax payable by the applicant out of the advance tax deposited by him under section 27 at the time of registration, shall be claimed in the last return required to be furnished by him.

36 with effect from 01.01.2022 vide Notification No. 35/2021 CT dated 24.09.2021 37 with effect from 01.10.2022 vide Notification No. 19/2022 CT dated 28.09.2022 38 with effect from 01.10.2022 vide Notification No. 19/2022 CT dated 28.09.2022 39 with effect from 01.10.2022 vide Notification No. 19/2022 CT dated 28.09.2022

Explanation—For the purposes of this sub-rule, “specified officer” means a “specified officer” or an “authorised officer” as defined under rule 2 of the Special Economic Zone Rules, 200640.

(1A) Any person, claiming refund under section 77 of the CGST Act of any tax paid by him, in respect of a transaction considered by him to be an intra-State supply, which is subsequently held to be an inter-State supply, may, before the expiry of a period of 2 years from the date of payment of the tax on the inter-State supply, file an application electronically in prescribed form through the common portal, either directly or through a Facilitation Centre notified by the Commissioner41. Please refer note given at the end for detailed explanation of this sub-rule**.

1. The application under sub-rule (1) shall be accompanied by any of the following documentary evidences, as applicable, to establish that a refund is due to the applicant, namely:-
   1. the reference number of the order and a copy of the order passed by the proper officer or an appellate authority or Appellate Tribunal or court resulting in such refund or reference number of the payment of the amount specified in sub-section

(6) of section 107 and sub-section (8) of section 112 claimed as refund;

• 1. a statement containing the number and date of shipping bills or bills of export and the number and the date of the relevant export invoices, in a case where the refund is on account of export of goods, other than electricity42;

(ba) a statement containing the number and date of the export invoices, details of energy exported, tariff per unit for export of electricity as per agreement, along with the copy of statement of scheduled energy for exported electricity by Generation Plants issued by the Regional Power Committee Secretariat as a part of the Regional Energy Account (REA) under clause (nnn) of sub-regulation 1 of Regulation 2 of the

40 vide Notification No. 14/2022 CT dated 05.07.2022

41 with effect from 24.09.2021 vide Notification No. 35/2021 CT dated 24.09.2021.

42 vide Notification No. 14/2022 CT dated 05.07.2022

Central Electricity Regulatory Commission (Indian Electricity Grid Code) Regulations, 2010 and the copy of agreement detailing the tariff per unit, in case where refund is on account of export of electricity43;

• 1. a statement containing the number and date of invoices and the relevant Bank Realisation Certificates or Foreign Inward Remittance Certificates, as the case may be, in a case where the refund is on account of the export of services;
  2. a statement containing the number and date of invoices as provided in rule 46 along with the evidence regarding the endorsement specified in the second proviso to sub-rule (1) in the case of the supply of goods made to a Special Economic Zone unit or a Special Economic Zone developer;
  3. a statement containing the number and date of invoices, the evidence regarding the endorsement specified in the second proviso to sub-rule (1) and the details of payment, along with the proof thereof, made by the recipient to the supplier for authorised operations as defined under the Special Economic Zone Act, 2005, in a case where the refund is on account of supply of services made to a Special Economic Zone unit or a Special Economic Zone developer;
  4. a declaration to the effect that tax has not been collected from the Special Economic Zone unit or the Special Economic Zone developer, in a case where the refund is on account of supply of goods or services or both made to a Special Economic Zone unit or a Special Economic Zone developer;
  5. a statement containing the number and date of invoices along with such other evidence as may be notified in this behalf, in a case where the refund is on account of deemed exports;
  6. a statement containing the number and the date of the invoices received and issued during a tax period in a case where the claim pertains to refund of any unutilised input tax credit under sub-section (3) of section 54 where the credit has accumulated on account of the rate of tax on the inputs being higher than the

43 vide Notification No. 14/2022 CT dated 05.07.2022

rate of tax on output supplies, other than nil-rated or fully exempt supplies;

• 1. the reference number of the final assessment order and a copy of the said order in a case where the refund arises on account of the finalisation of provisional assessment;
  2. a statement showing the details of transactions considered as intra-State supply but which is subsequently held to be inter- State supply;
  3. a statement showing the details of the amount of claim on account of excess payment of tax;
  4. a declaration to the effect that the incidence of tax, interest or any other amount claimed as refund has not been passed on to any other person, in a case where the amount of refund claimed does not exceed ` 2 lakh.

Provided that a declaration is not required to be furnished in respect of the cases covered under clause (a) or clause (b) or clause

• • 1. or clause (d) or clause (f) of sub-section (8) of section 54.
  1. a certificate issued by a chartered accountant or a cost accountant to the effect that the incidence of tax, interest or any other amount claimed as refund has not been passed on to any other person, in a case where the amount of refund claimed exceeds ` 2 lakh.

Provided that a certificate is not required to be furnished in respect of cases covered under clause (a) or clause (b) or clause

• • 1. or clause (d) or clause (f) of subsection (8) of section 54; Explanation. – For the purposes of this rule-

1. in case of refunds referred to in clause (c) of sub-section (8) of section 54, the expression “invoice” means invoice conforming to the provisions contained in section 31;
2. where the amount of tax has been recovered from the recipient, it shall be deemed that the incidence of tax has been passed on to the ultimate consumer.
3. Where the application relates to refund of input tax credit, the electronic credit ledger shall be debited by the applicant by an amount equal to the refund so claimed.
4. In the case of zero-rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provisions of section 16(3) of the IGST Act, 2017, refund of input tax credit shall be granted as per the following formula –

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷ Adjusted Total Turnover

Where, –

1. “Refund amount” means the maximum refund that is admissible;
2. “Net ITC” means input tax credit availed on inputs and input services during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both;
3. “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier, whichever is less, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both;
4. “Turnover of zero-rated supply of services” means the value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely:-

Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services and zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period;

1. “Adjusted Total Turnover” means the sum total of the value of-
   1. the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the turnover of services; and
   2. the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services,

excluding-

1. the value of exempt supplies other than zero-rated supplies; and
2. the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or sub-rule (4B) or both, if any, during the relevant period.
3. “Relevant period” means the period for which the claim has been filed.

Explanation–For the purposes of this sub-rule, the value of goods exported out of India shall be taken as –

1. the Free on Board (FOB) value declared in the Shipping Bill or Bill of Export form, as the case may be, as per the Shipping Bill and Bill of Export (Forms) Regulations, 2017; or
2. the value declared in tax invoice or bill of supply, whichever is less44.

(4A) In the case of supplies received on which the supplier has availed the benefit of Notification No. 48/2017 CT dated 18.10.2017, refund of ITC, availed in respect of other inputs or input services used in making zero-rated supply of goods or services or both, shall be granted.

(4B) Where the person claiming refund of unutilised input tax credit on account of zero rated supplies without payment of tax has –

1. received supplies on which the supplier has availed the benefit of Notification No. 40/2017 CT(R) dated 23.10.2017 or Notification No. 41/2017 IT(R) dated 23.10.2017; or

44 vide Notification No. 14/2022 CT dated 05.07.2022

1. availed the benefit of Notification No. 78/2017 Cus. dated 13.10.2017, or Notification No. 79/2017 Cus. dated 13.10.2017,

the refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods and the ITC availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted.

1. In the case of refund on account of inverted duty structure, refund of ITC shall be granted as per the following formula:-

Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC Adjusted Total Turnover} – {tax payable on such inverted rated supply of goods and services x (Net ITC ÷ ITC availed on inputs and input services)}45.

Explanation: – For the purposes of this sub-rule, the expressions –

• 1. “Net ITC” shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and

“Adjusted Total turnover” and “relevant period” shall have the same meaning as assigned to them in sub-rule (4).

**Note: Manner and conditions prescribed for refund under section 77 of the CGST Act and section 19 of the IGST Act

Section 77 of the CGST Act and section 19 of the IGST Act provides as under:

Where the taxpayer has initially paid IGST on a specific transaction which is later on held as intra-State supply and the taxpayer accordingly pays CGST and SGST/UTGST on the said transaction, he shall be granted refund of the amount of IGST so paid.

Where the taxpayer has initially paid CGST and SGST/UTGST on a specific transaction which is later on held as inter-State supply and the taxpayer accordingly pays IGST on the said transaction, he shall be granted refund of the amount of CGST and SGST/UTGST so paid.

As per newly inserted sub-section (1A) to section 89, any person, claiming refund of any tax paid under aforesaid provisions may file an application in

45 vide Notification No. 14/2022 CT dated 05.07.2022

prescribed form, before the expiry of a period of 2 years from the date of payment of the tax on said supply.

Thus, said refund can be claimed before the expiry of 2 years from the date of payment of tax under the correct head, i.e. IGST paid afterwards in respect of subsequently held inter-State supply, or CGST and SGST paid afterwards in respect of subsequently held intra-State supply, as the case may be. Refund would not be available where the taxpayer has made tax adjustment through issuance of credit note under section 34 in respect of the said transaction46.

Rule 95A omitted

Rule 95A contained the provisions relating to refund of taxes to the retail outlets established in departure area of an international Airport beyond immigration counters making tax free supply to an outgoing international tourist.

This rule has been omitted retrospectively effect from 01.07.2019. Owing to this omission, Circular No. 106/25/2019 GST dated 29.06.2019 has been withdrawn, wherein certain clarifications were given in relation to rule 95A.

[Notification No. 14/2022 CT dated 05.07.2022 read with Circular No. 176/08/2022 GST dated 06.07.2022]

• 1. Amendments carried out in rule 96 containing the provisions relating to refund of integrated tax paid on goods or services exported out of India

Amended rule 96 reads as follows:

1. The shipping bill filed by an exporter of goods shall be deemed to be an application for refund of IGST paid on the

Shipping Bill is refund application

goods exported out of India and such application shall be deemed to have been filed only when:-

• 1. the person in charge of the conveyance carrying the export goods duly files a departure manifest or an export manifest or an export report covering the number and the date of shipping bills or bills of export; and

46 Notification No. 35/2021 CT dated 24.09.2021 read with Circular No. 162/18/2021 GST dated 25.09.2021

the applicant has furnished a valid return in Form GSTR-3B.

Provided that if there is any mismatch between the data furnished by the exporter of goods in Shipping Bill and those furnished in statement of outward supplies in Form GSTR-1, such application for refund of IGST paid on the goods exported out of

India shall be deemed to have been filed on such date when such mismatch in respect of the said shipping bill is rectified by the exporter47.

• 1. the applicant has undergone Aadhaar authentication in the manner provided in rule 10B48

1. The details of the relevant export invoices in respect of export of goods contained in Form GSTR-1 shall be transmitted electronically by the common portal to the system designated by the Customs and the said system shall electronically transmit to the common portal, a confirmation that the goods covered by the said invoices have been exported out of India.

Provided that where the date for furnishing the details of outward supplies in Form GSTR-1 for a tax period has been extended in exercise of the powers conferred under section 37, the supplier shall furnish the information relating to exports as specified in Table 6A of Form GSTR-1 after the return in Form GSTR-3B has been furnished and the same shall be transmitted electronically by the common portal to the system designated by the Customs.

Provided further that the information in Table 6A furnished under the first proviso shall be auto-drafted in Form GSTR-1 for the said tax period.

47 Substituted for the words “the applicant has furnished a valid return in Form GSTR-3 or Form GSTR-3B, as the case may be,” retrospectively with effect from 01.07.2017 vide Notification No. 14/2022 CT dated 05.07.2022. Thus, reference to omitted Form GSTR-3 has been removed. 48 vide Notification No. 35/2021 CT dated 24.09.2021 with effect from 01.01.2022

1. Upon the receipt of the information regarding the furnishing of a valid return in Form GSTR-3B49 from the common portal, the system designated by the Customs or the proper officer of Customs, as the case may be, shall process the claim of refund in

respect of export of goods and an amount equal to the integrated tax paid in respect of each shipping bill or bill of export shall be electronically credited to the bank account of the applicant mentioned in his registration particulars and as intimated to the Customs authorities.

1. The claim for refund shall be withheld where,-
   1. a request has been received from the jurisdictional Commissioner of central tax, State tax or Union territory tax to withhold the payment of refund due to the person claiming refund in accordance with the provisions of sub-section (10) or sub-section (11) of section 54; or
   2. the proper officer of Customs determines that the goods were exported in violation of the provisions of the Customs Act, 1962; or

the Commissioner in the Board or an officer authorised by the Board, on the basis of data analysis and risk parameters, is of the opinion that verification of credentials of the exporter, including the availment of ITC by the exporter, is considered essential before grant of refund, in order to safeguard the interest of revenue50.

1. Where refund is withheld in accordance with the provisions of clause (a) of sub-rule (4), the proper officer of integrated tax at

49 Substituted for the words “Form GSTR-3 or Form GSTR-3B, as the case may be,” vide Notification No. 19/2022 CT dated 28.09.2022. This has been done to remove the reference to omitted Form GSTR-3.

50 retrospectively with effect from 01.07.2017 vide Notification No.14/2022 CT dated 05.07.2022

the Customs station shall intimate the applicant and the jurisdictional Commissioner of central tax, State tax or Union territory tax, as the case may be, and a copy of such intimation shall be transmitted to the common portal. 51

(5A) Where refund is withheld in accordance with the provisions of clause (a) or clause (c) of sub-rule (4), such claim shall be transmitted to the proper officer of Central tax, State tax or Union territory tax, as the case may be, electronically through the common portal in a system generated Form GST RFD-01 and the intimation of such transmission shall also be sent to the exporter electronically through the common portal, and notwithstanding anything to the contrary contained in any other rule, the said system generated form shall be deemed to be the application for refund in such cases and shall be deemed to have been filed on the date of such transmission.

(5B) Where refund is withheld in accordance with the provisions of clause (b) of sub-rule (4) and the proper officer of the Customs passes an order that the goods have been exported in violation of the provisions of the Customs Act, 1962, then, such claim shall be transmitted to the proper officer of Central tax, State tax or Union territory tax, as the case may be, electronically through the common portal in a system generated Form GST RFD-01 and the intimation of such transmission shall also be sent to the exporter electronically through the common portal, and notwithstanding anything to the contrary contained in any other rule, the said system generated form shall be deemed to be the application for refund in such cases and shall be deemed to have been filed on the date of such transmission.

(5C) The application for refund in Form GST RFD-01 transmitted electronically through the common portal in terms of sub-rules (5A) and (5B) shall be dealt in accordance with the provisions of rule 8952.

51 retrospectively with effect from 01.07.2017 vide Notification No.14/2022 CT dated 05.07.2022

52 retrospectively with effect from 01.07.2017 vide Notification No.14/2022 CT dated

Upon transmission of the intimation under sub-rule (5), the proper officer of central tax or State tax or Union territory tax, as the case may be, shall pass an order in Part A of Form GST RFD-07. 53

1. Where the applicant becomes entitled to refund of the amount withheld under clause (a) of sub-rule (4), the concerned jurisdictional officer of central tax, State tax or Union territory tax, as the case may be, shall proceed to refund the amount by passing an order in Form GST RFD-06 after passing an order for release of withheld refund in Part B of Form GST RFD-07. 54
2. The Central Government may pay refund of the IGST to the Government of Bhutan on the exports to Bhutan for such class of goods as may be notified in this behalf and where such refund is paid to the Government of Bhutan, the exporter shall not be paid any refund of the IGST.
3. The application for refund of IGST paid on the services exported out of India shall be filed in Form GST RFD-

01 and shall be dealt with in accordance with the provisions of rule 89.

1. Person claiming refund of IGST paid on export of goods/ services should not have:
2. received supplies on which the benefit of deemed exports55, except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods (EPCG) Scheme, has been availed or benefit of supply of goods to merchant exporters at the concessional rate of 0.1%56 has been availed, or

53 retrospectively with effect from 01.07.2017 vide Notification No.14/2022 CT dated 05.07.2022

54 retrospectively with effect from 01.07.2017 vide Notification No.14/2022 CT dated 05.07.2022

55 under Notification No. 48/2017 CT dated 18.10.2017 [discussed in detail in Chapter 14 – Import and Export under GST of Module 3 of the Study Material]

56 Notification Nos. 41/2017 IT(R) or 40/2017 CT(R) both dated 23.10.2017. These export benefits have been discussed in detail in Chapter 14 – Import and Export under GST of Module 3 of the Study Material.

1. availed the benefit of exemption from IGST and Compensation Cess, in respect of goods imported by EOU57 or for goods imported under Advance Authorisation (AA)58.

Explanation. – For the purpose of this sub-rule, the benefit of the notifications mentioned therein shall not be considered to have been availed only where the registered person has paid IGST and Compensation Cess on inputs and has availed exemption of only Basic Customs Duty (BCD) under the said notifications.

• 1. Clarification on various issues relating to refund claimed in respect of deemed export

Circular No. 172/04/2022 GST dated 06.07.2022 clarify issues with respect to refund claimed by the recipients of supplies regarded as deemed export as follows:-

Issue

Clarification

Whether ITC availed by

the recipient of deemed export

supply

for

claiming refund of tax paid

regarded

exports

on

as

supplies

deemed

would

be

subjected to provisions

of section 17?

The refund in respect of deemed export supplies is the refund of tax paid on such supplies. However, the recipients of deemed export supplies were facing difficulties on the portal to claim refund of tax paid due to requirement of the portal to debit the amount so claimed from their electronic credit ledger.

Considering this difficulty, the tax paid on such supplies, has been made available as ITC to the recipients vide Circular No. 147/03/2021 GST dated 12.03.2021 only for

enabling them to claim such refunds on the

57 under Notification No. 78/2017 Cus dated 13.10.2017.

58 under Notification No. 79/2017 Cus dated 13.10.2017.

portal. The ITC of tax paid on deemed export supplies, allowed to the recipients for claiming refund of such tax paid, is not ITC in terms of the provisions of Chapter V of the CGST Act, 2017. Therefore, the ITC so availed by the recipient of deemed export supplies would not be subjected to provisions of section 17.

Whether the ITC availed by the recipient of deemed export supply for claiming refund of tax paid on supplies regarded as deemed exports is to be included in the “Net ITC” for computation of refund of unutilised ITC under rule 89(4) & rule 89(5)?

The ITC of tax paid on deemed export supplies, allowed to the recipients for claiming refund of such tax paid, is not ITC in terms of the provisions of Chapter V of the CGST Act, 2017. Therefore, such ITC availed by the recipient of deemed export supply for claiming refund of tax paid on supplies regarded as deemed exports is not to be included in the “Net ITC” for computation of refund of unutilised ITC on account of zero-rated supplies under rule 89(4) or on account of inverted rated structure under rule 89(5).

Refund of accumulated ITC on account of inverted duty structure allowed in cases where rate of tax on outward supply is less than the rate of tax on inputs (same goods) at the same point of time

Circular No. 135/05/2020 GST dated 31.03.2020, issued earlier, had clarified that refund on account of inverted duty structure59 would not be admissible in cases where the input and output supply are same.

However, the intent of said clarification was not to cover those cases where the supplier is making supply of goods under a concessional notification and the rate of tax of output supply is less than the rate of tax on input

59 as per clause (ii) of first proviso to section 54(3)

supply (of the same goods) at the same point of time due to supply of goods by the supplier under such concessional notification.

Therefore, it is clarified that in such cases, refund of accumulated ITC on account of inverted duty structure would be allowed in cases where accumulation of ITC is on account of rate of tax on outward supply being less than the rate of tax on inputs (same goods) at the same point of time, as per some concessional notification issued by the Government providing for lower rate of tax for some specified supplies subject to fulfilment of other conditions.

The amended clarification is as follows:

It may be noted that refund of accumulated ITC is available where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies. It is noteworthy that, the input and output being the same in such cases, though attracting different tax rates at different points in time, do not get covered under the provisions of clause (ii) of the first proviso to section 54(3).

There may, however, be cases where though inputs and output goods are same but the output supplies are made under a concessional notification due to which the rate of tax on output supplies is less than the rate of tax on inputs.

In such cases, as the rate of tax of output supply is less than the rate of tax on inputs at the same point of time due to supply of goods by the supplier under such concessional notification, the credit accumulated on account of the same is admissible for refund under the provisions of clause (ii) of the first proviso to section 54(3), other than the cases where output supply is either Nil rated or fully exempted, and also provided that supply of such goods or services are not notified by the Government for their exclusion from refund of accumulated ITC under the said clause.

[Circular No. 173/05/2022 GST dated 06.07.2022]

• 1. Amendments in section 54 by the Finance Act, 2022

With effect from 01.10.2022, section 54 has been amended by the Finance Act, 2022 so as to:

1. explicitly provide that refund claim of any balance in the electronic cash ledger shall be made in such form and manner as may be prescribed;
2. extend the scope of withholding of or recovery from refunds in respect of all types of refund if any liability of the applicant is pending;
3. provide clarity regarding the relevant date for filing refund claim in respect of supplies made to a SEZ developer or a SEZ unit by way of insertion of a new sub-clause (ba) in clause (2) of Explanation thereto;

With effect from 01.10.2022, section 54(2) has also been amended by the Finance Act, 2022 to provide the time limit for claiming refund of tax paid on inward supplies of goods or services or both under section 55 as 2 years from the last day of the quarter in which the said supply was received.

However, earlier the time-limit provided under section 54(2) for making the refund claim was 6 months from the last day of the quarter in which such supply was received. This period of 6 months was increased to ‘18 months’, vide Notification No. 20/2018 CT dated 28.03.2018, in exercise of power granted under section 148.

However, since the time-limit has now been increased to 2 years, the above notification became redundant and thus, it has been rescinded60 with effect from 01.10.2022

The amendments in section 54 have been presented in the tabular form as follows:

Existing provisions	Provisions as amended by the Finance Act, 2022
Section 54 (1) ……. Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in the return furnished under section 39 in such	Section 54 (1) ……. Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub- section (6) of section 49, may claim such refund in such form and manner as may be

60 vide Notification No. 20/2022 CT dated 28.09.2022

manner as may be prescribed. (2) A specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries or any other person or class of persons, as notified under section 55, entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed, before the expiry of six months from the last day of the quarter in which such supply was received. (3) ……. (4) ……. (5) ……. (6) …… (7) ……. (8) ……. (9) ……. (10) Where any refund is due under sub-section (3) to a registered person who has defaulted in furnishing any return or who is required to

prescribed. (2) A specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries or any other person or class of persons, as notified under section 55, entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed, before the expiry of two years from the last day of the quarter in which such supply was received. (3) ……. (4) ……. (5) ……. (6) …… (7) ……. (8) ……. (9) ……. (10) Where any refund is due under sub-section (3) to a registered person who has defaulted in furnishing any return or who is required to

pay any tax, interest or penalty, which has not been stayed by any court, Tribunal or Appellate Authority by the specified date, the proper officer may… (11) ……. (12) ……. (13) ……. (14) ……. Explanation.— (1) ……. (2) ……. (a) ……. (b) …….

pay any tax, interest or penalty, which has not been stayed by any court, Tribunal or Appellate Authority by the specified date, the proper officer may… (11) ……. (12) ……. (13) ……. (14) ……. Explanation.— (1) ……. (2) ……. (a) ……. (b) ……. (ba) in case of zero-rated supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit where a refund of tax paid is available in respect of such supplies themselves, or as the case may be, the inputs or input services used in such supplies, the due date for furnishing of return under section 39 in respect of such supplies.

Frequency of filing Form GST ITC-04 revised from quarterly to annual/half-yearly

19

JOB WORK

Form GST ITC-04 serves as an intimation that is furnished by a registered manufacturer (principal) giving the details of goods/capital goods dispatched to/received from job workers.

Earlier, as per rule 45(3), Form GST ITC-04 was furnished

on a quarterly basis. Said form was to be furnished for said period, on or before 25th day of the month succeeding the said quarter or within such further period as may be extended by the Commissioner by a notification in this behalf.

With effect from 01.10.2021, rule 45(3) has been amended. Amended rule 45 reads as under:

The details of challans in respect of goods dispatched to a job worker or received from a job worker during the specified period shall be included in Form GST ITC-04 furnished for that period on or before 25th day of the month

succeeding the said period or within such further period as may be extended by the Commissioner by a notification in this behalf.

Provided that any extension of the time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.

Explanation – For the purposes of this sub-rule, the expression “specified period” shall mean. –

1. the period of 6 consecutive months commencing on 1st April and 1st October in respect of a principal whose aggregate turnover during the immediately preceding financial year exceeds ` 5 crore; and
2. a financial year in any other case.

Thus, now Form GST ITC-04 is required to be furnished by the principal on annual/half yearly basis, depending upon the quantum of his aggregate turnover during immediately preceding financial year.

In respect of a principal whose aggregate turnover during the immediately preceding FY

> ` 5 crore

≤ ` 5 crore

Form GST ITC-04 is required to be furnished

on half yearly basis, i.e., for April- September, due date will be 25th October and for October-March, due date will be 25th April

on annual basis, i.e., for FY 2021-22, due date will be 25th April, 2022.

The aforesaid amendment can also be presented in the following manner-

Aggregate turnover of principal during preceding F.Y.

upto ` 5 crore

greater than ` 5 crore

Form GST ITC-04 to be filed on

annual basis

half yearly basis

Due date(s) for filing Form GST ITC-04

25th April

25th October & 25th April

[Notification No. 35/2021 CT dated 24.09.2021]

• 1. Proceedings under sections 129 and 130 delinked from proceedings under sections 73 and 74

19

DEMANDS AND RECOVERY

Earlier, as per clause (ii) of Explanation 1 to section 74, where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122 (penalty for specified offences), 125 (general penalty), 129 (detention, seizure and release of goods and conveyances in transit) and 130 (confiscation of goods or conveyances and levy of penalty) are deemed to be concluded.

With effect from 01.01.2022, the said clause has been amended by the Finance Act, 2021. As per the amended position, on conclusion of proceedings under section 73/section 74, the proceedings under sections 122 and 125 will be deemed to be concluded but not the proceedings under sections 129 and 130.

This makes detention, seizure and confiscation of goods and conveyances in transit a separate proceeding from recovery of tax.

Self-assessed tax to include tax payable on outward supplies furnished in GSTR-1 but not included in return under section 39 [Section 75(12) amended]

Section 75(12) provides where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, there is no need to issue show cause notice and it can be directly recovered under section 79.

With effect from 01.01.2022, an explanation has been inserted to the said sub-section (12) by the Finance Act, 2021 to clarify that the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.

Thus, the scope of the term “self-assessed tax” has been widened and henceforth the recovery proceedings can straight away be initiated by the proper officer for the outward supplies shown in the Form GSTR-1, if not reflecting in Form GSTR-3B. In other words, where the tax payable in respect of details of outward supplies furnished in Form GSTR-1, has not been paid through Form GSTR-3B, either wholly/partly, or any amount of interest payable on such tax remains unpaid, then in such cases, the tax short paid on such self-assessed and thus self-admitted liability, and the interest thereon, are liable to be recovered under section 79.

However, the difference/mis-match between details of Form GSTR-1 and Form GSTR-3B may arise due genuine reasons:

for instance,

• a typographical error/wrongly reported details in GSTR-1 or GSTR-3B which may be rectified in subsequent GSTR-1 or GSTR-3B, or
• where a supply could not be declared in GSTR-1 of an earlier tax period, though the tax on the same was paid by correctly reporting the same in GSTR-3B of said tax period; details may now be reported in the GSTR-1 of the current tax period.

Therefore, Instruction No. 01/2022 GST dated 07/01/2022 provides that in case of mis-match between GSTR-1 and GSTR-3B, the proper officer may first send a communication to the registered person to pay the self- assessed tax short paid/not paid, or to explain the reasons for the same, within a reasonable time prescribed in the communication.

Recovery proceedings under section 79 will be initiated by the proper officer only when the said person either (i) fails to reply to the proper officer, or (ii) fails to make the payment of such amount short paid/not paid within the prescribed time or (iii) fails to explain the reasons for such amount short paid/not paid.

Commissioner empowered to invoke provisional attachment after initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV and also against person specified in section 122(1A) [Section 83(1) and rule 159 amended]

Section 83 contains provisions relating to provisional attachment to protect revenue in specified cases.

With effect from 01.01.2022, sub-section (1) to section 83 has been substituted by the Finance Act, 2021 to provide that where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV61, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed.

Earlier, the Commissioner was empowered to invoke provisional attachment only during the pendency of proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 7462. However, as a result of the aforesaid amendment, property including bank account can now be attached provisionally at any time after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV. Further, now the property of a person specified in section 122(1A)63 can also be provisionally attached apart from the taxable person.

Thus, the powers of Commissioner to invoke provisional attachment have widened.

61 Chapter XII – Assessment; Chapter XIV – Inspection, Search, Seizure and Arrest; Chapter XV – Demands and Recovery

62 Section 62 – Assessment of non-filers of returns; Section 63 – Assessment of unregistered persons; Section 64 – Summary assessment in certain special cases; Section 67 – Power of inspection, search and seizure; Section 73 and Section 74 – Determination of tax not paid/short paid or erroneously refunded or ITC wrongly availed/utilised (i) for any reason other than fraud or any willful-misstatement or suppression of facts and (ii) for by reason of fraud or any willful- misstatement or suppression of facts.

63 Person specified in section 122(1A) is any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of section 122(1) and at whose instance such transaction is conducted.

Since property of a person specified in section 122(1A) can also be provisionally attached apart from the taxable person, consequential amendments have been carried out in rule 15964.

Further, earlier the person whose property is attached could file an objection to such attachment within 7 days of the attachment. However, said provision has been amended by aforesaid notification to provide that the objections to such attachment can be filed at any time. Further, amendment in rule 159 is also effective from 01.01.2022. Further, a copy of the order of provisional attachment of the property including bank account shall also be sent to the person whose property is being attached.

Clarification in respect of refund of tax specified in section 77 of the CGST Act and section 19 of the IGST Act65

It is clarified that the term “subsequently held” in said sections covers both the cases where the inter-State or intra-State supply made by a taxpayer, is either subsequently found by taxpayer himself as intra-State or inter- State respectively or where the inter-State or intra-State supply made by a

64 vide Notification No. 40/2021 CT dated 29.12.2021 with effect from 01.01.2022

65 Section 77 of the CGST Act, 2017 contains the provisions regarding tax wrongfully collected and paid to Central Government or State Government. It provides that a registered person who has paid the Central tax and State tax or, as the case may be, the Central tax and the Union territory tax on a transaction considered by him to be an intra-State supply, but which is subsequently held to be an inter-State supply, shall be refunded the amount of taxes so paid in such manner and subject to such conditions as may be prescribed.

A registered person who has paid integrated tax on a transaction considered by him to be an inter-State supply, but which is subsequently held to be an intra-State supply, shall not be required to pay any interest on the amount of central tax and State tax or, as the case may be, the Central tax and the Union territory tax payable.

Similar provisions are contained in section 19 of the IGST Act, 2017. It provides that a registered person who has paid integrated tax on a supply considered by him to be an inter- State supply, but which is subsequently held to be an intra-State supply, shall be granted refund of the amount of integrated tax so paid in such manner and subject to such conditions as may be prescribed.

A registered person who has paid central tax and State tax or Union territory tax, as the case may be, on a transaction considered by him to be an intra-State supply, but which is subsequently held to be an inter-State supply, shall not be required to pay any interest on the amount of integrated tax payable.

taxpayer is subsequently found/ held as intra-State or inter-State respectively by the tax officer in any proceeding, for instance, scrutiny/ assessment/ audit/ investigation, or as a result of any adjudication, appellate or any other proceeding. Accordingly, refund claim under the said sections can be claimed by the taxpayer in both the above-mentioned situations, provided the taxpayer pays the required amount of tax in the correct head.

Clarification on various issues relating to applicability of demand and penalty provisions under CGST Act in respect of transactions involving fake invoices

A number of cases have been noticed where the registered persons are found to be involved in issuing tax invoice (fake invoices), without actual supply of goods or services or both, in order to enable the recipients of such invoices to avail and utilize ITC fraudulently.

Circular No. 171/03/2022 GST dated 06.07.2022 clarifies the applicability of demand and penalty provisions under the CGST Act, in respect of such transactions involving fake invoices as follows:

Sl. No.	Issues	Clarification
1.	In case where a registered person “A” has issued tax invoice to another registered person “B” without any underlying supply of goods or services or both, whether such transaction will be covered as supply under section 7? whether any demand and recovery can be made from ‘A’ in respect of the said transaction under the provisions of section 73 or	Since there has only been an issuance of tax invoice by the registered person ‘A’ to registered person ‘B’ without the underlying supply of goods or services or both, therefore, such an activity does not satisfy the criteria of “supply”, as defined under section 7. As there is no supply by ‘A’ to ‘B’ in respect of such tax invoice in terms of the provisions of section 7, no tax liability arises against ‘A’ for the said transaction, and accordingly, no demand and

	section 74? (iii) whether any penal action can be taken against registered person ‘A’ in such cases?	recovery is required to be made against ‘A’ under the provisions of section 73/section 74 in respect of the same. Besides, no penal action under the provisions of section 73/section 74 is required to be taken against ‘A’ in respect of the said transaction. The registered person ‘A’ shall, however, be liable for penal action under section 122(1)(ii) for issuing tax invoices without actual supply of goods or services or both.
2.	A registered person “A” has issued tax invoice to another registered person “B” without any underlying supply of goods or services or both. ‘B’ avails ITC on the basis of the said tax invoice. B further issues invoice along with underlying supply of goods or services or both to his buyers and utilizes ITC availed on the basis of the above mentioned invoices issued by ‘A’, for payment of his tax liability in respect of his said outward supplies. Whether ‘B’ will be liable	Since the registered person ‘B’ has availed and utilized fraudulent ITC on the basis of the said tax invoice, without receiving the goods or services or both, in contravention of the provisions of section 16(2)(b), he shall be liable for the demand and recovery of the said ITC, along with penal action, under the provisions of section 74, along with applicable interest under provisions of section 50. Further, as per provisions of section 75(13), if penal action for fraudulent availment or utilization of ITC is taken against ‘B’ under section 74, no penalty for the same act, i.e. for the said

	for the demand and recovery of the said ITC, along with penal action, under the provisions of section 73/section 74 or any other provisions of the CGST Act?	fraudulent availment or utilization of ITC, can be imposed on ‘B’ under any other provisions of the CGST Act, including under section 122.
3.	A registered person ‘A’ has issued tax invoice to another registered person ‘B’ without any underlying supply of goods or services or both. ‘B’ avails ITC on the basis of the said tax invoice and further passes on the said ITC to another registered person ‘C’ by issuing invoices without underlying supply of goods or services or both. Whether ‘B’ will be liable for the demand and recovery and penal action, under the provisions of section 73 or section 74 or any other provisions of the CGST Act.	In this case, the ITC availed by ‘B’ in his electronic credit ledger on the basis of tax invoice issued by ‘A’, without actual receipt of goods or services or both, has been utilized by ‘B’ for passing on of ITC by issuing tax invoice to ‘C’ without any underlying supply of goods or services or both. As there was no supply of goods or services or both by ‘B’ to ‘C’ in respect of the said transaction, no tax was required to be paid by ‘B’ in respect of the same. The ITC availed by ‘B’ in his electronic credit ledger on the basis of tax invoice issued by ‘A’, without actual receipt of goods or services or both, is ineligible in terms of section 16(2)(b). In this case, there was no supply of goods or services or both by ‘B’ to ‘C’ in respect of the said transaction and also no tax was required to be paid in respect of

the said transaction.

Therefore, in these specific cases, no demand and recovery of either input tax credit wrongly/ fraudulently availed by ‘B’ in such case or tax liability in respect of the said outward transaction by ‘B’ to ‘C’ is required to be made from ‘B’ under the provisions of section 73/section 74.

However, in such cases, ‘B’ shall be liable for penal action both under section 122(1)((ii) and section 122(1)(vii), for issuing invoices without any actual supply of goods and/or services as also for taking/ utilizing input tax credit without actual receipt of goods and/or services.

The fundamental principles that have been outlined in the above scenarios may be adopted to decide the nature of demand and penal action to be taken against a person for such unscrupulous activity. Actual action to be taken against a person will depend upon the specific facts and circumstances of the case which may involve a complex mixture of above scenarios or even may not be covered by any of the above scenarios.

Any person who has retained the benefit of transactions specified under section 122(1A), and at whose instance such transactions are conducted, shall also be liable for penal action under section 122(1A).

It may also be noted that in such cases of wrongful/ fraudulent availment or utilization of ITC, or in cases of issuance of invoices without supply of goods or services or both, leading to wrongful availment or utilization of ITC or refund of tax, provisions of section 132 may also be invokable, subject to conditions specified therein, based on facts and circumstances of each case.

Clarification on the legal position of voluntary payment of taxes during the course of inspection, search or investigation

During the course of search, inspection or investigation, sometimes the taxpayers opt for deposit of their partial/full GST liability arising out of the issue pointed out by the Department during the course of such search, inspection or investigation. Instances have been noticed where some of the taxpayers after voluntarily depositing GST liability have alleged use of force and coercion by the officers for making recovery during the course of search, inspection or investigation.

Consequently, the legal position of voluntary payment of taxes has been clarified for ensuring correct application of law and for protecting the interest of the taxpayers.

Under the CGST Act, the taxpayers have an option to make voluntary payment of tax. Such voluntary payment of tax before issuance of show cause notice is permitted under section 73(5) and section 74(5). This helps the taxpayers in discharging their admitted liability, self-ascertained or as ascertained by the tax officer, without having to bear the burden of interest under section 50 for delayed payment of tax and may also save him from higher penalty imposable on him subsequent to issuance of show cause notice under section 73 or section 74, as the case may be.

Recovery of taxes not paid or short paid, can be made under the provisions of section 79 only after following due legal process of issuance of notice and subsequent confirmation of demand by issuance of adjudication order. Therefore, there may not arise any situation where “recovery” of the tax dues has to be made by the tax officer from the taxpayer during the course of search, inspection or investigation, on account of any issue detected during such proceedings.

However, the law does not bar the taxpayer from voluntarily making payment of any tax liability ascertained by him or the tax officer in respect of such issues, either before or during the course of such proceedings or subsequently. The tax officer should however, inform the taxpayers regarding the provisions of voluntary tax payments.

[Instruction No. 01/2022-23 [GST-Investigation] dated 25.05.2022]

• • 1. Detained/seized goods and conveyance to be released merely on payment of penalty; time limit of 7 days prescribed for issuing notice and order for penalty; section 129 delinked from section 130 [Section 129 amended and new rule 144A inserted]

20

OFFENCES AND PENALTIES

Section 129 which provides for detention, seizure and release of goods and conveyances in transit has been amended with effect from 01.01.2022 by the Finance Act, 2021.

Earlier, tax, interest and penalty were required to be paid for the release of the goods detained/seized.

Post amendment, only penalty is payable for release of such goods but amount of penalty is now higher.

The amendments made in section 129 have been explained below:

Only penalty needs to be paid for release of detained/seized goods; penalty has also been enhanced [Section 129(1)]

	Erstwhile Provisions	Provisions as amended by the Finance Act, 2021
	Detained/seized goods and conveyance (used as a means of transport for carrying said goods) and related documents shall be released on payment of:	Detained/seized goods and conveyance (used as a means of transport for carrying said goods) and related documents shall be released on payment of:
When owner of goods comes forward for payment of tax and penalty or for payment of penalty [Section 129(1)(a)]:
Taxable goods	100% tax + penalty equal to 100% of tax payable	Penalty equal to 200% of tax payable
Exempted goods	Lower of the following: 2% of the value of goods or  ` 25,000	Lower of the following: 2% of the value of goods or  ` 25,000
When owner of goods does not come forward for payment of tax and penalty or for payment of penalty [Section 129(1)(b)]:
Taxable goods	Applicable tax + penalty equal to 50% of value of goods reduced by tax paid thereon	Penalty equal to higher of the following 50% of value of goods or 200% of the tax payable on such goods

Exempted goods

Lower of 5% of the value of goods or ` 25,000

Lower of 5% of the value of goods or ` 25,000

1. Detained/seized goods or conveyances not to be released on provisional basis [Section 129(2)]

Earlier, sub-section (2) provided that the detained/seized goods or conveyances shall be released, on a provisional basis, upon execution of a bond and furnishing of prescribed security, or on payment of applicable tax, interest and penalty payable, as the case may be. The said sub-section has been omitted.

This implies that the detained/seized goods or conveyances shall not be released on provisional basis upon execution of bond and furnishing of security.

Time limit of 7 days prescribed for issuing notice as well as for passing order for payment of penalty [Section 129(3)]

Earlier, sub-section (3) provided that the proper officer detaining/ seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).

The said sub-section has been substituted by the Finance Act, 2021 as follows:

The proper officer detaining/seizing goods or conveyance shall issue a

notice

within 7 days of such detention/seizure, specifying the penalty

payable. Thereafter, the proper officer shall pass an within a period

order

of 7 days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1) [as mentioned in point (i) above].

Thus, time-limit of 7 days each has been prescribed for issue of notice and passing of order for payment of penalty after detention/seizure of goods/conveyances whereas earlier, no time-limit was prescribed for the same.

Proceedings under section 129 delinked from the proceedings under section 130 [Section 129(6)]

Earlier, sub-section (6) provided that in case where the transporter/owner of the goods fails to pay the specified amount of tax and penalty within 14 days of such detention/seizure, such conveyance or goods would be liable to confiscation as per section 130.

The said sub-section has been substituted by the Finance Act, 2021 as follows:

Where the person transporting any goods/ owner of such goods fails to pay the specified amount of penalty within 15 days from the date of receipt of the copy of the order levying penalty, the goods or conveyance so detained/seized shall be liable to be sold or disposed of otherwise, in the prescribed time and manner, to recover the penalty so payable.

The manner of sale/disposal of the goods or conveyance so detained/seized for recovery of penalty has been prescribed in newly inserted rule 144A66.

Moreover, rule 154 (which earlier prescribed the sequence of appropriation of the proceeds of sale of goods and movable/immovable property for recovery of dues from defaulter) has been substituted67 to also provide the sequence of appropriation of the amounts realized from the sale of goods or conveyance for recovery of penalty payable under section 129(3). The substituted rule 154 has been given in detail in a separate heading subsequently in this chapter.

However, where the detained/seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of 15 days68 may be reduced by the proper officer.

Thus now, in case of failure of payment of penalty within 15 days of receipt of penalty order, said goods or conveyance shall be liable to be sold/disposed of.

66 vide Notification No. 40/2021 CT dated 29.12.2021 67 vide Notification No. 40/2021 CT dated 29.12.2021 68 Earlier, period of 14 days was prescribed here.

Further, now, the transporter can get the conveyance released on payment of:

• • penalty under sub-section (3) or
  • ` 1 lakh

whichever is less.

Consequential amendment

It has been already mentioned that earlier, tax, interest and penalty were payable for release of the goods detained/seized whereas under the amended provision, only penalty is required to be paid for release of such goods.

Consequential amendment has been made in sub-section (4) which now stipulates that no penalty69 shall be determined without giving the person concerned the opportunity of being heard.

Proceedings under section 130 delinked from proceedings under section 129 [Section 130 amended]

Section 130 relating to confiscation of goods or conveyances and levy of penalty has been amended as follows by the Finance Act, 2021 with effect from 01.01.2022, to delink its proceedings from the proceedings under section 129 relating to detention, seizure and release of goods and conveyances in transit:

• • • 1. Non-obstante clause removed i.e. section 130 will no more have overriding effect over the other provisions of the Act. [Sub-section (1) amended].
      2. The officer adjudging the confiscation gives to the owner of the goods an option to pay in lieu of confiscation, such fine as the said officer thinks fit [Sub-section (2)]. Earlier, second proviso to sub-section (2) provided that the aggregate of such fine and penalty leviable shall not be less than amount of penalty leviable under section 129(1).

69 Earlier words “tax, interest and penalty” were used here.

Since section 129 has now been delinked from section 130, said proviso has been suitably amended to provide that the aggregate of fine and penalty leviable shall not be less than the penalty equal to 100% of the tax payable on such goods.

• • • 1. Sub-section (3) has been omitted70, so as to remove requirement of paying tax, penalty and charges payable in respect of confiscated goods or conveyance, in addition, to fine imposed for the same under section 130(2).

Disposal of proceeds of sale of goods or conveyance and movable or immovable property [Rule 154 substituted]

Rule 154 which earlier prescribed the sequence of appropriation of the proceeds of sale of goods and movable/immovable property has been subtituted71 to also provide the sequence of appropriation of the amounts realized from the sale of goods or conveyance for recovery of penalty payable under section 129(3).

The substituted rule 154 has been given as under:

1. The amounts so realised from the sale of goods or conveyance, movable or immovable property, for the recovery of dues from a defaulter or for recovery of penalty payable under section 129(3) shall,-
   1. first, be appropriated against the administrative cost of the recovery process;
   2. next, be appropriated against the amount to be recovered or to the payment of the penalty payable under section 129(3), as the case may be;
   3. next, be appropriated against any other amount due from the defaulter under the CGST Act/IGST Act/UTGST Act/any of the

70 Sub-section (3) of section 130 earlier provided that where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in sub-section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance.

71 vide Notification No. 40/2021 CT dated 29.12.2021

SGST Act and the rules made thereunder; and

the balance, if any, shall be credited to the electronic cash ledger of the owner of the goods or conveyance as the case may be, in case the person is registered under the GST law, and where the said person is not required to be registered under the GST law, the said amount shall be credited to the bank account of the person concerned;

1. where it is not possible to pay the balance of sale proceeds, as per clause (d) of sub-rule (1), to the person concerned within a period of 6 months from the date of sale of such goods or conveyance or such further period as the proper officer may allow, such balance of sale proceeds shall be deposited with the Fund.

[Notification No. 40/2021 CT dated 29.12.2021]

1. Pre-deposit amount for filing appeal to AA against penalty order passed for release of detained/seized goods and conveyance in transit is of 25% of the penalty [Section 107(6) amended]

22

APPEALS AND REVISION

As per section 107(6), the amount of pre-deposit to be made by appellant for filing the appeal to the Appellate Authority (AA) is computed as under-

• 1. Full amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by appellant, and
  2. 10% of the remaining amount of tax in dispute arising from the impugned order, subject to a maximum of ` 25 crore (` 50 crore in case of IGST).

With effect from 01.01.2022, a proviso has been inserted to sub-section

(6) by the Finance Act, 2021, that no appeal shall be filed to (AA) against an order under section 129(3)72, unless a sum equal to 25% of the penalty has been paid by the appellant.

72 Amendment in section 129(3) has been discussed in detail earlier in Chapter 21 – Offences and Penalties.

This amendment is subsequent to the amendment in section 129(3) which provides that in case of detention/seizure of goods and conveyance during transit, only penalty is payable for release of the goods.

Consequently, aforesaid proviso has been inserted which provides that in case of appeal filed against penalty order passed for release of detained/seized goods and conveyance, pre-deposit amount shall be 25% of the penalty.

Jurisdictional commissioner to call for information from any person relating to any matters dealt with in connection with the Act [Section 151 substituted and section 168 amended]

24

MISCELLANEOUS

PROVISIONS

With effect from 01.01.2022, section 151 has been substituted by the Finance Act, 2021 to provide that the Commissioner or an officer authorised by him may, by an order, direct any person to furnish information relating to any matter dealt with in connection with this Act, within such time, in such form, and in such manner, as may be specified therein.

Earlier, the Commissioner was required to issue a notification to call for information from the concerned persons relating to any matter in respect of which statistics were to be collected.

Section 168 – Power to issue instructions or directions – amended

Following amendments have been carried out in section 168 by the Finance Act, 2021 and Finance Act, 2022:

• 1. Consequent to amendment in section 151 as discussed above, with effect from 01.01.2022, section 168 has also been appropriately amended so as to enable the jurisdictional commissioner to exercise powers under section 151 to call for information.
  2. Owing to substitution of section 44, with effect from 01.01.2022, section 168 has been accordingly amended.
  3. Consequent to the amendment in section 38, with effect from 01.10.2022, sub-section (2) of section 168 has been amended so as to remove reference to section 38 therefrom.

Amended section 168(2) read as follows:

The Commissioner specified in clause (91) of section 2, sub-section (3) of section 5, clause (b) of sub-section (9) of section 25, sub-sections (3) and (4) of section 35, sub-section (1) of section 37, sub-section (2) of section 38, sub-section (6) of section 39, sub-section (1) of section 44, sub-sections (4)

and (5) of section 52, sub-section (1) of section 143, except the second proviso thereof, sub-section (1) of section 151, clause (l) of sub-section (3) of section 158 and section 167 shall mean a Commissioner or Joint Secretary posted in the Board and such Commissioner or Joint Secretary shall exercise the powers specified in the said sections with the approval of the Board.

No information obtained under sections 150 and 151 be used for the purposes of any proceedings under the CGST Act unless an opportunity of being heard provided to the person concerned [Section 152]

With effect from 01.01.2022, sub-section (1) of section 152 has been amended by the Finance Act, 2021 to provide that no information obtained under sections 150 and 151 shall be used for the purposes of any proceedings under the CGST Act without giving an opportunity of being heard to the person concerned.

Amended section 152(1) provides as follows:

No information of any individual return or part thereof with respect to any matter given for the purposes of section 150 or section 151 shall, without the previous consent in writing of the concerned person or his authorised representative, be published in such manner so as to enable such particulars to be identified as referring to a particular person and no such information shall be used for the purpose of any proceedings under this Act.

Further, consequent to amendment in section 151, sub-section (2) of section 152 which prohibits the access to any information/individual return (referred to in section 151) to any person not engaged in the collection/ compilation/ computerisation of statistics under GST law, except for the purposes of prosecution, has been omitted with effect from 01.01.2022.

Tenure of National Anti-profiteering Authority increased to 5 years from 4 years [Rule 137 amended]

National Anti-profiteering Authority was constituted by the Central Government to examine whether input tax credits availed by any registered person or the reduction in the tax rate had actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him, this was to ensure that the consumer was protected from arbitrary price increase in the name of GST. The authority was established under section 171. Rule 137 specified the tenure of the said authority.

Initially, it was set up on 01.12.2017 for 2 years till 2019, but was later extended till November 2021.

Rule 137 was amended with effect from 30.11.2021, to extend the tenure of the Authority to 5 years from 4 years, from the date on which the Chairman enters upon his office (unless the Council recommends otherwise), in view of the pendency of the cases. Thus, the term of such authority was extended till 30.11.202273.

[Notification No. 37/2021 CT dated 01.12.2021]

73 With effect from 01.12.2022, rule 137 has been omitted vide Notification No. 24/2022 CT dated 23.11.2022. As per the decision by the GST Council, National Anti-profiteering Authority has ceased to exist from 01.12.2022. Henceforth, all investigations, based on complaints filed by consumers, will be done by the Directorate General of Anti-profiteering (DGAP) which will then submit a report to Competition Commission of India (CCI).

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155

PART II: CUSTOMS & FOREIGN TRADE POLICY

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Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022

1

LEVY OF AND EXEMPTIONS FROM CUSTOMS DUTY

With effect from 09.09.2022, CBIC vide Notification No. 74/2022 Cus (N.T.) dated 09.09.2022 has superseded the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.

These rules shall apply where:

1. a notification provides for the observance of these rules;
2. an importer intends to avail the benefit of any notification and such benefit is dependent upon the use of the goods imported being covered by that notification for the manufacture of any commodity or provision of output service or being put to a specified end use.

Important Definitions

1. “Act” means the Customs Act, 1962.
2. “capital goods” means goods, the value of which is capitalized in the books of account of the importer;
3. “customs automated system” means the Indian Customs Electronic Data Interchange System;
4. “date of import” means the date of the order made by the proper officer under section 47, permitting clearance of the goods;
5. “Form” means a form annexed to these rules;
6. “information” means the information provided by the importer who intends to avail the benefit of a notification;
7. “job work” means any treatment, process or manufacture, consistent with the notification undertaken by a person on goods belonging to the importer except gold, jewellery and articles thereof, and other precious metals or stones and the term “job worker” shall be construed accordingly;
8. “jurisdictional Custom Officer” means an officer of Customs of a rank equivalent to the rank of Superintendent or Appraiser exercising jurisdiction over –
   1. the premises where either the goods imported shall be put to use for manufacture or for rendering output services;
   2. the primary address specified in the Importer Exporter Code issued by Directorate General of Foreign Trade in other cases;
9. “manufacture” means the processing of raw materials or inputs by the importer in any manner that results in emergence of a new product having a distinct nature or character or use or name; and the term “manufacturer” shall be construed accordingly;
10. “notification” includes any notification issued under sub-section (1) of section 25 and section 11 of the Act;
11. “output service” means supply of service excluding after-sales service, utilising imported goods.
12. “section” means a section of the Customs Act.
13. “specified end use” means dealing with the goods imported in a manner specified in the notification and includes supply to the intended person and the term “end use recipient” shall be construed accordingly.

Note – The words and expressions used in these rules and not defined but defined in the Customs Act shall have the same meanings as assigned to them in the Customs Act.

Importer to give one-time prior information [Rule 4]

• 1. The importer shall provide one-time prior information on the common portal, in prescribed form containing the following particulars, namely: —
     1. the name and address of the importer and his job worker, if any;
     2. the goods produced or process undertaken at the manufacturing facility of the importer or his job worker, if any, or both;
     3. the nature and description of goods imported used in the manufacture of goods at the premises of the importer or the job worker, if any;
     4. particulars of the notification applicable on such import;
     5. nature of output service rendered utilising the goods imported;
     6. particulars of premises intended to be used in case of unit transfer;
     7. details of the end use recipient in cases where goods imported are supplied for specified end use; and
     8. the intended ports of import.
  2. On acceptance of the information, an Import of Goods at Concessional Rate of Duty (IGCR) Identification Number (IIN) shall be generated against such information.

However, such information may be updated on the common portal in case of a change in the details furnished in prescribed form.

• 1. The importer who intends to avail the benefit of a notification shall submit a continuity bond with such surety or security as deemed appropriate by the Deputy Commissioner/Assistant Commissioner of Customs having jurisdiction over the premises where the goods imported shall be put to use for manufacture of goods or for rendering output service or being put to use for a specified end use, with an undertaking to pay-

1. in case of a notification that provides a duty exemption, the amount equal to the difference between the duty leviable on inputs but for the exemption and that already paid, if any, at the time of import, along with interest, at the rate fixed by notification issued under section 28AA74, for the period starting from the date of import of the goods on which the exemption was availed and ending with the date of actual payment of the entire amount of the difference of duty that he is liable to pay ;

74 Section 28AA contains provisions relating to interest on delayed payment of duty

1. in all cases where the notification is other than one that provides an exemption benefit, the amount equal to the assessable value of the goods being imported.

Procedure to be followed [Rule 5]

• 1. The importer who intends to avail the benefit of a notification shall be required to mention the IIN (referred to in sub-rule (2) of Rule 4) and continuity bond number and details while filing the Bill of Entry.
  2. The Deputy Commissioner/Assistant Commissioner of Customs at the custom station of importation shall allow the benefit of the notification to the importer.
  3. Where a Bill of Entry is cleared for home consumption, the bond submitted by the importer gets debited automatically in the customs automated system and the details shall be made available electronically to the jurisdictional Customs Officer.

Importer to maintain records [Rule 6]

• 1. The importer shall maintain an account so as to clearly indicate –
     1. quantity and value of goods imported;
     2. quantity and date of receipt of the goods imported in the relevant premises;
     3. quantity of such goods consumed including the quantity used domestically for manufacture, quantity exported, if any, to fulfil the intended purpose and quantity of goods sent to an end use recipient;
     4. quantity of goods sent for job work and the nature of job work carried out;
     5. quantity of goods received after job work;
     6. quantity of goods re-exported, if any, under rule 10; and vii. quantity remaining in stock, according to bills of entry,

and shall produce the said account as and when required by the Deputy Commissioner/Assistant Commissioner of Customs having jurisdiction over the premises or where the goods imported shall be put to use for manufacture of goods or for rendering output service.

However, in case of non-receipt or short receipt of goods imported in the relevant premises, the importer shall intimate such non-receipt or short receipt immediately on the common portal in the prescribed form.

• 1. The importer shall submit a monthly statement on the common portal in the prescribed form by 10th day of the following month;

However, the importer may submit details of goods consumed in the prescribed form at any point of time, for immediate recredit of the bond which shall become a part of the monthly statement of the subsequent month.

Procedure for allowing imported goods for job work [Rule 7]

• 1. The importer shall maintain a record of the goods sent for job work during the month and mention the same in the monthly statement referred to in sub-rule (2) of rule 6.
  2. The importer shall send the goods to the premises of the job worker under an invoice or wherever applicable, through an electronic-way bill, as specified in the CGST Act, 2017, mentioning the description and quantity of the goods.
  3. The maximum period for which the goods can be sent to the job worker shall be 6 months from the date of invoice or electronic way bill referred to in sub-rule (2).
  4. In case the importer is unable to establish that the goods sent for job work have been used as per the particulars mentioned under rule 4, the jurisdictional Customs Officer shall take necessary action against the importer under rule 11 and 12.
  5. The job worker shall,-
     1. maintain an account of receipt of goods, manufacturing process undertaken thereon and the waste generated, if any, during such process;
     2. produce the account details before the jurisdictional Customs Officer as and when required by the said officer;
     3. after completion of the job work send the processed goods to the importer or to another job worker as directed by the importer for carrying out the remaining processes, if any, under the cover of an invoice or electronic way bill.

Procedure for allowing imported goods for unit transfer [Rule 8]

• 1. The importer shall maintain a record of the goods sent for unit transfer during the month and mention the same in the monthly statement referred to in sub-rule (2) of rule 6.
  2. The importer shall send the goods under an invoice or wherever applicable, through an e-way bill, as specified in the CGST Act, 2017, mentioning the description and quantity of the goods.
  3. The importer shall in relation to transfer of goods to another unit,-
     1. maintain an account of receipt of goods, manufacturing process undertaken thereon and the waste generated, if any, during such process;
     2. produce the account details before the jurisdictional Customs Officer as and when required by the said officer;
     3. after completion of the said process, send the processed goods back to the premises of the importer from where the goods were received or to a job worker for carrying out the remaining processes, if any, under the cover of an invoice or electronic way bill.

Procedure for supplying imported goods to the end use recipient [Rule 9]

• 1. The importer shall maintain a record of the goods supplied to the end use recipient during the month and mention the same in the monthly statement referred to in sub-rule (2) of rule 6.
  2. The importer shall send the goods under an invoice or wherever applicable, through an electronic way bill, as specified in the CGST, 2017, mentioning the description and quantity of the goods.
  3. In case of supply for replenishment or export against supply, the end use recipient shall,-
     1. maintain an account of receipt of goods, manufacturing process undertaken thereon and the waste generated, if any, during such process;
     2. produce the account details before the jurisdictional Customs Officer as and when required by the said officer;
     3. produce the relevant details to the importer for fulfilment of the benefit under the notification.

Re-export or clearance of unutilised or defective goods [Rule 10]

• 1. The importer who has availed the benefit of a notification shall use the goods imported in accordance with the conditions mentioned in the concerned notification within the period and with respect to unutilised or defective goods, so imported, the importer shall have an option to either re-export or clear the same for home consumption, within the said period, namely –

1. within the period specified in the notification;
2. within 6 months from the date of import, where the time period is not specified in the notification:

However, the said period of 6 months can be further extended by the jurisdictional Commissioner for a period not exceeding 3 months, if sufficient reason is shown that the causes for not conforming to the time period were beyond the importer’s control.

• 1. Any re-export of the unutilised or defective goods referred to in sub rule (1) shall be recorded by the importer in the monthly statement by providing the details of necessary export documents:

However, the value of such goods for re-export shall not be less than the value of the said goods at the time of import.

• 1. The importer who intends to clear unutilised or defective goods for home consumption shall have an option of voluntary payment of applicable duty along with interest on the common portal and the particulars of such clearance and the duty payment shall be recorded by the importer in the monthly statement.
  2. The importer shall have an option to clear the capital goods imported, after having been used for the specified purpose, on payment of duty equal to the difference between the duty leviable on such goods but for the exemption availed and that already paid, if any, at the time of importation, along with interest, at the rate fixed by the notification issued under section 28AA, on the depreciated value allowed in straight line method as under —
     1. for every quarter in the first year @ 4%;
     2. for every quarter in the second year @ 3%;
     3. for every quarter in the third year @ 3%;
     4. for every quarter in the fourth and fifth year @ 2.5%
     5. and thereafter for every quarter @ 2%. Explanation. –

1. For the purpose of computing rate of depreciation under this rule for any part of a quarter, a full quarter shall be taken into account.
2. The depreciation shall be allowed from the date when the capital goods imported have come into use for the purpose as laid down in the notification, upto the date of its clearance.
   1. The importer shall have the option of voluntary payment of the duty along with interest, through the common portal and the particulars of such clearance and the duty payment shall be recorded by the importer in the monthly statement.

Recovery of duty in certain case [Rule 11]

• 1. In the event of any failure on the part of the importer to comply with the conditions mentioned in sub-rule (1) of rule 10 or where the payment referred in sub-rules (3) and (4) of rule 10 is not paid or short paid, the Deputy Commissioner of Customs or, as the case may be, Assistant Commissioner of Customs having jurisdiction over the premises where the imported goods shall be put to use for manufacture of goods or for specified end use or for rendering output service shall take action by invoking the Bond to initiate the recovery proceedings of an amount as under –

1. in case of a notification that provides a duty exemption, equal to the difference between the duty leviable on such goods but for the exemption and that already paid, if any, at the time of importation, along with interest, at the rate fixed by notification issued under section 28AA, for the period starting from the date of import of the goods on which the exemption was availed and ending with the date of actual payment of the entire amount of the difference of duty that he is liable to pay;
2. in cases where the notification is other than one that provides an exemption benefit, an amount equal to the assessable value of the goods being imported.
   1. Notwithstanding anything contained in these rules in relation to removal and processing of imported goods for job-work, the importer shall be responsible for ensuring that the said goods are used in accordance with the purposes provided in the notification and in the event of failure to do so, the Deputy Commissioner of Customs, or, as the case may be, the Assistant Commissioner of Customs having jurisdiction over the premises where the imported goods shall be put to use for manufacture of goods or for specified end use or for rendering output service shall take action in accordance with these rules, without prejudice to any other action which may be taken under the Act, rules or regulations made thereunder or under any other law for the time being in force.

Penalty [Rule 12]

The importer or a job worker who contravenes any of the provisions of these rules or abets such contravention shall be liable to a specified penalty75 without prejudice to any other action which may be taken under the Act, rules or regulations made thereunder or under any other law for the time being in force.

75 penalty to an extent of the amount specified under clause (ii) of sub-section (2) of section 158 of the Customs Act.

Section 14 amended to address the issue of undervaluation in imports

4

VALUATION

UNDER

THE

CUSTOMS ACT, 1962

Section 14 has been amended by the Finance Act, 2022 to include provisions for rules enabling the Board to specify the additional obligations of the importer in respect of a class of imported goods whose value is not being declared correctly, the criteria of selection of such goods, and the checks in respect of such goods. This amendment is a measure to address the issue of undervaluation in imports.

With effect from 30.03.2022, following amendments have been carried out by the Finance Act, 2022 in section 14:

Existing provisions	Provisions as amended by the Finance Act, 2022
Section 14 (1) For the purposes of the Customs Tariff Act, 1975…………… Provided that such transaction…….. Provided further that the rules made in this behalf may provide for,-	Section 14 (1) For the purposes of the Customs Tariff Act, 1975…………… Provided that such transaction…….. Provided further that the rules made in this behalf may provide for,-

(i) ……… (ii) …………. (iii) …………..

(i) ……… (ii) …………. ………….. the additional obligations of the importer in respect of any class of imported goods and the checks to be exercised, including the circumstances and manner of exercising thereof, as the Board may specify, where, the Board has reason to believe that the value of such goods may not be declared truthfully or accurately, having regard to the trend of declared value of such goods or any other relevant criteria.

5

IMPORTATION, EXPORTATION AND TRANSPORTATION OF GOODS

Specified deposits exempted from provisions of electronic cash ledger [Section 51A]

Section 51A provides for payment of duty, interest, penalty, fee or any other sum payable by a person through deposit made in electronic cash ledger.

Section 51A(4) provides that CBIC may by notification exempt certain deposits to which provisions of Electronic Cash Ledger will not be applicable. Accordingly, with effect from 30.11.2022, CBIC has exempted deposits:-

1. with respect to goods imported or exported in customs stations where customs automated system is not in place;
2. with respect to accompanied baggage;
3. other than those used for making payment of,-
   1. any duty of customs, including cesses and surcharges levied as duties of customs;
   2. IGST;
   3. GST Compensation Cess;
   4. interest, penalty, fees or any other amount payable under the said Act, or the Customs Tariff Act, 1975

from the provisions of section 51A of the Customs Act.

[Notification No. 19/2022 Cus (N.T.) dated 30.03.2022 as amended by Notification No. 48/2022 Cus (NT) dated 31.05.2022]

• • 1. Applicability of FTP extended till 31.03.2023

9

FOREIGN TRADE POLICY

Foreign Trade Policy (FTP), 2015-2020, (as updated) incorporating provisions relating to export and import of goods and services will now remain in force upto 31.03.2023, unless otherwise specified.

[Notification No. 37/2015-2020 dated 29.09.2022]

• • 1. Exemption from IGST and GST compensation cess, in case of imports under Advance Authorisation, EPCG, EOU/EHTP/STP/BTP units, granted without any time restriction

The imports against Advance Authorizations for physical exports are exempted from IGST and compensation cess. Further, capital goods imported under EPCG Authorization for physical exports are exempted from IGST and compensation cess. In case of goods imported by EOU/EHTP/STP/BTP units from DTA, IGST and GST compensation cess are exempt.

Earlier, there was a restriction that the above exemptions were available upto 30.06.2022. The said restriction has been relaxed and the said exemptions are now available without any time restriction.

[Notification No. 16/2015-2020 dated 01.07.2022]

• • 1. Principles of restrictions and prohibitions for imports/exports revised to be in line with international agreements

With effect from 10.08.2021, principles of restrictions and prohibitions for imports/exports have been revised as follows:-

DGFT may, through a notification, impose ‘prohibition’ or ‘restriction’:-

• • • 1. on export of foodstuffs or other essential products for preventing or relieving critical shortages;
      2. on imports and exports necessary for the application of standards or regulations for the classification, grading or marketing of commodities in international trade;
      3. on imports of fisheries product, imported in any form, for enforcement of governmental measures to restrict production of the domestic product or for certain other purposes;
      4. on import to safeguard country’s external financial position and to ensure a level of reserves.
      5. on imports to promote establishment of a particular industry;
      6. for preventing sudden increases in imports from causing serious injury to domestic producers or to relieve producers who have suffered such injury;
      7. for protection of public morals or to maintain public order;
      8. for protection of human, animal or plant life or health
      9. relating to the importations or exportations of gold or silver;
      10. necessary to secure compliance with laws and regulations including those relating to the protection of patents, trademarks and copyrights, and the prevention of deceptive practices
      11. relating to the products of prison labour
      12. for the protection of national treasures of artistic, historic or archaeological value
      13. for the conservation of exhaustible natural resources
      14. for ensuring essential quantities for the domestic processing industry
      15. essential to the acquisition or distribution of products in general or local short supply;
      16. for the protection of country’s essential security interests:
          1. relating to fissionable materials or the materials from which they are derived;
          2. relating to the traffic in arms, ammunition and implements of war;
          3. taken in time of war or other emergency in international relations; or
      17. in pursuance of country’s obligations under the United Nations Charter for the maintenance of international peace and security.

The aforesaid principles of restrictions and prohibitions for imports/exports have been amended to be in line with international agreements.

[Notification No. 17/2015-2020 dated 10.08.2021]

• • 1. Provisions relating to denomination of export contracts amended

As per the Foreign Trade Policy, all export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realised in freely convertible currency. However, export proceeds against specific exports may also be realized in rupees, provided it is through a freely convertible Vostro account of a non-resident bank situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan. Additionally, rupee payment through Vostro account must be against payment in free foreign currency by buyer in his non-resident bank account. Free foreign exchange remitted by buyer to his non-resident bank (after deducting the bank service charges) on account of this transaction would be taken as export realization under export promotion schemes of FTP.

Contracts for which payments are received through ACU shall be denominated in ACU Dollar. Central Government may relax provisions in this regard in appropriate cases. Export contracts and invoices can be denominated in Indian rupees against EXIM Bank/ Government of India line of credit.

Now, invoicing, payment and settlement of exports and imports has also been made permissible in Indian rupees (INR)76. Accordingly, settlement of trade transactions in INR may also take place through the

76 under RBI’s A.P.(DIR Series) Circular No.10 dated 11th July, 2022

Special Rupee Vostro Accounts opened by AD (Authorised Dealer) banks in India77, in accordance to the following procedures:

1. Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier.
2. Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country.

[Notification No. 33/2015-2020 dated 16.09.2022]

77 as permitted under regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016

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