PwC Indirect Tax Newsletter - May 2018

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In the issue

GST

Central excise Service tax

VAT/Sales tax/Entry tax Contacts

Staying Updated

Indirect tax newsletter

Notifications and circulars GST

Circulars issued by Central Government

• Central Board of Indirect Taxes and Customs (CBIC) has issued a circular, clarifying various issues relating to refund

(Circular No. 45/19/2018-GST dated 30 May, 2018)

• It is clarified that IGST on supply of goods stored in customs bonded warehouse (CBW) would be levied only when the warehoused goods are cleared for home consumption and not on supply of such goods from the CBW prior to its clearance.

The circular is applicable for supply of warehoused goods on or after 1 April, 2018.

(Circular no. 3/1/2018-IGST dated 25 May, 2018)

Case Laws Central Excise

• Wrongly availed credit is reversed before being utilised, there cannot be a demand of duty, interest or penalty on the same as there was no intention to evade payment of duty on part of the assessee.

Service Tax

• Central Government cannot issue the

notification under a different statute i.e. Finance Act, 1994 in providing the conditions for grant of refund of service tax paid on the taxable services used for the authorised operations in the SEZ when the SEZ Act and the rules have not provided any conditions for granting exemption from payment of service tax in that case.

GST/ VAT

• Even in case of separate contracts for supply of goods and supply of services in setting up of a power plant, the same would qualify as works contract service taxable at 18% GST.

May 2018, Volume 21 Issue 02

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In the issue

GST

Central excise Service tax

GST

AAR Rulings

• In M/S Macro Media Digital Imaging Private Limited (2018-VIL-72-AAR), the Authority ruled that the printed advertisement material are classifiable under chapter heading 4911 of the GST Tariff and the rate of tax applicable is 12%.

• In Sri Dharsak.V.P., Saraswathi Metal Industries, Alappuzha (2018-VIL-76-AAR), the Authority ruled that the commodities such as marine propellers, rudder set, stern tube set, propeller shaft and M.S. Shaft for couplings used as a part of fishing/ floating vessels fall under the Entry 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28 June 2017.

• In EMC Limited (2018-VIL-31-AAR), the Authority on the question whether and at what rate tax is payable on freight on supply of materials in a composite supply of works contract ruled that the Applicant supplies works contract service, of which freight and transportation is merely a component and not a separate and independent identity, held that GST is to be paid at 18% on the entire value of the composite supply, including supply of materials, freight and transportation, erection, commissioning etc.

• In TP Ajmer Distribution Ltd, (2018-TIOL-77-AAR- GST), the Authority ruled that GST is leviable on certain non- tariff charges recovered by the Applicant engaged in

distribution of electricity as the Applicant is not eligible to avail the exemption under Entry No. 25 of Notification No.

12/2017-Central Tax (Rate) dated 28 June 2017.

• In Fermi Solar Farms Private Limited, 2018-TIOL-17- AAR-GST, the Authority held that even in case of separate

contracts for supply of goods and services in setting up of a power plant, the same would qualify as works contract service taxable at 18% GST.

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In the issue

GST

GST

Notifications and circulars

Notifications issued by the Central Government

• CBIC has waived late fee for failure to furnish GSTR-3B by due date for the period October, 2017 to April, 2018 by 31 May 2018 to persons whose declaration in TRAN-1 was submitted, but not filed on or before 27 December, 2017. The relief is available if the declaration in TRAN-1 is filed on or before 10 May, 2018 and GSTR-3B for each of such months, on or before 31 May, 2018.

(Notification No. 22 /2018 – Central Tax dated 14 May, 2018)

• The due date of filing GSTR-3B for the month of April, 2018 is extended from 20 May, 2018 to 22 May, 2018.

(Notification No. 23/2018 – Central Tax dated 18 May, 2018)

• CBIC has notified National Academy of Customs, Indirect Taxes and Narcotics as the authority for conducting the examination of GST Practitioners.

(Notification No. 24/2018 – Central Tax dated 28 May, 2018)

• CBIC has extended the due date to furnish GSTR-6 for input service distributors for the period July, 2017 to June, 2018 to 31 July, 2018.

(Notification No. 25/2018 – Central Tax dated 31 May 2018)

• Supply of Priority Sector Lending Certificates has been brought under reverse charge mechanism.

(Notification no. 11/2018 – Central Tax (Rate) and notification no. 12/2018-Integrated Tax (Rate) both dated 28 May, 2018).

Circulars issued by Central Government

• Transfer/ surrender of “tenancy rights” against

consideration in the form of tenancy premium is a supply of service, liable for GST. However, grant of tenancy rights in a residential dwelling for use as residence dwelling against tenancy premium or periodic rent or both is exempt.

(Circular No. 44/18/2018-CGST dated 2 May, 2018)

• CBIC clarified various issues relating to refunds. Major clarifications are as under:

– For refund claim of balance in electronic cash ledger by an ISD or a composition taxpayer and for refund claim of balance in the electronic cash and/

or credit ledger by a non-resident taxable person, the filing of Form GSTR 1 and GSTR 3B is not mandatory.

– The refund of tax paid on exports for the period of July, 2017 to March, 2018 will be allowed subject to the refund claim being maximum of IGST liability disclosed. This gives relief to the persons who erroneously disclosed the zero rated sales on payment of IGST under taxable turnover column in the return.

– Refund of compensation cess paid on inputs used for exports, where the final products do not attract compensation cess, can be claimed as refund of input tax credit. However, no such refund will be available if the exports are made on payment of IGST.

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In the issue

GST

GST

Notifications and circulars

– For refund claims on exports of non-GST and exempted goods without payment of IGST, LUT/

bond is not required. However, such persons will need to comply with requirements as prescribed under Excise Act or Customs Act or VAT Act as the case may be.

– The restriction under rule 96(10) to claim refund of IGST paid on zero rated sales is not applicable to exporter procuring goods from supplier who has not availed the benefit under specified notifications for making outward supplies.

(Circular No. 45/19/2018-GST dated 30 May, 2018)

• It is clarified that IGST on supply of goods stored in CBW would be levied only when the warehoused goods are cleared for home consumption and not on supply of such goods from the CBW prior to its clearance. The circular is applicable for supply of warehoused goods on or after 1 April, 2018.

(Circular no. 3/1/2018-IGST dated 25 May, 2018)

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In the issue GST

Central excise

Service tax

Central Excise Case laws

•

In Shiva Alloys Private Limited v. Commissioner of Central Excise, Delhi, 2018-TIOL-988-HC- DEL-CX, Delhi High Court (HC) held that payment of duty whether made before or after issuing of show cause notice, is not a determinative and relevant factor for deciding whether or not penalty should be imposed under section 11AC of the Excise Act, 1944 by

observing, inter alia, that mere payment of differential duty would not matter once the conditions for

imposition of penalty under section 11AC were satisfied.

•

In Commissioner of Central Excise

Mumbai v. M/S CEAT Limited, 2018-TIOL-976- HC-MUM-CX, Mumbai HC held that entitlement to refund & finalisation of provisional assessment under Rule 9B of the CER, 1944 is independent from the provisions of refund under section 11B of the Central Excise Act, 1944 by observing, inter alia, that only the procedure established under section 11B(2) of the Act is applicable to refund arising from finalisation of the provisional assessment under rule 9B of the CER and the proviso to Rule 9B did not have retrospective effect.

•

In CCE v. Grasim Bhiwani Textile Limited, 2018- TIOL-1074-HC-P&H-CX, Punjab & Haryana HC had held that when the wrongly availed credit is reversed before being utilised, there cannot be a demand of duty, interest or penalty on the same as there was no

intention to evade payment of duty on part of the assessee.

•

In CCE v. SAIL (Durgapur Steel Plant), 2018- TIOL-1039-HC-KOL-CX, Kolkata HC had held that for charging interest on delayed payment of duty under the provisions of section 11AA of the Central Excise Act, 1944 there must be a determination before any measure is taken under section 11AA.

•

In M/S Vega Auto Accessories (Private) Limited

v. Registrar, Customs, Excise & Service Tax

Appellate Tribunal, & Anr, TS-207-HC- 2018(DEL)-EXC, Delhi HC directed Tribunal to consider appeal without insisting on 7.5% pre-deposit under amended section 35F of Central Excise Act, 1944 in view of orders passed in connected matters in assessee’s favour by observing, inter alia, that the orders had attained finality and in these

circumstances, pre-deposit would be a technicality and mere formality.

•

In Uravi T & Wedge Lamps Private Limited v.

CCGST & CE, 2018-TIOL-1899-CESTAT-MUM,

Mumbai Tribunal held that the invoice issued by the

first stage dealer in respect of the imported goods is a

valid document in terms of Rule 9 of CCR, 2004 for

availing CENVAT credit.

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In the issue GST

Central excise

Service tax

Service Tax

• In M/S Yash Motors v. CCE, Jaipur - II., 2018-VIL- 366-CESTAT-DEL-ST, Delhi Tribunal held that no service tax is leviable under Business Auxiliary Service on amount retained by the appellant for getting vehicles registered with the local RTO on behalf of their customers.

• In Vasantha Green Projects v. CCT, Rangareddy GST, TS-183-CESTAT-2018-ST, Hyderabad Tribunal held that consideration received from landowners in the form of ‘Joint development rights’ for construction of villas under joint development agreement is not liable to service tax separately where the cost of acquisition of land is already included in the value of villas sold to prospective customers.

• In M/s Altech Equipments (P) Limited v. CCE Delhi III, TS-191-CESTAT-2018-ST, Delhi Tribunal held that renting of heavy duty cranes along with operator to parties engaged in construction of Metro is not taxable as ‘supply of tangible goods’ service by observing, inter alia, that as per CBEC Circular dated 29 February, 2008 only a transaction of allowing another person to use goods without giving legal right of possession and effective control would be treated as service.

• In M/s Alpha Corp. Development Private Limited v.

CST, Delhi-II, TS-192-CESTAT-2018-ST, Delhi Tribunal allowed the utilisation of credit availed on mall construction before April 2011, against taxable output service of ‘renting of immovable property’ rendered subsequently and rejected the Revenue’s stand that such utilisation is not in conformity with provisions of Rule 3(4) of CENVAT Credit Rules.

• In M/s Avadh Enterprises Appellant v. CCE (Adj.), New Delhi, TS-193-CESTAT-2018-ST, Delhi Tribunal

disallowed CENVAT credit of advertisement services availed on the ground that it did not amount to ‘input services’ for rendition of output services of promotion and marketing as the said expenditure was incurred for advertisement of other products of the company such as soda and it could not be considered as advertisement of alcoholic beverages of same company.

• In Cummins Technologies India Limited v. CCE & ST, Meerut-II, 2018-VIL-351-CESTAT-DEL-ST, Delhi Tribunal held that the Central Government cannot issue the notification under a different statute i.e. Finance Act, 1994 in providing the conditions for grant of refund of service tax paid on the taxable services used for the authorised

operations in the SEZ when the SEZ Act and the rules have not provided any conditions for granting exemption from payment of service tax in that case.

• In Shiva Automobiles Private Limited v.

Commissioner of Central Excise, Coimbatore, 2018- VIL-322-CESTAT-CHE-ST, Chennai Tribunal held that as the value of spares/ parts/ component replaced used during free replacement/ warranty services is recovered from manufacturer with applicable VAT/ CST, the transaction in relation to spares and parts is sale of goods and as the appellants have discharged VAT on such goods, they are not liable to pay service tax on such amount and the cost of spare parts cannot be included for the purposes of levy of service tax.

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In the issue GST

VAT/Sales tax/Entry tax

Contacts

VAT/Sales Tax/Entry Tax Case Laws

•

In Shree Raipur Cement Plant v. State of Chhattisgarh-TS-196-HC-2018(CHAT)-VAT, Chattisgarh HC allowed the issuance of Form C for inter-state purchase of high speed diesel to be used in manufacture of cement, after the promulgation of CGST/ SGST Act and rejects revenue contention that assessee could not be allowed to use Form C since it had not availed the facility before by observing, inter

alia, that neither CGST Act, 2017 not CST Act, 1956

disallows the availment of such facility on said ground and there is no provision under the CGST Act, 2017 which bars holding of registration under any other Act.

•

In Vodafone India Limited v. State of

Maharashtra, TS-181-HC-2018(BOM)-VAT, Mumbai HC held that the assessee engaged in activity of rendering telecommunication services cannot be held liable for payment of sales tax on the services provided as there is no sale element in

telecommunication services provided by the assessee except handsets supplied to the subscribers.

•

In Thyseenkrupp Elevator (India) Private Limited v. Commissioner of Commercial Taxes, Gandhinagar, TS-150-HC-2018 (KAR)- VAT, Karnataka HC had held that supply of elevators/

lifts and components from assessee’s Central Procurement Division in Maharashtra for executing works contract in Karnataka constitutes an inter-state supply of goods falling under the ambit of section 3(a)

of CST Act, 1956 and hence falls outside the competence of State VAT authorities and mere divisibility of contract would not empower the

Authorities to subject the inter-state transaction to tax under the State Tax Act.

•

In M/S Cipla Limited v. State of Karnataka,

2018-TIOL-1122-HC-KAR-VAT, Karnataka HC

held that application for rectification cannot be

rejected without examination of its contents,

contentions raised and documents furnished by the

assessee.

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In the issue GST

VAT/Sales tax/Entry tax Contacts

For private circulation only

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Contacts Delhi

Pratik Jain/ Gautam Khattar/ Rahul Shukla Ph: +91 (124) 3306000

Mumbai

Dharmesh Panchal Ph: +91 (22) 6689 1000 Kolkata

Pratik Jain/ Gopal Agarwal

Ph: +91 (33) 4404 3098/4404 6000 Bangalore

Pramod Banthia/ Kunal Wadhwa Ph: +91 (80) 4079 6000

Hyderabad

Ananthanarayanan S Ph: +91 (40) 4424 6363 Chennai

N Madhan

Ph: +91 (44) 4228 5000 Pune

Nitin Vijaivergia

Ph: +91 (20) 4100 4444 Ahmedabad

Jatin Arora

Ph: +91 (22) 6689 1000