Input Tax Credit not eligible on Rotary Car Parking System – Tamil Nadu AAR
The Authority for Advance Ruling (AAR), Tamil Nadu, in the case of M/s Arthanarisamy Senthil Maharaj has ruled that input tax credit (ITC) is not admissible on the installation of a rotary car parking system. The AAR held that the rotary car parking system is a civil structure and not a movable property, despite the applicant’s contention that it is detachable.
The AAR reasoned that the intention of the applicant is to enjoy the benefit of the civil foundation and the car parking system permanently, until it ceases to function. Therefore, the AAR concluded that the installation and commissioning of the rotary car parking system falls under the ambit of Section 17(5)(d) of the CGST Act, 2017, which blocks ITC on goods or services received by a taxable person for construction of an immovable property.
GST not leviable on sale of goods warehoused in 3P FTWZ on “as is where is” basis – Tamil Nadu AAR
The Authority for Advance Ruling (AAR), Tamil Nadu in the case of M/s Sunwoda Electronic India Private Limited has held that GST is not leviable on sale of goods in warehoused in 3P FTWZ on “as is where is” basis to customer who clears the same to bonded warehouse under the MOOWR Scheme.
The applicant in this case imports Portable Lithium System Batteries and stores them in a third-party Free Trade Warehousing Zone (3P FTWZ) in India. The applicant then sells these imported goods stored in the 3P FTWZ on an “as is where is” basis to an OEM licensed under the Manufacture and Other Operations in Warehouse (MOOWR) Scheme.
The AAR noted that post 01.02.2019 amendment to Schedule III of CGST Act, ‘warehoused goods’ in clause 8(a) now cover FTWZ/SEZ warehouses as well. However, no Customs duty or IGST is required to be paid as long as the imported goods remain warehoused, either in a Customs bonded warehouse or an FTWZ/SEZ warehouse.
Therefore, the AAR has ruled that GST is not leviable on the sale of goods warehoused in the 3P FTWZ on “as is where is” basis to the customer (OEM’s MOOWR unit) who clears the same to a bonded warehouse under the MOOWR Scheme.
Input tax credit is not eligible on-air conditioning and cooling system and ventilation system – Gujarat Appellate AAR
The appellant M/s Wago Private Limited had filed an advance ruling application with the Gujarat Authority for Advance Ruling (AAR) regarding the eligibility of input tax credit (ITC) on the supply of air conditioning and cooling system and ventilation system for their new factory. The AAR had ruled that the appellant is not eligible for ITC on the air conditioning and cooling system and ventilation system, as they are considered works contract services for the construction of an immovable property, which is blocked under Section 17(5)(c) of the CGST Act, 2017. The AAR had noted that the work order included the supply, installation, commissioning, maintenance and warranty of the air conditioning, cooling and ventilation system. The different components of the air conditioning and cooling system lose their individual identity when assembled and installed in the building and become a single system.
The air conditioning and cooling system, as well as the ventilation system, are considered works contract services for the construction of an immovable property, and not eligible for ITC under Section 17(5)(c).
The appellant appealed against the AAR’s ruling, but the Appellate Authority for Advance Ruling (AAAR) has affirmed the findings and ruling of the AAR that the ITC is not eligible on-air conditioning and cooling system and ventilation system.
Gujarat AAR rules on taxability of various employee recoveries
The Gujarat AAR in the case of M/s Zentiva Private Limited has given an advance ruling on following issues pertaining to taxability of employee recoveries:
Issue 1: Deduction towards Canteen facility
The deduction of a nominal amount from the salary of employees availing the canteen facility in the factory would not be considered as a ‘supply’ of services by the applicant under the CGST Act. This is based on Circular No. 172/04/2022-GST, which clarifies that perquisites provided by an employer to an employee as per the employment contract are not subject to GST.
Issue 2: ITC on Canteen facility
The applicant is eligible to avail Input Tax Credit (ITC) on the GST charged by the Canteen Service Provider for the canteen facility provided to its employees working in the factory. This is in view of the amended provisions of Section 17(5)(b) effective from 1 st Feb 2019 and the clarification in Circular No. 172/04/2022-GST.
However, the AAR ruled that the ITC will be restricted to the extent of the cost borne by the applicant after considering recovery from employees.
Issue 3: Transport facility
The transport facility provided by the applicant to its employees as per the company’s transport policy would not be considered as a ‘supply’ under the CGST Act. This is based on the clarification in Circular No. 172/04/2022-GST that perquisites provided by an employer to an employee as per the employment contract are not subject to GST.
Sale of Business as a Going Concern (Slump Sale) not Taxable under Maharashtra VAT Act – Bombay High Court
In this case the main issue was whether the sale Business by M/s Piramal Enterprises Limited to M/s Abbott Healthcare under a Business Transfer Agreement (BTA) should be considered a “sale of business as a going concern” (slump sale) and thus, not leviable to Maharashtra MVAT.
The VAT assessing officer had initially held that the transaction under the BTA was a transfer of business on a going concern basis and hence not subject to MVAT.
However, the reviewing authority (Joint Commissioner of State Tax) later reviewed this order and held that the transaction should be taxed under MVAT, on the grounds that the BTA also involved a transfer of intellectual property rights like trade name, logo, goodwill etc. for a fixed period.
The High Court ruled in favor of M/s Piramal Enterprises, holding that:
– Neither the term ‘sale of business’ nor ‘business’ is explicitly included in the definition of ‘goods’ under the MVAT Act. So, a slump sale of a business cannot be considered a sale of goods taxable under MVAT.
– On a holistic reading of the Business Transfer Agreement, it was clear that the intention was a lock, stock and barrel transfer of the pharmaceutical business on a slump sale basis.
– The High Court noted that the parties had provided values to the intangible assets for the purpose of stamp duty and as recognized under Section 2(42C) of the Income Tax Act. Merely assigning such values for the purpose of stamp duty, registration fees or other taxes/fees, as per Section 2(42C) of the Income Tax Act, cannot be considered as assigning values to individual assets and liabilities. This would not affect the transaction being a sale of the business as a going concern.
– The reviewing authority exceeded its jurisdiction by trying to ‘vivisect’ or reconstruct the BTA, instead of doing a holistic reading to determine the real intention and commercial effect of the transaction.
– The slump sale under the BTA should not be considered a sale of goods within the MVAT Act, and therefore, the High Court set aside the order of reviewing authority.
MAS Expands Application of Fair Dealing Guidelines to All Financial Institutions and All Products and Services
On 30th May 2024, the Monetary Authority of Singapore (MAS) issued the updated Guidelines on Fair Dealing – Board and Senior Management Responsibilities for Delivering Fair Dealing Outcomes to Customers (Guidelines), which articulate MAS’ expectations on the role of the boards and senior management of financial institutions (FIs) in ensuring fair dealing outcomes for customers. The Guidelines came into effect on 30th May 2024 and are applicable to all FIs, the financial products and services offered by them, and their customers.
The Guidelines set out five fair dealing outcomes that FIs should deliver to their customers, namely:
Outcome 1: Customers have confidence that they deal with FIs where fair dealing is central to the corporate culture.
Outcome 2: FIs offer products and services that are suitable for their target customer segments.
Outcome 3: Customers are served by competent representatives.
Outcome 4: Customers receive clear, relevant and timely information that accurately represent the products and services offered and delivered.
Outcome 5: FIs handle customer complaints in an independent, effective and prompt manner.
Key changes to Guidelines
The Guidelines contain additional guidance on:
– Assessing applications and providing differential treatments: FIs should adopt sound and objective processes to assess applications for financial products and services and be able to justify any differential treatment to any customer or group of customers based on relevant and reliable information or data.
– Product design: FIs that design and manufacture financial products and services should appropriately test if the product or service meets the needs, characteristics and financial objectives of the target customer segments.
– Information accuracy: FIs should accurately state what customers can expect of the products and services provided and not lead customers into having unrealistic expectations of the product or the level of service they will receive. Disclosures should be:
– Readily accessible.
– Written in plain language that avoids the use of technical jargon;
– Presented in a balanced format that highlights key features and risks without obscuring important terms and conditions; and
– Presented in a format that facilitates ease of reading and understanding.
– Use of RoR clauses: FIs should clearly disclose the existence of Right of Review (RoR) clauses (which provide them the unilateral right to revise the terms and conditions of a product or service) to customers during the sales process and the circumstances that would trigger the use of the RoR clause, the prior notice that will be given, and the customer’s rights in the event that the RoR clause is exercised. In addition to disclosing RoR clauses, FIs should institute a framework, involving representatives from a control unit independent from the relevant business line and approved by senior management, to oversee the exercise of the RoR clause. This should include assessing how exercising the RoR clause may impact the rights, obligations or interests of the customer.
The Guidelines also emphasise that FIs should consider the needs and interests of various customer segments, especially those who are more vulnerable, as follows:
– Design and governance of products and services: FIs should assess the performance of a product or service under different market conditions and appropriately test if the product or service meets the needs, characteristics and financial objectives of the target customer segment.
– Conducting product due diligence: FIs should undertake formal due diligence on any financial product they intend to distribute, in order to fully understand its features and assess the implications for each customer segment, thereby identifying suitable customer segments and those for which the product is clearly unsuitable.
– Marketing to target customer segments: FIs should adjust their marketing approach to suit the profiles, financial objectives and general financial literacy of their target customer segments.
https://www.mas.gov.sg/news/media-releases/2024/mas-expands-application-of-fair-dealing-guidelines
https://www.mas.gov.sg/-/media/mas-media-library/fair-dealing-guidelines-30-may-2024.pdf
Singapore Issues Environmental Crimes Money Laundering National Risk Assessment
On 29th May 2024, Singapore has published an Environmental Crimes Money Laundering (ML) National Risk Assessment (NRA) which identifies the key threats and vulnerabilities in environmental crimes ML that Singapore is exposed to, and outlines mitigation measures which government agencies, financial institutions (“FIs”) and Designated Non-Financial Businesses and Professionals (“DNFBPs”) can develop to address the risks.
Environmental crimes and the laundering of their proceeds endanger the environment and have a far-reaching impact. Each year, environmental crimes such as illegal wildlife trafficking and illegal logging are estimated to generate around US$110 billion to US$281 billion in criminal gains globally. Singapore’s exposure to environmental crimes ML stems from its position as an international financial centre, and a trading and transit hub, with a highly externally oriented economy.
The Environmental Crimes ML NRA assessed that:
a) Singapore is susceptible to ML threats that emanate from illegal wildlife trafficking, illegal logging, and waste trafficking, which are prevalent in Southeast Asia.
b) In comparison to other sectors in Singapore, banks and cross-border payment service providers are most vulnerable to being misused to launder proceeds from environmental crimes, given their transnational nature.
c) Singapore has a strong and transparent legal and enforcement framework to detect ML, and pursue ML investigations, prosecution, asset recovery and international cooperation, in relation to environmental crimes.
d) Given the level of exposure and extent of controls, there is a medium-low risk of criminals using Singapore for environmental crimes ML.
