September Month Newsletter

Corporate Laws

Clarification on due date for holding AGM for the financial year ending 31 March 2020.

The Ministry of Corporate Affairs vide General Circular No.28/2020 dated August 17, 2020 has clarified that there will be no general extension of time given by the Ministry of Corporate Affairs for convening the Annual General Meeting for Companies whose financial year ends on 31 March 2020.

Any Company who is not in a position to convene the AGM within the due date needs to make an application to the Registrar of Companies and seek extension of time for holding the AGM.

Convening AGM through Video Conferencing

Considering the present scenario, the MCA has vide its Circular No. 20/2020 dated 5 May 2020, permitted companies to conduct their AGM through Video Conferencing (VC) or other audio visual means (OAVM) during the calendar year 2020 subject to complying with the procedure and conditions as prescribed in the said circular.
1. MCA vide notification no. G.S.R. 525(E) dated August 24, 2020 has amended Schedule VII of the Companies Act, 2013 to include additional entities which are engaged in research and development for carrying out Corporate Social Responsibility (CSR) activities as required under Section 135 of the Companies Act, 2013. Consequent to addition of these entities, more options are available for spending under the CSR activities.

2. MCA vide notification no. G.S.R. 525(E) dated August 24, 2020 has amended the Companies (Corporate Social Responsibility Policy) Rules, 2014. As per the amended rules, research and development activity of new vaccine, drugs and medical devices related to COVID 19 for the FY 2020-21, 2021-22 and 2022-23 undertaken by a Company in normal course of business may be treated as a CSR activity subject to compliance with conditions as stated in the rules. Earlier to this amendment any activity done by Companies in the normal course of business was not allowed as a CSR Activity. Consequent to this amendment exception is made for three years as stated above for research and development activity of new vaccine, drugs and medical devices related to COVID 19.

3. MCA vide General Circular No.28/2020 dated August 17, 2020 has clarified that there will be no general extension of time given by the Ministry of Corporate Affairs for convening the Annual General Meeting for Companies whose financial year ends on 31 March 2020. Any Company who is not in a position to convene the AGM within the due date needs to make an application independently to the Registrar of Companies.

4. In terms of Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Second Amendment) Regulations, 2020 dated August 05, 2020, the Corporate Person may replace the liquidator by appointing another Insolvency Professional as Liquidator. Further Insolvency Professional needs to inform regarding his appointment to the Board within three days of this appointment.

Direct Tax

CBDT amends Rule 31AA consequent to newly introduced TCS on Sale of Goods, Liberalised Remittance Scheme (LRS) remittances. Notification No. 54 of 2020 dated 24 July 2020

The Finance Act, 2020 has substantially expanded the provisions related to tax collected at source (TCS). Sub-section 1(G) and 1(H) was added to section 206C for collection of tax on overseas tour travel package, remittance of Forex under LRS and sale of goods in excess of Rs. 50 lakh. Now, the CBDT has amended Rule 31AA and annexure to Form 27EQ to incorporate necessary changes related to new TCS provisions. The amended Rule shall come into force with effect from the 1st October 2020.

CBDT Amends Forms for purposes of Sec.115UB granting 'pass-through' status to investment funds. Notification No. 55 of 2020 dated 28th July 2020.

CBDT amends Rule 12CB with respect to statement to be filed under section 115UB(7), notifies amended Form 64C and 64D;

As per the amended rules, the statement in form 64D, consisting of details of income paid/ credited by investment fund, shall be furnished electronically (generated & downloaded from the web portal) to the Pr.CIT or CIT, within whose jurisdiction the Principal office of the investment fund is situated “by 15th day of June of the financial year following the previous year during which the income is paid or credited,” (as against the due date of 30th Nov earlier);

Amended Form 64C requires additional information w.r.t details of deemed loss as on 31st March, 2019 in terms of newly inserted sub-section (2A) of section 115UB, also requires bifurcation of LTCG/STCG income as per the chargeable rates u/s 112A/111A as the case may be; Further, amended Form 64D now seeks PAN/Aadhar details of Directors/ Trustees/ Partners of the Investment fund, also inserts table seeking break-up of total income of Investment Fund.

Relief to Senior Citizens Notification No. 56 of 2020 dated 29 July 2020

The CBDT has provided relief to senior citizens from levy of interest under section 234A. A resident senior citizen who does not have any income from business or profession is not required to pay advance tax and he can pay the entire tax by way of self-assessment tax. For computing the limit of Rs. 1 lakh (as specified in earlier notification No. 35/2020), the self-assessment tax paid by a senior citizen on or before 31-07-2020 shall be deemed to be the advance tax. Thus, same shall be reduced while computing the tax liability of Rs. 1 lakh.

PM unveils 'Transparent Taxation' Platform, announces ways of faceless appeals

Prime Minister (PM) Narendra Modi launches ‘Transparent Taxation’ platform encompassing Faceless assessments, Faceless appeals (w.e.f. September 25th) & Taxpayers’ Charter;
 
Highlighting the maxim of ‘Minimum Government, Maximum Governance’, PM expresses that the approach of this initiative is to move away from power centric towards people centric administration and focus on “Honouring the Honest”
 
PM explains that faceless assessments/ appeals will have technology driven interface (e.g. In case of scrutiny assessments, there will be random selection of cases and selection will not be limited to jurisdictional AO)

CBDT notifies amendments in E-assessment Scheme, 2019 to implement faceless assessments Notification 61 of 2020 dated 13th August 2020

CBDT notifies amendments in E-assessment Scheme, 2019 to implement faceless assessments; ‘Best judgment’ assessments u/s. 144 are now covered under the Faceless assessment scheme, notifies consequential changes in the procedure for assessment; Further, the amended scheme empowers Pr.CCIT/Principal Director General, in charge of the NeAC, to refer the case to jurisdictional AO, at any stage of the assessment, with prior Board approval.

Further, where a request for personal hearing is made by the assessee or his authorised representative in respect of modifications proposed in the draft assessment order, the Chief Commissioner or Director General in charge of Regional e-assessment Centre’s (ReAC), may approve the request if he is of the opinion that the request is covered under the circumstances as may be notified by the Pr.CCIT/Pr.DG.

Aiming at completing all faceless assessments by Mid- September
Press Information Bureau dated 04 August 2020

IT department is targeting to complete all faceless assessments by mid September.
So far, out of58,319 cases selected for faceless assessments, 8700 cases have been disposed off.
Mumbai, Delhi, Kolkata, Chennai, Bangalore, Ahmedabad and Pune are covered under the scheme.

 

How does this work?

 

The National e-Assessment centre (NEC) in Delhi is the single point of contact, which will issue notice under section 143(2). The assessee has to respond to the notice, within 15 days of its receipt. NEC allocates the case to any assessment unit through an automated allocation system unit, ensuring anonymity.

Issuance of Mutual Agreement Procedure (MAP) guidance by CBDT
MAP Guidance/2020 dated 07 August 2020

CBDT issued MAP guidance for the benefit of taxpayers, tax practitioners, tax authorities and CAs of India and of treaty partners, presented in following four parts:
Part A: Introduction and Basic
Part B:Access or Denial of Access to MAP
Part C:Technical Issues
Part D: Implementation of MAP outcomes
MAP is an alternate tax dispute resolution mechanism for taxpayers to resolve disputes that result or will result in taxation or double taxation, not in accordance with DTAAs.

CBDT grants PAN exemption to NR investing in category I and II AIF located in IFSC NotificationNo.58 of 2020 dated 10 August 2020

CBDT inserts new Rule 114AAB which specifies that a non-resident is not compulsorily required to obtain Permanent Account Number, if
i.The non-resident does not earn any income in India, other than income from investment in Category I or Category II Alternative Investment Funds [AIF] located in an IFSC in India, and
ii.TDS on such income is deducted by the Specified Fund, and
iii.The Non-Resident furnishes declaration
Further, the new Rule 114AAB requires the specified fund to furnish quarterly statement in respect of such non-resident in the newly notified Form 49BA.

CBDT directs passing all assessment orders by NeAC under Faceless scheme Order dated 13 August 2020

CBDT directs that all assessment orders shall be passed by the National e-assessment centre (NeAC) through faceless assessment scheme, 2019; Provides 2 exceptions:
• Assessment orders in cases assigned to Central charges and
• Assessment orders in cases assigned to International Tax charges;
Specifies that assessment orders not in conformity with above shall be treated as ‘non-est’
This order shall come into effect from 13th August 2020.

Expansion in the Scope of Reporting of Transaction (SFT)

To ensure better compliance and transparency.  Ministry of Finance has expanded the Scope of Reporting Transactions to include:
• Payment of educational fees/donation above Rs. 1 lakh p.a.
• Electricity consumption above Rs. 1 lakh p.a.
• Payment to hotels above Rs 20,000.
• Domestic business class air travel/ foreign travel
• Purchase of Jewellery, white goods, painting, marble etc, above Rs. 1 lakh p.a.
• Deposits/Credits in current account above Rs 50 lakhs
• Deposits/Credits in Non-current account above Rs 25 lakhs
• Payment of Property tax above Rs 20,000 p.a.
• Life insurance premium above Rs 50,000.
• Health insurance premium above Rs 20,000.
• Share transaction / Demat account/Bank lockers. 

CBDT notifies conditions to be satisfied by pension fund to become eligible for exemption u/s 10(23FE) notification 67 of 2020 dated 18th August 2020

CBDT specifies eligibility conditions for ‘Pension Funds’ [PF] to qualify for infrastructure investment income exemption u/s. 10(23FE), notifies new Rule 2DB; New Rule 2DB specifies 6-fold conditions for Pension Funds, 

• It is regulated under the law of a foreign country,
• It is responsible for administering or investing the assets for meeting the statutory obligations and defined contributions of one or more funds or plans established for  providing retirement, social security, employment, or any similar compensation to the participants or beneficiaries of such funds or plans,
• The earnings and assets of the pension fund are used only for meeting statutory obligations,
• It does not undertake any commercial activity whether within or outside India,
• It shall intimate the details in respect of each investment made by it in India on quarterly basis in newly notifies Form No. 10BBB,
• It shall file return of income within the specified due-date and furnish along with certificate in newly notified Form No. 10BBC;

Further inserts new Rule 2DC laying down guidelines for notification of Pension Funds u/s. 10(23FE), requires Pension Funds to make an application in newly notified Form 10BBA.

Income Tax Department & its Updates 25 August 2020

• CBDT has released utility for ITR Form 5 on 25th August 2020 applicable to AOP, LLPs, etc. With this now ITR Form No. 1,2,3,4 & 5 are available for e-filing of Income Tax Returns for AY 2020-21.

• CBDT issues refunds of over ₹ 95,853 crores to more than 25.55 lakh taxpayers between 1st April 2020 to 25th August 2020. Income tax refunds of ₹ 29,361 crore have been issued in 23,91,517 cases & corporate tax refunds of ₹ 66,493 crore have been issued in 1,63,272 cases

A National e-Assessment Centre will be set up to implement Faceless Assessment: Pr. CCIT, Mumbai Press Information Bureau 26 August 2020

“Faceless Assessment is a Tax Assessment System designed for the 21st century”

• A National e-Assessment Centre (NeAC) and a network of Regional e-Assessment Centers will be set up to implement the Faceless Assessment Scheme of the Income Tax Department, launched nation-wide by Prime Minister Shri Narendra Modi on 13 August 2020
• The regional assessment network would comprise assessment units, verification units, technical units and review units
• Earlier, there was no discretion in selection of cases. They were selected manually. But now, NeAC has automated random allocation of cases. While notices used to be issued both manually and, on the system, issue of notices will now be done through a central mechanism (by NeAC) in electronic mode
• Wide discretion and subjective assessment are being replaced by team-based assessment and a system wherein draft order is issued in one city, review is done in another city and finalization is done in yet another city
• The Hon’ble Prime Minister of India, Shri Narendra Modi announced the extension of the scheme to the entire department on 13 August 2020. The scheme is also being extended to the first appellate authority i.e. Commissioner of Income Tax (Appeals) from 25 September 2020

Banks to refund charges collected on transactions carried through prescribed electronic modes u/s.269SU post-Jan 2020 Circular 16 of 2020 dated 30th August 2020

CBDT vide circular no.16 of 2020, directs banks to immediately refund the charges collected, if any, on transactions carried out using electronic modes prescribed u/s.269SU on or after 1st January 2020 and states that-
• Representations have been received that some banks are imposing & collecting charges on transactions carried out through UPI
• Such practice on part of banks is a breach of Section 10A of the PSS Act (Payment and Settlements Act) as well as section 269SU of the IT Act.
• Such breaches attract penal provisions under section 271DB of the IT Act as well as section 26 of the PSS Act.”
• Further advises banks to not to impose charges on any future transactions carried through the prescribed modes.

Some Case Laws

Mumbai ITAT: Method of valuation can not be changed by AO Karmic Labs Pvt. Ltd.[TS-389-ITAT-2020(Mum)] dated August 07, 2020

It is held that AO cannot change the method of valuation for valuing the market value of shares by merely relying on the actual results in subsequent years and arbitrarily coming to the conclusion that the projections were not achieved.
Section 56 allows the assessee to adopt one of the methods of their choice. It is beyond the jurisdiction of the AO to insist upon a particularly one method, especially when the act allows to choose one of the two methods.

Landmark Judgement– Mumbai ITAT Grants stay-extension till Aug 31st for ‘automatic extension’ during Covid-lockdown - Cleared Secured Services Pvt. Ltd. v. Dy. Commissioner of Income Tax- 6(2)(1), Mumbai SA No.197/Mum/2020 (Arising of ITA No.7302/Mum/2018 ) (Mumbai - Trib.) dated 24 July 2020

Mumbai ITAT grants extension of stay of demand to assessee-company till 31st Aug 2020, cites Bombay HC order for “extension of interim orders” owing to Covid-induced lockdown and held that the stay which had expired during the lockdown period need to be automatically extended till 31/08/2020.

Bengaluru ITAT: Rejects negative working capital adjustment for software service provider; Follows IZMO ruling - Core One Technologies Pvt. Ltd vs ITO Ward-2(1)(1) Bengaluru IT(TP)A No.556/Bang/2015 – Bengaluru ITAT dated 24 July 2020

ITAT rejects negative working capital adjustment for assessee (engaged in software designing, programming, development, testing and related services) for AY 2010-11; Follows coordinate bench ruling in IZMO Ltd which in turn relied on FNF India Pvt. Ltd wherein it was held that there is no need for making any negative working capital adjustment when assessee does not carry any working capital risk;
Accordingly, ITAT holds that “action of the revenue authorities in making negative working capital adjustment and thereby increasing the average arithmetic profit margin of comparable companies is not sustainable in the facts and circumstances of the present case”.

JUST NOW

Provision of Sec. 47(v) applies even if certain shares of subsidiary Co. are held by nominees of holding Co. - CIT vs. Shardlow India Ltd [Tax case appeal no. 485 of 2018] 16 July 2020.

Assessee transferred some portion of its land to its holding company resulting in profit on sale of asset and same was not offered to tax under the head Capital gains by referring to section 47(v) on the ground that assessee was a 100% subsidiary of its holding company. Assessee filed return of income declaring nil income which was processed under section 143(1). Assessing Officer (AO) proceeded with the regular assessment.

The assessment was reopened by issuing a notice under section 148 on the ground that AO found that 25 shares of assessee-company were held by the nominees of holding company. Therefore, AO held that assessee was not eligible for exemption of capital gains as per section 47(v). CIT(A) upheld the order passed by AO.

On further appeal, ITAT held that the holding company had 80 lakhs shares out of which 79,99,995 shares were held by the holding company in its own name and the 25 shares were held by six individuals who had been nominated by the holding company. A public limited company should have a minimum of 7 shareholders. Those 6 individuals who were nominated by holding company had no individual right as a shareholder and there holding was for and on behalf of the holding company.

Therefore, ITAT held that the whole of the share capital of the subsidiary company was held by the holding company. On further appeal, the Madras HC upheld the order of ITAT.

ITAT quashes Assessment Order passed on amalgamated entity where notice was issued to non-existent amalgamating entity Siemens Limited [TS-424-ITAT-2020(Mum)] 20 August 2020

ITAT Ruling:
• Mumbai ITAT quashes Assessment Order passed by AO on Siemens Ltd. (assessee, amalgamated company) without serving any notice u/s 143(2).
• Pursuant to the orders of Bombay HC, the assessee had informed the AO regarding its amalgamation order. However, the AO issued the notice to the assessee instead of the amalgamating company.
• The draft assessment & final Assessment Order were passed in the name of amalgamated company i.e. assessee but PAN in both the orders was that of amalgamating company.
• ITAT holds that the issuance of notice u/s 143(2) to the amalgamating company i.e. non-existent company cannot be treated as a notice issued to amalgamated company and cannot be validated within the realm of procedural irregularity u/s 292B.
•  ITAT holds such Assessment Order as void-ab-initio & thus quashes Assessment Order passed by the AO

ITAT: Income-tax Act prevails over ICAI's accounting standard, Allows interest deduction to Realtor u/s 36(1)(iii) Cornerstone Property Investment (P) Ltd [TS-421-ITAT-2020(Bang)] 24 August 2020

Bangalore ITAT allows interest expenditure towards inventory to be claimable as an expense despite no income being offered from sale of such inventory.
Facts of the case:
• The Assessee engaged in real estate trade, claims deduction for interest expenditure u/s 36(1)(iii) of the Act. This interest was towards purchase of land.
• AO disallowed such expenses as it were to be added to cost of inventory as per AS-2 r/w AS-16.
• As per AS 2 on “Valuation of Inventories”, the cost incurred towards purchase of inventory should be added to the “Cost of Inventory”.
ITAT Decision:
• Bangalore ITAT relies on Delhi ITAT decision of DLF Limited stating, “it is well settled judicial precedent that when the provisions of the Act are in contradiction of Accounting Standards (AS) and the provisions of Act will apply and not the provisions of AS”.
• Further it was held that purchase of land, in the scenario would account as inventory and not as purchase of capital asset. Thus, the proviso to Section 36(1)(iii) would also not apply.
• The ITAT thus allowed such interest deduction to realtor u/s 36(1)(iii).

ITAT allows depreciation on self generated Goodwill from a Loss-making unit Classic Stripes Pvt. Ltd [TS-413-ITAT-2020(Mum)] 20 August 2020

• Mumbai ITAT allows ‘depreciation’ on goodwill arising on merger of Safety product division of vendor company into assessee company where difference between book value of assets & shares issues was debited as ‘Goodwill’.
• AO’s contended that goodwill has arisen from loss making division and being self generated, shall not be entitled for depreciation.
• ITAT holds that whether the unit is loss making has nothing to do with existence of Goodwill. Goodwill can arise pertaining to different factors.
• Further, following the decision of Supreme Court in case of CIT vs Smifs Securities Ltd, ITAT held that goodwill arising on account of amalgamation would constitute intangible asset eligible for depreciation u/s 32 of the Act. 

ITAT: Goodwill on Business Acquisition to be treated as a depreciable asset Geodis Overseas Pvt Ltd [TS-422-ITAT-2020(DEL)] 24 August 2020

Delhi ITAT favors assessee in claiming depreciation on acquired Goodwill

Facts of the case: 
• The assessee claims depreciation u/s 32(1)(ii) on ‘goodwill’ representing the workforce value, supplier contracts and other business rights obtained upon acquisition of business from IBM.
• AO held that depreciation is not allowable on goodwill and disallowed the same on the said grounds:
Assessee did not become the sole logistic provider to IBM;
Decline in business receipts post acquisition; and
The goodwill is not similar in nature to any of the preceding items stated in the Act and thus the residual clause is not applicable.

ITAT decision:
• The ITAT held that specified intangible assets viz., business claims, business information, business records, contracts, employees and know-how acquired by assessee thereunder were in nature of ‘business or commercial   rights of similar  nature’.
• ITAT passed order holding the assessee eligible for depreciation on such goodwill.

ITAT: Merely ‘Owning’ Residential property jointly with wife does not amount to purchase. Anil Dev [TS-432-ITAT-2020(Bang)] 25 August 2020

Bangalore ITAT provides relaxation in case of Joint holding of house properties with Spouse

Facts
• Assessee held a property and purchased subsequently 2 more house properties of which one jointly with his wife and one in his own name.
• Assessee and his wife both earned capital gains from sale of unlisted shares. Assessee’s wife claimed the exemption u/s 54F in the property purchased in joint name i.e. 2nd property of Assessee.
• Assessee claimed deduction u/s 54F for 3rd property against capital gains from sale of unlisted shares.

AO’s Contention-
• Assessing Officer disallowed the claim of exemption u/s 54F of the assessee on the ground of violation by holding 3 properties.

Conclusion by ITAT-
• ITAT held that mere inclusion of his or her relative’s name in the purchase deed is not a criteria to disallow such exemption as the inclusion of name would be because of some emotional issues.
• Further, in the current case as both the assessee and his wife had paid the consideration out of their own funds it was thereby concluded that they can claim the deduction u/s 54F.

For a thought - Taxing the unexplained

• In the year 2016, Demonetization was introduced after which the Tax Department has been aggressive in taxation of all unexplained specified transactions, incomes and money.
• The provisions of the Income Tax Act which plugs the loophole of the evasion of taxes by charging Unexplained specified transactions includes:
• Inadequately Investments
• Unexplained Expenditures
• Transaction in Hundi
• Cash Credits
• Unexplained Investments
• Unexplained Money, etc.
• These specified transactions are taxable @ 83% (60% basic tax + 25% surcharge + 6% penalty + 4% health and education cess) leaving only a meagre sum in the hands of the defaulter.
• The tax authorities in India are keen to bring under the scanner all unaccounted and unexplained transactions and monies of the tax evaders and charge them with higher tax rates. They monitor the prospective tax evaders also by gauging the financial transactions collected from various informants.
• However, often genuine tax payers, to their misfortune are held up with the notices and scrutiny of the Income Tax Department and may end up facing hardships in proving the same. As the old adage goes ‘Prevention is better than cure’, one needs to honestly disclose all the assets / liabilities / incomes / expenditures while filing their Return of Incomes. Also, preserving the evidences for essential financial transactions at least for reasonable period of time can come to rescue in establishing the right facts.

Faceless assessment- CBDT top brass assures taxmen of no disruption Article by- Financial Express Bureau 20 August 2020

• The Central Board of Direct Taxes (CBDT) top brass assured tax department officials that the faceless assessment regime would not lead to any large-scale movement of personnel and would be implemented without draining the existing resources at the department’s disposal, the finance ministry sources said.
• I-T department officials were given a detailed presentation in the online meeting on faceless assessment and taxpayers’ charter and their proposed implementation.
• In the online meeting of tax officials, it was discussed that the department would adopt a demand management strategy to identify and clean-up pending demands so that the correct demand could be made available to the taxpayers.

DAC 6: Disclosure rules for Cross Border Arrangements involving EU Article by-Salil Goyal 20 August 2020

• DAC 6 is a mandatory compliance in limelight regarding with BEPS Action minimum standards.
• For an Indian MNC with operations in one or more of the 28 countries (including the UK) in the European Union (EU), DAC 6 compliance requirements apply.
• DAC6 consists of mandatory disclosure rules to report a qualifying cross border arrangement. This disclosure is made to a local tax authority in EU country in which it is domiciled.
• There is an obligation to report when there is certain arrangement that falls into compliance as per BEPS Action Plan. An arrangement can consist of a transaction, action, agreement, commitment, or a combination thereof. It also specifically covers any prospective arrangements ready to be implemented.
• The reportable information consists of:
• Parties affected by arrangement along with reporting taxpayer/intermediary
• Summary of Arrangement
• Date of implementation
• Value of Cross Border arrangement

Indirect Taxation

Foreign Trade Policy Update

Government caps MEIS benefit at ₹2 crores per IEC for exports made between 1.9.2020 to 31.12.2020 ​

Goods and Services Tax

1. Interest on delayed payment of GST only on the amount of tax paid through cash – Section 50 made effective from 1st September 2020:

• Finance Act 2019 had introduced an amendment in Section 50 of the CGST Act to provide for computation of interest on delayed payment of GST only on the amount of tax paid through cash. However, this amendment was not notified immediately as all States were also required to carry out the same amendment in their respect State GST Acts. Now, amended Section 50 is made effective from 1.9.2020.

Impact of this amendment:
• Let us take an illustration: A taxpayer has GST liability of ₹100 for a tax period. He has input tax credit balance of ₹90 and balance liability ₹10 was required to be in cash. Due to working capital issues, he could not deposit ₹10 with the Government and consequently, could not file his GST return within due date. He then files his return after three months. Before the aforesaid amendment, department was of the view that interest is required to be computed for three months on the entire liability of ₹100 even though taxpayer had credit balance of ₹90. Now with this amendment, interest would be computed only on cash component of ₹10.

• Although this amendment is effective from 1.9.2020, Government has clarified that, GST authorities would consider amended Section 50 for computation of interest even for the past period, thus in effect, treating this amendment as retrospective.

• It is worthwhile to note that, benefit of computation of interest only on the cash component appears to be applicable only in case of delay in filing of GST returns and not in cases where tax liability is paid at the time of GST audit or in cases where GST return is already filed but few tax invoices were inadvertently missed to be reported in the return and thus, tax payment is delayed. Interest in such cases would be computed on the gross amount only.  

2. New functionalities on GST Portal: GSTR-2A report now contains details of IGST paid on import of goods

Recently, GSTN has enabled the facility in GSTR-2A report to view details of IGST paid on import of goods from overseas suppliers and from SEZ units. This will indeed help taxpayers to reconcile their credits pertaining to import of goods as per books with those appearing in 2A report.

Single refund application for multiple financial years enabled on GST Portal:

Earlier GSTN portal did not allow clubbing of tax periods across different financial years to claim GST refund, even though there was no such restriction under GST law. Taking cognizance of Delhi High Court’s Order in the case of M/s Pitambra Books Pvt. Ltd., CBIC vide its Circular #135 dated 31.3.2020 removed this restriction. However, it took some time for the GSTN portal to get ready. Now, bunching of GST refund claims across financial years is enabled on GSTN Portal in Form GST RFD-01.   

GSTN launches GSTR-2B Report: an auto drafted ITC statement

Presently, taxpayers report their input tax credit claim in monthly GSTR-3B return. There are various tables in GSTR-3B as regards reporting of input tax credit numbers such as: credits on invoices received from domestic suppliers, credits on import of goods, credits on tax paid under RCM, reversal of credits due to credit notes issued by suppliers and so on. Multiplicity of tables often causes taxpayers to make mistakes in reporting their credit claims under various tables. Now with the newly launched GSTR-2B report, taxpayers would get auto drafted ITC statement basis reporting in GSTR-3B. Government claims that this new report is expected to reduce the time taken for preparing return, minimise errors, assist in reconciliation and simplify compliance relating to filing of returns. 

GST Litigation Update:

Services provided during warranty: who is recipient of service?

Recently Karnataka Appellate Advance Ruling Authority (AAAR) in case of M/s Volvo-Eicher Commercial Vehicles Ltd held that for repair and servicing of vehicles during warranty period by Indian distributor, service recipient is foreign manufacturer (Volvo-Sweden) and not Indian customer. Referring to definition of “recipient of supply of goods or services or both” and “consideration” under the CGST Act, AAAR observed that person who is required to make a payment for getting a job done is the recipient of service. In the instance case, it is at the behest of Volvo-Sweden that the appellant has undertaken the activity of repair and/or replacement of parts to the customer during the warranty period. Reimbursement received from Volvo-Sweden is in the nature of consideration for carrying out the service during the warranty period, which activity was part of the obligations of Volvo-Sweden. Considering this, AAAR set aside the AAR ruling which held that the recipient of service is the customer in this case.

This Ruling is particularly important in case of post-sales support services rendered by Indian distributors to foreign principals in determining whether it constitutes ‘export of services’ or otherwise.

Gujarat HC grants refund of IGST paid on ocean freight in case of CIF import contracts:

In a landmark judgement in case of M/s Mohit Minerals Pvt Ltd, the Gujarat High Court earlier this year held that levy of IGST on ocean freight in case of CIF import contracts is unconstitutional.

Pursuant to the above order, now Gujarat High Court in case of M/s Bharat Oman Refineries Ltd has directed the Government to sanction the refund of IGST already paid in such cases. Basis this direction, those taxpayers who have already paid IGST must explore option of claiming IGST refund from the government.

Making available any Notice or Order on GSTN portal is valid communication

Section 169 of the CGST Act prescribes various methods of service of any notice, decision, order, or other communication to the taxpayer. One of the prescribed methods is making it available on the GSTN Portal of the taxpayer. Needless to say, the time limit available to the taxpayer to take action on this, runs from the date when it is made available on the GSTN Portal, whether or not taxpayer is in knowledge of the same.

Interestingly in a recent case before Kerala High Court, a taxpayer argued that assessment orders were not served on him even though they were made available on his GSTN portal. High Court obviously was not pleased with this argument and held against the taxpayer.

Therefore, it is very important that every registered person must put in some system in place to regularly check his GSTN portal for any notice/order/decision served on him so that appropriate action can be taken in a timely manner. A Stitch in Time Saves Nine…  

Customs Update

Government caps export incentives under MEIS at ₹2 crore

In a notification, The Directorate General of Foreign Trade (DGFT) said the total reward availed by any exporter under MEIS cannot exceed ₹2 crore during the September-December period. “The aforesaid ceiling may be subject to further downward revision to ensure that the total claim under the scheme for the (four month) period does not exceed the allocation prescribed by the government, which is ₹5,000 crore,” the DGFT notification said.
 
New importer exporter code (IEC) obtained on or after the notification have been made ineligible for submission any MEIS claim for exports made from 1 September onwards to avoid circumventing the cap.

FTA benefit on imports: Government notifies rules for enforcement of ‘rules of origin’ requirement

India has inked Comprehensive Economic Partnership Agreements (CEPA) / Free Trade Agreements (FTA) with various countries for reduction or elimination of import duties on goods traded between them. Usually such preferential trade agreements also provide for the “Rules of Origin” requirements related to minimum processing or value addition that should happen in the Partner country. This aids in identification of the source country of goods being imported and in turn help in containing dumping of goods by a third country by routing exports through FTA partner country.
 
For administration of rules of origin under trade agreements and to monitor the claims of preferential tariff by Indian importers, the Government has notified the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 to be effective from 21.9.2020. Further, CBIC has also issued Customs Circular No. 8/2020 dated 21.8.2020 clarifying certain aspects related to the said Rules.
 
The new rules provide clarity to the Indian importers as well as foreign suppliers as regards procedures to be adopted by Indian customs officers while evaluating the claims for preferential duty rate under trade agreements. Further, it is now practically impossible for importers/foreign suppliers to dishonestly use preferential duty rate in case goods do not originate from the FTA partner country.  
 
Key takeaways from the new rules are:
• Importers to make declaration in the bill of entry for preferential tariff claim;
• Origin related information to be possessed by importer in prescribed Form I;
• Form I to be retained along with supporting documents for a period of five years and submit the same to customs officer on request;
• Importer to exercise reasonable care to ensure the accuracy and truthfulness of the information and documents as regards origin of imported goods;
 
Importers need to rapidly gear up for the change with the new set of requirements set to become operational in less than one month’s time.

singapore updates

JOB SUPPORT FOR SINGAPORE BUSINESSES AND WORKERS – JSS SCHEME

As a measure to withstand business and retain workers, the government has extended the job support scheme until March 2021, in an announcement made on 17th August 2020.
The support varies sector wise:
SECTORS
Aerospace, Aviation, Tourism

Built environment sector


Arts and entertainment, food services, land transport, marine and offshore, and retail sectors

For the large majority of the remaining sectors

For the few sectors that are managing well, such as biomedical sciences, financial services, and ICT sectors
SUPPORT UNDER JSS
50% of wages paid for 7 more months

50% of wages paid for 2 more months, before lowering to 30% for wages paid up to March 2021

30% of wages paid for 7 more months


10% of wages paid for 7 more months

10% of wages paid for 4 more months, for wages paid up to December 2020

FOR START UPS:
I. STARTUP SG FOUNDER PROGRAMME:

For this programme , the government has set aside $150 million, which helps start ups to

1. Raise the start-up capital grant
2. Access the government for mentorship

II. EMERGING STRONGER TASKFORCE TESTING PROTOTYPES:

This was setup early this year to prototype new ideas through industry led alliances for action. It covers smart commerce and supply chain digitalisation.
HIRE LOCAL STAFF & GET FUNDED – RECRUITMENT
Government supports the firms who hire local workers, with their S$ 1 billion programme.
For one year – up to 25% co-payment of salaries of all new local hire.
For hiring local aged 40 and above, up to 50% co-payment.

IRAS – TAX TREATMENT OF FOREX GAIN/LOSS
Forex gain / loss is inevitable for a business conducted abroad. Tax treatment for the same may be complicated & confusing. Here comes the E-tax guide updated by IRAS providing details on tax treatment of forex gain / losses for business.

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