Resolving Albatross surrounding Goods and Services Tax

GST Calendar –Compliances for the month of August’2021

Nature of Compliances	Due Date
GSTR-7 (Tax Deducted at Source ‘TDS’)	September 10,2021
GSTR-8 (Tax Collected at Source ‘TCS’)	September 10,2021
GSTR-1 August 2021	September 11, 2021
IFF- Invoice furnishing facility (Availing QRMP)	September 13, 2021
GSTR-6 August 2021 Input Service Distributor	September 13, 2021
GSTR-2B (Auto Generated Statement)	September 14, 2021
GSTR-3B August 2021	September 20, 2021
GSTR-5 August 2021 (Non-Resident Taxable Person)	September 20, 2021
GSTR-5A August 2021 (OIDAR Service Provider)	September 20, 2021
PMT-06 (who have opted for QRMP scheme)	September 25, 2021
GSTR-9 & GSTR-9C FY 2020-2021	December 31, 2021
ITC-04 (Quarter Jul’21 – Sep’21)	October 25, 2021

A. Reimbursement of post-sale SKU discounts to distributor liable to GST

M/s Santhosh Distributors Kottayam | AAAR Kerala

FACTS

• Appellant entered in an agreement with M/s Castrol India Ltd. (hereinafter referred as ‘Castrol’) to distribute products on principal-to-principal basis.
• As part of agreement Castrol shall determine the price at which such goods shall be sold and the goods cannot be sold beyond such price.
• As part of agreement Castrol shall determine the price at which such goods shall be sold and the goods cannot be sold beyond such price.
• Appellant is entitled for following type of SKU discounts by Castrol by way of reimbursement through commercial credit notes:

i) Discount known at or prior to time of supply.
ii)Discount offered post sales where the discount may or may not be known at the point of supply and is not quantified in the agreement.

ISSUE

• Whether post sale SKU discount offered by Castrol to their dealers through the Appellant attracts GST.
• Whether the amount shown in the commercial credit note issued to the appellant by Castrol attracts proportionate reversal of Input tax credit.
• Is there any tax liability under GST laws on the Appellant for the amount received as reimbursement of discount or rebate provided by Castrol.

Held

• Hon’ble AAAR relied upon Sec 15(3) which prescribes that the post-sale discounts shall be excluded from the taxable value on satisfaction of below two conditions:

i) Discount can be established in terms of the agreement between the supplier and recipient and that such discount can be linked to the relevant invoice; and
ii) Input tax credit attributable to the said discount is reversed by the recipient.

• Hon’ble AAAR observed that in the transaction the agreement does not specify the terms, qualification, parameters, quantum or percentage of post-sale discounts. Further, that the incidence of tax in the instant transaction has been transferred to Castrol as the same are reimbursed to the Appellant and Castrol determines the prices at which the goods shall be sold leaving no control with the Appellant over the prices.
• Hon’ble AAAR held that transaction post sale discount cannot be allowed as discount and thereby excluded from the taxable value. Thus, the additional discount given by Castrol shall qualify as ‘Consideration’ and liable to be added in the consideration payable by the end customers to Appellant. Further, GST shall be payable at the applicable rate of goods.
• Hon’ble AAAR held that Appellant is not liable for reversal of proportionate input tax credit, as there is no reduction in outward tax liability for Castrol on account of issuance of commercial credit note in lieu of additional discounts.

B. Stay on bank attachment & cancellation of registration for not giving hearing opportunity

 M/s. Cheema Local Carrier & Construction vs Asst. Commissioner | Chhattisgarh High Court

FACTS

• Petitioners bank accounts were attached and freezed by the Revenue. Further, its GST Registration was cancelled and electronic input tax credit ledgers were blocked, which resulted into closure of the business.
• Petitioner contends that the show cause notice issued by the Revenue had no particulars reflecting contraventions made and that the ingredients of Rule 21 of the CGST Rules must be fulfilled before proceeding with cancellation of Registration.
• Petitioner had filed its written reply to the order issued by Revenue for attachment of bank accounts, however no opportunity of hearing was provided to the Petitioner in terms of GST provisions.

ISSUE

• Petitioner aggrieved by the order issued by the Revenue, wherein its bank accounts were attached, Input Tax Credit Ledgers were blocked and GST Registration was cancelled, filed the said petition.

Held

• Hon’ble High Court relied upon the matter of Valerius Industries v. Union of India wherein it was observed existence of relevant material is pre-conditional to the formation of opinion upon which the authority may act for provisional attachment of the bank account and cancellation of registration.
• Hon’ble High Court observed that in the instant transaction, that the order issued by Revenue do not reflect the grounds existing for passing such order and that the business of the Petitioner stands closed on account of such orders.
• Hon’ble High Court issued an interim order wherein attachment of the bank accounts and order for cancellation of GST Registration of Petitioner were stayed till the next date of hearing. Further, it directed Revenue that the said interim stay order shall not preclude Revenue from taking any action on deliberately avoiding any hearing given to Petitioner.

C. High Court sets aside order blocking ITC in Electronic Credit Ledger

M/s Shree Rajendra Steels vs. Asst. Commissioner | Madras High Court

FACTS

• Petitioner had earlier approached High Court seeking a direction for unblocking the Input Tax Credit (ITC) available in its Electronic Credit Ledger, wherein High Court had directed and permitted Petitioner to address its grievance to appropriate authority in accordance with law.
• Accordingly, Petitioner had approached Respondent by way of a written representation along with necessary documents substantiating its request for unblocking ITC.
• However, as per Respondent ITC has been availed against fake invoices and that there was no actual movement of goods. A Show Cause Notice was issued upon the Petitioner and an opportunity of personal hearing was granted. However, Petitioner did not avail this opportunity of Personal hearing amid lockdown and on-going pandemic.
• Thereafter, an order was issued by the Respondent disallowing the ITC claim of the Petitioner.

ISSUE

• Whether the Respondent is right in disallowing Petitioners request for unblocking ITC in Electronic Credit Ledger without any reasoning and without considering necessary documents.

Held:

•  Hon’ble Court observed that the impugned order simply rejects the claim for ITC stating that ‘the tax payer has claimed ITC using fake invoices. Hence the corresponding ITC is disallowed’.
• Hon’ble Court referred the claim of ITC should have been decided based on documents supplied along with material collated/available with the Assessing Officer; not by way of a cursory order and that the order must be reasoned.
• Hon’ble High Court set aside the impugned order as not being a speaking order and directed Petitioner to appear before the authority along with its reply to the SCN and without expecting any further notice in this regard. It further directed the Respondent to decide the claim of ITC by way of a speaking order, in accordance with law.

D. Implementation of Rule 59(6) of CGST Rules on GST Portal  w.e.f 1^st September 2021.

• Rule 59(6) of the CGST Rules,2017 inserted vide Notification No. 1/2021 dated 1^st Jan 2021, provides for restrictions imposed on filing of GSTR-1 / IFF (as the case may be) on GST portal for below mentioned cases:

a) Where a registered person has not furnished the return in FORM GSTR 3B for preceding two months; or
b) Where a quarterly registered person has not furnished the return in FORM GSTR-3B for preceding tax period;

• As per the advisory, GST portal shall check whether before filing of GSTR-1/IFF of a tax-period, following has been filed or not:

a) GSTR-3B for the previous two monthly tax-periods (for monthly filers); or
b) GSTR-3B for the previous quarterly tax period (for quarterly filers), as the case may be.

• Further, the system shall restrict filing of GSTR-1/IFF till Rule-59(6) is complied with. This check shall operate on clicking the SUBMIT button of GSTR-1 and the system will give an error message if the condition of Rule-59(6) is not met. The records which have been saved in GSTR-1 shall remain saved and filing of such records will be permitted after Rule-59(6) is complied with.
• It is imperative to note that the implementation of Rule-59(6) on the GST Portal shall be completely automated, similar to the blocking & un-blocking of e-way bill as per Rule-138E and facility for filing of GSTR-1 will be restored immediately after filing of relevant GSTR-3B. No separate approval would be needed from the tax-officer to restore the facility for filing of GSTR-1.

E. Extension in timelines

• Late Fee Amnesty :

CBIC vide Notification No. 33/2021 dated 29^thAugust 2021 has extended late fee amnesty scheme from 31^st August  2021 to 30^th November 2021 i.e., where a registered person furnishes GSTR-3B for the period 1^st July 2017 to 30^th April 2021 by 30^th November 2021, the late fee shall be waived as per the table below:

Tax Payable	Waiver of Late Fee
Where GST is payable	Any amount in excess of Rs. 500 per return
Where GST payable is NIL	Any amount in excess of Rs. 250 per return

• Revocation application for cancellation of registration :

CBIC vide Notification No. 34/2021 dated 29^th August 2021 has extended timelines from 31^st August 2021 to 30^th September 2021 , for filing revocation application of cancellation of registration,  where a registered person has not furnished returns for a continuous period of three months in case of a composite dealer and six months in other cases.

F. DGFT Update: Remission of Duties & Taxes on Exported Products (RoDTEP)

Background:

The merchandise exports scheme was resisted in the World Trade Organization (WTO). India has filed an appeal against the dispute settlement body’s ruling and is pending before the appellate body of the WTO. In augmenting exports by allowing refund of taxes that are not refunded or available as credit, the Remission of Duties and Taxes on Exported Products (RoDTEP) replaces the Merchandise Exports from India Scheme.

The scheme was operational from January 01, 2021 and was pending issuance of guidelines and notification of rates. The exporters need to indicate the claim benefit of RoDTEP in the shipping bill as a declaration with effect from January 01, 2021. An online RoDTEP record is created for the conversion of scrolls into scrips on the ICEGATE system. The Foreign Trade Policy 2015-2020 has now notified guidelines for RoDTEP scheme.

Highlights of the Scheme:

• The theme is to refund at present unrefunded duties, taxes, levies at the Central, State and local level borne on the exported products including prior stage cumulative indirect taxes on goods or services used in the production of the exported product and such indirect duties, taxes and levies in respect of distribution of exported product.
• Rebate is granted to eligible exporters at notified rate as a percentage of FOB value with capping system. However, for certain items, a fixed quantum of rebate per unit as may be notified. Rebate rates shall range from 0.01% to 4.3% for different HS codes as specified in Appendix to the Policy.
• Ministry of Finance in synergy with Department of Commerce shall specify the overall outlay for said scheme. Further, the said scheme shall operate on a budgetary framework for each financial year subject to revisions in scheme benefits post necessary calibrations.
• Rebate allowed shall be subject to realization of sale proceeds within time allowed and would not be dependent on the realization of export proceeds at the time of issue of rebate.     
• Rebate allowed shall be subject to realization of sale proceeds within time allowed and would not be dependent on the realization of export proceeds at the time of issue of rebate.
• Exports to be made from EDI ports.

Exports to be made from EDI ports.

• Export of imported goods in the same or substantially same condition in terms of Para 2.46 of Foreign Trade Policy;
• Exports through trans-shipment i.e., goods routed through India but not entering India;
• Export that are subject to Minimum Export Price or Export Duty;        
• Exports which are Restricted or Prohibited products as specified under Schedule-2 of Export Policy in ITC(HS);
• Supplies of products manufactured by DTA units to SEZ/FTWZ units; Products manufactured or exported under jobbing contracts thereby availing the benefit of the Notification No. 32/1997-Customs dated 1st April, 1997;
• Exports for which electronic documentation in ICEGATE EDI has not been generated/ Exports from non-EDI ports;
• Products manufactured / Exported by Free Trade Zones (FTZs) or Export Processing Zones (EPZ) or Special Economic Zones (SEZ);
• Products Manufactured in Electronic Hardware Technology Park (EHTP) / Bio-Technology Park (BTP) or a warehouse operating under Section 65 of the Customs Act i.e., MOOWR Scheme;
• Deemed Exports.

The inclusion of exports made against Duty Free Import Authorisation, Advance Authorisation, or by units in an EOU, SEZ or FTWZ, including rates, shall be decided based on the recommendations of the RoDTEP Committee.