We are delighted to share our 105th E-Newsletter “Weekly Taxation Newsletter” dated 21st March, 2023 from 13th March, 2023 to 20th March, 2023 with you. This E – Newsletter is a weekly reference / compilation of interesting and latest news related to tax including upcoming Timelines / Due Dates, Notifications / Press Information, Case Laws, International Taxation etc.                        

  • Stay updated, Stay connected
  • Due Dates under IT Act 1961
  Sl.  Compliance Particulars      Due Dates  
1​​Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA in the month of February, 2023.30.03.2023
2.​​Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IB in the month of February, 2023.30.03.2023
3​​Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194M in the month of February, 2023​.30.03.2023
  4​Country-By-Country Report in Form No. 3CEAD for the previous year 2021-22 by a parent entity or the alternate reporting entity, resident in India, in respect of the international group of which it is a constituent of such group.​  31.03.2023
    5​​Country-By-Country Report in Form No. 3CEAD for a reporting accounting year (assuming reporting accounting year is April 1, 2021 to March 31, 2022) by a constituent entity, resident in India, in respect of the international group of which it is a constituent if the parent entity is not obliged to file report under section 286(2) or the parent entity is resident of a country with which India does not have an agreement for exchange of the report etc.  31.03.2023
  6​​Uploading of statement [Form 67], of foreign income offered to tax and tax deducted or paid on such income in previous year 2021-22, to claim foreign tax credit [if return of income has been furnished within the time specified under section 139(1) or section 139(4).  31.03.2023
  • Under the GST, 2017

A. Filing of GSTR –3B / GSTR 3B QRMP

a). Taxpayers having aggregate turnover upto Rs. 5 crores in preceding FY (Group A)

Tax periodDue Date Particulars
February, 202322nd March, 2023 Due Date for filling GSTR – 3B return for the month of February, 2023 for the taxpayer with Aggregate turnover upto INR 5 crores during previous year and who has opted for Quarterly filing of GSTR-3B
Group A States: Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, Daman & Diu and Dadra & Nagar Haveli, Puducherry, Andaman and Nicobar Islands, Lakshadweep

b). Taxpayers having aggregate turnover upto Rs. 5 crores in preceding FY (Group B)

Tax periodDue Date Particulars
February, 202324th March, 2023 Annual Turnover Up to INR 5 Cr in Previous FY But Opted Quarterly Filing         
Group B States:  Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand, Odisha, Jammu and Kashmir, Ladakh, Chandigarh, Delhi

B. GST Refund:

Form No.Compliance ParticularsDue Date
RFD -10Refund of Tax to Certain Persons18 Months after the end of quarter for which refund is to be claimed

C. Monthly Payment of GST – PMT-06:

Compliance Particular  Due Date
Due Date of payment of GST for a taxpayer with Aggregate turnover up to INR 5 crores during the previous year and who has opted for Quarterly filing of return under QRMP.  25.03.2023
  • Weekly Departmental Updates: Income Tax

1. Step-by-step guide to pay advance, self-assessment taxes

According to section 208 of the Income Tax Act, advance tax liability arises only if the estimated tax liability exceeds Rs10,000. Individuals must pay the Self Assessment Tax (SAT) on other sources of income.

In case of failure in paying advance tax, a person will have to pay interest for non-payment of advance tax.

Advance Tax is a type of direct tax (income tax) that is paid in advance by an individual on their estimated total income for the fiscal year. It is also known as ‘pay-as-you-earn’ because it is paid before the end of a financial year. According to section 208 of the Income Tax Act, advance tax liability arises only if the estimated tax liability exceeds Rs10,000.

Self-assessment tax

Individuals must pay the Self Assessment Tax (SAT) on other sources of income. It is the calculation of the individual’s final income tax liability after deducting TDS (Tax Deducted at Source) from their source of income as well as the advance tax payable for the fiscal year. If there is any tax pending before filing an individual’s income tax return at the end of the year, the final amount that the individual is liable for is calculated. This is known as the self-assessment tax.

How to pay advance Tax?

  • Online Payment
  • Access http://www.tin-nsdl.com > Services > e-payment
  • Choose challan ITNS 280.
  • Enter the necessary challan information (Please select Advance Tax check box)
  • After entering all of your information, you will be directed to your bank’s net banking site.
  • Login to your net banking portal and enter payment information at the bank’s website.
  • Upon successful payment, a challan counterfoil with the CIN, payment details, and bank name will be displayed.

This challan serves as payment proof.

  • Offline/Papermode payment

Generally, after the SAT is paid, it reflects on the individual’s Form 26AS within a few days. If it does not show, the challan details can be filled in when filing the income tax return.

2. Income tax filing: Why is this important to cross-check the income shown on AIS before March 31?

The income tax (I-T) department recently shortlisted 68,000 income-tax returns for e-verification for the assessment year 2020-21 on account of discrepancy in income.

This means the income showed in the system is more than what they have declared in their tax return. Now, taxpayers have time till March 31, 2023 to file an updated return to incorporate the discrepancy. The department will start taking action only if the taxpayer fails to file an updated return or do not send a response by March 31, 2023.

This is why, the department recently urged tax payers to check if they have any objection to the displayed financial transactions in AIS (annual information system).

What is AIS?

Annual Information Statement is a complete view of information for a taxpayer. In fact, AIS is an extension of Form 26AS that displays details of property purchases, high-value investments, and TDS/TCS transactions carried out during the financial year.

Raising an objection

If tax payers feel that there is an error, they can raise an objection with the department. Upon raising the objection, the tax department will verify the income from the source, which could be any entity for example employer deducting TDS at the time of transferring of salary, or a bank at the time of transferring of interest income.

What is e-verification scheme?

When a financial transaction reported by a source (e.g., bank deducting TDS while transferring interest income) is not considered by tax payer at the time of filing of income tax return, a process of identification of such mismatch is undertaken under the e-verification scheme.

At the outset, tax payer can intimate the department raising the objection. The department, thereafter, sends communication to the source seeking confirmation.

If the source confirms the information, the tax department can start proceedings under the e-verification for the taxpayer. The taxpayer can send explanation or evidence through electronic means using the compliance portal (eportal.incometax.gov.in). To read more Click Here

3. Income Tax: How Advance And Self-Assessment Taxes Are Calculated And Paid?

Income Tax: In India, advance tax refers to the tax that is paid by individuals, companies, and businesses in advance, rather than waiting to pay it all in a lump sum at the end of the financial year. For salaried individuals, advance tax is mostly taken care of through TDS by employers. But other forms of income such as interest on savings bank accounts, fixed deposits, rental income, bonds, or capital gains increase the tax liability. One’s tax liability needs to be estimated beforehand.

If tax amounts to more than Rs 10,000 per year, taxpayers need to pay advance tax in quarterly installments (June, September, December and March). Self Assessment Tax means the amount that a taxpayer pays on the requisite income after deducting advance tax and Tax Deducted at Source (TDS).

Self-assessment tax is calculated based on the income tax rates and rules applicable for that particular financial year. The taxpayer can pay the self-assessment tax online through the income tax department’s website or by visiting a designated bank branch.

Who Is Liable To Pay Advance Tax?

As per section 208, every person whose estimated tax liability for the year is Rs 10,000 or more, shall pay his tax in advance, in the form of ‘Advance Tax’. In this part you can gain knowledge on various provisions relating to payment of advance tax by a taxpayer.

How is Advance Tax Calculated And Paid?

Advance tax is calculated as given below:

a) In case of all assessees (other than the eligible assessees as referred to in section 44AD and 44ADA of the Income Tax Act):

  • At least to 15% On or before June 15
  • At least to 45% On or before September 15
  • At least to 75% On or before December 15
  • 100% On or before March 15

b) In case of eligible assessee as referred to in section 44AD and 44ADA: 100% On or before March 15.

The presumptive taxation scheme of section 44AD is designed to give relief to small taxpayers engaged in any business (except the business of plying, hiring or leasing of goods carriages referred to in section 44AE).

The presumptive taxation scheme of section 44AD can be adopted by following persons :

1) Resident Individual

2) Resident Hindu Undivided Family

3) Resident Partnership Firm (not Limited Liability Partnership Firm)

A person resident in India engaged in following professions can take advantage of section 44ADA:-

  1. Legal
  2. Medical
  3. Engineering or architectural
  4. Accountancy
  5. Technical consultancy
  6. Interior decoration
  7. Any other profession as notified by CBDT

How Is Self-Assessment Tax Calculated And Paid?

Self-Assessment Tax Calculation: After filling out your ITR form with the TDS and advance tax details (if paid), the system computes your income and checks whether tax is still payable. You need to pay it and then fill in the challan details in the return before submitting it.

Who Is Not Liable To Pay Advance Tax?

A resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession is not liable to pay advance tax.

4. Is new income tax slab beneficial for home loan EMI paying individuals?

The Union Budget for 2023–24 was balanced across all sectors, but from the perspective of taxation, it incentivized individual taxpayers to choose the new tax regime by offering a higher tax rebate threshold than the old regime allowing them to claim higher deductions from various sources of income.

Ankit Aggarwal, MD, Devika Group said  for homebuyers, the old tax system offers more deductions for interest and principal payments on home loans when compared to the new tax system.

New tax regime will not allow homebuyers to claim deductions

However, when it comes to taxation, modifications of the new tax regime will not allow homebuyers to claim deductions that they can avail under the old tax regime, said Anurag Goel, Director, Goel Ganga Group

The Income Tax Act of 1961 provides various provisions for a tax rebate on home loans, such as tax deductions on principal repayment of home loans of up to Rs.1.5 lakh under Section 80C, tax deductions on interest payments for a home loan of up to Rs.2 lakh under Section 24, and deductions under Section 80EEA in case of affordable housing if you are a first-time property buyer, and Section 80EEA also allows taxpayers to claim an additional deduction of up to Rs.1.5 lakh annually.

New tax regime vs old tax regime: What should homebuyers opt for?

Suren Goyal, Partner, RPS Group said that all of these deductions fall under the old tax regime, thus the new tax regime will not advantage home buyers in terms of lowering the tax burden on their home loan.

According to Siddharth Maurya, Resource Specialist, Fund Management, those who choose the new tax regime will have to forfeit the potential for deductions under Sections 80C, 24(b), and 80EEA in consideration for a lower tax rate and a streamlined tax structure, such as new tax slabs of five, tax exemption limits of ₹3 lakh, and tax rebate limits of ₹7 lakh.

5. Income Tax Return: Who Is Eligible To File ITR 1 Sahaj Form?

In India, Income Tax Return (ITR) refers to the form in which taxpayers declare their taxable income, deductions, and taxes paid to the Income Tax Department of India.

Every year, individuals, businesses, and other entities whose income exceeds the minimum threshold set by the government are required to file their income tax returns. The due date for filing returns depends on the type of taxpayer and the nature of their income.

After filing the income tax return, the IT Department verifies the details provided by the taxpayer and assesses the amount of tax owed. If the taxpayer has paid more taxes than what is owed, they are entitled to a refund, while if they have paid less, they will need to pay the balance amount.

There are seven ITR forms which are used by different taxpayers according to the income and type of individuals. ITR 1 or Sahaj is one such form which is widely used to file the returns.

Who Can File ITR 1 Sahaj?

According to the IT department, ITR-1 can be filed by a resident individual whose:

  1. Total income does not exceed Rs 50 lakh during the FY
  2. Income is from salary, one house property, family pension income, agricultural income (up to Rs 5000), and other sources, which include:
  3. Interest from Savings Accounts
  4. Interest from Deposits (Bank / Post Office / Cooperative Society)
  5. Interest from Income Tax Refund
  6. Interest received on Enhanced Compensation
  7. Any other Interest Income
  8. Family Pension
  9. Income of Spouse (other than those covered under Portuguese Civil Code) or Minor is clubbed (only if the source of income is within the specified limits as mentioned above).

Who Is Not Eligible To File ITR-1?

ITR-1 cannot be filed by any individual who:

  1. Is a Resident Not Ordinarily Resident (RNOR), and Non-Resident Indian (NRI)
  2. Has total income exceeding Rs 50 lakh
  3. Has agricultural income exceeding Rs 5000
  4. Has income from lottery, racehorses, legal gambling etc.
  5. Has taxable capital gains (short term and long term)
  6. Has invested in unlisted equity shares
  7. Has income from business or profession
  8. Is a director in a company
  9. Has tax deduction under section 194N of Income Tax Act
  10. Has deferred income tax on ESOP received from employer being an eligible start-up
  11. Owns and has income from more than one house property
  12. Is not covered under the eligibility conditions for ITR-1

What Documents Do You Need To File ITR-1?

You would need Form 16, house rent receipt (if applicable), investment payment premium receipts (if applicable). However, ITRs are annexure-less forms, so you are not required to attach any document (like proof of investment, TDS certificates) along with your return (whether filed manually or electronically). However, you need to keep these documents for situations where they need to be produced before tax authorities such as assessment, inquiry, etc.

The pre-filling and filing of ITR-1 service is available to registered users on the e-Filing portal. This service enables individual taxpayers to file ITR-1 either online through the e-Filing portal, or by accessing the offline utility. This user manual covers the process for filing ITR-1 through online mode. To read more: Click Here

  • Important Circulars and Notifications:
Sl.Particulars of the Notification(s)File No. / Circular No.Notification Link(s)
1NA   Click Here

Weekly Departmental updates:

  • GST Updates

1. Tenders soon for ROB work on GST Road

The National Highways Authority of India (NHAI) will soon call for tenders for the construction of approaches on either side of the Rail Over Bridge (ROB) at Irumbuliyur, which was built to replace level crossing 95 A and B.

The existing ROB, which is presently a four-lane wide facility, is being made wider to handle additional traffic. After completion of the work, the facility, which is on GST Road at the location where the railway line crosses from one side to another, will become eight lanes wide.

The work is also being necessitated to make space for the additional track being laid by the railways. The road too in that stretch is being widened to eight lanes to accommodate more traffic.

The construction is being carried out jointly by the railways and the NHAI. The ₹22-crore work (NHAI’s contribution) to construct 900 m of approaches on either side is expected to be completed in two years. There is no land acquisition involved in the work, said an official in the NHAI.

Sources in the railways said it had been nearly a year since they completed their portion of work and were waiting for the NHAI to complete its work so that traffic could be diverted to the new facility. “We need space to go for further construction,” the source said.

Meanwhile, tenders are under process for the construction of a similar wider ROB just before Paranur toll plaza in Chengalpattu district. The level crossing used to be called 159. The 958-m approaches will cost around ₹16 crore and take a similar time to complete.

2. GST dept to scrutinise I-T, MCA data to identify entities not paying taxes

The GST department will soon begin analysing ITRs filed by businesses and professionals and also MCA filings to ascertain if the entities are adequately discharging their GST liability and widening the taxpayer base.

Currently, there are 1.38 crore registered businesses and professionals under the Goods and Services Tax (GST), which was launched on July 1, 2017. Businesses in manufacturing and services sectors with annual turnover of more than Rs 40 lakh and Rs 20 lakh, respectively are required to register themselves under the GST and file tax returns.

“We will be doing data triangulation based on the information available with the I-T department. If as per the analysis, the entities which should be paying taxes under GST are not doing so, then initially we will be sending a gentle inquiry,” an official told PTI.

The data analysis will focus on those entities which are not exempt and are required to register under the GST and file returns, either monthly or quarterly. After identifying the entities which are not complying with the GST law, the GST department will communicate to them at their registered place of business asking them the reasons for non-compliance.

The total evasion detected between July 2017 to February 2023 stood at close to Rs 3.08 lakh crore, of which over Rs 1.03 lakh crore has been realised. GST authorities have arrested 1,402 persons for evading taxes in the last five-and-a-half years.

The tax department has been using robust data analytics and artificial intelligence to identify and track risky taxpayers and detect tax evasion; sharing of data with partner law enforcement agencies for more targeted interventions; and mandatory Aadhaar-based authentication for new GST registrations as well as centralised suspension of registrations of registered persons who default in timely filing of returns.

With the anti-evasion measures and improved compliance, the monthly GST revenues have come in more than Rs 1.4 lakh crore for 12 months straight in a row. GST revenues were over Rs 1.49 lakh crore in February.

A nationwide GST, which subsumed 17 local levies like excise, service tax and VAT and 13 cesses, was rolled out on July 1, 2017. AMRG & Associates Senior Partner Rajat Mohan said connecting GST numbers with the filings under income tax law and corporate laws will bump up the data points available for big data analytics. This will help in swifter identification of the short payment of taxes.

3. GST stalemate to continue for cryptocurrencies

The proposed move to levy goods and services tax (GST) on cryptocurrencies is set to be delayed as consensus on the modalities has eluded officials from the centre and state governments. As a result, the 50th meeting of the Goods and Services Tax Council, which is expected later this year, is unlikely to finalise the move.

Consensus has eluded the officials because of the “complexities” involved in indirect taxation of cryptocurrencies. Officials say they will need “a few more months” to be able to draw clarity on indirect taxation of virtual digital assets. “I don’t think this subject will be taken up for discussion anytime soon,” an official said.

Last year the GST Council had tasked the finance ministries of Haryana and Karnakata to study and identify all relevant supplies associated with the crypto-ecosystem that would fall under the ambit of GST, their nature, whether those activities are goods or services, and their applicable rate based on appropriate classification.

Meanwhile, the law committee of the GST Council is looking into the legality and applicability of GST on cryptocurrency entities operating from domains outside India.

“The committee has been assessing the possibility of including such entities under Online Information Database Access and Retreival (OIDAR), and depending on whether the recipient is in India or not, a reverse or forward charge will be applicable, said the official.

The law committee has been in discussions over this, and no conclusion has been drawn yet, as per sources. Last week, the central government tightened regulatory control over virtual digital assets. According to a gazette notification, the government has mandated that a host of trading activities involving such cryptocurrency assets will now come under the ambit of the Prevention of Money Laundering Act.

4. Bring petroleum products under GST

Finance Minister Nirmala Sitharaman has exhorted the states to give their concurrence for fixing the tax rate for five petroleum goods—crude oil, natural gas (NG), petrol, diesel, and aviation turbine fuel (ATF)—under the Goods and Services Tax (GST) to enable the GST Council to give its stamp of approval to this pending proposal.

GST is a single nationwide tax with a provision for set-off tax paid on inputs. It subsumes within it more than a dozen taxes from the pre-GST era, namely central excise duty (CED), service tax, and sales tax/value added tax (VAT). Besides, a host of local taxes exist, such as octroi, purchase tax, turnover tax, etc. The Constitutional Amendment Act of 2016 on GST, while providing for the inclusion of petroleum products under its ambit, kept them ‘zero-rated’. Hence, these goods continue to attract CED and state-level VAT.

The multiplicity of taxes widely varying across states under the pre-GST dispensation led to the criss-cross movement of goods and services, lopsided development, regional disparities, and so on. It was also afflicted by the ‘cascading’ effect of ‘tax-on-tax’ and high transaction costs due to businesses having to deal with several authorities involved in the administration of a host of taxes. Above all, that regime was prone to massive tax evasion. The GST is intended to be free from all these maladies.

Petroleum being the prime source of energy, petroleum goods are used in almost all sectors of the economy. Given this and the fact that the GST holds the promise of yielding unprecedented benefits in terms of reining in price rises and making the industry more competitive, the case for taxing them under this regime was all the more compelling. Yet, these continue to be subject to being governed by the pre-GST era.

As per the Constitutional Amendment Act of 2016, the GST Council has the mandate to fix the rate under GST. But it has been dragging its feet. While, it has put fixing the rate for NG and ATF on its agenda umpteen times only to defer it, for other products it hasn’t even thought it fit to consider it.

In Delhi, the pump price of around Rs 97 per litre (as of February 4, 2023; the price has remained unchanged since May 22, 2022) includes the ex-refinery price plus freight of Rs 47 plus a buffer of Rs 10 for the so-called ‘future inflationary aspect etc’, dealer commission of Rs 4, CED, Rs 20, and VAT, Rs 16 (@ 19.4 per cent). The taxes alone make up Rs 36 per litre or 37 per cent of the pump price ((in the case of diesel, it accounts for 32 per cent).

The buffer of Rs 10 per litre for the so-called ‘future inflationary aspect etc’ is inexplicable. This could have been inserted to enable the oil marketing public sector undertakings (PSUs), viz., Bharat Petroleum Corporation Limited (BPCL), Indian Oil Corporation Limited (IOCL), and Hindustan Petroleum Corporation Limited (HPCL), to generate some surplus, which they could use in times when international prices of these products rise but they won’t be able to raise the pump price (courtesy, elections). Excluding this and taking the pump price at Rs 87 per litre, the tax component would be 41 per cent.

The Centre and states need to broaden their vision. Given the long-term benefits of taxing these products under GST, they should take the revenue loss in the near term in stride. Even in the short term, the surge in GST collection during 2022–2023 (it has seen an average monthly collection of Rs 150,000 crore) should give the much-needed confidence. Additionally, there is scope for increasing tax collection by plugging various loopholes.

  • Important Notifications under

Excise / Custom/ GST:

  • GST Updates
Sl. No.  Particulars of the Notification(s)File No. / Circular No.Notification Link(s)
1Regular taxpayers can opt for Composition Scheme for Financial Year 2023-24 by navigating as ‘Services-> Registration-> Application to Opt for composition Levy’ and filing Form CMP-02. This facility is available on GST Portal till 31st March, 2023.      GST Updates      Click Here

Custom / Excise Updates

LinksNotification Particulars
 NA
  1. Important Case-laws
  • Income Tax

1. Reassessment Notices Issued After Elapse Of Six Years: Gujarat High Court Quashes Assessment

Case b/w: Keenara Industries Private Limited Versus Income Tax Officer

The Gujarat High Court has held that the reassessment notices were issued after the lapse of six years and are therefore time-barred.

The single bench of Justice Sonia Gokani has observed that the board’s circulars and instructions are binding only on the departmental authorities and not on the court or the assessee.

The petitioners/assessees challenged the reassessment notice dated July 26, 2022, seeking to reopen the income tax assessment for the assessment year 2014–15.

The petitioner/assessee is a company incorporated under the Companies Act, of 1956, of which the majority shareholders are Indian citizens. The department had issued the notice of reopening under Section 148 during the period between 01.04.2021 and 30.06.2021 after following the erstwhile procedure prescribed for reopening (the law applicable until 31.03.2021), despite the fact that, w.e.f. 01.04.2021, a new regime of reopening provisions had come into force.

The Supreme Court directed that reassessment notices under Section 148 of the unamended Income Tax Act that were issued beyond April 1, 2021 (the effective date of amendment of the said provision by the Finance Act, 2021) be deemed to have been issued under Section 148A of the Income Tax Act as substituted by the Finance Act, 2021, and be construed as show cause notices in terms of Section 148A(b).

The court held that CBDT could not have the power to extend the time period under the first proviso to Section 149(1) of the Income Tax Act.

The court held that the time limit as per unamended Section 149(1)(b) was six years from the end of the assessment year. The Taxation and Other Laws (Relaxations and Amendments of Certain Provisions) Act 2020 (TOLA) has not altered the time limit provided in clause (b) of unamended Section 149 of the Income Tax Act. (Source: Click Here)

2. Case Title: Milestone Systems A/S vs. Deputy Commissioner of Income Tax

  • ITO Can’t By-Pass SC Decision In ‘Engineering Analysis’ In The Name Of A Review Petition Filed By Dept: Delhi High Court

The Delhi High Court has set aside the Income Tax Department’s order rejecting the assessee’s application seeking a certificate for “NIL” rate of withholding tax under Section 197 of the Income Tax Act, 1961.

The bench of Justices Rajiv Shakdher and Tara Vitasta Ganju observed that the concerned officer had failed to consider the Apex Court’s decision in Engineering Analysis Centre of Excellence Pvt. Ltd. vs. Commissioner of Income Tax (2021), which was relied upon by the assessee in support of its plea for a “NIL” rate of withholding tax.

The bench remarked that as long as the judgment of the Supreme Court in Engineering Analysis (2021) is in force, the income tax authority cannot side step the judgment on the ground that the department has filed a review petition.

The Court thus directed the Income Tax officer to reconsider assessee’s application under Section 197, in light of the Supreme Court’s decision in Engineering Analysis (2021), where it was ruled that payments made to nonresident computer software manufacturers/ suppliers for resale/use of computer software, is not taxable as Royalty in India.

The petitioner averred that the Income Tax officer, while passing the said order, had failed to consider the vital issue, i.e., whether or not the consideration received by it towards the sale of software in India, constituted royalty under the Income Tax Act and/or under the Double Taxation Avoidance Agreement (DTAA) between India and Denmark.

To this, the revenue department argued before the Court that while examining an application moved under Section 197, the concerned officer is not carrying out an assessment, and therefore, while rendering a decision on the Section 197 application, the parameters which apply for assessing taxable income would not get triggered.

The bench held that as long as the judgment of the Supreme Court in Engineering Analysis (2021) is in force, the concerned income tax authority could not have side stepped the judgment on the ground that the revenue department has filed a review petition against the said judgment.

The Court added that the concerned officer was required to examine the Section 197 application in the background of the parameters set forth in Rule 28AA of the Income Tax Rules, 1962. “Concededly, that exercise has not been carried out,” the Court concluded.

The bench thus set aside the order which rejected the petitioner’s application seeking a certificate for “NIL” rate of withholding tax as well as the certificate which provided a withholding tax rate of 9.99%. The bench directed the concerned income tax officer to reconsider petitioner’s application under Section 197 afresh.

“While doing so, the concerned officer will apply his mind, inter alia, to the terms of the Distributor Agreement, and the ratio of the judgment rendered by the Supreme Court in Engineering Analysis. In this context, the provisions of Rule 28AA shall also be kept in mind,” the Court added. “The concerned officer will not be burdened by the fact that a review petition is pending, in respect of the judgment rendered by the Supreme Court in Engineering Analysis,” the Court further said. To read in details: Click Here

  1. Important Case-laws
  • GST Cases:

 

1. Tel AAR: 12% GST is charged on Ayurvedic products falling under the AYUSH department

The Telangana Authority for Advance Rulings (AAR) has ruled that a GST rate of 12% must be charged on all Ayurvedic products supplied by the Ayush department of the Centre.

S V Kasi Vishweswara Rao and B Raghu Kiran on the bench heard the ruling for IncNut Lifestyle Retail Private Limited, who had applied for the advance ruling. The taxpayer dealt with cosmetic products and ayurvedic medicaments such as shampoo and hair oil with an approved Ayush license. They also deal with the treatment of mouth, oral and facial disorders.

The applicant wanted to check if the products would fall under Heading 30 or 33. They opined that since their products were certified by the Ayush, these would be ayurvedic medicaments. The bench asserted that these were falling under Heading 30 of HSN Chapter 63 since the products are ayurvedic medicaments enabling cure. Hence, a 12% GST must be levied. Whereas, Heading 33 covers preparations for use on hair charged at 18% GST.

If an item’s primary function is “care” and not “cure”, it is not considered a medicament. Further, a product used predominantly in curing or treating diseases or ailments but contains less quantity or portion of curative ingredients must be branded as a medicament. All products sold over the counter cannot be classified as cosmetics since some can be medicaments. 

2. “Coal rejects” Attracts 5% GST: Punjab AAR

Case Details: Applicant’s Name: M/s Punjab State Power Corporation Ltd.

The Punjab Authority of Advance Ruling (AAR) has held that “coal rejects” are to be classified under HSN 2701 and are taxable at 5% GST.

The two-member bench of Varinder Kaur and Viraj Shyamkarn Tidke has observed that where the goods are being received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment. Thus, if the applicant fulfils the eligibility conditions as prescribed under Section 16 of the CGST Act and if the type of ITC does not fall under the categories prescribed under Section 17 of the CGST Act, the applicant is eligible to avail the Input Tax Credit of GST and Compensation Cess of raw coal brought from its supplier and transferred to the washery/job worker for cleaning. The “principal” shall be entitled to avail himself of ITC in relation to goods sent directly to the premises of the job worker.

The AAR ruled that the formula prescribed under Rule 42 of the CGST Rules, 2017 for the manner of determination of input tax credit in respect of inputs or input services and reversal will be applicable in both cases, i.e., GST and Compensation Cess. Therefore, the provisions prescribed under Rule 42 of the CGST Rules, 2017 should be followed by the applicant and they have to make a reversal in the proportion of exempt/taxable turnover.

The applicant sought an advance ruling on the issue of whether the “coal rejects” whose invoice is raised by the applicant upon washery/job-worker is taxable under the GST Act and Compensation Cess Act in the hands of the applicant.

The applicant requested to allow reversal of the GST and compensation cess in terms of quantity of clean coal and coal rejects as it can be easily mapped by them, but there is no such provision as prescribed under Rule 42. The government has added a proviso to Rule 42 through Notification No. 16/2019 Central Tax dated 29.03.2019. Accordingly, it allowed reversal of ITC made by real estate on the basis of aggregate carpet area attributable to exempt supply, but nothing has been issued regarding reversal of ITC on the basis of quantity till date.

The AAR noted that any supply that has been exempted by the government by notification or any nil-rated supply or supply of non-GST goods such as petrol or diesel will fall within the ambit of exempt supply. Hence, ITC will be admissible in the proportion of taxable supplies made by the applicant. To read more: Click Here

  • International Taxation  Corner (ITC)

1. UAE: Federal Tax Authority launches ‘Muwafaq Package’

The Federal Tax Authority (FTA) has launched the “Muwafaq Package” initiative, which aims to facilitate doing business and tax compliance in the small and medium-sized enterprises (SMEs) sector by offering them a set of customised services, incentives, and privileges.

The initiative is part of the FTA’s strategy to support the Government Accelerators Project, launched by the UAE government to embody the directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai. The project aims to apply a new approach to government work and implement major and rapid transformational projects that focus on building the world’s best and most dynamic economy, spearheading major transformations in the economy and across various areas of government work.

In a press statement issued on Thursday, the FTA announced that the Muwafaq Package can be accessed by SMEs registered in the tax system in the UAE through the digital tax services platform EmaraTax. The package offers innovative tax solutions for SMEs registered in the tax system, as well as educational materials about tax systems. It was specifically tailored to SMEs and designed to empower the people behind these projects to be a driving force for the national economy, promoting entrepreneurship and innovation.

The Muwafaq package provides many advantages for SMEs, which they can access by participating in FTA’s training programmes on the basics of tax procedures. These programmes will raise their awareness about and help them comply with tax legislation, especially since SMEs represent the largest category of companies operating in the UAE. The Authority prioritises this important sector in its awareness activities while maintaining contact with other industries.

The Muwafaq package offers users a set of incentives and privileges to encourage tax compliance, including access to tax accounting programmes and software at competitive prices, immediate appointments with tax relationship managers, special offers on tax agent services, and priority for registered SME representatives when completing certain services provided by the Federal Tax Authority.

The package also allows the FTA to identify the challenges the sector may face, develop solutions to address and overcome them, and provide registrants with tailored educational materials about tax procedures to encourage self-compliance. Additional advantages will be offered to SMEs and will be announced at a later stage.

2. Italy Approves Bill Cutting Income Tax, Easing Sanctions for Evaders

ROME (Reuters) – Italy’s government approved a bill on Thursday to cut income and corporate taxes, while also reducing penalties for tax dodgers who come clean and agree to pay the overdue sums.

The scheme is “aimed at simplifying and reducing the tax burden, encouraging investment and hiring,” the Treasury said in a statement.

Under a draft seen by Reuters, the government intends to eliminate the risk of criminal convictions for those who settle with the authorities and catch up on missed payments, betting a cooperative approach will pay dividends.

Tax evasion is a chronic problem in Italy, costing state coffers some 90 billion euros ($95.5 billion) each year, according to the most recent Treasury data.

In its EU-funded post-COVID recovery plan, Italy promised the European Commission to cut the so-called “tax gap” — the difference between potential tax take and the amount of taxes actually raised — and thereby recoup around 7-8 billion euros in 2024 by comparison with 2019.

The cabinet will consider setting the three bands at 23%, 33% and 43% in the short term, government officials have said, adding that a more expensive solution being studied would lower the second band to 27%.

The current income tax levy, named IRPEF, is based on rates running from a minimum of 23% on annual income up to 15,000 euros, to a top rate of 43% on income above 50,000 euros. To avoid straining state coffers, the Treasury plans to partly fund the bill by reducing and simplifying the current 600 ways in which people and firms can deduct various types of spending from their tax bill.

These so-called “tax expenditures” deprive the state of 165 billion euros in revenues every year, a separate Treasury document showed.

In addition, the government wants to split the current 24% corporate income tax rate into two by introducing a second lower band at 15% to reward entrepreneurs who create jobs and invest in innovation to boost productivity.  To read more Click Here

  • Knowledge Bucket for NRI’s
  1. A person who stays in India for182 days or 6 months in a year will be considered an Indian resident for that year.
  2. If a person is staying in India for a period of 60 days or more during the year and 365 days or more during 4 years immediately preceding the previous year then they will be considered an Indian resident.
  3. It should be noted that, if someone is an Indian citizen working abroad or a crew member on an Indian ship, only the first condition is available to them – which means they will be treated as a resident of India when they spend at least 182 days in India.
  4. Non-resident Indians (NRIs) who have invested in crypto assets are likely to face hassles filing their income tax returns (ITR) this year, due to the ambiguity over certain taxation provisions. The Finance Act, 2022 had introduced a new flat rate of 30 percent on income arising from transfer of Virtual Digital Assets (VDA) or crypto assets, with effect from assessment year 2023-24.
  5. The Indian taxation on crypto gains is based on the principle of the residence of the person and the source of income. Worldwide income of Indian residents is taxable in India. However, NRIs are subject to source-based taxation, meaning only amounts received or accrued from a source, or so deemed to accrue or arising in India, are subject to income-tax in India.
  • Do you know ??
  1. Every transaction of transfer/sale of VDAs on or after April 1, 2022 is covered under this new taxation regime.
  • The NRI would need to file Form ITR-2 or another form based on what other incomes have been earned by the said individual.
  • There are different ways of raising complaints about fake GST invoices. People can visit the official portal of GST, then click on CBEC Mitra Helpdesk and ‘Raise Web Ticket’. People can also send emails to cbecmitra.heldesk@icegate.gov.in. Another way to flag a complaint is to reach out to the authority on Twitter. Their official Twitter handle is GST (@askGST_GoI) and the Finance Ministry (@FinMinIndia).
  • One of the easiest ways to identify a fake GST bill is by understanding the basic structure of the 15-digit GSTIN number assigned to the supplier/dealer/shopkeeper. The first two digits of the GSTIN indicate the state code, the next ten digits are the PAN number of the seller or supplier, 13th digit is the entity number of the same pan holder in the state. The 14th digit in the GSTIN is the letter ‘Z’, and the 15 digit is the ‘checksum digit’. Any mismatch in the GSTIN format can help in identifying discrepancies in the GST invoice.
  •    Disclaimer:

Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information. *(We consider various sources including ET, BS, HT, Taxmann etc.)

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He has contributed in ICAI, ICSI and MCCI and other various Newsletters. He is also a speaker at various platforms including seminars / webinars.