GST WEEKLY UPDATE : 45/2024-25 (09.02.2025)

1. Procedure to be followed in department appeal filed against interest and/or penalty only, related to Section 128A of the CGST Act, 2017 – (Ins 02/2025 dt. 07.02.25):

1. Kind attention is invited to the Section 128A of the Central Goods and Service Tax Act, 2017 (hereinafter referred as ‘the CGST Act’) read with Rule 164 of the Central Goods and Service Tax Rules, 2017 (hereinafter referred as ‘the CGST Rules’) which provides waiver of interest or penalty or both, relating to demands under section 73 of the CGST Act pertaining to Financial Years 2017-18, 2018-19 and 2019-20, subject to certain conditions. Further vide Circular No. 238/32/2024-GST dated 15th October, 2024, various doubts related to section 128A were clarified.

2. In this regard, references have been received from various field formations seeking clarification from the Board as to whether the benefit of section 128A (supra) be extended to taxpayers in cases where the tax amount has been paid but the department has gone in Appeal on the basis of wrong arithmetic calculation of interest, or where penalty is either not imposed or imposed less than the prescribed threshold etc.

3. The matter has been examined by the Board. It has been observed that at S. No. 4 of the Table under para 4 in the aforesaid circular, it is clarified that cases where the tax due has already been paid and the notice or demand orders under Section 73 only pertains to interest and/or penalty involved, the same shall be considered for availing the benefit of section 128A. Hence, it is evident that in cases where the taxpayer has paid the full amount of tax and only interest and/or penalty is in dispute by the taxpayer, then he is eligible to avail the benefit of Section 128A of the CGST Act. On the similar pattern, it is felt that just because the department has gone in appeal or is in the process of filing an appeal, a taxpayer who is otherwise eligible for availing the benefit of section 128A, should not be denied the benefits. Further the intention of the said provision is to reduce litigation and a taxpayer should not be denied the benefit of the provision on mere technicalities.

4. Based on the above, it is decided that in cases where the tax amount has been fully paid by the taxpayer on demands made under section 73 of the CGST Act and the department is in appeal or under the process of filing an appeal only on account of wrong interest calculation and/or wrong imposition or non-imposition of penalty amount under the provisions of CGST Act or IGST Act and the taxpayer fulfils other conditions of section 128A and the rules made thereunder, the proper officer may proceed towards withdrawing such appeal filed and in case where the order under section 73 is under review stage only, accept the same.

2. ADVISORY ON E-WAY BILL GENERATION FOR GOODS UNDER CHAPTER 71 (Feb 6th, 2025) No E way require for movement of gold , silver & diamond jewellery:

Clarification on E-Way Bill Requirement for Goods under Chapter 71:

Rule 138(14) of the Central Goods and Services Tax (CGST) Rules, 2017, read with its Annexure S.Nos. 4 and 5, states that goods covered under Chapter 71 viz., Natural or cultured pearls and precious or semi-precious stones; precious metals and metals clad with precious metal, Jewellery, goldsmiths’, and silversmiths’ articles, except those classified under HSN 7117(Imitation Jewellery), are exempt from the mandatory requirement of generating an E-Way Bill.

Pursuant to the introduction of the E-Way Bill (EWB) for goods classified under Chapter 71, excluding HSN 7117 (Imitation Jewellery), in the state of Kerala for intra-state movement, the National Informatics Centre (NIC) has provided an option to generate EWBs for goods covered under Chapter 71 except 7117 under the category “EWB for Gold” on the EWB portal.

It has been observed that various industry stakeholders have voluntarily been generating EWBs for goods under Chapter 71 due to the availability of this option in the EWB system. In this regard, it is clarified that while the system previously allowed EWB generation for goods under Chapter 71, this facility has now been withdrawn.

Accordingly, taxpayers and transporters engaged in the movement of goods under Chapter 71 (except HSN 7117) are advised that EWB generation is not required. However, it may be noted that for the intrastate movement of such goods within the state of Kerala, the generation of an EWB has been mandated vide Notification No.10/24-State Tax dated 27/12/24 issued by the state of Kerala. An advisory dated 27.01.2025 has already been issued in this regard.

3. AAR & Important Judgements:

(i) AAR On Turnkey EPC Contracts:

(Applicant – Thyssenkrupp Industrial Solutions (India) Private Limited)

The Advance Ruling Authority (AAR) Gujarat examined the GST applicability on a turnkey Engineering, Procurement, and Construction (EPC) contract executed by Thyssenkrupp Industrial Solutions (India) Pvt. Ltd. for IOCL’s Catalytic Dewaxing Unit (CDWU) project at Gujarat Refinery. The applicant contended that the contract consisted of two distinct components: supply of imported goods on a high sea sale (HSS) basis and erection and commissioning of the CDWU. However, the AAR ruled that these components formed an indivisible composite contract, subject to uniform GST treatment as a works contract service under Section 2(119) of the CGST Act, 2017.

The AAR noted that the turnkey nature of the contract made Thyssenkrupp responsible for all activities, including design, procurement, construction, and commissioning. Despite separate work orders for supply and services, the AAR concluded these were not severable, citing Black’s Law Dictionary, which defines a severable contract as one with independent promises that can be separately enforced. Here, the goods and services were interdependent, making the contract composite and inseparable.

Judicial precedent from Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu (Supreme Court) was instrumental in the ruling. The Court previously clarified that a works contract is taxable as a service under GST, irrespective of its goods and services components. This interpretation aligns with the 46th Constitutional Amendment, which enabled the taxation of composite contracts. The AAR further referenced Schedule II of the CGST Act, emphasizing that contracts involving immovable property, such as the CDWU project, qualify as works contracts.

Additionally, the AAR addressed the applicant’s claim that the HSS component could be treated independently to leverage the benefits of the Manufacture and Other Operations in Warehouse Regulation, 2019 (MOOWR). The ruling dismissed this argument, stating that the contractual terms explicitly tied the goods supply to their movement and installation at the IOCL site. Consequently, the GST treatment was determined by the place of supply rules under Section 10(1) of the IGST Act, which link supply to the final destination of goods.

(ii) AAR On GST on Takeaway vs Restaurant Sales:

(Applicant – Riddhi Enterprise)

In Riddhi Enterprise (GST AAAR Gujarat), the Gujarat Appellate Authority for Advance Ruling (AAAR) examined whether pre-packaged food sold over the counter qualifies as “restaurant services” under GST law. The appellant, engaged in the restaurant business, prepared and sold food items for dine-in and takeaway but also sold pre-packaged food purchased from external vendors. They contended that all sales, including pre-packaged items, should be classified under “restaurant services” with 5% GST and no input tax credit (ITC). However, the Gujarat Authority for Advance Ruling (GAAR) ruled that only food prepared in the restaurant qualifies as restaurant service, while pre-packaged food sold over the counter is a supply of goods, attracting applicable GST with ITC benefits.

Upon appeal, the AAAR upheld GAAR’s ruling, rejecting Riddhi Enterprise’s argument. The ruling referenced previous cases, such as Kundan Mishthan Bhandar and Gangaur Sweets, but found them inapplicable due to factual differences. The AAAR concluded that pre-packaged food purchased from the market and sold directly is distinct from restaurant service and should be taxed accordingly. The decision clarifies GST applicability for restaurants engaged in both food preparation and retail sales, distinguishing between services and goods for tax purposes.

(iii) AAR On Inclusion of sharpeners & erasers with pencil kits is mixed supply

(Applicant – DOMS Industries P Ltd.)

Gujarat Appellate Authority for Advance Ruling (AAAR) upheld the previous ruling on the GST classification of DOMS Industries P Ltd.’s stationery kits. The company, which manufactures and supplies stationery products, had sought clarification on whether the inclusion of sharpeners and erasers with pencil kits would affect the GST rate. The Gujarat Authority for Advance Ruling (GAAR) had previously determined that such supplies constituted a “mixed supply” rather than a “composite supply.” The ruling was based on the fact that sharpeners and erasers, though sold together with pencils, were not naturally bundled or essential components of the pencils. Additionally, the GAAR noted that while some companies in the industry sold these products together, they were also sold independently, making it difficult to establish a principal supply. Consequently, the tax rate applicable to the entire kit was determined based on the highest rate applicable to any of the included items.

DOMS Industries challenged the ruling, arguing that the industry practice justified considering the products as a composite supply. However, the AAAR rejected the appeal, affirming the original ruling that the supply was mixed and should be taxed accordingly. As a result, the stationery kits, which include sharpeners, would attract a 12% GST rate, determined by the item with the highest tax rate among the included goods. The decision highlights the importance of classification in GST law, reinforcing that the mere packaging of multiple items together does not automatically qualify them as a composite supply. The ruling also sets a precedent for similar cases in the stationery industry, requiring businesses to carefully evaluate their tax liabilities when bundling products.

Disclaimer:

This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.

THANKING YOU.

GST WEEKLY UPDATE :03/2024-25 (21.04.2024)

1. CBIC Alert: Ensure GSTN and DGFT Linkage Before ICEGATE Registration:

The Central Board of Indirect Taxes and Customs (CBIC) issues an alert on ‘X’ states that before registering on the Indian Customs Electronic Data Interchange Gateway (ICEGATE), users must ensure that their email and phone number are linked with the Goods and Services Tax Network (GSTN) and the Directorate General of Foreign Trade (DGFT).

2.     UP GST Department Clarifies DRC-07A Procedures for Recovery of Pre-GST Dues:

The Uttar Pradesh GST Department released Circular No. Collection/2024-25/2425001/65 dated April 16, 2024, updating procedures on DRC-07A for recovering pending tax dues from businesses active during the pre-GST era under laws like VAT. It clarifies processes for amending/deleting recovery certificates once dues are recovered under the CGST/UPGST Act using DRC-07A. The circular addresses the operational differences between departmental and district administration-led recoveries, detailing specific steps for both to ensure uniformity and compliance. Departmental entries for recoveries must use the R.C marking on their portal, while district administrations follow a separate procedure without needing to return recovery certificates. Full recovery compliance issues Form ST-45. Challenges in adherence should be reported to the issuing authority.

Earlier, vide Headquarters letter No. GST Section/2023-24/736/State Tax, dated January 09, 2024, such firms which are doing active business during the GST period under the previous Act (VAT, Entry Tax, Entertainment Tax etc.) For the cases of recovery of pending dues related to CGST/UPGST Act, by issuing format DRC-07A under Section 142A(1) of the CGST/UPGST Act, instructions were given to recover the said dues under the CGST/UPGST Act.

In case the outstanding amount is recovered under CGST/UPGST Act by issuing format DRC-07A as above, the recovery certificate issued under the previous law is required to be amended/deleted. At present, two different systems are working in the State Tax Department to recover the dues created under the previous law, by the departmental and district administration. In this regard, in order to remove the ambiguity prevailing in the implementation among the field units and to bring uniformity in the working system, the following is clarified –

Recovery by departmental and district administration for recovery of dues created under the previous law. Different procedures will be followed for two different systems of execution.

In those districts where the recovery of past dues is done by the departmental officers under the previous law, in those cases, the recovery certificate in respect of which format DRC-07A has been issued, should be entered in the departmental portal under R.C marking will be done.

While making such entry under the heading R.C marking, the radio button of R.C removal available on the portal will be selected. Open after selecting the said button. The number and date of DRC-07A will be entered in the drop down.

On making the entry as above, the amount covered by the concerned recovery certificate will be reduced by the amount of eligible recovery outstanding under the relevant previous law.

In those districts where the recovery of past dues is done by the district administration under the previous law, a separate procedure will be followed in those districts.

No action will be taken regarding the return of outstanding recovery certificates in the districts where the district administration has recovered.

In such cases related to the recovery of dues of the previous law, where any recovery has been made from the cash ledger or credit ledger of the taxpayer at the departmental level, the RC will be modified by reducing the amount equivalent to the recovery amount and the RC will be modified accordingly. Will be made available to the administration for recovery.

For both types of recovery formats, Form ST-45 will be issued only in the case where the entire outstanding amount as per the previous method has been recovered.

Strict compliance with the above instructions should be ensured.

Any difficulties arising in complying with the above instructions may be brought to the notice of the undersigned.

3.     AAR & Important Judgements:

(i) Hon’ble Chhattisgarh Highcourt Decision Regarding the non-refund of a 6% differential GST liability borne by contractors for works contracts:

(Applicant – Surana And Company)

This Court further directed in para 19 as under: – “19. The impugned therefore deserves to be and is accordingly set aside /quashed. The petitioner at this juncture is directed to make a fresh claim showing the difference of the tax liability that was incurred at the time of the submission of the bids and the excess tax paid by him in the light of the introduction of the GST. Upon such claim being made, the respondents shall forthwith process the same and the petitioner be suitably reimbursed after due scrutiny and enquiry necessary in-respect-of the additional tax burden incurred by the petitioner.”

(ii) Hon’ble Calcutta Highcourt Decision Regarding No predeposit require in the case of interest demand appeal under gst

(Applicant- Evergreen Construction)

Evergreen Construction has filed an intra-court appeal against an interim order requiring them to deposit 20% of disputed unpaid interest. The dispute arises from an adjudication order demanding interest due to delayed tax return filings for the relevant financial year. The appeal argues that the GST Act’s provisions do not mandate such a pre-deposit for appeals to the appellate tribunal. The central argument revolves around the interpretation of Section 112 of the GST Act, which specifies pre-deposit requirements for appeals to the appellate tribunal. While the government contends that the pre-deposit is discretionary and aimed at safeguarding revenue interests, Evergreen Construction asserts that the statute does not explicitly include interest in the pre-deposit calculation.

(iii) Refund claim either under Rule 89 (4) or 89 (4B) has been revenue neutral & procedural lapse:

(Applicant – IPG Asia Private Limited)

As per CGST Rules, 2017, the EOUs and Advance Authorization Holders are required to file refund under 89 (4B). However, most of the exporters have filed the refund under Rule 89 (4) and got the refunds.

Post Gujarat HC judgement in case of Filatex, the department started issuing the demands for recovery of refunds granted in past period under Rule 89 (4) by the exporters. Appellant appealed against the demand order passed by the lower authority. The Hon’ble Commissioner (Appeals) has given favorable judgement on the following grounds,

1. Applying refund under incorrect rule 89(4) as against 89(4B) is considered to be a technical/procedural lapse and that cannot be a ground for creating any demand.

2. Refund is applied for accumulated ITC on account of procurement of indigenous goods used in export product and therefore refund of such amount needs to be considered.

3. Refund under Rule 89 (4) or calculation in terms of Rule 89(4B) being almost similar, it has a revenue neutral effect.

(iv) AAR On GST exempt on Teachers & Lecturers Supply to BBMP Schools:

(Applicant – Crystal Infosystems and services)

The GST AAR Karnataka addressed queries regarding the exemption of services provided by Crystal Infosystems and Services to BBMP schools and colleges. The analysis delves into the applicability of CGST and SGST to these services.

Crystal Infosystems and Services provide teachers and lecturers to BBMP schools and colleges on an outsourcing basis, characterizing the service as pure with no goods involved. Despite billing with 18% GST, BBMP claims exemption, citing its status as a municipality and the nature of the service falling under exempt categories.

The crux of the issue lies in the interpretation of relevant GST notifications, particularly Entry No. 3 of Notification No.12/2017-Central Tax (Rate). This entry exempts pure services provided to local authorities for functions entrusted to them under Article 243W of the constitution.

The AAR examined three conditions for exemption eligibility:

1. Nature of Service: The service provided by Crystal Infosystems qualifies as pure service, devoid of any goods involvement.

2. Recipient Status: BBMP, being a municipality under Article 243P of the Constitution, qualifies as a local authority.

3. Function Relation: The service of providing teachers/lecturers aligns with the function of “Promoting educational aspects” entrusted to municipalities under Article 243W.

The ruling concludes that the service falls within the ambit of exemption under Entry No. 3, as it meets all stipulated conditions.

Disclaimer:

This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.

THANKING YOU.

GST WEEKLY UPDATE : 50/2023-24 (10.03.2024)

1. Guideline for the GST registration speed up & online tracking of the same on portal:

In accordance with Rule 9 of the Central Goods and Services Tax (CGST) Rules, 2017, pertaining to the verification and approval of registration applications, following is informed:

Where a person has undergone Aadhaar authentication as per sub-rule (4A) of rule 8 but has been identified in terms of Rule 9(aa) by the common portal for detailed verification based on risk profile, your application for registration would be processed within thirty days of application submission.

Necessary changes would also be made to reflect the same in the online tracking module vis-à-vis processing of registration application.

2. Integration of E-Waybill system with New IRP Portals:

1.  GSTN is pleased to announce the successful integration of E-Waybill services with four new IRP portals via NIC, enabling taxpayers to generate E-Waybills alongside E-Invoicing on these four IRPs.

2.   This new facility complements the existing services available on the NIC-IRP portal, making E-Waybill services, along with E-Invoicing, available across all six IRPs.

3.   Please find below the websites for all six IRP portals:

     https://einvoice1.gst.gov.in     https://einvoice4.gst.gov.in

     https://einvoice2.gst.gov.in     https://einvoice5.gst.gov.in

     https://einvoice3.gst.gov.in     https://einvoice6.gst.gov.in

3. Delhi State GST Dept. issued guideline for the rectification of assessment orders to correct the errors apparent on the face of record u/s 161 of the DGST Act:

The Delhi GST Department has issued Instruction vide F.No.3(543)/GST/Policy/2024/1312-18 dated March 01, 2024 regarding the rectification of assessment orders to correct the errors apparent on the face of record under section 161 of the Delhi Goods and Services Tax Act, 2017 (“the DGST Act”).

Several representations have been received with regard to allowing rectification of demand orders issued by zonal/ field formations on account of difficulties faced by tax payers/ dealers. It is submitted that allowing for rectification reduce the unnecessary litigation. Further, it has been brought to the notice of this Department, that several demand orders passed by Proper Officer pertaining to the FY 2017-18 have apparent errors including clerical/ arithmetical mistakes which can be simply resolved by invoking the provisions of rectifications as available under the DGST Act, 2017.

In this regard, the field formations are advised to strictly follow the letter of the law. The provisions of the Act have been reproduced as below:

Section 161. Rectification of errors apparent on the face of record:-

Without prejudice to the provisions of Section 160, and notwithstanding anything contained in any other provisions of this Act, any authority, who has passed or issued any decision or order or notice or certificate or any other document, may rectify any error which is apparent on the face of record in such decision or order or notice or certificate or any other document, either on its own motion or where such error is brought to its notice by any officer appointed under this Act or an officer appointed under this Act or an officer appointed under the Central Goods and Services Tax Act or by the affected person within a period of three months from the date of issue of such decision or order or notice or certificate or any other document, as the case may be:

Provided that no such rectification shall be done after a period of six months from the date of issue of such decision or order or notice or certificate or any other document.

Provided further that the said period of six months shall not apply in such cases where the rectification is purely in the nature of correction of a clerical or arithmetical error, arising from any accidental slip or omission:

Provided also that where such rectification adversely affects any person, the principles of natural justice shall be followed by the authority carrying out such rectification.

Further, sub-rule (7) of Rule 142 of DGST Rules, 2017 states that

…(7) Where a rectification of the order has been passed in accordance with the provisions of section 161 or where an order uploaded on the system has been withdrawn, a summary of the rectification order or of the withdrawal order shall be uploaded electronically by the proper officer in FORM GST DRC-08.

Following points merits attention of ward officers while invoking the provisions of rectification

I. It should be ensured that the reasons for initiating suo-moto rectifications are recorded in writing before such proceedings are initiated.

II. Where such powers are invoked on the application filed by the registered person, the application should be made within three months of the date of the order. Further, the rectification order in FORM GST DRC-08 should be passed within the period of six months of the date of original order.

III. The power of rectification in the order is confined only to mistakes apparent on the face of record. The application for rectification can be made if the mistake is ex facie and the matter does not involve presentation of further arguments or replies or submissions by either counter parties. In simple terms, a decision on the debatable point of law or undisputed questions of fact is not a mistake apparent from the record.

IV. Even in certain scenarios the Authority may not have considered the arguments as submitted by the appellant then such missed submissions may also not be considered as mistake apparent on record as in case of supporting documents not considered etc. Therefore, if there are interpretation points on facts of the case or from the law perspective, then it cannot be processed through rectification procedure.

V. The rectification may not be done where an appeal is preferred by the registered person to higher appellate forums.

Following type cases have been brought to the notice of this department and may be considered for limited purposes rectification under section 161:

a. Where amount of demand in question has already fully deposited/ reversed vide DRC-03 and adequately informed to the proper officer in the reply filed by the registered person/ dealer but the same has not been taken into consideration at the time of issuance of demand order.

b. Where there is arithmetical error i.e. calculation error/ head error i.e. IGST, CGST and DGST in the demand order issued by the proper officer.

The field formations are hereby advised to carefully examine the provisions of DGST Act, 2017 and apply their mind while invoking powers of the rectification for all the above cases.

4.     AAR & Important Judgements:

(i) Hon’ble Allahabad Highcourt Decision Regarding Appeal cannot be condone beyond statutory period allowed in the gst law by the court under limitation Act:

(Applicant – M/s. Yadav Steels)

In the case of M/s. Yadav Steels v. Additional Commissioner and Anr. [Writ Tax No. 975 of 2023 dated February 15, 2024] dismissed the writ petition, thereby holding that, Section 5 of the Limitation Act, 1963 (“the Limitation Act”) would not be applicable for appeal filed under Section 107 of the Uttar Pradesh Goods and Services Tax Act, 2017 (“the UPGST Act”).

M/s. Yadav Steels (“the Petitioner”) has filed a writ petition against the order dated January 23, 2023, (“the Impugned Order”) passed under Section 107 of the UPGST Act wherein the appeal filed by the Petitioner was dismissed on the ground of limitation as the said appeal was filed approximately 66 days beyond the date of limitation.

Issue:

Whether Section 5 of the Limitation Act would be applicable for appeal filed under Section 107 of the UPGST Act?

Held:

The Hon’ble Allahabad High Court in the case of Writ Tax No. 975 of 2023 held as under:

• Observed that, Section 107(4) of the UPGST Act, allows extension for a period of one month. Also, Section 107 aims to prevent undue delay in the adjudication process and promote effective administration of the GST regime.
• Relying upon the judgment of Hon’ble Allahabad High Court in the case of M/s. Abhishek Trading Corporation v. Commissioner (Appeals) and Anr. [Writ Tax No. 1394 of 2023 dated January 19, 2024] and noted that, the Central Goods and Services Tax Act, 2017 (“the CGST Act”) is a special statute and a self-contained code in itself and Section 5 of the Limitation Act would not be applicable.
• Opined that, the judgement Hon’ble Calcutta High Court in the case of K. Chakraborty and Sons. v. Union of India and Others. [MAT 81 of 2022 dated December 01, 2023] wherein it was held that Section 5 of the Limitation Act, would be applicable as Section 107 of the CGST Act does not expressly or impliedly exclude the attraction of Section 5 of the Limitation Act, would not be applicable in the present case.
• Held that, the writ petition is devoid of merits. Hence, the writ petition is dismissed.

Relevant Provision:

Section 5 of the Limitation Act:

“5. Extension of prescribed period in certain cases.—

Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.

Explanation.—The fact that the appellant or the applicant was missed by any order, practice or judgment of the High Court in ascertaining or computing the prescribed period may be sufficient cause within the meaning of this section.”

Disclaimer:

This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.

THANKING YOU.