RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

India’s Prime Minister has stated that he will make India the world’s third largest economic superpower in Government’s next term. On the other hand, IMF has warned that India’s general Government debt may exceed 100% of its GDP in the medium term and that its long-term debt sustainability risk is high due to huge investment required to meet India’s climate change mitigation targets. However, India does not foresee the same as risks from sovereign debt are extremely limited as it is predominantly denominated in domestic currency.

The Parliament (Lok Sabha) has passed the three new bills on Criminal laws i.e., Bills to replace Indian Penal Code (IPC), Indian Evidence Act and Code of Criminal Procedure (CrPC).

The new laws are Bhartiya Nyaya Sanhita, Bhartiya Nagrik Suraksha Sanhita and Bhartiya Sakshya Bill. These will replace the age old colonial justice system prevalent since British era. The focus shall now be justice rather than punishment.

Also, both houses of Parliament have passed the CGST (2^nd Amendment) Bill, 2023 which provide for raising the age limit for appointment of the President and Members (Technical / Judicial) of the proposed GST Appellate Tribunal (GSTAT). This will align the provisions with that the Tribunal Reforms Act, 2021. The President and Judicial and Technical Members of GSTAT shall hold office for four years, or until he attains the age of 70 years and 67 years, respectively, whichever is earlier.

The number of GST returns rose by 65% to 11.3 million in last five years till April, 2023 on the improvement in compliances. The number of active taxpayers in GST rose from 10.6 million in April, 2018 to 14 million in April, 2023. According to MoF, simplification in rules and procedure in GST has resulted in increase in return filing percentage by eligible taxpayers.

CBIC has issued instruction to not to mechanically apply Northern Operating System (NOS) Apex Court judgment on secondment of manpower. As per the instructions, the taxability of secondment arrangements under GST may vary depending on the specific nature of the contract and other terms and conditions between the overseas company and the Indian entity.

The due date for filing GSTR-3B return has been extended till 27 December, 2023 in specified districts of Tamil Nadu in view of recent cyclone.

CGST (2^nd Amendment) Bill, 2023

• Central Government has presented CGST (2^nd Amendment) Bill, 2023 in Lok Sabha on 13 December, 2023
• This Bill No. 159 of 2023 proposes amendment to section 110 of CGST Act, 2023, which provides for the President and Members of Appellate Tribunal, their qualification, appointment, conditions of service etc.
• Following amendments in relation to GST Appellate Tribunal are proposed in the Bill:

• An advocate for 10 years with substantial experience in litigation matters relating to indirect taxes in Appellate Tribunal, CESTAT, State VAT Tribunal, High Court or Supreme Court to be eligible for Judicial member of GST Appellate Tribunal.
• Person who has completed age of 50 shall be eligible for appointment as President or Member of GST Appellate Tribunal.
• For President, maximum age would be 70 years and he / she would be eligible for reappointment for a period, not exceeding two years, subject to age limit.
• For Member (judicial or technical), maximum age would be 67 years and he / she would be eligible for reappointment for a period, not exceeding two years, subject to age limit.

• The amendment seeks to align the provisions with the provisions of Tribunal Reforms Act, 2021.
• Lok Sabha has passed the CGST (2^nd Amendment) Bill, 2023 on 19.12.2023 and Rajya Sabha on 20.12.2023.

(Source: CGST (2^nd Amendment) Bill, 2023 dated 13.12.2023)

3B date extended for Tamil Nadu

• CBIC has extended the due date for furnishing the return in Form GSTR-3B for the month of November, 2023 till the 27^th December, 2023 for specified districts of Tamil Nadu.
• Registered persons whose place of business is in the districts of Chennai, Tiruvallur, Chengalpattu and Kancheepuram in the state of Tamil Nadu, can now furnishing the return GSTR-3B under section 39(1) of CGST Act, 2017 by 27^th December, 2023.
• This has been done to overcome hardships caused due to MICHAUNG cyclone in first week of December, 2023.
• Government of Tamil Nadu has also issued Press Release dated 20.12.2023 to this effect.
• No late fees and interest will be payable by the tax payers in the specified districts. 

(Source: Notification No. 55/2023-Central Tax dated 20.12.2023 &

Press Release dated 20.12.2023 issued by Commercial Tax Department, Tamil Nadu)

 

Secondment of Employees by Overseas Entities & Invocation of Section 74

• In C.C.,C.E. & S.T. – BANGALORE (ADJUDICATION) ETC. VERSUS M/S NORTHERN OPERATING SYSTEMS PVT LTD. - 2022 (5) TMI 967 - SUPREME COURT, Apex Court held that the secondment of employees by the overseas group company to NOS was a taxable service of 'manpower supply' and Service Tax was applicable on the same.
• There may be multiple types of arrangements in relation to secondment of employees of overseas group company in the Indian entity. In each arrangement, the tax implications may be different, depending upon the specific nature of the contract and other terms and conditions attached to it.
• The decision of the Supreme Court in the NOS judgment should not be applied mechanically in all the cases. Investigation in each case requires a careful consideration of its distinct factual matrix, including the terms of contract between overseas company and Indian entity, to determine taxability or its extent under GST and applicability of the principles.
• Further, it has been clarified that section 74(1) of CGST Act, 2017 can be invoked only in cases where there is a fraud or wilful mis- statement or suppression of facts to evade tax on the part of the taxpayer. Section 74(1) cannot be invoked merely on account of non-payment of GST, without specific element of fraud or wilful mis-statement or suppression of facts to evade tax.
• Only in the cases where the investigation indicates that there is material evidence of fraud or wilful misstatement or suppression of fact to evade tax on the part of the taxpayer, provisions of section 74(1) of CGST Act may be invoked for issuance of show cause notice, and such evidence should also be made a part of the show cause notice.

(Source: Instruction No. 05/2023-GST dated 13.12.2023

issued by GST Policy Wing, CBIC)

MRP includes GST

• A question “whether various retail traders are overcharging customers and manipulating GST payments to the Government through inflated bills” was raised in Parliament on 11.12.2023.
• In a reply to question in Parliament, Minister of State for Finance has stated that:

• Maximum Retail Price (MRP) includes Goods and Services Tax (GST).
• The Maximum Retail Price (MRP) of a pre-packaged commodity under the specified rules encompasses all applicable taxes, including GST.
• Rule 6 of the Legal Metrology (Packaged Commodities) Rules, 2011 (as amended) mandates that every package must prominently declare the retail sale price, making it clear that it is the maximum retail price inclusive of all taxes.
• MRP of products incorporates the GST and consumers should not be subjected to any additional charges towards it.

(Source: Q-A in Lok Sabha dated 11.12.2023)