RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

On a positive note, service sector has shown improvement in last three years but the job opportunities are still dull. Services grew by 11.4% in Q 1 on a low base of 21.5% contraction, a year back. Manufacturing and exports too have improved and it appears that economic recovery may accelerate from here on. Core industries grew by 9.4% in July, 2021 on YoY basis. Almost all sectors grew except crude oil. Further, @ 21.3% fiscal deficit in April – July, 2021 is lowest in nine years with total net tax collection of ₹ 5.30 lakh crore.

Economy is now reversing and showing positive signs. Industrial output grew 7.2% in July, 2021 over June. Except mining, other sub-Indices have also recovered to pre-Covid mark. These are manufacturing, primary goods, capital goods, infra goods and consumer durables / non-durables. Industrial activity has almost recovered to pre-Covid levels.

Ministry of Finance has opined that the possible third wave may not halt economic recovery. Infact, it is likely to be faster in next three quarters even if third wave hits country. This confidence is mainly due to intensified vaccination drive and several economic parameters back to pre-Covid levels.  The recovery is also evident in growth of power consumption, rail freight, highway toll collections, e-way bills, digital transactions and above all, GST collection.  A broad based rebound in economic indicators brighten the prospects for India’s continued V-shaped economic recovery.

There is a change in composition of CBIC with three new members joining as well as work allocation amongst the members. CBIC has issued Circular No. 158 dated 06.09.2021 clarifying extension of limitation under GST laws in the wake of Supreme Court’s Order dated 27.04.2021 (Covid) [IN RE COGNIZANCE FOR EXTENSION OF LIMITATION - 2021 (5) TMI 564 - SC ORDER].

Ministry of Road Transport And Highways have clarified on GST liability on contractors in case of road construction under hybrid annuity model. Projects where bid due dates are after 16.06.2021, no GST on annuity under change in law shall be paid or reimbursed by NHAI since bids were invited exclusive of GST.

The 45^th meeting of GST Council is scheduled to be held in physical form on 17^th September 2021 at Lucknow (UP), the state which is in election mode for the assembly polls in early 2022. Extending GST concessions on Covid related goods and services, compensation to sates, GST Tribunal etc are some hot issues to be discussed.

Industry bodies have raised up the issue of rise in GST summons over last few weeks leading to harassment by tax officers, blocking of ITC, cancellation of GST registration, penalties and arrest threats impacting businesses and working capital. This also creates atmosphere of fear and hampers the efforts made in ensuring ease of doing business.

Revocation of Cancellation of Registration :CBIC Clarification

• Notification Nos. 14/2021-CT dated 01.05.2021 and 34/2021-CT dated 29.08.2021 have extended dates for filing of application for revocation of registration cancelled by Department (now 30th September, 2021).
• It has been clarified that the benefit of said notification is extended to all the cases where cancellation of registration has been done under clause (b) or clause (c) of sub-section (2) of section 29 of the CGST Act, 2017 and where the due date of filing of application for revocation of cancellation of registration falls between 1st March, 2020 to 31st August, 2021.
• Such benefit will also apply in those cases also where the application for revocation of cancellation of registration is either pending with the proper officer or has already been rejected by the proper officer.
• Benefit will also apply in those cases which are pending with the appellate authority or which have been rejected by the appellate authority.
• To sum up, the date for filing application for revocation of cancellation of registration in all cases, where registration has been cancelled under clause (b) or clause (c) of sub-section (2) of section 29 of CGST Act, 2017 and where the due date of filing of application for revocation of cancellation of registration falls between 1st March, 2020 to 31st August, 2021, is extended to 30th September, 2021, irrespective of the status of such applications.

Taxpayers may note the following possible solutions in various situations of cancellation :

Application for revocation of cancellation of registration has not been filed by the taxpayer-

 In such cases, the applications for revocation can be filed upto the extended timelines as provided vide the said notification. Such cases also cover those instances where an appeal was filed against order of cancellation of registration and the appeal had been rejected.

Application for revocation of cancellation of registration has already been filed and which are pending with the proper officer-

In such cases, the officer shall process the application for revocation considering the extended timelines as provided vide the said notification.

Application for revocation of cancellation of registration was filed, but was rejected by the proper officer and taxpayer has not filed any appeal against the rejection –

In such cases, taxpayer may file a fresh application for revocation and the officer shall process the application for revocation considering the extended timelines as provided vide the said notification.

Application for revocation of cancellation of registration was filed, the proper officer rejected the application and appeal against the rejection order is pending before appellate authority-

In such cases, appellate authorities shall take the cognizance of the said notification for extension of timelines while deciding the appeal.

Application for revocation of cancellation of registration was filed, the proper officer rejected the application and the appeal has been decided against the taxpayer-

In such cases, taxpayer may file a fresh application for revocation and the officer shall process the application for revocation considering the extended timelines as provided vide the said notification.

(Source: Circular No. 158/14/2021-GST dated 06.09.2021 read with Notification No. 34/2021-CT dated 29.08.2021 )

NHAI to pay GST on Annuity; Not the Contractors

• Entry No. 23A of exemption Notification No. 12/2017-CT (Rate) dated 28.06.2021 does not apply to or exempts amount of  annuity paid by the National Highways Authority of India (NHAI) to road contractors for providing construction services (as per GST Council decision in 43^rd meeting held on 28.05.2021.
• Ministry of Road Transport and Highways has clarified on applicability of GST Road Construction under Hybrid Annuity Model (HAM) .
• NHAI will reimburse payment of GST on annuity amount up to June 16, 2021 wherever applicable. However, for period after June 16, 2021, GST would be payable by contractors on Annuity & interest amount and TDS under GST would also be applicable.
• Projects where bid due date are after 16.06.2021, no GST on annuity under change in law shall be paid / reimbursed since bids were invited exclusive of GST.

(Source: Ministry of Road Transport Highway Circular NH-24028/22/2020-H dated 27.08.2021  read with CBIC Circular No. 150/06/2021-GST dated 17.06.2021 )

GST exempt on Papad : CBIC

• Papad, by whatever name called, is exempt from the levy of Goods and Services Tax (GST)
• Tax rate on Papad would not vary based on its shape, whatsoever, i.e., oval, round, square or any other shape.
• Papad is exempt from GST vide entry No. 96 of Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017. This entry does not distinguish the levy of tax based upon the shape of Papad.
• CBIC has clarified this on a recent tweet that round Papad is exempt but a square Papad is not.

[Source: CBIC clarification on twitter]

GST on 2/3 wheeled electric vehicles

• What happens to levy of GST on 2/3 wheeled electric vehicles? What rate they would be taxed ? will the GST rate be different if these were supplied with or without vehicles ?

          Advance ruling was sought on the following query :

 “Whether fitting of battery is mandatory in two & three-wheeled battery powered electric vehicles (here-in-after referred to as ‘the subject goods’) while selling the same to the dealers for getting the benefit of 5% GST rate applicable for electrically operated vehicles?”

• The AAR analyzed the definite of ‘electrically operated vehicles’ and noted that the term ‘electrically operated vehicle’ to mean ” vehicles which run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicles and shall include e-bicycles”.
• The AAR ruled that a two or three-wheeled “battery powered electric vehicle” when supplied with or without battery pack is classifiable under HSN 8703 as an ‘electrically operated vehicle’ and is taxable @ 5% GST.

[Source: IN RE: M/S. ANJALI ENTERPRISES - 2021 (8) TMI 250 - AUTHORITY FOR ADVANCE RULING, ODISHA]

Coaching services: Issues clarified in Advance Ruling

Q. 1    Where the coaching services provider supplies services of coaching to students which also includes along with coaching, supply of goods/printed material/test papers, uniform, bags and other goods to students. Such supplies are not charged separately but a consolidated amount is charged, the major component of which is imparting of coaching. In such circumstances, whether such supply shall be considered, a supply of goods or a supply of services?

Ans.   Supply by the Applicant will be considered "Supply of Service".

Q. 2  If it is held to be a supply of service, whether such supply shall be considered as composite supply? If yes. what shall be the principal supply?  

Ans.  Yes, such supply shall be considered as Composite supply, and Coaching service shall be principal supply.

Q.3    Where coaching services are provided under a business model through Network Partners as per sample agreement attached, containing obligations of Applicant and Network partners. Accordingly, the network partner provides the services to the students on behalf of Applicant. In such a case, who shall be considered as supplier of service and recipient of service under the agreement?

Ans.   Applicant will be service provider to the students and Network partner will be service provider to the applicant.

Q.4   What shall be the value of service provided by Applicant to students and by network partner to Applicant?

Ans.   Total consolidated amount charged for which Tax invoice generated by the applicant will be the value of service supply by the applicant.

Q.5    Whether both, Applicant and network partner can avail eligible ITC for their respective supplies?

Ans.   Applicant can avail eligible ITC as per provisions of GST Act, 2017.

[Source: IN RE: M/S. SYMMETRIC INFRASTRUCTURE PRIVATE LIMITED - 2021 (9) TMI 482 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN]