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TMI Tax Updates - e-Newsletter
July 24, 2018
Case Laws in this Newsletter:
TMI SMS
Articles
By: CSHithakar Chouta
Summary: On 7th June 2018, the Reserve Bank of India (RBI) issued a circular detailing the implementation of the Single Master Form (SMF) for reporting foreign investments. The SMF consolidates various reporting forms for foreign investments in Indian entities such as companies, LLPs, REITs, InvITs, and AIFs. Before the SMF's implementation, entities must submit foreign investment data via the Entity Master Form (EMF) within a 15-day window from 28 June to 12 July 2018. Failure to file the EMF will prevent entities from receiving foreign investments and result in non-compliance with the Foreign Exchange Management Act, 1999.
By: Bimal jain
Summary: The article discusses the classification of intermediary services under India's Goods and Services Tax (GST) framework, specifically whether these services qualify as exports. Under the IGST Act, intermediary services, defined as facilitation between parties, are not considered exports if the supplier is in India, even if the recipient is abroad. This is due to the "place of supply" rule, which is the supplier's location. The article argues for changing this rule to the recipient's location to boost India's forex earnings by making intermediary services more competitive internationally. It also highlights the economic rationale for such a change, suggesting it would align with zero-rated export benefits under Section 16 of the IGST Act.
By: Bimal jain
Summary: A recent ruling by the Madhya Pradesh High Court imposed a penalty of INR 1.32 crores on a transport company for not completing Part-B of the E-Way Bill, highlighting the strict enforcement of compliance under the CGST Act, 2017. This decision has raised concerns about the potential misuse of authority for imposing penalties on procedural lapses without tax evasion intent. The E-Way Bill, mandatory for transporting goods over INR 50,000, requires complete details in Part-A and Part-B. The case underscores the need for clarity in responsibilities and potential legislative amendments to Section 129 to prevent undue penalties for technical errors.
By: Dr. Sanjiv Agarwal
Summary: Advance rulings under the GST framework provide clarity on tax provisions and legislative intent. Recent rulings include: the classification of UPS and battery supply as mixed, not composite; recruitment services to foreign university students as taxable, not export services; reinstatement charges for street restoration attracting 18% GST; certain exempt suppliers not requiring registration unless liable under reverse charge; catering services to manufacturing industries taxed at 18% as outdoor catering; and classification of trophies and Caesarstone under specific tariff headings. These rulings highlight the need for a centralized authority to prevent inconsistent state rulings.
Highlights / Catch Notes
GST
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Fabricating and Fitting Bus Bodies on Chassis is a Composite Supply; Principal Supply under HSN Code 8707.
Case-Laws - AAR : Nature of supply - The activity of fabrication and fitting and mounting of bus bodies on the chassis supplied by the other party is a composite supply with supply of goods, i.e., bus-bodies, being principal supply (HSN code 8707).
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Unredeemed payback points are taxable under GST as consideration for services rendered by the issuer.
Case-Laws - AAR : The value of points forfeited of the applicant on which money had been paid by the issuer of points on account of failure of the end customers to redeem the payback points within their validity period would amount to consideration received in lieu of services being provided by LSRPL to its clients - liable to GST.
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Taxation Classification for Truck Mounted Cranes: Heading 8705 Applies to Cranes Mounted on Ashok Leyland, TATA Trucks.
Case-Laws - AAR : Classification of goods - Truck Mounted Cranes (TMC) - The product manufactured/supplied by the applicant, which is resultant of mounting/fixing of crane on readymade trucks/lorries bought by them from truck/lorry manufacturers such as Ashok Leyland, TATA, etc. and known as truck mounted cranes (TMC), is classifiable under heading 8705.
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Lithium-Ion Batteries for Mobile Handsets: Classification Affects GST and Customs Duties Under Customs Tariff Act, 1985.
Case-Laws - AAR : Classification of goods - Battery’ for Mobile Handset - Under which of the chapter headings of the Customs Tariff Act, 1985, the said product “battery for mobile handsets’’, which is lithium-ion battery would be covered? - To be classified according to its use and type of sale.
Income Tax
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Postponed Excise Duty Payment Doesn't Impact Closing Stock Valuation; Accounting System Irrelevant to Accurate Valuation.
Case-Laws - HC : Valuation of closing stock - Even if the excise duty has not been paid and the assessee has postponed its payment, the valuation of the goods will not get affected. Accounting system of the assessee would be of no consequence to arrive at the true and correct valuation of the closing stock
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Partner's Exclusive Property Sale Pre-Dissolution Triggers Firm's Capital Gains Liability.
Case-Laws - HC : Sale of property owned exclusively by one of the partners - Even if the partner has been allotted the share, prior to dissolution, as is revealed from the facts, capital gains arise on the firm.
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TDS Provisions Apply to Technical Services Received: Additions u/s 40(a)(ia) Confirmed for LOTUS Note Management.
Case-Laws - AT : TDS liability - additions u/s 40(a)(ia) - the management of the LOTUS Note is not a mere sharing of any infrastructure or facility and since the assessee has received the technical services from Bayor, the same is liable to TDS provisions - additions confirmed.
Service Tax
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Tribunal Rules Room Booking Charges Exempt from Service Tax, Differentiates from Mandap Keeper Services.
Case-Laws - HC : Valuation - Mandap keeper service - Whether the Tribunal is correct in holding that no service tax is leviable/payable on the charges collected in the name of booking of the Rooms - Tribunal has rightly distinguished the Mandap service and the rooms rents received
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VAT and Service Tax Are Mutually Exclusive: Sales Cannot Be Reclassified as Services for Tax Purposes.
Case-Laws - AT : Business Auxiliary Service - The levy of VAT as well as Service Tax is mutually exclusive and once the transaction has been considered and declared as sale of goods it is not open to reopen transaction and consider it as service.
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Chilling Milk Classified as Manufacturing Process, Exempt from Service Tax According to Established Law.
Case-Laws - AT : Business Auxiliary Service - activity of chilling of milk - chilling of milk amounts to manufacture and it is settled law that process amounting to manufacture is not liable to service tax.
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Employee Deputation Not a Manpower Supply Service; No Service Tax Demand Due to Lack of Profit or Agency Relationship.
Case-Laws - AT : Manpower Recruitment and Supply Agency Services - deputation of employees from one company to another does not involve profit or finance benefit there is no relationship of agency and client involved in such deputation - demand set aside
Central Excise
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Allegations of Fake Invoices in CENVAT Credit Claims Challenged; Transport Tax Payments Support Goods Movement.
Case-Laws - AT : CENVAT Credit - fake invoices - allegation of non receipt of goods - The service tax payment in respect of transportation of goods also establish the transportation of goods - merely on the basis of the RTO reports, it cannot be concluded that the inputs were not received by the appellant.
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Supreme Court Rules Job Worker Can't Claim Duty Exemption; Principal Manufacturer's Area-Based Exemption Stands.
Case-Laws - SC : SC confirmed the decision of tribunal against the assessee denying the benefit of exemption from duty on Job work - Benefit under N/N. 214/86 - As the principal manufacturer was enjoying the area based exemption notification, job worker could not have sent the aluminum ingots to the principal manufacturer without payment of duty inasmuch as the final product of the principal manufacturer was exempted.
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Supreme Court Affirms Tribunal's Decision: Insurance Charges Included in Valuation for Central Excise on FOR Basis.
Case-Laws - SC : SC confirmed the decision of tribunal on the issue of Valuation under Central Excise against the assessee - inclusion of insurance charges - tribunal found that such sale ought to be considered not a sale on ex-factory basis but on FOR basis even though the Cost Transportation is not included in the price but shown separately in the invoice.
VAT
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Late Input Tax Credit Claim Denied Under TNVAT Section 19(3)(b) Due to Missed Deadline in Section 19(11).
Case-Laws - HC : Input Tax Credit on Capital Goods - Section 19(3)(b) of the TNVAT Act - denial of credit on the ground that the claim was made after the expiry of the time stipulated in Section 19(11) of the TNVAT Act, which states that input tax has to be claimed before the end of the financial year or before 90 days from the date of purchase, whichever is later. - Claim not allowed.
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