TMI Tax Updates - e-Newsletter
August 10, 2017
Case Laws in this Newsletter:
Articles
By: Dr. Sanjiv Agarwal
Summary: The article discusses the introduction of compensation cess under the Goods and Services Tax (GST) regime in India, aimed at compensating states for potential revenue shortfalls. Initially, a 15% cess was imposed on vehicles, making them cheaper than under the previous tax system. However, the government later considered increasing the cess to 25% on luxury and SUV vehicles to prevent prices from dropping below pre-GST levels. This proposal raised concerns about frequent tax rate changes and potential profiteering by the government, affecting trust in its tax policies. The decision was pending further discussion in the GST Council.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017, established under the Insolvency Bankruptcy Code, 2016, outlines the framework for registering and regulating information utilities. These regulations define 'information' as financial data related to debts, liabilities, assets, defaults, balance sheets, and cash flows. Only public companies with a net worth of at least 50 crores, among other criteria, can register as information utilities. The registration process involves submitting various documents and paying fees. The regulations also detail the conditions for registration, grounds for rejection or cancellation, obligations of information utilities, and the process for submitting financial information.
News
Summary: A recent announcement highlights a reduction in tax liability on homes under the Goods and Services Tax (GST) framework. This change is aimed at providing relief to homebuyers by lowering the overall tax burden associated with purchasing residential properties. The adjustment in GST rates is intended to make housing more affordable and stimulate the real estate market. This move is part of broader efforts to streamline tax structures and enhance economic activity in the housing sector.
Summary: Direct tax collections in India for the financial year 2017-18 up to July 2017 have grown by 19.1%, reaching Rs. 1.90 lakh crore, compared to the same period last year. This amount represents 19.5% of the total budget estimates for the year. Corporate Income Tax (CIT) gross revenue grew by 7.2%, and Personal Income Tax (PIT), including Securities Transaction Tax (STT), increased by 17.5%. After accounting for refunds, CIT net growth is 23.2%, and PIT net growth is 15.7%. Refunds issued during this period totaled Rs. 61,920 crore, a 5.1% decrease from the previous year.
Summary: The second meeting of the Council of Trade Development and Promotion took place in New Delhi, involving commerce industry ministers from eight states and representatives from 16 others. Discussions included the Chennai-Bengaluru Industrial Corridor, with the Tamil Nadu government requesting expedited planning and environmental assessments for the Ponneri Industrial Node. They also sought flexibility in governance structures for industrial nodes. The Delhi Mumbai Industrial Corridor Development Corporation has initiated master planning for Ponneri, Krishnapatnam, and Tumkur nodes. This was reported by the Commerce and Industry Minister in a written reply to the Rajya Sabha.
Summary: The Department of Industrial Policy and Promotion under the Ministry of Commerce and Industry has approved two projects in Andhra Pradesh under the Modified Industrial Infrastructure Upgradation Scheme. The projects, located in Hindupur and Bobbili, aim to enhance industrial clusters by upgrading infrastructure such as roads, drainage, power, and water supply. Additional services like health centers and parking areas will also be developed. The projects, approved in March 2016, are expected to be operational by March 31, 2018, and are anticipated to create approximately 5,500 direct and 8,500 indirect jobs.
Summary: Several countries, including the U.S.A. and the EU, implement incentive programs to boost exports, such as the Generalized System of Preferences (GSP). This program aims to foster economic growth in developing and least developed countries by offering preferential duty-free treatment for 30-40% of products from designated beneficiary countries, including India. The Reserve Bank of India (RBI) evaluates currency devaluation based on factors like inflationary pressures, which can sometimes enhance exports. However, the RBI's devaluation policy considers broader economic factors. This information was disclosed by the Commerce and Industry Minister in a written response to the Rajya Sabha.
Summary: The government has initiated steps to revive the salt farming industry by establishing Model Salt Farms in Rajasthan, Odisha, and Tamil Nadu, collaborating with state governments and the Central Salt Marine Chemicals Research Institute. Training programs have been conducted to upgrade the skills of 780 salt workers and 40 master trainers over three years. Financial assistance for labor welfare and development has been provided, with Rs. 98.89 lakhs spent by the Salt Commissioner's Organisation, including Rs. 30.46 lakhs in Gujarat. This initiative aims to enhance salt quality, meet global standards, and improve competitiveness in the international market.
Summary: The government has delegated the approval of Foreign Direct Investment (FDI) proposals in eleven sectors to respective Administrative Ministries/Departments, following the dissolution of the Foreign Investment Promotion Board (FIPB). A Standard Operating Procedure (SOP) for processing these proposals was issued on June 29, 2017. Currently, 99 FDI proposals are pending across various departments, including Economic Affairs, Pharmaceuticals, and Telecommunications. The SOP mandates that complete proposals should be processed within six to eight weeks, with additional time for security clearance if necessary. The Department of Industrial Policy and Promotion's concurrence is required for rejections or additional approval conditions.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 63.7491 on August 9, 2017, slightly up from Rs. 63.7382 on August 8, 2017. The exchange rates for other currencies against the Rupee were also provided: the Euro was at Rs. 74.8606, down from Rs. 75.2876; the British Pound was at Rs. 82.9248, down from Rs. 83.1465; and 100 Japanese Yen were at Rs. 57.94, up from Rs. 57.63. The SDR-Rupee rate will be determined based on the reference rate.
Notifications
Customs
1.
37/2017 - dated
9-8-2017
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ADD
Seeks to impose anti-dumping duty on "Opal Glassware", originating in or exported from China PR and UAE
Summary: The Government of India, through the Ministry of Finance, has imposed an anti-dumping duty on imports of Opal Glassware originating from or exported by China and the UAE. This decision follows a sunset review initiated in 2016 and is based on findings that recommend continuing the duty to protect domestic industry from injury due to dumping. The duty rates are set at 30.64% for Opal Glassware from China and 4.38% from the UAE, calculated as a percentage of the CIF value of imports. This measure will be effective for five years unless altered earlier.
GST - States
2.
Va Kar/GST/07/2017-S.O. 060 - dated
31-7-2017
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Jharkhand SGST
The Jharkhand Goods and Services Tax (Fourth Amendment) Rules, 2017.
Summary: The Jharkhand Goods and Services Tax (Fourth Amendment) Rules, 2017, effective from 27th July 2017, amend the existing GST rules. Key changes include extending the deadline in Rule 24 to 30th September 2017, revising Rule 34 regarding currency exchange rates for taxable goods and services, and modifying Rule 46 for export invoices. Rule 61 introduces provisions for electronic filing of returns via FORM GSTR-3B. Amendments also affect rules 83 and 89, and update headings in FORMS GST TRAN-1 and GST TRAN-2. These amendments were published in the Jharkhand Gazette on 20th June 2017.
3.
02/2017-State Tax - dated
6-7-2017
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Kerala SGST
Notifies the following modes of verification.
Summary: Notification No. 02/2017-State Tax from the Commissionerate of Commercial Taxes, Kerala, dated July 6, 2017, outlines the approved methods for verification under sub-rule (3) of rule 26 of the Kerala Goods and Services Tax Rules, 2017. The specified modes include Aadhaar-based Electronic Verification Code (EVC), EVC generated through net banking login on the common portal, and EVC generated on the common portal. This notification is retroactively effective from June 22, 2017.
4.
01/2017-State Tax - dated
6-7-2017
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Kerala SGST
Annual Turnover in the preceding of HSN Code Financial Year.
Summary: The Commissioner of Commercial Taxes in Kerala issued Notification No. 01/2017-State Tax, effective from July 1, 2017, under the Kerala Goods and Services Tax Rules, 2017. It mandates that registered persons must include specific digits of Harmonised System of Nomenclature (HSN) Codes in their tax invoices based on their annual turnover. For turnovers up to INR 1.5 crore, no HSN digits are required; for turnovers between INR 1.5 crore and INR 5 crore, two digits are required; and for turnovers exceeding INR 5 crore, four digits must be included.
Circulars / Instructions / Orders
GST - States
1.
32 T of 2017 - dated
21-7-2017
Tax Deduction at Source (TDS) as per section 31 of Maharashtra Value Added Tax Act, 2002 in respect of work contracts executed prior to 30-6-2017 for which payments to be made on or after 1-7-2017 and applicability of TDS.
Summary: The circular from the Office of the Commissioner of State Tax, Maharashtra, clarifies the applicability of Tax Deduction at Source (TDS) under the Maharashtra Value Added Tax Act, 2002, for work contracts executed before June 30, 2017, with payments made on or after July 1, 2017. It states that TDS should be deducted as per section 31 of the MVAT Act, regardless of the payment date, if the contract was executed before the specified date. The circular is intended for clarification and not for legal interpretation, and further inquiries can be directed to the office.
2.
31 T of 2017 - dated
15-7-2017
Advisory to trade for issues related to GST Migration and New Registrations.
Summary: The Maharashtra State Commissioner of Sales Tax issued a circular addressing GST migration and new registration issues. It outlines the registration process for SEZ units and business verticals, advising the use of unique mobile numbers and emails. It warns against data mix-ups caused by tax practitioners using multiple browser windows and advises clearing cache memory. The circular details a procedure for changing the email and mobile number of the primary authorized signatory, requiring written applications to nodal officers. It also provides clarifications on migration, new registrations, opting for the composition scheme, issuing bills of supply, and amendments.
3.
Memo No. 1470/ST-5, - dated
14-7-2017
Guidelines on composition and levy on directives/instructions regarding migration.
Summary: The circular from the Excise & Taxation Department of Haryana outlines guidelines for the composition levy under the Haryana GST Act, 2017, specifically addressing migration from previous tax systems to GST. It details the eligibility criteria, tax rates, and conditions for opting into the composition scheme, which is designed for small taxpayers with a turnover up to Rs. 75 lakh. The document also describes the procedure for migration, including the steps for obtaining registration and the responsibilities of Excise & Taxation Officers in verifying applications. Additionally, it provides FAQs to clarify common queries regarding the composition levy and migration process.
4.
30 T of 2017 - dated
13-7-2017
Designation Of officers under Maharashtra Goods and Services Tax Act, 2017 (Mah. XLIII of 2017).
Summary: The Government of Maharashtra, under the Maharashtra Goods and Services Tax Act, 2017, has designated officers from the Maharashtra Value Added Tax Act, 2002 to serve under the MGST Act. The circular provides a table aligning the designations of officers under both acts, such as Commissioner of Sales Tax becoming Commissioner of State Tax. It clarifies that officers should use their respective designations from the MVAT Act or MGST Act depending on the duties they are performing. This aims to streamline the roles and responsibilities across both tax frameworks.
5.
29 T of 2017 - dated
10-7-2017
Submission of Bond/Letter of Undertaking by the Exporter in respect of Exports without payment of Integrated Tax under IGST Act.
Summary: The circular from the Commissioner of State Tax in Maharashtra addresses the procedure for exporters to submit a bond or Letter of Undertaking (LUT) for exporting goods without paying Integrated Tax under the IGST Act. It outlines the eligibility for claiming tax refunds on zero-rated supplies and the requirement to furnish a bond or LUT before export. Exporters can submit these documents to either the Central or State Tax Authority until an administrative mechanism is in place. The circular aims to clarify procedures and facilitate exporters, emphasizing adherence to guidelines issued by the Central Board of Excise and Customs.
6.
27 T of 2017 - dated
7-7-2017
Tax Deduction at Source as per section 51 of Goods and Services Act, 2017 and procedure to be followed by Departments or establishments of Local Authority, State Government, Local Authority, Governmental agencies.
Summary: The circular from the Office of the Commissioner of State Tax, Maharashtra, outlines the procedures for Tax Deduction at Source (TDS) under Section 51 of the Goods and Services Tax Act, 2017. Departments and establishments of the Central and State Governments, local authorities, and governmental agencies must register under the MGST and CGST Acts to deduct TDS. A 2% TDS (1% each for MGST and CGST) is required for contracts exceeding Rs. 2.5 lakh. Registration, payment, and return filing must be done electronically. Penalties apply for non-compliance, and provisions for refunds and transitional scenarios are specified.
Customs
7.
14/2017 - dated
30-6-2017
Sub: Launch of Indian Customs EDI System- (ICES 1.5) for Imports and Exports, at Vijaydurg Port (INVYD1), Vijaydurg Village, Taluka : Devgarh, Sindhudurg - 416 806, Maharashtra – reg.
Summary: The circular announces the launch of the Indian Customs EDI System (ICES 1.5) for import and export processing at Vijaydurg Port, Maharashtra. It outlines the procedures for electronic filing and processing of Bills of Entry and Shipping Bills, including registration requirements for importers, exporters, customs brokers, and shipping lines. The document details the electronic filing process, data entry requirements, and the role of the Risk Management System (RMS) in facilitating customs clearance. It also addresses the procedures for duty payment, examination of goods, and the management of bonds and licenses. The circular aims to streamline customs operations and enhance efficiency at the port.
Highlights / Catch Notes
Income Tax
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High Court Rules Turnkey Contract Income from Plantations and Rock Gardens Not Agricultural Under Income Tax Act Section 2(i)(a)(iii.
Case-Laws - HC : Agricultural income or not - turnkey contract of plantation - to create and develop plantations, rock gardens etc. for companies/institutions - The consideration received cannot be classified as agricultural income under 2(i)(a)(iii) - HC
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Court Rules Service Charges Don't Affect Charitable Status; Assessee Eligible for 12AA, 80G Registration.
Case-Laws - HC : Eligibility to registration to the Assessee u/s 12AA and u/s 80G - The mere fact that the Assessee had received service charges from the various organizations for conducting programmes would not convert its essential function to that of a business - HC
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High Court to Decide on Interest Income Accrual; Taxable Amount Already Accrued for Appellant-Assessee on Fixed Deposits.
Case-Laws - HC : Accrual of interest income on FD's - compensation and interest was not final, but pending the decision of the High Court - it is an accepted position that the right to receive the interest from the fixed deposits already accrued to the appellant-assessee - amount is taxable in the hands of assessee - HC
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Royalty and Interest Income from Malaysia Taxable in India Once Remitted; Exchange Gains Also Taxable.
Case-Laws - HC : Royalty - exchange gain - Income attributable to royalty and interest remitted from Malaysia after retaining in Malaysia for sometime - income is taxable in India - HC
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Court Clarifies Tax Exemption u/s 10(23C)(vi) Starts on Application Date, Not Approval Date.
Case-Laws - HC : Grant of exemption under section 10(23C)(vi) - date of grant of registration - The registration will take effect from the date of application - HC
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Court Upholds Penalty for Late Filing of Annual Information Return u/s 271FA; No Reasonable Cause Provided.
Case-Laws - HC : Levy of penalty u/s 271FA - failure of the appellant in furnishing AIR in time - appellant had not established any reasonable cause for not filing AIR within time - penalty confirmed - HC
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Bandwidth Purchaser Not Eligible for Infrastructure Deduction u/s 80-IA(4)(ii) of Income Tax Act.
Case-Laws - AT : Deduction u/s. 80-IA(4)(ii) - telecommunication services - infrastructure facilities - A wholesale purchaser of bandwidth cannot be equated with an undertaking providing infrastructure facilities i.e. broadband network and Internet services.
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Duty Drawback and Export Incentives Qualify for Exemption u/s 10B of the Income Tax Act.
Case-Laws - AT : Eligibility to exemption u/s 10B - whether duty draw back / export incentive is eligible for deduction / exemption - Held Yes
Customs
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Section 111(d) Customs Act: Prohibited Goods Confiscated; No Re-export Without Paying Demurrage or Ground Rent.
Case-Laws - HC : Re-export of prohibited goods - The consignment having contained `prohibited goods', which were confiscated in terms of Section 111 (d) of the CA, the Petitioner is not entitled for re-export of the same without payment of demurrage/ground rent - HC
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"Removal" vs. "Clearance": Distinct Terms u/s 47 of Customs Act, No Violation of Section 111(j.
Case-Laws - HC : The “removal” and “clearance” cannot be equated to clear the goods for home consumption under Section 47 of the Customs Act. The permissions to clear the goods would not be in violation of Section 111(j), which is applicable to “removals” and not to the “clearance”. - HC
Service Tax
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CENVAT Credits Valid for R&D Centers: Input Service Distribution to Manufacturing Units Confirmed.
Case-Laws - AT : CENVAT credit - input service distribution - credit in respect of input services utilised at the R&D centres of the appellant company and transferred to factory through input service distribution mechanism - credit allowed.
Central Excise
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Court Allows CENVAT Credit for Pipelines Supplying Water to Mines from External Dams, Overturning Earlier Denial.
Case-Laws - AT : CENVAT credit - appellants are drawing water from various dams in the vicinity of factory and pipelines have been laid from the tanks to the mines - denial of credit on the ground that the pipes were not used in the factory of the appellant - Credit allowed.
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