TMI Tax Updates - e-Newsletter
September 9, 2017
Case Laws in this Newsletter:
TMI Short Notes
Income Tax:
Summary: If there is a change in accounting policies that does not have a material effect on the current or previous year but is expected to have a material impact in future years, it must be disclosed. Disclosure should occur in the year the change is adopted and in the first year it has a material effect. This requirement ensures transparency and prepares stakeholders for future financial implications.
Income Tax:
Summary: ICDS-I stipulates that accounting policies should not be altered without a 'reasonable cause,' though the term is not explicitly defined. The concept of 'reasonable cause' is well-established, offering flexibility to taxpayers in appropriate situations and is assessed individually. A change in accounting policy is deemed 'reasonable' if it aligns with AS 5 criteria, which allows changes if mandated by law, necessary for compliance with accounting standards, or if it enhances the presentation of financial statements.
Income Tax:
Summary: The Income Computation and Disclosure Standards (ICDS) I stipulate that marked-to-market or expected losses should not be recognized unless aligned with other ICDS provisions. This approach, as explained by the Accounting Standard Committee, aims to maintain consistency by not recognizing anticipated profits or expected losses. The Supreme Court, in CIT v Woodward Governor India (P) Ltd., ruled that losses from exchange rate fluctuations on revenue-purpose loans are deductible under Section 37 of the Income Tax Act, highlighting a specific scenario where such losses may be considered.
Income Tax:
Summary: An assessee is required to disclose fundamental accounting assumptions under ICDS-I, specifically if assumptions like Going Concern, Consistency, and Accrual are not followed. If these assumptions are adhered to, no specific disclosure is needed. The revised Form 3CD of the tax audit report includes columns for such disclosures, ensuring compliance with ICDS standards.
Income Tax:
Summary: The scope of "Going Concern" under ICDS I involves the assumption that an entity will continue its business operations without the intention or necessity to liquidate or significantly reduce its scale. Financial statements and income computations are periodic reflections of this status. If material uncertainties threaten this assumption, it may be questioned. ICDS I lacks specific guidance for situations where the going concern assumption is not met. In such cases, entities may refer to the Framework for the Preparation and Presentation of Financial Statements by ICAI, which suggests preparing financial statements on a different basis if the going concern assumption is compromised.
Articles
By: CA.VINOD CHAURASIA
Summary: The article addresses the Tax Collected at Source (TCS) obligations for E-commerce Operators (ECO) under the GST framework. ECOs must collect TCS at 2% on the net taxable value of supplies made through them. The net value is calculated by subtracting the value of returned supplies and supplies under Section 9(5) from the aggregate value. For example, if a product costs 1000, TCS is calculated on this amount, and the seller receives 1060 after deductions. The GST rate (12% or 18%) does not affect TCS calculations. For a product worth 1500, TCS is collected on 1500, and GST is paid on the same amount.
News
Summary: Taxpayers are urged to file their GST returns (GSTR-1, GSTR-2, and GSTR-3) promptly, with relaxed deadlines for July and August 2017. GSTR-1 must be filed by all normal and casual registered taxpayers, even if there is no business activity. Specific taxpayers, such as those under the Composition scheme, are exempt. Filing steps include using the GST portal or offline tools. Late filing incurs penalties. Taxpayers should not wait until the last minute to manage invoices. Assistance is available through the GST helpdesk.
Summary: The speech by a Reserve Bank of India official highlights the critical need to restore the health of India's public sector banks. The banking sector is under strain due to mounting non-performing assets (NPAs), which have weakened banks' balance sheets, limiting their ability to support credit growth. The speech draws parallels with Japan and Europe's banking crises, emphasizing the importance of decisive bank recapitalization to prevent economic stagnation. It discusses the role of the Insolvency and Bankruptcy Code in resolving stressed assets and urges a comprehensive plan for bank recapitalization to ensure sustainable economic growth.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 63.8664 on September 8, 2017, down from Rs. 64.0276 the previous day. Based on this rate and cross-currency quotes, the exchange rates for September 8 were: 1 Euro at Rs. 77.0357, 1 British Pound at Rs. 83.8757, and 100 Japanese Yen at Rs. 59.28. The SDR-Rupee rate is also determined using this reference rate.
Notifications
Customs
1.
74/2017 - dated
7-9-2017
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Cus
seeks to further amend notification No.50/2017-Customs dated the 30th June, 2017, so as to reduce the BCD on raw sugar[1701] upto a quantity of 3 lakh MT from 50% to 25% subject to the Tariff Rate Quota Allocation Certificate or license, as the case may be, issued by DGFT
Summary: The Government of India has amended Notification No. 50/2017-Customs to reduce the Basic Customs Duty (BCD) on raw sugar imports under tariff heading 1701 from 50% to 25%, applicable to a total quantity of up to 3 lakh metric tonnes. This reduction is contingent upon the issuance of a Tariff Rate Quota Allocation Certificate or license by the Directorate General of Foreign Trade (DGFT). The import must be completed within 60 days from the certificate's issuance, and the raw sugar must be converted to white or refined sugar within 30 days of the bill of entry or entry inwards date.
2.
85/2017 - dated
7-9-2017
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Cus (NT)
Defining jurisdiction of customs officers for the purpose of audit
Summary: The notification, issued by the Central Board of Excise and Customs, appoints Principal Chief Commissioners and Chief Commissioners of Customs for audit purposes under the Customs Act, 1962. It designates specific officers for various regions across India, including Chennai, Delhi, and Mumbai Zones I and II, with jurisdiction extending nationwide. The notification, originally effective from April 1, 2018, has been modified and superseded by subsequent notifications, including Notification No. 24/2022-Customs (N.T.) dated March 31, 2022.
3.
1/2017-Customs(CVD) - dated
7-9-2017
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CVD
Seeks to impose definitive Countervailing duty on the imports of "Certain Hot Rolled and Cold Rolled Stainless Steel Flat Products" originating in or exported from China PR
Summary: The Government of India, through the Ministry of Finance, imposed a definitive countervailing duty on imports of certain hot rolled and cold rolled stainless steel flat products originating from or exported by China. This action, effective from September 7, 2017, followed findings that these products were being subsidized, causing material injury to the domestic industry. The duty, set at 18.95% of the landed value, was to be levied for five years unless amended earlier. However, the duty was not imposed between February 2, 2021, and January 31, 2022. The notification was later rescinded on February 1, 2022.
DGFT
4.
27/2015-2020 - dated
7-9-2017
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FTP
TRQ for Raw Sugar: Amendment in import policy of raw sugar classified under Exim Code 170114 of Chapter 17 of ITC (HS), 2017-Schedule-1 (Import Policy)
Summary: The Government of India has amended the import policy for raw sugar under Exim Code 170114, allowing the import of 3 Lakh MT of raw sugar at a reduced 25% customs duty under the Tariff Rate Quota (TRQ) scheme. This import is restricted to specific ports in southern India, with applications required to be submitted to designated Regional Authorities. The application process is open from September 8 to September 12, 2017, with allocations announced on September 13, 2017. Importers must utilize their quota within 60 days and convert raw sugar to refined sugar within 30 days of entry. Non-compliance may result in penalties.
GST - States
5.
23/2017 - dated
22-8-2017
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Karnataka SGST
Amendments in the Notification No. (17/2017) dated the 29th June, 2017
Summary: The Government of Karnataka has amended Notification No. (17/2017) dated June 29, 2017, under the Karnataka Goods and Services Tax Act, 2017. The amendment, effective from August 22, 2017, adds a new clause to the notification. It specifies that services related to housekeeping, such as plumbing and carpentry, are included unless the service provider is required to register under section 22(1) of the Act when supplying through an electronic commerce operator. The amendment is issued by the Finance Department on behalf of the Governor of Karnataka.
6.
22/2017 - dated
22-8-2017
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Karnataka SGST
Amendments in the Notification No. (13/2017) dated the 29th June, 2017
Summary: The Government of Karnataka, under the Karnataka Goods and Services Tax Act, 2017, has amended Notification No. (13/2017) dated June 29, 2017. The amendments include changes to the table in the notification, specifically regarding goods transport agencies (GTA) that have not paid State tax at the rate of 6%. Additionally, a new clause has been added to the explanation, clarifying that a Limited Liability Partnership registered under the Limited Liability Partnership Act, 2008, is considered a partnership firm. These changes were made following recommendations from the Council.
7.
21/2017 - dated
22-8-2017
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Karnataka SGST
Amendments in the Notification No.(12/2017) dated the 29th June, 2017.
Summary: The Government of Karnataka amended Notification No. 12/2017 under the Karnataka Goods and Services Tax Act, 2017. The amendments include the introduction of tax exemptions for services related to the FIFA U-17 World Cup 2017 and services by Fair Price Shops under the Public Distribution System. Additionally, terminology updates were made for insurance schemes, replacing older names with "Restructured Weather Based Crop Insurance Scheme" and "Pradhan Mantri Fasal Bima Yojana." A clause was also added to include Limited Liability Partnerships as recognized partnership firms. These changes were enacted in the public interest following recommendations from the Council.
8.
20/2017 - dated
22-8-2017
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Karnataka SGST
Amendments in the Notification No. (11/2017) dated the 29th June, 2017
Summary: The Government of Karnataka has amended Notification No. (11/2017) under the Karnataka Goods and Services Tax Act, 2017. Key changes include revisions to composite supply of works contracts, covering services like construction and maintenance of infrastructure such as historical monuments, roads, and housing projects. Amendments also address transportation services, goods transport agency services, and printing services. Specific tax rates and conditions for input tax credits are outlined for these services. Additionally, modifications are made to services related to textiles and manufacturing. These changes are intended to streamline and clarify tax obligations under the Karnataka SGST framework.
9.
01-F/2017 - dated
22-8-2017
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Karnataka SGST
Extension of time limit for filing of GSTR3B.
Summary: The Commissioner of Commercial Taxes in Karnataka has issued a notification extending the deadline for filing the GSTR-3B form under the Karnataka Goods and Services Tax Rules, 2017. The original deadline of August 20, 2017, has been extended to August 25, 2017, for various entries in the notification. Additionally, the deadline for certain items originally set for August 21, 2017, is now extended to August 26, 2017. This extension applies to the electronic credit ledger as well. The notification takes effect from August 22, 2017.
10.
FA-3-57/2017-1-V-(100) - dated
7-9-2017
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Madhya Pradesh SGST
The Madhya Pradesh Goods and Services Tax (Amendment) Rules, 2017
Summary: The Madhya Pradesh Goods and Services Tax (Amendment) Rules, 2017, effective from July 1, 2017, introduce amendments to the state's GST rules. Key changes include modifications to rules regarding stock reporting, authority constitution, and e-way bill procedures. The amendments align several state rules with the Central Goods and Services Tax Rules, 2017. They establish guidelines for the appointment and service conditions of GST authorities, detail the e-way bill requirements for goods transportation, and specify exemptions for certain goods and scenarios. The amendments also introduce provisions for document verification, inspection, and reporting of detained vehicles.
Circulars / Instructions / Orders
Central Excise
1.
F.No. V/598/01/2017/8698 - dated
7-9-2017
Advisory for following the prescribed provisions of law and Board's Instructions in the matter of collection of Duty - reg.
Summary: The circular from the Directorate General of Vigilance, CBEC, advises officers to adhere strictly to legal provisions and Board instructions regarding duty collection. It follows a case where a manufacturer in Delhi failed to pay the required Central Excise duty and later filed a writ petition to prevent cheque encashment. The Delhi High Court directed an examination of potential offenses under the Prevention of Corruption Act and suggested regulatory improvements. Consequently, the Central Vigilance Commission advised CBEC to ensure compliance with established procedures to prevent deviations in duty collection practices.
Highlights / Catch Notes
GST
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Court Halts Coercive Recovery of Credit on Imported Dore Bars Pending Hearing u/r 44A Notification Dispute.
Case-Laws - HC : Credit of duty paid on import of old dore bar - Validity of Notification dated 17th August 2017 - Rule 44A in the Central Goods and Services Rules, 2017 - till the next date of hearing, no coercive steps shall be taken by the Respondents to recover the credit already availed by the Petitioners. - HC
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Petitioner cannot delay GST implementation from July 1, 2017; tax levy and collection are legally sanctioned.
Case-Laws - HC : Petitioner cannot urge and/or seek directions to the respondents to postpone the decision to implement GST with effect from 1.7.2017, for simple reason that herein levy and collection of taxes on goods and services has sanction of law. - HC
Income Tax
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Court Rules TDS Must Be Deducted u/s 195 for Property Purchases from Non-Residents via Intermediaries.
Case-Laws - AT : TDS u/s 195 - Interest u/s 201(1A) - Purchase of property from non-resident - On behalf of NRI, the Payment made to GPA Holder / bank - Payments made to both the parties constitutes the payments made to the non-resident and the TDS is deductible as per the provisions of section 195
Customs
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Customs Duty on Raw Sugar Imports Halved to 25% for Up to 3 Lakh Metric Tons with DGFT Certificate.
Notifications : BCD reduced on import of on raw sugar[1701] upto a quantity of 3 lakh MT from 50% to 25% subject to the Tariff Rate Quota Allocation Certificate or license issued by DGFT - See Sr. no. 88A with conditions no. 7 and 9 of the amended notification
Central Excise
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Potato Flakes Classified Under Tariff Item No. 11052000 Due to Flaking Process, Not Aloo Mash Formation.
Case-Laws - AT : Classification of goods - Potato flakes or Aloo Mash - whether classified under CTH 11052000 or under CTH 20052000? - the subject goods have been admittedly subjected to the process of flaking and there is no process carried out to form a mash of potatoes in the factory of the appellant - the subject goods are classifiable under Tariff Item No. 11052000
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Natural Gas Compression for Transport Not Manufacturing; Central Excise Rules Confirm No Product Transformation Occurs.
Case-Laws - AT : Manufacture - even though the Natural Gas is transported to the customers premises in compressed form, such process of compression has been done for the purposes of transportation only. Such process cannot be considered as a process of manufacture, since the goods are sold not as CNG but as Natural Gas
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