A division bench of the Kolkata ITAT, on Wednesday held that any income accrues on compulsory acquisition of agricultural land it is to be regarded as agricultural income and not chargeable to tax under the head ‘capital gain’ under the provisions of the Income Tax Act, 1961.
Assessee was engaged in tea plantation. The land used by him for the purpose of cultivation was compulsorily acquired by the Government under the Land Acquisition Act. The department was of the view that as per section 2(47) (iii) of the Income Tax Act, compulsory acquisition of a capital asset is also regarded as transfer of a capital asset capital gain that accrues or arises out of compulsory acquisition is chargeable to tax under the head “capital gain”.
In reply, the assessee contended that the land in question was an agricultural land which was used for agricultural purpose and therefore not a capital asset within the meaning of section 2(14) of the Act. further, the compensation received on compulsory acquisition will be in the nature of agricultural income within the meaning of section 10(1) of the Act and was therefore not liable to tax.
The bench noticed the decision in CIT vs All India Tea and Trading Co. Ltd. wherein the Supreme Court observed that the agricultural land which was being used for agricultural purpose even after its being acquired, the amount of compensation paid on its acquisition was not chargeable under the head ‘capital gains’ as the said land was not a capital asset. The Court further observed that “It is clear, therefore, that at no point of time or at least till its acquisition the land lost its character of agricultural land.”
The bench noted that up to the date of acquisition of the land, it was used by the assessee for the purpose of agriculture. “It is also not disputed that the other condition for regarding the property of the assessee that was acquired by the Government as agricultural land within the meaning of Sec.2(14)(iii) of the Act is satisfied. As we have already noticed, the definition of a capital asset u/s 2(14) of the Act does not include agricultural land. Therefore if any income accrues on compulsory acquisition of agricultural land it is to be regarded as agricultural income and not chargeable to tax under the Act under the head ‘capital gain’.”
Read the full text of the Order below.
The Institute of Chartered Accounts in India (ICAI) has advised the members to avoid peak filing of Balance Sheet & Annual Return under the Companies Act.
In an announcement made by the Secretary in the Official website, stated that “in order to avoid last minute rush and system congestion on the MCA 21 portal on account of annual filings during October / November 2017, we are quite sure that you might have already taken steps in advising corporates to file balance sheet and annual return of the companies early without postponing it to the last few days permitted for the same.”
It also informed that during this period the Corporate Seva Kendra / help desks (ph. no. 0124-4832500) would give priority to e-filing/ answering queries of companies for filing balance sheet and annual return. In this regard, the Ministry of Corporate Affairs, Government of India, has issued a Notice which is available on their website (www.mca.gov.in) in Important Notices in Home Page.
The Competition Commission of India has imposed Penalty on 10 Coal and Sand Transportation Companies for Anti-Competitive Conduct.
The Informant, Western Coalfields Limited, had approached Competition Commission of India (Commission) alleging bid-rigging by SSV Coal Carriers Private Limited, M/s Bimal Kumar Khandelwal, M/s Pravin Transport, M/s Khandelwal Transport, M/s Khandelwal Earth Movers, M/s Khanduja Coal Transport Co., M/s Punya Coal Road Lines, M/s B. Himmatlal Agrawal, M/s Punjab Transport Co. and Avaneesh Logistics Private Limited, upon noticing identical price quotes given by them in four tenders floated for coal and sand transportation. It was alleged that the conduct of submitting identical bids at higher rates is a blatant act of bid rigging.
The case was investigated by the Director General, Competition Commission of India(CCI) who found these parties in violation of Section 3(3)(d) of the Act. The Commission after hearing the parties concluded that they were in agreement to fix prices resulting in bid-rigging in the tenders floated by the Informant. In its order, the Commission noted that such conduct in public procurement besides defeating the tendering process, has an adverse impact on the process of competition resulting in deprivation of efficient outcomes that would have followed otherwise.
The Commission has held the said parties to be in contravention of the provisions of Section 3(3)(d) of the Act. Further, the Commission has also found eight officials of the said parties to be liable in terms of Section 48 of the Act being responsible for running the business or for being a part of the impugned conduct.
Resultantly, the Commission passed the following orders:
Apex industry body ASSOCHAM has written to the government, seeking a slew of tax reliefs, including exemption from tax on any hair cut taken by the banks in the form of a waiver of interest accrued, for the debt -ridden companies which are sought to be revived under the Insolvency and Bankruptcy Code (IBC) .
“Where any outstanding liability, inclusive of any accrued interest is waived in accordance with the approved Resolution Plan, such waiver / write-back should not be subject to tax under both normal and Minimum Alternate Tax (MAT) provisions of the Income-tax Act, 1961,” the ASSOCHAM said in its letters to the Secretaries in the Department of Financial Services, Corporate Affairs Ministry and the Central Board of Direct Taxes (CBDT).
The chamber has also sought exemption from Section 50CA of the Income Act for the companies which are being revived under the IBC. This Section provides that the computation of capital gains would be done on the basis of fair value of the shares of the company even if these are transferred under the IBC package below the fair value.
Likewise, no minimum alternate tax (MAT) was payable by a sick industrial company on its book profits from the year in which it became sick in accordance with the provisions of Sick Industrial Companies (Special Provisions) Act, 1985. “ It is recommended that similar reliefs should be extended to the Corporate Debtor whereby its book profits, after the approved Resolution Plan is effected”.
The ASSOCHAM has also sought exemption from the GAAR (General Anti Avoidance Rules) for all the parties in the revival plan if it has been approved by the National Company Law Tribunal (NCLT).
“The resolution plans approved after factoring in these reliefs/concessions will result in quick revival of assets, freeing up liquidity for banks for further lending, increased economic activity, job creation, increased contribution to the exchequer and will have multiplier effect on the associated economy,” the chamber said in its letter to different wings of the government.
Besides, the re-rating of assets post approved Resolution Plan will improve balance sheets of the banks thereby lowering capital infusion requirement from the Government. Further, a quick and timely resolution to the stressed assets with positive outcome implemented in a transparent manner will improve India’s “Doing Business” ranking thereby ensuring participation from global players and resultant capital inflows, ASSOCHAM Secretary General Mr D S Rawat said.
A division bench of the Delhi High Court, in JCB India Ltd v. DCIT, held that the Assessing Officer cannot pass a Final Assessment Order after the Remand Proceedings without Draft Order under section 144C of the Income Tax Act, 1961.
The petitioner-assessee is a Subsidiary Company of a UK based Company. The petitioner’s income tax return for the relevant assessment year was rejected by the Assessing Officer. Since there were international transactions involving the Petitioner-Assessee and its Associated Enterprise, the Officer referred the matter to the TPO and passed a final assessment order under Section 143 (3) read with Section 144C of the Act wherein certain additions were made.
The petitioners challenged the order before the appellate authorities. On second appeal, the ITAT remanded the matter back to the files of the Dispute Resolution Panel. Subsequently, the Assessing Officer passed a final order without passing a draft order.
Aggrieved by the order, the assessee approached the High Court through a writ petition contending that AO ought to have passed a draft assessment order after receipt of the report from the TPO.
The department contended that the failure to pass a draft assessment order under Section 144C of the Act is a curable defect and the Court should now delegate the parties to a stage as it was when the TPO issued a fresh order after the remand by the ITAT.
The bench noticed the decision in Turner International, wherein the Court held that the failure by the AO to adhere to the mandatory requirement of Section 144C (1) of the Act and first pass a draft assessment order would result in invalidation of the final assessment order and the consequent demand notices and penalty proceedings.
Based on the above view, the bench invalidated the impugned order with a specific direction to pass a draft assessment order and thereafter, subject to the objections filed before the DRP and the orders of the DRP, to pass the final assessment order.
Read the full text of the Order below.
Taking forward the initiative launched by the Government of India to curb the menace of shell companies, money laundering and black money in the country and prevent misuse of corporate structure by shell companies for various illegal purposes, the Ministry of Corporate Affairs and Central Board of Direct Taxes (CBDT) have now concluded a formal Memorandum of Understanding (MoU) for data exchange, on 6th September, 2017.
The MoU will facilitate the sharing of data and information between CBDT and MCA on an automatic and regular basis. It will enable sharing of specific information such as Permanent Account Number (PAN) data in respect of corporates, Income Tax returns (ITRs) of corporates, financial statements filed with the Registrar by corporates, returns of allotment of shares, audit reports and statements of financial transactions (SFT) received from banks relating to corporates.
The MoU will ensure that both MCA and CBDT have seamless PAN-CIN (Corporate Identity Number) and PAN-DIN (Director Identity Number) linkage for regulatory purposes. The information shared will pertain to both Indian corporates as well as foreign corporates operating in India. In addition to regular exchange of data, CBDT and MCA will also exchange with each other, on request, any information available in their respective databases, for the purpose of carrying out scrutiny, inspection, investigation and prosecution.
The MoU comes into force from the date it was signed and is an ongoing initiative of MCA and CBDT, which are already collaborating for near real time allotment of PAN and TAN also at the time of Incorporation of companies itself. A Data Exchange Steering Group also has been constituted for the initiative, which will meet periodically to review the data exchange status and take steps to further improve the effectiveness of the two agencies.
Indirect Taxes Committee of the Institute of Chartered Accountants of India (ICAI) has issued Frequently Asked Questions (FAQs) on the new Goods and Services Tax (GST) regime.
The document provides a comprehensive coverage of GST in easy to understand question answer format and written in lucid language which would facilitate the reader to easily comprehend the emerging law.
It has been prepared under the guidance of CA. Madhukar N. Hiregange, Chairman, CA. Sushil Kumar Goyal, Vice-Chairman and other members of the Indirect Taxes Committee of the Institute.
The FAQs cover all the important topics such as Levy and Collection of Tax, Time and Value of Supply, Input Tax Credit, Registration, Tax Invoice, Credit and Debit Notes, Accounts and Records, Returns, Payment of Tax, Refunds, Assessment, Audit, E-way Bill etc.
Read the full text of the FAQs below.
The Ministry of Corporate Affairs (MCA) has approved a request of the Malaysian Association of Company Secretaries (MACS) for adoption of the Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) as the benchmark in the development of Secretarial Standards of MACS.
The Secretarial Standards on Meetings of the Board of Directors and Secretarial Standard on General Meetings were approved by the Ministry of Corporate Affairs, Government of India under sub-section 10 of Section 118 of the Companies Act, 2013 and are in place with effect from 1st July, 2015.
It is a matter of prestige that Indian Standards are to be adopted/benchmarked by a foreign sister institution in the course of formulation of their own similar standards.
In a Significant ruling, the division bench of Gujarat High Court held upheld the Constitutional Validity of Section 52 of the Gujarat Value Added Tax Act, 2003.
In the Writ Petition, the Petitioner, Indus Tower Limited has challenged show cause notices and Section 52 of the Gujarat Value Added Tax Act, 2003 as ultra vires to the Constitution of India.
From the impugned show cause notices, the department has sought to levy of Value Added Tax under the Gujarat VAT Act on the consideration received by the Merging Entities/Transferor Companies with respect to the transactions undertaken under the Indefeasible Right to Use Agreements with the Transferee Company.It appears that the Emerging Entities/Transferor Company had, by way of an indefeasible right to use agreement provided to the petitioner-transferee company, an indefeasible right to use the Passive Infrastructure in lieu of consideration. The said transaction had taken place by virtue of Scheme of Arrangement sanctioned by the respective High Court, but after 1st April 2009.
The division bench comprising of Justice M.R Shah and Justice B.N Karia held that Section 52 of the Gujarat Value Added Tax Act cannot be said to be beyond legislative competence, and therefore, the same cannot be said to be ultra vires to Articles 246 & 252 of the Constitution of India.
The division bench also held that, it cannot be said that the notices issued upon the Merging companies with respect to tax event/taxing liability accrued or arisen between 1st April 2009 to 18th April 2013 can be said to be illegal and/or contrary to the provision of the GVAT Act.
“The amalgamation of the transferor companies with the transferee company, the liability to pay tax under the GVAT Act upon the transferor companies would not cease. At this stage, it is required to be noted that the incidence of payment of rent by the Transferee company to the Transferor companies during the period from 1st April 2009 to 18th April 2013 was nothing, but a “taxable event” within the meaning of Section 7 of the GVAT Act, read with Section 30 of the said Act, followed by the requirement of filing the monthly return, as per Section 29 of the GVAT Act read with Rule 19 of the GVAT Rules, 2006, which event had already occurred and completed prior to passing of the sanction order dated 18th April 2013 of amalgamation”, the bench said.
The division bench also held that, “Section 52 of the GVAT Act is within the State legislative competence under Entry 52 of List II of Seventh Schedule and the same cannot be said to be encroaching upon the powers of the Union legislation. Therefore, challenge to the constitutional validity of Sections 2 [23] (d) and 52 of the to the GVAT Act fails”.
While refusing to quash the impugned notices, the bench also added that, In view of the above and for the reasons aforestated, the show cause notices dated 4th February 2016 issued by the respondent no. 2 herein to the transferor companies, but served upon the petitioner Transferee Company also cannot be said to be illegal.
Read the full text of the Judgment below.
The Central Government has formed a four-member standing committee, comprising tax officials of the Centre and states to receive complaints of undue profiteering by any entity under the newly implemented GST regime.
The Standing Committee comprising CBEC officials Himanshu Gupta, Principal Commissioner, GST Delhi and O P Dadhich Principal, Commissioner Customs (Preventive) Delhi, as also H Rajesh Prasad Commissioner (Sales Tax), Delhi, and Ashima Brar Excise and Taxation Commissioner, Haryana, are members of the committee, according to an official order.
The Committee will act as a complaint processing machinery and will refer any cases it finds fit for investigation to the Directorate General of Safeguards (DGS).
The setting up of the panel, with two officials of the Central Board of Excise and Customs and one each from Delhi and Haryana tax department, sets in motion the anti- profiteering clause under the Goods and Services Tax (GST).
The anti-profiteering mechanism was proposed to enable the benefit of lower taxation in the GST with the subsuming of over a dozen central and state taxes like excise duty, Service Tax and VAT and end to tax-on-tax, is passed on to consumers.
Businesses or entities not passing on the benefit can be referred to the committee.
The detailed procedure for approaching the committees will be announced soon, officials said.
Anti-profiteering authority is a mechanism to examine whether the benefits of implementation of GST such as tax reduction or input tax credits availed by any registered person have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him, this is to ensure that the consumer is protected from arbitrary price increase in the name of GST.
In a major relief to Verizon India, Justices S Muralidhar and Prathiba M Singh allowed cenvat credit to the Company by holding that the connectivity services rendered by them under a Master Supply Agreement to a foreign entity constitute ‘Export of Service’ under the relevant Service Tax Rules.
While accepting the contentions of the assessee, the bench observed that the provision of telecommunication services by Verizon India during the period January 2011 till 1st July 2012 must be considered as ‘export of service’ since the payment for the service was received by Verizon India in convertible foreign exchange and the recipient of the service was Verizon US which was located outside India.
The question before the Court was that whether the services provided by Verizon India under a Master Supply Agreement it has with MCI International Inc. for rendering connectivity services for the purpose of data transfer, constitutes export of telecommunication services under the Finance Act, 1994 read with the relevant rules thereunder?
Petitioners obtained the National Long Distance (‘NLD’) and International Long Distance (‘ILD’) licences from the Government of India in order to provide connectivity services for the purpose of data transfer. The Service Tax department was of the view that the services rendered by the petitioners amounts to telecommunication services on which service tax is leviable.
The petitioners contended that it does not provide voice/telephony services but only data transfer service. In order to provide wireless voice telephony services, separate licence and spectrum is required. They claimed that they merely provide ‘business support services’ to Verizon US. It further contended that even if the services rendered by it are considered to be telecommunication services, the criteria for determining if there is an export of services under the Export of Service Rules 2005 (ESR) is the same.
The petitioners’ claim for cenvat credit was rejected by the department by stating that the services provided by Verizon India do not qualify as ‘export of services’ as they are provided within India. According to the department, telecommunication services rendered by Verizon India during the period April 2011 to September 2014 do not qualify as ‘export of services’.
The bench also observed that Verizon India may have utilised the services of Indian telecom service providers in order to fulfill its obligations under the Master Supply Agreement with Verizon US made no difference to the fact that the recipient of service was Verizon US and the place of provision of service was outside India.
Directing the department to allow refund to the assesses, the bench said that the subscribers to the services of Verizon US may be ‘users’ of the services provided by Verizon India but under the Master Supply Agreement it was Verizon US that was the ‘recipient’ of such service and it was Verizon US that paid for such service. Also, Verizon India and Verizon US were ‘related parties’ was not a valid ground, in terms of the ESR or the Rule 6A of the ST Rules.
“The Circular dated 3rd January 2007 of the CBEC had no application to the case on hand. It did not pertain to provision of electronic data transfer service. It was wrongly applied by the Department. With its total repeal by the subsequent Circular dated 23rd August 2007, there was no question of it applying to deny the refund for the period January 2011 till September 2014,” the bench added.
Even for the period after 1st July 2012 the provision of telecommunication service by Verizon India to Verizon US satisfied the conditions under Rule 6A (1) (a), (b), (d) and (e) of the ST Rules and was therefore an ‘export of service’. The amount received for the export of service was not amenable to service tax.
Read the full text of the Judgment below.
The Central Board of Direct Taxes (CBDT), today directed that on the death of the deposit holder of Capital Gain Account Scheme, the Banks shall deduct TDS on Interest in the name of Legal Heirs.
The Board, slammed the current practice of issuing TDS certificate in the name of the deceased depositor as illegal.
“Ideally, in such type of situations, the TDS certificate on the interest income for and up to the period of death of the depositor is required to be issued on the PAN of the deceased depositor and for the period after the death of the depositor is required to be issued on the PAN of the legal heir,” the Board said.
The Board also mandates submission of declaration under sub-Rule 2 of rule 37BA of the Income Tax Rules to this effect.
Read the full text of the Notification below.
Union Minister for Consumer Affairs, Food & Public Distribution Ram Vilas Paswan told that in order to check the levying of Service Charge compulsorily, CBDT has been asked to consider inclusion of Service Charge while assessing tax. Similarly, directions have been issued to the officers of Legal Metrology of all States to monitor the cases of charging more than MRP.
In order to stop levying Service Charge compulsorily from consumers without their consent, guidelines were issued on 21st April 2017. A number of renowned hotels/restaurants have made Service Charge optional under the Guidelines. But still the complaints are being received through National Consumer Helpline about levying 5% to 20% Service Charge compulsorily by some hotels and restaurants. Some media reports have also been published in this regard.
To stop this unfair practice, hotels and restaurants have been asked either to leave the column of Service Charge blank or mention on the Bill that it is optional. It means that the consumer can pay the Service Charge if he or she wants.
In this regard State Governments were asked to issue directions to hotels and restaurants to display the message at an appropriate place that Service Charge is completely optional and if the consumer is not satisfied with the services of that hotel or restaurant, he or she is free not to pay Service Charge.
Similarly, guidelines have been issued in April 2017 against levy of Service Charge compulsorily and consider it as an unfair trade. In addition to it, all the States have been asked to implement these guidelines strictly and sensitize the consumers about the same through publicity. These guidelines were sent to Federation of Hotel and Restaurant Association of India (FHRAI), National Restaurant Association of India (NRAI) and Hotel Association of India (HAI) also.
Advertisements have also been released under ‘Jago Grahak Jago’ conveying the message among consumers that Service Charge is not mandatory but a tip which is fully a discretion of the consumer. Hotels or restaurants cannot compel the consumer to pay Service Charge. Similarly, Voluntary Consumer Organizations have also been asked to increase awareness and pick up some cases for exemplary remedial action.
Present Government brought the policy of financial inclusion to the centre stage; About 30 crore accounts opened under PMJDY; No of dormant accounts come to less than 20%, says Finance Minister.
Demonetisation helped in reducing the volume of cash transactions and increase in digital payments, widening of the tax base and more formalization of the economy among others; No reverse in financial inclusion process possible for policy makers, aslo says Jaitley.
The Union Finance Minister Arun Jaitley said that the present Government brought the policy of financial inclusion to the centre stage and launched the Pradhan Mantri Jan Dhan Yojana (PMJDY) Scheme on a massive scale in August 2014. He said that the Government has tried to exploit the full potential of financial inclusion with the help of banks. The Finance Minister, Jaitley further said that this is one area where Public Sector Banks(PSBs) did better than others. The Finance Minister was delivering the Key Note Address at the Conclave on Finance Inclusion organized by United Nations (UN) in India in the national capital today.
Speaking further on the occasion, the Finance Minister Arun Jaitley said when the PMJDY was launched in August 2014, only 58% people had their bank accounts and 42% were outside the banking network. The Finance Minister, Shri Jaitley said that now the number of total bank accounts opened under PMJDY is more than 30 crore. He said that the number of zero balance accounts under PMJDY has declined from 76.81% in September 2014 to less than 20% as of now. Jaitley said besides it, more than 22 crore RuPay cards have also been issued to the account holders alongwith an overdraft facility of Rs. 5000/-.
The Finance Minister Arun Jaitley said that in addition to Financial Inclusion, the present Government has taken steps to provide security to the poor via life insurance under the Pradhan Mantra Jeevan Jyoti Bima Yojana (PMJJBY) and accident insurance through Pradhan Mantra Suraksha Bima Yojana (PMSBY). As on 7th August, 2017, total enrollment was 3.46 crore under the PMJJBY and 10.96 crore under PMSBY. In both schemes, close to 40 percent of the enrollees are women, the Minister added.
Speaking on the results of demonetization, the Finance Minister Shri Arun Jaitley said that it has helped in reducing the volume of cash transactions and increase in digitisation, widening of the tax base and more formalization of the economy among others. He said that post demonetization, there is emphasis to reduce overall quantum of cash in the economy.
As regards Aadhar, the Finance Minister Arun Jaitley said that it has been an important leap forward for the country as now we are beginning to understand its full potential. He said that 92% of our people have Aadhar cards. Shri Jaitley further said that he is sure that Aadhar Legislation will stand the test of constitutionality. He said that Aadhar has helped in targeting the subsidies which, in turn, helped in avoiding wastage of resources. He said after implementation of Aadhar system, such Government support/subsidy is confined to the vulnerable and those who are entitled for the same. The Finance Minister said that since this financial assistance goes directly into the bank accounts of the deserving people, it has, in turn, helped in more operationalization of PMJDY bank accounts and thereby reducing drastically the number of dormant/non-operational accounts.
Concluding his Key Note Address, the Finance Minister Jaitley said that the present Government has succeeded in the last three years in bringing financial inclusion on the centre stage of its political and economic agenda and in times to come, the policy makers will have to follow this direction only and will not be able to reverse this trend.
The Central Board of Excise and Customs (CBEC) issued a concept note on the applicability of Goods and Services Tax (GST) on non-resident tax payers.
Generally, the term “Non-resident taxable person” means any person who occasionally undertakes transactions involving supply of goods or services or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India.
A non-resident taxable person making taxable supply in India has to compulsorily take registration without threshold limit.
A non-resident taxable person cannot exercise the option to pay tax under composition levy. He has to apply for registration at least five days prior to commencing his business in India using a valid passport. They need not have a PAN number in India.
A business entity incorporated or established outside India, has to submit the application for registration along with its tax identification number or unique number on the basis of which the entity is identified by the Government of that country or its Permanent Account Number, if available. A non-resident taxable person has to make an advance deposit of tax in an amount equivalent to his estimated tax liability for the period for which the registration is sought.
Such persons are not required to apply in normal application for registration being filed by other taxpayers. A simplified form GST REG-09 is required to be filled. A non-resident taxable person has to electronically submit an application, along with a self-attested copy of his valid passport, for registration, duly signed or verified through EVC, in FORM GST REG-09, at least five days prior to the commencement of business at the Common Portal either directly or through a Facilitation Centre notified by the Commissioner.
In case the non-resident taxable person is a business entity incorporated or established outside India, the application for registration shall be submitted along with its tax identification number or unique number on the basis of which the entity is identified by the Government of that country or its PAN, if available.
Such persons cannot avail input tax credit in respect of goods or services or both received by him except on import of goods. The taxes paid by a non-resident taxable person shall be available as credit to the respective recipients.
Read the full text of the Concept note below.
In a Concept note issued recently, the Central Board of Excise and Customs (CBEC) has clarified all the ambiguities relating to Composite Supply and Mixed Supply under GST Regime.
Under GST, a composite supply would mean a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
In respect of composite supplies, need to determine the supply as a composite one, will arise, so as to determine the appropriate classification. It will be necessary to determine as to whether a particular supply is naturally bundled in the ordinary course of business and what constitutes principal supply in such composite supplies.
The concept of composite supply under GST is identical to the concept of naturally bundled services prevailing in the existing service tax regime.
No straight jacket formula can be laid down to determine whether a service is naturally bundled in the ordinary course of business. Each case has to be individually examined in the backdrop of several factors some of which are outlined above, said the Concept note.
Under GST, a mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.
In order to identify if the particular supply is a mixed supply, the first requisite is to rule out that the supply is a composite supply. A supply can be a mixed supply only if it is not a composite supply. As a corollary it can be said that if the transaction consists of supplies not naturally bundled in the ordinary course of business then it would be a mixed supply. Once the amenability of the transaction as a composite supply is ruledout, it would be a mixed supply, classified in terms of supply of goods or services attracting highest rate of tax.
Determination of Tax liability of Composite and Mixed supplies
The tax liability on a composite or a mixed supply shall be determined in the following manner:
(a) A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply
(b) A mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax
The Concept note also clarified that, If the composite supply involves supply of services as principal supply, such composite supply would qualify as supply of services and accordingly the provisions relating to time of supply of services would be applicable. Alternatively, if composite supply involves supply of goods as principal supply, such composite supply would qualify as supply of goods and accordingly, the provisions relating to time of supply of goods would be applicable.
The mixed supply, involving supply of a service liable to tax at higher rates than any other constituent supplies, would qualify as supply of services and accordingly the provisions relating to time of supply of services would be applicable. Alternatively, the mixed supply, involving supply of goods liable to tax at higher rates than any other constituent supplies, would qualify as supply of goods and accordingly the provisions relating to time of supply of services would be applicable.
Read the full text of the Concept Note below.
The Calcutta High Court, while upholding a decision of the Settlement Commission, held that off-shore sale of equipments and spares by a non-resident entity to Indian purchasers are not subject to Income Tax under the provisions of the Income Tax Act, 1961.
A non-resident sold the plant to the Indian purchaser aboard and that, the sale being concluded abroad on Cost, Insurance and Freight (CIF) basis Income Tax cannot be charged on such proceeds.
On behalf of the department, it was contended that the contract does not conclusively establish that, the title to the plant stood transferred abroad. On the contrary, since the plants are to be installed in India, the sale stands concluded on Indian territory and, therefore, the income derived therefrom is amenable to Income Tax under the Income Tax Act, 1961.
However, the Settlement Commission accepted the view of the Company. Aggrieved by the order, the department approached the High Court contending that the sale of the plant did take place in India in view of the various terms and conditions of the contract.
Justice Debangsu Basak upheld the order of the settlement commission that if the intentions of the parties, as garnered from the terms and conditions of the contract in question, justifies an interference that, the sale of the goods took place offshore then the Non-India Entities to the contract are not amenable to taxation in India. So far as the supervisory contracts are concerned, the Settlement Commission is of the view that, the same is taxable and has determined the tax liability.
“The private respondents have accepted the same. Provisions in the contract allowing deferred payment to be made in India, by itself may not allow an inference that, the title to the goods stand transferred only upon such payment being made.”
Read the full text of the Judgment below.
A division bench of the Delhi High Court, on Tuesday, referred the matters relating to imposition of sales tax on the sale of unserviceable aircraft and unserviceable stores, scrap and spare parts by Air India.
A bench of Justice S Muralidhar and Justice Prathiba M Singh was hearing a bunch of litigations wherein the levy of sales tax on the above was challenged.
The Petitioners contended before the High Court that they are not ‘dealer’ under the Delhi sales Tax Act. Further, the business for which the Petitioner is registered is not in any manner connected with the sale of old aircraft and scrap. It contended that its main activity is of running the aircraft and providing services of carriage of passengers and goods, which does not constitute sale of goods in Delhi. Hence it was not amenable to sales tax. According to them, the sales of spare parts etc. and scrap, which was incidental and ancillary to its main activity, would also therefore not be amenable to sales tax. Moreover, the predominant activity in terms of the test as laid down in the DTC (supra), being civil aviation, the sale of scrap and old aircraft is only ancillary thereto and not amenable to sales tax. The predominant activity being non amenable to sales tax the sale of scrap and spare parts is also not amenable to sales tax.
Rejecting the above contentions, the appellate Tribunal concluded the matter in favour of the Revenue. The Tribunal, further refused to apply the decision in DTC to the present case and also held that the said transactions of sales are incidental and ancillary to or in connection with the Petitioner’s ‘business’ as an airline as established in the decisions in DTC and AP Road Transport Corporation.
While referring the matter to the full bench, the Court observed that the decision in DTC is in the context of road transport. It was related to the context of the DTC being a statutory corporation.
“Here we are clearly with a company, which has ceased to be a statutory corporation. The activity of operating aircrafts to carry passengers and cargo is no doubt a commercial activity but it is not the ‘business’ for which the petitioner is registered as a dealer under the DST Act. However, the sale of scrap is not merely occasional but a regular and routine activity which will continue so long as the Petitioner continues to provide air transportation services. The important question thus, is whether the ‘dominant activity’ test would be a relevant criteria for determining whether under Section 2 (c) (ii) the sale of scrap constitutes ‘business’? This question does not appear to have arisen in the context of air transport earlier. It appears to the Court that the decision in DTC (supra) will need to be reconsidered.”
In the light of the above discussion, the bench referred the matter for the consideration of the Full Bench of this Court.
Read the full text of the Order below.
The Central Board of Excise and Customs (CBEC), on Wednesday notified the increased rate of cess on Motor Vehicles.
Earlier, the 21st meeting of the GST Council on September 9th had decided to hike cess on mid-sized cars by 2 percent, taking the effective GST rate to 45 percent. Also, cess on large cars has been hiked by 5 per cent, taking the total GST incidence to 48 percent while that of SUVs by 7 percent to 50 percent.
After the GST Council meet on September 9, Finance Minister Arun Jaitley had said that in large vehicles where affordability of consumers is high, the cess has been increased. “The pre-GST rate has not been restored… Even though we had a headspace of hiking cess by 10 per cent, it has been hiked by up to 7 per cent,” Jaitley had said.
Cess on small petrol and diesel cars, hybrid cars and those carrying up to 13 passengers has not been hiked. Post rollout of GST, Car prices had dropped by up to Rs 3 lakh which were lower than the combined central and state taxes in pre-GST days. The Council raised the cess in order to fix this anomaly Under the GST regime, cars attract the highest tax slab of 28 percent and on top of that, a cess is levied. An ordinance was promulgated last week to hike the cess from 15 percent to up to 25 per cent.
Read the full text of the Notification below.
In a concept note issued yesterday, the Directorate General of Taxpayer Services, Central Board of Excise and Customs (CBEC) has clarified the position of levy of Service Tax on Goods Transport Agency under Goods and Services Tax (GST) Act.
The legal position prevailing under Service Tax is being continued under the GST regime. The services of transportation of goods by road (except services of GTA) continue to be exempt even under the GST regime. In so far as the services of GTA is concerned, if the services (of Goods Transportation) are provided (by the GTA) to specified classes of persons, the tax liability falls on such recipients under the reverse charge mechanism.
Under GST laws, the definition of Goods Transport Agency is provided in clause (ze) of notification no.12/2017-Central Tax (Rate) dated 28.06.2017. (ze) “goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called; Thus, it can be seen that issuance of a consignment note is the sine-qua-non for a supplier of service to be considered as a Goods Transport Agency. If such a consignment note is not issued by the transporter, the service provider will not come within the ambit of goods transport agency. If a consignment note is issued, it indicates that the lien on the goods has been transferred (to the transporter) and the transporter becomes responsible for the goods till its safe delivery to the consignee.
Charge of GST on services provided by GTA
In terms of notification no. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by notification no. 20/2017- Central tax (Rate) dated 22.08.2017 , sr.no. 9 and sr. no. 11, (i) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use) attracts GST @2.5% or 6% CGST. Identical rate would be applicable for SGST also, taking the effective rate to 5% or 12%. However, the rate of 5% is subject to the condition that credit of input tax charged on goods or services used in supplying the service has not been taken.
The Explanation to the notification further clarifies that it shall mean that,- (a) credit of input tax charged on goods or services used exclusively in supplying such service has not been taken; and (b) credit of input tax charged on goods or services used partly for supplying such service and partly for effecting other supplies eligible for input tax credits, is reversed as if supply of such service is an exempt supply and attracts provisions of subsection (2) of section 17 of the Central Goods and Services Tax Act, 2017 and the rules made there under.
Person Liable to Pay GST on GTA services
The liability to pay GST devolves on the recipients for supply of services by a goods transport agency (GTA)who has not paid central tax at the rate of 6%, in respect of transportation of goods by road(in terms of notification no. 13/2017-Central Tax (Rate) dated 28.06.2017 (sr.no.1) as amended by notification no. 22/2017-Central Tax (Rate) dated 22.08.2017, if the recipients (located in the taxable territory)belong to the following category:
(a) Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or
(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or
(c) any co-operative society established by or under any law; or
(d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or theUnion Territory Goods and Services Tax Act; or
(e) any body corporate established, by or under any law; or
(f) any partnership firm whether registered or not under any law including association of persons; or
(g) any casual taxable person. Thus in cases where services of GTA are availed by the above categories of persons in the taxable territory the GTA supplier has the option to pay tax (and avail ITC) @12% (6% CGST + 6% SGST);and if the GTA does not avail this option, the liability to pay GST will fall on the recipients. In all other cases where the recipients do not fall in the categories mentioned above, the liability will be on the supplierof GTA services.
The Concept note also clarified that, In terms of notification no.12/2017-Central Tax (Rate) dated 28.06.2017 (sr.no.21), the following services provided by a GTA is exempt from payment of tax: Services provided by a goods transport agency, by way of transport in a goods carriage of:
(a) agricultural produce;
(b) goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed one thousand five hundred rupees;
(c) goods, where consideration charged for transportation of all such goods for a single consignee does not exceed rupees seven hundred and fifty;
(d) milk, salt and food grain including flour, pulses and rice;
(e) organic manure;
(f) newspaper or magazines registered with the Registrar of Newspapers;
(g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or
(h) defence or military equipments.
The Concept note also said that, To qualify as services of GTA, the GTA should be necessarily issuing a consignment note. Only services provided by a GTA are taxable under GST. Services of transportation of goods by a person other than GTA are exempt.
Moreover, in cases where the service of GTA is availed by the specified categories of persons in the taxable territory, the recipients who avail such services are the ones liable to pay GST and not the supplier of services unless the GTA opts for collecting and paying taxes @ 12% (6% CGST + 6% SGST). In all other cases where GTA service is availed by persons other than those specified, the GTA service supplier is the person liable to pay GST. The GTA service supplier is not entitled to take ITC on input services availed by him if tax is being charged @ 5% (2.5% CGST + 2.5% SGST). In case the GTA service supplier hires any means of transport to provide his output service, no GST is payable on such inputs.
In a nutshell, the GST law continues the provisions prevailing under the Service Tax regime. The law recognises that pure transportation of goods services are mostly provided by persons in the unorganised sector and hence has specifically excluded such operators from the tax net. In respect of those who provide agency services in transport, the liability is cast on the recipients in most of the cases or unless option to pay under forward charge has been exercised by the GTA.
Read the full text of the Concept note below.
The Union Cabinet chaired by the Prime Minister Narendra Modi has given its approval for introduction of the Payment of Gratuity (Amendment) Bill, 2017 in the Parliament.
The Amendment will increase the maximum limit of gratuity of employees, in the private sector and in Public Sector Undertakings/ Autonomous Organizations under Government who are not covered under CCS (Pension) Rules, at par with Central Government employees.
Background:
The Payment of Gratuity Act, 1972 applies to establishments employing 10 or more persons. The main purpose for enacting this Act is to provide social security to workmen after retirement, whether retirement is a result of the rules of superannuation, or physical disablement or impairment of vital part of the body. Therefore, the Payment of Gratuity Act, 1972 is an important social security legislation to wage earning population in industries, factories and establishments.
The present upper ceiling on gratuity amount under the Act is Rs. 10 Lakh. The provisions for Central Government employees under Central Civil Services (Pension) Rules, 1972 with regard to gratuity are also similar. Before implementation of 7th Central Pay Commission, the ceiling under CCS (Pension) Rules, 1972 was Rs. 10 Lakh. However, with implementation of 7th Central Pay Commission, in case of Government servants, the ceiling now is Rs. 20 Lakhs effective from 1.1.2016.
Therefore, considering the inflation and wage increase even in case of employees engaged in private sector, the Government is of the view that the entitlement of gratuity should be revised for employees who are covered under the Payment of Gratuity Act, 1972. Accordingly, the Government initiated the process for amendment to Payment of Gratuity Act, 1972.
