The Customs Excise and Services Tax Appellate Tribunal (CESTAT) held that mere use of word ‘principle to principle’ cannot be a basis for the service fee which is taxable under the category of ‘Franchise Service’ as defined under Section 65 (47) of the Finance Act, 1944.
The appellant M/s Easy Bill Ltd. is engaged in providing an efficient and easily assessable payment collection services for the bill issuers for the collection of payments from the customers who wish to settle their bills from the bill issuer over the counter.
On the basis of specific intelligence gathered by the Service Tax Commissionerate, the records of the appellant were checked and it was observed that they have entered into Retail Agent Agreements with various retailers for providing licenses for opening shops in its names i.e. Easy Bill Ltd. And have collected the service fee from them.
It is alleged that the said service fee is taxable under the category of ‘Franchise Service’ as defined under Section 65 (47) of the Finance Act, 1944. Alleging that the appellant has evaded payment of service tax on the amount collected by them that 4 different show-cause notices were issued to the appellant.
The Order was delivered by division bench which includes Technical Member, Bijay Kumar, and Judicial Member, Rachna Gupta on an appeal filed by M/s Easy Bill Limited.
Section 65 (47) of the Finance Act elaborates as follows: “franchise means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with the franchisor whether or not a trademark, service mark, Trade name or logo or any such symbol, as the case may be, is involved”.
‘Franchise Service’ is the right of representation given by one company to another business company against the consideration paid by the later (franchisee) to the former (franchisor) for the same.
In the light of the judgement of High Court in the case of State Vs. Gangana reported as something altogether different from what is called Representational Right. Thus, we are of the view that the objective of the agreement is to merely appoint the agents as different from the franchisee.
The Tribunal opined that mere use of the word ‘principle to principle’ basis cannot be read for the impugned arrangement between the appellant and his agents to be called franchise service.
The Tribunal also states that “Nothing contained in this agreement shall authorize the retail agent to make representations or incur any liability on behalf of the company”.
While allowing the petition court also observed that This particular term of the agreement is absolutely against the intent of what can be called as franchise service.
Subscribe Taxscan Premium to view the JudgmentThe National Bureau for Revenue (NBR) of Bahrain announced guidance on Value-Added Tax treatment in certain areas. Most significant of them included simplified annual value-added tax (VAT for small businesses, updated guidance on the Bahrain VAT treatment of educational supplies and the instructions on the apportionment of input VAT for financial institutions.
Value of Related Party Transactions: NBR has updated the guidance on the computation of market value associated with related party transactions. It is estimated in comparison to the goods or services identical or similar to the ones involved in the transaction, in an open market between the market participants. If this is not possible, the market value of related party transactions can be calculated using the methodologies in the OECD guidelines.
NBR has also affirmed that pre-approval of the calculation method put forward by the taxpayer will not be entertained.
Classification of Business Activities: Taxpayers are instructed to mention the nature of their business based on the United Nations Economic and Social Council’s classifications in order for them to register for VAT purposes. NBR has also provided guidelines for determining the nature of the business.
Apportionment of Input VAT for Financial Institutions: The guidelines regarding the deduction and apportionment for financial instruments have been issued.
The VAT regime of Bahrain uses ‘turnover’ or value of supplies’ method for apportionment. The calculation steps under the method are as follows:
NBR also confirms that the profit or loss of financial institutions from the transactions on a marginal basis should be taken as an ‘absolute value’. This should be included in the computation of the value of supplies for the apportionment calculation.
The VAT on Educational Services Guide:
All goods and services which aids in providing educational services are zero-rated. This will also be applied to online educational courses. The following goods and services are ‘not’ included under this regime:
The VAT on the cost incurred by the educational institutions can be recovered in full (VAT on the cost of exempt goods or services cannot be recovered).
Simplified Annual VAT Returns For Small Businesses: To make the return filing less complex, VAT registered small businesses (with annual supplies less than US$265,000) will only be required to submit a simplified one-time annual VAT filing document. This will soon be implemented.
Alberto Garzon a newly appointed Minister of consumption in the country of Spain has announced that double Value Added Tax (VAT) will be applicable to all the ‘unhealthy food’ or junk food. The prominent reason for introducing such a norm is to prevent the population of Spain to consume more healthy food so as to decrease obesity amongst the Spanish population.
The program demanded very clear-cut labeling which must include all the ingredients used, and the various Spanish food industry is directed to the food made for the consumption of students in schools and patients in hospital is ought to meet the model of quality and proximity standards. Further, Spain VAT the form of ‘Food Traffic Light’ has posted an alert to the Spanish food industry as the standards are specifically given in the ‘Food Traffic Light’.
The relevance of ‘food traffic light’ is that every food label consists of a ‘traffic light’, which is constituted of five colors that work as an indicator to demonstrate the quality of the food purchased by the consumers.
The mechanism of ‘traffic light’ works with the five colors, from a dark green color with a letter ‘A’; light green with a letter ‘B’; yellow with a letter ‘C’; orange with a letter D to the red color with the letter ‘E’. Further, it is based on the global scores wherein from -15 which denotes the healthiest of the food products to +40 which denotes the least healthy products. And on the basis of this global scoring, the product receives a letter with its respective color code i.e. from dark green (A) to dark red (E).
The score of any product is calculated on the basis of the ingredients used such as sugar content, saturated fatty acids, calories, and salt content, based on these elements the food product is marked negatively. However, food containing elements such as fiber, protein, fruits, vegetables, etc. helps to mark the product positively.
In order to promote a healthy environment, the Spanish government increased the VAT up to 10% and for products such as milk, egg, flour, cheese, bread, fruits, vegetables, legumes and grains only 4% of the VAT is applicable. This kind of restriction is far-sighted and will increase the life expectancy of the population of the nation and will decrease the disease rate of the nation which will ultimately lead to the betterment of the future of the nation.
The Gujarat High Court in the matter pertaining to revenue held that commission agents who are introducing potential consumers will be regarded as ‘Service’ therefore the claim of the commission is eligible for deduction under the law of the land.
In the case of Principal Commissioner of Income Tax vs. Vishal Engineering and Galvanisers, the respondent undertook a business wherein the clients were introduced by the commission agents to the assessee company. The contention of the appellant was that the practice of introducing clients must not be covered under the ambit of the word ‘service’. And as a consequence, the respondent undertaking can not claim the deduction in the tax paid.
Wherefore, the prominent issue which the Gujarat High Court addressed was whether introducing a client to the company is covered within the ambit of ‘service’ or not?
The division bench of Gujarat High Court comprised of Hon’ble Mr. Justice J.P. Pardiwala and Hon’ble Mr. Justice Bhargav D. Karia in the order dated January 13, 2020, dismissed the petition filed by the Principal Commissioner of Income Tax on the grounds that the respondent undertaking is engaged in the business where the clients are introduced by the commission agent to the respondent company i.e. the assessee, and this practice or work is done by the commission agents for the Vishal Engineering and Galvanisers (respondent) is covered under the ambit of ‘services’. Therefore, the respondent company is eligible for the deduction which can be claimed under the law of the land.
The significant subject matter of the case revolves around the concept of service as to which actions of the person will be counted under the ambit of Service and the introduction of clients by the commission agents to the company will be considered as service and thus the deduction can be claimed.
Subscribe Taxscan Premium to view the JudgmentThe Central Board of Indirect Taxes and Customs (CBIC) has issued an advisory on Error while uploading Balance Sheet and Profit & Loss Statement while filing GSTR-9C.
The CBIC has said that the Balance sheet and Profit & loss statement/income & Expenditure Statement keywords used in office network firewall/content security filter firewall to deny upload of such files/content as these contain sensitive information.
The CBIC also said that, If this will be used on an open network all such mentioned documents can be uploaded successfully.
GSTR 9 is an annual return to be filed yearly by taxpayers registered under GST. It consists of details regarding the outward and inward supplies made/received during the relevant previous year under different tax heads i.e. CGST, SGST & IGST and HSN codes. It is a consolidation of all the monthly/quarterly returns (GSTR-1, GSTR-2A, GSTR-3B) filed in that year. Though complex, this return helps in extensive reconciliation of data for 100% transparent disclosures.
Due Date for furnishing GST Annual Return and Reconciliation Statement (GSTR-9 / 9A and GSTR-9C) for FY 2017-18 to January 31st, 2020.
The late fees for not filing the GSTR 9 within the due date is Rs 100 per day, per act. That means late fees of Rs 100 under CGST & Rs 100 under SGST will be applicable in case of delay. Thus, the total liability is Rs 200 per day of default. This is subject to a maximum of 0.25% of the taxpayer’s turnover in the relevant state or union territory. However, there is no late fee on IGST yet.
Singapore has issued the Overseas Vendor Registration Regime (OVR) 2020 guide. With effect from 1 January 2020, overseas suppliers with a global turnover exceeding SGD1 million and also the ones that make B2C supplies (supplies made to individuals and businesses that are not registered for GST in Singapore) are required to register under the regime. The regime aims to reduce the discrepancies in GST treatment on the services consumed in Singapore.
Digital Service under OVR:
As per the guidelines from Inland Revenue Authority of Singapore (IRAS) ‘digital services’ are defined as the services supplied over the internet or an electronic network and the nature of which renders their supply essentially automated with minimal or no human intervention, and impossible without the use of information technology.
The scheme includes any digital content that can be downloaded, subscription-based media on the internet, software programs, support services, and data management through electronic means.
The new regime states the imposition of GST on the digital services made by overseas suppliers to non-GST customers in Singapore. Those services that are currently zero-rated are excluded from the regime.
Apart from overseas suppliers, B2C supplies made by overseas electronic marketplace operators and local electronic marketplace operators will also fall under the scheme.
Registration Rules:
Suppliers can determine the customers belonging to Singapore by using proxies such as customer’s bank account details, credit card info, IP address, billing or home address. Overseas suppliers should not charge GST on the digital services provided to GST registered customers who have already given the GST registration numbers.
Overseas suppliers and marketplaces will have to check if they are liable to make the registration and also will need to allocate sufficient resources to the IT system to make it capable to comply with the new regime.
Taking forward the mission of the Government against black money, particularly undisclosed foreign assets, the Income Tax Department conducted searches on 19th January 2020, on a group that has been on their radar for having substantial undisclosed foreign assets. The operation covered 13 premises in NCR.
The group is a leading member of the hospitality industry, running a hotel abroad and a chain of luxury hotels under a prominent brand name, situated at various locations in India.
The search operation has so far resulted in the seizure of unaccounted assets valued at Rs. 24.93 crores (cash of Rs. 71.5 lakh, jewelry worth Rs.23 crore and expensive watches valued at Rs.1.2 crore).
Evidence seized during the search reveals that a large amount of black money was stashed abroad by the group, through the mechanism of Trusts, formed in the early 1990s in tax havens.
Such foreign holdings of the main persons have remained hidden for decades beneath complex multi-layered structures, located in different countries, ensuring secrecy. Search action further revealed that one of the close relatives of the promoter family was intentionally introduced as a front to ostensibly escape the provisions of domestic tax laws.
The investigation has successfully lifted the veil, leading to the detection of undisclosed foreign assets of more than Rs. 1000 crore, apart from domestic tax evasion of more than Rs. 35crore which may, inter alia, lead to consequences under the Black Money Act, 2015, as also, action under the Income-tax Act, 1961 respectively. Foreign assets include investment in a Hotel in the UK, immovable properties in UK and UAE and deposits with foreign banks. Further investigations are in progress.
The Income Tax Department mounted a search on a group operating leading educational institutions having a large number of schools and colleges in Chennai and Madurai region. The search was conducted at the office of the Trust, residences of the trustees and key employees of the group. The charitable trusts are running a medical college and hospital, Engineering colleges and schools across Tamil Nadu. Search and survey operations were carried out at 64 places across the State.
During the search, evidence was unearthed of a fee collected under various Educational Institutions from students of Engineering colleges; schools run by the group which was received in cash and not accounted for, and cash receipts not accounted for in the hospital account. Loans and interest were seen repaid in cash which was earlier taken in cash for the purpose of unaccounted investments. These receipts were utilized for the purchase of properties by paying on-money.
The search has resulted in the seizure of around Rs.2 crore of unaccounted cash. Out of the unaccounted income detected so far, the group has admitted an amount of Rs. 532 crore as their undisclosed income. The searches are temporarily concluded and further investigations are under progress.
The Central Excise and Service Tax Tribunal (CESTAT) Ahmedabad, held that if the service provided by IILM Business School are not falling under category excluded from the definition of Commercial Coaching and Training and are liable to pay service tax.
The appellants are engaged in imparting courses such as MBA, PGP programs (industry integrated). A Show cause notice was issued to the appellant demanding service tax on this activity under the head of ‘Commercial Coaching and Training’.
The IILM Business School was set up by the International School of Learning in Management trust a Public Charitable Trust and it was an approved center of Eastern Institute of Integrated Learning in Management University Sikkim which in turn is approved by University Grants Commissioner.
It was also stated that the Eastern Institute of Integrated Learning in Management University Sikkim has full authority and legal sanction to grant degrees and diplomas as per section 22 of the said Act to its student upon successful completion of the course, after qualifying the exams. All the enrolled students were required to complete the course as prescribed by the university.
The Tribunal observes that the appellants are not granting any degree recognized by law but are acting as a knowledge hub for EIILM University set up by State Government of Sikkim and which is approved by University Grant Commissioner.
The Tribunal comprising of President, Justice Dilip Gupta and Technical Member Raju made an order on an appeal filed by M/s. IILM Business School.
The Tribunal observed that the appellants were aware of their tax liability as they have registered in Kota, Rajasthan and paid Service Tax. There is no logic or rationale on the different stand taken by the appellant in Kota and Andhra Pradesh. The appellants are not entitled to a bona fide belief that they are not liable to pay Service Tax.
In the light of the decision of Tribunal in case of Shri Chaitanya Educational Committee dismissed the appellants are liable to pay service tax on the service provided by them as the appellants are not falling under any category excluded from the definition of Commercial Coaching and Training.
While dismissing the appeal CESTAT upheld the decision of the lower tribunal that the appellants are liable to pay service tax on the service provided by them as the appellants are not falling under any category excluded from the definition of Commercial Coaching and Training.
Subscribe Taxscan Premium to view the JudgmentThe Income Tax Appellate Tribunal (ITAT) held that incentives paid to employees under section 40(a)(ia) in the nature of salaries cannot be disallowed.
The assessee is in wholesale distribution of mobile handsets. For the assessment year 2014-15, the assessee filed the return of income on 22.09.2014 admitting a total income of Rs.10,86,820/-.
The case was selected for scrutiny and the assessment was completed accepting the income returned. Subsequently, Ld.Pr.CIT, Vijayawada has taken up the case for revision u/s 263 and found that the Assessing Officer (AO) has not conducted inquiries on various issues in respect of incentives to its employees, trade incentives given to its dealers for which the assessee is liable to deduct the tax at source as per the provisions of section 194H of the Act.
The Ld.Pr.CIT further observed that the AO did not obtain relevant information or details etc. with regard to deduction of tax at source, therefore, issued the show-cause notice to the assessee calling for an explanation as to why the assessment should not be revised u/s263 of the IT Act.
In response to the notice, the assessee filed explanation objecting for revision and stated that the issue with regard to payments made to retailers and the incentives given to staff was examined by the AO at the time of assessment and the assessee is not liable for deduction of tax at source.
Not being convinced with the explanation of the assessee, the Ld.Pr.CIT held that the order passed by the AO is erroneous and prejudicial to the interest of the revenue, accordingly directed the AO to redo the assessment after detailed verification.
The Tribunal comprising of Judicial Member, Durga Rao, and Accountant Member, D.S Sunder Singh on an appeal filed by M/s Fusion Voice Solutions.
The Tribunal observed that, in respect of the incentives passed on to the retailers, the AO. has obtained the details of ledger accounts and examined the same. Therefore, it is established beyond doubt that the AO. has examined the issue and taken one of the possible views.
The Tribunal also examined that the entire transaction and sales by the assessee company to its retail dealers and sales by its dealers till to the end-users and verification of principal-agent relationship etc. at best can be treated as an inadequate inquiry but not lack of inquiry.
While setting aside the order the tribunal also observed that incentives paid to the employees take the character of salaries u/s 192 and no disallowance is warranted u/s 40(a)(ia) for the payment of salaries. Hence the assessment order passed by the AO is neither erroneous nor prejudicial to the department.
Subscribe Taxscan Premium to view the JudgmentThe Allahabad High Court has expressed displeasure for the long delay of not setting up of Goods and Services Tax Appellate Tribunal (GSTAT).
A pharmaceutical company filed a petition and sought to constitute the tribunal.
The court had sought answers from the central and state government.
The State Government submitted that they had sent a proposal to the GST Council on 21 February 2019 in which the bench of the state tribunal suggested to set up 20 area benches in Lucknow and 16 districts.
The State Government also submitted that judgment in the Bar Association case, the Supreme Court, the court ordered the state government that where there is a head bench of the High Court, Tribunal should become the same. On which the State Government sent the revised proposal to the GST Council on 15 March 2019. In which it was suggested to constitute Pradhan Peeth in Allahabad and four Area Chairs in different cities.
A division bench comprising of Justice Bharti Sapru and Justice R.R Agrawal observed that a provision has been made in Section 109 for the creation of the GSTAT. The persons aggrieved by the order of the First Appellate Authority have no other remedy than to file a writ petition before this Court, in absence of GSTAT.
Section 109 elaborates as General provision as to statutory corporations.
(1) Save as otherwise expressly provided by the foregoing provisions of this Part, where anybody corporate has been constituted under a Central Act, State Act or Provincial Act for an existing State the whole or any part of which is by virtue of the provisions of Part II transferred to any other existing State or to a new state, then, notwithstanding such transfer, the body corporate shall, as from the appointed day, continue to function and operate in those areas in respect of which it was functioning and operating immediately before that day, subject to such directions as may from time to time be issued by the Central Government, until another provision is made by law in respect of the said body corporate.
(2) Any directions issued by the Central Government under sub-section (1) in respect of any such body corporate shall include a direction that any law by which the said body corporate is governed shall in its application to that body corporate have effect subject to such exceptions and modifications as may be specified in the direction.
The division bench also further stated that an assessee cannot be left remediless despite statutory safeguards having been provided by the legislature.
Subscribe Taxscan Premium to view the JudgmentThe country of South Africa claimed that it will broaden the scope of Value Added Tax (VAT) by April 1, 2020, by digitizing the transactions made by the foreign digital company and if the company does not register for the same and the non-compliance of the norms under Value Added Tax (VAT) Act, then the strict actions will be taken against the foreign companies and as a consequence penalties would be imposed.
Under this scheme, South Africa strives to broaden the definition of the word ‘digital services’. Further, the nation has specified the services wherein the Value Added Tax (VAT) will be applicable on e-services such as online newspapers, blogs, journals, apps, web services, webcasts, social media, e-books, images, online media; all the internet-based auctions; and education which will not include those educational services which are regulated by the educational authority.
Further, the Value Added Tax (VAT) will be applicable to all the businesses wherein digital services are availed such as online consulting; online advertising online gaming; online training; and every kind of other software subscriptions.
Wherefore, the digital services charged under the Value Added Tax (VAT) Act of South Africa can be determined on the basis of resident and non-resident of South Africa. These laws will be applicable only in the case of foreign digital business and not to the residents of South Africa.
Further, the foreign digital business must be registered under VAT of South African income if exceeds ZAR 1 Million per annum. Also in the case of B2B services, the non-resident foreign digital business providing e-services are ought to register under the VAT Act. This practice is not based on zero-rating and use of reverse charge like any other nation of the world.
The Reserve Bank of India (RBI) has issued the revised guidelines for Merchanting Trade Transactions (MTT).
The Following are the changes:
I. For a trade to be classified as merchanting trade, goods acquired shall not enter the Domestic Tariff Area.
II. Considering that in some cases, the goods acquired may require certain specific processing/ value-addition, the state of goods so acquired may be allowed transformation subject to the AD bank being satisfied with the documentary evidence and bonafide of the transaction.
III. The MTT shall be undertaken for the goods that are permitted for exports/imports under the prevailing Foreign Trade Policy (FTP) of India as on the date of shipment. All rules, regulations, and directions applicable to exports (except Export Declaration Form) and imports (except Bill of Entry) shall be complied with for the export leg and import leg respectively.
IV. AD bank shall satisfy itself with the bonafide of the transactions. Further, KYC and AML guidelines shall be scrupulously adhered to by the AD bank while handling such transactions.
V. The entire merchanting trade is to be routed through the same AD bank. The AD bank shall verify the documents like invoice, packing list, transport documents and insurance documents (if originals are not available, Non-negotiable copies duly authenticated by the bank handling documents may be taken) and satisfy itself about the genuineness of the trade. The AD bank may, if satisfied, rely on online verification of the Bill of Lading/ Airway Bill on the website of the International Maritime Bureau (IMB) or Airline web check facilities. However, the AD bank shall ensure that the requisite details are made available /retrievable at the time of Inspection/Audit/investigation of the transactions.
VI. The entire MTT shall be completed within an overall period of nine months and there shall not be any outlay of foreign exchange beyond four months. The commencement date of merchanting trade shall be the date of shipment/export leg receipt or import leg payment, whichever is first. The completion date shall be the date of shipment/export leg receipt or import leg payment, whichever is the last.
VII. Short-term credit either by way of suppliers’ credit or buyers’ credit may be extended for MTT to the extent not backed by an advance remittance for the export leg, including the discounting of export leg LC by the AD bank, as in the case of import transactions. However, Letter of Undertaking (Lou)/ Letter of Comfort (LoC) shall not be issued for supplier’s/ buyer’s credit.
VIII. Any receipts for the export leg, prior to the payment for import leg, maybe parked either in Exchange Earners Foreign Currency (EEFC) account or in an interest-bearing INR account till the import leg liability arises. It shall be strictly earmarked/ lien-marked for the payment of import leg and the liability of the import leg, as soon as it arises, shall be extinguished out of these funds without any delay. If such receipts are kept in interest-bearing INR account, hedging thereof may be allowed by the AD bank at the request of its customer, as per extant regulations. No fund/non-fund-based facilities shall be extended against these balances.
IX. In case of discounting of export leg LC where payment for import leg is still to be made (even if partially), the proceeds shall be utilized in the manner prescribed at point no. 2 (viii) above.
X. Payment for import leg may also be allowed to be made out of the balances in the EEFC account of the merchant trader.
XI. Merchanting Traders may be allowed to make advance payment for the import leg on demand made by the overseas supplier. In the case where inward remittance from the overseas buyer is not received before the outward remittance to the overseas supplier, AD bank may handle such transactions based on its commercial judgment. It may, however, be ensured that any such advance payment for an import leg beyond USD 500,000/- per transaction, shall be made against Bank Guarantee / an unconditional, irrevocable Standby Letter of Credit from an international bank of repute. Overall prudential limits on allowing such advance payments by a customer may be fixed by the AD bank.
XII. Letter of Credit to the supplier for the import leg is permitted against confirmed export order, keeping in view the foreign exchange outlay of four months and completion of the MTT within nine months and subject to compliance with the instructions issued by Department of Banking Regulation on “Guarantees and Co-acceptances”, as amended from time to time.
XIII. AD bank shall ensure one-to-one matching in case of each MTT and report defaults in any leg by the traders to the concerned Regional Office of the Reserve Bank, on a half-yearly basis in the format as annexed, within 15 days from the close of each half-year, i.e. June and December;
XIV. Merchant traders with outstanding of 5% or more of their annual export earnings shall be liable for caution listing.
The merchanting traders shall be genuine traders of goods and not mere financial intermediaries. Confirmed orders must be received by them from the overseas buyers. AD banks shall satisfy themselves about the capabilities of the merchanting trader to perform the obligations under the order. The merchanting trade shall result in profit which shall be determined by subtracting import payments and related expenses from export proceeds for the specific MTT.
Write-off of the unrealized amount of export leg:
i. AD bank may write-off the unrealized amount of export leg, without any ceiling, on the request made by the Merchanting trader, in the following circumstances:
a. The MTT buyer has been declared insolvent and a certificate from the official liquidator specifying that there is no possibility of recovery of export proceeds has been produced.
b. The goods exported have been auctioned or destroyed by the Port / Customs / Health authorities in the importing country and a certificate to that effect has been produced.
c. The unrealized amount of the export leg represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar organization;
provided, the MTT is in adherence to all other provisions except the delays in timelines (either for outlay or completion period of MTT or both) attributed to reasons mentioned at a, b and c above.
ii. In addition to above, write-off as at (i) shall be subject to the following conditions:
a.AD bank shall satisfy itself with the bonafide of the transactions and ensure that there are no KYC/AML concerns.
b.The transaction shall not be under investigation under FEMA by any of the investigating agency/ies.
c. The counterparty to the merchant trader is not from a country or jurisdiction in the updated FATF Public Statement on High Risk & Non-Co-operative Jurisdictions on which FATF has called for countermeasures.
Third-party payments for export and import legs of the merchanting Trade Transactions are not allowed.
Agency commission is not allowed in MTTs. However, AD banks may allow payment of agency commission up to a reasonable extent by way of outward remittance under exceptional circumstances, subject to the following conditions:
MTT has been completed in all respects.
The payment of agency commission shall not result in the Merchanting Trade Transactions ending into a loss.
The Merchanting trader shall make a specific request to the AD bank in this regard.
AD bank may approach Regional Office (RO) concerned of the Reserve Bank for regularization of the Merchanting Trade Transactions for deviation, if any, from the prescribed guidelines and the MTT shall be closed only after receiving approval from the RO concerned of the Reserve Bank.
Reporting for merchanting trade transactions under FETERS shall be done on a gross basis, against the undermentioned codes:
| Trade | Purpose Code under FETERS | Description |
| Export | P0108 | Goods sold under merchanting /receipt against the export leg of merchanting trade |
| Import | S0108 | Goods acquired under merchanting /payment against import leg of merchanting trade |
AD banks shall bring the contents of this circular to the notice of their constituents concerned for strict compliance.
The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
The Reserve Bank of India (RBI) has released directions u/s 45 W of the Reserve Bank of India Act,1934 permitting Rupee derivatives (with settlement in foreign currency) to be traded in International Financial Services Centres (IFSCs).
An announcement to this effect was made in Para 2 of the Statement on Developmental and Regulatory Policies dated October 04, 2019.
The salient features of these Directions are as below:
(i) Currency derivatives in any currency pair involving the Rupee or otherwise are permitted on recognized stock exchanges set up in IFSCs;
(ii) Contracts in the Rupee shall be settled in a currency other than the Indian Rupee; and
(iii) Any person resident outside India may undertake these derivative contracts.
While upholding the ruling Appellate Authority Advance Ruling (AAR) the Allahabad High Court has held that odomos is not a medicine, it is a mosquito repellant hence 18% Goods and Services Tax (GST) applicable.
The petitioners pitched the product in their sale material and advertisements as a mosquito repellent. Various mosquito repelling qualities are identified as defining characteristics of the subject goods in the market.
The product is not normally prescribed as a medicine by medical practitioners as a drug. There is no restriction on odomos sales. The product is sold on-demand at the counters in shops and establishments. Sales are not restricted to chemists/druggists alone.
The product is a mosquito repellent by virtue of its mosquito repelling characteristics and is so understood in common parlance. The dealers identify and sell the product as a mosquito repellent. Customers purchase the same and use it in the like manner.
The division bench comprising of Justices Biswanath Somadder and Ajay Bhanot pronounced the judgment on the writ petition filed by M/S Dabur India Ltd.
The Court adopted twin test method evolved by the Hon’ble Supreme Court was applied to determine the classification of a product as a cosmetic or medicament in Puma Ayurvedic Herbal (P) Ltd. v. Commissioner, Central Excise, Nagpur.
The Court also said that the common parlance test or the market identity test for classification of the product was satisfied.
The division bench also observed that the active ingredient of the product is NNDB which is the improved version – formula of DEET. The essential quality of DEET is mosquito repelling. The NNDB was introduced to overcome the itchiness caused by the DEET. The basic component of the product is DEET while the quality enhancements are created by the NNDB.
While dismissing the writ petition, Court also added that there is no palpable infirmity in the classification of the product in the order passed by the Appellate Authority.
Subscribe Taxscan Premium to view the JudgmentThe Dell has invited application for the post of Accounting Senior Advisor – Indirect Taxation from qualified Chartered Accountant (CA) with 6 -8 years of experience.
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The Institute of Chartered Accountants of India (ICAI) has opened an online facility for changing center/group/medium for students appearing in CA Examinations.
The ICAI said that some candidates while filling the examination application form does not exercise reasonable care and commit errors and seek a change of Centre/Group/Medium, on account of errors committed by them in their examination application forms, after submission.
With a view to provide an opportunity to the candidates to correct such errors made by them while submitting their examination application forms, it has been decided to put in place an online facility to view and correct errors if any, committed by them while submitting the examination application form, in the fields of Centre/Group/Medium, (i.e. for seeking change of Centre/Group/Medium), with effect from May 2015 examinations.
Salient features of the facility are as follows:
For further details click here.
The Zambia Government has published the Tax Amendment Act 2020 heeding the decree of the National Budget 2020.
The amendments include:
Property Transfer Tax (PTT)
Customs and Exercise Duty:
The amendments aim at encouraging the use of alternative energy sources and generating and improving revenue.
While setting aside the order passed by Commissioner of Central GST and Central Excise, the Mumbai bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) held that department cannot levy Service Tax on amounts received by the Appellant for providing ‘club or association service’ and also on ‘convention service’ when it does not retain any amount.
The Department had issued two notices to M/s Indian Pharmaceutical Association, for the period from 2006-07 to 2009-10 and for 2010-11, for seeking recovery of ₹ 46,35,019 and ₹ 7,13,157 respectively, along with applicable interest and imposition of penalty. The demand was in the nature of Service Tax against the amounts received from members for providing ‘club or association service’ and ‘convention service’.
Aggrieved by the order that upheld the above demand of the Department, the Appellant has approached before this Tribunal.
The Tribunal has accepted the contentions of Appellant and thus relied upon the decision of Hon’ble High Court of Jharkhand in Ranchi Club v. Chief Commissioner of Central Excise & Service Tax, Ranchi Zone and Hon’ble High Court of Gujarat in Sports Club of Gujarat Ltd v. Union of India. In these cases, it has been held that in view of the mutuality and in view of the activities of the club, if club provides any service to its members in any form, then it is not a service by one to another since foundational facts of existence of two legal entities in such transaction is missing.
The Court observed that thus any demand in relation to service tax for providing ‘club or association service’ is without any authority of law.
The CESTAT bench comprising of members C. J. Mathew and Ajay Sharma has also observed that the appellant does not offer ‘convention services’ but gets events organized by professionals and, the collected fees are wholly transmitted to such organizers. Thus, the Tribunal has held that the activity is beyond the purview of taxability under section 65 (105) (zc) of the Finance Act, 1994.
Subscribe Taxscan Premium to view the JudgmentThe Kerala High Court has held that the substantial rights available to petitioners under the GST Act cannot be deprived solely on account of a technical lapse that was occasioned at the instance of the GST Council.
The petitioners in both Writ Petitions were assessing under the Kerala Value Added Tax (KVAT) Act, 2003, who migrated to the GST regime pursuant to the enactment of the CGST/SGST Act, 2017. The petitioners, consequent to their migration to the GST regime, were entitled to carry forward the tax paid on the purchase of goods during the VAT regime to the GST regime and to avail credit under the latter regime.
The transition provisions, which govern the transfer of credit under the CGST/SGST Act and Rules are Sections 139 to 143 of the Act and Rule 117 of the SGST Rules. As part of the procedure for the transfer of credit, the petitioners had to file a declaration in Form GST TRAN-1 on or before 27.12.2017 for the purposes of successfully migrating the credit to the GST regime.
In both these Writ Petitions, the grievance of the petitioners is essential that they had come across a press release by the GST Council, which indicated that the last date for uploading the details in the GST portal for the purposes of carrying forward the accumulated credit from the erstwhile regime was extended up to 31.12.2017.
In these Writ petitions, the communications issued to them by the respondents denying them the facility of transfer of accrued credit are impugned, inter alia, on the contention that the substantial rights available to them under the GST Act cannot be deprived solely on account of a technical lapse that was occasioned at the instance of the respondents.
The single-judge bench of Justice A.K Jayashankaran Nambiar pronounced the judgment based on writ petitions filed by A.F Babu and Naga Distributors.
While relying upon Delhi High Court Judgment in Amon Motors Vs. Union of India and Ors, wherein almost similar circumstances, the Court permitted the petitioners therein to file a Form TRAN-1 electronically on or before a specified date.
While allowing the petitions the Court quashed the impugned communications and directed the respondents to either open the online portal so as to enable the petitioners to file the Form TRAN-1 electronically or to accept the same manually on or before 31.12.2019.
Subscribe Taxscan Premium to view the JudgmentThe Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has approved amendments/extension/repeal in the following Acts and Regulations dealing with Goods and Services Tax (GST), Value Added Tax (VAT) and State Excise, and for designation of Daman as Headquarter:
These amendments will lead to “Minimum Government, Maximum Governance” by way of having common taxation authorities: better delivery of services to the citizens by reducing duplication of work and improving administrative efficiency, will help in bringing more uniformity in Laws relating to GST, VAT and STATE EXCISE and it will also help to avoid any legal complications in the levy and collection of GST Tax, VAT, State Excise, including recovery of arrears Moreover, the said amendments not only bring uniformity in taxation laws but also strengthen the system of laws.
The U.T. Administration of Dadra & Nagar Haveli and Diu have taken a big step to realize the vision of “Minimum Government, Maximum Governance” for the people of the two UTs, besides saving to the government exchequer and ensuring uniformity, stability and consistency in day to day functioning of taxation authorities. This is achieved by making Amendments/extension/repeal in Acts dealing with Goods and Services Tax (GST), Value Added Tax (VAT) and Excise, and by designation of Daman as Headquarters of UT of Dadra and Nagar Haveli and Daman and Diu in view of merger of Dadra and Nagar Haveli and Daman and Diu on appointed date of 26.01.2020.
