Govt. proposes Increase in Customs Duty on Footwear and Furniture to Promote Domestic MSMEs

Keeping in view the need of the MSME sector, Customs duty is being raised on items like footwear (from 25% to 35% on footwear and from 15% to 20% on parts of footwear) and furniture (from 20% to 25%). While presenting the Union Budget 2020-21 in Parliament today, the Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman said that special attention has been given to put measured restraint on import of those items which are being produced by our MSMEs with better quality. She stressed that labour-intensive sectors in MSME are critical for employment generation. Cheap and low-quality imports are an impediment to their growth, the Finance Minister said.

To achieve the twin objectives of giving impetus to the domestic medical equipment industry and also to generate resource for health services, the Finance Minister proposed to impose a nominal health cess (at the rate of 5%), by way of a duty of customs, on the imports of medical equipment keeping in view that these goods are now being significantly made in India. The proceeds from this cess shall be used for creating the infrastructure for health services in the aspirational districts, Smt Sitharaman said.

In the larger public interest, the Union Budget proposed to abolish anti-dumping duty on PTA (Purified Terephthalic Acid). The Finance Minister said that PTA is a critical input for textile fibres and yarns. Its easy availability at competitive prices is desirable to unlock immense potential in the textile sector which is a significant employment generator.

The Union Budget also proposed to reduce basic customs duty on imports of newsprint and light-weight coated paper from 10% to 5%. The Minister stated that she has received references saying that this levy on these items has put additional burden on print media at a time when it is going through a difficult phase.

The Budget also proposed to raise excise duty, by way of National Calamity Contingent Duty on Cigarettes and other tobacco products. No change is being made in the duty rates of bidis, Smt Sharman said. The Finance Minister said that Customs duty rates are being revised on electric vehicles, and parts of mobiles as part of such carefully conceived Phased Manufacturing Plans.

The Finance Minister said that Union Budget proposes to incorporate suitable provisions in the Customs Act and added that in the coming months, there will be a review of Rules of Origin requirements, particularly for certain sensitive items so as to ensure that Free Trade Agreements (FTAs) are aligned to the conscious direction of our policy. The Minister added that it has been observed that imports under FTAs are on the rise, undue claims of FTA benefits have posed a threat to the domestic industry. “Such imports require stringent checks”, Smt Nirmala  Sitharaman said.

The Minister said that we are also strengthening provisions relating to safeguard duties which are applied when the surge in imports causes serious injury to the domestic industry. The amended provisions shall enable regulating such surge in imports in a systematic way, she said. The Finance Minister said that the provisions for checking to dump of goods and imports of subsidized goods are also being strengthened for ensuring a level playing field for the domestic industry. “These changes are in line with international best practices”, she said.

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Union BUDGET 2020 – Live Updates

Govt. to implement Cash Rewards Scheme for customers who insist on #TaxInvoices for their purchases. #Budget2020 #Taxscan

— Tax Scan (@tax_scan) February 1, 2020

Import duty hiked on inputs used by footwear and furniture MSMEs #Budget2020 #BudgetScan#TaxScan

— Tax Scan (@tax_scan) February 1, 2020

The existing disputed direct tax cases will be closed if assessee pays the disputed tax amount by 31/03/2020, where interest and penalty will be waived off: FM#Budget2020#BudgetScan#TaxScan

— Tax Scan (@tax_scan) February 1, 2020

Registration of charity institutions to be made completely electronic, donations made to be pre-filled in IT return form to claim exemptions for donations easily

— Tax Scan (@tax_scan) February 1, 2020

#Budget2020 proposes 'Vivad se Vishwas' scheme for direct tax payers whose appeals are pending at various forum

— Tax Scan (@tax_scan) February 1, 2020

Income Tax Act to be amended to facilitate e-appeal #Budget2020

— Tax Scan (@tax_scan) February 1, 2020

Concessional corporate tax cut to be extended to new domestic companies engaged in power generation: FM#Budget2020#Budgetscan#Taxscan

— Tax Scan (@tax_scan) February 1, 2020

Tax Audit threshold limit increased Rs. 5 cr from 1cr. #Budget2020

— Tax Scan (@tax_scan) February 1, 2020

Tax rate of 30% on income above Rs 15 lakh will be continued: FM

— Tax Scan (@tax_scan) February 1, 2020

ESOP taxation: perquisite taxation at the time of 'exercise' deferred to 5 years or till they leave the company or until they sell their shares – whichever is earlier: FM#Budget2020#Budgetscan#Taxscan

— Tax Scan (@tax_scan) February 1, 2020

A person earning Rs 15 lakh per anum and not availing any deductions will now pay Rs 1.95 lakh tax in place of Rs 2.73 lakh: FM

— Tax Scan (@tax_scan) February 1, 2020

Dividend distribution tax to be taxed in the hands of the recipients: FM#Budget2020#Budgetscan#Taxscan

— Tax Scan (@tax_scan) February 1, 2020

BREAKING:
FM proposes to remove dividend distribution tax#Budget2020#Budgetscan#Taxscan

— Tax Scan (@tax_scan) February 1, 2020

#Budget2020 proposes Removal of Dividend Distribution Tax, Dividends are taxable

— Tax Scan (@tax_scan) February 1, 2020

Tax rate of 30% on income above Rs 15 lakh will be continued: FM#Budget2020#Budgetscan#Taxscan

— Tax Scan (@tax_scan) February 1, 2020

10 per cent for 5 to 7.5 lakh
15 per cent 7.5 lakh to 10 lakh
20 per cent for 10 lakh to 12.5 lakh (present is 30)
25 per cent for 12.5 lakh to 15 lakh (present 30)
30 percent above 15 Lakh #BudgetScan #Budget2020

— Tax Scan (@tax_scan) February 1, 2020

BREAKING:

For income between Rs 10-12.5 lakh, the tax rate is currently 30%. This has now been bought down to 20%#Budget2020#Budgetscan#Taxscan

— Tax Scan (@tax_scan) February 1, 2020

15% Income Tax for 7.5lakh to 10lakh #Budget2020

— Tax Scan (@tax_scan) February 1, 2020

10% Income Tax for 5 lakh to 7.5lakh #Budget2020

— Tax Scan (@tax_scan) February 1, 2020

Fiscal deficit at 3.8% in 2019-20 and 3.5% target for 2020-21#Budget2020#Budgetscan#Taxscan

— Tax Scan (@tax_scan) February 1, 2020

Nominal GDP growth estimate: 10%: FM#Budget2020#Budgetscan#Taxscan

— Tax Scan (@tax_scan) February 1, 2020

Govt plans to raise funds via LIC IPO, to sell part of its stake: FM#Budget2020#Budgetscan#Taxscan

— Tax Scan (@tax_scan) February 1, 2020

BREAKING:

FPI limit in corporate bonds to be raised to 15%.

Bilateral netting to be permitted.

New debt ETF with government securities to be set up.#Budget2020#Budgetscan#Taxscan

— Tax Scan (@tax_scan) February 1, 2020

Robust mechanism in place to monitor health of banks, depositors' money is absolutely safe; says FM

— Press Trust of India (@PTI_News) February 1, 2020

Deposit Insurance and Credit Guarantee Corporation has been permitted to increase deposit insurance coverage to Rs 5 lakh per depositor from Rs 1 lakh #Budget2020 #Budgetscan

— Tax Scan (@tax_scan) February 1, 2020

More relaxed norms to opt for the securitization of debts, for smaller NBFCs: FM#Budget2020#Budgetscan#Taxscan

— Tax Scan (@tax_scan) February 1, 2020

BREAKING:
Deposit insurance cover raised from Rs 1 lakh to Rs 5 lakh#Budget2020#Budgetscan#Taxscan

— Tax Scan (@tax_scan) February 1, 2020

Tax payer's charter enshrined in laws is a refreshing idea…this is needed in GST laws as well…

— Pratik Jain (@pratikdelhi) February 1, 2020

Finance Minister Nirmala Sitharaman: India will host G-20 presidency in the year 2022; Rs 100 crores allocated for preparation

— ANI (@ANI) February 1, 2020

Tax payer charter will be part of statute, says FM #Budget2020 #BudgetScan

— Tax Scan (@tax_scan) February 1, 2020

Budget 2020 woven around Aspirational India, Economic Development for all and building a Humane and Compassionate society: FM #Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

#Budget2020 proposes changes in Companies Act – Criminal liabilities to be substituted by Civil liabilities

— Tax Scan (@tax_scan) February 1, 2020

Finally, India will see a tax payer right as part of a statute. Tax payer statute #TaxPayers #rights #Budget2020

— Mukesh Butani ?? (@mukeshbutani) February 1, 2020

#Budget2020 proposes a taxpayer's charter will be institutionalised.

— Tax Scan (@tax_scan) February 1, 2020

Tax harassment cannot be tolerated #Budget2020 #BudgetSpeech

— Tax Scan (@tax_scan) February 1, 2020

Tax harassment cannot be tolerated #Budget2020 #BudgetSpeech

— Tax Scan (@tax_scan) February 1, 2020

Poets mentioned till now – Dinanath Kaul, Avaiyyar and Thiruvalluvar. #Budget2020

— Nistula Hebbar (@nistula) February 1, 2020

Finance Minister draws parallels to the '5 jewels' mentioned by Thiruvalluvar:

1. Ayushman Bharath.
2. Wealth creators will be respected.
3. PM Kissan scheme.
4. Ease of living
5. National Security is a top priority of the govt. #Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

FM Nirmala Sitharaman proposes Rs 27,300 crore for the development and promotion of industry and commerce in 2020-21.#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

We wish to turn every district into an export house: FM#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

Centre to announce new education policy soon; govt received over 2 lakh suggestions on it: FM

— Press Trust of India (@PTI_News) February 1, 2020

Rs 9,000 crore to be allocated for senior citizens: FM#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

Propose a taskforce to recommend steps on looking at age of motherhood of girls and women. #BudgetSession2020

— The News Minute (@thenewsminute) February 1, 2020

#Budget2020

FM #NirmalaSitharaman announces Rs 99,300 crore outlay for education sector in 2020-21 and Rs 3,000 crore for skill development.

FM announces degree-level full-fledged online education programme to be offered by the top 100 institutions in the country. pic.twitter.com/PkuaNPA7bN

— PIB India (@PIB_India) February 1, 2020

99,300 crore rupees to be provided for education sector in 2020-21 and 3,000 crore rupees for skill development

– FM @nsitharaman

Watch LIVE: https://t.co/TN71mvbfGt#Budget2020 #JanJanKaBudget pic.twitter.com/agMwakHG4S

— PIB India (@PIB_India) February 1, 2020

Dear @cbic_india One day over for extension….. Extend pls

— Surya Raj (@vvs_rajkumar) February 1, 2020

#Budget2020 proposes Rs 27,300 crore for the development and promotion of industry and commerce in 2020-21 #Budgetscan #taxscan #BudgetLive

— Tax Scan (@tax_scan) February 1, 2020

To achieve higher export credit, a new scheme called Nirvik will be introduced: FM#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

#Budget2020 proposes to set up investment clearance cell to entrepreneurs #Budgetscan

— Tax Scan (@tax_scan) February 1, 2020

Average family saves 4% of income due to reduced GST rates: FM#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

Entrepreneurs are always been the strength of India: FM #Budget2020 #BudgetScan

— Tax Scan (@tax_scan) February 1, 2020

Steps to be taken to attract external commercial borrowing, FDI in the education sector: FM#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

Krishi UDAN will be launched by @MoCA_GoI
on international and national routes, improving value realization in North East and tribal districts: Finance Minister #Budget2020 #BudgetScan

— Tax Scan (@tax_scan) February 1, 2020

#Budget2020 proposes Rs 3.6 lakh crore towards piped water supply to households #BudgetScan #BudgetSpeech

— Tax Scan (@tax_scan) February 1, 2020

Proceeds on taxes from medical devices will be used in funding hospital development: FM#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

2.83 lakh Crs. to be allocated to Agriculture and Irrigation: FM#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

Warehouses will be set up, viability gap funding to be provided to set up warehouses: FM#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

Taxpayers may kindly note that filing of GSTR-9 for FY 2017-18 and 2018-19 is optional for taxpayers having aggregate turnover below Rs. 2 Crore.

— CBIC (@cbic_india) February 1, 2020

Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhiyan (PM KUSUM) to be expanded to provide 20 lakh farmers in setting up standalone solar pumps: FM#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

Comprehensive measures for 100 water-stressed districts being proposed: FM#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

The first part of FM Sitharaman's budget is focused on addressing rural distress. Will these steps be effective enough to boost rural demand? May be key to reviving decelerating economic growth #Budget2020

— Remya Nair (@remyanair4) February 1, 2020

Central Govt debt reduced to 48.7% of GDP from 52.2 percent in March 2014: FM#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

Farmers with fallow barren land will be helped to set up solar power generation units : FM#Budget2020#Budgetscan#Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

FM says Budget woven around aspirational India, economic development and caring society #Budget2020 #Budgetscan #Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

60 lakh more taxpayers joined GST tax base in last two years, says FM #BudgetScan #Budget2020 #Taxscan #Taxnews

— Tax Scan (@tax_scan) February 1, 2020

40 Crores Income Tax Returns has been filed: FM #BudgetScan #Budget2020 #BudgetSpeech #Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

FM says 16 lakh more taxpayers joined GST tax base in last two years #Budget2020 #BudgetScan #Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

16 lakh more taxpayers joined GST tax base in last two years, says FM #BudgetScan #Budget2020 #Taxscan #Taxnews

— Tax Scan (@tax_scan) February 1, 2020

FM @nsitharaman underlines the paradigm shift in governance, brought about by the Government #Budget2020 #Budgetscan #Taxscan #TaxNews

— Tax Scan (@tax_scan) February 1, 2020

FM Nirmala Sitharaman pays homage to former FM Arun Jaitley.#Budget2020#BudgetScan

— Tax Scan (@tax_scan) February 1, 2020

#Budget2020 to boost Income and increase purchasing power. The budget aims to address aspirations of Indians: FM #BudgetSpeech

— Tax Scan (@tax_scan) February 1, 2020

Inflammation well contained in 2014-2019
-FM Nirmala Sitharaman#Budget2020#BudgetScan

— Tax Scan (@tax_scan) February 1, 2020

Budget session begins.#Budget2020#BudgetScan

— Tax Scan (@tax_scan) February 1, 2020

Union Cabinet approves Budget for 2020-21 #Budget2020 #BudgetScan

— Tax Scan (@tax_scan) February 1, 2020

Copies of #Budget2020 have been brought to the Parliament.

— Tax Scan (@tax_scan) February 1, 2020

Cabinet meeting begins at Parliament House.

— Tax Scan (@tax_scan) February 1, 2020

#Budget2020 : Cabinet meeting to begin shortly #BudgetScan

— Tax Scan (@tax_scan) February 1, 2020

Finance Minister @nsitharaman calls on President Kovind at @rashtrapatibhvn before presenting #UnionBudget2020 #BudgetScan #Budget2020 pic.twitter.com/4qsIwz8I4z

— Tax Scan (@tax_scan) February 1, 2020

Delhi: Finance Minister Nirmala Sitharaman to proceed to the Parliament House to attend the Cabinet meeting https://t.co/GJ91j05prH

— ANI (@ANI) February 1, 2020

Delhi: Finance Minister Nirmala Sitharaman and her team to meet President Ram Nath Kovind, ahead of presentation of Budget https://t.co/UOWNDjqVSo

— ANI (@ANI) February 1, 2020

Cabinet meeting to be held at 10:15 am today in the Parliament House, ahead of the presentation of Union Budget 2020-21. #BudgetScan #Budget2020 #UnionBudget

— Tax Scan (@tax_scan) February 1, 2020

 

Finance Minister Nirmala Sitharaman arrives at Ministry of Finance; She will present her second Budget today. #Budget2020 #BudgetScan #UnionBudget

— Tax Scan (@tax_scan) February 1, 2020

Conducting Safety Training Programmes, Seminars, Workshop, Conferences are ‘Educational Activities’, Exempted from Income Tax: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) held that trust conducting safety training programmes, training seminars, workshops, conferences are educational activities and are exempted from income tax under section 11 of the Income Tax Act,1961.

The assessee is a public charitable trust stated to be registered under the Bombay Public Trust Act, 1950 and is also registered under section.12(A)(a) of the Income Tax Act, 1961.

Consequently, the assessee trust is eligible for exemption of its income in terms of Section 11 of the Act. The assessee trust filed its return of income claiming exemption under s.11 of the Act. The return of income so filed was selected for scrutiny in the course of the scrutiny assessment.

The AO raised the question of eligibility of exemption claimed under s.11 (1) of the Act r.w. provision of Section 2(15) of the Act. The AO eventually held the surplus of Rs.19,86,737/- to be non-charitable in nature and consequently, taxable under the normal provisions of the Act.

The bench comprising of Judicial Member, Mahavir Prasad and Accountant Member, Pradip Kumar Kedia pronounced the order based on an application filed by Gujarat Safety Council.

​​Section 11 elaborates as provides an exemption for income derived from property held under trust wholly for charitable or religious purposes to the extent such income is applied for charitable or religious purpose in India. However, this exemption shall be subject to certain conditions.

The Tribunal examined as memorandum of association of the Trust, key objects of the trust are conducting safety training programmes, training seminars, workshop, conferences etc. for personnel working in Industries (Industrial safety), for people commuting on roads (road safety) and for the persons working at homes (home safety) etc.

The Tribunal further examined the form of handbook/literature published together with stated activities like holding conferences on industrial safety programmes, public talks, seminars, workshops etc. on an ongoing basis to inculcate safety measures would also be bracketed in the league of ‘educational activities’ when tested.

Relying on Gujarat High court decision in Ahmedabad Management Association, Court took note of the changing times and ever-widening of the horizon of knowledge, rapid changes in the method of teaching for constituting the word ‘education’ used under s.2(15) of the Act. Thus the court held that activities carried out by the assessee would be entitled to exemption under s.11 of the Act without any demur.

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18% GST is applicable for Fried Fryums: AAR [Read Order]

The Authority for Advance Ruling (AAR) held that 18% of Goods and Service Tax (GST) is applicable for Fried Fryums.

The Applicant is a partnership firm having two Partners engaged in the manufacturing business of Papad (Fryums), Namkeens and Popcorn under the brand name of Target School Times. The applicant has filed an application seeking advance ruling under section 97 of the CGST Act, 2017 MPGST Act, 2017 and IGST Act, 2017.

The Correct classification of Papad and Papad Fryums of different shapes, sizes and varieties (commonly known as Fried Fryums) manufactured by Applicant and sold. The Applicant manufactures Fried Fryums of different shapes, sizes, and varieties that are ready to eat.

An Application was filed regarding Classification of Items manufactured i.e Papad and Papad Fryums by the concern in different shapes and sizes. And to know the correct classification of Fried Fryums of different shapes, sizes and varieties which are ready to eat and What is the HSN Code and GST rate applicable on such goods manufactured.

The Authority comprising of Joint Commissioner Manoj Kumar Choubey and Joint Commissioner Virendra Kumar Jain on an application filed by M/s Alisha foods.

The Authority examined that Serial. No. 23 of Schedule III of issued under the CGST Act, 2017 and corresponding Notification No. 1/2017-State Tax (Rate) dated 30.06.2017, as amended, issued under the GGST Act, 2017 covers -Food preparations not elsewhere specified or included [other than roasted gram, sweetmeats, batters including idli/dosa batter, narnkeens, bhujia, mixture, chabena and similar edible preparations in ready for consumption form, khakhra, chutney powder, diabetic foods]” falling under Heading 2106.

The Authority further clarified that Goods and Service Tax (GST) rate of 18% (CGST 9% + GGST 9% or IGST 18%) is applicable to the product “Fried Fryums’ as per SI. No. 23 of Schedule III of Notification No. 1/2017 —Central Tax (Rate) dated 28.06.2017, as amended, issued under the COST Act, 2017 and Notification No. 1/2017-State Tax (Rate) dated 30.06.2017, as amended.

The bench ruled that the product ‘Fried Fryums’ manufactured and supplied by M/s. M/s ALISHA FOODS is classifiable under Tariff Item 2106 90 99 of the First Schedule to the Customs Tariff Act, 1975. Goods and Service Tax (GST) rate of 18% (COST 9% + GGST 9% or IGST 18%) is applicable to the product ‘Fried Fryums’.

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ICAI offers its Infrastructure to Income Tax Appellate Tribunal

The Institute of Chartered Accountants of India (ICAI) recently got into an arrangement with Income Tax Appellate Tribunal (ITAT) at New Delhi whereby ICAI has extended the facility of using ICAI infrastructure for conducting hearings of ITAT at some of ICAI branches & offices across the country including Srinagar & Ladakh.

ICAI, being a true Partner in Nation Building has always collaborated with various initiatives of the Government, Regulatory authorities, etc.  for facilitating the implementation of various policies/ measures for the development of the economy. Continuing further in this direction, ICAI recently offered ICAI’s infrastructure at branches to be used by ITAT for its camp hearings as and when required.

As per the arrangement, ICAI shall make available its vast network of branches and infrastructure for use of the ITAT including the facility of video conferencing at stations where ITAT does not have its infrastructure. This initiative will go a long way in establishing the idea of justice at the doorstep to the taxpayers, which would ultimately result in ease of doing business for the citizens of the country.

The documents were exchanged between CA. Prafulla P. Chhajed President, ICAI and Hon’ble Mr. Justice P.P. Bhatt, President, ITAT during the occasion of 79th Foundation Day Celebrations and All India Members’ Conference of the Income Tax Appellate Tribunal (ITAT).

The event was graced by Mr. Justice S.A. Bobde, Hon’ble Chief Justice of India. Also present were Mr. Justice M.R. Shah, Hon’ble Justice, Supreme Court of India, Mr. Tushar Mehta, Hon’ble Solicitor General of India, Shri Anoop Kumar Mendiratta, Hon’ble Secretary, Ministry of Law and Justice, Mr. Justice, P.P. Pannu, Hon’ble Vice-President, ITAT, Delhi Zone, CA. Atul Kumar Gupta, Vice- President, ICAI along with other Central Council Members of ICAI and other dignitaries.

Speaking on the occasion CA. Prafulla P. Chhajed, President, ICAI said “ICAI is a body set up under the Act of Parliament and has always been at the forefront in assisting all such activities which further the cause of justice. ICAI has a vast network of branches with the required infrastructure. This initiative will help in increasing the outreach program of the ITAT to provide justice at the doorstep.”

Economic Survey Suggests Rationalisation of Government Intervention to Boost Economic Freedom & Wealth Creation

The Economic Survey at the very onset says that while there is a case for Government intervention when markets do not function properly, excessive intervention especially when the market can do the job of enhancing citizens welfare perfectly well, stifles economic freedom and creates ‘deadweight loss’ which is the loss created by the wasted chance of creating a consumer and producer surplus and reduces wealth creation by not allowing efficient allocation of entrepreneurial resources and energy to productive activities thereby promoting economic dynamism. The Union Minister for Finance and Corporate Affairs Smt Nirmala Sitharaman tabled the Economic Survey 2019-20 in Parliament today.

Essential Commodities Act, 1955

The Survey describes inter alia, the Essential Commodities Act (ECA) as anachronistic and irrelevant in today’s India as the Act was passed in 1955 in India worried about famines and shortages. The Survey observes the frequent and unpredictable imposition of blanket stock limits on commodities under the ECA distorts the incentives for the creation of storage infrastructure by the private sector, movement up the agricultural value chain and development of a national market for agricultural commodities. The Survey further notes that imposition of stock limits on Dal, Sugar, and Onions had no effect on the volatility of retail and wholesale prices The Survey, providing clear evidence, suggests that the Act must be jettisoned in order to grant more economic freedom to the market and to facilitate the process of wealth creation in the economy. The Survey further says that the ECA only seems to enable rent-seeking and harassment.

Making Drugs Affordable

Given the important task of ensuring access to essential life-saving drugs and to avoid poor households from falling into poverty, Government often has to resort to controlling prices of drugs under Section 3 of the Essential Commodities Act.  The Survey expresses concerns over the regulation of drug prices through the National Pharmaceutical Pricing Authority (NPPA) and Drug Price Control Order (DPCO) as it often leads to an increase in the prices of the regulated drug vis-a-vis that of a similar unregulated drug which is counter-productive and leads to a sub-optimal outcome. The Survey further explains how the increase in prices of drugs is greater for expensive formulations than for cheaper ones and also greater for those sold in hospitals rather than retail shops thereby making DPCO counter-productive to its objective of making drugs affordable.

The Survey suggests that as Government is a huge buyer of drugs through its various arms such as CGHS, Defense, Railways, etc., it can intervene more effectively to provide affordable drugs by combining all its purchases and thereby exercise bargaining power. The Survey advises the Ministry of Health and Family Welfare and its related arms to imbibe the evidence to evolve non-distortionary mechanisms that utilize the Government’s bargaining power in a market-oriented transparent manner. The Surveys says that the Act interferes with the market functioning and provides incentives that are detrimental to wealth creation thereby adversely affecting both social welfare and economic development.

Rationalization of Food Subsidies

The Survey observes that Government Intervention policies in the foodgrain markets have led to the emergence of Government as the largest procurer and hoarder of rice and wheat which has led to burgeoning food subsidy burden and inefficiencies in the markets affecting the long-run growth of the agricultural sector and adversely affecting competition in these markets. This has led to overflowing of buffer stocks with FCI, burgeoning food subsidy burden, a divergence between demand and supply of cereals and acted as a disincentive towards crop diversification. The Survey suggests foodgrains policy needs to be dynamic and allow switching from physical handling and distribution of foodgrains to cash transfers/food coupons/smart cards.

Debt Waivers Disrupt Credit Culture

According to the survey, an analysis of the debt waivers given by States/Centre shows that full waiver beneficiaries consume less, save less, invest less and are less productive after the waiver when compared to the partial beneficiaries. Debt waivers disrupt the credit culture and end up reducing the formal credit flow to the very same farmers, thereby defeating the very purpose of the debt waiver provided to farmers. The share of formal credit decreases for full beneficiaries when compared to partial beneficiaries, thereby defeating the very purpose of the debt waiver provided to farmers.

The Survey makes the case that the Government Intervention must systematically examine areas where it needlessly intervenes and undermines markets. Eliminating such instances will enable competitive markets and thereby spur investments and economic growth.

India Ranks Third in Number of New Firms Created; 1,24,000 New Firms Created in 2018 Compared to 70,000 In 2014

The Union Minister of Finance &Corporate Affairs, Smt Nirmala Sitharaman presented the Economic Survey 2019-20 in Parliament today. The Survey stated that as per the World Bank’s Data on Entrepreneurship, it is seen that India ranks third in the number of new firms created. The same data shows that new firm creation has gone up dramatically in India since 2014. While the number of new firms in the formal sector grew at a cumulative annual growth rate of 3.8 percent from 2006-2014, the growth rate from 2014 to 2018 has been 12.2 percent. As a result, from about 70,000 new firms created in 2014, the number has grown by about 80 percent to about 1,24,000 new firms in 2018.

The Survey noted that reflecting India’s new economic structure, i.e. comparative advantage in the services sector, new firm creation in services is significantly higher than that in manufacturing, infrastructure or agriculture. Entrepreneurial activity in the services sector is highest in Delhi, Mizoram, Uttar Pradesh, Kerala, Andaman & NicobarIslandsand Haryana.

The Survey observed that the birth of new firms is very heterogeneous across Indian districts and sectors. Moreover, it is dispersed across India and is not restricted to just a few cities. The literacy and education in the district foster local entrepreneurship significantly. For instance, the eastern part of India has the lowest literacy rate of about 59.6 percent according to the census of 2011. This is also the region in which new firm formation is the lowest. In fact, the impact of literacy on entrepreneurship is most pronounced when it is above 70 percent, the Survey says.

The Survey points out that the level of local education and quality of physical infrastructure in the district influence new firm creation significantly. The grassroots entrepreneurship is not just driven by necessity as a 10 percent increase in registration of new firms in a district yields a 1.8 percent increase in GDDP (Gross District Development Product). Thus, entrepreneurship at the bottom of the administrative pyramid- a district – a significant impact on wealth creation at the grassroots level. This impact of entrepreneurial activity on GDDP is maximal for the manufacturing and services sectors.

The Survey further notes that despite being the 3rd largest ecosystem for entrepreneurship in the world, India appears to have lower rates of formal entrepreneurship on a per-capita basis when compared to other countries.

The Survey points out that relative to entrepreneurial capabilities in manufacturing, Services and Infrastructure, entrepreneurial capabilities in the Agriculture sector seem to be distributed evenly across most districts in India. States in the highest quintile of relative entrepreneurial activity in the Agriculture sector are Manipur, Meghalaya, Madhya Pradesh, Assam, Tripura, and Orissa. Establishments in the North-East are more likely to be private enterprises in the food business such as organic produce farms and tea plantations while a majority of the establishments in Madhya Pradesh and Orissa are farmer producer companies, designed as hybrids between cooperative societies and private limited companies that organize farmers into a collective to improve their bargaining strength in markets.

The Survey notes that the entrepreneurial activity in the Manufacturing sector is highest in the regions of Gujarat, Meghalaya, Puducherry, Punjab, and Rajasthan. Within Gujarat, the most entrepreneurially active districts in the Manufacturing sector are Surendranagar, Rajkot, Bhavnagar, and Surat. Establishments in these regions are focused on textiles, chemicals, metals, plastics, and pharmaceutical manufacturing.

Measures to increase the literacy levels rapidly through the institution of more schools and colleges will spur entrepreneurship and consequently local wealth creation. The better connectivity of villages through tar roads will likely improve access to local markets and improve entrepreneurial activity. The policies that foster ease of doing business and flexible labor regulations foster entrepreneurial activity, especially in the manufacturing sector. As the manufacturing sector has the potential to create the maximum jobs, states must focus on enabling ease of doing business and flexible labor regulations to foster job creation, says the Economic Survey.

Insolvency and Bankruptcy Code Improves Resolution Process: Registering a 4-Fold Decline in Resolution Time

The Economic Survey 2019-20 highlights that The Insolvency and Bankruptcy Code (IBC) has improved the resolution process in India compared to the earlier measures. The IBC proceedings take 340 days on an average compared to 4.3 years earlier and resulted in the recovery of 42.5% amount involved compared to 14.5% under the SARFAESI Act. The Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman presented the Economic Survey in Parliament today.

The Economic Survey notes that monetary policy has remained accommodative in 2019-20 with a 110 basis point cut from 6.25% in April 2019 to 5.15% in October 2019. The Survey states that “low inflation and need to strengthen domestic growth by spurring private investment” guided the rate cuts by the Monetary Policy Committee (MPC) of RBI.

The Survey highlights that personal loans continue to grow at a steady and robust pace in 2019-20 while the overall Bank Credit growth has moderated from 12.9% in April 2019 to 7.1% in December 2019. The Economic Survey observes that Monetary Transmission has been weak, for instance, the Survey notes that Credit Spread i.e. the difference between Repo Rate and the Weighted Average Lending Rate (WALR) is at the highest level this decade.

Further, the Survey points out that Capital to Risk-Weighted Asset Ratio (CRAR) of Scheduled Commercial Banks (SCBs) has increased from 14.3% to 15.1% between March and September 2019. Similarly, Return on Assets (RoA) for SCBs recovered from (-) 0.1% to 0.4% during H1 of 2019-20. The Economic Survey finds that the Gross Non-Performing Advances (GNPA) ratio of SCBs has remained flat at 9.3% from March 2019 to September 2019.

Furthermore, the resolution Process Survey highlights that CRAR of the sector is at 19.5% in September 2019 as against a statutory requirement of 15 % also acknowledges the stress in the Non-Banking Financial Companies (NBFCs) as GNPA ( Gross Non-Performing Advances) increased from 6.1% in March 2019 to 6.3% in September 2019.

The Pre-Budget survey observes that Systematic Liquidity has largely been surplus since June 2019 despite some episodes of forex sales in July and August. The survey notes that the first half of 2019-20 witnessed softening of the 10-year benchmark G-Sec yield due to subdued crude oil prices, surplus liquidity and change in monetary policy stance of UD Federal Reserve. The yield went up slightly and remained at 6.8% in December 2019 as MPC kept repo rates unchanged.

The Survey highlights a 13.2% growth in Reserve Money as in December 2019 whereas Broad Money growth picked up marginally defying the declining trend since 2009. Similarly, the Capital Markets witnessed some green shoots with total Public Issue from Primary Markets increasing by nearly Rs. 30,000 Crores. The total cumulative investments by Foreign Portfolio Investors (FPI) in Indian markets increased by 7.8 % to US $ 259.5 billion as on December 31, 2019. The Survey also points out that India’s benchmark indices Nifty50 and S&P BSE Sensex have reached record highs during 2019-20.

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Key Highlights of Economic Survey 2019-20

The Union Minister for Finance & Corporate Affairs, Smt. Nirmala Sitharaman presented the Economic Survey 2019-20 in the Parliament today. The Key Highlights of the Economic Survey 2019-20 are as follows:

Wealth Creation: The Invisible Hand Supported by the Hand of Trust

Entrepreneurship and Wealth Creation at the Grassroots

Pro-business versus Pro-markets

Undermining Markets: When Government Intervention Hurts More Than It Helps

  1. Essential Commodities Act (ECA), 1955:
  1. Drug Price Control under ECA:
  1. Government intervention in Grain markets:
  1. Debt waivers:

 Analysis of debt waivers given by States/Centre:

Creating Jobs and Growth by Specializing in Network Products

Targeting Ease of Doing Business in India

 Close coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping and the different port authorities.

Individual sectors such as tourism or manufacturing require a more targeted approach that maps out the regulatory and process bottlenecks for each segment.

Golden jubilee of bank nationalisation: Taking stock

 In 2019, investment for every rupee in PSBs, on average, led to the loss of 23 paise, while in NPBs it led to the gain of 9.6 paise.

 Credit growth in PSBs has been much lower than NPBs for the last several years.

Employee Stock Ownership Plan (ESOP) for PSBs’ employees representation on boards proportionate to the blocks held by employees to incentivize employees and align their interests with that of all shareholders of banks.

 Creation of a GSTN type entity that will aggregate data from all PSBs and use technologies like big data, artificial intelligence and machine learning in credit decisions for ensuring better screening and monitoring of borrowers, especially the large ones.

Financial Fragility in the NBFC Sector

 Over-dependence on short-term wholesale funding.

Privatization and Wealth Creation

 Financial indicators such as net worth, net profit, return on assets (ROA), return on equity (ROE) etc of the privatized CPSEs, on an average, have improved significantly.

 Privatized CPSEs have been able to generate more wealth from the same resources.

Is India’s GDP Growth Overstated? No!

Thalinomics: The Economics of a Plate of Food in India

India’s Economic Performance in 2019-20

Fiscal Developments

External Sector

Monetary Management and Financial Intermediation

Prices and Inflation

Sustainable Development and Climate Change

o ‘Enabler’ by institutionalizing 30 Fellowships from the Member countries.

o ‘Facilitator’ by getting the lines of credit worth US$ 2 Billion from EXIM Bank of India and 1.5 Billion from AfD, France.

o ‘Incubator’ by nurturing initiatives like the Solar Risk Mitigation Initiative.

o ‘Accelerator’ by developing tools to aggregate demand for 1000 MW solar and 2.7 lakh solar water pumps.

Agriculture and Food Management

o Low credit in Hilly, Eastern and North Eastern states (less than 1 % of total agricultural credit disbursement).

o An important role in achieving the goal of doubling farmers’ income.

o Livestock sector has been growing at a CAGR of 7.9 % during last five years.

Industry and Infrastructure

Services Sector

Social Infrastructure, Employment and Human Development

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ICAI announces Empanelment of Chartered Accountants to Act as Observers at Examination Centres

The Institute of Chartered Accountants of India (ICAI) has announced the Empanelment of Members to act as observers at the Examination Centres for the Chartered Accountants Examinations May 2020.

The proposal to impanel members to act as Observers for the forthcoming MAY, 2020 Chartered Accountants (CA)  Examination likely to be held from 2nd to 18 th May 2020.

Eligibility criteria for Empanelment:

Members who fulfill the following criteria are eligible for empanelment, to act as Observers.

  1. He/she should not be more than 65 years of age as on the date of empanelment; i.e. 10th February 2020.
  2. His/her name should have been borne on the Register of Members as on 1 st November 2017 and continues to be so;
  1. He/she is not coaching students for any of the examinations/tests conducted by the Council of the Institute in any institutions/organization including Regional Councils / Branches of the Institute and also private coaching.
  2. He/she has not been convicted by any court of Law and no disciplinary proceedings are pending against him/her, either by the ICAI / Disciplinary Directorate or by any other organization, both in India or abroad.
  3. He/she is not associated with the Institute as an elected/co-opted member of the Council / Regional Council / Managing Committee of any Branch of the ICAI.

Honorarium

An honorarium of chartered Accountants Examination  1500/- per day / per session and  350/- as conveyance reimbursement for ‘A’ class cities and 250/- for other cities per day (to cover cost of local travel) besides reimbursement of postal, stationery, telephone expenses, if any, will be paid.

The list of “A” class cities is as under Ahmedabad, Bangalore, Chennai, Delhi/ New Delhi, Hyderabad/ Secunderabad, Jaipur, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, and Pune.

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US against Czech on Introduction of Digital Tax

The US filed a protest against the Czech proposal of Digital Tax of 7% on digital services. If the new regime is introduced, internet companies with a global turnover of €750 million an annual turnover of €4 million will be imposed with 7% digital tax. It was already known that the introduction of digital tax may result in countermeasures from the US. The measure was proposed because the internet magnate companies do not pay taxes and this turns out to be an unfair situation for other companies.

The proposed regime will bring an expected additional revenue of €198.5 million. It is an alarming situation as the companies will pass on the extra cost to the customers through high sales prices.

The Finance Minister affirmed that the Czech Republic will be supportive enough for finding common international solutions.

Ukraine proposes 20% VAT on Digital Services

The Ukraine Tax Authorities brought in the proposal of 20% Value-Added Tax (VAT) to be levied on digital services provided by foreign companies to Ukrainian customers.

The procedures for non-resident suppliers of electronic services to register for VAT purposes have not been clearly defined. The new drafted regime stated simplified procedures for the registration for VAT purposes by the foreign digital service companies that can be electronically transmitted over a web portal and also the rules for the Ukraine VAT accounting for foreign suppliers.

The proposal is on an expectation to increase revenue to Ukraine’s state budget and to design an efficient system for administration and tax-related procedures.

Dividend derived from Shares held as Stock in Trade can’t be disallowed: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) in the case of Gajanan Enterprises vs. ACIT held that the dividend which is derived from the Shares which are ‘stock in shares’ will not be computed in the total income and disallowance under Section 14A of Income Tax is sustainable.

The facts of the case is that the Gajanan Enterprises is a firm that is engaged in the trading of shares and security filed its return of income under income tax. Further on conducting an assessment the Assessing Officer got to know that the assessee firm has earned exempt dividend income. On finding this the Assessing Officer called the assessee and asked for an explanation, the assessee in reply stated that as the assessee was engaged in the business of trading of shares and security the provisions of disallowance i.e Section 14A is not applicable on it.

The issue raised was whether the income earned in the form of dividends out of the investment on Stock-in-trade should be considered for the purpose of computing the disallowance under Section 14A or not?

The ITAT bench comprising of Judicial Member Ravish Sood and Accountant Member S. Rifaur Rahman, in the light of the decisions given by the Supreme Court in the case of Maxopp Investment Ltd. vs. CIT, dismissed the appeal saying that the exempted income in the form of dividend of shares were held by the assessee as a ‘stock-in-trade’ and further the stock of shares held by the assessee were in the form of liquid and it was not reflected in ‘closing stock’ too. Therefore, keeping in mind all the facts on record held that the provision i.e. Section 14A of Income Tax relating to the disallowance is not sustainable.

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To Compound Tax Evasion Offences, Assessee should pay the Whole Tax Amount Evaded: Gujarat HC [Read Judgment]

The Gujarat High Court held that 100% of tax sought to be evaded is to be paid for compounding of a tax evasion offences under Section 276C (1) of the Income Tax Act, 1961, and not 100% of the amount sought on offence pertains to willful attempt to evade tax.

The petitioner was a partnership firm and dealing in the business of lubricating oil and petroleum products. The search was conducted on various premises of the petitioner on 11th October 1984.

During the course of the search, incriminating material such as books of accounts, written loose papers, etc. and 503 grams of gold ornaments were seized and were retained under section 132(5) of the Act.

In the scrutiny assessment proceedings, an assessment order was passed for the period from A.Y. 1983­84 to A.Y.1985­86 by the Assessing Officer making addition on account of cash credit, bogus purchases etc.

The division bench comprising of Justice J.B. Paridwala and Justice Bhargav D.Karia pronounced the judgement based on an appeal filed by Mehta Laboratories.

Section 276C (1) of the act elaborates as, If a person willfully attempts in any manner whatsoever to evade74 any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable.

The court examined petitioner’s contention that the Assessing Officer committed an error while working out the number of compounding fees paid by the petitioner, as the compounding fees is required to be paid on the basis of 100% of the tax evasion offences and not 100% of the amount of income sought to be evaded.

While relying on the decision of Supernova System (P.) Ltd. Vs. Chief Commissioner of Income Tax reported in [2018] 99 taxmann.com 300 (Gujarat) court held that the petitioner would be permissible of payment of 100% of the tax sought to be evaded and not 100% of the amount sought to be evaded by the assessee.

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GST Tribunal to deal with matters relating to Interest also: Punjab & Haryana HC [Read Judgment]

The Punjab and Haryana High Court has clarified that Goods and Service Tax Tribunal (GST Tribunal) will handle all disputes regarding interest on GST and their appeal.

The petitioner (Bhagat Cars Pvt Ltd) from September 2018- March 2019, had purchased motor vehicles on payment of GST. At the end of every month, the petitioner was having more ITC than output tax payable on the sale of motor vehicles. However, due to the delay in the reconciliation of sale discount claim figures with the manufacturer of vehicles, the petitioner failed to file a monthly return by the due date. The respondent by the impugned order has demanded interest on the entire output tax even though nothing was payable or paid from cash credit ledger.

The petitioner filed the writ petition on seeking a declaration that interest cannot be demanded on the ground of delay in filing return when more ITC than output liability was available at the end of the said tax period.

The division bench comprising of Justice Ajay Tewari and Avineesh Jhingan made the clarification on dealing with the disputes related to interest on GST and their appeal

The court clarified that all the disputes related to interest on GST and their appeal will be handled by GST Tribunal and directs commercial tax officer to supply a copy to the petitioner and to approach the Tribunal.

No Service Tax on Charging License Fee for Quick Heal Antivirus software: CESTAT [Read Order]

The Customs Excise Service Tax Appellate Tribunal (CESTAT) held that the Quick Heal Antivirus software is deemed goods but whether the transaction would be sale or service, would be depending upon the terms of the agreement.

The Appellant is engaged in the business of Research and Development of Antivirus Software under the brand name ―Quick Heal.

This Quick Heal Antivirus software was, therefore, sold by the aforesaid manufactures to the Appellant on payment of VAT. They were thereafter transferred by the Appellant to various Sales Offices of the Appellants from where the ultimate sale took place on payment of applicable VAT in the respective States.

The Appellant claimed that this activity was initially undertaken from Pune by sending the Master CD to the Replicators like M/s Sagarika Acoustronics Pvt. Ltd. and M/s Moser Beer India Ltd., who replicated the CD and supplied them to various branches/ sales offices of the Appellant where the CDs were packed in boxes bearing  MRP and sold after pasting a sticker bearing the license/ personal key number.

The Appellant paid Central Excise Duty on such pre-packaged Antivirus Software. The Jurisdictional Central Excise Authorities at Pune, however, formed a view that each of the Sales Offices where the Software was packed had to take separate registration and pay Central Excise duty from each of the Sale Offices situated in different parts of the country and not from the main office at Pune.

The Appellant, therefore, shifted the aforesaid activity to Baddi (Himachal Pradesh) and Rudrapur (Uttarakhand).

The CESTAT observed that the end-user was provided with a temporary/ non-exclusive right to use the Antivirus Software as per the conditions contained in the End User License Agreement3 and would, therefore, not be treated as a deemed sale under article 366(29A) of the Constitution.

The Order was pronounced by the Tribunal bench comprising of President Gupta and Technical Member Bijay Kumar on an appeal filed by Quick Heal Technologies Limited.

Deemed sales are elaborated as those which are not really “sales” but have been deemed as sales. For instance, leasing and hire purchase transaction works contract, transfer of right to use goods are instances of deemed sales that are taxed under the Sales Tax Act.

Article 366(29A) of the Constitution elaborates as tax on income includes a tax in the nature of an excess profits tax;  tax on the sale or purchase of goods includes, a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration.

The Tribunal observed that the Software was held to be goods‘, but whether the transaction would be sale or service, it was held, would depend upon the terms of the agreement.

The Tribunal also stated that the software is goods and whether the transaction would amount to sale or service would depend upon the individual transaction.

While allowing the appeal the bench also added that the transaction in the present Appeal results in the right to use the software and would amount to deemed sale‘ and not possible to accept the contention of the learned Authorized Representative of the Department that the transaction would not be covered under sub-clause (d) of Article 366(29A) of the Constitution.

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Delhi HC stays Restriction that Refund Period can’t be Spread across Two Financial Years and to be filed in Chronological Order [Read Order]

The Delhi High Court has stayed the Paragraph 8 of Circular No. 125/44/2019-GST dated 18.11.2019 which restricted that Refund Period can’t be spread across Two Financial Years and to be filed in Chronological Order.

The Petitioner Pitambra Books, who is engaged in the business of manufacturing and trading of books The business involves procuring raw materials and allied goods from the domestic market for manufacture of final product through its in-house manufacturing facility, which is then exported to markets in Sudan, Russia, Ethiopia, Guinea and other African/Asian countries, etc. The export activity of the petitioner is categorized as zero-rated supplies as defined under Section 16(1)(a) of the Integrated Goods and Services Tax Act, 2017.

The Petition has challenged the Circular No.37/11/2018-GST dated 15.03. 2018 and Circular No. 125/44/19-GST dated 18.11.2019.

Mr. Puneet Agrawal learned counsel for the petitioner submitted that owing to the restrictions imposed in the aforenoted circulars, Petitioner has been deprived of the benefit of availing refund claim of the unutilized input tax credit (ITC) for the period from April 2018 to June 2018. This is causing serious financial hardship as more than Rs.30 crores of the accrued and unutilized input tax credit, that is eligible for a refund is now lying stuck. The implementation of the aforesaid circulars on the GSTN portal has occasioned the disablement of the option for filing the refund of tax.

The Petitioner also submitted that the problem stems from paragraph 8 of impugned circular no. 125/44/2013/GST dated 18th November 2019, which inhibits refund claims for a period of two separate (not successive) financial years. He argues that this is in contravention of Section 44 as also Rule 89 of the IGST rules.

The division bench comprising of Justice Vipin Sanghi and Justice Justice Sanjeev Narula observed that we are of the prima facie view that by way of the impugned circulars, though the respondents recognize the difficulties faced by the exporters and have permitted them to file refund claim for one calendar month/quarter or by clubbing successive calendar months/quarters, yet the restriction pertaining to the spread of refund claim across different financial years is arbitrary, there is no rationale or justification for such a constraint.

While staying the Circular, the Court also directed the department to either open the online portal so as to enable the petitioner to file the tax refund electronically or to accept the same manually.

The impact of the Hon’ble High Court’s verdict is that now the restriction that refund period cannot be spread across two financial years and that refund period has to be filed in chronological order is no more maintainable and therefore assessee can file refund claim which spread across two financial years and for any period.

The applicant, at his option, may file a refund claim for a tax period or by clubbing successive tax periods. The period for which refund claim has been filed, however, cannot spread across different financial years. Registered persons having an aggregate turnover of up to Rs. 1.5 crore in the preceding financial year or the current financial year opting to file FORM GSTR-1 on a quarterly basis, can only apply for a refund on a quarterly basis or clubbing successive quarters as aforesaid. However, refund claims under categories listed at (a), (c) and (e) in para 3 above must be filed by the applicant chronologically. This means that an applicant, after submitting a refund application under any of these categories for a certain period, shall not be subsequently allowed to file a refund claim under the same category for any previous period. This principle/limitation, however, shall not apply in cases where a fresh application is being filed pursuant to a deficiency memo having been issued earlier.

The petitioner – who is engaged in the business of manufacturing and trading of books, is registered under the Goods and Service Tax (GST) Act. The business involves procuring raw materials and allied goods from the domestic market for manufacture of final product through its in-house manufacturing facility, which is then exported to markets in Sudan, Russia, Ethiopia, Guinea and other African/Asian countries etc. The export activity of the petitioner is categorized as zero-rated supplies as defined under Section 16(1)(a) of IGST Act, 2017.

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DGFT invites appropriate Suggestions on Misclassification of Goods under ‘ Others’ Category [Read Circular]

The Directorate General of Foreign Trade (DGFT) has invited appropriate suggestions on misclassification of goods under the ‘others’ category at the time import registration.

The members of the Trade and Industry were advised to suggest appropriate HS codes for goods they are importing under the ‘Others’ category where the existing HS codes are not sufficient.

HS codes elaborate as the Harmonized Commodity Description and Coding System, HS Code for short, is a common standard worldwide for describing the type of commodity that is shipped. Every commodity that enters or crosses most international borders has to be declared to customs using this code. Thus, the code helps to standardize and identify cargo in the same manner whether it is in Singapore, Mali or Rotterdam.

To facilitate data collection and for quick analysis, it is advised to submit the data online, in addition to any representation, in the form available on the link. Firms who have already given suggestions regarding ‘Others’ are also requested to fill the information.

The DGFT directed to submit the data on or before 16th February 2020.

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No TDS on payment of External Development Charges not made out of any Statutory and Contractual Liability: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT), held that the assessee was not required to deduct TDS as the payment of External Development Charges (EDC) was not made out of any statutory and contractual liability to HUDA with whom the assessee has no privity of contract.

The Appellant, M/s. Santur Infrastructure Pvt. Limited filed an appeal on the basis of information come on record during the survey proceedings conducted under section 133A of the Income Tax Act at the business/office premises of Haryana Urban Development Authority (HUDA), Assessing Officer (AO) noticed that the Tax Deducted at Source (TDS) was not made on payment of External Development Charges (EDC).

Consequently, it initiated the penalty proceedings u/s 271C of the Act. AO proceeded to hold that the assessee was statutorily bound to deduct TDS on the amount of Rs.10,11,00,000/- nor brought on record any evidence if the non-deduction/non-deposit of tax at source was beyond the control of the assessee company.

Thus assessee company has no reasonable cause within the meaning of section 273B of the Income Tax Act for non-deduction of tax at source and consequently, levied the penalty of Rs.20,22,000/- @ 2% of the EDC amount u/s 271C of the Act.

The division bench comprising of Judicial Member Kuldip Singh and Accountant Member R.K. Panda delivered the order based on an appeal filed by M/s. Santur Infrastructure Pvt. Limited.

While allowing the appeal, the Tribunal observed that the assessee was not required to deduct TDS as the payment of EDC was not made out of any statutory and contractual liability to HUDA with whom the assessee has no privity of contract.

The Tribunal also said that the assessee has reasonable cause for non-deduction of tax at source by the assessee company. It is not the case of the Revenue authorities that the assessee has intentionally avoided the deduction of TDS by bringing on record contumacious conduct of the assessee. With continuous clarifications by the CBDT and DTCP discussed, the issue became debatable if the TDS is to be deducted or not on the EDC providing reasonable cause to the assessee not to deduct the TDS.

In light of the decision of the Supreme Court in the case of CIT Vs. Bank of Nova Scotia in 380 ITR 550 has approved the decision of the Delhi High Court wherein, it has been held that it is necessary to establish ‘contumacious conduct’ on the part of the assessee for failure to deduct tax at source for levy of penalty u/s 271C of the act.

The Tribunal also added that all the recipients have also furnished a certificate that they have received the payment. Hence the Tribunal reverse the order of the ld CIT (A) confirming the levy of the penalty of 1152461/- u/s 271C of the Act in absence of any finding to show contumacious conduct on the part of the assessee.

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IT Assessment Order against Deepak Kochhar put on hold and Ordered to move First Appellate Authority: Bombay HC [Read Order]

The Bombay High Court while presiding over the question of the Assessment Order in the case of Deepak Kochhar passed an order that the Income Tax (IT) Assessment Order pertaining to the Assessment Year 2012-13 which was passed against Deepak Kochhar was put on hold and the High Court ordered to move to the First Appellate Authority.

In the case of Deepak Kochar vs. Commissioner of Income Tax, Deepak Kochar hereinafter the appellant is the husband of ex-ICICI Bank CEO Chanda Kochhar has challenged the Income Tax (IT) Assessment Order passed by the  Commissioner of Income Tax (IT) on the grounds that the petitioner has not availed the alternative remedy which is available to him. Further, the counsel for the appellant also contended that a certain amount was added in the income of Mr. Deepak Kochar after the Income Tax (IT) Assessment Order was passed without any notice of the same to the petitioner and also without hearing the petitioner. The assessing officer was devoid of deliberation the further addition in the amount of income. Therefore this is against the principle of natural justice and no question pertaining to alternative remedy arises.

The division bench of the Bombay High Court comprising of Justice Milind N. Jadhav and Justice Ujjal Bhuyan held within four weeks of passing of this order the appellant may move to the First Appellate Authority, challenging the Income Tax (IT) Assessment Order and till such remedy is availed by the appellant the Income Tax (IT) Assessment Order will be put on stay. Further, the division bench expressed no opinion in favour of the case or against the case, and thereby all the contentions were left open for the argument.

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GST not applicable to Labour Contract Services for Construction of Flats under PMAY: AAR [Read Order]

The Rajasthan Authority of Advance Ruling (AAR) held that Goods and Services Tax (GST) not applicable to labour contract service for construction of flats under Pradhan Mantri Awas Yojana (PMAY).

M/s Sunrise Construction Company (Party A) entered into an agreement with Government of Rajasthan for construction of 270 flats under affordable housing scheme under Pradhan Mantri Awas Yojana (PMAY) which includes material and labour.

Party ‘A’ further sublets the work to M/s Banna Ram Choudhary (party B) to construct above 270 flats under a separate work contract which includes material and labour. Party B further entered in a sub-contract with party C (the applicant) for “Pure labour Service” in said project. These labour services will be used for “Chunai and Plaster Work only” in the above-said project. The applicant will have all the control over the labour and responsible for dues and other concerns.

The government does the contract of housing development projects including material and labour and not merely for “pure labour services”. Main contractors further sublet the work to other sub-contractors for different types of work related to the project.

The AAR bench comprising of J.P Meera, Additional Commissioner and Hemanth Jain, Joint Commissioner delivered the ruling based on an application filed by M/s S.R.S Enterprises.

While going through the entry 10 of the notification, Authority observed following elements-

  1. Services by way of the pure labour contract,
  2. Work-related to construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original work;
  3. Pertaining to beneficiary-led individual house construction; or enhancement under the Housing for All (Urban) Mission; or Pradhan Mantri Awas Yojana.

The Authority further observed that the services of pure labour contract supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works under PMAY is exempted from GST vide Entry 10 of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 (as amended).

While allowing the application, the Authority also said that the services provided by way of pure labour contract supplied by the applicant for the construction of flats under Pradhan Mantri Awas Yojana (PMAY) are covered under Entry 10 of the Notification.

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