The 35th GST Council Meeting was held at New Delhi last day under the chairmanship of Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. This was the first meeting of the Council after the swearing in of the new Government. The meeting was also attended by Union Minister of State for Finance & Corporate Affairs Shri Anurag Thakur besides Revenue Secretary Shri Ajay Bhushan Pandey and other senior officials of the Ministry of Finance. The GST Council recommended the following changes related to law and procedure:
In order to give ample opportunity to taxpayers as well as the system to adapt, the new return system to be introduced in a phased manner, as described below:
On account of difficulties being faced by taxpayers in furnishing the annual returns in FORM GSTR-9, FORM GSTR-9A and reconciliation statement in FORM GSTR-9C, the due date for furnishing these returns/reconciliation statements to be extended till 31.08.2019
To provide sufficient time to the trade and industry to furnish the declaration in FORM GST ITC-04, relating to job work, the due date for furnishing the said form for the period July, 2017 to June, 2019 to be extended till 31.08.2019
Certain amendments to be carried out in the GST laws to implement the decisions of the GST Council taken in earlier meeting
Rule 138E of the CGST rules, pertaining to blocking of e-way bills on non-filing of returns for two consecutive tax periods, to be brought into effect from 21.08.2019, instead of the earlier notified date of 21.06.2019.
The 35th GST Council Meeting was the First Meeting of the Council after the swearing in of the new Government. The Meeting took place in a cordial and professional manner.
At the start of the Meeting, the Council passed a resolution acknowledging the stellar role played by Shri Arun Jaitley, the former Chairperson of GST Council and expressed its gratitude and appreciation for the exemplary contribution made by him in making the GST Council a shining example of co-operative federalism that it has become today. The Council also thanked the outgoing Members and welcomed the new Members of the Council. It also expressed its deepest condolences at the untimely demise of Shri Prakash Pant, the former Finance Minister of Uttarakhand.
Altogether, 12 Agenda items were discussed during the Council meeting. Some of these items were of regular nature like confirmation of the Minutes of the 34th GST Council Meeting, deemed ratification by the Council of notifications, circulars and orders issued by the Central Government between 12th March, 2019 and 11th June, 2019, taking note of the decisions of GST Implementation Committee, etc.
The Council took a decision regarding location of the State and the Area Benches for the Goods and Services Tax Appellate Tribunal (GSTAT) for various States and the Union Territories with legislature. It has been decided to have a common State Bench for the States of Sikkim, Nagaland, Manipur and Arunachal Pradesh.
The tenure of National Anti-Profiteering Authority (NAA) has been extended by 2 years.
The Council also decided to introduce electronic invoicing system in a phase-wise manner for B2B transactions. E-invoicing is a rapidly expanding technology which would help taxpayers in backward integration and automation of tax relevant processes. It would also help tax authorities in combating the menace of tax evasion. The Phase 1 is proposed to be voluntary and it shall be rolled-out from January 2020.
The Chandigarh bench of the Customs, Excise and Services Tax Appellate Tribunal (CESTAT) has held that Cenvat credit is allowable for courier service since the buyer has not taken delivery of the goods.
The tax department denied CENVAT credit on Courier service on the ground that the appellant is selling goods at their factory gate. The appellant claimed that they are sending the goods through courier and till the goods reach to the buyer’s place, the appellant is the owner of the goods. In case, the buyer refused to take the delivery of the goods, the goods were returned by courier to them. In such a circumstance, it was claimed that till the delivery of the goods to the buyer, they are the owner of the goods; therefore, in view of the CBCE Circular No. 10654/4/2018 dt. 08.06.2018, they are entitled to avail the Cenvat credit.
The Tribunal observed that as per by the version of Ld. A.R. if the goods are delivered at the buyer’s place, C.S.T. is not required to be charged.
“This is not the mandate of law. In fact, for any interstate sale, C.S.T. is required to be charged by any seller of the goods. By charging C.S.T. does not make the goods are sold at the factory gate. In fact, we have to see that in terms of the CBCE Circular No. 10654/4/2018 dt. 08.06.2018, what is the place of removal. In this case, the goods were sold through courier and till the goods are delivered to the buyer, the appellant is the owner of the goods, as in the case, buyers refuse to take the delivery of the goods, it is the duty of the courier to return back the goods to the appellant. In that circumstance, I hold that the goods have been delivered by the appellant at the buyer’s place and the place of the buyer is the place of removal in facts and circumstances of the case. Therefore, I hold that the appellant is entitled to avail the Cenvat credit on courier service. Therefore, I do not find any merit in the impugned orders, the same is set aside.”
Subscribe Taxscan Premium to view the JudgmentThe Tax Bar Association appealed to the Government for an extension of GST return filing for four months.
The Association, comprising over 400 members of chartered accountants, company secretaries, cost advocates and tax consultants, said that the government has made the entire GST procedure and filing of returns very “confusing with hundreds of changes in the rules and taxes”.
“The government made available GST annual returns 9, 9A and 9C for 2017-18 online in March, 2019 and offline in April, 2019, after nearly 20 months and they are giving only three months to understand and file the most complex return form in the history of Indian taxation,” Tax Bar Association (TBA) president Gopal Singhania said at a press conference.
“To illustrate the intensity, it may be noted that besides major amendment in the GST Act in February 2019, over 200 tax notifications, including amendments in rules, about 180 tax rate notifications, over 100 circulars, 20 orders, over 125 press releases and over 50 FAQ series and flyers have been issued till the date,” Singhania said.
Further, the press releases and clarifications on certain points “lack clarity” and at some places, these are “against the GST laws” and need reconsideration, while some clarifications have “even increased the confusion” already prevailing in the minds of tax payers, tax consultants and auditors, he added.
The Association further suggested that a one-time revision of monthly or quarterly returns is crucial need for proper filing of annual return and the due date of filing of GSTR 9, 9A and 9C for 2017-18 and 2018-19 should be notified to be kept together, so that a total reconciliation can be done for both the years.
“This will help in better compliance and reporting, especially the SMEs who have been struggling with increased accounting needs after GST.
Alternatively, the due date for filing GSTR-9, 9A and GSTR-9C for the year 2017-18 should be extended by at least four months till October 31, 2019,” he urged, adding the problems should be resolved with clear instructions in line with the prescribed law.
“The association’s Indirect Taxes Committee Chairman Bikash Agarwala said that the data auto populated in GSTR-9 does not match with monthly GST returns at many places and the form is also asking for the details, which were never required to be maintained since the inception of GST.
“It has not even been clarified as to what should be the basis of filing the annual return, GSTR 3B or GSTR 1 or books of accounts, Agarwala claimed.
TBA member Raginee Goyal stated that the audit report in Form-9C is asking auditor to certify “true and correct” instead of “true and fair”.
“So the age old concept of audit under indirect taxes has now undergone a significant change in the form GSTR-9C.
Hence, it is not justified to get the certification from auditor that the records are true and correct.
The Goods and Services Tax Network has issued troubleshoot related to DSC-Part A while filing form GSTR-9C on Goods and Services Tax (GST) Portal.
The GSTN has issued following directions for Taxpayers:
For further information click here.
The Maharashtra State Authority for Advance Ruling (AAR) has held that the GST is payable on the advisory and management fee received by the assessee in Indian currency from the domestic contributors for financial services provided to AIF Fund.
The applicant, an investment advisory firm, has proposed to set up a new investment vehicle, AIF Fund wherein funds from various domestic & overseas investors will be pooled in & invested in various portfolio companies in India as per AIF Regulations. The proposed AIF Fund is a contributory trust registered with the SEBI. The assessee submitted that before setting up the fund, the applicant undertakes fundraising activities. Later, the applicant is appointed as Investment Manager of the AIF Fund & provides several services. For providing such services, the applicant raised invoices at regular intervals.
Before the AAR, the assessee sought for clarification regarding its tax liability under the GST regime.
The AAR bench observed that the Advisory and Management Fees received by the applicant are for financial services rendered to the AIF. It was noted that as the location of both the applicant as well as the AIF is in India, the place of supply must be determined by applying provisions of Section 12 of the IGST Act. It was further noted that as both parties are within taxable territory & the services rendered by the applicant to AIF are taxable, hence GST is payable u/s 12(12) of the IGST Act: AAR
The AAR held that “the Advisory and Management Services are provided to the AIF, which is a separate legal entity which makes investment decisions on the advice of the applicant and therefore sub-section 12 of Section 12 of IGST Act, 2017 will apply in this case also as both supplier and the recipient of service are located in India. For the same reason, we do not agree with the applicant’s contention that the transaction with foreign investors should be determined in terms of Section 13 of the IGST Act, 2017 because the recipient of service i.e. AIF is not located outside India and the applicant are not providing any services to the Overseas Contributors, The transaction also do not qualify to be an export of service as the condition specified in sub-clause (ii) of Sub-section (6) of Section 2 of IGST Act,2017 that recipient of service should be outside India, is not satisfied, and therefore it is not a zero-rated supply. We also do not agree with the concerned officer’s submission that the applicant should be treated as a financial institution which distinctly falls under Sec. 13(8)(a) of the IGST Act, 2017.”
The Maharashtra State Authority for Advance Ruling (AAR) has held that the GST is payable on the advisory and management fee received by the assessee in Indian currency from the domestic contributors for financial services provided to AIF Fund.
The applicant, an investment advisory firm, has proposed to set up a new investment vehicle, AIF Fund wherein funds from various domestic & overseas investors will be pooled in & invested in various portfolio companies in India as per AIF Regulations. The proposed AIF Fund is a contributory trust registered with the SEBI. The assessee submitted that before setting up the fund, the applicant undertakes fundraising activities. Later, the applicant is appointed as Investment Manager of the AIF Fund & provides several services. For providing such services, the applicant raised invoices at regular intervals.
Before the AAR, the assessee sought for clarification regarding its tax liability under the GST regime.
The AAR bench observed that the Advisory and Management Fees received by the applicant are for financial services rendered to the AIF. It was noted that as the location of both the applicant as well as the AIF is in India, the place of supply must be determined by applying provisions of Section 12 of the IGST Act. It was further noted that as both parties are within taxable territory & the services rendered by the applicant to AIF are taxable, hence GST is payable u/s 12(12) of the IGST Act: AAR
The AAR held that “the Advisory and Management Services are provided to the AIF, which is a separate legal entity which makes investment decisions on the advice of the applicant and therefore sub-section 12 of Section 12 of IGST Act, 2017 will apply in this case also as both supplier and the recipient of service are located in India. For the same reason, we do not agree with the applicant’s contention that the transaction with foreign investors should be determined in terms of Section 13 of the IGST Act, 2017 because the recipient of service i.e. AIF is not located outside India and the applicant are not providing any services to the Overseas Contributors, The transaction also do not qualify to be an export of service as the condition specified in sub-clause (ii) of Sub-section (6) of Section 2 of IGST Act,2017 that recipient of service should be outside India, is not satisfied, and therefore it is not a zero-rated supply. We also do not agree with the concerned officer’s submission that the applicant should be treated as a financial institution which distinctly falls under Sec. 13(8)(a) of the IGST Act, 2017.”
Subscribe Taxscan Premium to view the JudgmentThe Institute of Banking Personnel Selection ( IBPS ) has invited application from Chartered Accountants for the post of Officer Scale-II (Specialist Officers).
The online examinations for the next Common Recruitment Process for RRBs (CRP RRBs VIII) for recruitment of Group “A”-Officers (Scale-I, II & III) and Group “B”-Office Assistant (Multipurpose) will be conducted by the Institute of Banking Personnel Selection (IBPS) tentatively in August and September 2019.
The interviews for recruitment of Group “A”- Officers (Scale-I, II & III) under the same process will be coordinated by the Nodal Regional Rural Banks with the help of NABARD and IBPS in consultation with appropriate authority tentatively in the month of November 2019.
Last Date: 4th July 2019
Number of Vacancies: 24 Posts
Educational Qualification: Member of Institute of Chartered Accountants of India.
Age Limit: Above 21 years – Below 32 years i.e. candidates should not have been born earlier than 03.06.1987 and later than 31.05.1998 (both dates inclusive)
Application Fee: Application Fees/ Intimation Charges (Online payment from 18.06.2019 to 04.07.2019 both dates inclusive) Officer (Scale I, II & III) – Rs.100/- for SC/ST/PWBD candidates. – Rs.600/- for all others Office Assistant (Multipurpose) – Rs.100/- for SC/ST/PWBD/EXSM candidates. – Rs.600/- for all others Bank Transaction charges for Online Payment of fees/ intimation charges will have to be borne by the candidate.
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The National Academy of Customs, Indirect Taxes and Narcotics (NACIN) has declared GST Practitioners Exam Results.
NACIN has conducted examination for confirmation of enrollment of Goods and Services Tax Practitioners (GSTPs) in terms of the second proviso to sub-rule (3) of rule 83 of the Central Goods and Services Tax Rules, 2017. The examination was held on 14.06.2019 at twenty centres across India.
The GSTPs enrolled on the GST Network under sub-rule (2) of rule 83 and covered by clause (b) of sub-rule (1) of rule 83, i.e. those meeting the eligibility criteria of having enrolled as sales tax practitioners or tax return preparer under the existing law for a period not less than five years, were eligible to appear in this exam. 2.
The result of the above-mentioned exam, including marks obtained, has been made available individually to all GSTPs who had appeared in the examination through emails and also on the Exam Portal at Candidates’ dashboard.
For Results Click here.
The Pune ITAT, in a recent ruling, held that the tax rates applicable to individuals are also applicable to deities under the income tax law.
The assessee is a Trust formed in 1968 and the object of the Trust inter-alia was the maintenance and upkeep of Shri Vijay Durga Devi Devasthan, Keri, Goa. Before the Tribunal, the assessee claimed that the sole beneficiary as per the Trust Deed is the Deity and that the Deity being a juristic person, it can hold property and be in receipt of income and for this proposition he relied on the decision of Hon’ble Apex Court in the case of Official Trustee of West Bengal Vs. CIT. it was also claimed that since the sole beneficiary is the Deity having the status of an “individual”, the tax rates applicable to individual would apply to it. In support of their contentions, they relied on the decision in ITO Vs. Shri Hanuman Mandir Trust. It was also submitted that in the present case since the entire income belonged to only since person, i.e. the Deity, provisions of Sec.167B of the Act are not applicable and therefore, the assessee be allowed the basic exemption limit as applicable to an individual.
After hearing the rival contentions, the Tribunal observed that the trust has been created in the year 1968 and as per the trust deed, the entire income is to be used for the upkeep of Deity. It is also an undisputed fact that the Deity is the sole beneficiary of the Trust.
“It is also a fact that there is no dispute with respect to the status of the assessee and the income returned by the assessee. The only dispute is whether the tax has to be computed on the basis of tax rates applicable to an individual or the provisions of Sec.167B would apply. The perusal of Sec.167B of the Act reveals that the provision applies to an association or persons or body of individuals where its income is indeterminate or unknown then the tax shall be charged at the maximum marginal rate. In the present case, it is a fact that the Deity is the sole beneficiary and it is not a case where the share of its income is unknown or indeterminate. In such a situation I am of the view that provisions of Sec.167B would not be applicable and since the Deity is a juristic person and having the status of an individual, as held by Hon’ble Apex Court in the case of Official Trustee of West Bengal (supra) the tax rates and the slabs as applicable to an individual would apply. I therefore hold so. I therefore direct that the tax slab as applicable to individual be applied to the assessee,” the Tribunal said.
Subscribe Taxscan Premium to view the JudgmentThe Bangalore Bench of the ITAT has recently granted relief to the e-com giants Flipkart India by deleting the additions made by the tax department.
While completing assessment proceedings against the assessee, the Assessing Officer held that the losses incurred by the Assessee were to create marketing intangibles assets and therefore the loss to the extent it is created due to predatory pricing should be regarded as capital expenditure incurred by the Assessee and should be disallowed. It was also held that the value of marketing intangibles should be considered as an asset used for the purpose of the business for which the Assessee should be eligible to claim depreciation at 25%.
Relying on the decision in assessees’ own case, the Tribunal observed that the starting point for computing income from the business is the profit or loss as per the profit and loss account of the Assessee, which cannot be disregarded unless certain provisions [Section 145(3)] of the IT Act are invoked. Since the AO has not invoked such provisions, the AO is not empowered to go beyond the book results.
The Tribunal recalled that in that case, it was held that it is settled law that “where a trader transfers his goods to another trader at a price less than the market price and the transaction is a bonafide one, the taxing authority cannot take into account the market price of those goods, ignoring the real price fetched to ascertain the profit from the transaction” and “income which has accrued or arisen can only be subject matter of total income and net income which could have been earned but not earned”. It was held that “the AO was not right in proceeding to ignore the books results of the Assessee and resorting to a process of estimating the total income of the Assessee in the manner in which he did, what can be taxed is only income that accrues or arises as laid down in Sec.5 of the Act. Nothing beyond Sec.5 of the Act can be brought to tax”.
The Tribunal concluded that the action of the Revenue in disregarding the books results cannot be sustained and the further conclusion that the action of the Revenue in presuming that the Assessee had incurred expenditure for creating intangible assets/brand or goodwill is without any basis. Accordingly, the loss declared by the Assessee in the return of income should be accepted by the AO and the action of disallowing the expenses without any basis.
Based on the above findings, the Tribunal granted relief to the assessee and held that the aforesaid conclusion of the Tribunal will equally apply to AY 2012-13 to 2014-15 also as the basis of making the addition in these AYs are also the same as it was made in AY 2015-16.
“The allegation of the revenue regarding the Assessee and M/S.WS Retail Pvt.Ltd., being related parties does not emanate from the order of assessment. The revenue cannot be permitted to take a stand which was not the factual basis on which addition was made by the AO. Even otherwise, there is no basis for the stand taken by the revenue in the grounds of appeal. We, therefore, find no merit in these appeals by the revenue. Respectfully following the order of the Tribunal in Assessee’s own case for AY 2015-16, we uphold the orders of the CIT(A) and dismiss, these appeals by the revenue,” the Tribunal added.
Subscribe Taxscan Premium to view the JudgmentThe Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that the revisional jurisdiction under section 263 of the Income Tax Act cannot be invoked by the Commissioner if the assessment in question is already held as bad in law.
The question before the Tribunal was that where the assessment order passed by the Assessing Officer is admittedly void, can there be any exercise of jurisdiction by the Commissioner under section 263 of the Act against such void order which in fact did not exist in law.
The assessment against the assessee was re-opened after a search on the ground that certain documents were found relating to the assessee. The assessee submitted that since the system was not allowing it to file the revised e-return then the return of the income originally filed be treated as filed in response to the notice under section 148 of the Act. The assessee sought the reasons for reopening the assessment from the Assessing Officer. The Assessing Officer did not take cognizance of the same and issued the notice under section 142(1) of the Act. On a later date, the assessee filed the return of income at Nil and the Assessing Officer issued a notice under section 143(2) of the Act in 2015. On 03-03-2015, the reasons recorded for reopening the assessment were communicated to the assessee against which the assessee filed the objections. It was claimed that while finalizing the assessment order, the objections were dealt with in the body of the assessment order itself and simultaneously the Assessing Officer completed the assessment in the hands of the assessee.
Later, the Commissioner of Income Tax, under section 263 of the Income Tax Act revised the said order.
The Tribunal observed that “when the assessment order is void and did not exist in law, the question which arises is whether the Commissioner can exercise his revisionary jurisdiction under section 263 of the Act against the same. The answer to the same is No. The Commissioner can exercise the jurisdiction under section 263 of the Act where the assessment order is live. In case the order is void, then the same cannot be held to be erroneous and prejudicial to the interest of revenue. We find no merit in the exercise of jurisdiction by the Commissioner in this regard, where he himself admits that the assessment order was void.”
Based on the judicial precedents, the Tribunal held that “where the Commissioner himself has given a finding that the re-assessment proceedings have not been correctly carried out against the assessee and the Assessing Officer has failed to fulfil his obligation, then under such circumstances where, he has also held that “since, the copy of reasons recorded for re-opening of the assessment were not furnished to assessee till date of completion of assessment, the order of the AO is void”, then revisionary jurisdiction cannot be exercised against such order. When the said order is void and did not stand in law, it cannot be held to be erroneous and prejudicial to the interest of revenue by the Commissioner. Consequently, the exercise of jurisdiction under section 263 of the Act in the present case, is not justified and is bad in law.”
Subscribe Taxscan Premium to view the JudgmentWith a view to boost the synergy between university education and professional education, the Gujarat University has decided to start a certificate course on Goods and Service Tax ( GST ).
This is with an aim to enhance employability and remain relevant, the School of Commerce at the Gujarat University, through two months of the certificate course, will provide knowledge regarding compliance and legal aspects of GST.
This course will be offered and managed by Sheth Damodardas School of Commerce of the Gujarat University and the infrastructure will also be provided by them too.
Officials at the GU said, “The Ahmedabad branch of WIRC of Institute of Chartered Accountants of India (ICAI) has provided technical inputs for the course curriculum. The syllabus has been designed by WIRC. The faculty will consist of reputed CAs and experts.”
According to reports, the course will be offered twice in an academic year and will be conducted five days a week. The course will be offered to students, who have completed their graduation and postgraduation in any discipline from a recognised university. The last date of form submission is June 25.
While dismissing a Writ Petition against Dream11, a fantasy sports platform, the Bombay High Court has observed that It is undoubtedly a game of skill and not a game of chance.
The petitioner Gurdeep Singh Sachar claims himself as a public-spirited advocate sought directions to initiate criminal prosecution against the respondent No.3- a Company named “Dream 11 Fantasy Pvt. Ltd.”, firstly for allegedly conducting illegal operations of gambling/betting/wagering in the guise of Online Fantasy Sports Gaming, which as per the petitioner shall attract penal provisions of Public Gambling Act, 1867, and secondly for alleged evasion of Goods & Service Tax (GST) payable by it by violating the provisions of GST Act and the Rule 31A of CGST Rules, 2018.
The division bench comprising of Justice Ranjit More and Justice Bharati Dangre observed that, “Since the actionable claim in the Online Fantasy Sport Gaming of the respondent No.3 are amongst such actionable claims as per Schedule III and Section 7(2) of the Act, which are not considered as ‘supply of goods’ or ‘supply of services’, Rule 31A has no application. Moreover, actionable claim referred to in Rule 31A is limited to only activities or transactions in the form of chance to win in “lottery” or “betting” or “gambling” or “horse racing in a race club”. Thus, Rule 31A which is restricted only to such four supplies of actionable claim has no application in this case”.
The Petitioner also submitted that, is liable GST @ 28%, however, respondent No.3 wrongfully, to evade tax, claims classification under entry 998439 on the sum received by it as platform fees.
The bench also said that, The said entry evidently covers a host of online games which are intended to be played on the Internet and involve payment by subscription, membership fee, pay-per-play or pay per view. The said entry, however, excludes online gambling services. Since the Online Fantasy Sports Gaming of respondent No.3 is not gambling services, the respondent No. 3 is not in error in paying GST under this entry for its online gaming activities, by paying applicable GST @ 18%.
“It can be seen that success in Dream 11’s fantasy sports depends upon user’s exercise of skill based on superior knowledge, judgment and attention, and the result thereof is not dependent on the winning or losing of a particular team in the real world game on any particular day. It is undoubtedly a game of skill and not a game of chance. The attempt to reopen the issues decided by the Punjab and Haryana High Court in respect of the same online gaming activities, which are backed by a judgment of the three judges bench of the Apex Court in K. R. Lakshmanan that too, after dismissal of SLP by the Apex Court is wholly misconceived”, the bench also added.
Subscribe Taxscan Premium to view the JudgmentThe 20th Meeting of the Financial Stability and Development Council ( FSDC ) was held here today under the Chairmanship of the Union Minister of Finance and Corporate Affairs, Smt. Nirmala Sitharaman.
The FSDC Meeting was also attended by Shri Anurag Thakur, MoS (Finance &Corporate Affairs), Shri Shaktikanta Das, Governor, Reserve Bank of India (RBI); Shri Subhash Chandra Garg, Finance Secretary and Secretary, Department of Economic Affairs; Shri Rajiv Kumar, Secretary, Department of Financial Services; Shri Injeti Srinivas, Secretary, Ministry of Corporate Affairs; Shri Ajay Bhushan Pandey, Revenue Secretary; Dr. Krishnamurthy V. Subramanian, Chief Economic Adviser, Ministry of Finance; Shri Ajay Tyagi, Chairman, Securities and Exchange Board of India; Shri Subhash Chandra Khuntia, Chairman, Insurance Regulatory and Development Authority of India(IRDAI); Dr. M. S. Sahoo, Chairperson, Insolvency and Bankruptcy Board of India (IBBI); Shri Ravi Mital, Additional Secretary, Department of Financial Services & in charge, Chairperson, Pension Fund Regulatory and Development Authority(PFRDA); and other senior officers of the Government of India and the Financial Sector Regulators.
The Meeting reviewed the current global and domestic economic situation and financial stability issues including, inter-alia, those concerning Banking and NBFCs.
The Council was also apprised of the progress made towards setting-up of the Financial Data Management Centre (FDMC) to facilitate integrated data aggregation and analysis as also a Computer Emergency Response Team (CERT-Fin) towards strengthening the cyber security framework for the financial sector.
The Council also held consultations to obtain inputs/ suggestions of the financial sector regulators for the Budget. All the regulators presented their proposals for the Union Budget 2019-20.
The Council also took note of the activities undertaken by the FSDC Sub-Committee Chaired by Governor, RBI and the action taken by Members on the decisions taken in earlier Meetings of the Council.
Introduction
India is en-route to turn itself into a 21st-century super-economy fuelled by the unprecedented growth of its business enterprises. The business may grow in two ways – either in an organic way or inorganic. The former refers to the internal forces of the enterprises which are re-organised to bring in development and growth into the business, whereas, in case of inorganic growth, the company goes into corporate restructuring to re-align its external facade to fuel the planned development and growth. In today’s fast moving corporate environment, corporate restructuring happens to be the most ideal tool to win an advantage in this pursuit.
Business restructuring is a comprehensive process, be it financial or technological or market or organisational. Business can be re-arranged by way of mergers, demergers, disinvestments, takeovers, strategic alliance or slump sale.
This article focusses on implications of GST on slump sale.
Concept of Slump sale
The concept of slump sale comes from the Income Tax Act, 1961. The IT Act, in section 2(42C) defines “slump sale” as – “slump sale” means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales.” Further as per explanation 1 to section 2(19AA), “undertaking” shall include any part of an undertaking or a business activity taken as whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity.
Therefore, slump sale contains the following conditions:
Transfer of all assets and liabilities
One of the major precondition of a slump sale transaction is that all assets and liabilities of the business undertaking must be transferred to the buyer.
As per Section 50B of IT Act, the cost of acquisition of such sale shall be the net worth (book value of assets and liabilities) of the undertaking.
Explanation1 provides the method of computing the net worth of an undertaking or a division sold on slump sale basis. As per Explanation 1 “For the purposes of this section, “net worth” shall be the aggregate value of total assets of the undertaking or division as reduced by the value of liabilities of such undertaking or division as appearing in its books of account.” This definition is no different from the meaning of the expression ‘net worth’, as is commonly understood in the accounting parlance.
There are various judicial pronouncements where there is difference of opinion that it is not essential to transfer all assets and liabilities for a transaction to qualify for a slump sale. That is to say, that even if some assets are retained by the transferor and the undertaking after such transfer carries out its business activities without any obstruction, it shall still qualify to be a slump sale. The same has been substantiated by Bombay High Court in its ruling.
Since all assets and liabilities are to be transferred in a slump sale, it is important for one to understand the concept of going concern which is discussed at length below.
Going Concern concept
The terminology “going concern” is not precisely mentioned in the definition of slump sale. Transfer as a going concern means transfer of a business or a unit which is capable of being carried on by a purchaser as an independent business. To constitute a slump sale, it is not necessary that the business is ongoing at the time of its transfer.
Going Concern is a fundamental accounting assumption and Accounting Standard 1, Disclosure of Accounting Policies defines it as follows:
“The enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the operations.”
To constitute a slump sale all the assets and liabilities of the undertaking are to be transferred. Therefore it can be said that companies whose operations are shut and is into liquidation may also opt for slump sale provided the conditions mentioned above are met. The intention of such condition is to ensure that the business will continue in the new hands with regularity and a nature of permanency.
Further it is not necessary that the entity should be a profit making company. The only valid point to be considered for a transfer to constitute as a “going concern” to mean if it constitutes a business activity capable of being run independently for a foreseeable future. Such views were taken In the Matter of M/S. Indo Rama Textiles Ltd.
The term “going concern” has no place in the GST Act. However one can refer to the pronouncement of the Advance Authority Ruling in case of Rajashri Foods Pvt Ltd for the same as mentioned below:
A going concern is a concept of accounting and applies to the business of the company as a whole. Transfer of a going concern means transfer of a running business which is capable of being carried on by the purchaser as an independent business. Such transfer of business as a whole will comprise comprehensive transfer of immovable property, goods and transfer of unexecuted orders, employees, goodwill etc.
The transfer of business assets implies where the part of assets are transferred and not the whole business, i.e. the liabilities remain in the books of the transferor, whereas in transfer of business all assets and liabilities are transferred together. The concept of transfer of going concern comes handy when the business as a whole is transferred, however case laws and analysis do suggest the likelihood of transfer of assets as a going concern.
Slump sale: supply of good or supply of service under GST Act?
To understand the applicability of GST on a slump sale transaction, it is imperative to throw light on the word “supply” under the GST Act. It is explicitly discussed that for GST to be levied, there must be a case of “supply”. Therefore, we shall now refer the scope of supply as mentioned in Section 7 of the (Central Goods and Services Tax Act 2017 (CGST Act) which is as follows:
“(1) For the purposes of this Act, the expression “supply” includes––
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Supply includes activities such as sale, transfer, barter etc for a consideration in the course or furtherance of business. From this we can infer that the activities shall take place in the course or furtherance of business. Coming to slump sale, the transaction is neither during the course of business nor in persistence of business. However since the word “includes” has been used in the definition in Section 7 (1) of the CGST Act, the scope of supply goes beyond the course or furtherance of business. Therefore the transfer as a going concern shall also be treated as “supply” under GST.
As slump sale is considered to be a supply under GST, we should now understand if the same constitutes to be goods or services.
The term goods has been defined under section 2(52) of the CGST Act as:
“(52)“goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;”
Further definition of “Service” as per section 2(102) of the CGST Act defines the term service as:
“(102)“services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.”
Clause 4(c) of Schedule II of CGST Act states that
“(c) where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless—
(i) the business is transferred as a going concern to another person; or
(ii) the business is carried on by a personal representative who is deemed to be a taxable person.”
Schedule II of the CGST Act talks about activities to be treated as a supply of good or supply of service wherein Clause 4, transfer of business assets has been considered as supply of goods. In Clause 4(c ) the transfer of a business as a going concern does not constitute a supply of goods.
As per the definition of services, anything other than goods is called a service. Business transferred as a going concern is excluded from the list of supply of goods. Since the schedule specifically excludes this activity, it becomes very obvious that the transfer of a business as a going concern is considered to be a supply of service.
Ministry of Finance vide its notification no 12/2017- Central Tax (Rate) dated 28th June 2017, came out with a list of supply of services and further brought clarity on “service by way of transfer of a going concern, as a whole or an independent part thereof” in serial no 2 of the said notification to constitute undersupply of service. Further, the activity of transfer of a going concern shall have “nil” rate of tax on such supply.
Since the notification talks about the activity of transfer of a going concern as a supply of service and the same is exempt from the purview of GST. Similarly, Schedule II of the CSGT Act excludes the transfer of a business as a going concern as the supply of goods, the same shall be considered as a supply of service and GST shall be levied.
It shall be inferred that transfer of a going concern as a whole or a part there or transfer of a business as a going concern is tax-exempt under GST and transfer of business assets will have GST implications.
The above can be further justified by referring to the judgement passed by the Tax Authority of Advance Ruling in Karnataka in the case of Rajashri Foods Pvt Ltd where it was decided that subject to the condition that the unit being transferred is a going concern, it will be considered as a supply of service and the same shall be exempt from the payment of GST to the extent leviable under subsection (1) of Section (9) of the CGST Act, 2017.
Itemisation of assets for levy of GST
In a slump sale, assets proposed to be transferred consist of both movable and immovable property i.e. land, building, stock, plant and machinery etc. Since these assets and liabilities are sold together for a lump sum consideration it does not tantamount to a “mixed supply” under GST.
Let us first understand the concept of mixed supply under GST
Section 2(74) of the CGST Act defines mixed supply as under:
“(74) “mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.”
To constitute a mixed supply, there has to be two or more supplies of goods or services and they have be in conjunction with each other. Therefore if the item in the bundle are neither goods nor services, it will not be considered a mixed supply under GST.
Let us understand the same with the help of an example. Suppose the assets being transferred to the buyer are plant & machinery, land and stock for a single price. Here there are more than one good transferred in the transaction. The bundle is not exclusively that of goods or services or both. The same will not qualify to be a mixed supply as land being transferred is excluded from the purview of GST (As per Schedule III of the GST Act which enumerates items which are neither supply of good nor supply of services).
Referring to the above example we may say that all legs of the definition should be satisfied for it to become a mixed supply. Merely because multiple items are sold for a single price should not, by the very fact render them as “mixed supply”. In so far as movable assets being concerned, it would be treated as supply of goods and is likely to attract GST.
Conclusion
Slump sale may be of an on-going business/unit or transfer of a stalled business/unit where the intent of the transferee is to run the entity. It can be said that when there is a transfer of business and not of that of assets, in order to insulate from GST, it would require evaluation whether the transfer is as a going concern or not.
The transaction of transfer of a business as a whole of one of the units in the nature of going concern amounts to the supply of service. The notification holds good, but subject to the condition that the unit is a going concern and therefore the same shall be free from the GST purview.
To summarise on the above-discussed concept
The revival of companies will definitely be more cost-effective than setting up a new structure altogether. Also, this will give a push to the investors to take over such companies and create more job opportunities in India.
The Chennai bench of the Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the exemption under Section 54F of the Income Tax Act, 1961 has held that the exemption is allowable merely on the basis of the agreement without the evidence of payment of the purchase of new flat.
During the year under consideration, the assessee sold a plot and claimed a capital gain exemption under section 54F towards investment in the new flat. However, the assessee has not produced any construction agreement with the builder. The payment through three cheques for a total amount of Rs. 59,22,521/- before the due date of filing of return of income under section 139 of the Act was not in dispute.
The Assessing Officer denied the exemption by holding that the assessee has not produced any agreement entered into with the builder for the purchase of flat before the authorities proving the claim of three payments made for the purchase.
Before the Tribunal, the revenue contended that mere agreement without payment evidence, the authorities below have rightly denied the claim of deduction and pleaded for upholding the same.
The Tribunal held that when there was no clarity on the purpose for which the assessee made with the builder, under section 133 of the Act, the Assessing Officer would have called for details/explanation from the builder, which was not done by the Assessing Officer.
“Since the assessee has paid a sizeable amount towards the purchase of new flat out of the sale consideration, the Department cannot deny the claim of deduction under section 54F of the Act. However, the reason for not filing a copy of the purchase agreement with the builder against which the payment was made by the assessee was not explained. The assessee is liable to file complete details for claiming any deduction under the Income Tax Act, otherwise, such deduction is not allowable.”
“Since there was a long delay in construction of the property, the assessee made a request dated 18.08.2014 for withdrawal of the amount paid and the entire amount of Rs.59,22,521/- was refunded to the assessee on 06.02.2015. However, the assessee has not furnished any evidence of payment of Rs. 59,22,521/- with the builder with whom the assessee has entered into an agreement for the purchase of a new flat. Without furnishing payment details, the assessee’s claim cannot be entertained. In view of these facts and circumstances, we direct the assessee to furnish complete evidence towards payment of the above amount before the Assessing Officer for verification and the details are found to be correct, the assessee can be allowed to claim deduction under section 54F of the Act and otherwise not,” the Tribunal said.
Subscribe Taxscan Premium to view the JudgmentWhile responding to the criticism from various quarters for framing question in its Chartered Accountancy (CA) exam about “Namo and Raga” by asserting that the organisation has no political affiliations, the Institute of Chartered Accountants of India ( ICAI ) clarified that it is an independent agency.
The ongoing examination for Chartered Accountants (CA), conducted by the Institute of Chartered Accountants of India (ICAI), has sparked a debate with the use of abbreviated names “Namo” and “Raga” of two of the country’s most recognisable political figures in a question paper. In the Advanced Accounting question paper on June 6, students were asked about the balance sheets of two companies namely Namo Ltd and Raga Ltd going for a merger.
This was followed by criticism as the institute is an independent body and not politically aligned to any party. Some made fun of the question on social media.
After the examination which was held on 6 June, the Congress party raised an objection by alleging that it was motivated by politics. As per Congress spokesperson Sachin Sawant, there was a “clear political agenda behind the question and there was no need to introduce political names in question papers”.
ICAI’s member of examination committee Dugesh Kabra in response dismissed the allegations of political agenda and asserted the non-political nature of ICAI. He though claimed that it was no possible to know the name of the individual who framed the question as it goes through multiple layers of processing.
The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has held that notional rent cannot be applied to determine house property income towards an old non-habitable house which is not capable to let out.
The assessee inherited a house from his mother. The Assessing Officer demanded tax from the property under the head “income from house property” on a notional basis.
Before the authorities, the assessee claimed that the house is in dilapidated condition in a village situated in the State of Rajasthan which is not habitable at all and, therefore, cannot be let out to anybody so, therefore, it was pleaded before the AO that by invoking the deeming provision it should not be taxed.
However, the AO did not agree and he estimated the annual lettable value at Rs.1,20,000/- per annum and after having given the standard deduction of 30% on it made an addition of Rs.84,000/-. On appeal, the CIT(A) confirmed the action of AO.
After hearing the contentions from both the sides, the Tribunal noted that a house property was inherited by the assessee in his native village situated at Rajasthan which was duly shown in his Balance Sheet.
“Since the assessee has a residential house at Kolkata, the AO invoked sec. 22 and 23 of the Act, estimated the annual lettable value at Rs. 1,20,000/-, i.e. Rs.10,000/- per month. It was brought to our notice that the house in question is an old house, which is in a dilapidated condition and so it is not habitable. Therefore, according to Ld AR, the question of letting out of the property does not arise. It was also brought to our notice that no inquiry was carried out by the AO before estimating the annual lettable value of the house despite the assessee pointed out this fact to the AO that the house in question is an old house, which is in a dilapidated condition and so it is not habitable and therefore, the question of letting out of the property does not arise. Taking in to consideration the aforesaid facts, in the interest of justice and fair play, I set aside the order of Ld. CIT(A) and restore the matter to the file of AO to verify the contention of the assessee that the house in question is in a dilapidated condition and not habitable. The AO after making enquiries finds the contention of the assessee to be correct then no deemed provision of sec. 22 read with section 23 should be saddled on the assessee. If the contention of the assessee fails and the house is habitable then the AO to make reasonable annual letting value considering the location and rent which the house could fetch in that locality in accordance to law after hearing the assessee,” the Tribunal said.
Subscribe Taxscan Premium to view the JudgmentThe Infosys India Limited has invited applications from Chartered Accountants for the post of Associate Finance.
Skill(s): Financial Accounting
Experience Range: 01-03 years
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Location(s): Bhubaneswar
Interview location: Kolkata
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The Central Board of Indirect Taxes and Customs ( CBIC ) has notified a set of regulations before confiscation of goods and for issuing the notice for non-payment of duty or interest under section 28 and 124 of the Customs Act, 1962.
The regulations are applicable with effect from 18th June 2019.
“These regulations shall apply to the notices issued under clause (a) of sub-section (1) or in subsection (4) of section 28 or under the second proviso to section 124 of the Act including those which have not been adjudicated on the date of enforcement of these regulations,” the Notification said.
As per the notification, where a notice has been issued under section 28 or section 124 of the Act, a supplementary notice may be issued by the proper officer in any of the following circumstances., (a) in case there is a difference in the quantum of duty demanded in such notice including the cases which may necessitate change in adjudicating authority; (b) for invoking penal action under the provisions of the Act against a person/persons in addition to those charged in such notice; (c) for invoking additional section/sections of the Act in such notice; (d) in case there is any additional evidence that may have a significant bearing on the outcome of the case.
Where a notice has been issued under section 28 or section 124 of the Act, the supplementary notice shall be issued within the time limit as prescribed in the relevant sections of the Act.
Subscribe Taxscan Premium to view the JudgmentThe Ministry of Corporate Affairs ( MCA ) has informed that the facility to file the E-ACTIVE forms have been temporarily stopped to complete tagging of non-compliant companies and Directors. However, the same shall be restored soon with a facility to file with fees, the Ministry said in a statement.
“The Tagging of non-compliant Companies/Directors for not filing eForm Active(INC-22A) is in progress. To facilitate completion of the activity, e-filing of the form (ACTIVE) has been suspended temporarily. The same would be restored soon for filing purposes with fee as provided under the relevant rules once the Tagging activity is complete. Stakeholders may kindly take note and plan accordingly,” it said.
In February, the Ministry of Corporate Affairs had issued Companies (Incorporation) Amendment Rules, 2019 and Companies (Registration offices and Fees) Amendment Rules, 2019 which came into force from 25.04.19 with a view to enable common public to be aware of KYC (Know Your Company) status of the companies and their directors.
In the Rules, it has been mentioned that every company incorporated on or before the 31st December 2017 shall file the particulars of the company and its Registered Office, in E-Form ACTIVE (Active Company Tagging Identities and Verification).
Any company which has not filed its due financial statements under section 137 or due annual returns under section 92 or both with the Registrar shall be restricted from filing e-Form-ACTIVE unless such company is under management dispute and the Registrar has recorded the same on the registrar.
Companies which have been struck off or are under the process of striking off or under liquidation or amalgamated or dissolved, as recorded in the register, shall not be required to file e Form ACTIVE.
In case a company does not intimate the said particulars, the Company shall be marked as “ACTlVE-non-compliant” on or after the due date is liable for action under section 12 (9) of the Act.
