Get enlightened with the GST Weekly Digest May 2023 Vol-4! Discover the latest tax updates, breaking news, and insights that empower you. This edition covers key highlights from GST council meetings, updates on GST returns, revolutionary e-invoicing, and more. Stay informed and empowered with our all-inclusive weekly digest.
Digest Period: 21/05/2023 to 27/05/2023
GST – Sunday, 21st May, 2023
Table of Contents
Supreme Court Rules: Private Airport Developers Not Liable for Service Tax on User Development Fee (UDF)
In a recent judgment, the Supreme Court has provided relief to private airport developers regarding the payment of service tax on User Development Fee (UDF). The court referred to a 2006 tax circular, which clarified that amounts collected as taxes or statutory dues are exempt from service tax levy.
GST – Monday, 22nd May, 2023
GSTN Integration with Account Aggregator before July 1, 2023
The Goods and Services Tax Network (GSTN) will integrate with the Account Aggregator (AA) network before July 1, facilitating seamless credit disbursement for small businesses. This integration allows lenders to access tax records and financial information on a single platform, reducing friction in the lending process.
With approximately 1.4 crore registered taxpayers, GSTN will provide reliable financial statements for assessing small businesses’ financial health. This integration saves paperwork and enables lenders to easily pull data from GST returns along with other savings and pension accounts. The AA network includes banks, non-banking financial companies, asset management companies, insurance companies, and pension funds as registered financial information providers.
AI-Driven Project to Enhance Revenue and Capacity in Excise and Taxation Department
The Excise and Taxation Department is embracing modern techniques, including Artificial Intelligence (AI), to boost revenue and strengthen capacity. The Revenue Enhancement and Capacity Augmentation project aims to tackle GST revenue losses by employing cutting-edge tools and real-time data on defaulters.
By leveraging AI, the department aims to streamline tax enforcement, detect fraud, and generate an estimated annual revenue of Rs. 250 crore. The project addresses challenges of limited manpower, enabling swift identification of revenue leakages and informed decision-making. It also promotes voluntary tax compliance and enhances departmental officers’ capacity for effective vigilance. The initiative marks a significant step towards efficient and transparent governmental operations.
AAR Gujarat: GST Liability for Rent on Accommodation Building located outside religious places’ boundaries
The AAR, Gujarat (Advance Ruling no. GUJ/GAAR/R/2023/18) ruled that M/s. Nandini Ashram Trust, providing accommodation to pilgrims outside the Ambaji Temple boundary at INR 1000 per day, is not eligible for GST exemption.
The trust is liable for GST registration and payment at a rate of 12%. As the premises are not owned by Ambaji Temple Trust and are located outside the temple boundary, the exemption for renting precincts of a religious place does not apply. The Applicant will be liable for registration if the annual turnover exceeds INR 20 Lakhs.
GST – Tuesday, 23rd May, 2023
DGFT Notification: Amendment in Export Policy for Cough Syrup
The DGFT, through Notification No. 06/2023 dated May 22, 2023, has amended Chapter 30 of Schedule 2 of the ITC (HS) Export Policy for Cough Syrup.
Effective from June 01, 2023, the export of Cough Syrup under ITC HS Codes 3004 will be permitted, subject to testing the export sample and presenting a Certificate of Analysis (CoA). The CoA must be issued by specific laboratories listed in the notification.
CESTAT Kolkata: No Service Tax on Sale of Coaching Material
In the case of M/s. Kanhaiya Singh Vision Classes Pvt. Ltd. v. Commissioner of CGST & CX, Patna-I Commissionerate, the CESTAT Kolkata has ruled that the amount collected from the sale of study material is not subject to service tax under the Finance Act, 1994.
The appellant, engaged in coaching services and selling study material, argued that the value of book sales should not be included in the consideration for coaching services. Citing previous decisions and the judgment of M/s Chate Coaching Classes Pvt. Ltd., the CESTAT held that the sale of coaching material does not attract service tax.
The appeal was allowed, and it was concluded that no service tax is leviable on the sale of coaching material.
GST – Wednesday, 24th May, 2023
Orissa High Court Directs Assessee to File Appeal for Bank Account Attachment in GST Case
The Hon’ble Orissa High Court, in the case of Twisha Educational Private Limited v. Addl. CT & GST Officer [W.P (C) No.11358 of 2023 dated May 01, 2023], directed the assessee to file an appeal before the appropriate authority under Section 107 of the Central Goods and Services Tax Act, 2017.
The assessee claimed that their bank account was attached by GST authorities without prior notice. The Court advised the assessee to pursue their remedy through the established appellate process instead of seeking relief through a writ petition.
Government Proposes Reduction in GST on Flex Fuel and Hybrid Vehicles
The central government is considering reducing the Goods and Services Tax (GST) on flex fuel automobiles from 28% to 5%. The proposal may be sent to the fitment committee of GST.
Additionally, there are plans to lower the GST on hybrid vehicles from 28% to either 18% or 12%. However, there are no current plans to reduce GST on petrol and diesel vehicles.
This development is seen as positive news for companies like Bajaj Auto and TVS Motors, as they are interested in introducing more vehicles based on flex fuel and hybrid technologies.
Online Betting Company Issued Rs 1,500 Crore Notice for Tax Evasion
Haryana’s excise and taxation department has taken a significant step by issuing a notice of Rs 1,500 crore to M/s Probo Media Technologies Private Limited, a Gurugram-based online betting company.
The notice accuses the company of misclassifying its services, resulting in tax evasion. While the applicable GST rate for betting, gambling, or horse racing is 28%, the company was paying only 18%, evading Rs 1,500 crore in taxes.
The investigation conducted by Haryana’s GST intelligence wing revealed that the company was misclassifying its work to avoid taxes. It was found that the firm operated through a mobile application and website called Probo, which allowed users to bet on real-life events in various categories. The bets placed on the platform were matched with other users’ counter bets, and a commission was deducted from winnings and withdrawals. Ashok Kumar Meena, excise and taxation commissioner of Haryana, emphasized the government’s commitment to using IT tools and data analytics to identify tax evasion cases. Strict actions are being taken against tax evaders, and the state has achieved significant growth in the past financial year.
GST – Thursday, 25th May, 2023
Thousands of Fake GST Registrations Detected in Joint Drive
Central and state goods and services tax officials have uncovered approximately 10,000 fake GST registrations during the first week of a joint drive against fraudulent invoices and registrations.
The officials are conducting door-to-door physical verifications of addresses before taking any action. The drive, initiated on May 15 and running until July 15, aims to identify and tackle fraudulent GST registrations.
Instances of forged documents, such as electricity bills, property tax receipts, and rent agreements, have been found, which were used as proof of principal place of business to obtain GST registration.
The amount of fake input tax credit is yet to be determined, but initial estimates suggest it could exceed ₹25,000 crore. The final figures will be available at the conclusion of the drive.
Cases for physical verification are selected using data analytics and risk parameters by GST Network (GSTN), which identifies potential fraudulent GSTINs for state and central tax authorities.
Extended Filing Deadline for GSTR-1, GSTR-3B, and GSTR-7 in Manipur
In an innovative move, the Central Board of Indirect Taxes and Customs (CBIC) has issued Notifications No. 11, 12, and 13/2023 – Central Tax, all dated May 24, 2023. These notifications extend the due date for filing GSTR-1, GSTR-3B, and GSTR-7 for the month of April 2023 specifically for taxpayers with their principal place of business in the state of Manipur. The new deadline for filing is May 31, 2023. This measure aims to provide additional time and convenience to businesses in Manipur to fulfill their GST filing obligations effectively.
GST – Friday, 26th May, 2023
Penalty and Interest Demand Stayed in Absence of GST Appellate Tribunal
The Orissa High Court recently issued a stay order on the penalty and interest demand raised by the Revenue Department in the case of Prafulla Kumar Sahoo v. Commissioner of CT & GST Odisha.
The stay is granted during the pendency of the writ petition, subject to the condition that the petitioner deposits the entire tax amount within 15 days. The petitioner wanted to avail the remedy under the law by approaching the GST Appellate Tribunal (GSTAT), which is yet to be constituted.
The petitioner had challenged an order passed by the Joint Commissioner of State Tax (Appeal) that demanded penalty and interest.
The petitioner argued that they were not liable to pay the tax and penalty as they had already deposited 10% of the tax amount before the First Appellate Authority. However, with the absence of the GSTAT, the petitioner sought relief through the writ petition.
In response to the petition, the High Court issued a notice to the Revenue Department and observed that the petitioner intends to appeal before the GSTAT.
The court held that if the petitioner wishes to pursue the appeal, they must pay 20% of the disputed tax for the consideration of their appeal. Additionally, the court ordered that the penalty and interest demanded shall remain stayed as long as the petitioner deposits the entire tax amount within 15 days. This decision provides temporary relief to the petitioner and enables them to seek a remedy through the GSTAT once it is constituted.
Gujarat High Court Directs Assessee to Seek GST Registration Revocation under Notification No. 3
The Hon’ble Gujarat High Court, in the case of M/s. Radhe Packaging v. Union of India [Special Civil Application No. 5673 of 2023, dated April 5, 2023], has instructed the assessee to approach the Revenue Department to avail the benefits provided by Notification No. 3. This notification allows registered persons to apply for the revocation of their cancelled GST registration until June 30, 2023.
In this case, M/s. Radhe Packaging filed a petition against the Show Cause Notice and subsequent Order that cancelled their GST registration due to the failure to file returns for a continuous period of six months.
Notification No. 3 specifically states that registered persons, whose registration was cancelled under certain clauses of Section 29(2) of the CGST Act before December 31, 2022, and who failed to apply for revocation within the specified time period, may apply for revocation until June 30, 2023.
The Gujarat High Court recognized the applicability of Notification No. 3 to the case and directed the petitioner to approach the Revenue Department to seek revocation of their cancelled GST registration. Additionally, the court urged the Revenue Department to promptly consider the application for revocation without any delay.
CBIC Introduces SOP for Scrutiny of GST Returns from FY 2019-20 Onwards
The Central Board of Indirect Taxes and Customs (CBIC) has issued a Standard Operating Procedure (SOP) for the scrutiny of Goods and Services Tax (GST) returns from the financial year 2019-20 onwards.
The new procedure replaces the interim measure previously implemented and introduces an online workflow for the scrutiny process.
Key points of the SOP include:
1. Selection of returns for scrutiny: The Directorate General of Analytics and Risk Management (DGARM) will select GSTINs (GST identification numbers) based on risk parameters. The selected GSTINs will be made available on the scrutiny dashboard of the proper officer on the ACES-GST application.
2. Scrutiny schedule: The proper officer will finalize a scrutiny schedule for the selected GSTINs, prioritizing riskier cases. The schedule will specify month-wise scrutiny for the GSTINs.
3. Scrutiny process: The proper officer will verify the correctness of the returns and rely on information available in various returns, statements, and data from sources like DGARM, ADVAIT, GSTN, and E-Way Bill Portal.
Discrepancies will be communicated to the registered person through FORM GST ASMT-10, and the registered person can respond through FORM GST ASMT-11.
4. Timelines: The scrutiny process should adhere to specific timelines, including the communication of selected GSTINs, finalization of scrutiny schedule, issuance of notices, and conclusion of proceedings.
5. Reporting and monitoring: MIS reports will be available on the scrutiny dashboard, providing summary information and GSTIN-wise details of actions taken. Monthly Scrutiny Progress Reports to DGGST are no longer required from the CGST zones for FY 2019-20 onwards.
The new SOP aims to leverage technology and risk-based tools to streamline the scrutiny process and ensure timely and effective compliance with GST regulations.
GST – Saturday, 27th May, 2023
Madras High Court: Delay in Issuing Show Cause Notice Does Not Justify Continuation of Attachment under Section 83 of CGST Act
The Hon’ble Madras High Court, in the case of Nitesh Jain Mangal Chand v. The Senior Intelligence Officer, held that the delay in issuing the Show Cause Notice (SCN) cannot justify the continuation of attachment under Section 83 of the Central Goods and Services Tax Act, 2017 (CGST Act).
The court emphasized that Section 83, which allows provisional attachment, should only be used to ensure timely issuance of notice and finalization of proceedings. The court ruled that the four-year delay in issuing the SCN cannot be a reason to continue the attachment, as Section 83 itself is provisional in nature. Section 83 of the CGST Act allows provisional attachment of property, including bank accounts, during proceedings to protect the government revenue. The provisional attachment ceases to have effect after one year from the date of the order.
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Frequently Asked Questions (FAQ)
What is the recent Supreme Court ruling regarding service tax on User Development Fee (UDF) for private airport developers?
The Supreme Court has ruled that private airport developers are not liable for service tax on User Development Fee (UDF) based on a 2006 tax circular exempting taxes or statutory dues from service tax levy.
How will the integration of Goods and Services Tax Network (GSTN) with the Account Aggregator (AA) network benefit small businesses?
The integration of GSTN with the AA network will enable seamless credit disbursement for small businesses by providing lenders with access to tax records and financial information on a single platform. This integration reduces friction in the lending process and promotes easy data retrieval from GST returns and other financial accounts.
How is the Excise and Taxation Department using Artificial Intelligence (AI) to enhance revenue and capacity?
The Excise and Taxation Department is implementing an AI-driven project called Revenue Enhancement and Capacity Augmentation to boost revenue and strengthen capacity. By leveraging AI, the department aims to streamline tax enforcement, detect fraud, generate revenue, and address challenges of limited manpower.
What is the recent ruling by AAR Gujarat regarding GST liability for renting accommodation outside the boundaries of religious places?
AAR Gujarat ruled that M/s. Nandini Ashram Trust, providing accommodation to pilgrims outside the Ambaji Temple boundary, is not eligible for GST exemption. The trust is liable for GST registration and payment at a rate of 12% if the annual turnover exceeds INR 20 Lakhs.
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