RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

According to economic data released by National Statistical Organizations (NSO) yesterday, our economy has expanded at its fastest pace @ 13.5% in Q1 of 2022-23, backed by positive base effect and robust growth in agriculture, services, construction and consumption. This growth of 13.5% is lower than what Reserve Bank of India had projected i.e., 16.2%. Investment continued to rise with Government spending on capital expenditure. Growth in agriculture is 4.5 while as services grew by over 17 percent in Q1 of current year.

The recovery in double digits is seen in public administration, defence, utilities, construction etc. Robust tax revenues along with enhanced consumption has also helped in present fiscal situation.

Overall, the growth of three sectors of economy is impressive as compared to last four quarters, i.e., agriculture grew by 4.5%, manufacture by 4.8% and service by 17.6%. This growth of 13.5% is slightly lower by estimates by various agencies which was in the range of 15.2 – 16.2 percent. However, Government claims that Indian real gross domestic product (GDP) growth will exceed 7% in 2022-23 leading to fastest growing major economy is the world.  To put it in one sentence, it can be said that the GDP growth is slower than the forecast but yet the fastest in a year.

The growth in GDP of India in Q1 of 2022-23 is better than many major economies, the growth of China being at 4.8% only. India is expected to be the fastest growing major economy despite the global slowdown.

The GST collection figures for August, 2022 are out. The gross GST revenue collected in the month of August 2022 is Rs. 1,43,612 crore of which CGST is Rs. 24,710 crore, SGST is Rs. 30,951 crore, IGST is Rs. 77,782 crore (including Rs. 42,067 crore collected on import of goods) and cess is Rs. 10,168 crore (including Rs. 1,018 crore collected on import of goods). The revenues for the month of August 2022 are 28% higher than the GST revenues in the same month last year of Rs. 1,12,020 crore. During the month, revenues from import of goods was 57% higher and the revenues from domestic transaction (including import of services) are 19% higher than the revenues from these sources during the same month last year.

With rise in GDP growth estimates, it can be said that tax collection will be in tandem, i.e. on growth trajectory only. The GST collections also are indicative of this. With festive season ahead, tax collections are going to be buoyant only.

On direct taxes, April- August, 2022 collections have risen by 33% to Rs. 4.80 lakh crore on YoY basis. Thus, both direct taxes and indirect taxes have shown buoyancy.

In one of the important judgments, Supreme Court has held that providing HSN code and proper GST rate is the responsibility of the bidder and not the tenderer, quashing the Allahabad High Court order which ruled that it is mandatory for the tendering authority to mention the relevant HSN code in tenders so that the bidders can ascertain the correct classification and GST code. In yet another case, it has been ruled that IBC proceedings shall override Customs Act, 1962 for effecting recoveries of indirect taxes.

With recent changes in GST rate, the National Anti-profiteering Authority is concerned about profiteering by retailers, particularly of pre-packed items and has already undertaken investigation in few complaints. Even CBIC Chairman has said that though price revision is a commercial decision, but if businesses state that the price hike is because of GST and it is more than the GST rate hike, the issue requires examination.

CBIC (GST- Investigation Wing) has issued yet another guidelines for launching of prosecution under section 132 of CGST Act, 2017 on 1^st September, 2022.  The background of such guidelines lies in the observation of Supreme Court in the case of RADHESHYAM KEJRIWAL VERSUS STATE OF WEST BENGAL - 2011 (2) TMI 154 - SUPREME COURT

One interesting fact revealed recently is that economic offences in the country went up by 19% in 2021 over 2020, with total number at 174013, as per National Crime Records Bureau. Economic offences include all offences of criminal breach of trust, counterfeiting, forgery, cheating fraud etc. The highest number of cases were recorded in Rajasthan (23757) followed by Telangana, UP and Maharashtra.

September, 2022 is likely to witness yet another meeting of GST Council, the agenda of which is not yet known.

Guidelines for Launching of Prosecution under the CGST Act, 2017

These guidelines cover, inter alia, the following:

• Sanction of prosecution under section 132  of CGST Act, 2017
• Authority to sanction prosecution
• Procedure for sanction of prosecution
• Monetary limits under section 132(1), i.e. over Rs. 5 crore except in case of habitual offenders and arrest cases
• Appeal against court order in case of inadequate punishment or acquittal
• Procedure for withdrawal of prosecution
• Publication of names of convicted persons
• Monitoring of prosecution
• Compounding of offence
• Inspection of prosecution work by DGPM

[Source: Instruction No. 04/2022-23 [GST – Investigation] dated 01.09.2022]

GoM Recommendations on GST Appellate Tribunals

Considering the proposals of the GST Council, following are the recommendations made by GoM on Appellate Tribunals :

• Amendment in Section 110 of CGST Act, 2017 to be made to replace Government with State Government, to enable state governments to relax the experience condition in the appointment of members which currently only the Centre is empowered to do.
• Relaxation in the experience criterion for appointment of state technical members.
• States to have more than one bench, based on population, or number of registered and active GST users.
• A four-member search and Selection Committee suggested to be set up for the appointment of members to the benches.
• GST Council shall consider these recommendations in the next Council meeting likely to take place in September, 2022.

 [Source: Media Reports]

GST on Tour Operators in relation to services Haj & Umrah

• Supreme Court has held that Service Tax shall be payable on service provided by Haj Group Organizers (HGOs) and Private Tour Operators(PTOs).
• It observed that to enable Haj pilgrims of India to undertake Haj pilgrimage, there is a bilateral agreement executed every year between the Kingdom of Saudi Arabia and the Government of India. As per the bilateral agreement, a quota of number of pilgrims is assigned to India. Out of the said quota, normally only 30% is allocated to HGOs. The rest of the quota is made available to the Haj Committee.
• The Haj Committees are statutory bodies working under the control and supervision of the Government. The Haj Committees are the agencies and instrumentalities of the State. Apart from arranging visits of Haj pilgrims for the purposes of Haj pilgrimage, there are important statutory duties assigned to the Haj Committee - the Central Government has all pervasive control over the Haj Committee. The State Governments have the same control over the State Committee. On the other hand, there are no onerous duties attached to HGOs. They earn profit by rendering service to Haj pilgrims. Except for the stringent conditions for the registration, the Government has no control over HGOs.
• The Exemption Notifications under the IGST and the GST Acts so far as the Haj pilgrimage is concerned, are pari materia with the Mega Exemption Notification.

[Source: In ALL INDIA HAJ UMRAH TOUR ORGANIZER ASSOCIATION MUMBAI VERSUS UNION OF INDIA & ORS. - 2022 (7) TMI 1233 - SUPREME COURT; ]

Responsibility of HSN Code in Tenders

• In the impugned Allahabad High Court judgment, direction was issued to Railways (General Manager Diesel Locomotive Works, Varanasi) that if the GST value is to be added in the base price to arrive at the total price of offer for the procurement of products in a tender and is used to determine Interse ranking in the selection process, he would be required to clarify the Issue, If any, with the GST authorities relating to the applicability of correct HSN Code of the procurement product and mention the same in the NIT (Notice inviting tender) tender/ bid document, so as 'to ensure uniform bidding from all participants and to provide all tenderers/bidders a 'Level Playing Field'.
• On appeal, Apex Court held that providing HSN Code is the responsibility of the bidder and not the tendering authority.
• In order to also ensure that the successful tenderer pays the tax due and to further ensure that, by not correctly quoting the GST rate, there is no tax evasion, it is considered necessary to direct that, in all cases, where a contract is awarded by the appellants, a copy of the document, by which, the contract is awarded containing all material details shall be immediately forwarded to the concerned jurisdictional Officer.
• Apex court allowed the appeal.

[Source: UNION OF INDIA & OTHERS VERSUS BHARAT FORGE LTD. & ANOTHER - 2022 (8) TMI 690 - SUPREME COURT ]

Indirect Taxes Recovery under IBC Cases

• Supreme Court has held that Insolvency and Bankruptcy Code, 2016 (IBC) shall override the Customs Act, 1962 in case of any conflict between the IBC and Customs Act, 1962.
• The corporate debtor imported various materials for the purpose of constructing ships and some of these goods were stored in Custom Bonded Warehouses. The appellant (Insolvency Professional) was granted custody of those warehoused goods by National Company Law Tribunal (NCLT).
• On Revenue appeal, NCLAT held that the Corporate Debtor had abandoned the goods much before the insolvency process was initiated, and as such the title of the goods had passed to the Customs Authorities.
• The appellant (Resolution Professional) filed civil appeal before the Supreme Court against grant of custody of warehoused goods to Customs Authorities.
• It was held that the IBC would prevail over the Customs Act, to the extent that once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC, as the case may be, the respondent authority only has a limited jurisdiction to assess/ determine the quantum of customs duty and other levies. The Customs Authority does not have power to initiate recovery of dues by means of sale / confiscation, as provided under the Customs Act.
• Further, tax authorities does not have the power to initiate recovery of dues by means of sale / confiscation, as provided under the Customs Act.

[Source: SUNDARESH BHATT, LIQUIDATOR OF ABG SHIPYARD VERSUS CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS - 2022 (8) TMI 1161 - SUPREME COURT ]

GST Collection in August, 2022

• Rs. 1,43,612 crore gross GST revenue has been collected in the month of August, 2022
• Revenues for the month of August, 2022 are 28% higher than the GST revenues in the same month in 2021.
• Monthly GST revenues are more than the Rs. 1.4 lakh crore for six months in a row now
• The growth in GST revenue till August 2022 over the same period last year is 33%, continuing to display very high buoyancy.
• During the month of July 2022, 7.6 crore e-way bills were generated, which was marginally higher than 7.4 crore in June 2022 and 19% higher than 6.4 crore in June 2021.
• Maharashtra collected highest GST of Rs. 18863/- crore while Lakshadweep had nearly ‘zero’ collection followed by just Rs. one crore in Dhaman & Diu.

[Source: PIB Release ID 1855967 dated 01.09.2022 issued by Ministry of Finance)

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