RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

According to IMF, Indian economy is likely to be world’s third largest economy by financial year 2028, and will be fifth largest by financial year 2023.  It has however, warmed that worst is yet to come for global economy.

In its latest update, World Bank has slashed India’s GDP growth forecast for financial year 2023 to 6.5% from 7.5% citing Ukraine-Russia war and global situation.  This 6.5% becomes the lowest estimate by any agency so far.  However, according to India’s Chief Economic Advisor, India is still on course for 7% GDP growth. In India local consumption shall drive growth amid oil worry. RBI has opined that inflation may ease by 2023 and that Indian economy for Q2 current fiscal is expected to be 6.4%.

Finance Minister has expressed that Budget-2023 will focus on growth and address inflation issue. Budget won’t pass stress to people. Also, despite global slowdown, Indian economy may grow @ 7% in financial year 2023.

Ministry of Finance has commenced its Union Budget-2023 exercise by inviting suggestions from Industry and Trade Associations for Budget 2023-24 and changes in direct and indirect taxes which may be submitted by 5^th November, 2022.

GST Council has issued an advisory on Authority regarding action consequential to issuance of Show Cause Notice and for issuance of recurring SCN in case of an enforcement action initiated by the Central authorities against a taxpayer assigned to State and vice versa. CBIC has clarify that pre-deposit payment for cases pertaining to central excise and service tax, payment will have to be made in case in through electronic cash / credit ledger under GST law.

Mr. Sanjay Malhotra will take over as Revenue Secretary w.e.f. 1^st December, 2022.

GST Council’s meeting will now take place in November, 2022 to discuss, inter alia, the reports of GoM on Appellate Tribunal and taxation of online games, casinos and horse race etc. The long gap since last meeting is only delaying the reforms.

GSTR 3B date extended by one day

The GST implementation Committee of GST Council has approved extension of the due date of filing GSTR-3B return for the month of September, 2022, for the monthly filers, from 20^th October, 2022.  The notification in this regard is under process.

(Source: CBIC Updates dated 21.10.2022)

Budget suggestions invited

• MOF has invited suggestions from the Industry and Trade Associations for Budget 2023-24 regarding changes in direct and indirect taxes.
• Suggestions are invited for changes in the duty structure, rates and broadening of tax base on both direct and indirect taxes giving economic justification for the same. The request for correction of inverted duty structure, if any for a commodity, should necessarily be supported by value addition at each stage of manufacturing of the commodity.
• Suggestions are also invited for reducing compliances, for providing tax certainty and reducing litigations.
• It may be noted that GST related requests are not examined as part of Annual Budget.

(Source: TRU F. No. 334/6/2022 dated 14.10.2022 issued by Ministry of Finance)

Natural justice in GST adjudication proceedings

• Tamil Nadu State has recently issued instructions on adherence to principles of natural justice in GST adjudication proceedings.
• The main purpose of following the principles of Natural Justice is to protect the rights of the assessee against any arbitrary assessment and thereby, ensure fair and equitable administration of justice.
• The Adjudication / Assessment process should necessarily include the following, in order to comply with principles of Natural Justice:
  1. Proper service of Notice
  2. Grant of reasonable time to file reply and dealing with adjournments
  3. Grant copies of documents relied upon for assessment
  4. Grant of personal hearing
  5. Personal hearing and decision by the same officer
  6. Cross examination
  7. Issuance of speaking order or reasoned decision
• All Assessing / Adjudicating Authorities shall scrupulously follow the principles of Natural justice in all the quasi-judicial proceedings, without any flaw and always pass speaking orders, which can with stand the judicial scrutiny.

(Source: Circular No. 12/2022/LW/12/3040383/2022 dated 26.09.2022 issued by Commissioner of Commercial Taxes, Chennai)

Action on SCNs and Issuance of follow-on SCN’s

• GST Council has issued a clarification / advisory on authority regarding action consequential to issuance of Show Cause Notice and for issuance of recurring SCN’s in case of an enforcement action initiated by the Central authorities against a taxpayer assigned to State and vice versa.
• As per the practice, the Authority which initiates the investigation is also issuing recurring SCN whereas in some other cases, it is being left for the concerned jurisdictional Tax authority, who is administrating the taxpayer, to issue recurring SCN. This may create confusion and may lead to a situation in which none of the authorities issue the recurring SCN in timely manner.
• A taxpayer located within a State is open to enforcement action by both Authorities. In such cases, all the consequential action relating to the case including, but not limited to, appeal, review, adjudication, rectification, revision will lie with the authority which had initiated the enforcement action. However, refund shall be granted only by jurisdictional tax Authority who is administering the assessee.
• Issuance of recurring SCNs does not involve any fresh investigation as the subject matter as well as ground of SCN remain the same, and therefore, it may be desirable that such further/ recurring SCNs are issued by the actual jurisdictional authorities (which is responsible for assessment of returns of the taxpayer).
• The recurring SCNs may be issued by the concerned jurisdictional tax authorities administering the taxpayer, i.e. even if investigation is conducted by Central tax authorities and initial SCN is issued by them, the recurring SCN may be issued only by the jurisdictional tax authority administering the taxpayer and if the such jurisdictional tax authority is State tax, the recurring SCN may be issued by the concerned State tax Authority.

(Source: Office Memorandum F.No. 757/Follow-up/GSTC/2018/8198 dated 19.10.2022 issued by GST Council)

Anti-profiteering upheld in L’Oreal matter

• National Anti-profiteering Authority (NAA) concluded that :
  • Section 171 on anti-profiteering are violated when benefit of reduction in tax rate has not been passed to end consumers by way of commensurate reduction in price of products.
  • Guidelines and methodology are not required to be prescribed separately for computation of profiteered amount.
  • Reduction in prices is only legally permissible method for passing on benefit of tax reduction.
  • Best methodology for computation of profiteered amount could be comparison of average base price in pre-rate reduction period with actual transaction wise base price after date of rate reduction.

• On Appeal to Delhi High Court, the Anti-profiteering has been confirmed.  The supplier can’t insist that instead of reducing prices, it will give extra grammage of product.  Delhi high court observed/ held that :

• Supplier can’t give extra grammage of product instead of reducing prices for passing benefit to consumers
• L’Oreal had not only collected excess base prices from customers post reduction in rate of tax but asked them to pay additional GST and thus failed to grant commensurate reduction in prices.

• The case of violation of section 171(1) of CGST Act, 2017 was confirmed and supplier  directed to deposit principal profiteered amount after deducting GST imposed on net profiteered amount.

(Source: DIRECTOR GENERAL OF ANTI-PROFITEERING, CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS, VERSUS M/S. L'OREAL INDIA PVT. LTD. - 2022 (7) TMI 34 - NATIONAL ANTI-PROFITEERING AUTHORITY read with LOREAL INDIA PRIVATE LIMITED VERSUS UNION OF INDIA AND ORS.- 2022 (10) TMI 312 - DELHI HIGH COURT]

Pre-GST exemption may not continue post GST

• Supreme Court has recently held that:
  • After the enactment of the Central Goods and Services Tax Act in 2017, the Centre is not bound to continue with its pre-existing 100 per cent outright excise duty exemption policy of 2003 to promote industrial activities in certain less-industrialized states like Uttarakhand and Sikkim.
  • The legislature in its wisdom has specifically incorporated the proviso to Section 174(2)(c) of CGST Act, 2017 providing therein that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded.
  • When an exemption granted earlier is withdrawn by a subsequent notification based on a change in policy, even in such cases, the doctrine of promissory estoppel could not be invoked.
  • Where the change of policy is in the larger public interest, the State cannot be prevented from withdrawing an incentive which it had granted through an earlier notification.
  • The Apex Court dismissed the appeals of Hero Motocorp Ltd. and Sun Pharma Laboratories Ltd.
• Apex Court permitted the two companies to make representations to respective state governments as well as to the GST Council.

[Source: M/S HERO MOTOCORP LTD. VERSUS UNION OF INDIA & ORS. - 2022 (10) TMI 677 - SUPREME COURT]

Payment of Pre-deposit for pre-GST cases in GST era

• CBIC has clarified on manner of payment of Pre-deposit for cases pertaining to Central Excise and Service Tax in GST regime.
• Payment of Pre-deposit as a pre-condition for filing appeal is neither in the nature of duty on or can be treated as arrear under the erstwhile Service Tax / Excise laws and hence cannot be considered to be covered under the transitional provisions of CGST law.
• GST law provides an option to pay admitted tax dues and pre-deposit through electronic cash or credit ledgers.
• Form GST DRC-03 is prescribed for payment of tax, interest, penalty under sub-section (5) and (8) of both section 73 and 74, and section 129 (1) of the CGST Act, 2017 or any other payment due in accordance with the provisions of the CGST Act, 2017 as specified in rule 142(2) and 143(3) of CGST Rules, 2017
• In GST regime for appeal mechanism under section 107 of the CGST Act. 2017, Rule 108 (1) of the CGST Rules, 2017 provides Form GST APL-01 for filing an appeal with option of payment of admitted amount and pre-deposit through electronic cash/credit ledger. Thus, under GST Act also, Form GST DRC - 03 is not a prescribed mode for payment of pre-deposit.
• It has been clarified that payments through DRC-03 under CGST regime is not a valid mode of payment for making pre-deposit under section 35F the Central Excise Act, 1944 and Section 83 of Finance Act, 1994 read with section 35F of the CEA.
•  Further, there exists a dedicated CBIC-GST Integrated portal, https;//cbic-gst.gov.in [Board's Circular No. 1070/3/2019-CX dated 24^th June, 2019 refers in this regard], which should only be utilized for making pre-deposit under the Central Excise Act, 1944 and the Finance Act, 1994.

[Source: Instruction - CBIC-240137/14/2022-Service Tax Section-CBEC  issued by CX & ST Wing, Ministry of Finance, dated 28.10.2022]