RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

Indian complete three years of GST. However, still there are many issues and challenges to be addressed. Transition issues still are a headache for Government, Anti-profiteering law is still not free from doubts GSTN, the backbone of GST regime is still searching for a strong spine, and so on. The list is long.

The business is slowly coming to pre-Covid period level. The generation of e-way bills stood at 4.27 crore is June, 2020 where as it was 4.03 crore in March, 2020 which only indicates what economy is now moving with movement of goods. The upward trend means that unlock 2.0 may be more promising. As a ease out step, e-way bills validity was extended to ensure hassle free movement of cargo which was stuck on roads during lockdown.

Once again, it has been voiced that bringing petrol and diesel under the GST regime would help retail consumers, commercial entities and oil companies. The forum was Business Line knowledge webinar on fuel prices on 9th July, 2020.

Advance rulings, continue to create replies in otherwise controversial GST law which is plagued with weak and vague interpretation. After roti - paratha controversy, AAR, Tamil Nadu has now ruled that only distribution and transmission segments of electricity sector are exempt from GST and any transaction between the two utilities could come under GST depending upon its nature. The issue was applicability of GST to the inter-company transactions between applicant Tamil Nadu Generation and Distribution Corporation (TANGEDCO) and Tamil Nadu Transmission Corporation (TANTRANSCO), both subsidiaries of Tamil Nadu Electricity Board. The AAR held that GST is applicable on these supplies from TANGEDCO to TANTRANSCO, operation and maintenance materials used in the regular day-to-day functioning, transfer of assets and movement, and deployment of employees. GST will be levied on application for releasing connection of electricity, rental charges against metering equipment, testing fee for meters, transformers, capacitors, labour charges for shifting of meters or shifting of service lines and charges of duplicate bill.  However, GST will not be imposed on transaction of funds between the companies by the way of repayment of existing loan, availing of fresh loans without any interest component.

Appellate AAR, Maharashtra in case of Rotary Club has said that the amount collected as membership subscription and admission fees from members of curb is not a supply liable to levy of GST. However, there are contrary rulings too.

Central Government (CBIC) has filed an appeal against Delhi High Court judgment of May 5, 2020 allowing GST refund of ₹ 923 crore to Bharti Airtel Ltd. after rectifying its GST returns 2B. The company had claimed excess tax of ₹ 923 crore on inputs based on estimates since GSTR-2A form was not operational during July- September, 2017.

Now a Cess in the name of Covid-19 is being levied and Jharkhand State has started this. An ordinance has been promulgated to provide the levy of ‘COVID-19 cess’ within the State of Jharkhand on Mineral Bearing Land. The cess has been levied to rehabilitate labourers, mitigating the hardships caused due to loss of jobs, augmenting existing health infrastructures and for other purposes arising due to Covid-19 Pandemic.

Hand Sanitizers : Classification and GST Evasion

• The product [hand sanitizer (alcohol based)] has ingredients such as Ethyl Alcohol LP, Glycerol LP, Hydrogen Peroxide LP., Purified water etc. The active ingredient of Ethyl Alcohol LP. is over 70%in most of the cases.
• Hand sanitizers having ethyl alcohol as ingredient is a alcohol based product. Hand sanitizers (alcohol based) is liable to be classified under tariff heading 3808 of HSN attracting 18% GST.
• Manufacturer’s of hand sanitizers (alcohol based) classifying it under tariff heading 3004 of HSN with 12% GST are wrongly classifying the said product.
• This misclassification appears to have resulted in substantial tax evasion.
• Directorate General of GST Intelligence has initiated investigation in the matter.

(Source:  DG GSTI Letter dated 10.06.2020 to all PCCs / CCs ]

GSTR-4 date extended

• Due date for filing for GSTR-4 in case of composition dealers for the financial year ended on 31.03.2020 has been extended by CBIC from 15.07.2020 to 31.08.2020.
• Notification No. 21/2019-CT dated 23.04.2019 has been amended to this effect. This was last amended by Notification No. 34/2020-CT dated 03.04.2020 to extend the date up to 15.07.2020.

[Source :Notification No. 59/2020-CT dated 13.07.2020]

Covid Cess in Jharkhand State

• Jharkhand State has promulgated on Ordinance to levy Covid Cess.
• Jharkhand Mineral Bearing Lands (Covid-19 Pandemic) Cess Ordinance, 2020 has been promulgated as Ordinance No. 1/2020 dated 06.07.2020 valid for a period of 3 years.
• Covid-19 Cess shall be levied on mineral bearing land at such rates not exceeding ₹ 100 per tonne/cubic metre on despatch of such Run-of-mine/mineral
• Existing rate of Cess ranges from ₹ 5 to ₹ 20 depending upon the type of Mineral bearing Land. It shall be payable by the holder on despatch of Run-of-mine/mineral.
• Other states may follow suit.

[Source : Jharkhand Mineral Bearing Lands (Covid-19 Pandemic) Cess Ordinance, 2020 Jharkhand Ordinance No. 1/2020 dated 06.07.2020]

GST Rate on Hand sanitizers: Govt’s View Point

• The GST rates on various items are decided by the GST Council where the Central Government and all the state governments jointly decisions.
• Sanitizers are disinfectants like soaps, anti-bacterial liquids, dettol etc which all attract duty standard rate of 18% under the GST regime.
• Inputs for manufacture of hand sanitizers are chemicals packing material, input services, which also attract a GST rate of 18%.
• Reducing the GST rate on sanitizers and other similar items would lead to an inverted duty structure and put the domestic manufacturers at disadvantage vis-a-vis importers.
• Lower GST rates help imports by making them cheaper which is against the nation’s policy on Atmanirbhar Bharat.
• Consumers would also eventually not benefit from the lower GST rate if domestic manufacturing suffers on account of inverted duty structure.
• Therefore, hand sanitizers attract GST at the rate of 18%.

[Source : Ministry of Finance Press Release dated 15.07.2020]

GST on grant of licenses

• No GST is applicable on license fee charged by the States for grant of liquor license to vendors, both in pre-GST era as well as in GST era.
• GST Council  in its 26th meeting held on 10.03.2018 and 37th meeting held on 20.09.2019 decided that services by way of grant of alcoholic liquor license, against consideration in the form of license fee or application fee, by whatever name called, by State Government is neither a supply of goods nor supply of services. GST Council further decided in the 37th meeting held on 20.09.2019 to clarify that this special dispensation applies only to supply of service by way of grant of liquor license by the State Governments as an agreement between the Centre and States and has no applicability or precedence value in relation to grant of other licenses and privileges for a fee in other situations where GST is payable.
• Thus, fees payable on other licenses shall be liable to levy of GST.

[Source : GST  Council decisions and State Circulars]