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GSTCOUNSELLOR GSTC

VOLUME: 6 11 JUNE, 2020

NUMBER: 14

CONTENTS...

THE EDITOR’S DESK ANNOUNCEMENT

GST UPDATES

GST NEWS

OBLIGATIONS UNDER GST

ADVANCE RULINGS UNDER GST

FROM THE GOVERNMENT / CBIC

RELEVANT TERMS AND PHRASES

DECODING GST LAW

GST UNDERSTANDING

EVENTS

GST LITERATURE

GST HUMOUR GST CAPSULE

A THOUGHT IN QUOTE

ANNOUNCEMENTS

ASCO’S GOODS & SERVICE TAX COUNSELLOR

(AN INHOUSE TRI-MONTHLY NEWSLETTER ON GST)

(FOR PRIVATE CIRCULATION)

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GSTCOUNSELLOR GSTC

Dear Readers, Dear Readers, The Covid -19 Pandemic is still on and has moved India up in top five nations to suffer from this virus in terms of people affected. Covid-19 has also and is continuing to adversely affect our lives and economy as well making it difficult for one and all to survive and cope up with its economic after effects. Lockdown 5.0 or Unlock 1.0 has opened up businesses but not at old normal levels. This may take some more time. However, as the number of new cases throughout the country grow, one can not say with any amount of confidence as to whether further lockdown may be clamped or tightened. India economic growth continues to be of concern amid Covid impact. While it is expected to grow at about 0-3 percent in current fiscal, it is unlikely to recover till next year. With all sectors faring miserably coupled with joblessness, liquidity crunch and not much of liquidity support and demand push, thinking of its bouncing back appears to be a dream for next few months. India’s tax to GDP ratio is now at a 10 years low at 9.88%. This ratio was 10.97% in 2018-19 and 11.22 % on 2017-18. This is due to decline in tax collections. According to OECD, even the world economy is likely to squeeze by 6% in 2020 owing to global recession triggered by Covid. If there is a second wave of Covid, there could be a contraction of 7 percent or above. However, expressing confidence in India’s ability to recoup from the current economic uncertainty, Fitch Ratings expects the economy to clock near double-digit growth next fiscal year. It has projected GDP growth of 9.5 percent in 2021 -22 after a contraction of 5 percent this fiscal year. GST Council is likely to meet in virtual mode on 12 June, 2020 to discuss GST revenue, issues of states and Covid impact. This will be the first meeting since lockdown was clamped on 25.03.2020. CBIC has taken few steps recently to provide ease of compliances under GST. It has rolled out the facility of filing Nil monthly GST 3ZB return through SMS which will help over 22 lakh registered taxpayers to file returns. It has also extended the validity of e-way bills expired on or after 20 March, 2020 to 30th June 2020 as there was lockdown from 25th March, 2020. It has also notified norms for issue of order for notices regarding refund applications. The time limit for issuance of notices has been extended upto 30th June, 2020.

EDITOR: NEHA SOMANI, [B.COM, ACA] CHIEF EDITOR: DR. SANJIV AGARWAL, [FCA, FCS, ACIS (UK)]

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GSTCOUNSELLOR GSTC

CBIC has also issued two Circulars providing clarifications on refund related issues and non levy of GST on director’s remuneration which is considered as salary. Central Government has also released GST compensation of Rs. 36400 crore to states, making a total of Rs. 1.50 lakh crore for financial year 2019-20. DATE: 11.06.2020 DR. SANJIV AGARWAL

GST Newsletter In view of COVID 19 Virus, there may be situations wherein we may not be able to release GST

Counsellor Newsletter on the scheduled dates. However, we shall try to be regular.

Customs duty exemption medical equipments used for Covid-19

· To fight COVID pandemic, Customs Duty and Health Cess on import of medical equipments, namely ventilators, face or surgical masks, personal protection equipment (PPE), COVID testing kits and inputs for manufacturing such items have been exempted.

· Inputs thus, made available at lower cost would also boost domestic manufacturing of such medical equipments.

· The basic customs duty and health cess exemption shall be available upto 30.09.2020.

[Source: Notification No. 20/2020– Customs dated 09.04.2020]

GOODS AND SERVICES TAX UPDATES

ANNOUNCEMENT

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GSTCOUNSELLOR GSTC

Waiver of late fee on GSTR-3B only after GST council approval

· Based upon numerous requests for waiver of late fee on GSTR-3B pertaining to the period August, 2017 to January, 2020, CBIC has not taken a decision yet.

· Instead, it has advised that all decisions are taken by the Centre and the State with the

approval of the GST Council and as such , CBIC cannot waive the late fees unilaterally.

· It has however , informed that the issue of late fee would be taken up for discussion in the next GST Council meeting, likely to be held in second week of June.

[Source: Press Release, dated 01-06-2020]

Effecting the provisions of Rule 67A for furnishing a nil return in FORM GSTR-3B by SMS

· The Central Government vide Notification No. 44/2020- Central Tax dated 8th June, 2020 has appointed the 8th day of June, 2020, as the date from which Rule 67A ( Manner of furnishing of return by short messaging service facility ) shall come into force to allow the registered person to furnish a Nil return in FORM GSTR-3B for a tax period, through a short messaging service (SMS) using the registered mobile number and the said return shall be verified by a registered mobile number based One Time Password facility(OTP).

· A Nil return shall mean a return under section 39 for a tax period that has nil or no entry in all the Tables in FORM GSTR-3B.

[Source: Notification No. 44/2020- Central Tax dated 08.06.2020]

Extension of date for compliance for Daman Nagar Haveli and Daman & Diu

· Post merger of two Union Teritories , CBIC has extended the period for compliance with special procedure for tax payers in the two Union Territories from 31.05.2020 to 31.07.2020.

· This Notification is effecting from 31.05.2020.

[Soruce: Notification No. 45/2020- Central Tax dated 09.06.2020]

Time limit for issue of notice for refund In view of COVID pandemic, CBIC notifies time limit for issuance of order in cases where a notice has been issued for rejection of refund claim, in full or in part, falls during the period from the 20th day of March, 2020 to the 29th day of June, 2020, the time limit for issuance of the said order shall be extended to 15 days after the receipt of reply to the notice from the registered person or the 30th day of June, 2020, whichever is later.

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GSTCOUNSELLOR GSTC

The notification shall come into force w.e.f. 20.03.2020.

[Source: Notification No. 46/2020-Central Tax dated 09.06.2020]

Extension of validity of E-way Bills

Where an e-way bill has been generated under rule 138 of the Central Goods and Services Tax

Rules, 2017 on or before the 24th day of March, 2020 and whose validity has expired on or

after the 20th March, 2020, the validity period of such e-way bill shall be deemed to have been

extended till the 30st day of June, 2020.

This shall come into force from 31.05.2020

[Source: Notification No. 47/2020-Central Tax dated 09.06.2020]

Facility of filing of Nil GST return through SMS

· The Government has allowed filing of Nil GST monthly return in Form GSTR-3B through SMS.

· The functionalilty of filing Nil Form GSTR-3B through SMS has been made available on the GSTN portal with immediate effect.

[Source: CBIC Press Release dated 08.06.2020]

Clarificatin on Refund Issues

· CBIC has issued clarification on the issue relating to refund of accumulated ITC in

respect of invoices whose details are not reflected in the FORM GSTR-2A of the applicant.

· Vide Circular No.135/05/2020 – GST dated the 31st March, 2020, the refund related to these missing invoices had been restricted. Now, the refund of accumulated ITC shall be restricted to the ITC available on those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant.

· Circular No. 135 does not in any way impact the refund of ITC availed on the invoices / documents relating to imports, ISD invoices and the inward supplies liable to Reverse Charge (RCM supplies) etc.. It has been clarified that the treatment of refund of such ITC relating to imports, ISD invoices and the inward supplies liable to Reverse Charge (RCM supplies) will continue to be same as it was before the issuance of Circular No. 135/05/2020- GST dated 31st March, 2020.

[Source: Circular No. 139/09/2020-GST dated 10.06.2020]

Classifcaition on Director’s Remuneration

· Circular clarifies on leviability of GST on remuneration paid by companies to the

independent directors defined in terms of section 149(6) of the Companies Act, 2013 or those directors who are not the employees of the said company and leviability of GST on

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GSTCOUNSELLOR GSTC

remuneration paid by companies to the whole-time directors including managing director who are employees of the said company.

· In respect of such directors who are not the employees of the said company, the services provided by them to the Company, in lieu of remuneration as the consideration for the said services, are clearly outside the scope of Schedule III of the CGST Act and are therefore taxable. In terms of entry at Sl. No. 6 of the Table annexed to notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis. The remuneration paid to independent directors, or those directors, by whatever name called, who are not employees of the said company, is taxable in hands of the company, on reverse charge basis.

· The part of Director’s remuneration which are declared as “Salaries’ in the books of a company and subjected to TDS under Section 192 of the IT Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017.

· The part of employee Director’s remuneration which is declared separately other than “salaries’ in the Company’s accounts and subjected to TDS under Section 194J of the IT Act as Fees for professional or Technical Services shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, taxable. Further, in terms of notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis.

[Source: Circular No. 140/10/2020-GST dated 10.06.2020]

The Central Board of Indirect Taxes & Custom (CBIC) has extended the validity of e-Way bills issued before the lockdown till June 30. It has also decided to give more time for issue of order related to Goods & Services Tax (GST). CBIC is the apex policy-making board for indirect taxes (Central GST, excise duty and customs duty).

As per the board’s notification, the validity of an e-Way bill generated on or before March 24 and which expired on or after March 20, will be extended till June 30. Earlier, it was extended till May 31. Announcement of a lockdown on March 24 put brakes on the movement of thousands of trucks. Even after they were permitted, there are problems on account of border

GOODS AND SERVICES TAX

E-WAY BILL ISSUED BEFORE LOCKDOWN VALID TILL JUNE 30

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GSTCOUNSELLOR GSTC

sealing by some States. Then, shortage of drivers has make things worse for the transporters. Keeping all this in mind, a further extension has been given.

Curbing tax evasion

To curb tax evasion, the government introduced an e-way bill system for inter-State and intra-State trade. The bill, which is a kind of a document to be carried by the person in charge of a consignment of goods of value exceeding �50,000, is generated from the GST Common Portal. The consignor or consignee, as a registered person or a transporter of the goods, can generate the e-Way bill. The validity of the e-Way bill depends on the distance — how far the goods have to be transported.

Order for refund

CBIC also notified norms for issuance of order for notices issued regarding refund application. Original norm sets a deadline of 60 days for issuance of order from the date of receipt of application complete in all respects. Given the unusual scenario, it has been decided to relax the norms in case a notice has been issued for rejection of refund claim, in full or in part and where the time limit for issuance of order, as prescribed in the law, falls during the period from March 20 to June 29. “In such cases, the time limit for issuance of the said order shall be extended to 15 days after the receipt of reply to the notice from the registered person or the 30th day of June 2020, whichever is later,” the board said, while adding that the said notification shall come into force with effect from March 20, 2020.

On May 24, Finance Minister Nirmala Sitharaman had announced that the due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents, time limit for any compliance under the GST laws, where the time limit expires between March 20 and June 29 shall be extended to June 30.

(SOURCE: BUSINESS LINE DATED 11.06.2020)

In a bid to make compliance easier for taxpayers, the Government allowed filing of Nil GST monthly return in FORM GSTR-3B through SMS. This would substantially improve ease of GST compliance for over 22 lakh registered taxpayers who had to otherwise log into their account on the common portal and then file their returns every month.

Now, these taxpayers with NIL liability need not log on to the GST Portal and may file their NIL returns through a SMS. According to a statement, the functionality of filing Nil FORM GSTR-3B through SMS has been made available on the GSTN portal with immediate effect. This is a good move by the Government to ease the compliance burden for taxpayers with nil liability. India ranks a lowly 115 out of around 190 countries in ease of paying taxes, and such initiatives are definitely needed to make the compliances easy, less time consuming and in line with global best practices.

(SOURCE: ECONOMIC TIMES DATED 08.06.2020)

GOVERNMENT ROLLS OUT FACILITY OF FILING OF NIL GST RETURN THROUGH SMS

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GSTCOUNSELLOR GSTC

India’s telecom operators want the goods and services tax to be levied on actual payments received from customers – and not on invoices raised – so that they don’t have to pay GST on delayed payments or defaults, which are on the rise due to the Covid-19 outbreak. The operators, including Reliance Jio Infocomm, Vodafone IdeaNSE 7.96 % and Bharti AirtelNSE -0.12 %, are seeking the change for the 18% GST levied on telecom services for a six-month period. Experts said the problem of rising defaults is causing financial stress in telecom companies, given the tough economic conditions after the nationwide lockdown was imposed in March.

Many customers have defaulted or postponed bill payments due to job losses, salary cuts, business closures and also a general breakdown in corporate payment cycles. Various taxpayers including the telecom companies are demanding that they should be allowed to pay GST on actual receipts as against on the date of raising invoice as there are huge cashflow and working capital issues.

GST on bad debts is a real issue amid the Covid-19 pandemic and unless something is done, this could result in litigation. With most businesses having apprehensions on recoverability or anticipation of delayed collections, the government could consider relief proposals sought by businesses on GST being payable on receipt basis vis-a-vis milestones/ billing prescribed currently.

(SOURCE: ECONOMIC TIMES DATED 09.06.2019)

Ahead of the Goods and Services Tax (GST) Council meeting next week, the Centre released compensation worth Rs 36,400 crore to states for three months up to February, 2020. The much-delayed compensation comes at a time when state finances are under severe stress due to the Covid-19 lockdown.The GST compensation of Rs 1.15 trillion for April-November, 2019 was released earlier, the government said. This stands against Rs 95,551 crore collected as cess in the compensation fund in 2019-20 (FY20).

The compensation mechanism to states under GST has come under strain due to inadequate cess collection amid bleak consumer demand. Under the law, if states' GST revenue does not grow by at least 14 per cent over the base year of 2014-15, the Centre pays them the difference, on a bi-monthly basis for the first five years of GST implementation.

States have been up in arms with the Centre over non-payment of compensation dues, while the Union government has conveyed its inability on account of cess shortfall. Besides dwindling cess collection in the compensation fund, the rising dependency of states on the promised GST compensation amid sharp fall in revenue due to the Covid-19 pandemic has compounded the challenge. In FY20, the Centre used Rs. 47,271-crore surplus cess from 2017-18 and 2018-19.

TELCOS SEEK TAX RELIEF ON UNPAID BILLS

COVID-19 CRISIS: CENTRE RELEASES RS 36,400-CRORE GST COMPENSATION TO STATES

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GSTCOUNSELLOR GSTC

The compensation cess is levied on luxury and sin items such as aerated drinks, coal, paan masala, cigarettes, and automobiles over the peak rate of 28 per cent. The Government is exploring a slew of options, including borrowing from the market and extending the cess period further, to repay. The monthly GST compensation requirement is estimated at Rs 20,250 crore in 2020-21, against Rs 13,750 crore last year. Under the GST structure, taxes are levied under 5, 12, 18, and 28 per cent slabs.

The GST Council in its meeting held in March deliberated on whether it could go for borrowing if the compensation cess collections fall short of the requirement of states. It will seek opinion on various legal issues - who will give guarantee to the borrowing, how will it be repaid, how interest is to be paid, impact on the fiscal responsibility and budget management Act, etc.

(SOURCE: BUSINESS LINE DATED 05.06.2020)

DUE DATES OF VARIOUS FILINGS IN MONTH OF JUNE, 2020

Return Purpose Period To be filed by

GSTR-3B Payment of tax (Annual Turnover of

more than INR 5 Cr in Previous FY)

February,2020 to April,

2020

24.06.2020

GSTR-3B Payment of tax (Annual Turnover of

more than INR 5 Cr in Previous FY)

May , 2020 27.06.2020

GSTR-3B Payment of tax (Annual Turnover of

more than INR 1.5 Cr to upto INR

5cr in Previous FY)

February,2020 to March,

2020

29.06.2020

GSTR-7 TDS return under GST (monthly) March, 2020 to May, 2020 30.06.2020

GSTR-8 TCS return under GST (monthly) March, 2020 to May, 2020 30.06.2020

GSTR-1 Details of outward supplies

(monthly)

(T.O. more than 1.5 Crore)

March, 2020 to May, 2020 30.06.2020

GSTR-1 Details of outward supplies

(quartely)

(T.O. upto 1.5 Crore)

March, 2020 to May, 2020 30.06.2020

GSTR-6 Input Service Distributor (monthly) March, 2020 to May, 2020 30.06.2020

OBLIGATIONS UNDER GOODS AND SERVICES TAX

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GSTCOUNSELLOR GSTC

GSTR-3B Payment of tax (Annual Turnover of

upto INR 1.5 Cr in Previous FY)

February, 2020 30.06.2020

GSTR-5 Details of outward taxable supplies

and tax payable by Non Resident

Taxable person (monthly)

February,2020 to May,

2020

30.06.2020

GSTR-5A Details of outward taxable supplies

and tax payable by OIDAR

(monthly)

February,2020 to May,

2020

30.06.2020

ELIGIBILITY TO OPT FOR COMPOSITION SCHEME UNDER GST

In Empathic Trading Center (2020)116 taxmann.com 868 (AAR, Karnataka), on facts, applicant

was engaged in the business of supplying goods and also supplier of service of renting of

immovable property. There was no connection between the two lines of business and are two

separate distinct business activities. Applicant had recently migrated to composition scheme

as its aggregate turnover was less than Rs. 50 lakhs p.a. The applicant sought an advance

ruling to determine whether it is eligible for composition scheme?

AAR observed that there was no dispute that both the activities of the applicant are taxable

and supplied by the same person. It was ruled that the applicant is eligible for composition

scheme under GST if the turnover of services of the applicant does not exceed 10% of the

turnover in a State or Rs. 5 lakhs whichever is higher.

ADVANCE RULINGS UNDER GST

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GSTCOUNSELLOR GSTC

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS)

NOTIFICATION No. 44/2020 – Central Tax

New Delhi, the 8th June, 2020

G.S.R. 357(E).- In exercise of the powers conferred by section 164 of the Central Goods and Services Tax Act, 2017 (12 of 2017) read with rule 3 of the Central Goods and Services Tax (Fifth Amendment) Rules, 2020 (hereinafter referred to as the rules), made vide notification No. 38/2020 – Central Tax, dated the 5th May, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 272(E), dated the 5th May, 2020, the Government, hereby appoints the 8th day of June, 2020, as the date from which the said provisions of the rules, shall come into force.

[F. No. CBEC-20/06/16/2018-GST]

PRAMOD KUMAR, Director

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MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS)

NOTIFICATION No. 45/2020–Central Tax

New Delhi, the 9th June, 2020

G.S.R. 360(E).-In exercise of the powers conferred by section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Government, on the recommendations of the Council, hereby makes the following amendment in the notification of the Government of India in the

GOODS AND SERVICES TAX : FROM THE GOVERNMENT

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GSTCOUNSELLOR GSTC

Ministry of Finance (Department of Revenue), No.10/2020- Central Tax, dated the 21st March, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 193(E), dated the 21st March, 2020, namely:-

In the said notification, in the first paragraph, for the figures, letters and words “31st day of May, 2020”, the figures, letters and words “31st day of July, 2020” shall be substituted.

2. This notification shall come into force with effect from the 31st day of May, 2020.

[F. No. CBEC-20/06/03/2020-GST]

PRAMOD KUMAR, Director

Note : The principal notification No. 10/2020-Central Tax, dated the 21st March, 2020, was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 193(E), dated the 21st March, 2020.

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MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS)

NOTIFICATION No. 46/2020–Central Tax

New Delhi, the 9th June, 2020

G.S.R. 361(E).-In exercise of the powers conferred by section 168A of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereafter in this notification referred to as the said Act), read with section 20 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), and section 21 of Union Territory Goods and Services Tax Act, 2017 (14 of 2017), in view of the spread of pandemic COVID-19 across many countries of the world including India, the Government, on the recommendations of the Council, hereby notifies that in cases where a notice has been issued for rejection of refund claim, in full or in part and where the time limit for issuance of order in terms of the provisions of sub-section (5), read with sub-section (7) of section 54 of the said Act falls during the period from the 20th day of March, 2020 to the 29th day of June, 2020, in such cases the time limit for issuance of the said order shall be extended to fifteen days after the receipt of reply to the notice from the registered person or the 30th day of June, 2020, whichever is later

2. This notification shall come into force with effect from the 20th day of March, 2020.

[F. No. CBEC-20/06/03/2020-GST]

PRAMOD KUMAR, Director

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GSTCOUNSELLOR GSTC

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS)

NOTIFICATION No. 47/2020–Central Tax

New Delhi, the 9th June, 2020

G.S.R. 362(E).-In exercise of the powers conferred by section 168A of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereafter in this notification referred to as the said Act), read with section 20 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), and section 21 of Union Territory Goods and Services Tax Act, 2017 (14 of 2017), the Government, on the recommendations of the Council, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.35/2020- Central Tax, dated the 3rd April, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 235(E), dated the 3rd April, 2020, namely:-

In the said notification, in the first paragraph, in clause (ii), for the proviso, the following proviso shall be substituted, namely: -

“Provided that where an e-way bill has been generated under rule 138 of the Central Goods and Services Tax Rules, 2017 on or before the 24th day of March, 2020 and whose validity has expired on or after the 20th March, 2020, the validity period of such e-way bill shall be deemed to have been extended till the 30st day of June, 2020.”.

2. This notification shall come into force with effect from the 31st day of May, 2020.

[F. No. CBEC-20/06/03/2020-GST]

PRAMOD KUMAR, Director

Note : The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) No. 35/2020-Central Tax, dated the 3rd April, 2020 vide number G.S.R. 235(E), dated the 3rd April, 2020 and was last amended by notification No. 40/2020–Central Tax, dated the 5th May, 2020, published in the Gazette of India, Extraordinary vide number G.S.R. 274(E), dated the 5th May, 2020.

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Circular No. 139/09/2020-GST dated 10.06.2020

CBEC-20/06/03-2020 -GST

Subject: Clarification on refund related issues – reg.

Various representations have been received seeking clarification on the issue relating to refund of accumulated ITC in respect of invoices whose details are not reflected in the FORM GSTR-2A of the applicant. In order to clarify these issues and to ensure uniformity in the implementation of the provisions of law in this regard across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies the issues detailed hereunder:

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GSTCOUNSELLOR GSTC

2. Circular No.135/05/2020 – GST dated the 31st March, 2020 states that:

“5. Guidelines for refunds of Input Tax Credit under Section 54(3)

5.1 In terms of para 36 of circular No. 125/44/2019-GST dated 18.11.2019, the refund of ITC availed in respect of invoices not reflected in FORM GSTR-2A was also admissible and copies of such invoices were required to be uploaded. However, in wake of insertion of sub-rule (4) to rule 36 of the CGST Rules, 2017 vide notification No. 49/2019-GST dated 09.10.2019, various references have been received from the field formations regarding admissibility of refund of the ITC availed on the invoices which are not reflecting in the FORM GSTR-2A of the applicant.

5.2 The matter has been examined and it has been decided that the refund of accumulated ITC shall be restricted to the ITC as per those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant. Accordingly, para 36 of the circular No. 125/44/2019-GST, dated 18.11.2019 stands modified to that extent.”

3.1 Representations have been received that in some cases, refund sanctioning authorities have rejected the refund of accumulated ITC is respect of ITC availed onImports, ISD invoices, RCM etc. citing the above-mentioned Circular on the basis that the details of the said invoices/documents are not reflected in FORM GSTR-2A of the applicant.

3.2 In this context it is noteworthy that before the issuance of Circular No. 135/05/2020-GST dated 31st March, 2020, refund was being granted even in respect of credit availed on the strength of missing invoices (not reflected in FORM GSTR-2A) which were uploaded by the applicant along with the refund application on the common portal. However, vide Circular No.135/05/2020 – GST dated the 31st March, 2020, the refund related to these missing invoices has been restricted. Now, the refund of accumulated ITC shall be restricted to the ITC available on those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant.

4. The aforesaid circular does not in any way impact the refund of ITC availed on the invoices / documents relating to imports, ISD invoices and the inward supplies liable to Reverse Charge (RCM supplies) etc.. It is hereby clarified that the treatment of refund of such ITC relating to imports, ISD invoices and the inward supplies liable to Reverse Charge (RCM supplies) will continue to be same as it was before the issuance of Circular No. 135/05/2020- GST dated 31st March, 2020.

5. It is requested that suitable trade notices may be issued to publicize the contents of this circular.

6. Difficulty, if any, in implementation of this Circular may please be brought to the notice of the Board. Hindi version would follow.

(Yogendra Garg)

Principal Commissioner

y.garg@nic.in

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GSTCOUNSELLOR GSTC

Circular No: 140/10/2020 – GST dated 10.06.2020

CBEC-20/10/05/2020 -GST

Subject: Clarification in respect of levy of GST on Director’s remuneration - Reg.

Various references have been received from trade and industry seeking clarification whether the GST is leviable on Director’s remuneration paid by companies to their directors. Doubts have been raised as to whether the remuneration paid by companies to their directors falls under the ambit of entry in Schedule III of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act) i.e. “services by an employee to the employer in the course of or in relation to his employment” or whether the same are liable to be taxed in terms of notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017 (entry no.6).

2. The issue of remuneration to directors has been examined under following two different categories:

(i) leviability of GST on remuneration paid by companies to the independent directors defined in terms of section 149(6) of the Companies Act, 2013 or those directors who are not the employees of the said company; and

(ii) leviability of GST on remuneration paid by companies to the whole-time directors including managing director who are employees of the said company.

3. In order to ensure uniformity in the implementation of the provisions of the law across the field formations, the Board, in exercise of its powers conferred under section 168(1) of the CGST Act hereby clarifies the issue as below:

Leviability of GST on remuneration paid by companies to the independent directors or those directors who are not the employee of the said company

4.1 The primary issue to be decided is whether or not a “Director’ is an employee of the company. In this regard, from the perusal of the relevant provisions of the Companies Act, 2013, it can be inferred that:

a. the definition of a whole time-director under section 2(94) of the Companies Act, 2013 is an inclusive definition, and thus he may be a person who is not an employee of the company.

b. the definition of “independent directors’ under section 149(6) of the Companies Act, 2013, read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 makes it amply clear that such director should not have been an employee or proprietor or a partner of the said company, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed in the said company.

4.2 Therefore, in respect of such directors who are not the employees of the said company, the services provided by them to the Company, in lieu of remuneration as the consideration for the said services, are clearly outside the scope of Schedule III of the CGST Act and are therefore taxable. In terms of entry at Sl. No. 6 of the Table annexed to notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis.

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GSTCOUNSELLOR GSTC

4.3 Accordingly, it is hereby clarified that the remuneration paid to such independent directors, or those directors, by whatever name called, who are not employees of the said company, is taxable in hands of the company, on reverse charge basis.

Leviability of GST on remuneration paid by companies to the directors, who are also an employee of the said company

5.1 Once, it has been ascertained whether a director, irrespective of name and designation, is an employee, it would be pertinent to examine whether all the activities performed by the director are in the course of employer-employee relation (i.e. a “contract of service”) or is there any element of “contract for service”. The issue has been deliberated by various courts and it has been held that a director who has also taken an employment in the company may be functioning in dual capacities, namely, one as a director of the company and the other on the basis of the contractual relationship of master and servant with the company, i.e. under a contract of service (employment) entered into with the company.

5.2 It is also pertinent to note that similar identification (to that in Para 5.1 above) and treatment of the Director’s remuneration is also present in the Income Tax Act, 1961 wherein the salaries paid to directors are subject to Tax Deducted at Source ('TDS') under Section 192 of the Income Tax Act, 1961 ('IT Act'). However, in cases where the remuneration is in the nature of professional fees and not salary, the same is liable for deduction under Section 194J of the IT Act.

5.3. Accordingly, it is clarified that the part of Director’s remuneration which are declared as “Salaries’ in the books of a company and subjected to TDS under Section 192 of the IT Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017.

5.4 It is further clarified that the part of employee Director’s remuneration which is declared separately other than “salaries’ in the Company’s accounts and subjected to TDS under Section 194J of the IT Act as Fees for professional or Technical Services shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, taxable. Further, in terms of notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis.

6 It is requested that suitable trade notices may be issued to publicize the contents of this circular.

7. Difficulty, if any, in the implementation of the above instructions may please be brought to the notice of the Board. Hindi version would follow.

(Yogendra Garg)

Principal Commissioner

y.garg@nic.in

For text of Notifications / Circulars / Press Releases, Finance Bill please visit www. cbic.gov.in www.gstcounsellor.com

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GSTCOUNSELLOR GSTC

Interpretation of ‘Actionable claim’

The 'actionable claim' as defined in Section 3 of the Transfer of Property Act, 1882 comprises

two types of claims: (a) a claim to unsecured debts and (b) a claim to beneficial interest in

movable property. If the beneficial interest in movable property is not in possession of the

claimant it will be an actionable claim but if it is in his possession or enjoyment, it will not be

actionable claim but a chose in possession. [In H. Anraj v. Govt. of Tamilnadu, (1986) AIR 63

(SC)].

That a lottery ticket has no value in itself. It is mere piece of paper. Its value lies in the fact that

it represents a chance or a right to a conditional benefit of winning a prize of a greater value

than the consideration paid for the transfer of that chance. It is nothing more than a token or

evidence of this right. There can be no doubt that on purchasing a lottery ticket, the purchaser

would have a claim to a conditional interest in the prize money which is not in the purchaser's

possession. The right would fall squarely within the definition of an actionable claim. Even if

the right to participate is assumed to be a separate right, there is no sale of goods within the

meaning of sales tax statutes when that right is transferee. The draw cannot be suggested to be

the movable property. The only object of the right to participate would be to win the prize. The

transfer of the right would, thus, be of a beneficial interest in movable property not in

possession. By this reasoning also, a right to participate in a lottery is an actionable claim. [In

Sunrise Associates v. Govt. of NCT of Delhi (2006) 4 STT 105 (SC)].

RELEVANT TERMS AND PHRASES

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GSTCOUNSELLOR GSTC

Taxability of GST on Director’s Remuneration

There has been a lot of confusion on taxability of director’s remuneration

from companies in which they are directors in different forms. The confusion or

doubts got mounted in the wake of recent conflicting advance rulings.

CBIC has now come out with a detailed Circular No. 140/10/2020-GST dated

10.06.2020 which clarifies issues relating to taxability of director’s

remuneration including salary. The following points are worth noting:

· Managing director / whole-time directors / executive directors are

employees of company if they get salary and allowances from such company.

· Independent / non-executive / nominee directors are not employees of

company and as such don’t get salary but are remunerated in other forms

such as sitting fees, commission etc.

· Both types of directors can not be equated for the purpose of GST.

· In terms of section 7 read alongwith Schedule III of CGST Act, 2017, services

by employee to employer in the course of or in relating to his employment

are excluded. As such, services by such directors who are considered as

employees are not a supply and hence not taxable. There is no question of

levy of GST on such services and as such reverse charge also does not apply.

· One acid test for such cases can be that TDS is deducted u/s 192 of the

Income Tax Act, 1961 (i.e. salary).

DECODING GST LAW

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GSTCOUNSELLOR GSTC

· In case of directors other than whole time directors (i.e., independent, non-

executive, nominee etc.), since they are not in whole time employment, they

do not earn salary but get rewarded in some other form which could be

sitting fees, bonus, commission, percentage of net profit etc.

· In case of such non-whole time directors, they are not ‘employees’ or in

whole time employment by any interpretation and hence their services does

not fall under exclusion vide Schedule III of CGST Act.

· Being taxable, such services of directors shall be subject to levy of GST but

in such cases, Notification No. 13/2017-CT (Rate) dated 28.06.2017 comes

into play which provides for discharge of GST liability under reverse charge

mechanism i.e., by the company.

· Such director’s remuneration is also subject to TDS but under section 194J

of the Income Tax Act, 1961 (i.e., professional services)

· For other services rendered by whole-time directors which are otherwise

taxable, GST shall be levied and discharged under reverse charge

mechanism.

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GSTCOUNSELLOR GSTC

PROGRAMME : Input Tax Credit & Departmental Audit under GST

(Journey so far and path ahead)

DATE : Monday, June 15, 2020

TIME : 11.00 am – 12.00 pm

ORGANISED BY : The Associated Chambers of Commerce and Industry of India

(ASSOCHAM)

CONTACT DETAILS : 9999068767, ankit.raghav@assocham.com

GOODS AND SERVICES TAX UNDERSTANDING

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GSTCOUNSELLOR GSTC

GST HUMOUR!!

Covid invents new Profit terminology EBITDAC Earning before interest, taxes, depreciation, amortization and corona impact.

· Cestat new appellate procedure for online filing and hearing (as amended) – Dr. Sanjiv Agarwal, www.taxmanagementindia.com, dated 04.06.2020.

· Covid -2019, Economy and GST- Dr. Sanjiv Agarwal, www.taxguru.co.in, dated 04.06.2020.

· Reimagining GST for the post –Covid era – Mukesh Butani & Tarun Jain, Business Standard, dated 05.06.2020.

· Future hearings via virtual mode in indirect taxes – Dr. Sanjiv Agarwal, Business Advisor, dated 10.06.2020.

GST LITERATURE

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GSTCOUNSELLOR GSTC

A THOUGHT IN QUOTE!!

“Even the worst days have an ending, and the best days have a beginning.”

GST CAPSULE!!

“What about after FY 2021-22? Can we recover to a long-term trajectory of 7 percent plus growth ? Frankly, the huge uncertinties about the spread of the pandemic in India, global economic, htealth and political developments and the governement’s policy responses render post –FY 2021-22 growth projections /scenarios enromously problematic. What we can say, with some degree of confidence, is that if we indulge in sustained fiscal profligacy, often treat the banking system as an arm of budgetary policy, resurrect a new licence- permit raj or continue down the recently adopted path of trade protectinism,then it will be extermely difficult to aspire to growth levels higher than a 3-5 percent range in the years after FY 2021-22”.

Shankar Acharya Former Chief Economic Adviser

Government of India

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GSTCOUNSELLOR GSTC

NEW TITLES ON GST (JAN – FEB 2020)

OUR GST PUBLICATIONS

ANNOUNCEMENTS

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GSTCOUNSELLOR GSTC

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ANNOUNCEMENTS FOR EXCLUSIVE AND IN HOUSE

SEMINAR / WORK SHOP ON

GOODS AND SERVICE TAX (GST) CONDUCTED BY

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