Filing of Form TRAN-I to avail Input Tax Credit

Transition to GST provided for trust based transition of input tax credit of the existing taxpayers. A tax payer could file Form TRAN-1 and avail input tax credit on the basis of closing balance of the input tax credit declared in the last return under the pre GST regime. The last date for filing of Form TRAN-1 is 27th December, 2017. In keeping with the philosophy of voluntary compliance, revision of Form TRAN-1 has also been provided. The last date for revision of TRAN-1 is also 27th December, 2017.

It has been noted that some taxpayers have availed extraordinarily high transitional credit of CGST which is neither commensurate with the trend of input tax credit of the industry nor as maintained by the taxpayer himself in the past. Some of these high transitional credits may have a bonafide explanation or may be a case of bonafide mistake. However, it has been noted that high transitional credit has been claimed in many cases for which perhaps no bonafide explanation exists. Analysis to identify such units is underway. Such behaviour leads to breach of trust between the taxpayer and the tax-administration, which is the bed-rock of self-assessment regime in GST.

Taxpayers who have claimed transitional credit erroneously are advised to avail of the opportunity to revise Form TRAN-1 by 27th December, 2017 and ensure that only correct and bonafide credit is availed in transition, failing which the tax administration would be constrained to initiate audit and enforcement action against the identified units.

Extension of deadline till 31.03.2018 for submission of Aadhaar number, and Permanent Account Number or Form 60 by client to the reporting entity

After considering various representations received and inputs received from Banks, it has been decided to notify 31st March, 2018 or six months from the date of commencement of account based relationship by the client, whichever is later, as the date of submission of the Aadhaar number, and Permanent Account Number or Form 60 by the clients to the reporting entity. Necessary notification in this regard has been issued.

It may be recalled that earlier Under the provisions of Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2017, published in the Extraordinary Gazette of India vide G.S.R. 538 (E) dated 01.06.2017, it was provided that

• In case the client, eligible to be enrolled for Aadhaar and obtain a Permanent Account Number does not submit the Aadhaar number or the Permanent Account Number at the time of commencement of an account based relationship with a reporting entity, the client shall submit the same within a period of six months from the date of the commencement of the account based relationship. Provided that the clients, eligible to be enrolled for Aadhaar and obtain the Permanent Account Number, already having an account based relationship with reporting entities prior to date of this notification, the client shall submit the Aadhaar number and Permanent Account Number by 31st December, 2017.
• In case the client fails to submit the Aadhaar number and Permanent Account Number within the aforesaid six months period, the said account shall cease to be operational till the time the Aadhaar number and Permanent Account Number is submitted by the client. Provided that in case client already having an account based relationship with reporting entities prior to date of this notification fails to submit the Aadhaar number and Permanent Account Number by 31st December, 2017, the said account shall cease to be operational till the time the Aadhaar number and Permanent Account Number is submitted by the client.

No section 14A disallowance if no exempt income earned; CBDT circular can’t override express provision

The issue before the High Court was as under:

Whether the disallowance of the expenditure will be made even where the investment had not resulted in any exempt income during the AY?

High Court held in favour of assessee as under:

• Section 14A does not clarify whether the disallowance of the expenditure would apply even where no exempt income is earned.
• The words "in relation to income which does not form part of the total income under the Act for such previous year" in the Rule 8D(1) indicate a correlation between the exempt income earned in the AY and the expenditure incurred to earn it. In other words, the expenditure as claimed by the Assessee had to be in relation to the income earned in 'such previous year'.
• This implies that if there was no exempt income earned in the relevant AY, the question of disallowance of the expenditure incurred to earn exempt income in terms of Section 14A, read with Rule 8D could not arise.
• CBDT's Circular No. 5/2014 dated 11-02-2014 does not refer to Rule 8D(1) at all but only refers to the word "includible" occurring in the title to Rule 8D as well as the title to Section 14A. The Circular concluded that it was not necessary that exempt income should necessarily be included in a particular year's income for the disallowance to be triggered.
• For all of the aforementioned reasons, the CBDT Circular (Supra) couldn’t override the express provisions of Section 14A, read with Rule 8D. Therefore, if no exempt income was earned, there could be no disallowance of expenditure in terms of section 14A, read with Rule 8D. [2017] 84 taxmann.com 186 (Delhi)

Search and seizure -- Search on holding company and assessee name not mentioned in warrant--Notice under section 153A issued to assessee

Dorf Ketal Chemicals LLC v. Dy. CIT

Search and seizure--Assessment under section 153A-- Search on holding company and assessee name not mentioned in warrant--Notice under section 153A issued to assessee

Facts:

Assessee-company was a 100 per cent subsidiary of Indian Company D and had its control and management in India. A search and seizure action under section 132(1) was carried out at the business premises of D and also on the residential premises of the directors of the said company. A notice under section 153A was issued to the assessee and thereafter the assessment was completed under section 143(3) read with section 153A. Assessee contended that there was no initiation of search under the provisions of section 132 as the name of the assessee was not mentioned in the warrant of authorization and, therefore, the issue of notice under section 153A and the consequent assessment framed were void ab initio.

Held:

For the purpose of assumption and exercise of powers under section 153A in case of a person, the initiation of search in terms of section 132 or 132A on the said persons was mandatory and, therefore, whether there was no initiation of search as contemplated under section 132, the fundamental conditions for issuance of notice under section 153A was not fulfilled. Thus, the person in respect of whom the search was initiated under section 132 was the same persons against whom the notice is to be issued under section 153A. In view of this legal position, since no search had been initiated under section 132 in the case of assessee, therefore, notice issued under section 153A was without jurisdiction and the consequent assessment so framed under section 143(3) read with section 153A was also void ab initio.

Direct Tax Collections for Financial Year 2017-18 show Growth of 14.4% upto November, 2017

The provisional figures of Direct Tax collections up to November, 2017 show that net collections are at Rs. 4.8 lakh crore which is 14.4% higher than the net collections for the corresponding period of last year. 

The Net Direct Tax collections represent 49% of the total Budget Estimates of Direct Taxes for the Financial Year. 2017-18 (Rs. 9.8 lakh crore). Gross collections (before adjusting for refunds) have increased by 10.7% to Rs.5.82 lakh crore during April-November, 2017. Refunds amounting to Rs. 1.02 lakh crore have been issued during April, 2017 to November, 2017.

CBDT extends date till 31.3.18 for linking of Aadhaar with PAN

Under the provisions of recently introduced section 139AA of the Income-tax Act, 1961 (the Act), with effect from 01.07.2017, all taxpayers having Aadhaar Number or Enrolment Number are required to link the same with Permanent Account Number (PAN). In view of the difficulties faced by some of the taxpayers in the process, the date for linking of Aadhaar with PAN was initially extended till 31st August, 2017 which was further extended upto 31st December, 2017.

It has come to notice that some of the taxpayers have not yet completed the linking of PAN with Aadhaar. Therefore, to facilitate the process of linking, it has been decided to further extend the time for linking of Aadhaar with PAN till 31.03.2018.

Income Tax Department suspends an officer for harassing the taxpayer

A complaint was received making serious allegations against Shri D. K. Meena, Deputy Commissioner of Income Tax, posted at Surendranagar in Gujarat Regioan for harassing a taxpayer in a scrutiny case with malafide intention. The officer was alleged to have demanded illegal gratification through the taxpayer’s Chartered Accountant for favourably completing the assessment. The audio recordings of conversations were also received which, inter alia, mention the bribe amount being demanded by the officers of the Department for settling the case.

In order to verify the veracity of the allegations, case records were requisitioned immediately by the Vigilance Directorate of CBDT. On examination of the case records, serious lapses and irregularities were found which led credence to the allegations made against the officer. The matter is under investigation.

The Department has zero tolerance to such malpractices and corruption. Pending investigation, the officer has since been placed under suspension.

Exporters advised to file Table 6A and GSTR 3B for processing of IGST Refund and for Refund of the unutilized Input Tax Credit

The Government of India is seized of the issue of Exporters complaining about delay in grant of refunds pertaining to Integrated Goods and Services Tax (IGST) paid on goods exported out of India and similarly Input Tax credit (ITC) on exports. Media reports with incorrect estimations of refund amounts held-up for the period July to October 2017 have been noticed. It is clarified that the quantum of IGST refund claims as filed through Shipping Bills during the period July to October 2017, is approximately Rs. 6,500 crore and the quantum of refund of unutilized credit on inputs or input services, as per the RFD 01A applications filed on GSTN portal, is to the tune of Rs. 30 crore.

With regard to IGST paid on goods exported out of India, majority of refund claims for exports made in July, 2017, wherever due, have been sanctioned. Refund claims of IGST paid for exports made in August, September and October 2017 are being sanctioned seamlessly wherever returns have been accurately filed. The prerequisites for sanction of refund of IGST paid are filing of GSTR 3 B and table 6A of GSTR 1 on the GSTN portal and Shipping Bill(s) on Customs EDI System by the exporter. It is essential that exporters should ensure that there is no discrepancy in the information furnished in Table 6A of GSTR 1 and the Shipping Bill. It has been observed that certain common errors such as incorrect Shipping Bill number in GSTR1, mis-match of invoice number and IGST amount paid, wrong bank account etc. are being committed by exporters while filing their returns. These errors are the sole reason for delay in grant of refunds, or rejection thereof. While information has been made available to Exporters on the ICEGATE portal if they are registered, they may also contact jurisdictional Customs authorities to check the errors they have committed in furnishing information in GST returns and Shipping Bill, and rectify them at the earliest.

As the Customs System is designed to automatically grant refunds without involvement of any officer by matching information that is furnished on GSTN portal and Customs system, the onus is on the exporters to fill in all the details accurately. Exporters may,therefore, take due precaution to ensure that no errors creep in while filing Table 6A of GSTR 1 of August 2017 and onwards. The facility for filing GSTR 1 for August 2017 would also be ready by 4th December 2017. In case of wrong entries made in July, Table 9 of GSTR 1 of August month would allow amendments to GSTR 1 of July 2017.

As far as refund of the unutilized Input Tax Credit on inputs or input services used in making exports is concerned, exporters shall file an application in FORM GST RFD- 01A on the Common Portal where the amount claimed as refund shall get debited from the Electronic Credit Ledger of the exporter to the extent of the claim. Thereafter, a proof of debit (ARN- Acknowledgement Receipt Number) shall be generated on the GSTN portal, which is to be mentioned on the print-out of the FORM GST RFD-01A and to be submitted manually to the jurisdictional officer. The exporters may ensure that all the necessary documentary evidences are submitted along with the Form GST RFD 01A for timely sanction of refund.

Exporters are, therefore, advised to immediately file (a) Table 6A and GSTR 3B, if not already done, for processing of IGST refund (b) RFD 01A on GSTN portal for refund of the unutilized input tax credit on inputs or input services used in making exports and (c) GSTR 1 for August 2017 for amending details provided in July GSTR1 wherever required. The Government has taken various measures to alleviate the difficulty and is fully committed to provide speedy disbursal of refunds due to exporters.

GST for the month of October 2017 (received in upto 27th Nov 2017)

A sum of Rs 83,346 crores has been collected as Total Revenue Collection under GST for the month of October, received in November till 27th November 2017. 95.9lakh taxpayers have been registered under GST so far, of which 15.1 lakh are composition dealers who are required to file returns every quarter. 50.1 lakh returns have been filed for the month of October till 26th November 2017.

Revenue of States: The States have collected a total of Rs. 87,238 crores by way of SGST in the months of August, September, October and November 2017 (till 27th November). Further on all inter-state trade, a net amount is transferred from IGST account to the SGST account whenever IGST collected is used for payment of SGST. By way of settlement an amount of Rs. 31,821 crores has been released to the States for the months of August, September and October 2017. Rs.13,882 crores is being released by way of settlement to all the States for the month of November 2017. Further, as per Goods and Services (Compensation to States) Act 2017, the States revenues are fully protected against any shortfall in GST collections. A compensation amount of Rs. 10,806 crores has been released to all the States for the months of July and August 2017 and a compensation of Rs.13,695 crores for the months of September and October 2017 is being released. The States revenues have thus been fully protected taking base year revenue as 2015-16 and providing for a projected revenue growth rate of 14%.

Centre’s Revenue: The total CGST income in the months of August, September, October and November (till 27thNovember) has been Rs.58,556 crores. In addition to this, an amount of Rs.16,233 crores has been transferred from IGST account to CGST account by way of settlement of funds on account of inter-state supply of goods and services in the month of August, September and October, 2017. Further, Rs. 10,145 crores is being transferred to CGST account from IGST account for the month of November 2017 by way of settlement. The major reason for the gap in income of CGST and SGST has been that more CGST liability has been discharged using transition credit rather than by way of cash. Thus, taxpayers are using the balance credit available with them in the previous tax regime, which is the reason why there is an additional revenue gap in the Centre’s revenue.

The reason for downward trend of tax revenue under GST could be attributed to the following factors:

• Because of the first time requirement of paying IGST on transfer of goods from one state to another state even within the same company, there was an additional cash flow of IGST in the first 3 months. As and when the final transaction of these goods takes place, the credit for IGST is being utilized for payment of SGST and CGST and therefore, the inflow of new taxes is low;
• Since the overall incidence of taxes on most of the commodities have come down under GST, it would naturally have some implication on the revenues of the Government.
• The tax administration of GST is now based on self-declared Tax Return, in which the assesse decides on his own how much tax liability he has and claims input tax credit as per his own calculations. Since implementation of some of the main features of GST such as, matching of returns, e-way bill as well as reverse charge mechanism have been postponed the tax compliance may not be up to the mark.

Returns filed: The total number of GSTR 3B returns filed for the return period July, August, September and October 2017 till 26th November is 58.7 lakh, 58.9 lakh, 57.3 lakh and 50.1 lakh respectively.

Government extends last date of filing of GSTR-2 and GSTR-3 for July, 2017

The last date for filing of GSTR-2 for the month of July, 2017 is 31st October, 2017. The competent authority has approved the extension of filing of GSTR-2 for July, 2017 to 30th November, 2017, for facilitation of businesses and all taxpayers.

The last date for filing of GSTR-3 for the month of July, 2017 also stands extended to 11th December, 2017 (the deadline was 10th November, 2017).

A Notification in this regard is being issued very shortly. This will facilitate about 30.81 lakh taxpayers for filing GSTR-2 for the month of July, 2017.

Amendments to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017

The Insolvency and Bankruptcy Board of India (IBBI) has amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017.

According to the Amended Regulations, a Resolution Plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the Corporate Debtor. 

The Amendments are available at www.mca.gov.in and www.ibbi.gov.in.

Direct Tax Collections for F.Y. 2017-2018 show Growth of 15.8% up to September, 2017

The provisional figures of Direct Tax collections up to September, 2017 show that net collections are at Rs. 3.86 lakh crore which is 15.8% higher than the net collections for the corresponding period of last year. Net Direct Tax collections represent 39.4% of the total Budget Estimates of Direct Taxes for F.Y. 2017-18 (Rs. 9.8 lakh crore). Gross collections (before adjusting for refunds) have increased by 10.3% to Rs. 4.66 lakh crore during April to September, 2017. Refunds amounting to Rs.79,660 crore have been issued during April to September, 2017. 

An amount of Rs. 1.77 lakh crore has been received as Advance Tax up to 30th September, 2017 reflecting a growth of 11.5% over the Advance Tax payments of the corresponding period of last year. The growth in Corporate Income Tax(CIT) Advance Tax is 8.1% and that in Personal Income Tax(PIT) Advance Tax is 30.1%.

Changes in GST Rates for Goods and IGST Rates on Imports of Goods

As per discussions held in the 22^nd GST Council Meeting held under Chairmanship of Union Finance Minister Shri Arun Jaitley on 6^th October, 2017, the following changes in GST rates for certain Goods and IGST rates on Imports of specified Goods have been recommended.

A.           GST RATE FOR FOLLOWING GOODS HAVE BEEN REDUCED

S. No.	Chapter/ Heading/ Sub-heading/ Tariff item	Description	Present GST Rate	GST Rate Recommended by the GST Council
1.	0804	Mangoes sliced dried	12%	5%
2.	1905 or 2106	Khakra and plain chapati / roti	12%	5%
3.	19 or 21	Food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programme duly approved by the Central Government or any State Government, subject to specified conditions [Foot note 1]	18%	5 %
4.	21	Namkeens other than those put up in unit container and, - (a) bearing a registered brand name; or (b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or enforceable right in respect of such brand name has been foregone voluntarily [Foot note 2]	12%	5%
5.	2710	Imposing GST only on the net quantity of superior kerosene oil [SKO] retained for the manufacture of Linear Alkyl Benzene [LAB]	18%	18% [Clarification to be issued]
6.	30	Ayurvedic, Unani, Siddha, Homeopathy medicines, other than those bearing a brand name [Foot note 3]	12%	5%
7.	3213	Poster Colour	28%	18%
8.	3407	Modelling paste for children amusement	28%	18%
9.	3915	Plastic waste, parings or scrap	18%	5%
10.	4004 00 00	Rubber  waste, parings or scrap	18%	5%
11.	4017 00 20	Hard Rubber waste or scrap	28%	5%
12.	4707	Paper waste or scrap	12%	5%
13.	4907	Duty credit scrips	5%	Nil
14.	5401	Sewing thread of manmade filaments, whether or not put up for retail sale	18%	12%
15.	5402, 5404, 5406	All synthetic filament yarn, such as nylon, polyester, acrylic, etc.	18%	12%
16.	5403, 5405, 5406	All artificial filament yarn, such as viscose rayon, Cuprammonium,	18%	12%
17.	5508	Sewing thread of manmade staple fibres	18%	12%
18.	5509, 5510, 5511	Yarn of manmade staple fibres	18%	12%
19.	5605	Real Zari	12%	5%
20.	6802	All goods falling under heading 6802 [other than those of marble and granite or those which attract 12% GST]	28%	18%
21.	7001	Cullet or other waste or scrap of Glass	18%	5%
22.	8305	Fittings for loose-leaf binders or files, letter clips, letter corners, paper clips, indexing tags and similar office articles, of base metal; staples in strips (for example, for offices, upholstery, packaging), of base metal	28%	18%
23.	8483	Plain Shaft Bearing 8483	28%	18%
24.	84	Parts suitable for use solely or principally with fixed Speed Diesel Engines of power not exceeding 15HP	28%	18%
25.	84 or 85	Parts suitable for use solely or principally with power driven pumps primarily designed for handling water, namely, centrifugal pumps (horizontal and vertical), deep tube-well turbine pumps, submersible pumps, axial flow and mixed flow vertical pumps	28%	18%
26.	84 or 85	E-Waste	28%/18%	5%
27.	Any Chapter	Biomass briquettes	18%	5%

Foot note;

1.       Reduction in GST rate against S. No 4 above is subject to following condition:

a.       If the supplier of such food preparations produces a certificate from an officer not below the rank of the Deputy Secretary to the Government of India or not below the rank of the Deputy Secretary to the State Government concerned to the effect that such food preparations have been distributed free to the economically weaker sections of the society under a programme duly approved by the Central Government or the State Government concerned, within five months from the date of supply of such goods or within such further period as the jurisdictional Commissioner of Central tax or jurisdictional Commissioner of State tax, as the case maybe, may allow in this regard.

2.       For S. No.5 above, the phrase registered brand name means:

a.       A brand registered as on 15.05.2017 shall be deemed to be a registered brand for the purposes of levy of 5% GST, irrespective of whether or not such brand is subsequently deregistered.

b.      A brand registered as on 15.05.2017 under the Copyright Act, 1957 shall also be treated as a registered brand for the purposes of levy of 5% GST.

c.       A brand registered as on 15.05.2017 under any law for the time being in force in any other country shall also be deemed to be a registered brand for the purposes of levy of 5% GST.

3.       For S. No. 7 above, the phrase “brand name” is defined as:

"brand name" or "trade name" means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person.

B.     IGST EXEMPTION ON IMPORTS OF GOODS:

S. No	Description	Present applicable IGST rate	Recommended IGST rate
1	IGST exemption on imports of rigs imported for oil / gas exploration and production projects under lease, subject to the following conditions that: (i)       Integrated tax leviable under section 5(1) of the IGST Act, 2017 on supply of service covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017; (ii)     The rig is not sold without the prior permission of the Commissioner of Customs of the port of importation; (iii)   to re-export the goods within 3 months from the expiry of the period for which they were supplied under a transaction covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017 out of India; (iv)   to pay on demand an amount equal to the integrated tax payable on the said goods but for the exemption under this notification in the event of violation of any of the above conditions and applicable interest.	5%	Nil
2	Exemption from IGST on imports of medicines supplied free by international agencies like UNICEF, WHO, Red Cross etc.	12%/5%	Nil
3	A.    Exemption from IGST on imports of bona fide gifts upto CIF value limit of Rs. 5000 imported through post or air.	28%	Nil