the essay of 31 October 2018 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" color="#663399"><strong> OCTOBER 31, 2018</strong></font></p> <p align="center"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GST - Thou Shalt Not Correct</strong></font></font></p> <p align="center"><font size="2" face="verdana, Arial, Helvetica, Sans-serif"><strong><u><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By Vijay Kumar</font></strong></u></strong></font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span">The zero that cost a Crore</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHAT</strong> do you do if you do a mistake? Kind masters used to allow us to correct our mistakes and it seems even God and Government sometimes allow correction of mistakes, but GST is such a perfect rocket science that you are deemed to be doomed if you commit a mistake, for that damned mistake cannot be corrected. This rule applies only to the taxpayer, not the collector. The tax department can hurriedly commit any number of mistakes and leisurely correct them, while the taxpayers run around various authorities, tribunals and courts.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But here is a case, where the Government has graciously agreed to consider correction of the mistake.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a recent case we reported, [O/E/N India Ltd v Union of India - <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTQxNTYx" target="_blank"><strong>2018-TIOL-2874-HC-MUM-GST</strong></a>], the Petitioners had while submitting its Form TRAN-1 to enable the unutilised Cenvat credit from the earlier regime be carried forward into the GST regime had on account of typographical error indicated that the Cenvat credit available is Rs. 11,10,555/- instead of Rs. 1,11,05,550/-. This, the Petitioners have been seeking to correct by approaching the Respondents (CBIC). However, inspite of the Petitioners best efforts, the Respondents have refused to allow the Petitioners to carry out the necessary amendment to the TRAN-1 already submitted or even accept a fresh TRAN-1. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court noted <em>that the human errors such as one which is arising in the present Petition are likely to have taken place in other cases also. </em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span"><em>At times these mistakes in keying in the correct figures would work in favour of the State and at other times in favour of Assessee. </em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>According to learned Counsel for both sides, there is no provision in the Act, which allows correction/rectification of such errors </em>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Court suggested to the Government that it would be appropriate that the Central Government issues a general and/or special order under Section 172 of the Act addressing the above issue on general or special basis, taking into account the ground realities. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Last Wednesday, when the Court heard the matter, the GST Commissioner submitted an affidavit to the effect that <em>it has been decided by the CBIC (Central Board of Indirect Taxes & Customs) that relief may be extended to the petitioner after due verification of the bona fides of the claims made by the petitioner from GSTN. Once the claims made by the petitioner have been verified, he may be allowed to amend the TRAN¬1 to file correct amount of CENVAT credit to be transitioned </em>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Noting that nothing survives in the petition, the Court, however, directed that <em>Petitioners would have to file representation to the Central Board of Indirect Taxes and Customs (CBIC). This representation would be considered by the CBIC for verification and the bona fides of the claim made by the Petitioners. If satisfied, Petitioners would be allowed to amend the Trans­I form to reflect the correct amount of credit available.The CBIC will decide the Petitioners' representation as expeditiously as possible and preferably within a period of twelve weeks from the date the representation, is received by the CBIC. </em><strong>[<a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTQyNDE4" target="_blank">2018-TIOL-2892-HC-MUM-GST</a>]</strong> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nani Palkhiwala remarked on Octroi, <em>"It is the only impost which taxes the people to a tolerable extent in terms of money and to an intolerable extent in terms of time and energy.''</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF0000"style="background-color:#FFFF00" span="span">GST Council - Journey so far: </font></strong>In a self-congratulatory Press Release, the Finance Ministry states, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">- Till date, the Goods and Services Tax (GST) Council has taken 918 decisions related to GST laws, rules, rates, compensation and taxation threshold etc. More than 96% of the decisions have already been implemented through 294 Notifications issued by the Central Government and the remaining are under various stages of implementation. Almost equal number of corresponding SGST Notifications have been issued by each State. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">- The GST Council Members under the Chairperson ship of the Union Finance Minister have spent long hours discussing the broad contours as well as the nitty gritty of the new GST regime in a harmonious and collaborative spirit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">- The working of GST Council has ushered in a New Phase of Cooperative Federalism where the Central and the State Governments work together to take collective decisions on all issues relating to Indirect Tax regime of the country. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Great achievements indeed. Maybe we can try the GST Council experiment in other departments like Home, Education, Agriculture etc., We can have an Education Council on the same lines as GST Council, which will decide on all matters of education or the lack of it. We will take co-operative federalism to new heights and areas with an Apex Council consisting of the Prime Minister and all Chief Ministers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sardar Vallabhai Patel, whose birthday we are celebrating today is credited with making India into one country merging the 500 odd Princely States who were given the option to stay out by the British as they were going. Patel created One Nation and left it to Modi to fill the blanks and create <em>"One Nation, One Tax"</em>. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span"><strong>Why do people pay taxes? </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you didn't know and were afraid to ask, here is the answer.</font></p> <p align="center"><img src="http://taxindiaonline.com/RC2/image/stories/Jest011.JPG" width="448" height="196"></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span"><strong>But Please Wait for Your Turn: </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is a snapshot from the GSTN site</font></p> <p align="center"><img src="http://taxindiaonline.com/RC2/image/stories/Jest022.JPG" width="376" height="122"></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span"><strong>No Credit on Capital Goods in Transit prior to 1.7.2017: </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 140(5) of the CGST Act reads as <em>(5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of <strong>inputs or input services </strong> received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day </em>: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As can be seen, only the credit on inputs and input services is allowed and not on Capital Goods. Many thought this was a mistake and the Government would soon correct it. But in a twitter clarification, the Government stated: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span">Q: Would we be eligible for credit on Capital Goods in transit and received post GST? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span">A: No provision for such credit is there in GST law </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Gujarat High Court recently dismissed a petition challenging this denial of provisional credit on capital goods in transit observing, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>The legislature, as we have noted, made a clear and conscious demarcation between capital goods and inputs when it comes to availing credit of the duties paid on the goods which are in transit. When the entire tax structure was being replaced by the GST provisions, there would arise a need for making transitional arrangements. Chapter XX of the CGST Act, as noted, contains transition provisions. Section 140 contained in the said chapter makes detailed provisions for transitional arrangements for input tax credit. Subject to contentions and in the manner as may be prescribed, the unused tax credit would be migrated to the GST regime. This section also would enable a registered person to claim credit of the duty paid prior to the appointed day on the inputs even though the inputs may be received after the appointed day. This section consciously does not provide any such facility in relation to the capital goods in transit. This demarcation itself would not be artificial, arbitrary or in any manner, discriminatory. The capital goods and inputs used in manufacturing process have always been treated differently and distinct treatment have been given under the earlier statutes. If the legislature therefore was of the opinion that in relation to capital goods in transit, duty paid before the appointed date cannot be claimed as a credit in the GST regime, we do not find that the distinction is in any manner artificial or arbitrary</em>. - <strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTQyMjYx" target="_blank">2018-TIOL-146-HC-AHM-GST </a></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What was perceived to be an inadvertent omission, not only got administrative approval but also judicial justification. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A frantic assessee wrote to us: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Kindly clarify whether Capital goods in transit as on 01.07.2017 is eligible for credit.. GST rules covers only Inputs and services. These capital goods were eligible for credit in pre GST regime and also in GST regime. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>We have around one Rs.1 Crore worth of Capital goods in transit as on 30.06.2017. Please clarify. </em></font></p> </blockquote> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span"><strong>Refund Claims – Board Corrects a Mistake: </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Para 7.1 of circular No. 59/33/2018-GST dated the 4th September, 2018 clarified the intent of law in cases where a deficiency memo is issued in respect of a refund claim. In para 7.2 of the said circular, the practise being followed in the field formations was elaborated and it was clarified that show cause notices are not required to be issued (and consequently no orders are required to be issued in FORM GST RFD-04/06) in cases where refund application is not re- submitted after the issuance of a deficiency memo (in FORM GST RFD-03). It was also clarified that once a deficiency memo has been issued against an application for refund, the amount of Input Tax Credit debited under sub-rule (3) of rule 89 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the "CGST Rules") is required to be re-credited to the electronic credit ledger of the applicant by using FORM GST RFD-01B and the taxpayer is expected to file a fresh application for refund. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All very well, but Board recently noticed that the <em>common portal </em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span"><em>does not allow</em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em> a taxpayer to file a fresh application for refund once a deficiency memo has been issued against an earlier refund application for the same period. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And so clarified <em>that till the time such facility is developed, taxpayers would be required to submit the rectified refund application under the earlier Application Reference Number (ARN) only. - CBIC Circular No.<strong><a href="https://taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjQ5NjU=" target="_blank"> 70/44/2018-GST</a></strong>, dated 26th October, 2018 </em></font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span"><strong>Cancellation of Registration<em>: </em></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was easier for a camel to go through the eye of a needle than a Service Tax assessee to get his registration cancelled. It was a one-way ticket. The tax officers were always reluctant to let go, assuming that they would not be able to collect taxes if the assessee was not registered. Now, the Board has issued instructions on cancellation of registration. See <a href="https://taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjQ5Njc=" target="_blank"><strong>69/43/2018-GST</strong></a>, Dated: October 26, 2018. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board states: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">- <em>Since the cancellation of registration has no effect on the liability of the taxpayer for any acts of commission/omission committed before or after the date of cancellation, the proper officer should accept all such applications within a period of 30 days from the date of filing the application: </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">- <em>The application for cancellation of registration should be immediately accepted by the proper officer and the order for cancellation should be issued in FORM GST REG-19 with the effective date of cancellation being the same as the date from which the applicant has sought cancellation. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">- <em>It is pertinent to mention here that section 29 of the CGST Act has been amended by the CGST (Amendment) Act, 2018 to provide for "Suspension" of registration. The intent of the said amendment is to ensure that a taxpayer is freed from the routine compliances, including filing returns, under GST Act during the pendency of the proceedings related to cancellation. Although the provisions of CGST (Amendment) Act, 2018 have not yet been brought into force, it will be prudent for the field formations not to issue notices for non- filing of return for taxpayers who have already filed an application for cancellation of registration under section 29 of the CGST Act</em>. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let's hope the Board's instructions are respected and followed. </font></p> </body> </html>