the essay of 24 June 2020 · the untouched capture
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<p align="justify"><font color="#330066" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>JUNE 24, 2020</strong></font></p>
<p align="center"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GST - No Offence - No Arrest? </strong></font></p>
<p align="center"><u><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>By Vijay Kumar</strong></font></u></p>
<p align="justify"><STRONG><FONT SIZE="2" FACE="VERDANA, ARIAL, HELVETICA, SANS-SERIF">SECTION</FONT></STRONG><FONT SIZE="2" FACE="VERDANA, ARIAL, HELVETICA, SANS-SERIF"> 138 of the CGST <strong><a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=29&filename=notification/gst/cgst_act/2017/cgst_act_index.htm" target="_blank">Act, 2017</a></strong> lists a series of acts which are offences punishable with various terms of sentence and or fine. Section 69 empowers the Commissioner to authorise any officer to arrest a person, who the Commissioner believes has committed an offence. This CGST Act, as we know, is a law passed by Parliament. Now is the Parliament empowered to pass such a law? What! Should parliament be empowered to pass a law? Doesn't it have the power to pass any law? It appears, unfortunately not. Parliament can pass only such laws as permitted by the Constitution. The question whether the legislature (in this case the State one) had the power to make laws regarding arrest and prosecution under the GST laws was the subject matter of a recent writ in the Punjab and Haryana High court. - <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTU5MDU0" target="_blank"><strong>2020-TIOL-1028-HC-P&H-GST</strong></a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was submitted that as per the Scheme of the Constitution of India, there are two sources from which power to legislate flows i.e.:- </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Schedule VII read with Article 246; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) A specific Article for example Article 35, Article 323B, Article 369… </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was further submitted that vide the 101st Constitutional Amendment, Article 246-A was inserted w.e.f. 16.09.2016, whereby the Union and the State Legislatures were empowered to levy tax on Goods and Services (GST). Prior thereto, the power to levy different taxes like Central Excise, Service Tax, VAT etc., was enumerated in the different entries of Schedule VII read with Article 246. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was submitted that different provisions of the Constitution allowed making of laws by Parliament such as: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Entry 93 of Union List and 64 of State List specifically empowers Legislature to make law for offences against laws with respect to any of the matters in the Union/State List. Thus Union and State Legislature while introducing any enactment in exercise of powers conferred by the entries of Union/State Lists in Schedule VII gets the power to insert provisions for offences. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Entry 93 of Union List - Offences against laws with respect to any of the matters in this List. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Entry 64 of the State List - Offences against laws with respect to any of the matters in this List. </em></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) Sub clause (i) of clause 2 of Article 323-B authorises legislature to make law for offences with respect to any matter specified in sub clause (a) to (h), whereas sub clause (j) authorises to make law with respect to any matter incidental to matters specified in sub clause (a) to (i), thereby establishing the power to legislate regarding the offences as not an incidental power. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(i) <strong>offences </strong> against laws with respect to any of the matters specified in sub-clauses (a) to (h) and fees in respect of any of those matters; </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(j) any matter incidental to any of the matters specified in sub-clauses (a) to [(i)]. </em></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) Sub clause (ii) of Clause (a) of Article 35 empowers Parliament to prescribe punishment for those acts, which are declared offences under this part-III (fundamental rights). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) Clause (b) of Article 369 empowers Parliament to make law with respect to offences against laws with respect to any of the matters mentioned in clause-(a). </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus, it was argued that the criminal trial for the offences under Section 132 of the PGST Act, 2017 as also the arrest under Section 69 are without jurisdiction, having no backing of the constitutional provisions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Court found considerable force in the submissions raised and demonstrated by the Advocate for the Petitioner and issued notices to the respondents. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government of Punjab and obviously the Central Government will have to come up with sound reasons to defend the charge that the provision to arrest and prosecute under the GST laws has no constitutional sanction. If this view is found to be correct, perhaps nobody can be arrested for any offence under GST. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Blasphemy? </strong></font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>Personal Loans and PPF under GST? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Do you have a house to rent and some money to spare? Beware, you may get a call from your friendly GST officer. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An individual who was not doing business had an estimated income of Rs. 20.12 lakhs in a year which included,</font></p>
<table width="90%" border="1" align="center" cellpadding="3" cellspacing="0">
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<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) </font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rent receipts:</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 9,84,000/-, </font></td>
</tr>
<tr valign="top">
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii)</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Bank interest:</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 3,000/-,</font></td>
</tr>
<tr valign="top">
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) </font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interest on PPF deposit: </font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 2,76,000/- and </font></td>
</tr>
<tr valign="top">
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv)</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interest on Personal Loans and Advances:</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 7,49,000/-. </font></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We don't know what drove him to that exalted authority called AAR. Anyway, he reached to the Authority for Advance Ruling in Gujarat with the questions: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Whether Interest received in form of PPF would be considered for the purpose of calculating the threshold limit of Rs.20.00 Lakh for registration under GST Law? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Whether Interest received on Personal Loans and Advanced to family/friends would be considered for the purpose of calculating the threshold limit of Rs.20.00 Lakh for registration under GST Law? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Whether Interest received on Saving Bank Account would be considered for the purpose of calculating the threshold limit of Rs.20.00 Lakh for registration under GST Law? </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He got YES for an answer for each of his questions and what a costly YES!. He must have casually walked into the AAR. Now he must run to the AAAR. Moral of the story - Don't try to solve a problem that doesn't exist, particularly in tax matters and more particularly with Advance Ruling. Please see - <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTU5MTcy" target="_blank"><strong>2020-TIOL-130-AAR-GST</strong> </a>. </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Hair Cut in Paris - Tax in India </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Fifteen years ago, I said in a meeting, <a href="http://www.thehindubusinessline.in/bline/2005/03/23/stories/2005032301661700.htm" target="_blank"><em>"If you go abroad and have a hair-cut in Paris or London, you may have to pay service tax for it in India" </em></a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently the AAR had to answer such a question: Whether GST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor's premises (located outside India) to the customer's premises. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I buy goods in one country and ship it another country, while remaining in India. The goods do not come to India at all. The AAR emphatically ruled - <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTU5MTM2" target="_blank"><strong>2020-TIOL-124-AAR-GST</strong></a>, "<em>Applicable GST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor's premises (located outside India) to the customer's premises."</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In an earlier case, the AAR, Kerala had ruled - <strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTM1OTU1">2018-TIOL-02-AAR-GST</a></strong>, <em>"The applicant is neither liable to GST on the sale of goods procured from China and directly supplied to USA nor on the sale of goods stored in the warehouse in Netherlands, after being procured from China, to customers, in and around Netherlands, as the goods are not imported into India at any point ." </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Be assured, not a dull moment in GST after the unlocking of the economy - you have nothing to lose, except your money and time - but we are developing jurisprudence. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice time </font></strong></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Until next week </strong></font></p>
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