ELP GST Update

Notification No. 29/2018 – Central Tax, F. No.349/58/2017-GST (Pt.) dated July 6, 2018

The anti-profiteering related rules of the CGST Rules, 2017 have been amended to substitute the words “Directorate General of Safeguards”, with the words “Directorate General of Anti-profiteering”. Therefore, the investigating agency that has been formed to investigate anti-profiteering related contraventions has now been appropriately renamed as the Directorate General of Anti-profiteering instead of the Directorate General of Safeguards.

GST Council has released a proposal containing 38 amendments to the CGST Act, 6 amendments to IGST Act, and 2 amendments to the GST (Compensation to States) Act. The proposed amendments relate to the scope of supply, time and value of supply, input tax credit, levy and collection, registration, composite schemes, refunds etc. Few such amendments are outlined below:

• Definitions of “services” u/s 2(102) of the CGST Act is proposed to be amended to include all services of facilitating or arranging transactions in securities. The change is being proposed to remove doubts that if some service charges or documentation fees or broking charges etc. are charged in relation to transactions in ‘securities’ (which is otherwise excluded from services), the same would be a consideration for provision of service and chargeable to GST.
• Scope of ‘supply’ u/s 7 of the CGST Act is proposed to be amended to prescribe that activities / transactions listed in Schedule II is to be treated as supply of service or supply of goods only when such activities otherwise constitute as a ‘supply’. The amendment is proposed to remove ambiguity under the existing clause which leads to a situation where an activity listed in Schedule II would be deemed to be a supply even if it does not otherwise constitute a supply.
• Schedule II of the CGST Act has been proposed to be amended to consider import of services even by unregistered business entities (say, entities only making exempted supplies) as a deemed supply when received from a related person.
• Schedule III of the CGST Act has been proposed to be amended to expressly add few supplies as excludable from the tax net of GST i.e. (a) transactions which involve movement of goods caused by a registered person from one non-taxable territory to another non-taxable territory; (b) supply of goods in the course of high sea sales and sale of warehoused goods before clearance for home consumption. Thus, to avoid double taxation IGST in such situations will be levied only upon clearance for home consumption post amendment.
• Section 9(4) of the CGST Act which mandates that all registered persons shall pay the tax on reverse charge basis on purchases made from unregistered persons, is presently under suspension. It is proposed to amend this provision to give enabling power to the Government to notify a class of registered persons who would be liable to pay tax on reverse charge basis on supplies received from an unregistered person.
• The limit of composition scheme under section 10 of the CGST Act is proposed to be raised from Rs. 1 crore to Rs. 1.5 crore as a measure of trade facilitation, as already recommended by the GST Council.
• Section 17(5) of the CGST Act is proposed to be amended to expand the scope of input tax credit (‘ITC’) availability. The amendment inter alia proposes to provide that ITC in respect of restricted goods or services (say, food and beverages, health services, travel benefits to employees, etc.) will be available where the provision of such goods or services is obligatory for an employer to provide to its employees under any law for the time being in force.
• Section 49(5) of the CGST Act is proposed to be amended to provide that SGST / UTGST can be utilized for payment of IGST only when the balance of the input tax credit on account of CGST is not available for payment of IGST.
• Section 12(8) of the IGST Act is proposed to be amended to provide that when the transportation of goods from a place in India is to a place outside India, the place of supply would be the place of destination of such goods. The amendment seeks to provide a level playing field to the domestic transportation companies and promote export of goods, as transportation of goods from a place in India to a place outside India would not be chargeable to GST, as place of supply will be outside India.

Comments from the stakeholders on the proposed amendments have been sought by July 15, 2018.

M/s. Manjira Machine Builders (P) Ltd [2018-TIOL-85-AAR-GST]

Taxability – Authority for Advance Rulings, Telangana

The question under consideration was whether the concessional tax rate of 5% on supplies to specified institutions as notified under Notification No. 47/2017 dated 14.11.2017 is applicable only for Interstate supplies or also applicable for supplies within the state. If the concessional tax rate of 5% is applicable for both Interstate and within the state supplies, then can ITC be availed for the raw materials used for the supplies.

Vide the ruling, it has been held that the concessional rate of tax of 5% is equally applicable for within the state supplies vide a separate Notification No. 45/2017-Central Tax (Rate) dated 14.11.2017. As regards the second question of eligibility to ITC, it has been held that in Section 17 of the CGST Act (relating to ITC) there is no restriction for availment of credit on raw materials used for supplies made under the concessional rate of tax. Therefore, ITC would be available.

M/s. Madhucon Sugar and Power Industries Limited [2018-TIOL-86-AAR-GST]

Taxability – Authority for Advance Rulings, Telangana

While hearing the application raising the issue of ‘Taxation of Rectified Spirit & Extra Neutral Alcohol (‘ENA’) under GST’, the authority for advance rulings have stated that since the issue is pending before the GST council for a decision, Advance Ruling on this issue cannot be given at this juncture. In the 27th GST council meeting held on May 04, 2018 it was decided to defer the agenda point on the ‘applicability of GST on ENA’ to the next meeting.

M/S. Lyophilization Systems India Private Limited [2018-TIOL-87-AAR-GST]

Classification – Authority for Advance Rulings, Telangana

Applicant is a manufacturer of Lyophilizers machines used in the drug & pharmaceutical industry for manufacture of life saving drugs. The issue is with respect to the classification of ‘Lyophilizers-Machinery’ under the GST Tariff and the rate of tax applicable on the same as on November 15, 2017. Vide the Notification No. 41/2017 dated 14.11.2017, Sr. No. 320 of Schedule – III to the Notification No. 1/2017 dated 28.06.2017 was amended with effect from November 15, 2017.  Prior to the amendment, the said serial entry with respect to the Customs tariff heading 8419 covered ‘Medical, surgical or laboratory sterilisers’ and post the amendment it covered ‘Machinery, plant or laboratory equipment, for the treatment of materials by a process involving a change of temperature such as heating, cooking, roasting, distilling, rectifying, sterilizing, etc.’ The applicant cleared the goods under chapter heading 8419 of the Customs Tariff and applied a GST rate of 28% prior to the amendment as the said machinery was not finding place in any of the entries prior to November 14, 2017.

The Telangana Authority for Advance Ruling held that ‘Lyophilizers’ are classifiable under the heading 8419 8990 as per the Section notes to Section XVI and Chapter notes to Chapter 84 of the Customs Tariff. As the rules for interpretation of the Customs Tariff Act, 1975 was made applicable to GST Tariff, the goods ‘Lyophilizers’ are classifiable under the heading 8419 of the GST Tariff. Accordingly, the applicable GST Tariff on such goods covered under the amended Sr. No. 320 is 18%.