The 48th Goods and Services Tax Council (hereinafter referred to as the “Council”) meeting under the chairmanship of the Union Finance Minister Smt. Nirmala Sitharaman along with the Finance Ministers of the States/Union Territories was held virtually from Delhi on 17.12.2022.
The Council dealt only with eight out of total fifteen agenda items listed for discussion. The Central Board of Indirect Taxes and Customs (hereinafter referred to as “CBIC”) on 27.12.2022 notified a series of clarificatory Circulars providing insights on various provisions and procedures under the current GST regime.
CIRCULAR NO. 183/15/2022
Vide Circular No. 183/15/2022, the CBIC has issued numerous clarifications regarding the process for handling the issue of mismatch of the Input Tax Credit (hereinafter referred to as the “ITC”) claim made in FORM GSTR-3B and FORM GSTR-2A for Financial Year 2017-18 and 2018-19.
This is primarily a clarification to handling disparities; pertaining to “the mismatch of the ITC claims with GSTR 2A for FY 2017-18 & FY 2018-19 is a valid ground for denying the ITC”.
While in the opinions of several industry experts the CBIC vide this Circular in its defense stated that “the availability of ITC was subjected to restrictions and conditions specified in Section 16 of CGST Act from July, 01, 2017 itself.” The CBIC vide this Circular has sought to address only those circumstances where bona fide flaws have been committed by the vendors during the Financial Year 2017-18 and 2018-19.
The CBIC has categorically observed that the discrepancies between the amount of ITC availed by the class of registered persons in their returns in FORM GSTR3B and the amount as available in their FORM GSTR-2A are being noticed by the tax officers during proceedings such as scrutiny/audit/investigation etc. due to such credit not flowing to FORM GSTR-2A of such registered persons.
It has been further laid down that the stated process would be relevant only in the context of the ongoing proceedings for the Financial Year 2017-18 and 2018-19 or in such cases where for the said time period, any appeal or judicial proceedings are pending in the Court of Law. Clarifications provided in this Circular would bear no impact on the proceedings that are already completed.
This Circular seeks to legitimize the actions of the Department in terms of questioning the validity of the claim of the ITC merely based on a mismatch with GSTR-2A in bona fide cases, which is in contrast to the statutory provisions of the GST law.
This clarificatory Circular is also silent on whether the already recovered ITC (with a presumption that the factum of actual payment has yet to be established via certificate) would be allowed as a re-credit when the said tax stands recovered by the vendor.
The Circular covers only four situations where bona fide errors have been made by the vendors. However, various occasions which are not envisaged in this Circular, where similar errors would have been committed, also deserve a similar approach.
This Circular also implies that in absence of confirmation of the payment of tax, the mismatch ITC shall be recovered. Now it is settled law that the Circulars only bind the Authorities and not the taxpayer. Section 168(1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”) pursuant to which the said Circular has been issued accords the Authority to issue the Circular only to the Department Officers. This implies that the taxpayers shall have the right to contest the demands in case they are not able to produce the requisite certificates for instance; the vendors are no longer in the business.
Although the Circular is a clarification however, it was overdue and unfair to those who were already made to pay.
CIRCULAR NO. 184/16/2022
The CBIC vide Circular No. 184/16/2022 has provided clarifications on availment of ITC in those cases where the supply of services is by way of transportation of goods to a place outside India while both – the Supplier and the Recipient of such supply are located in India.
The Circular in this regard clarifies that the place of supply in such cases would be the concerned foreign destination of the transported goods as per the proviso to Section 12(8) of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as “IGST Act”) inserted vide the IGST (Amendment) Act, 2018.
Such supply of services would attract IGST as it would be considered as ‘inter-state supply of services.’ It has been further clarified that the Recipient of such supply would also be able to avail ITC in respect of the IGST charged by the Supplier.
The CBIC vide this Circular has further stipulated that the Supplier shall report the place of supply of such services under the State code as ’96-Foreign Country’ in the list of codes while filling FORM GSTR-1 on the GST portal.
CIRCULAR NO. 185/17/2022
Vide Circular No. 185/17/2022, the CBIC has provided clarifications on the time limit of 2 (two) years for the Proper Officer to re-determine the tax amount in all such circumstances where the Appellate Authority/Appellate Tribunal/Court determines that the notice issued by virtue of Section 74(1) of the CGST Act, 2017 against the tax payer is not sustainable in the eyes of law and directs the proper officer to re-determine the sum of tax payable.
It has been stated in the circular that “the proper officer is required to issue the order of re-determination of tax, interest and penalty within the time limit specified under Section 75(3) of the CGST Act, i.e., within a period of 2 years from the direction/ order issued by appellate authority, appellate tribunal or the court.”
CIRCULAR NO. 186/18/2022
The CBIC vide this Circular clarified that ‘No Claim Bonus’ (NCB) under the insurance policies does not qualify as a consideration for any supply made by the Insured (discount receiver) to the Insurance Company (discount giver).
Meaning thereby, discount even if addressed by a different nomenclature, is a permissible deduction under Section 15(3)(a) of CGST Act, 2017 for the purpose of calculating the value of supply of insurance services provided to the insured.
The CBIC observed that the Insurance Companies deduct NCB from overall sum total of insurance premium in all those cases where no claim is made by the insured during the relevant time period of the policy.
The CBIC vide this Circular has clarified that “while the insured is under no such contractual obligation to not raise an insurance claim during the policy period; no supply is provided by the insured to the insurance company in form of agreeing to the obligation to refrain from the act of lodging insurance claim. Therefore, where the deduction on account of NCB is provided in the invoice issued by the insurer to the insured, GST shall be leviable on actual insurance premium amount payable by the policy holders to the insurer subsequent to the deduction of NCB mentioned on the invoice.”
CIRCULAR NO. 187/19/2022
The CBIC vide this Circular contemplates the treatment of statutory dues under the contemporary GST regime particularly with respect to such taxpayers against whom proceedings under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) have been finalized.
The CBIC observed that procedures under IBC inter alia also adjudicates the Government dues pending against such Corporate Debtor in light of the CGST Act, and hence, it can be contended that the term ‘other proceedings’ under Section 84 of the CGST Act, encompasses such instances.
The CBIC has clarified that in all such instances where
- The Tax Authorities have issued confirmed demand for recovery of tax dues from the Corporate Debtor, for which a summary has been issued in FORM DRC-07/FORM DRC-07A; and
- Where the insolvency proceedings under IBC have been finalized against such Corporate Debtor that amounts to reduction in statutory dues payable to the Government under CGST Act or any other laws for the time being in force.
The Commissioner must issue an intimation in FORM DRC-25 to the taxable persons as well as the Appropriate Authority with whom the recovery proceedings are pending thereby intimating the reduction in such tax dues.
CIRCULAR NO. 188/20/2022
Addressing the conundrum of unregistered home buyers and policy buyers, the CBIC vide this Circular has clarified the manner of filing an application for tax refund borne by such unregistered home buyers and policy buyers, where the construction contract or agreement has been terminated or the long-term insurance policy has been scrapped.
In such cases, where the time period for issuing credit note in light of Section 34 of the CGST Act might already have elapsed; the suppliers/insurance companies had repaid the sum to buyers/insured only after deducting the GST amount collected from them on such services/policy.
According to this Circular, an unregistered person willing to file an application for refund under Section 54(1) of the CGST Act, requires to apply for a temporary registration using his Permanent Account Number (PAN) on the common portal.
It has further been specified in the Circular that the application for refund must be filed in FORM GST RFD-01 under the category ‘Refund for unregistered person’. Also, for each invoice raised by distinct suppliers, a separate refund application requires to be filed.
In addition to that, in those cases where the Suppliers are not registered in a single State/UT, the Applicant needs to acquire a temporary registration in respect to refund application in all such States or UTs where the concerned Suppliers are registered.
Moreover, no claim for refund would be available in case the amount does not exceed Rupees 1000.
These clarificatory Circulars could certainly be considered as a stepping stone towards a more unambiguous and pellucid legal framework under the current GST regime.
However, there still exists numerous concerns that remain unaddressed or inadequately addressed by the CBIC and in the opinion of handful legal luminaries some of these clarifications might also end up fueling the procedural hurdles and complications faced by the stakeholders.
As it remains the ongoing practice, the CBIC is expected to come up with more comprehensive clarifications, giving due considerations to the representations made by several concerned entities and individuals. As GST is an evolving law, it is expected that with the passage of time the lacunae and short comings would be sorted and a full proof framework would be setup.
Team AMLEGALS assisted by Mr. Saurin Thakkar (Intern)
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