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GST Updates June 2024: Key Developments and Court Decisions

Explore the latest developments in GST with our comprehensive coverage of the GST Updates June 2024. Discover essential changes and major court decisions that are shaping the tax landscape. Gain valuable insights to stay informed and compliant as a business or taxpayer.

Section A: News & Updates

  1. Circular No. 207/1/2024-GST dated 26 June 2024

Reduction of Monetary limit for filling of appeal by department

In light of Section 120 of CGST Act read with Section 168 of CGST Act, CBIC on recommendation of GST Council has fixed the following monetary limits below which appeal or application or SLP shall not be filed by Central Tax Officers:

Forum

Monetary Limit (Amount in INR.)

GSTAT

20,00,000

High Court

1,00,00,000

Supreme Court

2,00,00,000

In order to determine the said monetary limits, the following principles are to be considered:-

  • Where the dispute pertains to demand of tax(with or without penalty and/or interest),  the aggregate of amount of tax in dispute (including CGST, SGST/UTGST, IGST and Compensation Cess), only shall be considered
  • Where the dispute pertains to erroneous refunds, the amount of refund in dispute (including CGST, SGST/UTGST, IGST and Compensation Cess) shall be considered
  • Monetary limit shall be applied on the disputed amount of tax/interest/penalty/late fee, as the case may be, in respect of which appeal or application is contemplated to be filed in a case.
  • In a composite order which disposes more than one appeal/demand notice, the monetary limits shall be applicable on the total amount of tax/interest/penalty/late fee, as the case may be, and not on the amount involved in individual appeal or demand notice.

The above monetary limits shall be subject to the following exclusions:-

  1. Where any provisions or Rules or Regulations under CGST Act or SGST/UTGST Act or IGST Act or GST (Compensation to States) Act have been held to be ultra vires to the Constitution of India or the parent Act respectively.
  2. Where any order, notification, instruction, or circular issued by the Government or the Board has been held to be ultra vires of the CGST Act or SGST/UTGST Act or IGST Act or GST (Compensation to States) Actor the Rules made thereunder; or
  3. Where the matter is related to –
    • Valuation of goods or services; or
    • Classification of goods or services; or
    • Refunds; or
    • Place of Supply; or
    • Any other issue,which is recurring in nature and/or involves interpretation of the provisions of the Act /the Rules/ notification/circular/order/instruction etc; or
  4. Where strictures/adverse comments have been passed and/or cost has been imposed against the Government/Department or their officers; or
  5. Any other case or class of cases, where in the opinion of the Board, it is necessary to contest in the interest of justice or revenue.

It is also clarified that where appeal is not filed solely on the basis of the above monetary limits, it cannot be presumed that department has acquiesced in the decision on the disputed issues in the case of same taxpayers or in case of any other taxpayer. Hence, in case where no appeal is filed based on monetary limit, it shall not be inferred that the decision rendered therein is acceptable to department

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No.-208/2/2024-GST dated 26 June 2024

CBIC clarifies the special procedure for manufacturers of certain goods under Notification 04/2024-Central Tax

CBIC issues clarification with respect to special procedure notified vide Notification 04/2024-Central Tax for registered person engaged in manufacturing of certain specified goods. The said clarification addresses the concerns raised by trade associations, such as non-availability of make, model number, machine number and electricity consumption rating details of packing machine etc.

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No.-209/3/2024-GST dated 26 June 2024

Comprehending Circular No.209/3/2024-GST dated 26 June 2024

The captioned Circular clarifies the place of supply in terms of clause (ca) of Section 10(1) of the IGST Act.

The advent of Notification 02/2023-Integrated Tax dated 29th September, 2023 introduced the insertion of a new clause i.e. Clause (ca) in Section 10(1) of the IGST (Amendment) Act, 2023 which came into effect from 1.10.2023. The same is reproduced here for ease of reference-

 “(ca) where the supply of goods is made to a person other than a registered person, the place of supply shall, notwithstanding anything contrary contained in clause (a) or clause (c), be the location as per the address of the said person recorded in the invoice issued in respect of the said supply and the location of the supplier where the address of the said person is not recorded in the invoice.

Explanation.—For the purposes of this clause, recording of the name of the State of the said person in the invoice shall be deemed to be the recording of the address of the said person;”

The said insertion, was a non-obstante clause to Section 10(1)(a) and (c) of the IGST Act, which stated that where the supply of goods is made to an unregistered person, the place of supply would be the location as per the address of the said person recorded in the invoice and where the address of the said person is not recorded in the invoice, the place of supply shall be the location of the supplier. Further, an explanation added to the said clause stated that in case the invoice records the name of the State of the said person, it shall be construed as recording the address of the said person.

The above resulted in chaos in cases where the billing address is different from the address of the delivery of goods (especially in the context of supply being made through e-commerce platforms.

Case: Suppose Mr. Amit (unregistered person) residing in Maharashtra, places an order on e-commerce platform for delivery of a mobile phone in Rajasthan, then in such scenario where the billing address and the shipping address being different, what shall be the place of supply in light of Section 10 (1) (ca) of the IGST Act?

Clarification: In the above case, the place of supply shall be the address of delivery of goods recorded on the invoice i.e. Rajasthan (in the instant case).

Conclusion: In cases involving supply of goods to an unregistered person, where the address of delivery of goods recorded on the invoice is different from the billing address of the said unregistered person on the invoice, the place of supply of goods in accordance with the provisions of clause (ca) of sub-section (1) of section 10 of IGST Act, shall be the address of delivery of goods recorded on the invoice and the supplier may record the same for the purpose of determination of place of supply of said goods.

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No.-210/4/2024-GST dated 26 June 2024

The captioned circular provides clarification on valuation of supply of import of services by a related person, where recipient is eligible for full ITC

It is clarified that in terms of second proviso Rule 28 (1) of the CGST Rules, where recipient is eligible for full input tax credit, the declared value in the invoice would be deemed to be

the open market value. In case, where invoice is not issued with respect to any service provided by foreign entity, the value of such services would be deemed to NIL and the same would be deemed as open market value.

  1. Circular No. 211/5/2024-GST

Clarification on time limit under section 16(4) of CGST Act, in respect of RCM supplies received from Unregistered Person-

The captioned circular clarifies the time limit specified under Section 16(4) of CGST Act, for availment of ITC in case where GST is paid by recipient under RCM in case of supplies received from unregistered persons. In cases where tax is paid under RCM, for instance, an activity is performed by the overseas related person for the entity located in India and no consideration is involved, such an activity may not be considered as supply of services by the concerned recipient in India and accordingly, no invoice is issued as well as no tax is paid by the said recipient under RCM in respect of the same. However, later on, either on their own on the basis of some clarification issued by the department or on the basis of some court judgement or on being pointed out by the tax authorities during scrutiny or audit or otherwise the said recipient issues the invoice and pays the tax under RCM, along with interest, and claims ITC on such tax paid.

In the said regard, on combined reading of Section 16(2) (a) of CGST Act, Rule 36(1)(b) of CGST Rules, Section 31 (3) (f) and Section 16(4) of the CGST Act; it is clarified that that in case of supplies received from unregistered suppliers, where tax has to be paid by the recipient under reverse charge mechanism (RCM), the relevant financial year for ITC availment is the year in which the recipient issues the invoice u/s 31(3)(f) of the CGST Act, subject to tax payment. Further, if the invoice is issued after the time of supply of the said supply and pays tax accordingly interest will be payable on delayed payment of tax. Further, penal action under Sectio 122 of CGST Act would also be applied.

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No.-212/6/2024-GST:

Mechanism for validating reversal of ITC in case of discount offered through tax credit notes post supply

  1. The captioned circular addresses the mechanism for verifying compliance with Section 15(3)(b)(ii) of the CGST Act, 2017 by suppliers offering discounts through tax credit notes post-supply.
  2. In view of the governing provisions of Section 15 of the CGST Act, which deals with value of supply in case of goods or services or both; Clause (b) of Sub-section (3) of Section 15 provides that any discount given after the supply has been effected should not be included in the value of supply, subject to following conditions:-
    • Such discount is established in terms of an agreement entered into at or before the time of such supply and is specifically linked to the relevant invoices;
    • Input Tax Credit attributable to such discount on the basis of document issued by the supplier has been duly reversed by the recipient.
  3. Therefore, in case of issuance of a tax credit note in terms of Section 34 of the CGST Act after supply has been effected, the said discount can be excluded from the value of taxable supply only if the above referred conditions are satisfied. However, currently in absence of any functionality on portal to validate the proportionate reversal if ITC by the recipient; the Circular provides that the supplier can procure a certificate from the recipient of supply, issued by Chartered Accountant (CA) or the Cost Accountant (CMA) certifying that the recipient has made the required proportionate reversal of ITC at his end corresponding to such credit note issued by supplier
  4. The said certificate issued by CA/CMA should include the relevant details such as invoice number against which credit note has been issued, the amount of ITC reversal in respect of each of the said credit notes along with the details of Form DRC-03/return/any other relevant document through which such reversal of ITC has been made by the recipient.
  5. The CA/CMA should consist of verified UDIN (Unique Document Identification Number)
  6. Such Certificates issue by CA/CMA or undertakings/certificates issue by recipient should be treated as evidence of such input tax credit reversal done.
  7. In case where the amount of tax (CGST+SGST+IGST and including compensation cess, if any) involved in the discount given by the supplier to a recipient through tax credit notes in a FY is not exceeding INR 5,00,000/- then instead of CA/CMA certificate, the said supplier can procure a undertaking/certificate from said recipient that the said ITC attributable to such discount has been reversed by him with the details mentioned at point (iv).
  8. Such certificates issued by CA/CMA or the undertakings/ certificates issued by the recipient of supply, as the case may be, shall be treated as a suitable and admissible evidence before the tax authorities during any proceedings, for the purpose of section 15(3)(b)(ii) of the CGST Act, 2017. Even for the past period, the said certificate or undertaking shall suffice.  

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No.-213/07/2024-GST:

Clarification regarding the taxability of Employee Stock Option (ESOP)/Employee Stock Purchase Plan (ESPP)/ Restricted Stock Unit (RSU) by a company to its employees through its overseas holding company

This clarification deals with the taxability of reimbursement by Indian subsidiary company to its foreign holding company on account of transfer of shares/securities by said holding company to the employees of Indian subsidiary company. Whether the same would be considered as import of financial services by Indian subsidiary company and therefore GST would be payable under reverse charge on the same, is what is being dealt by way of this Circular.

  1. In the said regard, the captioned circular provides that since ‘Securities’ are considered neither goods nor services under GST Law, GST is not leviable on said transaction of sale/purchase/transfer of securities/shares.
  2. The ESOP/ESPP/RSU being a part of remuneration of the employee by the employer as per terms of employment, GST is not leviable on the compensation paid to the employee by the employer in view of Entry No.1 of Schedule III of the CGST Act.
  3. The captioned circular also clarifies that if the foreign holding company charges any additional fee, markup or commission from domestic subsidiary company for issuing ESOP/ESPP/RSU to the employees of domestic subsidiary company, GST will be leviable on such additional fee, markup or commission. The same will be payable by domestic holding company under RCM on import of such service.
  4. Hence, there is no supply of service in case where domestic subsidiary company reimburses the cost of such securities/shares to foreign holding company on cost-to-cost basis.

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No.-214/8/2024-GST

Clarification on treatment of input tax credit in relation to life insurance premiums not included in taxable value

The said circular provides clarification with respect to amount of insurance premium not included in the taxable value in terms of of Rule 32 (4) of the CGST Rules applicable for life insurance companies, shall be treated as exempt supply/non-taxable supply for the purpose of ITC reversal as per Section 17(1) of CGST Act read with Rule 42 & 43 of CGST Rules.  Clarification provided vide said circular is summarized as below:

  1. The service of providing life insurance cover is neither nil rated, nor there is any notification issued under section 11 of CGST Act by virtue of which the said service or any portion of the said service has been exempted from GST.

Accordingly, the portion of premium which is not includible in the taxable value as per provisions of Rule 32(4) of CGST Rules is neither nil rated, nor wholly exempted from tax.

  1. In view of Rule 42 of the CGST Rules, only the ITC attracting provisions of Section 17(1) and (2) of CGST Act, needs to be reversed i.e. in case where registered person uses goods or services partly for business or other purposes or partly for making taxable or exempt supplies. Since the portion of premium not includable in terms of Rule 32(4) of CGST Rules, cannot be considered as pertaining to exempt or non-taxable supply, there is no requirement of reversal of input tax credit in terms of Rule 42 or Rule 43 of CGST Rules read with Section 17(1) and (2) of CGST Act in respect of said amount.

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No.-215/9/2024-GST

Taxability of salvage/wreck value in case of damage caused to motor vehicle under motor claim insurance

The captioned circular deals with taxability of salvage/wreckage in case of total loss/Constructive total loss or cash loss and partial loss situation in the hands of general Insurance company.

In the said regard, CBIC vide the captioned circular clarified that in cases where the general insurance companies deduct the value of salvage from the claim amount (due to the conditions mentioned in the contract itself), the salvage remains the property of the insured and thus, the insurance companies are not liable to discharge GST liability on the same. However, in cases where the insurance claim is settled on full claim amount without deducting salvage value, the salvage becomes the property of the insurance company and GST is payable on the disposal/sale of the salvage to the salvage buyer.

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No. 216/10/2024-GST

Taxability of supply of extended warranty and reversal of ITC for the supply of goods or parts by the manufacturer.

While the Circular No. 195/07/2023-GST dated 17 July 2023 dealt with replacement of parts, the captioned circular is issued to clarify the position with respect to replacement under warranty.

Clarifications with respect to Warranty:

In cases where warranty is provided to customers by the manufacturer/suppliers in respect of any goods, and if any defect is detected in the said goods during the warranty period, the manufacturer

may be required to replace either one or more parts or the goods as such, depending upon the extent of damage/ defect noticed in the said goods. While the circular dated 17 July 2023 only covered replacement of parts, it is now clarified that the same shall also include situations involving replacement of goods. Hence, wherever the term ‘any part’, ‘parts’ and ‘part’ shall now be read as ‘goods or its parts, as the case may be’. 

In cases where the distributor replaces the goods or its parts to the customer under warranty out of his own stock, subsequently gets it replenished from the manufacturer and the replacement is made at no additional cost; no GST shall be payable on such replenishment of such goods or the parts. Further, the manufacturer need not reverse the ITC with respect to goods or the parts so replenished to the distributor

Clarifications with respect to Extended Warranty:

In case where supply of extended warranty is made subsequent to the original supply of goods, or where the supply of extended warranty is to be treated as a separate supply from the original supply of goods, the supply of extended warranty shall be treated as a supply of services distinct from the original supply of goods. Therefore, the supplier of extended warranty shall be liable to pay GST on such supply of service.

Hence, in case where the customer enters into an agreement of extended warranty at the time of original supply, then it shall form part of value of composite supply wherein principal supply being the supply of goods. However, if the extended warranty is made by a person other than the original supplier of goods, then supply of extended warranty will be treated as a separate supply from the original supply of goods and will be taxable as supply of services.

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No. 217/11/2024-GST

Availment of ITC to General Insurance Companies in case of reimbursement model wherein repair expenses are reimbursed to insured:

  1. It is hereby clarified vide captioned circular that even in case of reimbursement mode of claim settlement, the liability to pay for the repair service ultimately lies with the insurance companies and thus they shall qualify to be a ‘recipient’ in terms of Section 2(93) of CGST Act. Further, the availment of credit with respect to motor vehicle repair services is not restricted vide Section 17(5) of CGST Act. Therefore, ITC is available to Insurance companies in respect of motor vehicle repair expenses incurred by them in case of reimbursement mode of claim settlement.
  1. With respect to availment of ITC in case where invoice raised by garage includes an amount in excess of approved claim cost and the reimbursement is made only to the extent of approved claim cost after considering the standard deductions viz. deductibles to be borne by the insured, depreciation, improvements outside the coverage etc. to what extent ITC would be available to the insurer.

In the said regard, it is clarified that the wherein 2 separate invoices are issued by garage i.e. one to insurance company for the approved claim cost and second to insured for the amount in excess of approved claim cost, ITC shall be restricted to the extent of invoice issued to insurance company provided the same is reimbursed to the insured, However, where one single invoice is issued for full amount of repair, while the insurance company reimburses to insured to the extent of approved claim cost, ITC shall be restricted to the extent of reimbursement to the insure and not of the full invoice amount.

  1. In case where the invoice issued by garage is not in the name of insurance company, ITC shall not be available since it will not satisfy conditions of clause (a) and (aa) of Section 16(2) of CGST Act.

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No. 218/12/2024-GST

Clarification regarding taxability of the transaction of providing loan by an overseas affiliate to its Indian affiliate or by a person to a related person

The service of granting loan/credit/advances by an entity to its related entity even without consideration qualifies to be a supply under GST in terms of Schedule I to CGST Act. However, in lieu of Notification No. 12/2017- Central Tax (Rate), the consideration represented by way of interest or discount (other than interest involved in credit card services) are exempt under GST. Thus, vide captioned circular it is clarified that where loans are provided by overseas affiliate to its Indian affiliate or by a person to its related person, where the consideration is only in the form of Interest or discount, the same is fully exempt under GST. It is also clarified that services of processing/administering/facilitating the loan would get covered under Schedule I to CGST Act, if the charges towards the same is recovered other than by way of interest or discount. Hence, same would be liable to GST.

Accordingly, in lending between related parties, if no charges other than interest are charged, it cannot be said that any other service in the form of processing/facilitating/ administering the loan is supplied. Consequently, GST cannot be levied by resorting to the Open Market Value (OMV) of such supply. However, wherever any fee in the nature of processing fee/ administrative charges/ service fee/ loan granting charges etc. is charged, over and above the amount charged by way of interest or discount, the same may be considered to be the consideration for the supply of services of processing/ facilitating/ administering of the loan, which will be liable to GST as supply of services by the lender to the related person availing the loan.

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No. 219/13/2024-GST

Clarification on availability of ITC on ducts and manholes used in network of optical fiber cables (OFCs) in terms of section 17(5) of the CGST Act, 2017

It is clarified vide the captioned circular that the ducts and manholes are covered under the definition of plant & machinery as they are used as part of optical fibre network for making outward supply of transmission of telecommunication signals from one point to another. Further, the same is not specifically excluded from the definition of plant & machinery. 

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No. 220/14/2024-GST

Clarification on place of supply applicable for custodial services provided by banks to Foreign Portfolio Investors

The captioned circular provides clarification with respect to whether the custodial services provided by bank to foreign investors by banks, non-banking institutions will be treated as  services provided to ‘account holders under section 13(8)(a) of IGST Act

The clarification provided vide Service Tax Education guide has been adopted here. In light of the same, it is clarified that the custodial service provided by bank or financial institutions to FPIs are not to be treated as services provided to account holder. Hence, place of supply is not to be determined under section 13(8)(a) but has to be determined under section 13(2) of the IGST act.

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No.-221/15/2024-GST

Clarification on time of supply in respect of supply of services of construction of road and maintenance thereof of National Highway Projects of National Highways Authority of India (NHAI) in Hybrid Annuity Mode (HAM) model

The captioned clarifies the issue related to the time of supply in respect of supply of services of construction of road and maintenance thereof by NHAI in HAM Model (generally over a period of 15-17 years), where certain portion of Bid Project Cost is received during construction period and remaining payment is received through deferred payment (annuity) spread over years.

The complete Circular on the captioned subject is provided in the link mentioned below.

  1. Circular No.-222/16/2024-GST

Clarification on time of supply of services of spectrum usage and other similar services under GST

The captioned circular provides clarification with respect to time of supply for payment of GST in respect of supply of spectrum allocation services in cases where the successful bidder for spectrum allocation (i.e. the telecom operator) opts for making payments in instalments under deferred payment option as per Frequency Assignment Letter (FAL) issued by Department of Telecommunication (DoT), Government of India.

Section B: Case Laws (GST)

  1. IN RE: M/S. ARTHANARISAMY SENTHIL MAHARAJ (M/S. A. SENTHIL MAHARAJ) [2024 (6) TMI 12 AUTHORITY FOR ADVANCE RULING, TAMILNADU]

The applicant is engaged in the supply of renting of immovable property. They were desirous of installing a sophisticated multi-layer car parking system with highest space efficiency to accommodate parking of 18 cars in their own land, within the campus of an already existing building. Also, the said parking facility being highly essential to retain the existing tenants as well as to have full occupancy would be solely for the purpose of furtherance of the business, for which GST registration was obtained. Therefore, the applicant in the captioned case has sought Advance Ruling for the admissibility of ITC on the ‘Rotary Parking System’ falling under HSN Code: 8428.

While pronouncing the said ruling, the authorities have analyzed the following questions:

Q1. Whether Rotary car parking is movable or immovable?

Ruling: The applicant contended that the car parking system could be easily dismantled and installed elsewhere with a simple screw driver technology and thus cannot be construed as immovable. However, the authorities stated that the entire car parking system cannot be moved ‘as it is’ and it is necessary to dismantle for moving the same. Further, the applicant does not plan to dismantle it and move the structure to some other place since the intention of the applicant is to enjoy the benefit of the civil foundation and the car parking fastened to the foundation permanently, until the system ceases to exist or function.

Authorities have also placed reliance upon the judgement of Allahabad HC in case of The Commissioner Trade Tax UP. Lucknow versus Triveni NL. Ltd. – 2014 (4) TMI 842. In the said case, HC held that the question whether a machinery is movable or immovable property would depend upon intention of the party i.e. whether the intention is to be permanently or temporarily embed the machine.  Therefore, authorities after perusing the facts and circumstances of the case, held that the car parking system falls within the meaning of “permanently fastened to anything attached to earth” as envisaged in the definition of  ‘immovable property’ provided in Section 3 (26) of the General Clauses Act, 1987, and also under clause (c) of Section 3 of Transfer of property Act, 1882 which reads “attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached.” Thus, Rotary car parking system is not a movable property.

Q2. Whether the Rotary Car parking falls under the category of plants and machine?

Ruling: The applicant, by explaining the terms “apparatus”, “equipment” and “machinery” claimed that the car parking system falls under the inclusion clause of plant and machinery. However, the authorities held that the rotary car parking falls gets covered in exclusion clause of ‘plant and machinery definition i.e. ‘any other civil structure’. Further, while referring to the term ‘Foundation’ defined in the Tamil Nadu Combined Development and Building Rules, 2019 stated that pre-fabricated car parking system is erected on the foundation to transmit the load over the foundation and ultimately the ground which bears the load of the parking system along with the vehicles parked over it and gives stability to the car parking from falling down Further, in view of Section 17(5)(c) and Section 17(5)(d) of the CGST Act, the term ‘construction’ includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property, hence, rotary car parking system falls under the ambit of additions as envisaged in the said explanation clause, to the immovable property i.e. existing commercial building owned by the applicant (in the instant case) and becomes a part of the existing building.

Therefore, in view of the foregoing paras, authorities

ITC is not admissible under Section 17 (5) (d) of the CGST Act on the Rotary Parking System desired to be installed by the applicant.

  1. IN RE: M/S. BALAT ENTERPRISES PRIVATE LIMITED [2024 (6) TMI 9 – AUTHORITY FOR ADVANCE RULING, TAMILNADU]

The Applicant here is a Chennai based start-up providing mobile based digital platform “Vyavshay” which is a B2C model. The app Vyavshay offers Farm equipment services and Transportation services (skill-based services) wherein the entrepreneurs of small &medium sized business sign themselves on the app as partners and the end consumer can avail the listed services. While the applicant does not charge any joining /subscription/membership fee while signing up, however the applicant charges the entrepreneur a fixed rate (based on its usage) on which the applicant discharges output GST. Further, there is no other link between the supplier of services and the end consumers with the applicant. The consideration for supply of services is not routed through the applicant nor does he liaison in the process or take up responsibility of supply of services between the partner member and its customers.

In light of the above, the applicant has sought Advance ruling on the issue whether they satisfy definition of e-commerce operator and nature of supply as in Section 9 (5) of CGST Act, 2017 w.r.t to Notification No.17/2017 dated 28.06.2017, and on which leg of the transaction the applicant would be liable to pay and collect tax.

Ruling: The definition of e-commerce operator (ECO) includes any person who owns, operates or manages digital or electronic facility or platform for electronic commerce i.e. for the supply of goods or services or both, including digital products over digital or electronic network. In the instant case, the applicant facilitates the supply from the supplier to customer and takes the responsibility of such supplies carried through App (“Vyvashay” APP). Therefore, the applicant squarely fits into the definition of ECO. Section 9(5) of the CGST Act creates a statutory obligation on the ECO as deemed supplier of the services received by the consumer through the online platform facilitated by the ECO. The applicant gets covered under Notification No. 17/2017 dated 28.06.2017 issued under Section 9(5) of the CGST Act. The fact that e-commerce operator is not receiving the amount from service recipients will not hold a valid argument since in terms of Section 9(5) of CGST Act read with Notification No. 17/2017, e-commerce operator is deemed to have supplied the service. Thus, the applicant is liable to pay GST on the amount charged by him towards the usage of app as well as on the transaction value as the sole consideration in terms of Section 15 of the CGST Act paid by the users towards receipt of services as applicant being the deemed supplier being an e-commerce operator is deemed to be supplier of service in terms of Section 9(5) of CGST Act. The applicant is liable to pay GST only on the transaction between the applicant and the partners with respect to supply of services other than which are notified under Section 9(5) of the CGST Act, 2017.

  1. IN RE: M/S. WAGO PRIVATE LIMITED [2024 (6) TMI 109 – APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT]

The captioned appeal was filed by the appellant against impugned ruling by the Gujarat Authority for Advance Ruling [GAAR] which held that the appellant was not eligible for ITC on Air conditioning and cooling system and Ventilation system since they are blocked credit falling undersection 17 (5) of the CGST Act, 2017.

In the said regard, the AAAR Gujarat referring to para 5 (iii) of CBEC’s (now CBIC) Order No. 58/1/2002-CX dated 15 January 2022 states that Refrigeration/Air-conditioning Plants are in the nature of systems and are not machines as a whole. Further, they come into existence only by assembly and connection of various components and parts. Accordingly, the supply of Air Conditioning & Cooling system & Ventilation system falls under the category of works contract service supplied for construction of an immovable property.

Further, AAAR placed reliance upon the judgement of the Hon’ble Supreme Court in the case of Globus Stores P. Ltd [2011 (267) ELT 435 (SC)] wherein it was held that air conditioning plant is an immovable property. Therefore, AAAR, confirmed the order of the Advance ruling authority by holding that the air conditioning and cooling system and ventilation system are immovable property (works contract service) and thus ceases to be a plant and machinery. Hence, the appeal was rejected thereby denying ITC on supply of air conditioning and cooling system and ventilation system in terms of Section 17 (5) (c)     of the CGST Act, 2017.

  1. M/S GRAZIANO TRASMISSIONI & Others. VERSUS UOI & Others [2024 (6) TMI 233 – ALLAHABAD HIGH COURT]

In the captioned case, challenge has been made to the Notification No. 09/2023- Central Tax (CGST) dated 31 March 2023 issued by the Government of India and corresponding State Government (U.P) Notification i.e. Notification No. 515/XI-2-23-9 (47)/17-T.C.215-U.P.Act-1-2017-Order-(273)-2023 dated 24.4.2023 issued under Section 168A of the CGST Act, 2017 which extended the time limit for adjudication of proceedings for the period 2017-2018.

The petitioners contended the following:-

  1. The captioned notification dated 31 March 2023 extending the time limit for adjudication proceedings was not an independent notification, rather it was partial modification of earlier notifications issued for extending the time limit.

  1. On 31.03.2023 i.e. date of issuance of captioned notification, there did not exist any ‘force majeure’ circumstance i.e. COVID-19 circumstance. Reference was also made to the order of the Supreme Court passed in Re: Cognizance for Extension of Limitation (Miscellaneous Application No. 408 of 2022 and connected matter) wherein the Apex Court had granted exemption/relaxation of limitation for a limited period i.e. 15.03.2020 to 28.02.2022 only. Thus, the exercise of power by the Central Government and the State Government to extend the limitation for adjudication order for F.Y 2017-18 upto 31.12.2023 in absence of ‘force majeure’ is patently ultra vires the Act.

  1. The power vested under Section 168A of the CGST Act is not a general power to be exercised for completion of certain actions but an exceptional power vested in the delegate to be exercised, in special circumstances.

Since ingredients of force majeure circumstances did not exist on relevant date i.e. at the time of issuance of impugned notification, the same is ultra vires.  Also, the burden to establish the existence of force majeure lies upon Central and State Government.

  1. Further, Section 168A of CGST Act is a piece of conditional legislation. It does not bind the Central Government and the State Government to offer mute compliance to the recommendation made by the GST Council.

  1. Non-obstante clause appearing by way of opening words in Section 168A of CGST Act and State Act must be read strictly to confine it to the object for which the said provision was enacted. Therefore, the said provision can be invoked only during extreme circumstances such as complete lockdown during COVID.

  1. The reason provided in minutes of 49th GST Council meeting for giving said extension is difficulty in completing adjudication proceedings. The same cannot constitute any force majeure circumstance.

The respondents in the said regard contended the following:-

  1. In this case since petitioner has challenged only the captioned notification i.e. most recent notification and not the original notification, they cannot be heard to challenge this recent notification.
  2. The words “due to force majeure” clearly refer to the after-effects of a ‘force-majeure’ occurrence whether epidemic or earthquake or cyclone. These have a potential to disrupt human activity for an indefinite period of time depending upon place, time, intensity and duration of their occurrence, the after effects caused by such occurrences would remain a circumstance to be considered by the legislative body. Thus, to the extent the principal legislature has delegated that evaluation/function to the Central and the State Governments and the issuance of the impugned notifications had been made upon the recommendation made by the Council, no defect may be found.
  3. With respect to the petitioner’s contention that the COVID-19 circumstance came to an end in 2022, the respondents submitted the advisory issued by the World Health Organization dated 5.05.2023 which recognized that the COVID-19 pandemic and the circumstances arising therefrom continued to exist till May 2023.

In light of the above, Hon’ble HC held that it is undisputed that the power to issue the impugned notifications existed and the said power was exercised within the confines of the legislative conditions and occasioned by circumstances confronted by the legislature. While the extent to which the said power may have been exercised i.e. the length of time extension granted would remain outside the scope of judicial review, however no excessive extension of time is seen to have been granted.

Also, HC held that the reliance placed on the marginal note appended to Section 168A is misconceived. The language of the section being clear and free from doubt or ambiguity, there does not exist the necessary pre-condition to look at the marginal note to interpret the true meaning of words used in the said section. To read the marginal note in face of clear language of Section 168A of the Central Act and the State Act, is impermissible. HC stated that it is suffice to conclude, inherent indication exists that initially the legislature treated the COVID-19 pandemic circumstance to be temporary as may pass in a short while. However, on its continuance, further extensions may have been felt desirable. Insofar as the power vested under Section 168A is not shown to be a power that may be exercised once as get exhausted upon that exercise made, the legislative wisdom to issue a further notification, would always survive. With respect to argument related to modification of the original notification, HC held that the same is within the insulated realm of legislative wisdom.

Further, HC stated that while adjudging the illegality of the impugned notification, we would have to examine on the basis as to whether the objectives for which it was enacted has nexus with the decision taken or not.

If the impugned notification had a nexus with the objectives to be achieved, then, merely because some citizens have suffered through hardships would not be a ground to hold the impugned notification to be bad in law; held that the said writ petitions challenging the issuance of impugned notifications must fail.

  1. IN RE: M/S SAVFAB BUILDTECH PRIVATE LIMITED [2024 (6) TMI 220 – AUTHORITY FOR ADVANCE RULING, UTTAR PRADESH]

The applicant is a company engaged in developing a group housing project in the name and style of ‘Saviour Park’ which is divided into 4 phases. First 3 phases have already been completed and delivered to customers. Phase IV was constructed and completed in 2 parts i.e. Part I of Phase IV having 169 units (already completed and delivered) and Part II of Phase IV having 113 units was completed in April 2023.

The applicant had also obtained certificates & NOC from various authorities required for completion of building structure i.e. Fire Safety NOC, Structure stability certificate, lift NOC, and Electrical NOC. Applicant then applied for issuance of completion certificate of 113 units before Ghaziabad Development Authority (GDA).However, GDA vide letter dated 27.04.23 (recd. on 2.05.24) denied to issue the said completion certificate on account of solitary reason of pending dues of GDA in respect of certain development, , and in absence of issuance of completion certificate by the GDA within prescribed time, the applicant relied on the Order of the Uttar Pradesh Real Estate Regulatory Authority (UPRERA) which held the project to be ‘deemed completed’.  Accordingly, the applicant proceeded to give possession of units to its customers, the first being given on 25.04.2023.

In light of the above, the applicant has sought advance ruling to understand whether GST is applicable or the same is exempted in respect of the selling of residential units in the said project after ‘deemed completion’ or ‘first occupation’ in Phase IV of the project.

Ruling:-AAR observed that in a single building if projects are registered under RERA as separate projects, those shall be treated as distinct projects. Applicant did not phase any problem in obtaining completion certificate for first three phases and part 1 of phase 4. Since phase 4, had separate registration, the same will have to be treated as distinct project and will have to independently satisfy the requirements of the definition of ongoing projects. Thus, the 4th Phase was an independent project and completion certificate was to be obtained for the same in order to treat it as sale of property. As per bye-laws of GDA, completion certificate/occupancy certificate is mandatory for the project. Further, in terms of Para 5 (b) of Schedule II of CGST act, since in case of this project there is requirement to obtain the completion certificate, the certificate from architect or chartered engineer will not suffice.  Also, authorities referred to the definition of occupancy certificate in terms of UP RERA Act and the definition of the term ‘first occupation defined in FAQs on real estate-reg issued vide F. No.354/32/2019-TRU dated 7 May 2019 by Tax Research Unit. Therefore, AAR held that any occupancy in Phase 4 of the project without completion certificate/occupancy certificate is in contravention of bye-laws of GDA. Hence, sale of residential units in phase 4 of the project is not sale of immovable property but sale of services and thus GST is leviable.

  1. SURENDRA STEELS PVT. LTD. VERSUS THE UNION OF INDIA [2024 (6) TMI 111 – GAUHATI HIGH COURT]

The captioned case deals with provides insights on two key issues assailed by the petitioner – the maintainability and entertainability of a writ petition, and the calculation of time limit in terms of Section 140(5) of CGST Act.

Upon the respondent’s contention of availability of statutory remedy of appeal, the HC, with respect to maintainability and entertainability of a writ petition under Article 226 of the Constitution of India held that an exercise of writ power, when the statutory remedy of appeal is available, should not be encouraged in routine manner; however just because a statutory remedy is available would not oust the jurisdiction of the High Court and render a writ petition ‘non-maintainable’. The rule of pursuing an alternate remedy by statute is a rule of policy, convenience and discretion rather than a rule of law. Further, the HC observed that where the challenge purely involves question of law and the investigation into facts is absolutely unnecessary then the case ought to be decided by the HC instead of dismissing the writ petition on the ground of an alternative remedy being available. Subsequently, HC in its extra-ordinary and discretionary power can examine the decisions of the subordinate tribunals, bodies or officers to validate their actions with respect to jurisdiction, rendering of natural justice and manifest error in the face of record.

with respect to the clarification pertaining to calculation of ‘within a period of 30 days from the appointed date’ occurring in Section 140 (5) of the CGST Act, HC held that in absence of any provision in CGST Act regarding calculation of period of time and in light of Section 9 of the General Clauses Act (which is applicable to the CGST Act), the period has to be reckoned by excluding the appointed day, which is 01.07.2017. Thus, after exclusion of the appointed date, the period of 30 days is counted then the 30th day falls on 31.07.2017 which is exactly the date when the TRAN Invoices were entered in the recipient’s books of accounts (in the instant case) and therefore the findings of the O-I-O was not sustainable.

  1. M/S. HITACHI NEST CONTROL SYSTEMS PVT. LTD. VERSUS ADDITIONAL COMMISSIONER [2024 (6) TMI 227 – KARNATAKA HIGH COURT]

The captioned case clarifies whether the tax authorities can initiate tax assessment proceedings under the provisions of the CGST Act against a company which is dissolved under Section 59(8) of the Insolvency and Bankruptcy Code, 2016 (for short ‘IBC’).

The petitioner contends that the impugned show cause notice which culminated into an adjudication order is illegal, arbitrary and without jurisdiction since the same has been issued against the dissolved company (vide NCLT order under Section 59(8) of IBC) i.e. the company which was not in existence at the time of issuance of impugned show cause and at the time of passing the adjudication order. In contrary, the respondents contended that even though the impugned show cause was issued after the company stood dissolved, they can still proceed against the erstwhile Directors of the petitioner company by virtue of Section 88(3) of the CGST Act, 2017.

In the said regard, the Hon’ble Division Bench upon referring to relevant precedent of Delhi High Court, held that the tax authorities do not have the jurisdiction to initiate tax assessment against a ‘non-existing’ entity. Further, applying the principles laid down by Apex Court in a similar case, HC held that since a company would cease to exist after an amalgamation has occurred, tax assessment under the CGST Act cannot be initiated against non-existent company which was dissolved under Section 59 (8) of the IBC Act.

With respect to the respondent’s entitlement to proceedings by virtue of Section 88(3) of the CGST Act, HC held that while Section 88 (1) and (2) provides that when a company is being wound up, the appointed liquidator has to give intimation to the Commissioner (as defined under CGST Act) within 30 days of his appointment and the Commissioner has to thereafter notify the liquidator within 3 months of the amount which in his opinion would be sufficient to provide for any tax, interest or penalty which is or is likely to be payable by the Company. However, in the instant case no such demand was issued by the Commissioner to the liquidator. Therefore, in absence of any notice issued by the Commissioner under Section 88(2) of the CGST Act to the liquidator, the Commissioner cannot proceed to adjudicate tax liability against the directors of the Company as per Section 88(3) of the CGST Act.

Accordingly, the impugned order was quashed and the petition was allowed.

  1. M/S SHREEHARI REALTECH PVT. LTD. VERSUS UNION OF INDIA [2024 (6) TMI 468 – ALLAHABAD HIGH COURT]

With respect to petitioner’s attempt to challenge the impugned Order before the Hon’ble Allahabad HC, the defendants raised a preliminary objection regarding its maintainability on the ground of availability of statutory remedy. 

In the said regard, the petitioner contended that the impugned order was bad in the eyes of law i.e. no preliminary notice was issued, order was not digitally signed and was not communicated in any other way except for uploading on the portal. Thus, it was in violation of principles of natural justice. Although the fact of availability of statutory remedy could not be disputed by the petitioner, but it was ably argued that where patently illegal orders are passed, the Court has the discretion to entertain the petition. Accordingly, the petition was maintainable.

The Hon’ble HC upon referring to Apex court judgement in Magadh Sugar & Energy Ltd. Vs. State of Bihar, 2021 SCC Online SC 801, held that the entertainability of writ petition is High Court’s discretion, it can deny to entertain a writ and one of the restriction to deny could be where an effective statutory remedy is available to the aggrieved person.  Since the statutory remedy of appeal is available, the HC in exercise of its discretionary power found it inappropriate to entertain the petition and thus dismissed the same (without examining the merits of the case) leaving it open for the petitioner to file an appeal before the appellate authority within a period of three weeks. Further, the Court clarified that in case the said appeal is filed within the said period, the case would be considered on merits and the issue of limitation (if involved) shall be considered sympathetically by the appellate authority. 

  1. M/S. NORTH EAST WATER TANK MANUFACTURING PRIVATE LIMITED & ORS. VERSUS UNION OF INDIA & ORS. [2024 (6) TMI 546 – CALCUTTA HIGH COURT]

The captioned is an instant Mandamus Appeal assailing the impugned order passed by the Single Bench refusing to exercise the discretion of entertaining the writ-petition under Article 226 of the Constitution of India on the ground of alternative remedy provided under CGST Act, 2017.

The Single Bench had opined that the moment an order is passed by an adjudicating authority, such order is open to be challenged before the Appellate authority under Section 107 of CGST Act and therefore, if the Court observes that an efficacious alternative remedy is available under the statute, the Writ Court should be slow and circumspect in exercising such discretion under Article 226 of the Constitution of India. However, Section 107 of CGST Act does not confer any power or jurisdiction upon such appellate authority to declare any provision of the statute or the statutory circular to be ultravires to the parent Act. Therefore, in such cases it is the duty of the High Court to decide the issue since the power to do so is vested upon them instead of relegating the matter before the statutory authority.

Accordingly, since the petitioner in the captioned case have challenged the vires of paragraph 6 of Circular No. 31/05/2018- GST dated 09.02.2018, as amended vide CBI&C Circular No. 169/01/2022-GST dated 12.03.2022, having offended with the provisions contained in Sections 73 and 74 of the CGST Act 2017, the matter is remanded back to the Single Bench to decide the primary relief and the impugned order was set aside.

  1. BISWAJIT KUNDU, PROPRIETOR OF M/S. B.K. TRADING VERSUS THE SUPERINTENDENT [2024 (6) TMI 662 – CALCUTTA HIGH COURT]

The captioned is an intra-court appeal by the writ petitioner against the order by which the challenge to adjudication order was rejected directing the appellant to prefer an appeal against the adjudication Order.

HC in the said case observed that the adjudicating authority had not verified the genuineness of transaction at supplier’s end and denied the ITC to the purchaser who had valid tax invoices and taxes had been paid on the purchases from suppliers whose registration had been cancelled retrospectively.

In the said regard, HC held that appellant has to first prove the movement of goods through documents and establish the genuineness of the transaction and only upon proving the same through documentary evidence, the burden then shifts on the adjudicating authority to cause verification at the supplier’s end.  Accordingly, to provide one more opportunity to the appellant to prove the movement of goods HC directed the appellant to treat the O-I-O as a show cause notice and submit his reply to the same enclosing documents to prove movement of goods, post which the decision shall be taken by the adjudicating authority. Accordingly, the appeal was dismissed.

  1. IN RE: M/S UTTARAKHAND PEYJAL SANSADHAN VIKAS EVAM NIEMAN NIGAM [2024 (6) TMI 826 – AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND]

In the captioned case, the applicant namely Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam (‘UK Peyjal) claims to be a ‘Local Authority’ undertaking the construction/erection of Government schemes relating to water supply, sewerage etc. and providing these services to Government. Thus they entered into MOU with a PSU namely- THDC. However, as per GST norms, THDC does not fall under the definition of Centre/State Govt and based on the MOU, only in this specific case, since the applicant does not qualify the definition of Local Authority, the service shall be treated as ‘composite supply’ like any other contractor and thus it shall not fall under RCM.

In light of the above, the applicant seeks advance ruling on the determination of the tax liability on services w.r.t. SI. No. 5 of the N/N. 13/2017-Central Tax (Rate) dated 28.06.2017 issued under Section 9(3) of the CGST Act i.e. on RCM basis.

Ruling:

While the applicant claims that they provide services purely to Government, but in the instant case it is observed that the receiver of services as per the MOU, is M/s THDC India Ltd. which is a Public incorporated company and not the Government.

Further, with respect to examining whether UK Peyjal i.e. the applicant  is a “local authority” in the CGST

Act, AAR ruled that in view of Section 2(69) of the CGST Act, the definition of local authority includes ‘any other authority’ legally entitled to or entrusted by the Government with the control or management of a municipal or local fund. In case of the applicant,  there is no local fund entrusted by the Government to UK Peyjal Nigam but the fund is its own fund, thus in the absence of the important requirement of fund being controlled and managed by the Government it was opined that the Applicant “UK Peyjal Nigam” is not a ‘local authority’, within the meaning of the provisions of the CGST/SGST Act, 2017. Also, the PAN card issued to the applicant as a ‘local authority’ are as per the provisions of the Income Tax Act and that the GST registration was granted based on the declaration by applicant of their constitution of business as a ‘local authority’. However, when the definition is evaluated in detail, it is found that applicant does not qualify as a local authority’ and hence, there is no applicability of the RCM as per the provisions of the Notification No.13/2017- Central Tax (Rate) dated 28.06.2017.

AAR held that the applicant does not qualify as local authority, but falls under the category of a “Governmental Authority” in view of the provisions of the Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017, as amended. The construction of an overhead water tank at Rishikesh in the THDC colony is a construction service and pertains to supply of water which is an activity in relation to a function entrusted to a Municipality & Panchayat under article 243W & 243G respectively of the Constitution of India. Therefore, the same is exempted from payment of tax and hence the question of claiming of ITC shall not arise.

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