A. The Authority of Advance Rulings (the AAR) decided on questions (i) whether Input Tax Credit (ITC) is available on GST charged by service providers on hiring of bus/motor vehicle having seating capacity of more than thirteen person for transportation of employees to & from workplace, (ii) GST payable on nominal amount recovered by Applicant from employees for usage of bus transportation facility in non-air conditioned bus and (iii) whether ITC is restricted to cost borne by the Applicant.
The Hon'ble AAR held that no ITC is available on motor vehicles or conveyances used in transport of passenger's transportation facility to its employees, in non-air-conditioned buses having seating capacity of more than 13 persons till February 1, 2019. However, ITC is available on leasing, renting, or hiring of motor vehicles for transportation of persons, having approved seating capacity of more than thirteen persons (including driver) w.e.f. February 1, 2019.
Further, the AAR held that the Applicant is not providing transportation facility to its employees and therefore, not eligible for exemption from GST under Serial No. 15(b) of Notification No. 12/2017-CT (R) dated June 28, 2017 (Notification 12/2017) in relation of nominal amount of recoveries made from employees towards bus transportation services. Accordingly, such transaction between the Applicant and employees is not a supply in terms of serial No. 1 of Schedule III of the CGST Act and therefore, Applicant is not liable to pay GST.
The AAR further held that ITC is required to be restricted to extent of cost borne by Applicant and not the cost borne by employees.
Takeaway: ITC available on transportation facility provided to employees.
[M/s Tata Motors Limited 2020-TIOL-245-AAR-GST]
B. The department rejected refund of unutilized ITC filed by the Petitioner which is operating as a Special Economic Zone (SEZ) unit. Department contended that Rule 89 of the CGST Rules allows refund of ITC only to supplier of goods or services for supplies made to SEZ unit, however the Petitioner is not supplier of goods or services to SEZ unit but SEZ unit itself, thus, not eligible to claim refund of ITC under Section 54 of the CGST Act. Department further contended that the Petitioner received ITC on services from Input Service Distributor (ISD) which is not supplier of services.
The Hon'ble High Court observed that outward supplies made by SEZ unit is zero rated supply and there is no statutory provision barring refund of accumulated ITC to SEZ unit relatable to zero rated supplies. Accordingly, it has been held that the Petitioner is entitled to claim refund of ITC of GST distributed by ISD and there is no specific supplier who can claim refund under GST laws.
Takeaway: Refund of accumulated ITC received from ISD to SEZ unit in relation to zero rated supplies cannot be barred.
[M/s Britannia Industries Vs UOI 2020-TIOL-1495-HC-AHM-GST]
C. The AAR decided on the question whether different types of wellness packages (the Packages) such as Naturopathy, Ayurveda, Yoga and meditation, Physiotherapy and special therapy (the Therapies) is exempted on account of health care services provided by a clinical establishment in terms of Entry No. 74 of Notification 12/2017.
The Hon'ble AAR observed that the Packages offered by the Applicant for the Therapies is strictly on residence basis and same is evident from the fact that consideration is solely dependent on the type of room opted by customer. Thus, accommodation becomes primary activity in the entire package.
Consequently, it has been held that services provided by the Applicant is composite supply of services, accommodation service, being principal supply falling under Heading 9963. Further it has been held that exemption has been provided to services by way of healthcare services by a clinical establishment services classifiable under Heading 9993 falling under Entry No. 74 of the Notification 12/2017. Thus, benefit of the exemption under the Notification has been denied to the Applicant.
Takeaway: Therapies offered on residential basis by Naturopathy Centres taxable under GST.
[M/s Oswal Industries Limited 2020-TIOL-251-AAR-GST]
D. The AAR decided on question (i) whether selling of residential flats after date of completion certificate of commercial shops or after first occupancy in building is exempt supply (ii) manner of reversal of ITC on expenses incurred up to date of completion certificate shops (iii) manner of claiming ITC on expenses incurred after date of completion certificate of commercial shops.
The Hon'ble AAR held that since the Applicant has received part building used permission for the commercial shops of ground and first floor and not for residential flat, sale of residential flats in such cases shall be treated as supply of service in terms of Section 5(b) of Schedule-II of the CGST Act.
The Hon'ble AAR further held that manner of reversal of ITC on expenses incurred up to date of completion certificate of commercial shops is provided in Rule 42 and Rule 43 of the CGST Rules. Further it has been held that manner of claiming ITC on expenses incurred after date of completion certificate of commercial shops is specified under Section 16 and Section 17 of the CGST Act read with Notification No. 16/2019-CT dated March 29, 2019.
Takeaway: GST exempted only to that portion of the building for which completion certificate has been received.
[M/s V2 Realty 2020-TIOL-252-AAR-GST]
E. The Petitioner challenged the constitutional validity of Section 54(3)(ii) of the CGST Act and Rule 89(5) of the CGST Rules which denies refund of unutilised ITC of 'input services' accumulated on account of inverted duty structure.
The Hon'ble High Court has held that Section 54(3)(ii) of the CGST Act does not infringe Article 14 of the Constitution of India. It was further held that exclusion of unutilised accumulated ITC of input services for claiming refund under inverted duty structure is a valid classification and exercise of legislative power. Thus, the Hon'ble High Court has held that 'Net ITC' defined in Rule 89(5) of the CGST Rules which provides only for refund of accumulated unutilised ITC on account of input goods is in conformity with Section 54(3) (ii) of the CGST Act.
Takeaway: Section 54(3) (ii) of the CGST Act held to be constitutional. It may be noted that the Gujarat High Court in case of VKC Footsteps India Private Limited has held contrary judgement wherein it was held that refund of ITC was allowed on input services in conformity with Section 54(3) of the CGST Act.
[M/s Tvl. Transtonnelstroy Afcons Joint venture Vs UOI 2020-TIOL-1599-HC-MAD-GST]
F. The Petitioner challenged validity of Orders passed by the department wherein refund of ITC was rejected pursuant to sale of Duty-Free goods from Duty Free Shops (DFS) at the departure area of airport.
The Hon'ble High Court held that goods and services provided in DFS situated at international airports is considered to be outside India i.e. beyond customs frontier of India and considered as zero-rated supply under Section 16 of the Integrated Goods and Services Tax Act, 2017. Thus, the Petitioner was held to be eligible to claim refund of ITC under Section 54(3) of the CGST Act.
Takeaway: Supplies made by DFS are considered as zero-rated supplies under GST laws, thus refund of ITC is allowed under GST laws.
[M/s Cial Duty Free and Retail Services Limited Vs. UOI 2020-TIOL-1622-HC-Kerala-GST]
G. The Appellant is an authorized SEZ unit and received services from outside India and accordingly, paid Service Tax under reverse charge mechanism (RCM) in terms of Section 66A of the Finance Act, 1994 (the Finance Act). The Appellant claimed refund of Service Tax paid by on services received for use in authorised operations in terms of Notification 40/2012-ST dated June 29, 2012 (Notification 40/2012) read with Notification 12/2013-ST dated July, 2013.
The department rejected refund of Service Tax on ground that challans provided by the Appellant is not substantial documentary evidence for payment of Service Tax under RCM and further, services received from associated enterprises located outside India not taxable in terms of Section 66B of the Finance Act.
The Hon'ble Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the Appellant can claim exemption by way refund of Service Tax by indicating such amount of Tax in challan in terms of condition no. 3(f)(ii) of Notification 40/2012. Further, CESTAT held that the Appellant has paid the Service Tax under RCM correctly in terms of second proviso to Rule 7 of the Point of Taxation Rules, 2011 and there is no essential condition of payment of amount to the service provider to avail refund of service tax paid under RCM.
Takeaway: Challan is substantial documentary evidence for payment of Tax under RCM.
[M/s Cummins Technologies India Private Limited Vs CST, 2020-TIOL-1404-CESTAT-DEL]
H. The Appellant provided works contract services to Andhra Pradesh Power Generation Corporation (APGENCO), Andhra Pradesh Tourism Development Corporation (APTDC). Further, the Appellant claimed exemption from payment of Service Tax in terms of Entry 12(a) of Notification No. 25/2012-ST dated June 20, 2012 (Notification 25/2012) relating to works contract services provided to government authority. Further, the Appellant has entered into development agreement with landlords for construction of residential complex and not paid Service Tax on construction of residential complexes allocated to landowner.
The department alleged that the Appellant is not eligible for exemption from Service Tax for providing Services to APGENCO and APTDC and liable to pay Service Tax on construction of residential complex which is allocated to landowner in terms of development agreement entered between the Appellant and landowner.
The Hon'ble CESTAT held that APGENCO and APTDC is established by the Government of Andhra Pradesh under various statutory acts and under control of various ministries of state government. Therefore, works contract services provided by the Appellant to APGENCO and APTDC is exempted in terms of Notification 25/2012.
It was further held development agreement entered between the Appellant with landowner in relation to construction of residential flats is on principal to principal basis with no element of service provided to landowner. Thus, the Appellant is not liable to pay Service Tax on construction of residential flats allocated to landowner.
Takeaway: Service Tax not payable on construction of residential flats allocated to landowner in terms of exemption provided under Notification 25/2012.
[M/s Krishi Constructions Private limited Vs CCT Service Tax Order No. A/30922/2020 dated September 22, 2020]
I. The Hon'ble Supreme Court decided the issue of applicability of 200% Duty on specified goods originating in or exported from Pakistan which had arrived in customs station and bill of entry was presented before issuance of Notification No. 5/2019-Cus dated February 16, 2019 (Notification 5/2019). The customs officer exercised power of re-assessments for bill entry presented on February 16, 2019 in terms of Section 17(4) of the Customs Act, 1962 (the Customs Act) and accordingly, imposed 200% Duty on the importer.
The Hon'ble Supreme Court held that bill of entry was presented before Notification 5/2019 was uploaded on Central Board of Indirect Taxes and Customs website. Notification 5/2019 cannot be used to alter the rate of Duty in respect of bill of entry presented several hours ago. Further, the department cannot exercise power of re-assessment under Section 17(4) of the Customs Act for self-assessments made earlier in the day. Therefore, Duty of 200% is not imposable on the importer.
Takeaway: Increased in rate of Duty on imported goods cannot be levied with retrospective effect.
[UOI and Ors Vs M/s GS Chatha Rice Mills and ANR 2020-TIOL-157-SC-CUS-LB]
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