GSTN enabled window to opt in for composition scheme for the FY 2022-23

The Goods and Services Tax Network (“GSTN”) has enabled window to opt in for composition scheme for the FY 2022-23 on GST Portal for the taxpayers.

The eligible taxpayers, who wish to avail the composition scheme may opt in for composition before March 31, 2022.

Source from: https://www.gst.gov.in/

 

Coming soon, a structural revamp of GST

 

The Union government and states will implement a proposed structural revamp of the goods and services tax (GST) in phases, keeping in mind the impact tax rate changes can have on consumption, according to two officials.

The proposed revisions will include pruning tax exemptions, removing anomalies from taxing raw materials and intermediates higher than finished products, and reducing the number of GST slabs, said one of the officials, who spoke on condition of anonymity.

The revisions are currently being studied by two ministerial panels and will entail implementing the tax rate changes needed in the textile industry to correct the inverted duty structure, which have been kept on hold. On 31 December, the council deferred a rate hike from 5% to 12% on several items in the textile and apparel sector, including woven fabrics of cotton, silk and wool, coir mats, apparel and clothing accessories of sale value up to ₹1,000, which was to take effect from 1 January.

An email sent to the finance ministry seeking comments for the story remained unanswered at the time of publishing.

One major shift in the circumstances favouring implementing further structural changes in GST is the expiry of GST compensation to states in June this year, a major concern for states. That would leave a big gap in state budgets, especially of large state economies, which need to find ways of raising revenue receipts. That makes rate and slab rationalization and revenue augmentation methods agreeable to states. Besides, the Centre’s practise of borrowing from the market to meet the shortfall in compensation for FY21 and FY22 have improved Centre-state relations. The GST Council had, in an earlier meeting, decided to collect the GST compensation cess levied on items like automobiles till March 2026, but the proceeds will be used only to repay the loans taken in FY21 and FY22.

“The main concern of states is the expiry of GST compensation in June. Even though the cess collection has been extended, it will only raise adequate resources for paying back the loans already raised. The only way out is to augment revenue from GST, which can be done in one of two ways. It can be done administratively, or you make your rate structure efficient that is, remove exemptions, cut duty inversions and reduce the number of slabs," the official said.

The official said many of the duty inversions have already been corrected, and there is a limit to how much revenue augmentation can be done administratively. “Eventually, you have to fix the rate structure. The group of ministers are likely to come out with a road map. They may not want to do everything in one go. It will be phased. But it has to happen. How they sequence, we do not know yet, but there is this realization that they have to do it now. There is no escape," the official said, adding that concerns about private consumption recovery lagging behind other growth drivers will be factored into while finalizing the proposals.

During post-budget interactions with the industry this month, revenue secretary Tarun Bajaj asked business leaders to share their views with the ministerial panels examining GST rationalization. Karnataka chief minister Basavaraj Bommai leads a panel of state ministers on tax rate rationalization, while Maharashtra deputy chief minister Ajit Pawar heads a panel on GST system reforms. The panels are likely to give their reports this month.

Source from: https://www.livemint.com/economy/revamp-of-gst-likely-in-phases-hike-in-textile-rates-on-cards-11644949326500.html

Highlights of Union Budget 2022 (केंद्रीय बजट 2022 की मुख्य विशेषताएं)

• 1.0 DIRECT TAXES 

• 1.1 Effective Tax Rates 
• No change in tax rates in respect of income of all categories of assessee.
•  
• No change in MAT and AMT rate for companies and other entities except in case of Co-operative Societies where the AMT rate is reduced from 18.5% to 15%.
•  
• No change in Surcharge and HEC except the following:
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• Surcharge on any long term capital gains arising to Individual/ HUF/AOP/BOI under section 112 of the IT Act, restricted to 15%.
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• Surcharge in case of AOP, consisting of only companies as its members, restricted to 15%.
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• Surcharge in case of Co-operative society (except resident cooperative society opting for section 115BAD), reduced from 12% to 7% where income exceeds Rs. 1 crore but does not exceed Rs. 10 crore.
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• 1.2 Tax Incentives and Proposals for Business
•  
• Section 115BAB of the IT Act is proposed to be amended to extend the date of commencement of manufacturing or production of an article or thing or generation of electricity from 31 March 2023 to 31 March 2024.
•  
• It is proposed to further extend the period of incorporation of the eligible start-ups for claiming the tax holiday under section 80-IAC of the IT Act by 1 more year i.e., before 1 April 2023.
•  
• It is proposed to amend section 115BBD of the IT Act to provide that the concessional regime for taxation of foreign dividends @15% shall not apply from AY 2023-24 onwards.
•  
• It is proposed to include an explanation in the IT Act that for the purposes of section 40(a)(ii) of the IT Act, the term tax includes and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. Accordingly, HEC and surcharge shall be disallowed under said section.
•  
• It is proposed to insert clarification in section 43B that conversion of interest payable, under section 43B, into debenture or any other instrument by which liability to pay is deferred to a future date, shall not be deemed to be actual payment for the purpose of claiming deduction under the said section.
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• It is proposed to insert a new explanation 3 to section 37 of IT Act to further clarify that the expression expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law under explanation 1, shall include and shall be deemed to have always included  the expenditure incurred by an assessee, for any purpose which is an offence under, or which is prohibited by, any law for the time being in force, in India or outside India; or
•  
• to provide any benefit or perquisite, in whatever form, to a person, whether or not carrying on a business or exercising a profession, and acceptance of such benefit or perquisite by such person is in violation of any law or rule or regulation or guideline, as the case may be, for the time being in force, governing the conduct of such person; or to compound an offence under any law for the time being in force, in India or outside India.
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• To clarify that proceedings in case of predecessor entity which ceases to exist pursuant to business reorganization are valid, section 170 proposed to be amended to provide that such proceedings pending or completed on the predecessor shall be deemed to have been made on the successor entity.
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• In order to enable the successor entity to give effect to business reorganization, it is proposed to insert section 170A allowing the successor entity to file a modified return within 6 months from the end of the month in which the order of competent authority is issued.
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• It is proposed to insert section 156A to give effect to the orders of the competent authority to modify the income-tax demand as directed by such authority.
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• It is proposed to insert new section 194R to the IT Act to provide that the person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from carrying out of a business or exercising of a profession by such resident, shall before providing such benefit or perquisite, to such resident, deduct the tax @10% of the value or aggregate of value of such benefit or perquisite.

 

•   1.3 Personal Taxation
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• Exemption of following amounts received for medical treatment and on account of death due to COVID-19.
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• Section 17(2)  Any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family in respect of any illness relating to COVID-19 subject to such conditions, shall not be forming part of perquisite.
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• Section 56(2)(x) (a) Any sum of money received by an individual, from any person, in respect of any expenditure actually incurred by him on his medical treatment or treatment of any member of his family, in respect of any illness related to COVID-19 subject to such conditions, shall not be the income of such person (b) any sum of money received by a member of the family of a deceased person, from the employer of the deceased person (without limit), or from any other person or persons to the extent that such sum or aggregate of such sums does not exceed Rs. 10 lakh, where the cause of death of such person is illness relating to COVID-19 and the payment is, received within 12 months from the date of death of such person, shall not be the income of such person.
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• It is proposed to allow the deduction under section 80DD of the IT Act during the lifetime, i.e., upon attaining age of 60 years or more of the individual or the member of the HUF in whose name subscription to the scheme has been made and where payment or deposit has been discontinued.
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• Further, it is proposed that the provisions of sub-section (3) shall not apply to the amount received by the dependent, before his death, by way of annuity or lump sum by application of the condition referred to in the proposed amendment.
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• 1.4 Non-residents
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• The income of a non-resident from offshore derivative instruments, or over the counter derivatives issued by an offshore banking unit, income from royalty and interest on account of lease of ship and income received from portfolio management services in IFSC shall be exempt from tax, subject to specified conditions.
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• 1.5 Other Proposals
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• It is proposed to introduce section 139(8A) of the IT Act wherein any person, whether or not he has furnished a return, may furnish an updated return of his income or the income of any other person in respect of which he is assessable under the IT Act, within 24 months from the end of the assessment year, subject to other prescribed conditions, in prescribed form and manner containing such particulars.
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• It is proposed to introduce section 115BBH which provides that any income from transfer of any virtual digital asset shall be taxed @ 30% and no deduction would be allowed for any expenditure or set-off of losses. Further, loss from transfer of such assets shall not be allowed.                        It is also proposed to amend Explanation to section 56(2)(x) of the IT Act to interalia, provide that for the purpose of the said clause, the expression property shall include virtual digital asset.
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• In order to capture the transaction details, it is proposed to introduce section 194S under the IT Act which provides for TDS on payment made to a resident in relation to transfer of virtual digital assets @1% of such sum above a monetary threshold and certain other conditions.
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• Certain provisions applicable to trusts and institutions covered under section 11 and section 12 (referred as second regime) to be made  applicable to trusts and institutions covered under section 10(23C) (referred as first regime). Further, various clarifications on taxation in respect of these charitable trusts and institutions proposed.
•  
• It is proposed to amend the provisions of section 68 to provide that the nature and source of any sum, whether in form of loan or borrowing, or any other liability credited in the books of an assessee shall be treated as explained only if the source of funds is also explained in the hands of the creditor or entry provider.
•  
• Section 148 proposed to be amended to clarify what constitutes information under Explanation 1 to section 148 and it proposes to include any audit objection, or any information received from a foreign jurisdiction under an agreement or directions contained in a court order, or information received under a scheme notified under section 135A, etc. Further, section 149 proposed to be amended to provide that a notice under section 148 shall be issued up to 10 years from end of the relevant assessment year where the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented (a) in the form of an asset or (b) expenditure in respect of a transaction or in relation to an event or occasion or (c) an entry or entries in the books of accounts.
•  
• The requirement of higher TDS / TCS shall be applicable in case of nonfiling of tax return by the payee for preceding 1 year instead of 2 years as earlier provided. Further, deduction of tax under section 194 IA, 194 IB and 194M excluded from the operation of section 206AB of the Act.
•  
• Provisions of section 94(8) of the IT Act relating to bonus stripping proposed to be amended to include securities as well. Further, definition of units proposed to be amended to include units of business trusts for dividend and bonus stripping.
•  
• It is proposed to amend section 194-IA of the IT Act and to provide that in case of transfer of an immovable property (other than agricultural land), TDS to be deducted @ 1% of such sum paid or credited to the resident transferor or the stamp duty value of such property, whichever is higher.
•  
• It is proposed to insert section 79A of IT Act to provide that, notwithstanding anything contained in the Act, no set-off of brought forward loss or unabsorbed depreciation shall be allowed against any undisclosed income unearthed during the course of search and survey proceedings.
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• It is proposed that the existing provisions are replaced with section 144B to streamline the process of faceless assessment in order to address various legal and procedural problems being faced in implementation of the said section. Section 144B(9) treating the proceedings to be void on non compliance of procedure laid down under the said section, proposed  to be omitted from date of its inception.
•  
• It is proposed that the revision of transfer pricing assessment order under section 263 shall be within the powers of the PCCIT or CCIT or PCIT or CIT who is assigned the jurisdiction of transfer pricing.
•  
• Procedure prescribed under section 158AB for deferral of revenue appeal where identical question of law is pending before jurisdictional High Court or Supreme Court in case of any other assessment year of the assessee or in case of any other assessee.
•  

• 2.0 INDIRECT TAXES

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• 2.1 GST, Custom & Excise
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• 2.1.1 CGST Act Amendments
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• Time limit for claiming input tax credit (ITC) under section 16(4) extended to 30th November of the succeeding financial year as against the due date of September's Form GSTR 3B               Time limit for issuing credit note under section 34(2), rectification of errors in GSTR 1 and GSTR 3B and section 52 (6) extended to 30th November of succeeding financial year as against September earlier
•  
• Insertion of new clause Section 16(2) (ba) restricting availment of ITC as communicated to the taxpayer under section 38.
•  
• Cancellation of registration of composition dealer if the returns not furnished for a FY beyond 3 months from the due date Cancellation of registration in cases other than composition dealer in case if returns are not furnished for continuous tax period as may be prescribed.
•  
• The due date for filing GSTR 5 by Non 􀁅resident taxable person has been stated as 13th day of the following month
•  
• Section 38 of the CGST Act is substituted for prescribing the manner, conditions and restrictions for communication of details of inward supplies and input tax credit.
•  
• Section 41 of the CGST Act is being substituted to do away with the concept of "claim" of ITC on"provisional" basis Removal of section 42, 43 and 43A of the CGST Act.
•  
• In order to do away with two-way communication process in return filing system Section 47 of the CGST Act is being amended so as to provide levy of late fees for delayed filing of TCS returns Section 49 is being amended to provide restriction for the amount available in electronic credit Ledger (ECL) and the maximum proportion of output tax liability which may be discharged through the ECL
•  
•  Section 49 also allows transfer of amount available in electronic cash ledger of registered person to the electronic cash ledger of distinct person.
•  
• Section 54 of the CGST act is being amended to provide for the situation of refund of balance in electronic cash ledger. Insertion of sub clause (ba) in clause (2) in section 54 by providing clarity regarding the relevant date for filing refund claim in relation to supplies made to SEZ/ SEZ (developer).
•  
• The relevant date for claiming refund of tax paid on inward supply under section 55 has been clarified as two years from the last day of the quarter in which the said supply is received.
•  
•  
• Inclusion of officer of Directorate of Revenue Intelligence, Audit and Preventive formation in the class of officers for the purpose of section 3 (i.e. definition of officer)
•  
• Section 14 is being amended to include provisions for rules enabling the Board to specify the additional obligations of the importer in respect of a class of imported goods whose value is not being declared correctly, the criteria of selection of such goods, and the checks in respect of such goods.
•  
• Applicant can withdraw his application in respect of advance ruling at any time before pronouncement of advance ruling. Also, Advance ruling shall remain valid for three years or till there is change in law or facts, whichever is earlier.
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• Publishing of import and export data submitted by importer to Customs is declared an offence unless required under law.
•  
• Procedural changes are made in Customs (Import of goods at concessional rate of duty) Rules, 2017.
•  
• 2.1.3 Changes in Customs Duty Rate and Exemption
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• BCD rate on imitation jewellery has been amended to 20% or Rs 400/kg whichever is higher.
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• Decrease in BCD on cut and polished diamond and cut and polished natural stones from 7.5% to 5%
•  
• Increase in BCD on electrical and electronic items Increase in BCD rate on Solar Cells (other than those exclusively used with ITA-1 items) and Solar Modules (other than those exclusively used with ITA-1 items)
•  
• Decrease in BCD rate for textile products
•  
• Decrease in BCD rate for ferrous waste and scrap
•  
• Effective BCD rate on Project Imports would continue to be 􀀼Nil / 2.5% / 5% (as applicable) till 30 September 2023 for the project imports registered till 30 September 2022.
•  
• For other project imports, 7.5% BCD rate will be applicable from 01 October 2022.
•  
• All project imports will attract 7.5% BCD rate after 30 September 2023
•  
• Certain Cesses (AIDC, Health Cess and RIC) are being exempted for specified notifications
•  
• Nil BCD on scrap of iron and steel is being extended up to 31 March 2023
•  
• The Customs duty rate structure on capital goods and project imports has been comprehensively reviewed and exemption on capital goods/ project imports are being phased out in a gradual manner.
•  
• However, certain exemptions on capital goods would continue
•  
• A new entry at S. No. 166A would be inserted w.e.f. 1 April 2024 providing a concessional rate of 5% for bulk drugs falling under Chapters 28, 29 or 30 used in the manufacture of Poliomyelitis Vaccine or Monocomponent insulins subject to importer following IGCR Rules 2017
•  
• There have been proposals involving changes in effective basic custom duty rates in respect of phased manufacturing program (PMP) with respect to specific electronic goods.
•  
• 2.1.4 Changes in Anti-Dumping Duty (ADD)
•  
• ADD is permanently revoked on import of :
•  
• 1) Straight length bars, rods of alloy steel from China.
•  
• 2) High Speed Steel of Non-Cobalt Grade from Brazil, China and Germany 3) Flat rolled product of steel, plated or coated with alloy of Aluminium or Zinc from China, Vietnam and Korea RP
•  
• 2.1.5 Changes in Countervailing Duty (CVD)
•  
• CVD is permanently revoked on imports of Certain Hot Rolled and Cold Rolled Stainless Steel Flat Products from China.
•  
• 2.1.6 Changes in Excise Duty
•  
• Two new tariff items, namely, 2710 12 43 and 2710 12 44, falling under Chapter 27, have been inserted in the Fourth Schedule to the Central Excise Act, 1944 with rate of duty as 14% plus Rs 15 per litre.
•  
• 2.1.7 Changes in National Calamity Contingent Duty (NCCD)
•  
• The Seventh Schedule of the Finance Act, 2001, is being amended by substituting Central Excise tariff item 2709 20 00 with 2709 00 10 [Petroleum Crude] with rate of duty as Rs 50 per tonne.

Limitation period not applicable to refund claim of service tax paid mistakenly

The CESTAT, Delhi in M/s Ishwar Metal Industries v. Commissioner, Central Excise and CGST, [Service Tax Appeal No. 51834 of 2018-SM dated January 28, 2022] set aside the order rejecting the refund claim of the assessee for the Service tax paid mistakenly, passed by the Revenue Authority, on the grounds of limitation. Directed the Revenue Department to refund the amount to the assessee along with the interest @12% within 45 days.

Facts:

M/s Ishwar Metal Industries (“the Appellant”) filed refund claim along with interest under Section 11B of the Central Excise Act, 1944 (“the Central Excise Act”) of mistakenly paid Service tax amounting to INR 31,50,587/- on May 25, 2011 for the period 2007-08 to 2009-10 provided to Electricity Board/Nigam. The Assistant Commissioner (“the Respondent”) rejected the refund claim stating that the Appellant is required to deposit Service tax on the taxable services, on the ground that the refund claim has been filed after more than one year from the date of deposit of the tax.

Subsequently, the Appellant preferred an appeal before the Ld. Commissioner Appeals (“the Appellate Authority”) against the decision of the Respondent, wherein the appeal was dismissed and the decision of the Respondent was upheld.

Being aggrieved, the Appellant filed this appeal.

The Appellant contended that, as per Circular No. 123/5/2010 -TRU dated May 24, 2010, that clarified the applicability of service tax on laying of cables under or alongside roads and similar activities. The work undertaken by them, are not liable to service tax, hence no service tax was payable and all the services/work was allotted by the government was through open bidding. The price fixed as per work order is not affected due to levy of tax.

Issue:

Whether the Appellant is entitled to get the refund claim of service tax paid by mistake along with interest?

Held:

The CESTAT, Delhi in Service Tax Appeal No. 51834 of 2018-SM dated January 28, 2022 held as under:

• Noted that, Service tax was not leviable on the services provided by the Appellant, which was paid by mistake, thus, it will be treated as deposit, ipso facto, and are entitled for refund.
• Observed that, the limitation under Section 11B of the Central Excise Act will not be applicable as the amount deposited by the Appellant is not tax but revenue.
• Further noted that, work orders issued to the Appellant in competitive open bid and it is clear that the prices are firm in all respect and independent of any variation. Furthermore, the Appellant have not charged any service tax in their invoices. Thus, unjust enrichment is not applicable.
• Set aside the order passed by the Respondent.
• Directed the Respondent to grant refund of the amount in cash, within 45 days, along with the interest @12% p.a. from end of 3 months from the date of refund application filed by the Appellant, till the date of grant of refund.

Relevant Provisions:

Section 11 of the Central Excise Act

“Claim for refund of duty

1. Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of  ²[duty of excise and interest, if any, paid on such duty] in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person

Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act;

Provided further that the limitation of one year shall not apply where any [duty and interest, if any, paid on such duty] has been paid under protest.

(2) If, on receipt of any such application, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty] paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund:

Provided that the amount of  duty of excise and interest, if any, paid on such duty] as determined by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to-

(a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(b) unspent advance deposits lying in balance in the applicant's account current maintained with the Commissioner of Central Excise;

(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act;

(d) the duty of excise and interest, if any, paid on such duty paid by the manufacturer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

(e) the duty of excise and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

(f) the duty of excise and interest, if any, paid on such duty] borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify:

Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty and interest, if any, paid on such duty has not been passed on by the persons concerned to any other person.

(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).

(4) Every notification under clause (f) of the first proviso to sub-section (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its re-assembly, and the Central Government shall seek the approval of Parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the House of the People and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder.

(5) For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to sub-section (2), including any such notification approved or modified under sub-section (4), may be rescinded by the Central Government at any time by notification in the Official Gazette.

Provided further that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest.”

 

Union FM Nirmala Sitharaman will present the Union Budget 2022-23 today in Parliament at 11:00 AM

 

Union Finance Minister Nirmala Sitharaman will present the Union Budget 2022-23 today in Parliament.

Watch LIVE from 11 AM onwards https://youtu.be/2WgKQ_HhEWw

Source from: https://twitter.com/PIB_India/status/1488368179223359488

New GST rates on textile likely from January 1, 2022

 

Despite concerns expressed by the industry, the government is unlikely to defer implementation of higher Goods and Services Tax (GST) on certain textile products, as the decision was taken by the GST Council.

The new GST rates will kick in from January 1, 2022.

The sector had opposed the increase citing higher compliance costs, especially for the unorganised sector and micro, small and medium enterprises (MSMEs), besides making clothing more expensive for the poor.

The finance ministry is expected to take up with the GST Council the concerns raised by the industry over the latter's decision to increase the rates on several textile products to 12%.

The Council had in its previous meeting held in Lucknow on September 17, 2020 decided to correct the inverted duty structure on footwear and textiles. After this, the GST on footwear and textiles was raised to 12%, effective January 1, 2022.

"The decision to implement from January 1, 2022 was taken by the Council after intense deliberations. We will place the representations before the Council whenever it meets next," an official said.

Since the GST was raised by the Council, any decision on the rates or implementation also lay with it, the official added.

Once it kicks in, an apparel will attract 12% GST as against 5% on sale value of up to Rs 1,000 per piece currently. Similarly, the 5% tax on sale value of up to Rs 1,000 per pair of footwear has been increased to 12%.

GST on woven fabric, sewing thread of man-made filaments, synthetic filament yarn other than sewing thread, synthetic monofilament, and artificial filament yarn including artificial monofilament, among others, have also been increased to 12% from 5% earlier. "Inverted duty structure broadly harms the sector as companies are unable to take credit of higher tax paid on inputs. It had to be corrected to help the industry," the official said.

The government has said that uniform GST will aid in the resolution of input tax credit residues that got accumulated due to the inverted tax structure earlier.

It will enable the industry to encash piled-up input tax credit progressively, the textiles ministry said last month.

The Confederation of All India Traders said that any hike in GST rates on textiles will adversely affect consumers and block capital for small traders.

Sources said the textiles ministry had not taken up the issue with the finance ministry or the GST Council Secretariat yet.

"Industry has made a representation to the finance ministry and taken up the issues with them," said another official.

Source from: https://economictimes.indiatimes.com/small-biz/gst/new-gst-rates-on-textile-likely-from-january/articleshow/88466734.cms?from=mdr

Indian FM rejects textiles ministry proposal to defer GST hike

 

India’s finance minister Nirmala Sitharaman at a meeting on December 24, 2021 rejected the proposal put forward by the ministry of textiles to defer the increase in Goods and Services Tax (GST) from the current 5 per cent to 12 per cent on fabrics and other textile products. A similar request from the Confederation of All India Traders (CAIT) was also rejected.

As a result, GST rates will go up as scheduled with effect from January 1, 2022, from 5 per cent to 12 per cent on all types of fabrics, and on garments with retail value below ₹1,000. The GST rate on man-made fibre, however, will come down from 18 per cent to 12 per cent. The rates on cotton, cotton yarn and synthetic yarn will remain unchanged at 5 per cent, 5 per cent, and 12 per cent respectively.

The GST Council at its last meeting had decided to change the GST rate to address the inverted tax structure in the MMF textile value chain. The GST of 18 per cent, 12 per cent and 5 per cent levied on MMF, MMF yarn and MMF fabrics created build-up of credits and cascading costs, as the tax on inputs was at higher rates than finished products. This further led to accumulation of taxes at various stages of MMF value chain and blockage of crucial working capital for the industry.

“Though there is a provision in the GST law to claim unutilised Input Tax Credit (ITC) as a refund, there were other complications and it resulted in more compliance burden. The inverted tax structure caused effective increase in rate of taxation of the sector. The world textiles trade has been moving towards MMF, but India was not able to take advantage of the trend as its MMF segment was throttled by inverted tax regime,” the ministry of textiles had said while announcing the change in GST structure last month.

“The uniform rate of 12 per cent is likely to contribute positively to the growth of the sector by helping save a lot of working capital and reducing the compliance burden of the industry players. It will be helpful in resolving the ITC residues that accumulated due to the inverted tax structure earlier,” the ministry had said.

On the decision to uniformly tax all garments at 12 per cent, the ministry said that differential rates for garments create problems in compliance of tax regime. “MMF garments cannot be identified easily and cannot be taxed differently, hence there is a need for uniform rate. Uniform rate makes it simple and since there is so much high potential of value addition in garment segment, the increase in rate is likely to be absorbed in value addition. It will provide clarity to the industry and settle, once and for all, the issues caused by inverted tax structure.”

However, industry experts feel that the uniform rate will lead to smaller players being pushed into the unorganised sector, as it will make harder for the sector to keep afloat. So, few textile bodies had made representations to the textiles ministry to defer/cancel the hike in GST rate from 5 per cent to 12 per cent on fabrics, and garments costing below ₹1,000. This request now stands rejected.

Source from: https://www.fibre2fashion.com/news/textile-news/indian-fm-rejects-textiles-ministry-proposal-to-defer-gst-hike-278074-newsdetails.htm

GST not applicable on payment of notice pay and allowed ITC on canteen services

 The AAAR, Madhya Pradesh in the matter of M/S. Bharat Oman Refineries Limited [Advance Ruling No. MP/AAAR/07/2021 dated November 8, 2021] reversed the ruling of AAR which held that GST is applicable on recovery of:

• Notice pay from an employee by employer in lieu of notice period
• Telephone charges
• Group Medical Insurance Policy (“the Policy”) recovered from employees and providing
• Canteen facility to employees free of cost

Held that, the AAR had erred in concluding that such activity was leviable to GST. Further held that Input Tax Credit (“ITC”) shall be available on obligatory canteen services provided by the employer to their employees.

Facts:

This appeal has been filed by M/s Bharat Oman Refineries Limited (“the Appellant” or “the Employer”) against the ruling passed by the AAR, Madhya Pradesh in M/S. Bharat Oman Refineries Limited [Advance Ruling Order No. 02/2021 dated June 7, 2021], wherein, it was held that, GST is applicable on payment of notice pay by an employee to employer in lieu of notice period and telephone charges, premium of the Policy recovered from employees and free of cost canteen facility provided to employees. Further AAR disallowed the ITC with respect to canteen services provided by the employer to their employees.

Issue:

Whether the Appellant is liable to pay GST on amount recovered in lieu of notice pay by an employee, the premium of the Policy at actuals from non-dependent parents of employees, telephone charges, and nominal charges for availing and canteen facility or free of cost canteen facility to the employees, and whether the ITC of tax paid or deemed to have been paid is admissible on such facilities provided?

Held:

The AAAR, Madhya Pradesh in Advance Ruling No. MP/AAAR/07/2021 dated November 8, 2021 held as under:

• Noted that, para 5(e) of the Schedule II of the Central Goods and Services Tax Act, 2017 (“CGST Act”) is similar to the Section 66E(e) of the Finance Act, 1994 (“the Finance Act”) applicable during Service Tax regime. In the GST era also, services provided by an employee to the employer is treated neither as supply of goods nor supply of services under Schedule III of the CGST Act.
• Relied on the judgment of the Hon’ble Madras High Court in GE T & D India Limited v. Deputy Commissioner of Central Excise [W.P. Nos. 35728 to 35734 of 2016] wherein, it was held that, no service tax is payable on notice pay recovery made by the Employer.
• Stated that, the services by an employee to the Employer in the course of or in relation to his employment have been placed out of the purview of GST. Further, the compensation which accrues to the Employer is in relation to the services provided by the employee and is related to the services not provided by him to the Employer during the course of employment i.e. the Employer is being compensated for the employee's sudden exit.
• Observed that, the Appellant is collecting amounts only in respect of Mediclaim cover in lieu of the Policy provided to the employee’s non-dependent parents and retired employees who opt for such cover. Evidently, the Appellant is not in the business of providing insurance coverage and providing such insurance cover is not a mandatory requirement under any law for the time being in force and therefore, non-providing insurance coverage to employees non-dependent parents and retired employees would not affect Appellants business by any means. Therefore, activity of recovery of cost of insurance premium at actuals cannot be treated as an activity done in the course of business or for the furtherance of business.
• Reversed the ruling passed by the AAR, Madhya Pradesh and held that:
  • Merely because the Employer is being compensated does not mean that any services have been provided by him or that he has 'tolerated' any act of the employee for premature exit.
  • Facilitating medical insurance services in lieu of the Policy to non-dependent parents and retired employees upon recovery of premium amount on actuals and telephone connection to employees upon recovery of usage charges on actuals cannot be considered as 'supply of service' under CGST Act.
  • GST is not applicable on the collection by the Appellant, of employees' portion of amount towards foodstuff supplied by the third party / Canteen Service Provider and the Appellant is providing the facility to employees, without making any profit and working as mediator and the Employer is mandated to run a canteen under the Factories Act, 1948 (“the Factories Act”). Further, canteen services provided to employees without charging any amount i.e. free of cost will also fall under Para 1 of Schedule III of CGST Act that shall be treated neither as a supply of goods nor a supply of services and therefore, not be subjected to GST.
  • ITC on GST paid towards telephone services and Policy would not be available to the Appellant in terms of Section 17(1) of the CGST Act and Section 17 (5) of the CGST Act respectively. Further, ITC in respect of canteen facility provided by the Appellant would be available as per Section 17(5)(b), as obligatory for an Employer to provide the same to its employees under the Factories Act.

Karnataka AAR ruled that 5% GST applicable on packed and branded Pushti

 

The Hon’ble Karnataka Authority for Advance Ruling (“the Karnataka AAR”) in the matter of  M/s. Devanahalli and Hosakote Taluks MSPC [Advance Ruling No. KAR ADRG 56/2021 dated October 29, 2021], ruled that Pushti is classified under HSN code 1106. If unbranded it attracts nil Goods and Services Tax (“GST”) as per S. No. 78 of Notification No. 2/2017-Central Tax (Rate) dated June 28, 2017 and if branded and packed it attracts 5% GST as per S. No. 59 of Schedule I of Notification No. 1/2017-Central Taxes (Rate) dated June 28, 2017.

Factually, the M/s. Devanahalli and Hosakote Taluks MSPC (“the Applicant”) are registered as a Society under Karnataka Societies Registration Act, 1960. The Applicant stated that as per the Integrated Child Development Services (“ICDS”) Scheme of the Government of India, Karnataka State Government has established Mahila Supplementary Production and Training Center (“MSPC”) in all the taluks of the State. MSPC supply supplementary food to Anganwadi centers through Child Development Project Office (“CDPO”) and the activities and operations of MSPC are supervised by the CDPO of the concerned Taluks. The society i.e MSPC is all women associated with the main objective of member’s welfare especially widows, women in reservation cadre, backward communities, and SC/ST. Further, the society also aims at providing high nutrition food products to beneficiaries under ICDS Scheme. The Applicant states that the Society is formed with the motive of social welfare and not monetary benefits and is into supply of Pushti which is a powdered mixture of Ragi, Rice, Wheat, Green gram, Fried gram, Moong dal, and Soya in different proportions to CDPO and CDPO, in turn applies the same to Anganwadis which is further distributed to children, pregnant women and lactating mothers.

The Applicant has sought the advance ruling on the issue in respect of classification and rate on Pushti.

The Hon’ble Karnataka AAR ruled that Pushti which is a powdered mixture of Ragi, Rice, Wheat, Green gram, Fried gram, Moong dal, and Soya in different proportions is classified under HSN code 1106. If unbranded it attracts Nil GST as per S. No. 78 of Notification No. 2/2017-Central Tax (Rate) dated June 28, 2017 and if branded and packed it attracts 5% GST as per S. No. 59 of Schedule I of Notification No. 1/2017-Central Taxes (Rate) dated June 28, 2017.

होजरी निर्माताओं ने परिधानों पर संशोधित जीएसटी दर की आलोचना की -Hosiery makers slam revised GST rate on apparel

 साउथ इंडिया होजरी मैन्युफैक्चरर्स एसोसिएशन (सिहमा) ने केंद्र से परिधान वस्तुओं पर संशोधित जीएसटी दर को वापस लेने का आग्रह किया।

केंद्रीय वित्त मंत्री को लिखे पत्र में सिहमा के सदस्यों ने कहा कि इस कदम से तैयार उत्पादों की लागत बढ़ेगी, जिसका बाद में बिक्री पर असर पड़ेगा।

जीएसटी परिषद ने अपनी पिछली बैठक में जनवरी से कई कपड़ा और परिधान वस्तुओं और जूते पर 5% से 12% तक कर बढ़ाया।

किसी भी मूल्य के बुने हुए कपड़ों पर जीएसटी दर को 1,000 रुपये तक के उत्पादों पर 5% से बढ़ाकर 12% कर दिया गया है। उद्योग के विशेषज्ञों ने कहा कि यह कार्यशील पूंजी की आवश्यकता को प्रभावित करेगा, इसके अलावा बिक्री जो कोविड संकट के बाद धीरे-धीरे बढ़ रही थी।

सिहमा के अध्यक्ष ए सी ईश्वरन ने कहा कि नया कर होजरी निर्माताओं को प्रभावित करेगा। “निम्न आय वर्ग को लाभ पहुंचाने के लिए 1,000 रुपये से कम के उत्पादों पर जीएसटी रियायत बहाल की जानी चाहिए। 500 रुपये से कम के उत्पादों पर रियायत दी जा सकती है। होजरी की एक जोड़ी की कीमत 500 रुपये हो सकती है और जीएसटी दरों में वृद्धि से लागत में और वृद्धि होगी।' "हमें उम्मीद है कि सरकार ऐसे कठिन समय में मजदूर वर्ग को और तनाव में नहीं डालेगी।"