*CBDT introduces new rule for making online application for lower withholding on payments to non-residents*

*CBDT introduces new rule for making online application for lower withholding on payments to non-residents*

A notification no. 18 issued by CBDT on 16 March 2021  that amends the Income Tax Rules, 1962 by inserting Rule 29BA (Rule) that deals with online application for lower withholding on payments to non-residents (NR) under the Indian Tax Laws (ITL) . The Notification also notifies final Form 15E  for making such application.

The extant procedure for making application for lower withholding on payments to NR is a physical paper-based submission process with no specific form prescribed. Pursuant to recent amendments in the ITL, which empower the CBDT to prescribe the form and manner of filing such application, the CBDT had earlier published a draft of the Form, seeking stakeholders’ comments.

The CBDT has now notified the Rule and the Form. Broadly, the Form requires furnishing of elaborate details of the payer, NR payee, transaction details and taxability under the ITL, including relief claimed under the Double Taxation Avoidance Agreement (DTAA), along with copies of transaction documents. The Rule requires the taxpayer to file such Form under digital signature or through electronic verification code. The Tax Authority shall, after examining the specific information of the NR recipient, issue lower withholding order after determining the appropriate proportion of sum chargeable to tax. Such order shall be valid only for the payment to NR named therein and for such period of the year as may be specified in the certificate or cancellation by the tax authority, whichever is earlier.

CA Amresh Vashisht

Mandatory to mention 4/6-digit HSN/SAC Code w.e.f. April 1, 2021

The Central Board of Indirect Taxes (“CBIC”) issued Notification No. 12/2017- Central Tax dated June 28, 2017, to show specified digits of Harmonised System of Nomenclature (“HSN”)/ Service Accounting Code (“SAC”) Code on raising of tax invoices for supply of goods or services as under:

S. No.	Aggregate Turnover in the preceding Financial Year	Number of Digits of HSN Code
1.	Upto INR 1.50 crore	Nil
2.	More than INR 1.50 crore and upto INR 5 crores	2
3.	More than INR 5 crores	4

Subsequently, the above notification was amended vide Notification No. 78/2020 – Central Tax, dated October 15, 2020 to mandate 4/6- digit HSN/SAC Code on supply of goods or services on the tax invoices w.e.f. April 1, 2021:

S. No.	Aggregate Turnover in the preceding Financial Year	Number of Digits of HSN Code
1.	Upto INR 5 crores	4
2.	More than INR 5 crores	6

Further, a proviso was inserted to provide that 4- digits of HSN Code is optional in respect of supplies made to unregistered persons i.e., B2C supplies for a registered person having aggregate turnover upto INR 5 crores in the previous financial year.

Thereafter, Notification No. 12/2017- Central Tax dated June 28, 2017 was again amended vide Notification No. 90/2020 – Central Tax, dated December 01, 2020 to provide for class of supply- ‘Chemicals’ whose HSN Code are required to be mentioned at 8-digit on the tax invoices.

Further, it is to be noted that the above changes of mentioning 4/6 Digit HSN/ SAC code, as applicable, are also required to be captured in Table 12 of Form GSTR-1 (i.e., details of outward supplies of goods or services) and therefore, corresponding changes are made in the same.

Furthermore, it is very important to mention the correct HSN/ SAC Code on the tax invoices and Form GSTR-1 as penalty of INR 50,000/- (INR 25,000/- each for CGST and SGST) can be levied for non-mentioning or mentioning wrong HSN/ SAC Code under Section 125 of the Central Goods and Services Tax Act, 2017 (i.e., General penalty).

However, it is to be noted that there are many disputes w.r.t. classification of the various goods and services like sanitizers, railway parts, fryums etc. Further, the disputes are also going on as to whether classification as per Notification No. 1/2017- Central Tax (Rate) dated June 28, 2017 (“Goods Rate Notification”) should be in line with explanation (iii) and (iv) of said notification vide which it is provided that “Tariff item”, “sub-heading” “heading” and “Chapter” in the Goods Rate Notification shall mean tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (“CTA”) and  that rules for the interpretation of the First Schedule to the CTA including the Section and Chapter Notes and the General Explanatory Notes would be apply to the interpretation of the  Goods Rate Notification which provides only 1,208 goods approx. as against more than 12,000 products under First Schedule of the CTA.

To know more, kindly watch video on “Compulsorily mentioning of 4/6 Digit HSN/SAC Code -Goods/Services w.e.f April 1, 2021” by CA Bimal Jain- https://www.youtube.com/watch?v=TCQOgz3CyUk

*Updation Regarding Selection Of Core Business Activity For Every Registered Person On GST Portal:*

The Goods and Service Tax Network (GSTN) has enabled the new feature to select Core Business Activity enabled on GST Portal. 

*Meaning Of Manufacturer* 

A manufacturer is a registered person produces new products from raw materials and 

components using tools, equipment’s and machines and then sells them to the consumers, wholesalers,distributors, retailers or to the other manufacturers. A manufacturer may sell 

some more brought out items or may provide some ancillary services with his manufactured 

goods, but he would continue to be classified as manufacturer because it is the Primary Business Activity. 

*Meaning Of Trader* 

A trader is a registered person who engages in the buying and selling of goods. Traders have 

been further classified as – Wholesaler or Distributor 

*Meaning Of Retailer*

Retailer includes a registered person selling goods through e-commerce operators. 

*Meaning Of Service Provider And Others*

A service provider is a registered person who provides service to a recipient of service and is  neither a manufacturer nor a trader. e.g. Banking service, IT service, works-contract service, agents, intermediaries, GTAs etc. 

*Others will include Work Contract and Other Miscellaneous Items.* 

If more than one business Activity then In case all activities are applicable to you, kindly select your core business activity then go to MY PROFILE > CORE BUSINESS ACTIVITY STATUS and 

include all the category.