The question arose when a client of the Applicant refused to pay GST citing that diesel is a no GST good hence not liable to tax under Section 9 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) and Karnataka Goods and Services Tax Act, 2017 (“KGST Act”).
The Hon’ble Karnataka Authority for Advance Ruling (“KAAR”) noted that the contract entered between the Applicant and the recipient is for the hiring of DG Set and is a comprehensive contract with the consideration having a fixed component and a variable component. The fixed component is the monthly fixed rent charged in the invoice for the DG Set and the variable charge is the charge for the diesel used. Both are part of the same consideration and is for the contract of supplying DG Set on hire. Though it appears that the Applicant is receiving the reimbursement of diesel cost, the recipient is not paying for the diesel but for the services of DG Set, which is an integral part of the supply of DG Set rental service. There is no separate contract for supply of diesel and the invoice issued for the reimbursement of diesel cost is nothing but a supplementary invoice issued for the supply of rental service of DG Set
Hence, the reimbursement charges for running DG Set is an additional consideration for the supply of DG Set on rent as per Section 15 of the CGST/KGST Act.
Therefore, the same attracts 18% GST implying that in a case where diesel is included in a composite service and charges are applicable, the fuel irrespective of the exemption would attract GST on the invoice value.
The DGFT vide Notification No. 17/2015-2020 dated August 10, 2021 has amended Para 2.07 of Foreign Trade Policy, 2015-2020 so as to amend the provision regarding prohibition and restrictions for imports/ exports, in line with international agreements. The existing and revised provision are as under:
Existing Provision | Revised Provision | |
DGFT may, through a Notification, impose restrictions on export and import, necessary for: - a) Protection of public morals; b) Protection of human, animal or plant life or health; c) Protection of patents, trademarks and copyrights, and the prevention of deceptive practices; d) Prevention of use of prison labour; e) Protection of national treasures of artistic, historic or archaeological value; f) Conservation of exhaustible natural resources; g) Protection of trade of fissionable material or material from which they are derived; h) Prevention of traffic in arms, ammunition and implements of war i) Relating to the importation or exportation of gold or silver | DGFT may, through a Notification, impose 'Prohibition' or 'Restriction': - a) on export of foodstuffs or other essential products for preventing or relieving critical shortages; b) on imports and exports necessary for the application of standards or regulations for the classification, grading or marketing of commodities in international trade c) on imports of fisheries product, imported in any form, for enforcement of governmental measures to restrict production of the domestic product or for certain other purposes; d) on imports to safeguard country's external financial position and to ensure a level of reserves. e) on imports to promote establishment of a particular industry; f) for preventing sudden increases in imports from causing serious injury to domestic producers or to relieve producers who have suffered such injury; g) for protection of public morals or to maintain public order; h) for protection of human, animal or plant life or health i) relating to the importations or exportations of gold or silver; j) necessary to secure compliance with laws and regulations including those relating to the protection of patents, trademarks and copyrights, and the prevention of deceptive practices k) relating to the products of prison labour l) for the protection of national treasures of artistic, historic or archaeological value m) for the conservation of exhaustible natural resources n) for ensuring essential quantities for the domestic processing industry o) essential to the acquisition or distribution of products in general or local short supply; p) for the protection of country's essential security interests: i. relating to fissionable materials or the materials from which they are derived; ii. relating to the traffic in arms, ammunition and implements of war; iii. taken in time of war or other emergency in international relations; or q) in pursuance of country's obligations under the United Nations Charter for the maintenance of international peace and security. |
The Notification can be accessed at: https://content.dgft.gov.
Section 50:- Interest on delayed payment of tax.—
(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made there under, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent, as may be notified by the Government on the recommendations of the Council:
[Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.]
(2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.
(3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty four per cent., as may be notified by the Government on the recommendations of the Council.
Section 42(10):- Matching, reversal and reclaim of input tax credit.—
(10) The amount reduced from the output tax liability in contravention of the provisions of sub-section (7) shall be added to the output tax liability of the recipient in his return for the month in which such contravention takes place and such recipient shall be liable to pay interest on the amount so added at the rate specified in sub-section (3) of section 50.
Section 43(10):- Matching, reversal and reclaim of reduction in output tax liability.—
The amount reduced from output tax liability in contravention of the provisions of sub-section (7) shall be added to the output tax liability of the supplier in his return for the month in which such contravention takes place and such supplier shall be liable to pay interest on the amount so added at the rate specified in sub-section (3) of section 50.
As per the recent judgment of Madras High Court in the case of M/S F1 Components Private Ltd V/S The State Tax Officer, Chennai [W.P No. 6631 of 2021 And WMP No. 7188 of 2021, Dated 09/07/2021.
The High Court referred to the decision of M/S Maansarover Motors Private Ltd Dated 29/09/2020 wherein the Court set aside the orders levying interest on ITC as applied on delayed payment in line with GST Council Recommendation of levying interest on Net Cash Liability only w.e.f July 1, 2017 and it was held that this proviso to Section 50 of the CGST Act is retrospective.
Analyzed the provisions of Section 42 of the CGST Act and noted that, the same is not applicable as the Petitioner has accepted the error in claim of ITC by the Respondent and has accordingly reversed ITC through Voluntary Payment of Tax in Form GST DRC – 03
Author View
As per Section 42(10) & Section 43(10) both talks about Matching Concept with Section 38 i.e GSTR 2 and Section 39 i.e GSTR 3 both the returns has been suspended by the government according to GSTR 2 we were about to accept/reject the invoices; instead of introducing GSTR 2 Government has introduced GSTR 2A which has no relevance till now as Section 16(2)(aa) has not been Notified till now which gives power to GSTR 2A and on the other side instead of introducing GSTR 3 government introduced GSTR 3B which after many litigations which were filed before many Authorities and High Courts which was now amended to be a return, parallelly Government also issued the Finance Act which was brought into force w.e.f September 01, 2020 with Retrospective Effect which stated that the Interest will be levied on Net Cash Liability Only which ultimately means that who have wrongly availed it but not Utilized it and you reversing it. Now with thisMadras High Court Judgment of M/S F1 Components Private Ltd V/S The State Tax Officer it is proved that NO Interest will be Levied on Wrongful Availment and not Utilizing ITC which is a very Positive Judgment for the Taxpayers.
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