Tax Vista Your weekly tax recap Edn. 136 - 23rd Jan 2023 By Dr. G. Gokul Kishore

 

 

VAT TDS is eligible for transition to GST as ITC

Tax deducted at source under VAT law (VAT TDS) which remained unadjusted in June, 2017 is eligible for transition to GST regime as input tax credit (ITC). In a well-reasoned judgment, Jharkhand High Court has held that Section 140 of CGST Act / JGST Act uses the words "credit of amount of value added tax and entry tax" which reveals the legislative intention to allow migration of credit of TDS amount under VAT law and such transition is allowed to avoid cumbersome process of claiming of refund by taxpayers. The bar on transition of credit as per Section 140 is only in case of ITC restricted under Section 17(5) and any contrary interpretation would nullify the object of transition provision, as per the order. The department argued in vain that what is permitted to be transitioned is input tax credit while VAT TDS is in the nature of output tax. The High Court noted the format of VAT return and observed that unadjusted TDS amount is treated as ITC and was permitted to be carried forward to subsequent month. The law is almost similar in other States as well and taxpayers in other States have the opportunity to rely on this judgment to persuade their jurisdictional Court to follow the same though there is a Single Judge Bench judgment of Madras High Court on this issue in favour of taxpayer.

 

In this case, transition of credit of VAT TDS was denied without issuance of adjudication order and only summary of order was shared with the taxpayer. Very strangely, the department initially denied entire transitional credit which included normal credits plus VAT TDS and later issued rectification order disallowing only VAT TDS. But, the Appellate Authority went by the first order though, it appears, he took note of the second order [2023-VIL-36-JHR].

 

Provisional attachment - High Court orders department to accept immovable property in lieu of movable property

In cases of provisional attachment, CBIC had issued instructions on 23-2-2021 that the taxpayer may offer immovable property in lieu of movable property which is attached (like bank account) so that movable property which is used in routine business does not get affected. In a case before Gujarat High Court, the department refused to follow this circular. The High Court ordered release of fixed deposit which was provisionally attached based on the offer of immovable property by the taxpayer for attachment purpose. The Court noted that the value of the immovable property was not less than the tax amount in dispute and the department did not substantiate that the property is not free from any charge, lien, mortgage or encumbrances as property tax was being paid and undertaking was furnished with an assurance that the said property is unencumbered. Valuation given by Government Approved Valuer was on the higher side in this case which was accepted by the Court. The Court, however, did not grant relief in lifting attachment of current account. The department, it appears, was hesitant because the property was leased from government on long-term basis but the Court said that such property is easily transferable [2023-VIL-35-GUJ]

 

High Court permits GSTR-1 rectification

High Courts have been permitting amendments or rectification to returns filed 2 or 3 years before mostly taking into account the travails of taxpayers. In a recent case, the petitioner, a sub-contractor was aggrieved over refusal of authorities to allow rectification of GSTR-1 to correct the error of showing B2C while the supplies were actually B2B. The error was noticed only after the date for rectification of returns passed and the principal contractor withheld subsequent payment to the petitioner. Understandably the revenue authorities quoted the statutory provisions and could not assist the petitioner. The High Court held that rectification of the returns for September 2017 and March 2018 was to be permitted since it would not lead to any escapement of tax and the issue was only about ITC benefit which was anyway admissible to the petitioner. The department was directed to receive the rectified returns manually and then facilitate in uploading in GST portal [2023-VIL-30-ORI]

 

High Court allows rectification of GSTR-3B returns for errors during first year

What is simple, apparent and just for even a layman appears to be extremely difficult for the taxman. The taxpayer faced with a demand based on mismatch of ITC between GSTR 2A and GSTR 3B because of filling up amounts in the wrong column i.e., IGST and CGST and SGST, sought the intervention of the High Court. The period involved was prior to GSTR-2A and while the department was able to take figures from ICEGATE during such period, it chose to ignore the same for the months in which the error occurred. The taxpayer pleaded that while adjudicating the liability of the petitioner, the department is required to look beyond the returns filed and take a more holistic view having regard to the books of accounts, other statutory forms such as those filed in ICEGATE, etc. Observing that a lenient view is required to be taken, particularly since the tax periods involved relate to the very first year of the GST regime which was also besieged with technical glitches, the High Court directed that rectification of the return was to be allowed. As regards reliance placed by the department on Union of India v. Bharti Airtel Ltd., & others [2021-VIL-87-SC], it held that since there would be no cascading effect on dealers and the petitioner only sought to shift the ITC already claimed from one head to another, it was to be allowed to revise the GSTR-3B returns [2023-VIL-46-KAR].

 

Extension of time for issuance order means time for SCN also stands extended

The petitioner approached the High Court with a possible and somewhat creative interpretation of the notification extending time for issuance of order to 30-9-2023 arguing that the time limit for issuance of show cause notice (SCN) had not been extended and hence the order fastening liability for the period July 2017 to March 2018 was without jurisdiction. However, the Court agreed with the argument that when the time limit for issuance of an order under sub-section (10) of Section 73 of CGST Act stands extended, automatically the time limit for issuance of a show cause notice under sub-section (2) of Section 73 also stands extended. It held that show cause notice can also be issued with reference to the date 30-9-2023 and not with reference to any other date. In GST law, the time-limit for issuance of SCN is tied to the time-limit for issuance of order. Such nexus has worked against the taxpayer in this case [2023-VIL-40-KER].

 

Portability and classification of computers

Interpreting the word "portable" which was held as referring solely to weight by lower authorities, the Supreme Court held that weight is not the sole criteria and that where the word was incorporated in sub-heading 8471 30 and was preceded by a single '-', which meant that classification of goods under the same would be taken as a sub-classification of the heading 8471. Automatic Data Processing Machines which are not portable are classifiable under Tariff Item 8471 50 00 of Customs Tariff and not as Portable Digital Automatic Data Processing Machines, weighing not more than 10 kg, consisting of at least a central processing unit, a keyboard and a display under Tariff Item 8471 30 10. The judgment is interesting and illuminating in terms of both the arguments and reasoning of the Apex Court and readers may see the order for a sojourn into a classic ruling on classification [2023-VIL-03-SC-CU].

 

Forest permit fee is liable to GST

Forest permit fee paid to Forest Department for use of forest land to transport goods is liable to GST at the rate of 18%. Though this is the advance ruling delivered earlier, the same has been affirmed by Appellate AAR also. The appellant, a government coal mining company has been paying the Forest Permit Fee under State Forest Produce Transit Rules to the Forest Department to transport the mined coal through forest area. The Appellate AAR held that services provided by government by way of grant of license, privileges, mining rights, etc., were taxable under service tax and they continue to be taxable under GST also and such services are classifiable under "public administration services" and GST is payable on reverse charge basis by the recipient. Advance ruling holding that concessional rate of tax is not available as the same as taxable at 18% under agreeing to the obligation to tolerate an act was modified in so far classification is concerned. The AAAR rejected the claim for exemption holding the same as not related to social or farm forestry [2023-VIL-07-AAAR]. The payment is statutory in character and is collected by the government. A clear distinction on taxability of services provided by government is elusive.

 

 

(The author is an Advocate, Gokul & Subha Advocates, Chennai. The views expressed are personal. The author has published books on cross-border taxation and investigations & appeals under GST. He edits R.K. Jain's GST Law Manual. E-mail - gokulkishore@gmail.com)