1. RBI vide notification dated 7 April 2021, has announced a one-time measure that un-utilised ECB proceeds drawn down before 1 March 2020, may be parked in term deposits with banks up to 1 March 2022 in order to provide relief to borrowers who could not utilise the proceeds due to the impact of COVID-19.
2. MCA, vide Companies (Accounts) Second Amendment Rules, 2021 dated 1 April 2021, has changed the effective date for usage of software having feature of audit trail for each and every transaction and which will create an edit log of each change made in the books of accounts along with the date to reflect when changes were made. Companies will now have additional one year to identity and procure the necessary software to comply with these provisions.
• CBDT notifies IT (8th Amendment) Rules: this 2021 to insert Rule 6G(3), provides for revision of tax audit report u/s 44AB for recalculation of disallowance under Sections 40 or 43B;
• The Rules come into effect on 1 April 2021.
• They also amend Form 3CD:
(i) clause 8A, to include Sections 115BAC, 115BAD,
ii) clause 17 , to include details of transfer of land or building for consideration less than the value referred to in Sections 43CA/50C and whether such transfer falls under fourth proviso to Sec. 56(2)(x) or second proviso to Sec. 43CA (both inserted by Finance Act, 2021) allowing 20% variation in consideration for transfer,
(iii) clause 18, to include details of adjustments made to WDV u/s 115BAC/115BAD (special provision for individuals, HUFs/ Cooperative Societies) and intangible asset due to exclusion of the value of goodwill, and
iv) clause 32, to include details of brought forward losses/ depreciation allowance having regard to special provisions u/s 115BAC/115BAD in addition to Sec. 115BAA;
Omits clause 36 (applicable to Dividend Distribution Tax)x
Ministry of Finance notifies India-Iran DTAA by exercising powers u/s 90(1);
DTAA applies in India with respect to income-tax arising in FY 2021-22 onwards
CBDT authorizes Director of Income-tax (CPC), and Commissioner of Income-tax (Exemption), Bengaluru, for:
(a) receiving applications for provisional registration or registration or approval or intimation in Form 10A
(b) for passing order granting provisional registration or registration or provisional approval or approval in Form 10AC
(c) for issuing Unique Registration Number (URN)
(d) for cancelling the approval granted in Form 10AC and URN, under IT Rules;
The notification shall be effective from 1 April 2021.
♦ Czech Republic
♦ the Netherlands
♦ Russia and
Time limits have been extended to 30 June 2021 in the following cases:
♦ Passing an order for assessment, reassessment or recomputation u/s 153 or search and seizure u/s 153B
♦ Passing an order consequent to direction of DRP u/s 144C(13)
♦ Issuance of notice where income has escaped assessment u/s 148
♦ Sending intimation of processing of Equalisation Levy u/s 168(1) of the Finance Act 2016
♦ Payment of amount payable under the Direct Tax Vivad se Vishwas Act, 2020, without an additional amount.
The CBDT vide its Circular No.8 of 2021 dated 30 April 2021, gave relief to taxpayers extending various time limits of compliances due to the Covid-19 pandemic. As per the circular, the new various tax compliance dates are as follows-
♦ Per Revenue: Above countries became members of the OECD post signing of the Indo-Dutch DTAA. Hence, MFN clause and 5% rate both inapplicable.
Issue: were the DRP and AO right in denying the carry forward of short-term capital loss?
The Gujarat Authority for Advance Rulings (AAR) recently had an occasion to determine the reverse charge implications on interest charged for delay in vendor payment towards goods imported.
In the present case, the applicant M/s. Enpay Transformer Components India Private Limited, imported certain goods from its holding company located outside India. Against such import of goods, there was delay in payment to foreign supplier. For this delay, foreign supplier charged interest to the applicant. The applicant posed a question before AAR whether such interest paid on delay in payment of consideration to foreign supplier would be regarded as supply liable to GST under reverse charge.
The AAR observed that “tolerating an act or a situation” is deemed to be a service in terms of Entry No. 5(e) of the Schedule-II to the CGST Act, 2017. When applicant delays vendor payment, the foreign supplier tolerates such delay and interest charged is the consideration for such act of tolerance. So, AAR held that applicant is liable to pay GST under reverse charge mechanism on such interest payment. It is worthwhile to note that Section 15 of the CGST Act, 2017, which deals with the value of taxable supply, treats interest on delayed payment as an additional consideration of the original supply. So, it appears that the observation of the AAR in this ruling that the interest for delayed payment is a consideration for separate supply of service requires reconsideration
Unsettling the jurisprudence in catena of judgements related to the pre-GST regime, the Gujarat Authority for Advance Rulings (AAR) in the case of M/s Aristo Bullion Private Limited introduced a new requirement of establishing one-to-one correlation between the inward supplies and the outward supplies for availing input tax credit.
Facts of the case are that the applicant was engaged in two business activities, viz. (i) supply of bullion, and (ii) trading in castor oil seeds. The applicant requested for an advance ruling on whether the input tax credit accumulated in respect of its bullion business can be utilized against its GST liability towards outward supply of castor oil seeds.
The AAR in its ruling surprisingly introduced a new and onerous condition for availing input tax credit that Section 16(1) of the CGST Act, 2017, mandates applicant to prove the nexus/connection between the inward supplies and the outward supplies. Since inward supplies of bullion business do not have any nexus to the business of supply of castor oil seeds, the AAR ruled that the applicant cannot utilize the input tax credit balance available for payment of GST liability on outward supply of castor oil seeds. It appears that the AAR has not properly appreciated the scope of Section 16 which basically deals with fundamental conditions for availing input tax credit; once the input tax credit is eligible in terms of Section 16(1) it forms part of the common pool of credit which can be used for payment of output GST liability without having to establish one-to-one correlation.
The Gujarat Authority for Advance Rulings (AAR) in the case of M/s. I-tech Plast India Private Limited disregarded a recent amendment made in Section 16(4) of the CGST Act, 2017 and ruled that the applicant cannot claim input tax credit of GST charged in debit notes issued by the supplier in the financial year 2020-21, towards the original supply transaction pertaining to the year 2018-19.
Before discussing this Ruling, it would be apposite to first understand the legal background around the issue related to input tax credit on debit note. Section 16(4) of the CGST Act, 2017 deals with time limit to avail input tax credit on tax invoice and debit note as the earliest of (i) due date for furnishing GSTR-3B return for the month of September following the end of financial year to which such tax invoice or debit note pertains, or (ii) furnishing of the annual return. For the easy understanding, we have explained in the below table the time limit to avail input tax credit in different scenarios:
Before amendment in Section 16(4), time limit to avail input tax credit on debit note was linked to original tax invoice date. Due to this, taxpayers were not able to claim input tax credit on debit note due to time limit restriction under Section 16(4) in the pre-amendment period. See scenario explained at serial number 2 in above table. From 1 January 2021, the amendment in Section 16(4) de-links debit note from the original tax invoice for determining time limit to avail input tax credit. It appears that the amendment is aimed at enabling taxpayers to avail input tax credit on debit notes as can be seen from the third scenario in the above table.
The AAR, however, squarely took a divergent view in the present case where it observed that the aforesaid amendment to Section 16(4) had not resulted in any drastic or far-reaching change in the operation of Section 16(4). Even after the amendment, it observed that debit note is essentially linked to original invoice and is not an independent document in itself. Thus, even if a debit note is issued in a different financial year than that of the original invoice, it would still be linked to the year in which the original invoice was issued for determining the time limit under Section 16(4). Thus, the AAR rejected the input tax credit of GST paid on debit note on the ground that it is barred by time prescribed under Section 16(4).
The Karnataka Appellate Authority for Advance Rulings (AAAR) in the case of M/s. Page Industries Limited ruled that promotional goods/materials used by appellant in its brand promotion and product marketing can be considered as ‘inputs’ within the meaning of Section 2(59) of the CGST Act, 2017. However, it also ruled that input tax credit on such promotional goods/materials would not be eligible in terms of the provisions of Section 17(2) read with Section 17(5)(h) of the CGST Act, 2017.
The appellant in this case is engaged in the manufacture, distribution and marketing of knitted and woven garments under the brand name “JOCKEY” and swimwear and swimming equipment under the brand name “SPEEDO”. In terms of agreements with franchisees/ exclusive brand outlets the appellant is under a contractual obligation to provide promotional materials such as gondola racks, wall shelves, storage units, etc. On this point, on a perusal of the various provisions of the GST law, including scope of the term ‘supply’, Schedule I transactions and various other definitions etc., the AAAR noted that supply of the said promotional items is without consideration and thus, in the nature of non-taxable supply/ exempt supply. Therefore, the AAAR held that GST paid on procurement of the aforesaid promotional items is not eligible for input tax credit.
Further in this case, the appellant also provides other promotional items such as carry bags, calendars, diaries, pens etc., embossed/engraved with the brand name to its franchisees, distributors and retailers for the purpose of giving away to the customers. On this point, the AAAR noted that this is also in the nature of non-taxable supply and the appellant is not eligible for input tax credit on the said promotional items. AAAR also noted that there is an additional disentitlement under Section 17(5)(h) which provides that goods which are disposed by way of gift are not eligible for input tax credit.
At the outset we state that this judgement is under the erstwhile service tax law. In an interesting case, the Hon’ble CESTAT Bangalore in the case of M/s. Ace Creative Learning Private Limited, had an opportunity to decide eligibility to CENVAT Credit in case of profit earned from redemption of mutual fund investments.
Under the erstwhile service tax law, CENVAT Credit was restricted when the assessee derives its income from taxable as well as exempt supplies. Interestingly, trading in goods (including mutual funds) was treated as exempt supply. The department in this case demanded proportionate reversal of CENVAT Credit on common input services in proportion to the quantum of profit earned from redemption of mutual funds. The Hon’ble CESTAT observed that ‘trading’ in mutual fund, which is treated as exempt service, is different from ‘investment and redemption’ of mutual fund. In the absence of a license from the SEBI, the appellant was not permitted to trade in mutual fund units. Thus, the appellant could not transfer mutual fund units to any third party and could only get the mutual fund units redeemed from the mutual fund. Thus, the Hon’ble CESTAT held that CENVAT Credit reversal is not required because redemption of mutual funds is different from trading in mutual funds.
As regards invocation of extended period of limitation and allegation of suppression of facts in this case, the Hon’ble CESTAT also observed that, when the appellant had appropriately reflected the profit on redemption of mutual fund units as “other income” in its financial statements, extended period of limitation cannot be invoked.
It will be interesting to see how the ratio of this judgement will apply under the GST regime because GST law treats transactions in securities (including mutual fund units) as exempt supply for the purpose of computing input tax credit reversal.
In this case, the appellant viz. M/s ICU Medical India LLP is engaged in the business of software development for its ultimate holding company in USA. The appellant followed a practice of raising its invoice for software development on ‘cost plus markup’ basis, meaning all the costs which it incurred essentially formed a part of its billing. Appellant’s employees inter alia incurred travel related expenses in the course of their employment. Towards such travel related expenses, foreign holding company had issued credit cards to appellant’s employees. The settlement of such credit card bills was initially done by the foreign holding company with the card issuing bank and later claimed reimbursement at actuals from the appellant by raising an invoice. The Tamil Nadu AAR had earlier held that such reimbursement to foreign holding company is liable to GST as import of services at the rate of 18%. Being aggrieved, the appellant appealed against the AAR order.
The AAAR modified the order of the AAR and held that GST is not payable on the reimbursement of credit card expenses to foreign holding company. While arriving at its conclusion, the AAAR observed that the fact of reimbursement does not result in any transaction on its own. Such reimbursement is only for the purpose of restoring the appellant company’s accounts to previous position for operational convenience so that the same could be later included in the software development charges invoiced by the appellant to the overseas holding company. AAAR finally held that such reimbursements are nothing but part of software development billing and consequently part of the taxable value of services of the appellant.
The Government has notified the new regulations viz. the Customs (Verification of Identity and Compliance) Regulations, 2021 for verification of identity of the importer or the exporter. These new regulations would apply to the following class of persons:
Verification process involves (i) verification of entity level documents, (ii) verification of PAN and Aadhar of authorized person/signatory, and (iii) physical verification of business premises. Failure to comply with these regulations may attract penalty as well as temporary suspension of import/export clearances, other benefits such as refunds, duty drawback, exemption etc.
Due dates with relaxation in interest rates for delay in payment of GST
Due dates with relaxation in late fees for delay in filing of GST compliance returns
Category 1 States: Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar Islands or Lakshadweep
Category 2 States: Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha, the Union territories of Jammu and Kashmir, Ladakh, Chandigarh or Delhi
On 6 April 2021, the Ministry of Law announced the extension of the duration of the COVID-19 (Temporary Measures) (Alternative Arrangements for Meetings for Companies, Variable Capital Companies, Business Trusts and Debenture Holders) Order 2020 (the “Meetings Order”) beyond 30 June 2021. This will provide entities with greater legal certainty to plan their meetings, and the option to hold virtual meetings to minimise physical interactions, amid the continuing COVID-19 situation.
The Ministry of Law had earlier announced that the Meetings Orders would apply for the period starting on 27 March 2020 and ending on 30 June 2021. The Meetings Order will now extend beyond 30 June 2021, until it is revoked or amended by the Ministry of Law. Accordingly, until such time, issuers may continue to utilise the Checklist issued by ACRA, MAS and SGX RegCo to guide entities on the conduct of their general meetings.
To provide certainty to entities organising meetings, the Ministry of Law will give at least 6 months’ advance notice before the alternative arrangements cease to be available. This is to cater to entities who have relied on the Meetings Order to make early preparations for meetings before the end date is announced.
On 26 April 2021, the Singapore IP Strategy (SIPS) 2030 (“SIPS 2030) was launched at the virtual World IP Day 2021 event hosted by the Intellectual Property Office of Singapore (“IPOS”), led by an inter-agency committee comprising over 10 government agencies. The 10-year blueprint builds on the 2013 IP Hub Master Plan and comprises the following three interlinked thrusts:
Below is the summary of the SIPS 2030 recommendations highlighted in the media release jointly issued by the Ministry of Law, Ministry of Finance, Ministry of Trade, and Industry and IPOS:
The Monetary Authority of Singapore (MAS) has published a guidance infographic setting out an overview of MAS’ anti-money laundering requirements, and related supervisory expectations for the Digital Payment Token (DPT) sector (Infographic). The Infographic is intended to raise industry awareness among DPT service providers of money laundering and terrorism financing (ML/TF) risks in the sector, and to provide additional information to such service providers to support their implementation of effective controls.
This update highlights key elements in the Infographic pertaining to: (a) Financial Action Task Force (FATF) standards and recent developments; (b) ML/TF risks in the DPT sector; and (c) an overview of MAS’ AML/CFT requirements and expectations for the DPT sector.
The Monetary Authority of Singapore (‘MAS’) released, on 26 April 2021, its report on the foundational digital infrastructure necessary for an inclusive digital economy and seamless cross-border transactions. In particular, the report highlights the importance of systems that allow different users and digital devices to interact with one another and aims to assist both public sector agencies and organisations in the financial and technology sectors to better understand the key value drivers of strong digital infrastructures.
Specifically, the report outlines the following four key pillars needed for an effective foundational digital infrastructure:
Form C-S/C for the FY 2020 -30 – November 2021
Estimated Chargeable Income (ECI) (Mar year-end)- 30 – Jun 2021
GST Return: April 2021 – Jun 2021- 31 – July 2021