Article

Untangled indirect tax web in automotive sector – Whether proposed PLI scheme will do justice?

By Bhavya Jindal, Hetal Chauhan and Shivam Mehta

As an industry with multitude of components and parts, the automotive industry is always under the scanner of the taxmen. Particularly, in respect of indirect taxes, there has been emergence of many new complicated issues. The article in this issue of Tax Amicus discusses some of these issues which plague this industry. It also raises a very pertinent question as to whether the recently proposed Production Linked Incentive (‘PLI’) scheme will bring some relief for the sector. Discussing the recent upward revision in customs duty rates for various auto components, the article raises doubt over the meaning of the expression ‘suitable for use in motor vehicle’. Similarly, the recent Supreme Court decision in the case of Westinghouse Saxby will have a far-reaching impact on classification of parts of motor vehicles. According to the authors, considering the rate arbitrage, importers and domestic suppliers of parts will need to revisit their classification. Highlighting the salient features of the PLI Scheme, the authors state that while the intent of the Government is undoubtedly clear and positive regarding encouragement of domestic manufacture, but one needs more action to develop the faith of investors in the automotive sector by bringing more clarity on potential tax issues...

Goods & Services Tax (GST)

Notifications and Circulars

• Dynamic QR Code for B2C supplies – Penalty for non-compliance waived till 30 June 2021

Ratio decidendi

• Provisional attachment – Conditions prescribed by statute must be strictly followed – Supreme Court
• Section 74(5) not a statutory sanction for amount collected prior to final determination of liability – Madras High Court
• No requirement to pay IGST on Ocean freight, however refund of such IGST already paid to await final decision of Supreme Court – Orissa High Court
• Recovery of interest on delayed payment of tax – Form DRC-07 and not DRC-01 to be issued – Gujarat High Court
• Summons under Section 70 is not notice under Rule 159(5) – Madras High Court
• Mere existence of some discrepancies cannot lead to conclusion of undisclosed turnover – Allahabad High Court
• Debit note is always connected to invoice – Amendment in Section 16(4) not material – Gujarat AAR
• Date of issue of voucher is ‘time of supply’ of goods or services for which it is redeemed later – Tamil Nadu Appellate AAR
• Services by cab aggregator – GST liability on pick-up services, services by associated partner, etc. – Karnataka AAR
• Subsidized shared transport facility provided to employees is not supply of service – Uttar Pradesh AAR
• ITC available on free supply of tables and chairs to school under CSR activity – Uttar Pradesh AAR
• Non-returnable sinking fund collected by RWA from members is advance for service and liable to GST – Karnataka AAR

Customs

Notifications and Circulars

• India-Japan CEPA – Deeper tariff concessions notified
• India-Mauritius CECPA effective from 1 April 2021 – Rules of Origin and tariff notification notified
• IGST and Compensation Cess exemption on imports by EOUs or under Advance Authorisation or EPCG scheme extended
• Timeline under Customs Section 46 for filing Bill of Entry relaxed for short haul vessels/flights
• Verification of identity of exporters, importer or Customs broker – New Regulations notified
• Copper and Aluminium – Mandatory registration of imports of certain products
• Pharmaceuticals and drugs – Implementation of Track and Trace System for export consignments extended to 1 April 2022
• Non-Preferential Certificate of Origin – Electronic applications through Common Digital Platform

Ratio decidendi

• Bill of Entry amendment in manual form when ICES portal not supports such amendment – Madras High Court
• Seizure – Extension of period for issuance of SCN is conditional upon reasons being recorded and intimated to assessee prior to expiry of original period – Madras High Court
• Customs authorities have inherent power to process refund claims in case of SEZ clearances – CESTAT Ahmedabad
• Refund not deniable for delay in filing when vital documents seized by DRI – Madras High Court
• Paper import – ‘Stock lot’ clarified – Madras High Court
• Classification of parts and accessories of toys in Chapter 95 – Relevance of Chapter Note 3 relating to sole or principal use – UK’s Upper Tribunal Tax and Chancery Chamber

Central Excise, Service Tax & VAT

Ratio decidendi

• Cenvat credit available on workmen compensation insurance policy – Assessee and not the workmen being the actual beneficiary – CESTAT Larger Bench
• Voluntary statements cannot constitute pre-show cause notice consultation – Delhi High Court
• Notice demanding service tax for service to separate juridical entity outside India not exempt from pre-SCN consultation – Delhi High Court
• Refund of service tax to SEZ unit – Conditions of Notification No. 12/2013-ST not material when substantial conditions in SEZ Act fulfilled – CESTAT Chennai
• Cenvat credit on prefabricated building parts, etc. for creating clean room – Credit available as ‘inputs’ – CESTAT Delhi