Article

Withholding Income Tax: Withholding the ambiguity in GST Valuation?

By Shiwani Kaushik

The article in this issue of Tax Amicus highlights the intricacies of TDS withholding, under the income tax provisions, which appear to impact the taxable value under GST in case of import of services. The moot question is whether the taxable value for discharging GST should be confined only to the contractual payment qua the foreign service provider or the amount of TDS, paid by the Indian service recipient as additional statutory obligation, should also be added. Analysing various Court and Tribunal decisions, the author points out that, indirectly, the service provider is financially benefitted, since TDS is not on account of service provider. Furthermore, the service provider may also claim Income Tax benefits of such TDS in the respective foreign country, under the Double Tax Avoidance Agreements, and thus, the contractual payment is not a ‘sole consideration’. However, the author also points out that this interpretation can be challenged, as deposit of TDS by service recipient is merely to fulfill statutory obligation while there is no indirect favour. Further, the incidence of TDS upon the service recipient is a ‘condition of contract’ and not a ‘consideration of contract’. The article concludes by stating that a suitable clarification from Government could be helpful to avoid triggering another litigation front.

Goods and Services Tax (GST)

Notifications and Circulars

• Changes implementing recommendations of 49th GST Council Meeting
• Time limit for reporting invoices on the IRP Portal to be implemented

Ratio decidendi

• Intermediary services – IGST Sections 13(8)(b) and 8(2) are constitutionally valid – Provisions however not applicable for levy of tax on services under CGST Act – Bombay High Court
• Non-filing of certified copy of impugned order within stipulated time is a technical defect – Madras High Court
• Refund of unutilised ITC not deniable on mere allegation of issuance of fake invoices by supplier to assessee-exporter – Delhi High Court
• Input Tax Credit to be restored if liability is made good by supplier subsequently – Madras High Court
• No ‘intermediary’ even if service provided on behalf of somebody else – Delhi High Court
• Cash not forming part of stock in trade of business cannot be seized during investigation aimed at detecting GST evasion – Kerala High Court
• Refund of unutilised ITC on exports – CGST Rule 89(4)(C) as amended by Notification No. 16/2020-Central Tax, to restrict value of goods exported, quashed – Karnataka High Court
• Attachment of bank accounts of person, other than taxable person and those specified under Section 122(1A), assuming that funds owned by a taxable person, is not permissible – Delhi High Court
• Invoice to be carried in physical form by person-in-charge of conveyance – Calcutta High Court
• Non-sale of perishable goods by authorities within specified days of seizure will not convert them into non-perishable goods – Allahabad High Court
• Refund application does not become non est merely because deficiency memo is issued by Revenue – Delhi High Court
• Packaging at behest and under specific instruction of a specific buyer is not ‘pre-packaged’ – Andhra Pradesh AAR
• Lease or sale of commercial unit – Quantum of time has no relation in determination of lease or sale – Gujarat AAR
• Construction of residential projects – Services naturally bundled and those not inextricably linked – Maharashtra Appellate AAR
• Renting of immovable property, used by lessee for trading in fruits and vegetables, is not covered under ‘warehousing of agriculture produce’ – Tamil Nadu AAR
• Manpower supply for housekeeping, etc., to Government offices is not covered under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) – Gujarat Appellate AAR
• Plantation association – Subscription fees received natural persons, i.e., farmers, is exempt – Tamil Nadu AAR

Customs

Notifications and Circulars

• New Foreign Trade Policy 2023 announced – Highlights

Ratio decidendi

• Non-generation of DIN is fatal to the communication itself – Madras High Court
• Classification of goods – ‘Pull in’ Note to be narrowly construed when goods excluded by different Note from particular Chapter – Supreme Court
• Tariff Rate Quota licence – DGFT Public Notice No. 15/2015-20, dated 14 June 2022 is contrary to Foreign Trade Policy – Karnataka High Court
• Valuation – LME prices cannot be a benchmark when manufacturer certifies that goods produced from scrap – CESTAT Kolkata
• Classification of parts/accessories of Dredgers – Test whether parts essential for purpose of dredging – Independent use for other purpose is immaterial – Supreme Court
• Probiotics are classifiable under Tariff Item 3002 90 30 – CESTAT Mumbai

Central Excise, Service Tax & VAT

Ratio decidendi

• Service Tax VCES is not beyond scope of Sabka Vishwas (LDR) Scheme – Bombay High Court
• Cenvat credit on imported inputs directly sent to job worker available even when credit also taken of duty paid by job worker while sending intermediate goods to assessee – Punjab & Haryana High Court
• SEZ – Time limit for filing refund claim under Notification No. 12/2013-S.T. is only a procedural requirement – CESTAT New Delhi
• Renting of vacant land, even if surrounded by a boundary wall, is not liable to service tax – CESTAT Ahmedabad
• TN VAT – Sale to dealer in SEZ – No condition of export of goods purchased by SEZ, for zero-rated sale under Section 18(1)(ii) – Madras High Court
• Cenvat credit admissible on re-insurance services in respect of motor vehicles, during 1 April 2011 till 20 July 2012 – Delhi High Court
• Demand – Non-disclosure in returns when is not suppression of facts to evade – Delhi High Court