Article

Taxing times ahead for textile sector?

By Ravi Raghavan and Brijesh Kothary

The textile sector has recently been in news for various reasons. The article in this issue of Tax Amicus intends to highlight the possible consequences arising out of the recent changes in the GST rates of textiles and textile articles. While the Government intends to support the industry by resolving the problem of accumulation of ITC, the manner in which the issue has been approached by the authorities seems to cast doubt on Government’s virtuous intentions. The article in this regard notes that changes like restricting refund of unutilized ITC and the recent decision of the Supreme Court prohibiting refund of ITC on input services, have adversely impacted the sector. It also observes that the increase in tax rates may have significant impact on the working capital requirement and cash flow of the sector already battered by Covid. According to the authors, the Government needs to adopt a pragmatic approach of easing tax rates of the raw materials that go into the manufacture of MMF value chain. Alternatively, the GST Council may also revisit restricting of refund only in respect of inputs. The authors feel that the textile sector must continue to make representations and approach the Ministry for ensuring that the industry is not adversely impacted due to skewed tax policies...

Goods & Services Tax (GST)

Notifications and Circulars

• Form GST DRC-03 – Amendments
• Service supplied by restaurants through e-commerce operators clarified

Ratio decidendi

• Budgetary support scheme – Claim for period prior to registration under the scheme when correct – Sikkim High Court
• Refund claims – Circular No. 125/44/2019-GST not applicable for manual filings – Bombay High Court
• Release of goods on payment of fine permissible even during pendency of confiscation proceedings – Kerala High Court
• Limitation for appeal under Section 107 – Date of upload on GSTN portal is not the sole criteria – Bombay High Court
• Jurisdiction – Reasoning of Supreme Court’s decision in case of Canon India not applicable to State tax officers – Allahabad High Court
• Non-filing of returns – Postal notice not valid, procedure under Rule 68 for electronic notice to be followed – Uttarakhand High Court
• Liquidator appointed by NCLT, performing functions under IBC, 2016, to be granted GST registration – Gujarat High Court
• ITC not available of tax paid for surrender of rights in a leasehold industrial plot – Gujarat AAR
• GST liable on premium of group medical insurance policy recovered from non-dependent parents of employees and retired employees and on provision canteen facility, free of cost or on recovery of nominal charges – Madhya Pradesh AAR
• Housing society not eligible to take ITC of works contract services received for repairs, renovations, etc. – Maharashtra AAR
• Port and terminal handling facility eligible to ITC on services procured for operation and maintenance of diving support vehicles and security patrol vessels – Gujarat AAR
• Construction of rehabilitation and resettlement colony not part of composite supply of mining services – Madhya Pradesh AAR

Customs

Notifications and Circulars

• RCMC available through common digital platform

Ratio decidendi

• DRI officers cannot stall assessment proceedings by a proper officer – Madras High Court
• Late fee for filing delayed Bill of Entry when not imposable – Court notes absence of provisions for purging of B/E – Madras High Court
• ‘Gears ’ for use in manufacture of transmission assembly in motorcycles classifiable under Heading 8483 and not under 8714 – CESTAT Mumbai
• LCD with inseparable PCB classifiable under Heading 9013 – CESTAT Mumbai
• Valuation – Documents received from foreign customs when not acceptable – CESTAT Ahmedabad

Central Excise, Service Tax & VAT

Ratio decidendi

• Service tax on interchange fee – Supreme Court delivers a split judgement – Supreme Court
• Proportionate reversal of Cenvat credit – Non-filing of declaration or filing before wrong authority not material – CESTAT Hyderabad
• Show cause notice demanding amount under Cenvat Rule 6(3) not sustainable – CESTAT Hyderabad
• Service transactions between merging companies from date of effect of merger to order of competent authority, not liable to service tax – CESTAT Delhi
• ‘Input services ’ definition – Exclusive part of definition overrides main definition and inclusive part – CESTAT Ahmedabad
• Sabka Vishwas (LDR) Scheme – Credit of payments made under head of interest and penalty, available – Punjab and Haryana High Court