Article

Unhappy toy story – A classification conundrum under GST

By Nivedita Agarwal and Nirav Karia

The article in this issue of Tax Amicus intends to demystify the controversial issue relating to the classification of different kinds of toys under GST. It notes that tariff headings under the Customs Tariff Act are broadly divided into two categories under GST - electronic products and non-electronic products. While electronic toys and games attract higher rate of tax i.e. 18%, non-electronic toys attract lower rate of tax i.e. 12%. It raises the question as to whether the toys like guns, skipping ropes, musical toys and the toys which fall under the scope of ‘other toys’ in the HSN explanatory note to Heading 9503, can be classified under Sl. No. 228 of Schedule II (12% GST) to Notification No. 1/2017-Central Tax (Rate). According to the authors, the Revenue department may classify the said toys under the residuary entry i.e. Sl. No. 453 of Schedule-III (18% GST). The article concludes by stating that the toy story can end well only if these problems are addressed and the government manages to bring the industry out of the woods...

Goods & Services Tax (GST)

Notifications and Circulars

• GSTR-1 cannot be filed if GSTR-3B not filed for preceding period

Ratio decidendi

• Detention of exempted goods during inter-State transportation – No liability under State GST Act – Kerala High Court
• No confiscation without opportunity of being heard – Madras High Court
• Mens rea an essential ingredient for confiscation – Kerala High Court
• Non-maintenance of records at place of business when not leads to confiscation – Allahabad High Court
• Refund of unutilized ITC – Assessee should not suffer because of laches of the department – Jharkhand High Court
• Notice pay recovered from employees is consideration for ‘tolerating the act’ – AAR Gujarat
• Consultancy service by foreign company to Indian company when not import of service – AAR Odisha
• Refund of IGST under Rule 96(10) – Scope of ‘availing’ benefit of Notification No. 79/2017-Cus. – AAR Gujarat
• Refining and testing of gold – Job work and mixed supply – AAR Gujarat
• No supply in case of high sea sales when goods do not enter India – AAR Gujarat
• ITC taken on inputs and input services used in manufacture of finished goods destroyed by fire, need to be reversed – AAR Gujarat
• Forfeiture of advance money due to non-fulfilment of conditions in agreement for sale of land is not sale of land – AAR Gujarat

Customs

Notifications and Circulars

• RoDTEP – Benefit available to all goods with effect from 1 January 2021
• Coal imports to be mandatorily prior-registered
• No Bank Guarantee by carriers for carriage of EXIM cargo for transhipment through Sri Lanka and Bangladesh
• Courier import and export of COVID-19 vaccines – Regulations revised
• Posting of staff at Customs areas and collection of Cost Recovery Charges – Guidelines
• Modifying PAN based IEC – Procedure introduced
• Online e-PRC system for seeking policy/procedure relaxation
• Paperless processing – Additional PGAs for uploading COO and membership certificate on eSANCHIT
• Odoriferous preparations not operating by burning – Import conditions relaxed

Ratio decidendi

• Exemption – Words ‘for use’ mean ‘intended for use’ – No proof of end use required – Karnataka High Court
• Penalty not imposable in the absence of mention of specific clause of Section 112 and mens rea – CESTAT Kolkata
• Valuation – No need to apply Customs Valuation Rules, once importer accepts enhanced value – CESTAT Delhi
• SAD refund – Limitation – CESTAT Delhi notes that Bombay High Court in CMS Infosystems Ltd. did not distinguish various findings of Delhi High Court in Sony India Ltd.
• DEEC scheme – Exemption not deniable even if imported inputs written off – Karnataka High Court
• Non-possession of BIS certificate will not make goods ‘prohibited’ – CESTAT Mumbai

Central Excise, Service Tax & VAT

Ratio decidendi

• Sale in course of import – High sea sales – Effect of filing of Bills of Entry by seller -Supreme Court
• Recovery of compensation/liquidated damages when not consideration for service – CESTAT Delhi
• Sabka Vishwas (LDR) Scheme – Interest for delayed deposit of tax along with returns filed belatedly not covered – Allahabad High Court
• Sabka Vishwas (LDR) Scheme – Declaration cannot be rejected after issuing Form SVLDRS-3 – Madras High Court