Article

Shifting the burden of indirect taxes: A contract conundrum

By Sahana Rajkumar and Derlene Joshna

It is common in commercial transactions to negotiate and record specific terms regarding which party would bear the burden of indirect tax in the agreement governing the transaction. Observing that if a person chooses to, or mistakenly, not shifts the burden of tax contractually, it will still not alter the nature of the tax, the article in this 10th Anniversary Issue of Tax Amicus analyses few select situations for highlighting the importance of drafting contracts with a proper tax clause. Taking aid of various Court precedents, the authors elaborately discuss various scenarios including where the tax clause is dealing only with the erstwhile levy or where the tax clause is vague or is not at all available in the contract. Lastly, stating that since the tax rates under GST are as high as 28% of the value of supply, parties must pay careful attention to the terms of the contract, the authors conclude the discussion by pointing out various key points which may be noted while entering into contracts...

Goods & Services Tax (GST)

Notifications and Circulars

• Covid – Extension of limitation, by the Supreme Court, of various time lines under GST clarified

Ratio decidendi

• Refund of tax paid under mistake of law – Section 54 of CGST Act is not applicable – Gujarat High Court
• ITC reversal not required under Section 17(5)(h) of CGST Act for manufacturing loss – Madras High Court
• Proceedings for cancellation of registration cannot be kept hanging even when assessee filed reply late – Rajasthan High Court
• RWAs – Contributions upto INR 7500 exempt – GST payable only on contributions in excess of said amount – Madras High Court
• ‘Business’ covers any trade or commerce, even if not for a pecuniary benefit – Gujarat High Court
• Hiring v. renting – Operating buses for State Transport Undertaking when is not ‘giving on hire’ – Maharashtra AAR
• Track assembly for car seats is classifiable as part of motor vehicle and not part of seat – Tamil Nadu AAR
• Arranging sales of goods for overseas suppliers is not export of service – West Bengal AAR
• EU VAT – Taxable amount of concealed transaction – Amounts paid and received to be regarded as including VAT – Court of Justice of the European Union

Customs

Notifications and Circulars

• Licences/Registration under Customs Brokers Licensing Regulations and Sea Cargo Manifest and Transhipment Regulations to be valid for lifetime
• IGST and compensation cess leviable on re-import of goods sent for repairs
• IEC modifications – Fees waived for modification till 31 July 2021
• Rice exports – Requirement of Certificate of Inspection for export to specified European countries postponed
• Palm oil – Customs duty reduced till 30 September 2021 while import restrictions relaxed till 31 December 2021
• Covid – Specified inputs for medicines and raw materials for Covid test kits exempted

Ratio decidendi

• Amendment of shipping bill – Flimsy grounds cannot deny legal right – CESTAT Chennai
• Non-filing of EGM when only an omission which is a condonable lapse – Penalty imposable only for continued non-compliance beyond 1 April 2019 – CESTAT Chennai
• Provisional release not barred even when proceedings under Section 124 initiated – Bombay High Court
• Penalty invalid when SCN issued by DRI invalid – CBIC Instruction cannot override dictum of Supreme Court – CESTAT Chennai
• Notification mandating BIS standards mandatory – Andhra Pradesh High Court
• EPCG export obligation can be discharged by direct or third-party exports – CESTAT Chennai
• Apple HomePod classifiable under TI 8517 62 90 based on ‘essential character’ test – Customs AAR
• Drones having zoom-in and video recording facilities classifiable as ‘drones’ on application of GRI Rule 1 – Customs AAR
• Show-cause notice issued by DRI – Adjudicating authority to decide issue of jurisdiction as preliminary issue – Delhi High Court

Central Excise, Service Tax & VAT

Ratio decidendi

• Venture Capital Funds, rendering taxable services of asset management, liable to service tax – CESTAT Bengaluru
• Non-distribution of common credit by ISD not fatal – CESTAT reiterates revenue neutrality – CESTAT Bengaluru
• Refund of service tax on export of goods – Violation of provisions of another Act by supplier of goods, not fatal – CESTAT Chennai
• Refund of service tax on export of goods – Limitation under 41/2012-ST to be counted from first day after end of quarter – CESTAT Delhi
• Refund of unutilised Cenvat credit on exports – Reversal of credit in GSTR-3B is sufficient – CESTAT Bengaluru
• ‘Convenience fee’ charged for online booking of movie tickets not covered under OIDAR services – CESTAT Delhi