Article

Compensation Cess and sharing of revenue with States – Some points to ponder

By Murtaza Hussain and Manoj Gupta

On the 5th Anniversary of implementation of GST in India, the article in this issue of Tax Amicus discusses the levy of compensation cess which was initially imposed to compensate the States for their revenue loss due to GST implementation, and which was supposed to expire after 5 years. Elaborately discussing the levy, the article proceeds to deliberate the background of the recommendation of the GST Council to extend the levy till March 2026. It notes that how the levy is being extended but the States will not get any compensation after June 2022. The authors highlight that interestingly, till date, there is no mention of the extension either by any Bill introduced in the Parliament or through any notification. According to them, absence of a law regarding the extension in levy (to service the loan) but continued collection could open doors for legal disputes. They also raise the question, assuming that the Centre would agree to further compensate the States, as to what would be the source of revenue for that compensation, considering that clearing of debt only requires an extension in levy for approximately four more years. The article lastly also highlights that it is not long when States will start imposing their own cesses...

Goods & Services Tax (GST)

Notifications and Circulars

• GSTR-4 for 2021-22 – Late fees waived for period from 1 May 2022 till 30 June 2022
• No interest on specified e-commerce operators who failed to file GSTR-8 during specified period due to technical glitch on the portal
• Refunds – CBIC issues procedure for sanction, post-audit and review of refunds
• No recovery during search, inspection or investigation – Assessee can however deposit tax voluntarily

Ratio decidendi

• Pre-show cause notice consultation is mandatory – Voluntary statement cannot substitute a statutory notice – Delhi High Court
• Interest on delayed payment of self-assessed tax cannot be paid in instalments – Orissa High Court
• ITC blocking under Rule 86A – Mere recording that some investigation is going on, not enough – Punjab and Haryana High Court
• Mis-match in ITC can be communicated by way of show cause notice – Madras High Court
• No penalty for inadvertent human error in e-way bill – Uttarakhand High Court
• Refund – Procedures under Rule 96 not to be applied strictly so as to defeat legitimate export incentives – Madras High Court
• Refund of credit of compensation cess in case of exports – Domestic supply of finished goods which are not liable to compensation cess are to be reckoned as exempted supplies – Calcutta High Court
• Gratuitous payment received from outgoing member by Cooperative Housing Society is liable to GST – Maharashtra AAR
• ‘Physical fitness’ training and ‘summer coaching’ are not exempt – Maharashtra AAR
• Residential property leased to a corporate for residence of latter’s staff exempt – Maharashtra AAR
• Medical insurance for employees has no relation to functions discharged under Article 243W of Constitution – Premium paid for vehicle insurance may get exemption, subject to conditions – Telangana AAR
• Mining lease is not leasing of goods – Covered under ‘licensing services for the right to use minerals including its exploration and evaluation’ – Telangana AAR
• Occupational health check-up services provided by clinical establishment outside the hospital premise qualify as healthcare service – Gujarat Appellate AAR

Customs

Notifications and Circulars

• Electronic cash ledger – General exemption from 1 June 2022 till 29 November 2022
• Mega Power Projects – Exemption condition relaxed
• EPCG scheme – Date for filing of report on annual export obligation for year 2022-2023 extended
• e-BRC for exports made under RoSCTL scheme – Last date for uploading notified as 15 July 2022
• Paper Import Monitoring System (PIMS) notified
• SCOMET items/technology/software – Amendment in procedure for global authorisation for intra-company transfers

Ratio decidendi

• Advance authorisation – Transfer of duty-free inputs to other unauthorised units of importer itself, not fatal – CESTAT Chennai
• SEZ – Merely moving goods out of SEZ for exports or for storage in bonded warehouse does not give jurisdiction to DRI officers under Customs Act – Andhra Pradesh High Court
• Ownership of imports – Mere filing ex-bond Bill of Entry not vests title of goods into importer – Gujarat High Court
• Iron ore only crushed and screened without any special process cannot be classified as iron ore concentrate – CESTAT Mumbai
• Summons under Section 108 to Managing Directors to be issued only as a last resort – Gauhati High Court
• Pea protein powder, with less than 90% protein concentrate, classifiable under Heading 2106 – Customs AAR
• Revenue Department not bound to reveal sources of information – Madras High Court
• DRI officer is ‘proper officer’ for issuance of show cause notice – Madras High Court

Central Excise, Service Tax & VAT

Ratio decidendi

• Integrated logistics for export of goods – No service tax on part of service provided in India – CESTAT Mumbai
• Cenvat Credit not available on services used for corporate social responsibility (CSR) – CESTAT Delhi
• Manufacture – Blending of oils when covered under ‘manufacture’ – Himachal Pradesh High Court
• Storage in container freight station is incidental to cargo handling activity – CESTAT Ahmedabad
• Clandestine removal – Print-outs from external hard discs recovered from premises when not reliable – CESTAT Kolkata
• Kerala VAT – Credit notes from manufacturer when not includible in assessment – Kerala High Court