Article

Asset distribution on retirement of partners – A transaction with multiple GST issues

By Arushi Jain

It is not an aberrant practice for partnership firms to distribute assets to its partners at the time of retirement. However, such distribution of assets is an area of concern as far as GST is concerned. Considering the decisions of the Supreme Court and various High Courts under income-tax and VAT, the article notes that it is possible to argue that when a retiring partner is given assets in proportion to his share in the assets of the firm, the transaction will not be brought within the confines of Section 7(1)(a) of the CGST Act. However, a contra argument can be that the distribution of assets by the firm is towards consideration of giving up of rights by the retiring partner. The article notes that the complexity further increases in case where the retiring partner is distributed assets in excess of his share. The article similarly also ponders on the question of liability when the partnership firm permanently parts away with an asset on which it had availed credit [Schedule I read with Section 7(1)(c)], while also deliberates on the latest insertion of clause (aa) under Section 7(1) which may affect the transactions between a firm and its retiring partners...

Goods & Services Tax (GST)

Top Notifications and Circulars

• Refund under CGST Section 77 or IGST Section 19 when nature of tax paid is wrong
• Intermediary services – Scope clarified
• Services to foreign related company covered as exports
• ITC on debit note issued prior to 1 January 2021 can be availed till filing of September 2021 GSTR-3B or furnishing of annual return for 2020-21
• Invoice physical copy not required in case of e-invoice

Ratio decidendi

• Inverted tax structure - Supreme Court urges GST Council to reconsider formula
• Inverted tax structure – CBIC Circular No. 135 contrary to provisions of Section 54(3)(ii) – Gauhati High Court
• Interest when amount to be re-credited in electronic credit ledger delayed after issuance of GST PMT-03 – Jharkhand High Court
• No provisional attachment after passing Order in Form DRC-07 – Gujarat High Court
• Input tax credit blocked under Rule 86A can be utilized after expiry of one year – Tripura High Court
• Refund claim arising from appeal order not deniable after acknowledgment in RFD-02 – Allahabad High Court
• Jurisdiction of Central authorities to issue summons under Section 70 when assessee under State authority – Madras High Court
• R&D activity for foreign entity on samples provided by latter is not exports – Gujarat AAR
• Part of canteen charges collected by employer from employees and paid to service provider, not liable to GST – Gujarat AAR
• Composite supply – Merely common agreement not makes a supply of bundled services – Maharashtra AAR
• Transfer of going concern – Sale not the only criteria under Notification No. 12/2017-CT (R) – Gujarat AAR
• ITC not available on inputs/input services used for CSR activities – Gujarat AAR
• ITC not available inputs/input services used in expired cakes and pastries – Gujarat AAR

Customs

Top Notifications and Circulars

• RoDTEP – Manner to issue duty credit notified – CBIC also notifies Electronic Duty Credit Ledger Regulations, 2021
• RoSCTL – Manner to issue duty credit notified
• Service Exports from India Scheme (SEIS) for service exported in 2019-20 notified
• Duty credit scrips – Validity period and last date for submitting applications revised
• EPCG scheme – Relief in Average Export Obligation for 2019-20 and 2020-21 notified
• IEC – Deactivation of non-updated IECs on 6 October
• Aircraft and helicopter imports by Aircraft Leasing Entities in IFSC permitted
• India-Mauritius CECPA – Tariff Rate Quota and procedure for import notified
• Mercury imports and exports now restricted

Ratio decidendi

• Re-classification by department for subsequent period not permissible – CESTAT Chennai
• ADG, DRI is not the proper officer to issue show cause notice under Section 28(4) of Customs Act – Supreme Court
• Refund when reassessment absent – Assessee can get bills of entry amended/ corrected under Section 149 or Section 154 – CESTAT New Delhi
• Refund – Section 27 of Customs Act not applicable for refund of Extra Duty Deposit – CESTAT Chennai
• Redetermination of value for additional duty based on retail sale price – CESTAT Mumbai
• Cash refund permissible of duty paid using MEIS scrips – CESTAT Delhi
• Multi-functional devices – Compulsory Registration Order 2012 prescribing standards for import of goods, is beyond scope of BIS Act 1986 and BIS Rules 1987 – CESTAT Chennai

Central Excise, Service Tax & VAT

Ratio decidendi

• No service tax under C&F Agent service on profits from trading in ocean freight, and under Steamer Agent service on amount received from agent of shipping line – CESTAT Bengaluru
• TDS deducted after grossing up, while making payment to foreign service provider not includible for service tax – CESTAT Chennai
• Cenvat credit available on event management services for organising skill competition among dealers and employees and for Vishwakarma Puja, etc. – CESTAT Chandigarh
• Sabka Vishwas (LDR) Scheme – Litigation category – Filing of appeal and not it numbering before the cut-off date important – Madras High Court