Article

A tale of tax technology and GST matching woes: Balancing idealism and pragmatism

By Shiwani Kaushik

The article in this issue of Tax Amicus discusses the problem of absence of mechanism for matching Input Tax Credit (‘ITC’). It analyses a recent Rajasthan High Court decision in the case of Hindustan Lever Ltd., where the practicality of this matching exercise has come into question. The article observes that while on one hand, requiring suppliers to collect certificates or proof from recipients may lead to administrative inefficiencies and potential disputes between businesses, on the other hand, allowing businesses to claim reductions in tax liability without verification could lead to misuse of the system and revenue leakage. According to the author, the said decision may have significant implications for the GST framework. If the court upholds the petitioner’s argument and directs the tax department to undertake the matching exercise, it could simplify compliance for businesses, but may place additional administrative burden on the tax authorities. She also notes that it is an opportunity for policymakers and stakeholders to restructure the GST framework and explore ways to make it more efficient and business-friendly while maintaining the integrity of the tax system.

Goods and Services Tax (GST)

Notifications and Circulars

• Online gaming and casinos – New Rules for valuation set to be introduced in the Central Goods and Services Tax Rules, 2017

Ratio decidendi

• Intermediary services – Use of word ‘agent’ in agreement and fact that services were for clients of assessee’s affiliate, are not material to hold service to be intermediary service – Delhi High Court
• Recovery – Closure of financial year, or bank holidays, cannot justify recovery on the day next to the date of unfavourable order – Patna High Court
• Limitation for availing Input Tax Credit – CGST Section 16(4) is constitutionally valid – Patna High Court
• Blocking of Electronic Credit Ledger under CGST Rule 86A – Jurisdiction of STO – Bombay High Court
• Intra-State movement of goods while passing through another State – Absence of e-way bill when not fatal – Allahabad High Court
• Refund of Input Tax Credit on exports – Amendment to Rule 89(4) in 2022 is prospective – Jharkhand High Court
• Input Tax Credit is not deniable for non-reflection of tax amount in GSTR-2A – Kerala High Court
• Audit – Having failed to conduct audit for long, Department cannot wake up and conduct audit after assessee subsequently got unregistered – Madras High Court
• Appeals – Pre-deposit payment by using electronic credit ledger – Madras High Court
• Registration cannot be cancelled for discrepancies in tax returns and tax liability – Delhi High Court
• Revocation of cancelled registration – Madras High Court extends benefit of amnesty scheme in case where registration was cancelled after cut-off date – Madras High Court
• Seizure – Order prohibiting assessee to deal with goods is not a stop gap for Department to take decision on seizure – Delhi High Court
• Budgetary Support Scheme is not available after change of ownership/constitution or slump sale of unit – Sikkim High Court
• Not every communication through medium of emails or electronic transfer is OIDAR service – Bombay High Court
• ITC available on gold coins, etc., given as incentives to dealers for achieving targets under promotional scheme – Karnataka AAR
• Transport service to education institutions for transportation of students and staff is exempt from GST – Tamil Nadu AAR
• Pre and post examination services provided to universities is exempt – West Bengal AAR
• Canteen services – GST liability and ITC availability – Gujarat AAR
• Electrical and mechanical spare parts of electric vehicle are not covered under HSN 8703, liable to GST at 18% - Telangana AAR

Customs

Notifications and Circulars

• Phased Manufacturing Program (PMP) for hearable and wearable devices amended
• Project imports – BCD exemption to specified project imports extended till 30 September 2025
• Food supplements containing botanicals – SHEFEXIL allowed to issue official certificate for exports to EU and UK
• Pre-shipment and Post-shipment Export Credit and Packing Credit in Foreign Currency (PCFC) for E-Commerce Exports
• Exemption for manufacturing of electronics, semiconductor, etc. under MOOWR

Ratio decidendi

• Drawback on exports is available even when BCD is not paid on imports, if additional duty is paid – Delhi High Court
• MEIS is available in a case involving supply to intermediate consignee in SEZ/FTWZ – Delhi High Court
• Time limit for amendment of shipping bill – Amendment in Customs Section 149 in 2019 cannot confer retrospective validity to Circular No. 36/2010-Cus. – Bombay High Court
• Valuation – Deductive method – Deduction of expenses towards employee cost, rent, repair maintenance, office expenses and miscellaneous expenses, permissible – CESTAT Chennai
• Foreign currency – No absolute confiscation if within permissible limits of RBI Circular – CESTAT Allahabad
• Universal Joint Parts for Transmission Shafts for further use in motor vehicles are classifiable under Heading 8483 and not under Heading 8708 – CESTAT Delhi
• Nikon camera Model No. N2120 is principally a still image digital camera though has unlimited video recording time – Classifiable under TI 8525 89 00 and covered under S. No. 502 of Notification No. 50/2017-Cus. – Customs AAR
• ‘Interactive large format display’ is classifiable under Customs TI 8471 4190 (ADP machine) and not under Heading 8528 – Customs AAR

Central Excise, Service Tax & VAT

Ratio decidendi

• Body building on chassis purchased from group company eligible for exemption under Notification No. 12/2012-C.E. (Sl. No. 276) – CESTAT Bengaluru
• Mere agreement giving right to sale goods or services is not franchisee agreement – Conferment of representational rights is important – CESTAT Ahmedabad
• Writing-off of Cenvat credit as per practice in automobile industry – No recovery provision under Cenvat Rule 3(5B) before 1 March 2013 – CESTAT Chandigarh
• Services procured from India through separate contracts and supplied to foreign company is not ‘intermediary service’ – Delhi High Court