Month: October 2017

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It would not be appropriate for Court to direct that Circular should be followed and not decision of Court : SC in Rattan Melting & Wire Industries

Ratan Melting & Wire Industries, 2008 (12) STR 416. At paragraph 6 of the judgment, the Hon’ble Apex Court observed as follows “6. Circulars and Instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the Circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Govt. and/or the State Govt. are not concerned they represent merely their understanding of the statutory provisions. They are not binding upon the Court. It is for the Court to declare what the particular provision of statutes says, and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law

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Mere Application to change the use of land does not alter the chracter of agricultural land for 2(14)(iii)

As per Section 2(14)(iii), agricultural land outside specified limit is not capital asset and hence there can be no capital gain on transfer of such agricultural land. Hence it is important to determine whether land is agriculture land or not.

Where assesse enters into agreement to sell agri land. There after makes  an application to the authorities to permit to covert the land into farm houses  and authority replies that no such conversion required for farm houses and there after the sale deed with buyer is registered. Whether the land ceases to be agricltual land on the date of registration of sale deed. What is the relevant date of transfer, the date of agreement or date of registration of sale deed?

Held by Jaipur Tribunal in Megh Chand Meena, HUF [2016] 70 taxmann.com 374 (Jaipur – Trib.)MAY  17, 2016  that  it was clear that there was no conversion of agricultural land and what had been transferred by assessee continued to be agricultural land beyond 8 Kms. of municipal limits. it was not a capital asset under section 2(14)(iii) . therefore, sale consideration was not liable to capital gains tax under section 45.

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Supreme Court Settles the Income Tax matter of Tata Chemleot Project matter of MLAs in the favor of assesse in Balbir Singh Maini Case dtd 04-10-2017 [2017] 86 taxmann.com 94 (SC). However differs from High Court reasoning in CS Atwal case

Important Excerpts from the Order

1 An agreement of sale which fulfilled the ingredients of Section 53A was not required to be executed through a registered instrument. This position was changed by the Registration and Other Related Laws (Amendment) Act, 2001. Amendments were made simultaneously in Section 53A of the Transfer of Property Act and Sections 17 and 49 of the Indian Registration Act. By the aforesaid amendment, the words “the contract, though required to be registered, has not been registered, or” in Section 53A of the 1882 Act have been omitted.

 

[Para 19 on Page 28 of SC Order]

 
2 There is no contract in the eye of law in force under Section 53A after 2001 unless the said contract is registered. (Para 20 on Page 31 of SC Order)

 
3 On the basis of Arguments above SC concluded that “……….we are of the view that sub-clause (v) of Section 2(47) of the Act is not attracted…………..”

[Para 20 on Page 32 of SC Order]

 
4 “…………..the High Court has held that Section 2(47)(vi) will not apply for the reason that there was no change in membership of the society, as contemplated. We are afraid that we cannot agree with the High Court on this score………………..”

 

“……………The High Court has not adverted to the expression “or in any other manner whatsoever. in sub-clause (vi), which would show that it is not necessary that the transaction refers to the membership of a cooperative society. We have, therefore, to see whether the impugned transaction can fall within this provision……………….” [Para 21 of SC Order]

 
5 A reading of the JDA in the present case would show that the owner continues to be the owner throughout the agreement, and has at no stage purported to transfer rights akin to ownership to the developer. At the highest, possession alone is given under the agreement, and that too for a specific purpose -the purpose being to develop the property, as envisaged by all the parties. We are, therefore, of the view that this clause [S(47)(vi)]will also not rope in the present transaction. [Para 23]

 
6 In the facts of the present case, it is clear that the income from capital gain on a transaction which never materialized is, at best, a hypothetical income. It is admitted that, for want of permissions, the entire transaction of development envisaged in the JDA fell through. In point of fact, income did not result at all for the aforesaid reason. This being the case, it is clear that there is no profit or gain which arises from the transfer of a capital asset, which could be brought to tax under Section 45 read with Section 48 of the Income Tax Act. [Para 27, Page 37 of SC Order]

 
7 Supreme Court in Excel Industries has said that “……………in our opinion more importantly, that income accrues when there “arises a corresponding liability of the other party from whom the income becomes due to pay that amount……………” [Para 26,Page35]

 

In the present case, the assessee did not acquire any right to receive income, inasmuch as such alleged right was dependent upon the necessary permissions being obtained. This being the case, in the circumstances, there was no debt owed to the assessees by the developers and therefore, the assessees have not acquired any right to receive income under the JDA. This being so, no profits or gains “arose” from the transfer of a capital asset so as to attract Sections 45 and 48 of the Income Tax Act. [Para 28]

 
8 Hence Supreme Court has concurred with the Conclusion of Punjab and Haryana High Court in CS Atwal but not with the reasoning .
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Construction Service Present and Proposed Rates after GST Council Meeting on 06-10-2017

Notification 11/2017-CTR  as amended by Notification 20/2017- CTR dated 22-08-2017, NN 24/2017-CTR dated 21-09-2017 and further proposed to be amended by GST Council meeting recommendations dated 06-10-2017 and  is covered by heading 9954

Sl. No.3

(i) Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.  (Provisions of paragraph 2 of this notification shall apply for valuation of this service) is taxable @ 18%

 

In case of supply of service specified in column (3) of the entry at item (i) against serial no. 3  of the Table above, involving transfer of property in land or undivided share of land, as the case may be,

Ø the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be,

Ø and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply.

 

Explanation .– For the purposes of paragraph 2, “total amount” means the sum total of,-

(a) consideration charged for aforesaid service; and

(b) amount charged for transfer of land or undivided share of land, as the case may be

 

Hence effective tax rate shall be 12% in case of construction of complex service.
(ii) composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017.is taxable @ 18%

 
(iii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied  to the Government, a local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, – [Note: Building,fabrication , Modification, Improvement is not covered]

 

(a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);

 

(b) canal, dam or other irrigation works;

 

(c) pipeline, conduit or plant for

(i) water supply

(ii) water treatment, or

(iii) sewerage treatment or disposal.

 

Is taxable @ 12% w.e.f. 22/08/2017. (From 01/07/2017 to 21/08/2017 It is taxable @ 18%)

 

 
(iv) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

 

(a) a road, bridge, tunnel, or terminal for road transportation for use by general public;

 

(a)  a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;

 

(c) a civil structure or any other original works pertaining to the “In-situ rehabilitation of existing slum dwellers using land as a resource through private participation” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for existing slum dwellers;

 

(d) a civil structure or any other original works pertaining to the “Beneficiary led individual house construction / enhancement” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;

 

(e) a pollution control or effluent treatment plant, except located as a part of a factory; or

 

 (f) a structure meant for funeral, burial or cremation of deceased.

 

Is taxable @ 12% w.e.f. 22/08/2017 (from 01-07-2017 to 21/08/2017. It is taxable @ 18%).

 

Note:

1.     It is similar to Sl No, 13 of 25/2012

2.     However Sl No, 13 of 25/2012 provided exemption for services  by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a building owned by an entity registered under section 12 AA of the Income tax Act, 1961(43 of 1961) and meant predominantly for religious use by general public

For which concessional tax is not available and hence shall be taxed at 18%.
 
(v) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied  by way of construction, erection, commissioning, or installation of original works pertaining to,- [Note : Repair, Alteration. Modification, Renovation, Completion, fitting out not covered by Concessional taxation]

 

(a) railways, excluding monorail and metro; [Note : Cosntruction service for Air port, port, monorail and metro shall be @ 18%]

 

(b)  a single residential unit otherwise than as a part of a residential complex;

 

[Para 2 (zzb) “residential complex” means any complex comprising of a building or buildings, having more than one single residential unit;

 

[Note:

1.      Construction for Residential Complex is taxable @ 18%.

2.     Services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex is exempt as per Sl. No. No. 11 of Exemption Notification 12/2017]

 

(c) low-cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;

 

(d) low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under-

 

(1) the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;

 

(2) any housing scheme of a State Government

 

(e) post-harvest storage infrastructure for agricultural produce including a cold storage for such purposes; or

 

(f) mechanised food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages.

 

Is taxable @ 12% w.e.f. 22/08/2017 (from 01-07-2017 to 21/08/2017. It is taxable @ 18%)

 

Note: As per item no. 10 of Exemption Notification 12/2017 , Services provided by way of pure labour contracts of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the beneficiary-led individual house construction or enhancement under the Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana is exempt

 

 

Note :

1.     Para 2(zs) of 12/2017

“original works” means- all new constructions;

(i)                all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;

 

(ii)              erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise;

 

2.     Hence Pure labor contracts of following nature for erection, commission or installation  in single residential unit should be exempt:

a)     Air Conditioning

b)    Security Systems

c)     Electrical Installations

d)    Sanitary Installation
(vi)  

 Services provided to the Central Government, State Government, Union Territory, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

(b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment; or

(c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017.

 

[Notification 24/2017-CTR dated 21-09-2017]
(vii) Construction services other than (i), (ii), (iii), (iv), (v) and (vi) above is taxable @ 18%

 

Note : Construction Services shall cover pure labor service also

 

Further as per GST Council decision dated 06-10-2017

1  Works contract services involving predominantly earth works (that is, constituting more than 75% of the value of the works contract) supplied to Central Government, State Governments, Local Authority, Governmental Authority or Government Entity shall be taxed at 5%.
2 Present definition of “governmental authority”  has the same meaning as  assigned to it in the Explanation to clause (16) of section 2 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017

As per Explanation to Section 2(16) of IGST Act:

Explanation.––For the purposes of this clause, the expression “governmental authority” means an authority or a board or any other body,–

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government

 

Definition of Governmental Authority expanded also to include any authority set up to carry out any functions entrusted to a Panchayat under Article 243G of the Constitution.
3 Supply of service or goods by a Government Entity to Central Government, State Government, Union Territory, Local Authority or any person specified by them against consideration received from them in the form of grants, shall be exempted.

 

“Government Entity” shall be defined as an authority or a board or any other body including a society, trust, corporation which is, –

(i) set up by an Act of Parliament or State Legislature, or

(ii) established by any government,

 

with 90% or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government or a local authority
4 The reduced rate of 12% on specified works contract services supplied to the Central Government, State Government, Union Territory, Local Authority and Governmental Authority shall be extended to a Government Entity, where such specified works contract services have been procured by the government entity in relation to the work entrusted to it by the Central Government, State Government, Union Territory or Local Authority
5 GST shall be levied @ 12% on works contract services in respect of offshore works contract relating to oil and gas exploration and production (E&P) in the offshore area beyond 12 nautical miles
6 Exemption to annuity paid by NHAI (and State authorities or State owned development corporations for construction of roads) to concessionaires for construction of public roads.

 

 

 

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Job Work present and proposed rates after GST Council 22nd Meeting on 06-10-2017

 

W.e.f. 01-07-2017 Changes W.e.f. 22-08-2017 As per 22nd GST Council meeting on 06-10-2017 (not yet effective)
Job Work for Printing of Newspaper and books, journals and newspapers

(Newspaper, journals, periodcals, printed books are exempt)

 5% Job work for printing of Newspapers and books , Journals and newspapers only was retained at 5% but where only content is provided by publisher and printer has obligation to provide paper also along with performing printing rate was pegged at 12% No Change
Printing of Brochures,

leaflets and similar

printed matter, whether

or not in single sheets, Maps, atlas, charts and globe, Judicial, Non judicial stamp

papers, Court fee stamps

when sold by the

Government Treasuries or

Vendors authorized by

The Government,

Postal items, like envelope, Post card etc.,

sold by Government, rupee notes when sold to

the Reserve Bank of India

& Cheques, lose or in book form

(Supply of these items is exempt or taxable at 5%)

 18% No Change 5% but where only content is provided by publisher and printer has obligation to provide paper also along with performing printing rate pegged at 12%
Printing of :

1.Children’s picture, drawing or colouring books,

 

2.Music, printed or in manuscript, whether or not bound or illustrated,

 

3.Plans and drawings for architectural, engineering, industrial, commercial, topographical or similar purposes, being originals drawn by hand; hand-written texts; photographic reproductions on sensitised paper and carbon copies of the foregoing

 

4. Unused postage, revenue or similar stamps of current or new issue in the country in which they have, or will have, a recognised face value; stamp impressed paper; banknotes; cheque forms; stock, share or bond certificates and similar documents of title

 

5. Transfers (decalcomanias) [The art or process of transferring pictures and designs from specially prepared paper (as to glass)]

 

6. Printed or illustrated postcards; printed cards bearing personal greetings, messages or announcements, whether or not illustrated, with or without envelopes or trimmings

 

6. Calendars of any kind, printed, including calendar blocks

 

7. Other printed matter, including printed pictures and photographs; such as Trade advertising material, Commercial catalogues and the like, printed Posters, Commercial catalogues, Printed inlay cards, Pictures, designs and photographs, Plan and drawings for architectural engineering, industrial, commercial, topographical or similar purposes reproduced with the aid of computer or any other devices.

 

8. Uncoated paper and

paperboard, uncoated

kraft paper,

greaseproof paper,

glassine paper,

composite paper etc.

 

9. Aseptic packaging

Paper

 

10. Boxes, pouches,

wallets and writing

compendiums, of

paper or paperboard,

containing an

assortment of paper

stationery including

writing blocks

 

11. Cartons, boxes and

cases of corrugated

paper or paper board

 

12. Exercise book, graph

book, & laboratory

note book

 

13. Kites

 

14. Paper pulp moulded

Trays

 

15. Braille paper

 

16. Paper splints for

matches, whether or

not waxed, Asphaltic

roofing sheets

 

[ These items are taxable @ 12%]

 18% 18% 12%, whether or not paper is also provided by the printer.
Other Printing Job Work on material taxable @ 18% including printing on Cartons, boxes and

cases of non -corrugated

paper or paper board

 

 18% 18% 18%
Textile Job Work 5% for Textile yarns (other than of man-made fibres) and textile fabrics

 

 Tax rate for Job work on all textile products falling under chapter 50 to 63 was reduced to 5% including job work on man made fibres and job work on garments or made ups
Jewellery Sector Job Work 5% for

Cut and polished diamonds; precious and semi-precious stones; or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 in the First Schedule to the Customs Tariff Act, 1975

 

But Job work for imitation jewellery, gold smith, silver smith wares was not specified in 5% category. Hence it was taxable at 18%

 

 No Change Job Work for all Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal, and articles thereof; imitation jewellery; coin has been pegged at 5%
Processing of Hides skins and leathers 5% for

Processing of hides, skins and leather falling under Chapter 41 in the First Schedule to the Customs Tariff Act,

 

 No Change
Job Work in relation to food products 18% subject to exemption under Notification 12/2017  for

1 Slaughtering of Animals

 
2 pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables

 
3 Services provided by the National Centre for Cold Chain Development under the Ministry of Agriculture, Cooperation and Farmer’s Welfare by way of cold chain knowledge dissemination

 
4 processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market;
5 loading, unloading, packing, storage or warehousing of agricultural produce
6 loading, unloading, packing, storage or warehousing of rice.

 

 

 No Change 5%. However packaging of milk processed milk into packets is not in 5% category.
Job Work in relation to residue and waste of food industry and animal fodder 18% 18% 5% except job work for

 dog and cat food put up for retail sale
 

 Job work in relation to manufacture of umbrella
18% 18% 12%
Manufacture of clay bricks 18% 18% 5%
Other Job Work 18% No Change 18%

 

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Recommendations of GST Council at 22nd meeting on 06-10-2017 (Other than Rates)

1 Services provided by GTA to unregistered persons has been exempted from tax. Since the transporter need not pay tax on these transactions, transporters should now have no difficulty in dealing with unregistered persons.

 
2 GSTR-4 for composition scheme dealer for quarter ending 30-09-2017 deferred from 18-10-2017 to 15-11-2017

 
3 Composition Scheme

a)      Threshhold limit being raised to 1 crore for non special category states and state of J&K

b)      Threshhold limit being raised to 75 lacs for special category states except J&K

c)       Increased threshold exemption limit benefit can be availed by migrated as well as new registrants

d)      Option exercised for new threshold shall be operational from first month of the month succeeding the month in which option is exercised.

e)      GSTR-4 applicable to new registrants shall applicable from the day of composition scheme being operational for them. For period prior to that, return shall be filed like normal tax payer.

f)       Persons providing wholly exempt services like earning interest income shall be entitled to avail composition scheme.

g) Also interest income and value of other exempt services shall not be taken into account to compute threshold limit for composition scheme

 
4 Interstate Taxable Supply of service exempted from registration for small service providers.

Persons providing inter state taxable supply of service but having their aggregate turnover below Rs. 20 lacs shall be entitled to exemption from compulsory registration and hence shall no longer be required to pay GST E.g. Chartered Accountant having receipts below Rs. 20 lacs shall not be required to pay GST even if he makes inter state taxable supply of services.

 
5 Returns reshuffled

a)      GSTR-3B up to December 2017 to be filed by all taxpayer whether turnover is above or below Rs. 1.5 cr.

b)      Monthly GSTR-1,2,3, for July, August and September separately  to be filed by all taxpayers whether turnover is above or below Rs. 1.5 cr.

c)       Business having turnover up to 1.5 crore shall file GSTR-1,2,3 quarterly only starting from quarter for  October to December

d)      Business having turnover up to 1.5 crore shall pay tax quarterly only starting from quarter for  October to December

 
6 Reverse Charge:

Deferred

Reverse Charge Mechanism for supplies received by registered person from unregistered person has been suspended till 31-03-2018. However reverse charge mechanism for supply of specified goods and services like GTA, legal services, import of service shall continue.

 

Expanded

Sale by way of auction etc. of used vehicles, seized and confiscated goods, scrap etc by Central Government, State Government, Union Territory or a local authority, to any person, to be subjected to GST under reverse charge under section 9 (3) of the CGST Act
TDS and TCS provisions deferred till 31-03-2018

 
8 E-Way bill to be implemented from 01-01-2018 in phased manner and shall be nationwide rolled out w.e.f. 01-04-2018

 
9 Taxpayers having annual aggregate turnover up to Rs. 1.5 crores shall not be required to pay GST at the time of receipt of advances on account of supply of goods but shall pay tax at the time of supply of goods only.

 
10 IGST on imports of bonafide gifts up to CIF value of Rs. 5000 imported through post or air has been exempted

 

 

 

 

 

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Electronic Assessment proceedings in cases getting time barred on 31-12-2017: Instruction 8/2017 dated 29-09-2017

  • AO shall issue a communication to assesses having e filing accounts and also having their cases pending for scrutiny assessment by 8th October 2017

 

  • These Assessee to send his consent for E-assessment till 15-10-2017

 

 

  • Mannual Scrutiny to be kept at hold till 15-10-2017 or till the consent of these assesse, whichever is earlier

 

  • E-proceedings can be opted out subsequently under intimation to AO

 

 

  • Proceedings of assesses not having e filing accounts, assesses opting for manual scrutiny, search assessments, transfer pricing assessments, Cases before Range Head u/s 144A shall continue to be assessed manually.

 

  • Notices/communications/orders through e proceedings to be digitally signed by AO

 

 

  • Mannual issue of notice to Assessee shall be done only after providing reason to Range Head

 

  • Online response to AO can be made only till the conclusion of office hours of the day fixed for response

 

 

  • Response for electronic proceedings to be closed by seven days before time barring date i.e. 24-12-2017. An exception can be allowed with permission of Range Head only.

 

  • Manual production of response can  be allowed in following cases
  1. Where manual books or original documents have to be examined
  2. Where summons are issued to assesse or for third party enquiries
  3. Where examination of witness is required by assesse.
  4. Where show cause notice is issued drawing any adverse inference and assesse requests personal appearance

 

  • In appeal proceedings documents shall be produced in two parts : Manual-Part A & Electronic-Part B