GST WEEKLY UPDATE :03/2024-25 (21.04.2024) By Vipul Khandhar

• By CA Vipul Khandhar

1. CBIC Alert: Ensure GSTN and DGFT Linkage Before ICEGATE Registration:

The Central Board of Indirect Taxes and Customs (CBIC) issues an alert on ‘X’ states that before registering on the Indian Customs Electronic Data Interchange Gateway (ICEGATE), users must ensure that their email and phone number are linked with the Goods and Services Tax Network (GSTN) and the Directorate General of Foreign Trade (DGFT).

2. UP GST Department Clarifies DRC-07A Procedures for Recovery of Pre-GST Dues:

The Uttar Pradesh GST Department released Circular No. Collection/2024-25/2425001/65 dated April 16, 2024, updating procedures on DRC-07A for recovering pending tax dues from businesses active during the pre-GST era under laws like VAT. It clarifies processes for amending/deleting recovery certificates once dues are recovered under the CGST/UPGST Act using DRC-07A. The circular addresses the operational differences between departmental and district administration-led recoveries, detailing specific steps for both to ensure uniformity and compliance. Departmental entries for recoveries must use the R.C marking on their portal, while district administrations follow a separate procedure without needing to return recovery certificates. Full recovery compliance issues Form ST-45. Challenges in adherence should be reported to the issuing authority.

Earlier, vide Headquarters letter No. GST Section/2023-24/736/State Tax, dated January 09, 2024, such firms which are doing active business during the GST period under the previous Act (VAT, Entry Tax, Entertainment Tax etc.) For the cases of recovery of pending dues related to CGST/UPGST Act, by issuing format DRC-07A under Section 142A(1) of the CGST/UPGST Act, instructions were given to recover the said dues under the CGST/UPGST Act.

In case the outstanding amount is recovered under CGST/UPGST Act by issuing format DRC-07A as above, the recovery certificate issued under the previous law is required to be amended/deleted. At present, two different systems are working in the State Tax Department to recover the dues created under the previous law, by the departmental and district administration. In this regard, in order to remove the ambiguity prevailing in the implementation among the field units and to bring uniformity in the working system, the following is clarified –

Recovery by departmental and district administration for recovery of dues created under the previous law. Different procedures will be followed for two different systems of execution.

In those districts where the recovery of past dues is done by the departmental officers under the previous law, in those cases, the recovery certificate in respect of which format DRC-07A has been issued, should be entered in the departmental portal under R.C marking will be done.

While making such entry under the heading R.C marking, the radio button of R.C removal available on the portal will be selected. Open after selecting the said button. The number and date of DRC-07A will be entered in the drop down.

On making the entry as above, the amount covered by the concerned recovery certificate will be reduced by the amount of eligible recovery outstanding under the relevant previous law.

In those districts where the recovery of past dues is done by the district administration under the previous law, a separate procedure will be followed in those districts.

No action will be taken regarding the return of outstanding recovery certificates in the districts where the district administration has recovered.

In such cases related to the recovery of dues of the previous law, where any recovery has been made from the cash ledger or credit ledger of the taxpayer at the departmental level, the RC will be modified by reducing the amount equivalent to the recovery amount and the RC will be modified accordingly. Will be made available to the administration for recovery.

For both types of recovery formats, Form ST-45 will be issued only in the case where the entire outstanding amount as per the previous method has been recovered.

Strict compliance with the above instructions should be ensured.

Any difficulties arising in complying with the above instructions may be brought to the notice of the undersigned.

3. AAR & Important Judgements:

(i) Hon’ble Chhattisgarh High court Decision Regarding the non-refund of a 6% differential GST liability borne by contractors for works contracts:

(Applicant – Surana And Company)

This Court further directed in para 19 as under: – “19. The impugned therefore deserves to be and is accordingly set aside /quashed. The petitioner at this juncture is directed to make a fresh claim showing the difference of the tax liability that was incurred at the time of the submission of the bids and the excess tax paid by him in the light of the introduction of the GST. Upon such claim being made, the respondents shall forthwith process the same and the petitioner be suitably reimbursed after due scrutiny and enquiry necessary in-respect-of the additional tax burden incurred by the petitioner.”

(ii) Hon’ble Calcutta High court Decision Regarding No pre deposit require in the case of interest demand appeal under gst

(Applicant- Evergreen Construction)

Evergreen Construction has filed an intra-court appeal against an interim order requiring them to deposit 20% of disputed unpaid interest. The dispute arises from an adjudication order demanding interest due to delayed tax return filings for the relevant financial year. The appeal argues that the GST Act’s provisions do not mandate such a pre-deposit for appeals to the appellate tribunal. The central argument revolves around the interpretation of Section 112 of the GST Act, which specifies pre-deposit requirements for appeals to the appellate tribunal. While the government contends that the pre-deposit is discretionary and aimed at safeguarding revenue interests, Evergreen Construction asserts that the statute does not explicitly include interest in the pre-deposit calculation. 

(iii) Refund claim either under Rule 89 (4) or 89 (4B) has been revenue neutral & procedural lapse:

(Applicant – IPG Asia Private Limited)

As per CGST Rules, 2017, the EOUs and Advance Authorization Holders are required to file refund under 89 (4B). However, most of the exporters have filed the refund under Rule 89 (4) and got the refunds.

Post Gujarat HC judgement in case of Filatex, the department started issuing the demands for recovery of refunds granted in past period under Rule 89 (4) by the exporters. Appellant appealed against the demand order passed by the lower authority. The Hon’ble Commissioner (Appeals) has given favorable judgement on the following grounds,

1. Applying refund under incorrect rule 89(4) as against 89(4B) is considered to be a technical/procedural lapse and that cannot be a ground for creating any demand.
2. Refund is applied for accumulated ITC on account of procurement of indigenous goods used in export product and therefore refund of such amount needs to be considered.
3. Refund under Rule 89 (4) or calculation in terms of Rule 89(4B) being almost similar, it has a revenue neutral effect.

(iv) AAR On GST exempt on Teachers & Lecturers Supply to BBMP Schools:

(Applicant – Crystal Infosystems and services)

The GST AAR Karnataka addressed queries regarding the exemption of services provided by Crystal Infosystems and Services to BBMP schools and colleges. The analysis delves into the applicability of CGST and SGST to these services.

Crystal Infosystems and Services provide teachers and lecturers to BBMP schools and colleges on an outsourcing basis, characterizing the service as pure with no goods involved. Despite billing with 18% GST, BBMP claims exemption, citing its status as a municipality and the nature of the service falling under exempt categories.

The crux of the issue lies in the interpretation of relevant GST notifications, particularly Entry No. 3 of Notification No.12/2017-Central Tax (Rate). This entry exempts pure services provided to local authorities for functions entrusted to them under Article 243W of the constitution.

The AAR examined three conditions for exemption eligibility:

1. Nature of Service: The service provided by Crystal Infosystems qualifies as pure service, devoid of any goods involvement.
2. Recipient Status: BBMP, being a municipality under Article 243P of the Constitution, qualifies as a local authority.
3. Function Relation: The service of providing teachers/lecturers aligns with the function of “Promoting educational aspects” entrusted to municipalities under Article 243W.

The ruling concludes that the service falls within the ambit of exemption under Entry No. 3, as it meets all stipulated conditions.

Disclaimer:

This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.

(The author is a well known Chartered Accountant practicing at Ahmedabad)