GST WEEKLY UPDATE :34/2024-25 (24.11.2024) By CA Vipul Khandhar

-By CA Vipul Khandhar

1. Important advisory on GSTR 2B and IMS (Nov 16th, 2024):

1. It has been reported by few taxpayers that their GSTR-2B for October-2024 period has not been generated on 14th November, 2024. In this regard it to be informed that as per the design of IMS, GSTR-2B will not be generated by the system in below scenarios:
2. In case the taxpayer has opted for QRMP scheme (Quarterly filers), GSTR-2B will not be generated for first and second month of the quarter. Ex. For quarter Oct-Dec, 2024, the quarterly taxpayer will get GSTR-2B for December-2024 period only and not for October-2024 & November-2024.
3. In case the taxpayer has not filed their previous period GSTR-3B, GSTR-2B will not be generated by the system. Such taxpayers need to file their pending GSTR-3B in order to generate GSTR-2B on demand. For example, if the taxpayer has not filed GSTR-3B for September-2024, their GSTR-2B for October-2024 will not be generated. Once the taxpayer files their GSTR-3B for September-2024, they will be able to generate their GSTR-2B for October-2024 by clicking the “Compute GSTR-2B (OCT 2024)” button on the IMS dashboard.

2. MahGST has issued instruction for the offline gst audit:

• The Goods and Services Tax (GST) department typically initiates an audit when it detects discrepancies or suspicious activities, such as inconsistencies in GST returns or a significant mismatch between input and output tax credits. After completing the audit, a report is prepared, and a notice is issued to the taxpayer based on the findings.

• For the financial year 2020-21, where the deadline for issuing a GST notice under Section 73 is November 30, 2024, the Maharashtra GST department has made changes to the procedure. Instead of the usual online format, both the audit report and notices for discrepancies will be sent offline. This adjustment was reasoned to technical challenges with the online system.

• To finalize the audit for FY 2020-21, GST proper officers are now permitted to send communications, such as the Discrepancy Notice under Rule 101(4) and the Final Audit Report (GST-ADT-02), through offline methods. According to a circular issued on November 8, 2024, these documents will not be uploaded to the GST portal but will be delivered using alternative methods specified under Section 169 of the GST Act.

• The Maharashtra GST department explained in its circular that receiving complaints from proper officers about technical issues with the online audit functionality hindered the processing of follow-up actions. Consequently, the decision to use offline procedures was made to ensure the smooth completion of audits for this period.

• The Maharashtra GST department confirmed that the limitation period under Section 73(10) of the GST Actremains unchanged. The deadline for issuing notices related to FY 2020-21 is still November 30, 2024. However, technical glitches necessitated modifications to the usual online procedures.

• Experts confirmed that under Section 73, notices must be issued within three years from the due date for filing annual returns. For FY 2020-21, this three-year period ends on February 28, 2025. Processing backwards, in these cases notices should typically be released at least three months before given deadlines as additional relief for proceedings. To allow sufficient time for follow-up actions, the notices are expected to be issued by November 30, 2024.

• The circular clarified that show cause notices (SCNs)arising from audit findings, such as demand and recovery actions (GST-DRC-01), will still be issued online through the GST portal. The offline process is only applicable to discrepancy notices and audit reports.

• To ensure a complete record of audit activities, the Maharashtra GST department directed proper officers to upload all manually issued notices and Final Audit Reports (GST-ADT-02) to the GST portal by December 31, 2024. Once uploaded, these documents will be accessible to taxpayers through the portal’s defined workflow system.

3. AAR & Important Judgements:

(i) Hon’ble Mumbai ITAT Decision Regarding GST cannot be included while computing Deemed Income u/s 44B:

(Applicant – Orient Overseas Container Line Limited vs Deputy Commissioner of Income Tax)

The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) held that, Goods and Services Tax should not be added while computing Deemed Income under Section 44AB of the Income Tax Act, 1961. As a result, it was held that GST could not be included in income computations under Section 44B of the Income Tax Act. The Tribunal upheld the minority view of a DRP member that GST should not form part of deemed income under Section 44B, ruling in favour of the assessee.

(ii) AAR On GST on Diagnostic Services at 18%; No TCS on Medpiper Technologies

(Applicant – Medpiper Technologies Pvt. Ltd.)

The Authority for Advance Ruling (AAR), Karnataka, issued a ruling on Medpiper Technologies Pvt. Ltd., addressing critical questions concerning Goods and Services Tax (GST) applicability on its operations as a digital aggregator for diagnostic and wellness services. Below is an overview of the key rulings.

Background

Medpiper Technologies Pvt. Ltd., based in Bengaluru, operates as an aggregator facilitating diagnostic and lab services via third-party providers. Acting as a digital platform, the company provides tools for companies, insurance firms, and brokers to manage workflows and service interactions. It invoices contractors after adding a margin to the diagnostic labs’ charges.

The company sought clarification from the AAR on the following questions:

1. GST Applicability: Is GST to be collected on the diagnostic and lab services facilitated by the company? If yes, should GST apply to the entire invoice value or only the margin?

2. TCS Requirement: Does the company qualify as an e-commerce operator requiring tax collection at source (TCS)?

3. Classification as Insurance Agent: If the applicant invoices insurance companies, would it qualify as an insurance agent under GST?

Key Rulings by GST AAR Karnataka

1. GST on Diagnostic and Lab Services:

– Medpiper Technologies is required to collect GST at 18% on the entire invoice value for diagnostic and lab services provided via third-party labs.

– The applicable Service Accounting Code (SAC) for these services is 9993.

2. TCS Applicability:

– The company does not qualify as an e-commerce operator under the GST framework.

– As per the definitions in Sections 2(44) and 2(45) of the CGST Act, Medpiper’s operations do not meet the criteria for electronic commerce since services are not directly provided through its platform.

– Consequently, the question of collecting TCS does not arise.

3. Insurance Agent Classification:

– Medpiper Technologies is not classified as an “insurance agent” when it invoices insurance companies.

– The ruling clarified that the company is not providing services on behalf of another party but is operating independently.

– Thus, the reverse charge mechanism (RCM) does not apply to its transactions with insurance companies.

Analysis and Implications

GST Applicability: By mandating GST collection on the entire invoice value, the ruling emphasizes that aggregators facilitating services through third-party providers cannot limit their tax liability to their margin. This reinforces the principle that GST applies to the total value of supply.

Non-Qualification as E-Commerce Operator: Medpiper’s operational structure, where services are contracted and executed independently of the aggregator’s platform, distinguishes it from traditional e-commerce operators. The decision may serve as a precedent for similar aggregators providing platform-based services without directly facilitating supply.

Insurance Agent Definition: The clarification on Medpiper’s non-qualification as an insurance agent ensures that similar service providers can avoid the implications of RCM under GST, provided they operate independently and not on behalf of insurers.

Conclusion

The AAR ruling on Medpiper Technologies Pvt. Ltd. provides critical insights for aggregators operating in the healthcare and wellness sectors. By delineating tax liabilities and clarifying the scope of operational definitions, the decision offers a framework for compliance with GST regulations.

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 well known Chartered Accountant Practicing in the fields of Taxation at Ahmedabad)